What is digitization, and why should Logistics and Transportation care? It is a cornerstone capability that enables Logistics to deliver its true potential.
January 23, 2019
What is Digitization?
Digitization is the conversion of analog information (paper-based) into a digital format. In a business context, it goes further - Digitization is the automation of processes based on digital information formats. It is the replication of the real (physical) world in a digital format.The more granular and comprehensive the data captured in digital format, the higher the fidelity and resolution of the picture presented through digitization. The greater the clarity and scope of the picture, the better the quality and contextualization of information - which in turn improves the decision process and outcomes. Digitization began in the early 1970s with the advent of the computer. It accelerated through the 1990s and 2000s as PCs became accepted and commonplace in business and for personal use. However, digitization really became mainstream around 2009 when there were officially more "things" than people connected to the internet. The interaction of people and things on the internet increased in intensity around the same time with the creation of the "smartphone" and its ubiquitous adoption. Digitization is an essential cornerstone capability that enables Logistics to deliver its true potential. From the perspective of Logistics, understanding digitization is particularly relevant because much of the information logistics requires is in analog format. By converting all that information into a dynamic virtual representation of the real world, Logistics increases control over the global supply chain and is able to provide greater support to internal organizational teams that are reliant on that information. However, just being able to receive or send information digitally does not make for a digitized environment. What defines digitization is the synchronization of digital information with the work processes. The degree to which the information is synchronized with and integrated to the business processes defines the level of digitization.
Why is Digitization suddenly important?
The combination of "things and people" constantly connected to the internet radically changes the way we relate to our customers, suppliers, service providers, and internal associates. Digitization changed, and continues to change, the way that we see and interact with information. The smartphone ushered in the "app" which changed how we access and use information and this has carried over into a vast universe of new products. Shrewd investment in digitalization holds the promise to leapfrog an organization over its competitors, enabling unimagined value to customers while streamlining response times, cutting through complexity, and dramatically reducing the assets needed to carry out operations. (A Savvy Guide to the Digital Supply Chain - How to Evaluate and Leverage Technology to Build a Supply Chain for the Digital Age. Haslam College of Business, April 2018)The tools supporting digitization enables the presentation of information in ways not conceived of pre-2009. The ability to present digital information dynamically and graphically provides the user with interfaces that make information gathering and sharing a pleasant, exciting, or sometimes addictive experience. Today, we often see the world through a lens of digitized information. With the advent of Augmented Reality (AR) and Virtual Reality (VR), this trend of viewing the world through digitization will only increase in speed and intensity.But the presentation of information is only part of the digitization revolution. The real power comes from the process change that accompanies the digitization of information. It is the interweaving of the presentation of information with processes and workflow that make digitization an ever increasingly powerful and compelling capability. Analog information is mostly static. Analog information is paper-based. A best-case analog scenario is that information is maintained in "Word", spreadsheet, or PDF documents. Digitization is more than email or a scanned document. Digitized information is fluid and fungible. Digitized information is not bounded by the same physical constraints that are imposed on the analog world. In order to be truly digitized the information must be available on-demand with rules-based accessibility in support of dynamic decision making and work processes. Digitization is suddenly so important because the current technology supports the capturing of phenomenal amounts of raw data from an unlimited number of sources and the converting of that data into meaningful, contextual, and actionable information - quickly and at low cost.
Why should Logistics Care about Digitization?
Logistics should care about digitization because its activity is heavily dependent on vast amounts of data originating with 3rd parties outside of its control. Logistics is a highly procedural function with clearly defined responsibilities and performance metrics. While the Logistics transactional activities - such as freight quotation management, freight contract management, shipment execution and transportation tracking - are important, in and of themselves, these individual activities fail to deliver to their potential if they are not orchestrated, synchronized and communicated. The lack of digitization results in the Logistics functions being less effective, less efficient, less responsive, and more costly than otherwise can be achieved. Logistics is somewhat still a laggard in adopting technology and digitizing its information and processes. By not adopting digitization the Logistics function will not achieve its potential to deliver value beyond what is achievable in a non-digitized environment. The use of spreadsheets or siloed databases for Logistics data management is a tell-tale sign that a company is a laggard in its handling of critical information. Why should Logistics care? Because digitization enables:
Centralized data control
Accurate, verifiable, manageable, and accessible information
Real-time operation data management - visibility
Sustainable synchronization for streamlined workflow and business processes
Greater data accuracy for operational execution, analytics, and reporting
System driven audit support - for freight audit management
Dramatically better communication and collaboration capability
Higher levels of 3rd party execution visibility and influence
Simplified integration and interfacing with 3rd party information providers
Digitization is a fundamental building block in creating and delivering verifiable information and process improvement. Logistics should care about digitization because the work output and effort is directly dependent on accurate and timely information and standardized processes. The ability for Logistics to communicate and collaborate with internal stakeholders and external service providers about the status of a shipment and the positioning of a product/SKU is directly dependent on the accuracy and accessibility of information in a proactive and timely fashion.
5 Reasons Logistics and Transportation Should Digitize
Centralized Logistics Data Management:
Centralized data simplifies the maintenance of "all" required data elements necessary to support Logistics activity including Quote and Freight Contract management, shipment planning and execution, shipment track and trace, and freight auditing and payment validation.
It increases the control and accuracy of data elements related to specific Logistics requirements - Carrier route details, freight and service costs, equipment and volume commitments, product descriptions and units of measure, product freight classification, and account profiles.
It supports the immediate acquisition, storage and access to supporting digital information from internal and external sources: Purchase Orders, Commercial Invoices, Packing Lists, and Bills of Lading - documents, specification, and pictures Unfortunately, most ERP systems do not have the requisite data fields for all Logistics data in their core solutions. Therefore, the master data is managed in (multiple, disassociated) spreadsheets or lightweight databases (e.g. Access). ERP solutions that do support Logistics offer a specific TMS module - but usually at a very high total cost of acquisition.
Contextualization of Information:
Digitization is the foundation for providing context to data.
Digitization enables data to be manipulated so that it accurately portrays what is happening in the real/physical world.
With digitization, data is visualized from different perspectives providing Logistics real-time understanding of what is happening across the supply chain as it affects its internal needs and its ability to communicate and collaborate with associates and external actors.
It allows for controlled management of product and account data. It supports the provisioning, management, and visibility of 3rd party trade data (i.e. ISF, Invoices, Packing lists, Bills of Lading, Specifications, Documents, Pictures).
Standardizing Logistics processes is a real challenge regardless of business size. When information is maintained in non-digitized formats standardization of processes is extremely difficult.
Digitization supports standardized processes by acquiring, controlling, and managing data in formats that are easily accessible, usable, verifiable, and auditable. Digitization normalizes information which is then standardized and usable in repeatable and controlled system processes.
Standardization simplifies Logistics processes by seamlessly and simply acquiring electronic data through multiple formats like excel, XML, or EDI (eliminating or greatly reducing manual data entry, improving data timeliness and availability, increasing information accuracy).
Process standardization improves Logistics administration, oversight, and control.
The level of streamlined workflow is directly dependent on the integration of digitized information, standardized processes, and system design.
System design is an important variable in streamlining workflow because the solution's user interface (UI) is the point where the system, human, and digital information interact. The better the UI, the more natural and logical the workflow. The more intuitive the UI, and the more complete the integration of the supporting digital information with standardized processes, the more streamlined the workflow.
Streamlined workflow is visible and persistent throughout the entire digitized solution. Streamlined workflow manifests itself in:
Automated acquisition and cleansing of Logistics Master Data,
Automated alerting of missing data elements
Automated digital acquisition and auditing of all operations data required to support the Logistics activity - i.e. Purchase Orders, Advance Ship Notices, Packing List, Bills of Lading, Commercial Invoices, supporting documents, etc.),
Automated auditing of all imported operations data to ensure all Logistics data elements are complete - with workflow alerts when data elements are missing and in-line support for corrective action,
Comprehensive user-defined reports t
Extensive analytic capabilities
Communication and Collaboration:
Effective communication and collaboration are rooted in complete and accurate information presented in a manner that is meaningful for its intended use. The information must be timely and easily shared between consumers of the information.
Logistics maintains and manages information that is required across the organization for planning and execution purposes. The ability to share that information with different internal actors and external suppliers and service providers is proven to reduce errors and costs. Logistics data is an important input supporting:
Optimized supply chain network planning and execution
Freight quote and contract management and execution
Optimized total landed cost forecasting and budgeting
Optimized load planning and execution
Shipment and Product/SKU visibility and tracking
Freight Invoice auditing and payment
Being able to share that communicate the Logistics information when and where it is needed is critical to improving collaboration and supporting other operations within the organization.ConclusionDigitization of Logistics is more than automating single or multiple functional activities like Freight RFQs, Freight Contracts, Shipment plans, Shipment tracking, etc. Digitizing Logistics requires a comprehensive makeover of the Logistics activities from Data Management to Process Control to Workflow Design in support of all the specific functional activities and actual daily work.While digitizing Logistics might appear daunting, it really doesn't have to be. Most Logistics activities are seen and managed as discrete functions. For example, freight negotiations are seen as a separate and different activity from track and trace, which in turn is separate from freight auditing. Most Logistics group are built around these discrete activities, but in practice, all these activities are part of a holistic process. Digitizing Logistics processes require a holistic perspective and comprehensive and integrated work processes. In order to implement a digitized Logistics program, it is necessary to reorient from a discrete to a holistic view of the foundational activities.This reorientation is the most significant challenge to digitizing Logistics. The actual conversion to Logistics digitization is surprisingly simple. At 3rdwave, our solution is designed with a comprehensive orientation to Logistics processes and its pivotal position in supply chain execution. This holistic perspective by 3rdwave totally supports and simplifies the transition from the traditional analog practice to a fully digitized Logistics capability.