The impact of Industry 4.0 on the Transport & Logistics sector

Dennis Adonis

As is the case for most industries, transport sector businesses are facing sustained and profound change, driven by software disruption and the impacts of new technologies on supply chains globally, creating a rapid in shift in processes to accommodate the fundamentals of Industry 4.0.

Although referring to the trend towards automation and digitisation of manufacturing, the practical applications of these technologies are being significantly realised across the transport & logistics sector. This is driving digitisation and integration of vertical and horizontal value chains, digitisation of product and service offerings and the development of new digital business models and customer access platforms.

Industry 4.0 basics

Four central design principles support all Industry 4.0 system conceptualisation:

  • Inter-operability: the ability of machines, devices, sensors, and people to connect and communicate with each other via the Internet of Things (IoT).
  • Information transparency: contextualized information created via a virtual copy of the physical world through sensor data.
  • Technical assistance: in thought and action. Firstly, the analytical support by system for humans in making decisions and solving problems; secondly, the ability to assist humans with tasks that are too challenging or physically dangerous for humans.
  • Decentralized decision-making: the ability of cyber-physical systems to make simple decisions on their own and become as autonomous as possible.

What's driving these developments?

Data volumes are rising dramatically, along with computational power and connectivity. This has led to the emergence of analytics and business-intelligence capabilities as required core competencies in organisations as supply chains.

New forms of human-machine interaction have emerged, such as touch interfaces and augmented-reality systems, creating improvements in transferring digital instructions to the physical world, such as robotics and 3D printing.

How is this impacting the sector?

Industry 4.0 has finally started to emerge as a real driving force shaping the future of the global supply chain. A confluence of technologies including advanced robotics and artificial intelligence; sophisticated sensors; big data analytics; 3D printing; cloud enabled business models; high powered mobile devices; and algorithms to direct motor vehicles (navigation tools, ride-sharing apps, autonomous vehicles and last mile delivery services) are enabling advanced interoperability across companies, countries, collaborators and competitors.

With more than $4.6 trillion of annual revenues at stake the rewards are evident for businesses who are able to adopt the appropriate vision, strategies, tools and partnerships to ensure their digital fitness.

Digital transformation – engaging the value of the Industrial Internet of Things

The Physical Internet (PI or π) is allowing manufacturers to redefine how they interact with customers, and how they structure their supply chains which need to become far more social and data acquisitive for trace-ability and predictability.

Concepts from internet data transfer are being applied to real-world shipping processes, with smart, eco-friendly and modular containers ranging from the size of a maritime container to the size of a small box becoming standard across all businesses and countries. These modular containers are continuously monitored and routed, sharing digital connectivity through the Internet of Things.

For the Physical Internet to work in practice, a far greater level of collaboration is needed across the sector. Most of the 535,000 distribution centres in the US, for example are standalone operations owned by different companies - improved connectivity, and standardisation of physical workflows could create significant efficiencies.

The potential is vast - estimates in the EU logistics sector have shown that a 10% to 30% increase in efficiency would translate into €100-300 billion in cost savings for European industry. (2)

Looking ahead.

Technology is redefining every element of global supply operations, from manufacturing to shipping, warehousing, competition, collaboration and customer expectation management. With so many technologies competing for management attention and investment, defining a clear digital strategy to help drive business efficiencies is crucial for future competitive survival.

In the next edition of our transport & logistics series, we'll take a look at the growth of SaaS technologies as a key means of sourcing these critical competitive capabilities. Stay tuned.