Logistics 4.0. – Automation in the supply chain

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Autor: Zespół Ekspertów PITD

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"The history of logistics is at the same time the history of automation, from the steam engine, through the forklift, to today's order collecting and packaging robots," argues the American consulting firm McKinsey & Company. Such a relationship requires investment, something that business managers are now beginning to realize. Nearly 70 percent of CEOs from around the world count on the fact that the basic technologies of providing services will change. Slightly less, 65 percent believe that the changes will affect distribution channels. "The sector will change under the dictation of digitalization, shifts in international trade, software solutions, internal changes in trade and the development of solutions in the field of machinery and equipment," according to the PwC report "CEE Transport & Logistics TrendBook 2019".

"Digital maturity should be understood as the ability of an organization to build an effective business strategy and gain competitive advantage through the use of digital solutions," instructs the Digital Economy Lab.

What solutions are we talking about? First of all, about digitalization, artificial intelligence, Big Data, blockchain and the combination of various products and services within the Internet of Things (IoT). In the industry sector alone, investment in such solutions is expected to bring additional revenues of 2 to 3 percent annually, according to researchers. According to forecasts, efficiency will also increase by nearly 18 percent until 2020.

Companies are therefore preparing for changes. Over the next five years, in four out of five enterprises, the value chain will be digitized (a concept that divides activities performed in the enterprise into categories of valuable activities, including but not limited to supply, logistics, supply and service of products). By 2020, investments in IoT are expected to reach up to EUR 140 billion per year - according to PwC calculations. This is the situation in industry. However, changes in this sector will necessitate changes in closely cooperating industries, such as the TFL sector.

In transport, expenditure on IoT is steadily rising. And to such high levels that only the consumer goods sector is overtaking this industry. Last year, USD 367.43 million was allocated to the Internet of Things in transport. It is estimated that this year it will reach 404.24 million, and in the next - 450.29 million. In 2022, this sum may reach almost USD 590 million - according to the estimates presented in the 'IoT in the Polish economy' report prepared by the Internet of Things (IoT) Working Group, which was established in 2018 at the Polish Ministry of Digitital Affairs.

As the experts working in the said group argue, compared to the whole world, countries of the Central and Eastern Europe look moderately - certainly below the level presented by Western Europe and North America, at least in terms of the number of companies that deal with the implementation of solutions that support the IoT. Nevertheless, Poland is doing quite well in this region.

Compared to other countries, there are more companies that declare that they are at the "almost mature" or "close to perfect" level of adoption of digital transformation solutions.

The coming years will be very dynamic. The working group of experts for IoT forecasts that within the next few months, “70 percent of organizations will use commercial IoT platforms to develop and implement IoT applications, and over 50 percent will have environments built from IoT platforms from many suppliers."

"In the coming years, a high growth rate of the IoT technology and solutions market (about 13 percent year-over-year), is expected. This means that the Polish economy has a great chance to absorb this technology, and if the existing restrictions are removed, this potential may increase further. Barrier removal, including in terms of regulation or development of new communication technologies (including 5G), will bring dynamic development of IoT in Poland," the experts ensure.

Errors - human domain

The TFL industry is aware of the potential of IoT. “Companies must keep up with the needs of customers and quickly respond to challenges posed by the supply market. It is necessary to modify the way of thinking and be ready to flexibly adapt to changes that take place very quickly and cover many areas. Even 20 years ago, no one thought about autonomous trucks that move without a driver. Today, such vehicles move on public roads between the DB Schenker terminals in Sweden. The digital revolution requires companies to create new solutions,” admits Marta Miciałkiewicz, IT Management Land at DB Schenker.

Marek Pluciak, solutions design manager at Raben states that “the integration of IT systems of logistics operators involved in the supply chain is key. Maybe not for the whole chain, but in the initial phase, certainly for its key nodes. Hence the need to standardize solutions and carriers.”

“It’s nothing unusual. It is necessary today, for example, to constantly analyze an increasing amount of data and correct flows in the network. Based on this information, it is possible to create and analyze plans for the future. Unfortunately, the quality of the analyzed data is not always the best, which is largely due to the need of involving a human being in their generation. Some data can be obtained automatically, others, unfortunately, must be entered manually. And that’s where errors sometimes appear,” he adds.

Work from scratch in the company

Automation is the solution. However, experts warn that it is not enough to invest in additional sensors, telematics and the Internet of Things in connection with the most sensitive procedures.

“The key is to build a strategic transformation plan in the company. Success will not be ensured by modifying one process, but by rebuilding the entire activity,” advises Dr. Andrzej Bujak, professor and head of the Logistics Institute at WSB University in Wrocław.

“You have to start from scratch, i.e. from investment in human resources. Preparing employees for technological change will make them able to take advantage of new opportunities and understand the need to implement new solutions. Next, we must make an assumption of what we want to achieve as an institution in this digitalization and automation. What exactly do we want to digitize and to what extent. Also think about who to work with and connect by exchanging data,” he adds. Dr. Bujak advises to create the so-called mind map (concept developed by Professor Hans-Christian Pfohl from the European Logistics Association).

It involves analyzing:

  • what is the basis for the main processes in the company,
  • where are the biggest barriers,
  • where the largest losses are incurred,
  • what are the links between the various activities in the company and how should flows be organized between them,
  • what should be done to achieve efficiency gains.

Look at global trends

Transformation based on digital revolution is crucial for several reasons. “If we look at Polish dynamics of trade exchange, we will see that invariably nearly 30 percent of export goes to Germany - a country that consistently introduces solutions related to automation and digitalization. Nothing unusual. The concept of Industry 4.0, from which it all began, was created in Germany. When the key partner, with whom you have the largest trade turnover, changes, you have to keep up with it,” advises Dr. Andrzej Bujak, professor at WSB University in Wroclaw. “Otherwise you may run off course. A German company, who has different expectations for the exchange of information and the implementation of the flow, will focus on automation, and not e.g. on e-mail exchange. It will give up on suppliers who cannot keep up with the changes,” he warns.

Global trends require digital solutions. “First on the list is an aging population. Companies should start to focus on the Y and Z generation, which is now entering management positions and has specific expectations in terms of achieving goals, work behaviour and spending free time. They are people for whom the use of modern technologies and automating operations is the norm,” explains Dr. Halina Brdulak, associate professor at the Warsaw School of Economics. “Second trend is the climate change and ecological movements that corespond to it, third, globalization and regionalization and fourth - the digitalization itself,“ says Dr. Brdulak.

According to experts of the Working Group on Internet of Things, the focus on digital technologies will:

  • reduce human error, which is the most important cause of accidents in transport sector,
  • help create a multimodal transport system combining all types of transport into one integrated service that will allow efficient transport of people and loads from door to door,
  • reduce the energy consumption and exhaust emissions.

The industry has concerns

First, however, it is important to face a number of barriers, which include ”quite large investment costs, lack of experts and well qualified staff that understands the needs of the market, and mentality,” mentions Dr. Andrzej Bujak, professor at WSB University in Wroclaw. “Talking to company representatives I heard many times: "I know about automation, but this is not the moment. Everything works fine for me, I'll wait until things break down."

That’s when it may be too late according to experts.

The industry also has concerns about the security of the data it is exchanging. Another major factor that is stopping companies from investments is the uncertainty about what partners are planning.

“Many say ‘I introduce changes, automate processes, but I am not sure if these changes will affect my business. If contractors don't go in the same direction, what will happen to these changes?” notes Dr. Bujak.

From exoskeletons to RPA

Despite the fears, automation is taking place. The warehouses use AGV (automated guided vehicles), i.e. automatically controlled vehicles that transport pallets and cartons. The so-called swarm robots are also used, work on a problem like a swarm, operating according to written algorithms. Drones and exoskeletons help people.

In many tasks, the Internet of Things and artificial intelligence can even replace humans. “Algorithms can perform, for example, the work of a forwarder who quotes. Thanks to this men can do something more creative,” indicates Dr. Halina Brdulak.

The goal is primarily to look for savings at individual stages of the supply chain. Different companies do this differently.

“From the point of view of a logistics company, it is necessary to deeply analyze and identify individual areas of operations that need improvement or adaptation to the new environment. Of course, we analyze the network on an ongoing basis and search for the possibility of introducing solutions that optimize processes and flows. Currently, it is difficult in our conditions to automate distribution - there are no tractors that drive without drivers, and AGV trucks that can unload goods at cross dock without human intervention, are not yet cost-effective for logistics operators,” explains Marek Pluciak from Raben.

“We have tools based on a data warehouse, regarding the distribution and flow of goods through warehouses, which will enable the creation and analysis of data at the user level - without the support of the IT department in obtaining it. And this is associated with a great savings of time, because as practice shows, the demand for IT department support is very high,” he adds.

“We also use a specialized calculation tool for modeling processes and flows, finding bottlenecks and optimizing networks,” reveals Pluciak.

DB Schenker is also aware of the need to modify the company's operations in terms of logistics 4.0.

 “RPA (Robotic Process Automation) is one of the tools supporting the supply chain automation. This digital employee can replace a person in tedious activities. Thanks to the fact that it is digital, it doesn't get bored and doesn't make mistakes resulting from inattention or lack of concentration. Thanks to robotization and automation, many repetitive tasks can be performed much faster. RPAs at DB Schenker in Europe perform over 130 processes. Each robot gives different savings, so it's difficult to clearly estimate the benefits. First of all, we note that RPAs allow the employees  to change the way of thinking and encourages them to look for processes that require automation,” explains Marta Miciałkiewicz, IT Management Land.

“We also focus on the development of the Internet of Things, and examples of our activities are smartboxes that measure all parameters of shipments. They inform about their GPS location, temperature, shocks and humidity. Before their implementation, customers themselves analyzed the information about transported goods through the date loggers inserted into the packages. However, they did not receive real-time information. Today we want to give them such an opportunity by choosing the right service on the site,” she adds.

According to industry representatives, this type of investment is necessary to keep up with the most important trends in TFL sector. “One of the most important trends is the availability of tools for tracking shipment parameters. Customers can and want to check their location from anywhere in the world. They are able to order the transport of goods quickly and easily, e.g. using the application on the phone. Consumer expectations have necessitated changes in the method of delivery. Increasingly, the customer, apart from information about the location of his package, is also informed about the route traveled or the date of delivery. Equally important is the order reporting system, as well as a transparent and clear way of exchanging information with the customer,” explains Bartłomiej Centlewski, head of IT Management Land Cluster NEE at DB Schenker.

“One of the continuing trends is also the creation of systems in which there are more and more autonomous elements, self-steering machines, collision-free transport and dynamically planned routes depending on the traffic volume,” he adds. It also draws attention to a new concept that is becoming increasingly popular, i.e., blockchain.

“This system allows decentralization of data by processing it in the cloud. The solution is forward-looking and flexible - it can result in the creation of one platform for everyone, both for operators and customers,” explains the expert. “The result will be a reduction in costs and standardization of messages and documents. Profit will become visible to the entire industry, because it will solve the problem of having your own platforms and any costs associated with them. This will give you the ability to dynamically scale your resources.”

“We also notice the trend of full process automation. One example is the auto-replenishment (supplementing) of the customer's warehouse, which is programmed to use the so-called safe stock, i.e. secure inventory. When the warehouse system shows that the products are starting to reach minimum levels, they can order the relevant goods or components, without human assistance. They will appear in the forwarder's system and will be delivered to the place. All this is carried out according to a set scenario, taking into account all services (VAS), regulations and standards,” adds Centlewski.

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