The next big thing ?

Every now and then there comes an innovation that brings a paradigm shift in how business and logistics is approached. There is a need to assess the latest radical innovations when it comes to service and technology while assessing their impact on the supply chain. Lionel Alva

In a scene from the movie, ‘The Matrix’, Keanu Reeves, who plays the protagonist (Neo) asks Morpheus (a lead supporting character) about the nature of The Matrix. Morpheus tells him that it is the mind that has the power to make things real. For the human imagination is the most powerful tool there is. For instance, imagine a world where even non-living things espouse a consciousness or sentience, much akin to that of a Disney animation. And while this may seem like far-fetched fantasy that is constricted to the realms of science fiction; the advent of the internet of everything where appliances, mobile devices, electrical utilities, clothes and accessories and every non-living object could interact with each other in perfect consonance and respond intuitively to your needs is no longer mere fantasy. It is the evolution of technology that is making science fiction concepts a very real possibility. This is the promise and potential that radical technologies such as 3D printing, internet of everything and crowdsourced shipping depict. The confluence of this disruptive change is expected to bring about a paradigm shift in terms of possibilities that shall lead to a new epoch in manufacturing and logistics. Research firm Gartner estimates that the Internet of Things (IoT) will support total services spending of $235 billion in 2016, up 22 percent from 2015. Services are dominated by the professional category (in which businesses contract with external providers in order to design, install and operate IoT systems), however connectivity services (through communications service providers) and consumer services will grow at a faster pace. "Digital disruption is all around us and it's having massive implications for business. Digitisation and the expansion of the Internet of Things is a catalyst for growth, which is driving new economic models and enabling organisations to remain competitive and embrace the pace of change happening globally. This report clearly demonstrates that digitisation and the IoT will deliver long term efficiencies and growth opportunities across a wide range of industries," commented Chris Dedicoat, president, EMEAR for Cisco. According to Cisco's economic analysis, IoT will generate $8 trillion worldwide in Value at Stake over the next decade. This will come from five primary drivers: innovation and revenue ($2.1 trillion); asset utilisation ($2.1 trillion); supply chain and logistics ($1.9 trillion); employee productivity improvements ($1.2 trillion); and enhanced customer and citizen experience ($700 billion). “The Internet of Things is the connection of almost anything – from parcels to people – via sensor technology to the web and both Cisco and DHL believe this will revolutionise business processes across the entire value chain including supply chain and logistics. To get the maximum global economic benefit, we'll need to understand how all components in the value chain converge and this will require a comprehensive collaboration, participation and the willingness to invest to create a thriving IoT eco system for sustainable business processes," highlights Markus Kückelhaus, vice president innovation & trend research, DHL Customer Solutions & Innovation. Within the supply chain and logistics space, there are two forms of innovations that herald transformative change; one being service based innovation and the other being technological innovation. “Technology based innovations disrupt well established technologies to completely transform business processes and enable new business models. Within the supply chain and logistics space, two such technologies stand out due to their faster than expected adoption in the industry - IoT (Internet of Things) and 3D printing. IoT technology closes the gap between the physical world and the digital world by enabling electronic monitoring and control of sensors and actuators that are installed at each and every interface within the supply chain operation,” says Ronak Amin, product manager, JDA Software. Presently, technology such as automation has played a pivotal role towards enhancing core efficiency and overcoming problem areas including the impact of human errors. In terms of logistics, its inherent competitive nature has seen automation being used in various facets of logistics. John Dunlop, international development, Solon Software, avers, “Automating large equipment in shipping ports that are moving heavy payloads is not something that people immediately feel comfortable with. Removing the human element may be seen as risky. But, as the technology develops – and it is developing very quickly – we can see that reducing the human element not only contributes greatly to efficiency and timeliness of operations, but also defines higher safety standards.” He further elucidates upon how critical technology is for ports and how its rapid evolution has put the shipping industry in a race to adopt the latest technologies and systems that lend them a competitive edge. Being that technological evolution is a natural aspect of globalisation. He adds, “Disruptive innovations eventually replace existing modalities – for the better. The future is clear. The trend for ports is towards greater productivity with fewer and fewer stoppages and interruptions. This is what a disruptive innovation like terminal operating technology can provide as it goes on to evolve and develop the industry.” Apart from automation and the Internet of Everything there are technologies such as drone delivery systems and 3D printing that can completely change the fundamentals of the supply change for the better. In particular, 3D printing can transform digital bits into physical atoms thereby bringing the once ardous aspects of the supply to the barest minimum and building new efficiencies in the system. Sanchit Jain, CEO, DreamOrbit, a software company, says, “Disruptive innovations need an accepting market and competent IT providers to have a constructive impact. The market leaders have predicted a promising future for these innovations. McKinsey has predicted that 3D printing could generate economic impact of $230 billion to $550 billion per year” While technologies such as drone delivery systems have been used extensively in crisis situations like the recent Ebola outbreak and the Nepal disaster, their use has not become mainstream as yet. There is still enormous potential for drone delivery systems as it could ameliorate upon many of the last-mile delivery problems that the logistics industry faces. Jain adds, “According to Association for Unmanned Vehicle Systems International (AUVSI), the drone industry is poised to generate more than $80 billion in economic impact within the first 10 years of commercial use. And the companies which has already adopted Big Data within their decision making process are already enjoying five percent more productivity and six percent more profitability than their competition.” 3D printers use laser beams to melt down a raw material, building up the product layer upon layer. In recent years the technology has developed to allow printing in plastic and metal, resulting in a flood of interest from some of the world’s biggest companies which are using it to speed up production and create complex, lightweight parts at a fraction of the cost. Big companies like Maersk perceive 3D printing aboard their vessels as holding great promise and replacing a faulty engineering part during transit becomes an expensive and cost-prohibitive operation. Facilitating the logistics of such replacements can be a nightmare. Recently, the US Navy installed a compact 3D printer on amphibious assault ship USS Essex (LHD 2) for testing. The Navy aims to train sailors with this expertise, so if there is a part needed and it doesn't exist in the inventory, sailors could design and print the part on demand within hours or days, allowing for a more rapid response to the ship's needs. “It can cost up to $5,000 just to get one part on board a vessel. 3D printing would eliminate costs of warehouse and packing, airfreight to the port, customs clearance and chartering of the delivery ship,” says Markus Kuhn, purchasing manager, Group Procurement Marine, Maersk. While these technologies are still in their nascent stages, it would only take a while to reach a level when it would be hard to imagine a logistics operation without Big Data, 3D printing and drone services. There are also significant challenges to be overcome before these technologies become mainstream. For instance, with drone technology there are concerns pertaining to regulations, privacy and drones being used to collect classified information. With 3D printing, the key areas of concern are with intellectual property that must be circumvented. However, there are solutions in the form of encryption. The biggest change will be that the industry will become far more streamlined and organised with better information flow for everybody from companies, in house management, vendors and customers. While not every new technology will be a game changer; some truly have the potential to change the status quo completely transforming lives, changing fundamentals and perceptions. It is therefore extremely important that the logistics and manufacturing industries are geared up for the change that these technologies promise. Mohnish Sharma, CEO, DestaGlobal, asserts, “Dedicated service providers would emerge for similar industries, with a clear demarcation between the order taking industry and the service providers (e.g. a food ordering company and a food delivery company). I believe a few platforms like these would emerge which would have a large network of buyers and sellers of truck space – and perhaps a few dedicated, niche platforms for specific industries. Also, the same technology can be used for obtaining better utilisation of their trucks by large 3PL providers and companies having their own fleet.”