3PLs and shippers slowly adopting more automation, digitization tools

Automation and digitization continue to infiltrate the shipper and 3PL markets, even as those industries lag in investment, according to a study conducted by Infosys Consulting and presented during a Stifel conference call on Tuesday.

According to the findings of the study, 65% of shippers and 71% of 3PLs are investing less than 5% of their capital expenditures on digitization and automation. Only 3% of shippers and 3PLs are investing as much as 25%.

A lot of (3PLs) look at automation and digitization as a way to separate themselves from the competition, but shippers look at it as a way to improve [customer service],” explained Melissa Hadhazy, associate partner at Infosys Consulting. “While there is a lot of interest in this, it is an area that is not seeing a lot of investment.”

The study, the 2018 22nd Annual 3PL Study, was conducted with Penn State’s Smeal College of Business and Penske. The survey was sent to nearly 10,000 people and incorporated additional research from Infosys.

Nearly 35% of 3PLs view digitization and automation as critical to maintaining their competitiveness in the industry, but just over 15% of shippers believe the same. Survey respondents also noted decreasing operating costs, increasing efficiencies and visibility, lowering prices or adding value-add services among additional reasons given for adoption of digitization and automation.

Infosys identified automation as driver-assisted technologies, vehicle automation and platooning. Digitization was identified as the Internet of Things, digitization of loadboards, virtual supply chain and warehouse robotics.

While interest is increasing, investment is not. When asked what is holding back adoption of digitization and automation tools, 25% of 3PLs and 18% of shippers cited uncertainty of return on investment. Lack of funding (13% of 3PLs, 17% of shippers) and competing IT projects (22% of 3PLs and 16% of shippers) were also concerns.

Big data analytics is expected to leap to the top of the list of technologies being utilized with more than 80% of both 3PLs and shippers expecting to utilize it more in the future. Mobile applications and platforms, telematics and warehouse robotics all cracked the 60% threshold.

“We’ve been talking about big data analytics for several years, and it has moved from something that is a buzzword to something that companies are looking to [incorporate],” said Hadhazy.

Third-party logistics providers were more enthused than shippers about the increasing “Uberization of freight,” but both see connected vehicles as contributing in the future.

Blockchain was mentioned by Shanton Wilcox, partner with Infosys Consulting, as a technology that is poised to disrupt 3PLs and shippers, but he noted that the technology remains too new at this point for many to understand how it will impact them.

According to the survey, 62% of 3PL respondents and 67% of shippers said they don’t know enough about blockchain at this point to comment. In terms of trust, 2% of 3PLs and 8% of shippers said they don’t trust the technology while 15% of 3PLs and 14% of shippers are waiting to see how it develops. Twenty-one percent of 3PLs view blockchain optimistically or as a game-changing technology. Conversely, shippers are less optimistic, with just 12% saying the same.

“The value [of blockchain] is being driven by reducing the time associated with gaining access or visibility to information,” said Wilcox. “Many of us work with point to point visibility, but are losing end to end visibility.”

According to Wilcox, blockchain has potential in several areas of the supply chain, including traceability, visibility, regulatory compliance, ethical compliance, customer data, financial monitoring, security and safety of products, environmental sustainability and to eliminate corruption.

“Ensuring ethical compliance is really important to shippers…but when you look at what 3PLs are focused on, it’s the safety and security of high-risk products and condition monitoring,” said. Wilcox

The development of blockchain standards is important to help “get people over the initial hurdle,” said Wilcox. “I think if [the Blockchain in Transport Alliance] can facilitate that, it will speed up adoption.”

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