Digitization: Basis for Enhanced Supply Chains

SimpliRoute, a startup specializing in logistics optimization through Software as a Service (SaaS) technology, has published the first edition of the State of Logistics 2024 study, designed to generate in-depth analysis and address industry concerns, which highlighted the need for modernization and adoption of emerging technologies to strengthen competition within the logistics sector.

In collaboration with Tecnológico de Monterrey and the Association of Professionals in Logistics, Operations and Supply Chain (APLOG), the State of Logistics 2024 report surveyed more than 300 industry leaders in Latin America. Results point out how the low implementation of technology in logistics processes continues to represent a significant challenge for the region, underscoring to the need to adopt a proactive approach to modernization and the integration of emerging technologies.

"As leaders in the sector we are sometimes navigating without much knowledge of what the rest of the industry is doing … We are seeing a strong paradigm shift in logistics, where there are much more demanding customers asking for more information, as we deal with the adoption of Artificial Intelligence, which means that as logistics professionals, we need to better understand how we are operating," says Alvaro Echeverria, CEO and Co-Founder, SimpliRoute.

Challenges, Need for Renewal

According to Economist and Logistics Consultante Jaime Mira Galiana, digitization in logistics processes offers a number of advantages to address current challenges and stand out in the market. Cost savings and greater efficiency in document management by eliminating manual processes, higher productivity and work quality through process automation, greater visibility in terms of resource management, and more effective product traceability are just some of the benefits. In turn, transportation planning becomes more efficient, deliveries and returns are more flexible and agile, and demand forecasting is improved through data analysis. All of this contributes positively to the reliability and efficiency of the logistics chain, while favoring the competitiveness of companies, streamlining commercial relations and reducing procurement times. 

According to the study, 87% of respondents acknowledge that they need to improve their logistics operations, while in Mexico this rate rises to 91%. About 59% of respondents indicate that their operations are in a process of "continuous improvement", while 28% think that their operation requires a thorough review or shows significant current challenges. Mexican companies, the most represented in the study with 23.58% of total respondents, say they feel even more challenged, with 41% of respondents in Mexico indicating that their operation needs a review due to "significant challenges."

A reactive, later than a proactive approach reigns in logistics operations, as 89% of respondents state that instead of anticipating or collaborating with technological partners to avoid potential threats, they choose to respond once they have already occurred, while only 11% of companies consider developing predicative capabilities, highlighting that this represents an opportunity for the rest of the industry.

The study points out that the main challenges for companies to address within the region's logistics processes are transportation efficiency (34%), technology implementation (25%), and global supply chain (24%). Specifically for Mexican companies, challenges in the global supply chain are the biggest problem, with 34% of companies indicating hurdles in their logistics processes. In addition, 50% indicate that they do not have a fixed schedule for reviewing their global strategy, while only 15% of companies use technology to optimize logistics costs, which still indicates a digitalization gap.

Technology Within the Supply Chain

Echeverría notes that around 88% of companies have implemented technologies in at least one of their logistics processes or are in the process of implementing them. However, the study reveals that only 21.9% of the companies surveyed have integrated technologies in all of their logistics processes. Although this is noted as progress, it contrasts significantly with the 46.9% of companies that consider their logistics status efficient and optimized thanks to technological implementation, revealing low satisfaction on the part of the companies. 

"Most companies are challenged in terms of finding professionals to make use of these technologies, either because they did not have the internal knowledge capabilities or because of difficulties to recruit in the logistics area," Echeverría.

Regarding the adoption of artificial intelligence (AI) and blockchain databases, the executive stated that "while 33% of companies will evaluate and select new technologies on an ongoing basis, a worrying 14% have no plans in the short term, suggesting a lack of preparation to address future challenges. In Mexico, for example, only 26.67% of companies plan to adopt AI." Regarding the specific use of blockchain technology in logistics operations, it was revealed that 40% of companies have not yet considered its implementation and 29% do not perceive practical applications for this technology, while only 8% are currently using it, suggesting a lack of understanding or reluctance toward it.

According to IBM, blockchain models provide a number of operational advantages to companies, such as increased trust, greater security, transparency and traceability of shared data in a business network, increasing cost savings thanks to its new efficiencies. "Building trust between trading partners, providing end-to-end visibility, simplifying processes and solving problems faster with blockchain adds up to stronger and more resilient supply chains, resulting in better business relationships," states the company. 

The study also highlights the low adoption of Internet of Things (IoT) devices, focused on real-time tracking of shipments and assets, since 40% of respondents have not implemented such devices, and only 15% of companies have implemented this technology within their supply chain.

The study establishes the need for transformation in the logistics industry. Collaboration between companies and technology partners, as well as the development of internal capabilities, are key to addressing the challenges and seizing the opportunities offered by digitization. "It is crucial that companies take a proactive approach toward modernization and integration of emerging technologies to remain competitive in an increasingly demanding and digitized global marketplace," the study reads.