Amazon’s ongoing effort to build a fleet of air, road and sea vehicles should set off warning alarms for traditional logistics companies; the company has a 40-strong fleet of aircraft, has registered for a license for sea freight and holds a patent for a futuristic, high-speed subterranean urban delivery system.
However, Amazon’s real disruptive force isn’t underground pipes, ships or planes; it’s the company’s effective use of data.
Amazon uses very advanced analytics and technology to mine its data and is always experimenting to improve its delivery model. The traditional logistics industry, meanwhile, is mired in legacy mentalities and data-sharing policies.
To survive, logistics companies must realize that they are no longer competing against each other, but with data-driven global giants. To stay competitive, they should use artificial intelligence and machine learning to unleash the full potential of their data, and — importantly — exchange this data with other logistics players to keep pace with the Amazons of the world.
This last point will require a shift in mentalities, as the logistics sector is highly competitive, crowded and operates on thin profit margins. Most leading logistics companies compete not on products, but rather on price and speed. As a result, they protect their fleet data at all costs, wary of surrendering any strategic advantage. But continuing to hoard that data puts them at a disadvantage.
Since venturing into logistics, Amazon has been able to track a shipment’s journey from start to finish. This “bird’s eye view” of data across the supply chain is an advantage Amazon has over traditional logistics companies’ more fragmented systems. Amazon packers, drivers and delivery workers log information into the same data system, offering a fluid data trail from start to finish. Logistics companies generally only manage particular steps of the journey and typically don’t share information with others across the supply chain. This limits the actual learnings companies can glean from their data and also how actionable those data insights could be.
Plus, companies are not effectively “cleaning up” their data. Failing to enforce unified data standards when recording data leaves gaps that makes the information difficult to use or share.
For example, there is no standardized measure for logging data about shipping containers or truckloads. Even within an organization, individuals at different stages are not recording shipments in a uniform manner. Some may register volume, others loading meters, others weight, and many companies fail to register the size and capacity of different types of vehicles. The problem is exacerbated further by legacy systems that require employees to note and enter data manually and accept client estimates of shipments’ weight and volume.
To advance, logistics companies must automate and harness the power of AI systems to “clean up” this existing data and stop treating analytics as a side project.
But even if logistics companies improve their internal data collection, they’ll lack information about the legs preceding and following their involvement unless the industry begins sharing selected data with other players. So that everyone has a solid overview, logistics companies must cooperate in building a data-driven, transparent process and reach a “single version of the truth.”
Despite these goals, companies simply may not want to hand this precious data to their competitors. But they may feel comfortable sharing it with a third party.
The Supply Chain and Logistics Institute’s co-director, Benoit Montreuil, has proposed the alternative of a global logistics system called the “physical internet,” based around collaboration between academia, industry and governments worldwide. Under this system, products would be transported in standard modular containers as seamlessly as the internet moves digital information. Blockchain technology could be used to collectively store and share select data on a decentralized ecosystem, allowing individual companies to choose what information is shared with whom.
The key, ultimately, is that logistics companies need to start building bridges rather than walls. Traditional companies can only rest on their laurels for so long before they are forced to adapt or disappear. The clock is ticking, and with every moment that traditional companies hesitate, Amazon is creating, storing and analyzing more data and advancing one more step ahead of the competition.
Based in Sofia, Bulgaria, Transmetrics is a provider of predictive analytics and AI software for logistics used for demand forecasting, asset and network optimization.