Digitisation: Shifting Gears in 2021

Digitisation: Shifting Gears in 2021

2020 will be remembered as the year of mass digitisation. Few had imagined that the wind finally started turning. But when humans don’t have a choice, they adapt. Before Covid-19, pressures resulted from slowing growth and trade wars and rising consumer expectations.

Consumers demand more transparency, governments wish to ensure homeland security, and supply chain stakeholders are seeking higher levels of visibility for optimisation and increased resiliency. But Covid-19 has turned out to be the biggest game changer and accelerator of the digitisation of our economy and society this century.

Suddenly, digital tools, like video conferencing became mainstream. But how deep is the change? What were the fundamental transformations driven by leaders? Beyond working from home and the acceleration of e-commerce, some necessities evolved on their own.

But, are organizations and governments capturing this special moment and momentum to drive upgrades, restructurings and reforms? Are we about to see a broader and better use of technology to drive productivity and build more resilient chains?

Are we more fiercely tackling the challenges our global society is facing, like over-population, degradation of land, pollution of air and oceans, climate change, and increasing tensions caused by inequality?

It becomes clear that this change is not only about technology but most importantly about mind shifts and new concepts. Technology is a key enabler of the transformation. But technology is a means to an end and not an end in itself.

Supply chain and logistics are at the centre of our economy. They are the economy, as the economy is a supply chain delivering daily the things we need. Supply chain and logistics is often labelled as a digital laggard with a high level of inertia. So far, digitisation projects in the supply chain networks have indeed been progressing slowly.

What is missing? What are the hurdles in the way? A crisis can be catalyst for change. Hence, at the end of 2020 stands the legitimate question: What is it that we really achieved in 2020, and what is in store for 2021? What has been the journey so far and what lies ahead? What should leaders do to stay ahead of the curve and what the others to increase their chances to reduce gaps or even take the lead? It seems that shifting gears is on the agenda.

We started with a tailwind—2020 began with some digital optimism

In 2019 the supply chain industry had moved beyond high-level discussions, with well-scoped pragmatic projects. These activities were grounded in the belief that digitisation was unavoidable and would soon start to show its impact.

There was that rising awareness that those companies who waited too long would risk to struggle at a later stage and pay a higher price. Leaders increasingly agreed with the notion that digitisation may require much more collaboration before it becomes a magnifier of working together in itself.

The creation of the Digital Container Shipping Association (DCSA) and an increasing number of startup challenges, incubators etc. marked the development. Warehouse automation was in full swing and maritime apps were suddenly mushrooming. Logistics service providers set up their portals to more efficiently deal with and manage ad-hoc quotations and bookings. The broad range of activities and actions taken announced promising developments for the unfolding new year.

Then Covid-19 came into play

With the arrival of the pandemic, automation became a hot topic. Automated production sites, faced less challenges of infections and factory closures. But not everything can be automated. Where automation is difficult, computer vision models were discussed and tested as a way to redesign manual supply chain processes to maintain safety, without significantly reducing productivity. Technology and software companies reported increasing demand for their solutions in 2020. Certainly, these are indicators and positive signs on the route to digitisation.

Visibility became the king. Situational awareness empowers decision makers. Which can be simply defined as “knowing what is going on around us”, or more technically as “the perception of the elements in the environment within a volume of time and space, the comprehension of their meaning and the projection of their status in the near future” (Endsley MR. Toward a theory of situation awareness in dynamic systems. Human Factors 1995;37(1):32–64)

In Q1 2020, around 50% of global supply chains were impacted by the virus. We saw delays and backlogs. Digitisation and visibility helped companies to manage the situation. They benefitted from seeing in near to real time that orders were turned away at borders or ports. They immediately knew where they needed to take action, such as rerouting freight or adding new cross-docking facilities.

But technology also failed us. Algorithms are rarely trained on extreme volatility. Planning tools stopped providing reliable results. Hence, Covid-19 also drives the realization that people with their experience, skills and relations remain important. Because it is people that fill in where machines fail. Not a real surprise. But it is something that we sometimes tend to forget with our fascination with technology and the vision of an automated world.

At the end it will be the machine-human hybrid that is expected to produce the optimal results. In parallel, an awareness of the need for digitisation and the role of people has risen. This has ignited thinking towards the broader adoptions, like openness, knowledge and system solutions.

Whilst 2020, is widely seen as the start of exponential digitisation, the revolution is yet to come.

A year of reflection

An attendee poll at a recent conference of The European Freight and Logistics Forum hints at some cultural challenges. 52% of the participants voted for “A more open mindset; start up agility” as the most important attribute to move the freight logistics sector forward. A workshop in the run up to the event yielded some other roadblocks.

On the public sector side hurdles are seen in “overwhelming bureaucracy” and “slow action”. On the company and people side, the workshop attendees prioritised “lack of understanding” and “fear of innovation”. And missing “harmonization of KPIs and data” and “uneven B2B partnerships” seem to hamper closer collaboration between businesses. Shortages in data sharing and the willingness to engage in collective activities are likely to be additional obstacles.

Reforms and dialogue between the public and private sectors can help to reduce bureaucracy and accelerate processes efficiency. Intensified collaboration across industries and with governments can be instrumental to establishing eye-level relations and defining standards. The lack of understanding can be overcome with information and training.

On the one hand, it is up to institutions and academia to step up and change curricula to respond to the demand to reduce the knowledge gap. On the other hand, companies need to be willing to invest in training.

In addition, there may not be enough talent in the market. In particular younger generations are reluctant to work in traditional structures. As the startup scene is booming, this might be something the leadership in corporates may wish to reflect on. Corporate Leaders are advised to review their employee experience culture, innovation policies and incentive programs.

Change has always been challenging businesses and in times of accelerated digitisation the stakes grow by the minute. Digitisation is about transitioning from competing on markets, to designing and managing ecosystems. The latter creates better utilization of resources and capacities. As history shows, collaboration is not a natural reflex. Nor is system thinking, which is required to identify the key drivers of system transformation.

Architecting the next industry

The high number of challenges we face in businesses and society, indicates that we need to transition to much more sustainable systems, like the circular economy, a model which replaces our take-make-waste model with a repair-reuse-recycle approach. This movement is on its way.

A 2020 Gartner survey finds that 70% of supply chain leaders plan to invest into the circular economy. Digitisation is a very helpful driver in this transformation.

“Already, 35% of companies believe that digital technology will be a key enabler for their circular economy strategies. However few are leveraging new technologies for this purpose,” explains Sarah Watt, senior director analyst with the Gartner Supply Chain practice. The circular economy also needs circular supply chains. This is an opportunity for our industry.

Capturing today’s opportunities needs “an architect of the industry” mindset. This changes the approach from a “forced-to-catch-up with competition” to a “leader of change”. This sets the (digital) standards and serves customers in a superior way. Taking this path requires courage, knowledge and skill.

Humanity, wisdom and creativity are fundamental to design and build a world that is much more aligned to societal and future needs, than what we have today. I am thinking about a world from humans for humans. With machines working with us and for us, with an economy that is preserving instead of gradually destroying the planet.

This article is a call for a considerate and wise use of technology. For a collective action and lifelong learning to equip ourselves with the knowledge and instruments to build a world that works for us as well as for future generations.

Achieving this goal needs Leaders that are driving positive change following a code of global citizenship. It is needless to say that each of us can and must be such a leader in our own space, shaping the industry through our collective contributions to this vital transformation.

Wolfgang Lehmacher

Advisory Board Member, at The Logistics & Supply Chain Management Society (LSCMS)

Wolfgang Lehmacher is Operating Partner, Industrial Innovation Partners, Anchor Group. He was Director, Head of Supply Chain and Transport Industries at the World Economic Forum, Partner and Managing Director China and India at strategy firm CVA, President and CEO of GeoPost Intercontinental at France’s La Poste, and Head of the Eastern European and Mediterranean Regions and Country General Manager Switzerland at TNT. Wolfgang is Founding Member of the Logistikweisen, an expert committee under the patronage of the German Federal Ministry BMVI, and the think tank NEXST. He is Leader, KATALYST Supply Chain Innovation Network and Board Member of the Logistics & Supply Chain Management Society. The book author is FT, Forbes, Fortune, BI and Nikkei contributor.

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