Logistics Q&A: How Technology Has Changed Logistics

Sept. 3, 2010
An ask-the-expert series focusing on plant operations and logistics.

Q. What effect has technology had on the transportation and logistics industry?

A. Before we can talk about the impact technology has had, we need to paint a clear picture of the supply chain management industry. Until the 1970s, transportation was a simple commodity and usually involved either a truck or a train. Most products were manufactured and consumed within the U.S., and ocean transportation was used for export when needed.

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With the 1980s came an influx of imports and overseas manufacturing and a need for the ability to easily manage more modes of movement in a greater number of locations. By the 1990s, shippers were optimizing modes and locations they had begun using in the 1980s, and a decade of new supply chain management (SCM) techniques was ahead. Shippers were looking for more efficient processes to reduce empty miles traveled and using new techniques for consolidating and deconsolidating partially-filled tractors and containers.

A great example of 1990s innovation was done by a Japanese automobile manufacturer. The company manufactured cars in the U.S. and shipped them to Japan. To improve efficiencies, rather than sending an empty ship back to the U.S., the manufacturer shipped shiitake mushrooms and turned what would have been empty miles, burned fuel and no profit into an efficient and profitable "back haul."

As pressure from the SCM industry continued to rise, it forced evolution and innovation in terms of technological capabilities. Now, technology is the most critical component in supply chain management in terms of tracking and visibility. It is key for a transportation provider such as a third-party logistics provider (3PL) to have visibility to all components of a customer's supply chain, even to other 3PL providers. With accurate, timely tracking and visibility, a wealth of data is at your fingertips, and your enterprise supply chain solutions dramatically increase along with service accuracy and the optimization of supply and demand.
Technological advances, such as onboard computers in the case of trucking, allow shippers and logistics providers to track a driver's speed, fuel, location, trailer temperature (in the case of refrigerated goods) and hours of service.

Data such as these allow a shipper to know where freight is at all times and if there is the possibility of a delay or interruption in service before it affects their customer, not after. The more you know where things are, the better you can reduce labor costs, make fewer shipments and be prepared for just-in-time requirements.

Because investments in technology are not always feasible for a mid-sized company due to expense and personnel, it often makes sense to outsource transportation to a 3PL. Outsourcing allows the shipper to focus on their core business practices and leaves the logistics to the experts in the field. Technologies like those described above send an electronic feed of data from the shipper and allow a 3PL to process, manage and operate a supply chain as an extension of the shipper's work force. A 3PL can ensure the effective use of scarce resources through advanced technology and trained personnel.

So, how has technology affected the supply chain industry? The industry was slow to adopt new technology, but the level of technological adoption has increased as the level of expectations from shippers has increased. The small package transportation industry, due to its high frequency and volume, has pushed the IT envelope, and its technological advances have been adopted by other logistics sectors.

It's no surprise that it's difficult to estimate the effects different technologies have on the industry. There's no crystal ball that explains what will catch on and what won't. A perfect example is RFID (radio frequency identification). When it first emerged, RFID was thought to impact supply chain in a way nothing else had done. However, the technology around it still needs to be developed so the RFID process can be useful and cost-effective. Because that hasn't happened, there are gaps in the supply chain, and RFID has not yet revolutionized supply chain management like it was originally predicted to do.

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