Sundar Swaminathan

The Effects of Big Data on the Logistics Industry

Big data represents a whole new source of competitive advantage for shippers, third-party logistics providers, and carriers.

by Sundar Swaminathan, February 2012

2012 will see the true emergence of the “data deluge” — the flood of near real-time data that businesses are collecting through a variety of sources, ranging from sensors and smart phones to business-to-business data exchanges. IT companies will need to help their clients in the logistics industry deal with this massive amount of new data by introducing new hardware appliances and software tools — otherwise known as big data — that process and analyze the data. The broader market will recognize what IT-savvy companies already know: Companies need a strategy to handle the data deluge. With the right infrastructure to acquire, organize, and analyze this information, companies can equip executives and operations personnel with whole new insights into their customers, operations, and partner networks. These are insights that they have not had before, and that can help them make better strategic and real-time decisions that offer a “real differentiating” competitive advantage.

We are also entering an era of unprecedented levels of real-time visibility to new data through mobile devices in the logistics industry. There are new data sources supplying real-time supply-chain data everywhere we look. Electronic On Board Recorders (EOBRs) in trucks, sensors and RF tags in trailers, RF readers in distribution centers, and the massive numbers of new handheld devices (smart phones and tablet PCs) are all sending, receiving and processing huge amounts of data that have not been part of our business world until now. The deluge of new data is being driven by a need to manage assets more efficiently, have greater visibility and control over supply chains, new regulations, and the need to communicate from anywhere at any time.

The Global Logistics Industry

So just what does the term “logistics” encompass? The Council of Supply Chain Management defines logistics as “that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”

The global logistics industry involves an array of participants — shippers (manufacturers, retailers, distributors) who make or sell the products that need to be stored or moved; logistics service providers (third-party logistics providers (3PLs), 4PLs, freight forwarders, ocean shipping, trucking, rail, air cargo, drayage) who store and move products, logistics hubs (airports, sea ports, rail terminals) and regulatory authorities (customs). The United States alone spends over $1.1 trillion on logistics, representing about 10.2 percent of the country’s gross domestic product (GDP). Logistics costs represent an even greater share of the GDP in developing economies, accounting for 15 to 16 percent of GDP in China, and 11 to 13 percent of GDP in India.

Big Data in Global Logistics

Positive train control, EOBRs, RF tags, and mobile devices will have an increasing impact on the amount of data that shippers, logistics service providers, and carriers need to process to manage logistics. For shippers, especially retailers, social networks and personalized websites will offer whole new ways of reaching customers, and will consequently impact logistics as customer demand spurs orders. For 3PLs, key sources of big data will be pallets, cases, trailers with RF tags, personnel with mobile devices, and B2B hubs for EDI transactions. For carriers, big data will come from RF tags/sensors on assets (trailers, rail cars, ships), EOBRs, and mobile devices. The table below shows some of the sources of big data in logistics, and insights that could be gained from the data. 


  Source


  Opportunity

  Weblogs
   Insights into the customer shopping patterns (quote requests, types of loads,
   origin-destination pairs), going beyond confirmed bookings.
 
  Trailer tags  
   Insights into container transit times and dwell times, temperature, integrity of
   loads
 
  Pallet/Case/SKU
  tags
 
   Insights into transit and dwell times from source to destination — on the road,
   in the yard, at a warehouse
 
  EOBRs  
   Insights into travel times, load/unload times, and driver hours
 
  Mobile devices  
   Insights into mobile application usage by customers, partners, and employees
 
  Social platforms  
   Customer insight —who “likes” your products, who has advocated your products,
    who has issues, and what their issues are
 

Big data represents a whole new source of competitive advantage for shippers, 3PLs, and carriers. Companies that put in place the infrastructure and processes to acquire, organize, and analyze this data will get enhanced visibility to assets and personnel, the ability to adjust in real-time to demand and capacity fluctuations, and insights into customer buying patterns that enable smarter pricing and better products.

The Final Take Away

2012 will be another challenging year for the logistics industry with the mixed economic outlook, the broad structural changes in the industry, the impact of new regulations, the upcoming data deluge, and the rapid growth in mobility. Leaders in logistics who are in the process of re-engineering and automating processes, and building out more flexible, configurable, and scalable IT platforms, will be the winners in the marketplace. They will handle change and uncertainty better than those who are still wrestling with aging IT platforms and manual processes.


Sundar Swaminathan is senior director of industry strategy and marketing at Oracle.