Digital Transformation Of Logistics And SCM

Abstract

During the last decades, there have been significant transformations in organizational forms, tools, technologies for managing logistics of companies and supply chains. This is mainly a result of the paradigm of business digitalization. Companies switch to large-scale automation of corporate information systems, become participants of electronic trading platforms and e-commerce services, and form their virtual clones. The advantages of information services and fast business response to changes in demand are increasingly appreciated by consumers. Despite the existence of numerous research works in this area, there is uncertainty in understanding the goals, directions, and technologies of the digitalization of logistics and SCM. The principle of logistics integration focuses on the possibility of creating a unified information field for the supply chain and providing decision-making processes with quality information. It is the key factor in optimizing resources and costs. Russian logistics and SCM market is in the early stages of development and many companies are only beginning to explore the possibilities of logistics outsourcing and provisioning. Therefore, digitalization issues are not of paramount importance. The article formulates several hypotheses that are verified by comparing the results of the analysis of the market of applied Information and communication technologies and infrastructure solutions, the results of research of world consulting companies, which requires identifying the features of digitalization of logistics and SCM in Russia and the World. The conducted research helps to determine the prerequisites and general regularities of the qualitative transformation of the industry.

Keywords: SCMdigital logisticsLogistics 40logistics infrastructureinformation and communication technology in logistics

Introduction

Leading world scientists recognize the exceptional role of technologies in modern economic development and social life. Scientific discoveries embodied in technologies create new opportunities for resources, provide business growth potential, mechanisms for interaction between economic entities, new markets, and industries.

The direct influence of radical scientific discoveries and innovations on the deepest transformations that mark the transition to a new technological or economic mode of production. In the scientific environment, there is a strong belief that human history in its technological evolution from the first industrial revolution to the era of computers and telecommunications has overcome five types of technological patterns, and is currently developing a sixth. The present technological development of economic sectors is caused by the phenomenon of NBIC convergence (N - nano; B - bio; I - info; C - cogno).

The market diffusion of Nano, Bio, Information technology and Cognitive science has different impacts on economic sectors, human activities, and society. The greatest practical effect in logistics has been identified in relation to Information & Communication technology. Since the mid-twentieth century, scientists have been talking about the transformation of information into the most important productive force and resource determining success in business (P. Drucker, Al. Toffler, and others). This tendency has also been characteristic of the logistics industry. In traditional logistics and SCM, the main object of research is the material flow, in relation to which the system of optimal 7R management criteria is formed. However, the development of the industry allowed considering the information chain of value creation. Recognition of the information as a strategic economic resource, object of purchase and sale forces to reconsider the system of an assessment of indicators of efficiency of logistics and SCM. Along with the concept of "logistic material flow", the concept of "logistics information flow" is used. The logistic system integrates the information subsystem essential for performing operational and strategic management functions in logistics. Information & communication technology enables logistics and SCM to master new capabilities in global monitoring (GPS, GLONASS), controlling, analysis (Business intelligence), regulation, planning, and forecasting.

Digital economy conditions lead to the search for new forms and methods of supply chain organization and logistics management (Evtodieva, Chernova, Ivanova, & Protsenko, 2020). Logistics and marketing tools are transformed as well (Pogorelova, Yakhneeva, Agafonova, & Prokubovskaya, 2016). With the development of Web 2.0, Internet of Things (IoT), and Industry 4.0, flexible models of supply chains and logistics networks are implemented on a larger scale. The new concept of Logistics 4.0 has become an actual trend (Evtodieva, Chernova, Ivanova, & Kisteneva, 2019).

Problem Statement

There is a growing awareness among logistics managers regarding the necessity of systematic implementation of informational technologies. Along with this, the pursuit of higher profits and improved operational performance requires analyzing the IT market and the latest developments in this field. The principle of economic feasibility in terms of selecting models of information support for logistics, management, and technological functionality, is achieved by correlating TCO (Total Cost of Ownership) logistics information systems with the advantages they bring to the company and its customers (McFarlane, Giannikas, & Lu, 2016; Yakhneeva, Agafonova, Fedorenko, Shvetsova, & Filatova, 2020).

Telematics and informatics fields have very high update dynamics. Technologies become outdated rapidly enough, and new ones emerge to replace them. This peculiarity causes market uncertainty and high risks of decision making. The implementation of information technologies requires significant investments. Mahindroo, Samalia and Verma (2018) explore the possibilities of regression analysis and development of a roadmap for analyzing the relationship between selected logistics information system structures and indicators of its economic and operational efficiency. This question is not yet been completely answered and requires a more thorough study.

The world market for logistics services is developing unevenly. For many manufacturing, commercial and logistics companies, the transition from paper to electronic document management, the use of RFID (Vaculik, Michalek, & Kolarovszki, 2009), the adoption of 3PL and 4PL are significant breakthroughs. At the same time, transnational global companies demonstrate a high level of utilization of the latest developments in Business Intelligence, Big Data analytics, IoT. Govindana, Cheng, Mishrac and Shuklad (2018) conduct an in-depth analysis of the use of Big data analytics and applications for logistics and supply chain management. The efficiency of telecommunications and information technologies in logistics is directly influenced by market conditions and its infrastructural support. Within the framework of the topic, a general analysis of the state of information infrastructure in logistics, evaluation of the quality of information resources and availability of digital services are of high importance. Review of publications on the topic has demonstrated that there is no systematic information about the transformation of paradigms of logistics automation, the positive and negative consequences of the implementation of one or another technology in terms of functional areas of logistics (transport, warehousing, inventory logistics, and others). Determination and search of preconditions and potential for qualitative change in logistics under the influence of the development of information and telecommunication technologies is another relevant issue of this study.

Research Questions

In the frame of this research, several hypotheses have been formulated and tested:

• Digitalization is the key factor in the transformation of logistics and SCM;

• Globally, and in Russia in particular, Logistics 4.0 infrastructure is developing.

Purpose of the Study

To test hypotheses about the digital transformation of logistics, to identify current trends in logistics service development and ways to improve SCM efficiency based on Information&communication technology are the main purposes of the study. The major objective is to determine the features of the digital transformation of logistics and SCM based on public information, external research, and reports on the analysis of the IT market.

Research Methods

The study used methods of economic and marketing analysis, expert estimations, empirical (measurement and synthesis of research results, grouping) methods. PwC research report "Review of Transport and Logistics Trends in 2019" was applied to assess the factors of changes in logistics and SCM. The survey was conducted among managers of transport and logistics companies; 60% of them have been in management positions for 15 years; 94% are men, 36% are under 50 years old (Sachek, Antonik, Babich, Malkievich, & Matyushko, 2019). The report is based on the results of 1,239 interviews with executives in 85 countries, and 85 respondents were representatives of the transport and logistics industry. In order to determine the investment preferences of top managers in BI tools and analytics, the results of a survey (over 600 respondents) of Tibco Software were used. Data sources for the analysis of the market of applied Information and communication technologies are the research results of IDC «Russian infrastructure market in 2019» (Lebedev, 2019), Mail.Ru Cloud Solutions (2019) «IT infrastructure in 2019: Key trends, forecasts, problems and solutions», CNews Analytics (2019) «Largest IaaS Providers in Russia 2019», rankings of IT companies CNews100.

Findings

These studies illustrate the evolution in logistics and CRM caused by the implementation of the information and communication technology and by the adaptation of logistics concepts to the new digital economy framework. In "Review of transport and logistics trends in 2019" by PricewaterhouseCoopers, digitalization has been mentioned as the most important factor influencing the development of the transport and logistics industry (Sachek, Antonik, Babich, Malkievich, & Matyushko, 2019). 68% of transportation and logistics executives expect that changes in key production and service technologies will have a breakthrough impact on their business.

The analysis of the international and Russian ICT markets reveals its maturity, diversity of application software solutions of different levels of complexity, functionality and price. Supply grows due to the implementation of new technologies of processing and transmission of data, including its big volumes and variability of structure, new intellectual services, virtualization of management of logistic processes and infrastructure. One of the popular models of informational support of logistics and SCM is outsourcing. The IT infrastructure of the supply chain increasingly acquires virtual, scalable, and flexible quality, which is ensured by "Infrastructure as a Service" technologies. Logistic services built on the principle of aggregation of information resources and transactions are in high demand. Increasingly, companies refuse proprietary on-premise systems by selecting public cloud technologies. This indicates the democratization of logistic information and the overcoming of entropy of the market. Optimization of supply chains is often performed in real-time, which is ensured by new identification and geolocation technologies, software products, and BI services.

Conclusion

The field of logistics and SCM is experiencing significant changes caused by the digitalization factor. Technologies of stream processes management that involve a high degree of human physical labor, which do not allow interactive monitoring of operations and quality control of their execution, and paper workflow, become inefficient and outdated. Application of Information and communication technology increasingly determines the level of competitiveness of logistics companies. The degree of digitalization largely determines the speed, accuracy of operations, and provides opportunities to develop adaptability and flexibility of SCM. This leads to new perspectives for companies and their customers: risk management based on rating and user community engagement, joint developments, forms of self-service and complex outsourcing. Smart logistics becomes a reliable basis for the development of international business, supporting the optimization of the involvement of world resources. The change in priorities from physical to virtual infrastructure, from owned to leased or utilized as a service, indicates a change in the nature of supply chains, their spontaneity, and orientation towards real-time solutions. The study of preconditions for the formation of logistic digital ecosystems, including at the meso-, macro- and global levels of functioning, can be an important direction of development of this study.

References

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