It’s rumoured to be on the horizon with a rise in technological solutions across the entire spectrum of human activity. But how disruptive will the fourth industrial revolution be and what will it mean for the logistics industry? Sindhu Hariharan investigates
The Future of Jobs report released by the World Economic Forum 2016 held in January claims that a fourth industrial revolution is underway and will bring sweeping changes to virtually every sector. The report reveals that developments in previously disjointed fields like artificial intelligence, machine learning, robotics, nanotechnology, 3D printing, genetics and biotechnology are all building on, and will cause disruption to, business models.
Almost in tandem, the logistics industry has been undergoing series of transformations over the past few years. Technologies that seemed like science fiction in the past, including virtual reality, driverless vehicles and drones, are potential drivers of the industrys operations.
With regard to the MENA region, the vision of regional leaders is to develop innovation hubs and inculcate a culture of innovation across states. Various initiatives have been undertaken, across sectors, to strengthen the regions position as a leading innovation force globally.
On the occasion of UAE Innovation Week held recently, the global marine terminal operator DP World, released a report titled A Turning Point: The potential role of ICT innovations in ports and logistics. The report stated slowdowns in global trade have added fresh impetus for ports and logistics firms to invest in the latest innovations in ICT.
After growing at breakneck speed throughout the noughties, the value of global merchandise trade shrank in the first six months of 2015 by more than 13% year-on-year, cautions the report, attributing this largely to the current economic situation in China and near stagnant growth in Europe.
DP Worlds report, prepared in collaboration with the Economist Intelligence Unit theorises that significant investment is needed to apply digital tools to business and timing is key in taking the plunge into automation. The report considers government policy to be the primary driver for these innovations and emphasises the new set of skills needed to keep up with an ever-increasing tech-savvy world. The study identifies five ICT innovations as being particularly relevant to the logistics industry: robotics and automation; autonomous vehicles; the Internet of Things and big data; simulation and virtual reality; and cyber-security.
Robotics and automation
Automation varies in intensity across ports and logistics players. As reasoned by the report, while the worlds busiest container port, Shanghai, operates on less automation at Rotterdams Maasvlakte II terminal which opened in April 2015 has almost no personnel inside its cargo-handling section. As the cost of labour increases and the cost of technology decreases, companies are fast-moving to a scenario where investments in automation will work out cost-effective.
The report states that automation makes most sense in ports where there is a competitive need to efficiently handle. the rise in megaships has driven the latter need, it points out.
Commenting on the regional industrys adoption of high-tech, Muthanna Muckatira, ME business director, Ehrhardt + Partner Solutions says: There is hardly any serious automation in this region due to the fact that manpower costs are relatively less and they are easily available. However, there are few sites where investment in automation is happening, he says. He adds that it is essential to educate stakeholders and end-users about the significance of automation techniques to make them consider the investment beneficial from a long-term perspective.
Shashi Shekhar, group chair and founder, SCLG (Supply Chain and Logistics Group) is optimistic about innovation in logistics in the region. In our recent interaction with many experts from supply chain and logistics domain, they have identified automation as a key theme to be adopted. SCLGs recent conference also concluded that automation helps the industry but there is an increased need to help customers drive the business case for automation.
As for robotics, the report identifies growth of e-commerce and changes in consumer preferences as key drivers of adoption. The fulfilment of online orders requires increased responsiveness compared to traditional methods.
Today many consumers expect same-day delivery and also want to be able to customise the products that they order. This is placing an onus on warehouses to dramatically increase their speed and productivity, states DP Worlds report.
The use of robotics in intra-logistics is proliferating in developed markets think Amazon and is also gradually entering emerging markets. As a result, a number of start-ups and larger technology companies have begun developing autonomous systems to meet these fulfilment requirements.
As per analysts, the biggest barriers to retrofitting automation systems remain perceived impact on employment opportunities and resistance from trade unions at existing ports and logistics companies.
Driverless vehicles
The report anticipates that given the ongoing investment in self-driving vehicles, it is likely that logistics firms will soon be using fully automated trucks and delivery vans, reasoning: Once the technology has a solid track record and a clear safety record, its attraction may become too compelling to ignore.
The study is cautiously optimistic about the technology. Referring to analysts estimates, it states that humans may need to stay in the driving seat for the foreseeable future, especially for long-haul trucks. The report also considers various governments racing to position themselves as leaders in the sector as a positive sign. For instance, in December 2014, Innovate UK announced that it would invest £10 million in four new testing facilities for driverless cars.
Drones
The report counts introduction of small drone copters as parcel carriers the kind currently being tested by companies such as Amazon and Google as an important development in the last mile of logistics chains. Just as any technology in its infancy, drone delivery also faces challenges. While commercial use of these carriers is already underway by large players like DHL, Amazon and others, regulatory challenges and inadequate makers or providers of the solution pose a challenge for scalability.
Smaller drones are already being used for security surveillance in some ports, such as Abu Dhabis Khalifa Port, and could also have a role in monitoring port operations and detecting problems requiring maintenance in both port equipment and ships.
Internet of Things and Big data
The revolutionary and widely spoken advances in IoT and Big Data allow devices to communicate with each other within an existing network infrastructure. By 2030, the supply chain industry will the biggest creator of data. For many organisations, the first step is to build meaningful intelligence on existing data while finding ways to capture new data, explains Shekhar.
DP Worlds report expects that IoT will become more prevalent with the increased proliferation of smart devices in logistics operations. However, it also sounds a note of caution. It stresses that a robust communications systems needs to be in place for the successful implementation of IoT in logistics and this becomes particularly important in environments such as ports, where containers and equipment can block signals.
Simulation and Virtual Reality
Simulation and Virtual Reality (VR) are two lesser-known but more complicated technologies that are expected to make a difference in logistics operations in the near future. The report expects simulation to become increasingly important in modelling the potential impact of the other ICT innovations discussed, such as automated vehicles, thereby helping operators to determine if and how to incorporate them into operations. It also states that as automation increasingly removes personnel from core operational area, simulation will allow remaining staff members to understand how the automated areas are functioning.
As for VR, the study shows that for the broader logistics sector, VR may have several applications. While at a basic level, a driver whose truck breaks down could launch a VR application that would show them how to fix it, VR can also be used to visualise any planned rearrangements at full scale, explains the report.
Muckatira of Ehrhardt + Partner Solutions explains the utility of their product LFS glass adapted from a product innovation from Google that guides the picker in the warehouse with a visual reference to go directly to the bin location and pick the item. Adoption of this concept and technology is still in its infancy and possible commercial rollout will take some time due the ongoing product development from Google, he says.
Cyber-security
Highlighting a flipside to the entire digital wave in logistics, the report names cyber-security as a challenge. The potential vulnerability to software bugs and cyber-attacks range from small scale attacks by criminals seeking to evade port security through major assaults by terrorists or hostile countries seeking to disrupt trade flows as an act of war, explains the report.
Looking beyond the innovations covered by the study, industry analysts largely agree on the significance of these technologies for the logistics industry. Eft (Eye for Transport) Supply Chain and Logistics Business Intelligence, a research organisation for the supply chain industry, publishes annually its 3PL Contracting Report exploring technological advances entering the industry.
A key finding of the 2015 report says that while in 2014, less than 25% of respondents acknowledged areas such as drone delivery, augmented reality, 3D printing and driverless vehicles as playing any role in their businesses, in 2015 this number jumped to over 40%. Further, as per Transport Intelligences briefings on trends to look out for in 2016, autonomous vehicles, 3D printing, sensor technology and the like, will be key influencers for the industry though not lead to any revolution in the short-term.
Commenting on MENAs efforts in adoption of these transformative tools, Sebastian Stefan, CEO, LoadME says: Some logistics companies are aligned with the latest technologies but the majority are still using inefficient and outdated methods. Though we [MENA] are a bit behind, the adoption rate of new technologies is fast and governments are also supporting the smart initiatives.
Shekhar feels that a one-size-fits-all approach will not help the industry. Our recommendation is that each organisation should evaluate their needs of automation to generate internal efficiency, he says. He adds that policy makers in GCC are engaging with the community and implementing ways to regulate and grow all positive aspects of technology.
On the occasion of UAE National Day, DP World hosted an Innovation Stand that provided a glimpse of the use of high-tech in its terminal operations at flagship Jebel Ali Port in Dubai.
As per DP Worlds official release, the state-of-the-art technology showcased included automated guided vehicles used at Rotterdam World Gateway (RWG); the use of security drones at its ports providing live video coverage of areas not in view of fixed camera networks; remotely controlled quay cranes at Jebel Ali Port, operated by female UAE national crane operators; and also a 3D virtual reality tour of port operations.
DP World also runs the TURN8 programme, a startup accelerator initiative, to encourage future innovation by way of mentoring, business plan advisory and access to seed capital investors.
I am sure that MENA is ready for technology and the region will also be forced into it in the coming years as all emerging markets mature. Fuel prices in Saudi Arabia have been doubled recently and this will definitely influence the RoI for adopting new technology in logistics companies, states Stefan.
As postulated in DP Worlds detailed take on ICT innovations, at a time when trade flows are down and competition is rising, getting large-scale investments approved for port automation or robotics will be a huge challenge by itself.
Secondly, the regulatory stance taken by governments is also considered a critical factor in determining the pace of rollout of various innovations in core operations. Further, emerging as a mixed blessing for MENA will be the need for new skill sets.
The report stresses that, in addition to the skills that all employers expect, hard skills will also be needed in fields such as applied mathematics, statistics, data analytics, software engineering, and cyber-security. Finally, logistics providers must keep in mind that they cannot address management of high-tech tools in isolation. The report recommends that in case of issues like cyber-security, companies need to work with private sector partners and the government to share information on attacks and on new capabilities.