By Sameer Bhatnagar, Partner - Mobility and Logistics Solutions, KPMG in India
Where uncertainty and difficulty in terms of management are concerned, logistics trumps production. This article will discuss why and what we can do about this challenge.
Most organisations work with multiple external agencies for their logistical requirements whereas production might be largely done in-house and, in a few locations, making production easier to monitor and control. The uncertainty in logistics arises from the multiple handoffs in the chain of activities that occur in the transportation, storage, handling and delivery of good and services. Other than the inherent risks in such a volatile system, external shocks only exacerbate the situation.
There are multiple risks that a business faces with respect to logistics, including increased cost to deliver, reduced profits and lost sales, as well as potential reputational and brand loss when an organisation fails to deliver to its customers, as committed. Organisations invest significant efforts in managing and controlling logistics because it requires coordination with diverse regulatory and commercial agencies in roads, rail, ports, shipping, customs, tax, vehicle licensing, warehouses, local governments, municipal agencies, etc. Since logistics is a chain of activities with multiple handoffs, seamless coordination is critical for it to function efficiently. A fault in the chain at any point can severely impact the entire system.
Today, technology can help circumvent some of these challenges by providing timely data and information to enable predictability and manage uncertainty. Predictability ensures streamlining and through exception handling, it provides an opportunity for possible mitigation of unforeseen hiccups. However, there are many technologies that are available to improve logistics and many more being developed, in India and globally, with rapid innovation. We present the three basic ABCs for digitising logistics.
Accelerate data capture: The faster you capture data, the faster your digital ‘twin’ gets established, which can simulate, track, predict and control by using heuristics and optimisation/ forecasting methods.
Build local: Technology is evolving, and upgrades and transitions can be expensive. Building local and indigenous capabilities promote local talent, bespoke innovation and lower costs.
Collaborate: Data shared (mutually) is data gained. More data means better decision making, especially in times of crises, allowing the logistics network to respond faster and better and making it more resilient.
Now, let us look at each of these ABCs in some more detail.