What is Logistics DX? Challenges faced by the logistics industry and efforts to solve them

One of the challenges facing the logistics industry is the labor shortage. Many companies are suffering from a chronic shortage of drivers and are struggling to solve the labor shortage. Such problems can be solved with DX. In this article, we will explain the issues facing the logistics industry, the benefits of working on DX, and the points to be taken into consideration.

What is Logistics DX?

DX is an abbreviation for “Digital Transformation,” which means using digital technology to transform business . DX is not just the introduction of IT tools and digital technology, but also an initiative to transform organizations and business models and establish superiority in business.

And logistics DX is literally DX in the logistics industry. We will utilize AI and IT equipment in operations that occur in the logistics business, such as delivery, transportation, storage, cargo handling, and distribution processing . For example, the introduction of a logistics management system to visualize logistics operations and improve management efficiency, as well as new delivery services using drones.

Market size of logistics DX

The size of the DX market continues to expand. According to the document “Future Outlook of the 2022 Digital Transformation Market Market/Vendor Strategy” published by Fuji Chimera Research Institute, the size of the DX market in Japan in fiscal 2020 is 1,382.1 billion yen, but the forecast for fiscal 2030 is 5.5 trillion yen. It is expected to expand 3.8 times from fiscal 2020 to 195.7 billion yen .

On the other hand, according to data released by Fuji Keizai Co., Ltd., the market size of next-generation logistics systems is expected to reach 962.7 billion yen in 2026, a 60% increase compared to fiscal 2020 . . As many companies operating in the logistics industry are promoting DX initiatives, it is believed that the market for next-generation logistics systems is expanding.

Challenges facing the logistics industry

Before you start working on DX, clarify the issues your company has. If the problem is clarified, it may be possible to find a more effective solution. In addition, since the issues that should be prioritized in promoting DX will be clarified, it is an urgent task to first extract and clarify the issues.
Here are three common challenges faced by logistics companies.

labor shortage

The logistics industry is already suffering from chronic labor shortages. Moreover, with the enforcement of work-style reform-related bills, the annual overtime hours for drivers will be capped at 960 hours from April 2024. As a result, the logistics industry will be hit in various ways, so it is called the “2024 problem” in logistics .

The bills related to work style reform were enacted with the aim of limiting overtime hours, obligating employees to take annual paid leave, and ensuring fair treatment regardless of employment status. However, due to the enforcement of work style reform bills, drivers will not be able to work overtime as before, and there is a risk that their income will decrease sharply.

Some employees may leave their jobs in search of better income. In order to avoid such a situation, it is effective to improve the working environment, review conditions, and improve work efficiency by introducing robots and logistics systems .

Increase in small-lot deliveries

With the spread of the Internet and mobile terminals, we have entered an era where everyone uses Internet shopping as a matter of course. In addition, due to the spread of the new coronavirus infection, more people refrained from going out, and as a result of increased demand for online shopping, small-lot deliveries increased .

The impact of the increase in small-lot deliveries on logistics companies is not small. Many small parcels are stored in warehouses, and some companies have complicated management . In addition, small-lot deliveries lead to a decline in truck loading ratios, leading to a deterioration in operational efficiency .

Delay in IT adoption/aging of systems

It has long been pointed out that the logistics industry is lagging behind in the introduction of IT. There are many companies that are not proactive in adopting IT, and there are still cases where they are still working on their business using analog methods .

Another issue is the aging of the system . An outdated system not only reduces work efficiency but also leads to personalization of work . If work is dependent on the individual, only certain employees can carry out the work, and if that employee suddenly takes a day off, there is a risk that the work will not be able to continue.

Many companies are unable to collect and utilize data . This is because in the logistics industry, there are many cases in which independent systems are built for each department. In such a situation, close cooperation between departments cannot be achieved, leading to inefficiency and an increase in work load .

Issues that can be improved or resolved by DX

By working on DX, you can get benefits such as operational efficiency and cost reduction. In addition, we can expect effects such as visualization of delivery status, elimination of labor shortage, and prevention of human error.

Business efficiency

By introducing digital technology, it is possible to automate and unmanned operations that have traditionally been performed by humans. By entrusting simple tasks and routine tasks to tools and systems, employees can focus on tasks that can only be done manually, leading to improved operational efficiency and productivity .

For example, the introduction of a picking system is effective in improving operational efficiency. Warehouse management, which has become more complicated due to the increase in small-lot deliveries, can be simplified by introducing a picking system, and it is possible to visualize where the parcels are.

In addition, if drones equipped with autonomous operation AI can be used, the need for drivers to visit again will be eliminated, improving work efficiency.

Cost reduction

Promoting DX is also effective in reducing costs. For example, if various logistics-related procedures are digitized, data can be exchanged without using paper, leading to cost reductions. By going paperless through digitization, we can reduce the costs of paper, printing, and stamps when sending invoices, as well as human costs.

Visualization of delivery status

DX makes it possible to visualize the delivery status. For example, if you introduce and operate a movement management system or delivery management system, you can grasp the current location and status of the vehicle in real time .

If the driver’s current location and delivery status can be accurately grasped, the manager can issue appropriate instructions according to the moment . It is also possible to check the map after grasping the current location and instruct the route that can be delivered in the shortest time.

With visibility of delivery status, drivers can perform their duties more efficiently. As a result, parcels can be delivered to customers faster than before, leading to improved customer satisfaction .

Eliminate driver shortage

One of the major challenges facing the logistics industry is the shortage of drivers. There are many reasons for the shortage of drivers, such as long working hours and low wages, but DX initiatives are expected to improve this situation.

For example, if we introduce trucks that use AI drones and autonomous driving technology, they can take the place of human drivers and carry packages to their destinations, helping to solve the labor shortage.

In addition, optimization of delivery by the movement management system is also effective in resolving the shortage of drivers. The administrator can grasp the driver’s location and delivery status in real time, so it is possible to give appropriate instructions according to the situation at that time. If we can create an environment that enables more efficient delivery operations, we will be able to carry out operations with fewer personnel .

These measures will also improve the working environment for existing drivers. If it becomes possible to work more comfortably than before, it will be possible to avoid driver turnover and make it easier to acquire human resources .

Prevention of human error

Human error is inevitable in logistics operations. There are quite a few companies that still perform picking operations manually at distribution warehouses. The task of finding and retrieving the desired package from a large number of packages is prone to errors and reduces work efficiency.

By introducing a picking robot, it is possible to avoid the above mistakes. Unlike humans, they do not make mistakes and work quickly, which improves work efficiency. It also has the advantage of reducing the burden on employees .

The same effect can be expected not only by picking robots, but also by automating and systemizing simple tasks and routine tasks.

Key points of DX in the logistics industry

For companies operating in the logistics industry to work on DX, it is important for the front line and the management team to collaborate. In addition, securing human resources who can lead the promotion of DX and promoting digitization in a planned manner are also important points for the success of DX.

Work in collaboration with management team

In order for DX to be successful, the management team and the field must not proceed independently, but must work together. What the management should do is to clarify the purpose of DX, and then firmly convey to employees the necessity, merits of introduction, value, etc.

Since it is the workplace that is particularly affected by DX, ignoring the workplace and tackling it only by the management team may cause resentment from employees. Let’s proceed with initiatives in cooperation with the site while the management takes the lead .

Secure DX human resources

In order to promote DX, it is necessary to secure IT personnel who are familiar with DX. DX is not just digitization, but it requires initiatives that look ahead. For that purpose, since reliable know-how and technology are required, human resources who are well versed in IT are indispensable.

If you want to advance DX as soon as possible, it is better to consider acquiring human resources from outside, but recently, competition for acquiring IT human resources has intensified in various industries, and it is possible that things will not go as planned. . In addition to attracting IT personnel, efforts to develop IT personnel in-house will also be important .

In addition, the introduction of various digital technologies will significantly change the way work is done on site. We also need to develop manuals so that employees can respond smoothly .

Systematic introduction

DX is not something that can be realized overnight. Extracting issues and selecting tools and systems to be introduced takes time, effort, and cost. Random implementation will not only not proceed smoothly, but it may also interfere with normal operations, so let’s proceed with the implementation in a planned manner .

It all starts with planning well in advance. Make a detailed schedule and stick to it. It is also important to start with the parts where you can feel the effects in a short period of time by introducing tools and the parts that are easy to work on.

Examples of DX that can be tackled in the logistics industry

There are probably more than a few corporate managers and people in charge who are thinking, “I want to promote DX, but I don’t know where to start.” In such cases, looking through the DX examples of other companies may give you hints for solving your own problems.

Optimization of transportation and delivery routes

By optimizing transportation and delivery routes, we can expect effects such as improved operational efficiency and productivity . Optimization of delivery routes means deriving routes that deliver packages to their destinations in the shortest distance without waste .

Even in the case of driving the same route every time, efficiency can decrease due to various factors. Examples include weather changes, accidents, and sudden traffic jams.

In recent years, efforts are underway to use AI to analyze data on weather and road conditions, and derive optimal delivery routes according to the time. By introducing such a system, it is possible to quickly determine the optimal delivery route and realize efficient delivery operations.

Logistics management system

If you introduce an inventory management system and a storage management system, unify the data handled by these systems and seamlessly link them, you can expect a significant improvement in operational efficiency .

In cases where multiple systems are introduced, there may be situations where “information from system A must be manually reflected in system B.” If you link data with the logistics management system, it will be efficient because the information will be reflected in all systems with a single input.

System introduction and coordination are also effective in optimizing operations . Visualization of trends in delivery routes and history of incoming and outgoing shipments makes analysis easier, effectively optimizing operations.

Paperless/digitalization of information

Going paperless is an effective way to promote DX and reduce costs. By using data instead of paper media for materials, you can obtain various benefits such as reduced storage space, faster information sharing, and reduced printing costs .

Once you have an environment in which you can centrally manage digitized data, analysis will become easier. Based on the analysis results, it is possible to discover hints that lead to problem solving and propose improvement measures .

AI-OCR is an effective tool for digitizing documents . OCR that uses AI has higher character recognition accuracy than conventional OCR, and is also compatible with various formats. If you automate your work by linking with RPA, you can achieve further efficiency improvements.

AGV (Automated Guided Vehicle)

AGV is an abbreviation for “Automatic Guided Vehicle” and is an automatic transport robot. The robot operates within a predetermined range and smoothly transports even heavy loads. In recent years, more and more companies are introducing AGVs into their distribution warehouses.

In conventional warehouse operations, employees would walk around the warehouse and pick out the desired packages. On the other hand, with the introduction of AGVs, the shelves on which the products are stored are transported to the designated location where the employees are located, eliminating the need to walk around the warehouse as in the past .

However, many AGVs can only move on preset routes, and there are disadvantages such as the need to input map information in advance, so caution is required.

Autonomous driving technology

Self-driving car technology has also advanced considerably compared to the past. Research and experiments are still underway, and it is believed that it will eventually be put into practical use.

Some major transportation companies are already actively experimenting with automated delivery robots. Since we are actively working on experiments such as having automatic delivery robots perform transportation between bases and delivering packages to designated locations, it may not be too far from practical use.

drone delivery

Experiments are also underway for delivery using drones. If drones can be used for delivery, it will be possible to easily deliver to places that are difficult to access by land.

A drone that can fly in the sky can reach its destination in the shortest distance regardless of road conditions. As a result, a significant improvement in work efficiency can be expected.

Maintenance of manuals

In promoting DX, we must not forget to prepare manuals in order to introduce various systems and tools. If you do not have rules , rules, work procedures, etc. for the system and tools , there is a risk of confusion in the field.

If you want to create a manual, we recommend electronic manuals instead of paper ones. Especially with tools that allow you to create and edit in the cloud and share online , it’s even more convenient.

summary

Promoting DX is effective in resolving the various issues faced by the logistics industry. Efforts to DX provide various benefits such as improving operational efficiency, eliminating driver shortages, preventing human error, and visualizing delivery status.

When working on DX, it is important that the management team and the field work together. In addition, we must secure human resources familiar with DX and proceed systematically. Since various systems and tools will be introduced in the process, don’t forget to prepare an appropriate manual so that the site can respond smoothly