Where do German companies stand in the digital transformation of their supply chains? Which technologies are already being increasingly used and what are the main drivers? Also – what are the obstacles that logistics managers are facing on their way to the logistics of the future? The comprehensive online study “Digitalization of Supply Chains” conducted by the German Association of Materials Management, Purchasing and Logistics (BME) and Fulda University of Applied Sciences, provides valuable information on this topic. We have summarized the most important findings:
Digital networking advances
The development and expansion of networked supply chains continues to make progress in German companies: According to the BME study “Digitalization in Supply Chains”, half of the 210 logistics managers surveyed are planning a digitalization offensive over the next five years. Technologies such as cloud environments and APIs, big data analytics, robots and automation, artificial intelligence (AI), and the Internet of Things (IoT) are considered particularly important.
Accordingly, in view of global challenges and uncertainties such as pandemics, geopolitical upheavals or severe weather events, companies are increasingly recognizing that the optimization of logistics processes is crucial to their own competitiveness and future viability. With the increased use of technology, smooth and efficient supply chain processes are being sought.
Increasing use of technology in the logistics environment
Approximately three quarters of survey respondents are familiar with the seven top applications: cloud and APIs, robots and automation, 3D printing, autonomous vehicles, drones, AI, augmented reality/virtual reality (AR/VR). The larger the company, the more know-how is present with regard to the above mentioned technologies.
Consequently, 29 percent of large companies with revenues of more than one billion euros already use digital technologies. Almost on a par are medium-sized companies with sales of between 50 and 250 million euros (21 percent) and organizations with sales of between 500 million and one billion euros (20 percent). The automotive, pharmaceutical and chemical industries are taking on a pioneering role overall – they use digitization technologies most frequently. In contrast, the study found that smaller companies in particular have “room for improvement” when it comes to supply chain digitization.
Cloud, Big Data, AI and other leading technologies in logistics
Cloud environments and APIs are used more frequently than average across all industries: 80 percent of companies are already using them in regular or testing operations. Cloud technology is therefore seen as an important technological basis for benefiting from the opportunities of digitization, gaining control and increasing performance. Cloud applications, for example in the form of cloud-based SCM software, are particularly useful in the logistics environment. Among other things, they enable uncomplicated networking with other relevant supply chain players or location-independent access to company data.
According to the study, robotics and automation (60 percent) and big data analytics (47 percent) are also being used more frequently. The use of big data analytics is above average, particularly in the area of warehousing and transport. That is because qualified real-time analyses within the framework of business intelligence tools and risk management software help to better understand processes, recognize patterns and create data-based forecasts. This allows supply chains to be mapped seamlessly. Further, they can be designed efficiently and – to a large degree – automatically controlled from production to delivery.
Overall, the use of technologies such as AI (+76 percent) and for cloud environments and APIs (+29 percent) has increased significantly over the past three years.
Main goals and potentials related to the use of technology
Time saving, transparency, cost reduction
Respondents cite time savings (68 percent), closely followed by greater transparency (64 percent) and cost reductions (49 percent) as the main goals pursued with the use of digital technologies. Quality improvement is seen as a priority by around half of respondents, while increased flexibility is cited as a primary goal by 37 percent.
Supply Chain Risk Management
In the area of supply chain risk management, 62 percent of respondents regard the use of Big Data analytics as the leading technology for identifying risks, 58 percent state the use of artificial intelligence, 39 percent prioritize the implementation of a digital twin, and 31 percent view cloud technologies and APIs in the lead.
Sustainability in the supply chain
Almost half of the companies (46 percent) see potential in the use of AI and big data analytics as a boost to their sustainability efforts. In this context, 36 percent have high expectations when it comes to digital twin technology, and around one-third (35 percent) mention cloud solutions and APIs.
Logistics managers attest a particularly high degree of efficiency to the following technologies:
- According to the survey, robots and automation realize a high degree of cost reductions (75 percent) as well as time savings (76 percent),
- Big data analytics are convincing with their efficiency in terms of greater transparency (67 percent).
- Cloud environments and APIs primarily lead to time savings (53 percent) and greater transparency (52 percent).
- Artificial intelligence (AI) above all enables quality improvements (59 percent), optimized monitoring, improved data use, and opens up great potential for compensating for the shortage of skilled workers by capturing expertise.
Overall, technology use in supply chains contributes significantly to the achievement of operational and supply chain goals. Accordingly, the majority of logistics executives surveyed report positive experiences with digital applications – the most significant driver being the recognition of associated benefits.
Potential is also seen for the current logistics topics of resilience, sustainability, innovation development, as well as compliance with the supply chain due diligence act. However, it is apparent in this context that the digital opportunities are not yet being fully exploited due to a wide range of barriers.
Barriers to technology adoption
The most severe obstacle to the introduction of digitization technologies cited by 58 percent of the companies surveyed is a lack of human resources, followed by poor master data quality (47 percent) and excessive investment costs (37 percent). Insufficient compatibility with existing systems, tools and applications as well as cyber security and data protection also play a role. Compared to the study results from 2019, however, there is an upward trend: The proportion of those respondents who state these obstacles has decreased.
Support for the implementation of technologies
When it comes to overcoming remaining hurdles, collaboration with logistics service providers can pay off – this is illustrated by the results of the 17th Hermes Barometer “Collaboration within the Supply Chain”. Seven out of ten companies surveyed would like support in the provision of digital offerings to drive forward technologically supported collaboration with other players in the supply chain. For example, cloud solutions can help remove barriers such as non-compatible IT systems and IT security concerns.
Hermes International has adapted to the growing demand for digital tools and is strategically developing its already comprehensive portfolio of solutions. The aim is to provide customer companies with the best possible support and to continuously digitize logistics processes in order to make global goods movements efficient, secure and cost-sensitive.
Further info can be found in our article “Future of Logistics: Taking Supply Chain Management to the Next Level”