By John Chen, Vice President Asia, C.H. Robinson
It’s hard to imagine our lives today without technology enabling us to do virtually everything faster. Technology is also impacting the logistics industry in similar ways, improving speed, service quality and business outcomes for both shippers and carriers.
In Singapore, with the Tuas Mega Port Development project and the launch of the Networked Trade Platform – a national effort to strengthen the IT ecosystem that supports Singapore’s trade activities, it is clear that technology is already propelling the industry forward. Logistics players no longer have a choice on whether or not their organisations will undergo change – the key now lies in going about it strategically.
The first, and most crucial step, to tackle this industry-wide transformation is harnessing technology to modernise infrastructures and processes. We call this the ‘DiSCO’ approach, or Digital Supply Chain Optimisation, at C.H. Robinson, a framework we believe will usher in the next phase of logistics.
Digital Supply Chain Optimisation Hierarchy
The first two levels of the optimisation hierarchy encompass the attributes of digital freight matching, which, at its core, is nothing new as it has formed the foundation of the third-party logistics industry since it started in 1980.
First, freight consolidation. Businesses that need to transport small volumes of goods but want to avoid high shipping costs can rely on technology platforms to match and consolidate complimentary freight into a full-truckload or full container shipment, thus increasing efficiency and reducing shipping costs.
Second, instantaneous communication. The mobile phone’s ability to triangulate geo-location is amazing, but when it comes to global shipping across multiple modes, businesses should rely on technology built by and for supply chain experts that track all your modal activity in one place. Utilizing real-time visibility tools allows businesses to adjust if unplanned disruptions arise and keep their supply chain running smoothly.
But the shipment locations alone far from guarantee a good business outcome.
On to the third level in the hierarchy, service qualification. Qualifying the service required for a specific shipment is where we start to separate technology companies dabbling in the freight business and true global logistics professionals. This process answers the question: What are the potential risks, their probabilities, and what is the appropriate risk management strategy? Service qualification speaks to a real-world aspect of transportation that many do not understand: freight is not a commodity.
In the upper echelons of the hierarchy we move into pricing. Accurate pricing is a very important component of both transactional and contractual freight movements.
The fourth level of the hierarchy is robust supply and demand forecasting. Accurate pricing requires insights into potential capacity challenges, fluctuations in demand, and market conditions on a lane-by-lane basis. Logistics solutions that leverage historical data and predictive analytics to offer this capability improve clarity on not only market pricing, but also on where capacity and freight imbalances may occur.
At this point, we can begin to identify the right price for a specific shipment or commitment within a broad market context. This is the fifth level of the hierarchy. At C.H. Robinson, we simplify this process for our customers with the Incoterms® tool, which allows businesses to effectively connect with suppliers around the globe to negotiate unit price, cash flow, inventory levels, and logistics costs.
Once we can identify the right price, it’s time for things to get personal, which is why the sixth level of the hierarchy is personalisation. Think about this as the quantification and application of “shipper of choice.” This process identifies specific attributes of a logistics provider that impact the productivity of shipments, custom clearance, and cargo examinations, and apply that within the pricing algorithms.
The seventh level and ultimate goal is optimisation. This is the crown jewel of DiSCO. Based on a comprehensive customer survey which we gathered some valuable insights from more than 3,000 shippers and more than 5,000 carriers, 98 percent of supply chain technology decision-makers are looking for improvements in their logistics technology stack. Furthermore, all shippers are under real pressure to continually increase efficiency and they are looking at technology as a means to achieve this. The supply chain experience can be completely revolutionised by the introduction of collaborative logistics and transportation networks – an ecosystem that fosters industry intelligence, knowledge exchange, business commitments that benefit all. With our information advantage, we drive better outcomes for customers’ businesses by taking advantage of our experience, scale and data. The goal is to match needs, not just shipments.
What does this mean for the industry?
There isn’t a silver bullet that can help organisations achieve optimisation overnight. It’s all about getting these elements right: advanced technology built by and for supply chain experts; an information advantage based on experience, data and scale; and expert guidance from trusted consultants.
Today, the industry is still largely in the geographic proximity and instantaneous communication game. But change is quickly happening, and technology is at the centre of this revolution. Those who see the digital transformation not as a threat, but as a shape-shifting business opportunity, stand a higher chance of achieving DiSCO and reaping the rewards of greater optimisation – lower costs and a better shipper experience. It’s important to invest in both people and technology to deliver the best supply chain solutions—people will drive the tech and not the other way around.