Delivering change: digital transformation in logistics
Digitalization threatens to fundamentally disrupt logistics but could also unlock $4 trillion of value for the industry and wider society.
Over the past two decades, as the internet and mobile revolutions have taken hold, our day-to-day lives have become increasingly digital. With email eclipsing ‘snail mail’ and digital downloads replacing physical products, this could well have dealt a devastating blow to the logistics industry. But in fact, more packages than ever before are now being shipped. On any single day, 85 million packages and documents are delivered around the world.
Demographic and digital trends are combining to drive growth, but logistics businesses cannot afford to rest easy and enjoy the fruits of this global boom in shipments. Logistics has introduced digital innovations at a slower pace than some other industries. This slower rate of digital adoption brings enormous risks that, if ignored, could be potentially catastrophic for even the biggest established players in the business.
As other industries with close links to logistics, such as retail, are revolutionized by digital technology, the chances of digital disruption engulfing the logistics industry increase – for instance, the rise of e-commerce has led to new digital entrants in the last-mile delivery market.
E-commerce penetration rates are forecast to grow strongly
Source: Oregon Digital Library – Euromonitor, Accenture analysis
More significantly, digital platforms will become increasingly important in the logistics industry, allowing small companies to have a global reach and compete with the sector’s established giants. Over the next few years, the race to build a dominant global platform will transform the customer’s experience of logistics and will be the central issue in determining which enterprises will be the winners and losers in a truly digital logistics industry.
With the logistics industry suffering from some very significant inefficiencies – for instance, 50% of trucks travel empty on their return journey after making a delivery – digital transformation can also bring important social and environmental benefits by increasing efficiency and cutting down energy consumption and emissions.
We have identified five themes that will be central to the digital transformation of the logistics industry over the next decade:
Digitally enabled information services will put data at the heart of logistics businesses through initiatives such as logistics control towers and analytics as a service. These will reduce operating costs while improving operational efficiency.
Digitally enabled logistics services will grow trade by creating digitally enhanced cross-border platforms. They will also help satisfy growing customer demand for faster same-day deliveries, and promote the concept of city logistics, which will allow firms to operate in ‘megacities’.
New delivery options such as digital trucks and drones mean more efficient ways to deliver shipments, while 3D printing and crowdsourcing offer new ways to think of manufacturing and logistics processes.
A circular economy will foster a more sustainable product life cycle, helping to lessen the industry’s environmental footprint by reducing carbon dioxide (CO2) emissions, air pollution and waste material.
|Shared logistics capabilities|
Shared warehouse and shared transport capabilities are expected to increase asset utilization in the near future.
Digital transformation in logistics: a $4 trillion opportunity
Our value-at-stake analysis aims to assess the potential for digital transformation initiatives in the logistics sector to unlock benefits for the industry, its customers and society more generally over the next decade (2016-2025).
Our analysis indicates that digitalization in logistics could unlock $1.5 trillion of value for logistics players and a further $2.4 trillion worth of societal benefits over the next decade (to 2025).
Logistics: value at stake for industry and society (2016-2025, by digital initiative)
Source: World Economic Forum / Accenture analysis
Important findings from our analysis include:
Data-driven information services
This initiative offers an $810-billion upside to the industry. Industry players will use analytics to optimize routes, reduce maintenance costs and improve utilization. The big players will implement control tower solutions to augment these benefits with real-time visibility, which would generate incremental profits by reducing downtime and recovery costs.
Crowdsourcing is a potential game changer for the industry. It will make the sector more competitive, and major trucking companies could be at a risk of losing $310 billion of operating profits to players enrolled on crowdsourced platforms.
Digitally enhanced cross-border platforms
This digital initiative will increase trade flows by simplifying import-export processes. These platforms could earn $120 billion in the form of commissions. Logistics companies could earn $50 billion in additional profits as a result of this increase in trade.
Long-term bold play capabilities
Autonomous trucks and drones will increase the industry’s efficiency and bring significant societal benefits once the regulatory hurdles are overcome and mass adoption becomes feasible. However, over the next 10 years, they will have a relatively smaller contribution to the tune of approximately $50 billion.
Customer and societal benefits
The greatest impact from digital transformation in the logistics industry will come from societal benefits. These include lower carbon emissions, less traffic congestion, lives saved through reduction in accidents, increase in cross-border trade as a result of platforms simplifying trade, and discounts to customers on account of increased utilization levels. Digital alone has the opportunity to reduce emissions from logistics by as much as 10 to 12% by 2025. We estimate the total benefits to customers and society to add up to approximately $2.4 trillion coming primarily from three initiatives: crowdsourcing, digitally enhanced cross-border platforms, and shared warehouse agreements.
Unlocking societal value: crowdsourcing
Crowdsourcing platforms – the ‘Uber’ of logistics – can be a game changer. By helping smaller firms raise utilization levels, they will make the industry more competitive, and bring societal benefits such as logistical cost reductions for customers of $800 billion. They could also reduce CO2 emissions by 3.6 billion tonnes, while generating additional income for consumers who decide to use their personal vehicles to deliver goods while on personal trips. Clear regulation will promote these platforms and increase adoption.
Next steps towards a digital logistics industry
The time and complexity required for these initiatives to reach scale across the market vary significantly. We have identified certain underlying requirements that are the building blocks for the digital transformation of the logistics industry. Two of the most important ‘no-regret’ capabilities are: companies should improve their collection of data from all along their value chain; and enterprises should ensure they have the capability to analyse big data streams to derive insights that improve operational efficiency and enable the launch of new services, such as last-mile delivery.