Modernizing the supply chain requires holistic thinking

As more processes and industries transition to using connected sensors and software to track and manage their operations, analog industries such as shipping or health care are realizing that standards and a holistic perspective matter most. Meanwhile, the vast majority of companies understand that their digital transformation isn’t really about adding software and connectivity to their business operations, but adapting those operations in service of a holistic goal.

For many companies, evaluating their operations holistically will mean they focus more on the end user. For a deeper understanding of this process playing out in the transportation and logistics industry, Deloitte has compiled a few reports breaking down the players, their role in the overall supply chain, and their maturity with regards to digital thinking.

I know very little about the transportation industry except that it helps get food to my grocery store and Amazon purchases to my door. The few times I’ve had to move, I’ve been dismayed at the paper bills of lading I received and the manual nature of the process. Yet Deloitte’s research makes clear that for many last-mile shippers, paper and manual data collection is still the norm.

The research also shows how much fragmentation there is between the giants that handle international shipping and the smaller firms that bring goods to individual homes and businesses. So when it comes to ways of sharing package data and requirements, standards would help.

But even if standards don’t develop across supply chains, many players are already adding sensors to track goods as they move from production and into consumers’ hands. Deloitte’s report notes that DHL is adding sensors to 10,000 trucks in India in the hopes of cutting delivery times in half. Supply chain optimization doesn’t only have to happen with shippers, however. The report also highlights fast-fashion company Zara, which attaches RFID tags to every garment it produces, activating them when they leave the factory and deactivating them as those garments leave their stores in the hands of customers.

This level of data will change how supply chains operate. Yet just 40% of the companies surveyed by Deloitte for this report were actually turning their data into algorithms that would help improve their operations today.

The companies already taking advantage of digital technologies are often the largest, as they have the resources to spend on investing in technology and building new business processes. However, a supply chain is only as strong as its weakest link, which is where the holistic perspective becomes important. Businesses must view their digital transformation efforts holistically across their organization, but they also need to think holistically across the industry.

Deloitte’s research shows that smaller companies are falling behind. That means a shipper might be able to follow and optimize a package’s route only until it hits the last mile, where a smaller provider takes it for final delivery. If the package doesn’t make it, all of the optimizations earlier in the supply chain don’t matter.

While digitalization is accelerating, we are still witnessing a growing digital divide. According to our research, 50% of large, integrated players are digitalizing the value chain and looking to new data sources for insights. This signals a growing maturity in this pillar. However, adoption falls significantly (13%) among smaller-sized players. In the end, as companies advance their operations toward a new normal, we believe they should consider connected community and holistic decision-making—as well as intelligent automation.

In short, if you are thinking about the end user, then all parties have to work together to adopt technologies that can make the production or delivery process better. In an interconnected world, you’re only as strong as your weakest link.