Recognising logistics trends and harnessing potential

Reading time approx. 9 minutes
Text: Juliane Gringer
Photos: GettyImages – Colin Anderson, Dierk Kruse, Kompetenzzentrum Kaiserslautern, Deutsche Telekom AG

Observers are forecasting a variety of trends for the logistics industry. Where should companies be focusing their attention, and which paths should they be taking? Experts recommend sober analysis and are helping to extract useful information from the wealth of available data.

According to a study on the subject of digitisation produced by the auditing company KPMG, change is compulsory. Transformation and action are essential ingredients for those who want to face the future with confidence. There are unlikely to be many companies that embody these concepts better than transport and logistics enterprises. No matter what the business, however, a series of questions have to be addressed on a regular basis. What kind of change do we wish to bring about? Which of the issues are short-term trends, and which ones demand sustained attention? Big data, the internet of transport, artificial intelligence, connectivity – what are the truly essential topics? And how can the relevant issues be harnessed to deliver business success?

Talking to the experts

“It’s important to analyse all the hype calmly and without yielding to the influence of marketing,” insists Christian Kille, Professor of Commercial Logistics and Operations Management at Würzburg-Schweinfurt University of Applied Sciences. Paying attention to brash publicity claims is nonetheless worthwhile, he explains, “Facing up to the developments that are on the horizon leads to better decision making.” He recommends talking to experts who are willing to share their knowledge and judgement. “On the subject of the sharing economy, for example, I would get in touch with companies such as Uber and seek to learn from their experience.” External quantitative figures are another useful resource for those who wish to evaluate all the data and information objectively.

»It’s important to analyse all the hype calmly and without yielding to the influence of marketing.«

Christian Kille, Professor of Commercial Logistics and Operations Management at Würzburg-Schweinfurt University of Applied Sciences

Change is compulsory – and delaying too long is inadvisable. Many people regard the sheer pace of change as excessive, however, and feel under pressure to respond. Prof. Kille puts this perception into perspective, “Many things happen very quickly nowadays – and certainly much more rapidly than in the past. But it’s crucial to retain a realistic view.” In his opinion, taking action simply for fear of missing out on something is never a good idea. Composure, he insists, is a more appropriate emotion, “The best policy is continuously to monitor what’s happening within an industry and calmly to decide on the best approach for your own business.“

KPMG’s study series, which declares change a must, is entitled “Survival of the Smartest” and aims to help identify the complex economic challenges facing companies in the digital age. Within the framework of research cooperation with universities, regular scientific studies are conducted to determine whether German companies are in a position to keep pace with the increased speed of change. The research shows that so far there are only a few companies that are clear about the direction in which they should change and have set themselves concrete goals.

Continuous observation

Drawing on his academic experience, Prof. Kille is cautious when evaluating trends. He says, “I am not expecting to see a massive fleet of autonomous vehicles by the middle of the 2020s.” They are sure to represent a feasible option on some stretches of road but, for legal reasons alone, a driver will still be required.” He likewise regards drones as a niche phenomenon and feels that their status is unlikely to change in the future. He thinks that 3D printing, in contrast, will be much more widely used in future for manufacturing not only replacement parts, but also numerous customised products. “The technology is currently too slow and expensive, but these problems could be resolved in the foreseeable future.“

Prof. Kille views artificial intelligence as a steadily emerging discipline that is not to be underestimated. Despite commenting that scientists are unable to create algorithms that can endow systems with intelligence at present, he believes that such developments take place by leaps and bounds, rather than gradually. As he explains, “We barely notice just how intelligent systems are becoming, but we are surprised when we suddenly realise what enormous progress has been made. While I was studying electrical engineering about two decades ago, artificial intelligence was already a hot topic. Then it was all but forgotten for a long while, but now rapid progress is taking place again because computer systems have become so powerful. Today they have the performance capabilities that were previously lacking.“

New business models

In Prof. Kille’s opinion, the shape of the future will be determined by innovative business models. “Logistics experts must adapt and respond to the forthcoming challenges,” he says. The professor then outlines the importance of closely monitoring and supporting the start-up culture, “SMEs should not only seek to assimilate young companies, but also give consideration to strategic partnerships, for example. As soon as a start-up is integrated in other enterprise, it is forced to observe boundaries again and becomes less disruptive.”

»The digital era harbours tremendous potential for both production and the service sector.«

Tobias Thielen, Mittelstand-4.0-Kompetenzzentrum Kaiserslautern

Tobias Thielen is someone who helps SMEs to develop new ways of doing business. He is an industrial engineer and an expert for Industry 4.0 business models at a centre of excellence, the Mittelstand 4.0 Kompetenzzentrum in Kaiserslautern. The Federal Ministry for Economic Affairs and Energy wants this and similar institutions, which are overseen in collaboration with partners, such as universities or research organisations, to enable SMEs and independent tradespeople across Germany to digitise, interconnect and apply Industry 4.0 practices in their businesses. “The digital era harbours tremendous potential for both manufacturers and the service sector to exercise imagination and develop innovative business ideas,” remarks Thielen. “Here in Kaiserslautern we address this topic from an interdisciplinary perspective. We look at the ways in which people and technologies are interconnected and identify the strategies that enterprises need to apply as a consequence.“

Achieving a lot by simple means

Many young entrepreneurs decide to get in touch with these centres of excellence. Thielen comments, “We then work together to pinpoint how they can use the opportunities afforded by digitisation to their advantage. In particular, we look at possible new business models that could be developed on the basis of ones that already exist.” He regularly discovers that fairly small companies lack the resources needed to address issues such as these. “It would be reasonable to assert that the smaller the business, the less likely that sufficient time and employees are available for tackling the challenges. It is also more likely in such circumstances that the business owners regard Industry 4.0 as the preserve of the big players. They are blocking out the belief that a lot can be achieved even by simple means. Industry 4.0 can sound like a complex subject to many, but there are a lot of simple approaches to utilising the opportunities it provides.“

Citing the topic of connectivity as a case in point, he comments, “We regularly encounter companies that have procured a good inventory of modern machines, but not interconnected them. It’s a fairly simple thing to change – and before long valuable data are being generated. There is sometimes a lack of awareness of the data that already exist and of its hidden potential.” And some companies that have been found to be using solutions already, he claims, have not adopted them in a systematic way. “In almost every case only a single activity, such as production, is interconnected – but it has no contact whatsoever with the accounts department, for example. Even for relatively small enterprises, however, establishing connections between processes makes good sense and is easy to achieve. As long as the machines are technically capable, even simple tablet computers can serve as workstations in many instances, explains Thielen, “By retrofitting older machines with new technology, such as one of these mobile devices, employees can be given access to their production data.“

The use of data that already exist could be regarded as the most important pathway to new business models for SMEs in particular. In his view, “The key personal skills are creative thinking and a willingness to explore.” He underlines this point by referring to the example of Ford. It sells information collected by its vehicles’ automatic windscreen wiper systems to weather services – and thus generates additional income from data that would otherwise have remained unused.

Production data as a service for customers

Another example is taken from Thielen’s own consulting activities. Using parameters captured over many years of business, a building company established a construction agency offering a full range of building-related services online. As he explains, raw production data are generally of little interest to external users, but they can constitute an appropriate platform for providing customer support, “Especially in the automotive industry, lots of customers want to see the data.” It’s important for suppliers, therefore, not to get left behind, “These include many small companies with around 20 employees, and losing a major customer can soon lead to the collapse of their business. Utilising production data and giving products a memory – typically in the form of RFID chips – actually entails relatively little work or expense.“

Prof. Kille shares the view that such applications sometimes offer the greatest potential, “There’s a lot of talk about big data, and most companies are sitting on large volumes. In most cases, however, these resources lack structure, and the different standards that exist are subject to frequent change. Practically every business possesses a large quantity of data garbage.” The solution could lie in IT platforms, interfaces and fixed standards. “Data garbage has to be transformed into a recyclable asset,” says Prof. Kille. “In the next step, all the parties in the supply chain must see themselves as partners and share information.” In this context data security is, of course, imperative. Apart from installing security mechanisms, the essential action plan includes detecting and responding to cyber attacks.

Modern IT-supported transport and communications systems help to accelerate traffic and trade flows in the port of Hamburg and coordinate them more efficiently.

Resolute connectivity

The performance capabilities of carefully considered and resolutely implemented connectivity are well illustrated by the project smartPORT logistics (SPL) in the Port of Hamburg. The platform there has been built jointly by SAP, Deutsche Telekom and the logistics specialist Dakosy. The port occupies a 7,200-hectare site, where as many as 8,000 container trucks complete around 40,000 journeys every day in 2014. In view of rising transshipment figures, the number of trucks is expected to exceed 15,000 by 2025. Navigating the port’s road network could become difficult. By interconnecting the entire supply chain, the IT solution SPL has allowed twice the volume of goods to be handled without any increase in the size of the facility. All the relevant traffic data, truck locations and the infrastructure situation can be displayed on the screens of mobile devices. Hauliers can subscribe to a fleet management service that notifies them of their trucks’ arrival times at the container terminal. And the drivers’ screens display the best routes, which also alleviates the traffic situation in the port. The system reduces driving time, per truck and journey, by five to ten minutes, which adds up to a total saving of 5,000 hours a day. Everyone is a winner.

As an international mobility and system partner, BPW ranks among the companies that are taking a keen interest in the topic of Industry 4.0. Its most recent example of a successfully digitised production process entailed the establishment of a fully interconnected wheel and axle assembly shop in Wiehl. The digital system has raised production efficiency and offers customers significant value-added – the modules they are purchasing are manufactured to order, and all the relevant data are recorded and made transparent. In overseeing this major project, the IT production & internal logistics department has contributed substantially to embedding the principles of Industry 4.0 in the company.

Finding individual solutions

Addressing the subject of change, Philipp Ostermeier, a partner in KPMG in Germany and an expert in solution management, comments, “Business life cycles are becoming shorter and shorter, and decision makers nowadays must continuously analyse changes concerning their customers, markets and competitors, and recognise opportunities and risks as they arise. In order to weigh up the strategic options and enable the business model to adapt more quickly, entrepreneurs must be willing, and possess the necessary capacities, to interconnect all the relevant information and data points.” The survey he conducted with his colleagues revealed that, because of their numerous divisions and departments, large companies find it especially difficult to define the exact implications of the changing landscape and decide how to respond. Many smaller businesses, on the other hand, simply don’t find the time to address the issue in depth.

According to KPMG, “Every company must define the details of its own individual solutions. Where does ultimate responsibility rest for the entire transformation process? Which products and business models can be redeveloped or adjusted? Which of the many approaches are practicable? The answers to these questions differ from one business to the next.” There’s no single blueprint for digital transformation, but precisely this lack of a catch-all plan opens up many opportunities. After all, those who bring about change inevitably give shape to the process. They not only influence what will happen tomorrow, but also drive success and the emergence of trends for the future.

The BPW subsidiary idem telematics is also working on digital solutions for the Internet of Transport. Jens Zeller (left), managing director of idem telematics, and Heiko Boch, the company’s senior product manager, explain how this is implemented.

What role does connectivity play for idem telematics?

Jens Zeller: We are certain that the exchange of information between vehicles, their environment and businesses is becoming more intensive. Connectivity is an elementary subject for the logistics industry – and therefore for us as well.

Heiko Boch: We provide telematics systems for trucks and trailers, and are helping to build the internet of transport, a network in which goods organise their own shipping movements. It will trigger an exponential increase in data volumes, but we are determined to be open – isolated data silos are things of the past.

Which challenges are you facing at the moment?

Zeller: We are operating in a very dynamic environment in which numerous start-ups, among others, are seeking to gain a foothold. Using our know-how, we establish which topics clearly have a long-term future, and create new products and services to address them. The benchmark is always defined by customers and their everyday business needs. Once we have identified the ideas that are relevant, we pursue them assiduously and persistently. The strategy is simple: keep going, keep going, keep going.

How can the key developments be pinpointed in this landscape?

Boch: Our customers need a reliable, independent partner that has a thorough understanding of the business in which it engages. For our part, we need a good product management team who are familiar with customers’ wishes and needs. The subject matter is always the transport chain – that is our customers’ business domain and the field in which they invest. It’s crucial that we know our customers and appreciate what makes them tick in their core business, namely the transportation of goods. These aspiration can be fulfilled only through experience, close contacts and many conversations. We also have to give consideration to customers’ own expertise and be aware that they are running their businesses on very tight margins.

Zeller: In this industry new ideas, many of them intriguing, arise practically every day. But we always adopt the customer’s perspective and can therefore develop appropriate solutions almost as a matter of course.

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