Most organizations today are aware of the need for digital. In the supply chain and logistics industry, the pressure has continuously grown while customers call for more efficient and quick processes.
Meanwhile, business stakeholders explore blockchain, IoT and other technologies that could help drive growth and generate new streams of income. The problem is, a digital journey is not a one-size-fits-all. There are many aspects to consider when evaluating the road to improved processes and data with digital solutions.
To get a little more into this, we contacted Dr. Maria Jesus Saenz, Director of the research on Digital Supply Chain Transformation at the MIT Center for Transportation and Logistics.
Dr. Saenz has focused her research on measuring the importance of partnerships and collaborations as drivers to face digital transformations in the supply chain and logistics sector. We wanted to learn more about her findings and here's what she had to tell us about it:
1. How is technology proving to transform the supply chain and logistics sector?
Dr. Saenz: From our point of view it is not only technology. Technology is the enabler of transformation in every kind of industry. But, the main purpose of organizations that go through the digital journey is to change the experiences in the supply chain of specific stakeholders within the industry. So, the transformation comes from the implementation of technology, changing processes, adapting the logistics flows, and adapting to those changes.
Some organizations are better prepared for the transformation than others and it depends a lot on the needs of each organization. We find that sometimes companies don't need to transform too much in processes or within the organization, or they don't need a huge investment in technology.
It is a matter of finding their equilibrium, before deciding on technology, the company should think and decide about "why". What are their expectations in the future 5 years? What is the experience they want to create with their logistics service providers, with their suppliers upstream, and even with their final users? And very importantly, what do they want to change in order to be more competitive? It takes time to understand what is the effective model that needs to be implemented.
2. How would you define digitalization and digitization?
Dr. Saenz: We need to make a clear differentiation between digitization and digitalization, in our research, we took a position about these two words that sometimes in the digital transformation umbrella, are used interchangeably. It is only those who are going through the process that usually can differentiate between the two:
Digitalization means the transformation towards creating new value offerings for the market/customer. In logistics, this can mean maybe a different kind of service, for example, building connections with all logistics service providers in order to provide a better range to the customers. It comes down to offering a new value proposition.
On the other hand, we have digitization. When you're transforming your processes and operations in order to have a new operational backbone, this process needs to be more digital and rely on the interpretation of data in order to drive decisions. For this kind of purpose, you will need IT technology to better connect processes with data, to make decisions quickly and more efficiently. This involves using the best resources to provide these services, for example, better transportation decision systems.
When companies get maturity in terms of digital transformation, they can be ambidextrous, one can feed the other.
3. In the case of 3PLs/Freight Forwarders, what would you consider the benefits of embarking on a digitization process?
Dr. Saenz:
Gain market share (direct benefit and most prominent)
Second, you are going to be more efficient by using your resources better - you will have visibility in order to decide what is the best location of resources depending on where they're needed
Responsiveness and efficiency
To be able to reap the benefits, this is a process that takes time. We need to change technology, process, and people taking into account that speed is not the same in all organizations.
4. In your department, there has been some research about the use of blockchain to optimize logistics processes, what do you think is the biggest advantage of this technology?
Dr. Saenz: Absolutely, visibility and speed. Blockchain allows for enhanced visibility as adopters will rely on only one system that everybody has access to. It helps in order to align data and come back to that data to understand what happened and it provides a single source of truth. The availability of data will be a great opportunity if we are able to implement it in different processes, such as smart contracts, operations, and financial flows.
I am a firm believer that blockchain is a great solution to align the supply chain but it may take longer than initially expected. The challenge is about changing processes and how to align partners with different interests.
5. You also have some publications about the importance of global collaboration. How do you envision the implementation of technology into a sector that is very much used to old-fashioned processes?
Dr. Saenz: I guess there are different difficulties in the logistics service providers because the margins are low and sometimes the medium players don't have enough investment in order to follow the changes. Although it presents a barrier, there's a way around it by focusing on collaboration. Logistic Service Providers can become connectors.
Digital has another dimension, which we call "digical" (digital + physical). The physical part could very well be deployed by LSPs, they have to be aware and prepared or they will lose the opportunity. They need to react and invest. A way they can do that is by partnering with bigger manufacturers or deciding to make an investment to be able to differentiate from other logistics providers.
Any last words?
Dr. Saenz: The key point of implementing technology is to develop the right integration with people and organizations. It requires a lot of maturing before implementing. The solution will not work if these are not taken into consideration.
Let us know your thoughts in the comments!
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