Route Planning in the Era of Logistics 4.0
Brian Hoey - December 20, 2018
Over the course of human history, many of our most critical technological advances have been put to use in helping people and goods get from Point A to Point B more effectively. Take air travel, for instance: only a few years ago, most travelers needed travel agents in order to cut through the complexity involved in bundling together connections and return flights in the most sensible manner. Cut to the modern day, and a simple Google search can give you the times, connections, and prices for your various options based on your desired travel dates and destinations. Not only that, but once you’ve booked your travel itinerary, you can check in online (rather than at the airport), receive your boarding passes via e-mail, and receive alerts about your flight on your phone. All of sudden, life as a traveler is about connectivity and convenient digital workflows.
As it happens, a similar paradigm shift is taking place in the way we move goods, rather than people, from place to place. With the rise of Logistics 4.0, we’re seeing the same sorts of changes that we saw in the example above: real time price tracking, automated alerts, and digitized workflows based on centralized caches of information. What does this mean for the modern manufacturer, shipper, or freight forwarder? Basically, that routing goods from their origins to their destinations is rapidly evolving into a more modern, connected process, and that modern route planning will have to evolve with it.
The Logistics 4.0 Difference
Historically, a few well-traveled, pre-determined trade routes have dominated the world of shipping. Because earlier eras in supply chain management were less globalized, these trade routes were often fairly efficient options—not so in the current era of globalization. Luckily, the expanding complexity of modern trade routes has been met by expansions in connectivity and technological integration, i.e. Logistics 4.0. Comprised of smart containers and smart pallets, digitally connected fleets, smart ports, and other Internet of Things enabled elements, Logistics 4.0 frameworks offer a more cohesive and connected value stream. Shipments of goods half way around the world can be monitored in real-time, and the temperatures inside of containers can be checked to make sure that perishable goods aren’t going to go bad.
The examples above give a sense of the wealth of data that is being made available to logistics planners in this newly digitized environment, but Logistics 4.0 isn’t just about data—it’s about what you do with that data. For instance, with real-time price updates for various shipping routes, you can keep costs down in a dynamic fashion by securing freight capacity in the most favorable market conditions. Other information on vehicle usage, pallet usage, etc. can help businesses to boost their agility and flexibility by helping them to gain a clear, comprehensive picture of all of their existing options before they have to make a decision, just like our hypothetical plane traveler in the introduction.
From Point A…
Now that we’ve talked a little about the difference between Logistics 4.0 and classical logistics, let’s take a deeper dive into a specific example. Let’s say that you’re working within a traditional logistics framework, and you need to receive two parts shipments from different distributors, combine them into a finished product, and send those products to a global distribution center on another continent. Because your pair of suppliers aren’t in communication with one another, the raw materials don’t arrive at the same time, meaning that the first shipment takes up costly warehouse space while you’re waiting for the second one. Once you’ve received the second shipment and created the final product, you utilize the same freight options via the same route that you’ve always used, planned well in advance without regard for price changes over time. Unfortunately, the workers at one of the ports involved in this shipping route happen to go on strike while your goods are in transit. You don’t have enough visibility into other transit options to adjust efficiently to these new realities, so your shipment sits in its containers at the port until the strike is over, arriving at the distribution center well past its expected date.
…to Point B
What might this same scenario look like in a Logistics 4.0 context? Well, to begin with you would have an increased level of communication between your two suppliers, meaning that they could dynamically coordinate production plans and delivery schedules to ensure that your parts arrive all at the same time. This would save you storage costs, since these parts could essentially transition straight into production. While your production plan is being conceived and carried out, you’re monitoring real-time transport and routing information, so that you can lock in the right cost and the right route for your freight.
Once the goods have begun their journey to the distribution center, you receive real-time traffic, weather, and news alerts. In this way, you’re able to make adjustments on the fly when the port strike threatens. You route your shipment through a different port instead, whereupon it is delivered the rest of the way to the distribution center via a trucking route that’s adjusted in real-time to avoid areas of heavy traffic. Just as Google Maps is able to offer updates to your navigation in real-time as traffic conditions change, so should your telematics systems be able to inform drivers of the fastest routes as they become apparent.
Not only does the same scenario in a Logistics 4.0 framework help you to avoid the massive delays caused by the strike, it also ensures that you’re optimizing the efficiency of your inventory usage, container levels, freight utilization, and tour composition. Thus, the route that your goods take from Point A to Point B becomes dynamic, rather than static, offering you new ways to mitigate disruptions and add value to your operations.