Swift response time and flexible management became the default expectations among clients and employees. With the advance of technology, there is less patience for delays—and no industry has made this trend more obvious than e-commerce. As 50% of the logistics market consists of consumer goods and retail, presenting new growth opportunities for 3PL companies that can optimize their supply chain coordination and maximize performance under pressure by introducing new flexible routines and enhanced visibility.
To enable such change, handle more complex logistics, and deliver flawless customer experience, logistics companies switch to the integrated (also known as omnichannel logistics) model, offering an amalgamated approach to key operations.
In this guide, we’ll break down the specifics of this approach and the technology that fuels it, and provide instructions on establishing a functional integrated logistics support.
What are integrated logistics?
When describing integrated logistics, Maersk uses a characterization of Mark S.Daskin, who identifies it as a particular design of the managerial, informational, and physical system—the kind of design that helps goods "overcome time and space."
In simpler terms, integrated logistics is a perspective that sees all logistics processes as flows connected and interlinked through digital means for faster and more sustainable management.
Integrated logistics are based on synergy and collaboration between all the departments, allowing them to operate as a single entity.
From a consumer perspective, integrated logistics work the following way:
- Within a traditional logistics model, a retail company has its representatives drive their goods to a warehouse, where it's stored for a paid period of time. Afterward, another contract transportation company picks it up and delivers it to the point of destination, where it's distributed across the company's shops or sent directly to buyers. Every step is a separate process managed by a different entity and accompanied by loads of paperwork and regulations.
- Within anintegrated logistics model, the retail company reps' job is done after they deliver the goods to a production center. From that point, cargo pickup and delivery are handled by a 3PL partner who provides the client with information about the goods' journey, manages the papers and customs, and enables product tracking.
With the help of an integrated logistics framework, clients work with only one entity and brand without scattering their focus, budget, and time across several third parties (with each party coming with unpredictable disruptions or schedule management issues). Accordingly, they receive the following value:
Increased sales rate
By working with an integrated logistics service provider to manage and deliver goods, businesses can focus on their sales strategies, increasing the number of buyers they can cover and the goods they can ship.
New business opportunities
The presence of an integrated logistics partner enables retail businesses to explore and engage new target audiences, discovering niches with demand for a particular type of goods. Accelerated logistics operations also give retail companies a competitive advantage, letting them establish their niche presence faster than competitors.
By enforcing their operations with a more flexible and responsive model, companies can stay prepared for disruptions and sudden interruptions. Close communication and information exchange with integration logistics service providers also allow businesses to gain a full understanding of the situation and make more informed decisions.
Integrated logistics are more than a new supply chain management or operations approach. It's a business model focused on enabling clients and partners to prioritize profit-increasing activities as 3PL service providers handle goods transportation and distribution.
Naturally, switching to such a model isn't just a fashion statement for logistics companies and service providers but a point of evolving and accommodating their performance to the needs of their customers.
- 82% of organizations improved their delivery timelines by accelerating collaboration
- 80% of logistics leaders see customer experience as the new battleground
- $840 billion is the expected total value of the omnichannel distribution by 2025
Getting started with integrated logistics: what do you need to know?
Any innovation or change starts with adopting the right mindset before implementing the technology. Most common resistance issues or challenges arise from the decision-makers lack of readiness to commit or fully understand the full extent of the transformation. Due to this, it's important to outline the key elements of integrated logistics before we go over the technological side.
To build an integrated logistics system that delivers stellar experience for workers and clients, business owners and stakeholders need to keep the following core elements in mind:
A company should have verified and reliable routes via air, water, and land to timely deliver goods. The diversity of routes, the availability of alternative routes, and methods of cargo transportation matter immensely in securing 100% fulfillment.
Client support and communication are integral to the success of an integrated logistics model. Requests, queries, and suggestions must be handled by a proactive and qualified support team invested in solving problems instead of providing superficial answers.
All necessary assets should be available across the supply chain, and the general logistics network needs to be accommodated for a multimodal approach. This means that integrated logistics providers should have several performance scenarios in mind and be ready to switch to them in case of necessity.
Logistics companies must maintain close communication with their customers, gather feedback, and explore their needs, most common logistics-related issues, and expectations regarding the 3PL companies. Knowing the image of the perfect logistics partner from the customer's POV is also crucial as it gives an important perspective on the strong and weak aspects of the company.
The logistics service providers must have enough storage space (warehouses and production centers) for handling and managing customer goods. The updates to the infrastructure aren't just a recommendation but a necessity as they allow for maintaining high quality standards.
Effective integrated logistics management needs tools and software products are the baseline of a robust and secure network enabling workers to exchange insights and timely inform about disruptions.
Integrated logistics require replacing paperwork with digital assets wherever it's possible to accelerate operations, reduce repetitiveness, and liberate employees for other, more critical tasks. Additionally, digitization involves injecting more accuracy into supply chain coordination via real-time analysis and forecasting.
With that established, let’s focus on the two last components of integrated logistics that can be considered a part of integrated logistics support.
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An overview of integrated logistics support
According to Maersk, there is no such thing as integrated logistics solutions. At least, the direction hasn’t fully been shaped yet. Innovative technologies and mindsets are all about individuality and the exclusivity of needs.
Therefore, integrated logistics solutions are often custom digital solutions placed at the critical junctures of an integrated logistics support system. As a result, to understand the diversity of integrated logistics tools and products, it’s important to understand what integrated logistics support is made of.
Integrated logistics support (ILS) is a term for a management system that is designed to secure the long-term performance of the entire enterprise. It's a non-stop process aimed at preserving functionality within each relevant sector.
- Engineering services
ILS includes corrective, predictive, and preventive planning, reliability, and maintainability engineering. It oversees the entire system's performance within the enterprise lifecycle, taking into account disruptions and areas for improvement. The integrated logistics support gathers technical performance data and evaluates each component individually to see how well it functions in synergy with others.
- Employee services
Employee onboarding and training are crucial to a well-performing integrated logistics system. Among numerous ILS tasks, education and qualification, as well as engaging employees across the globe, are considered to be as much of a priority as equipment maintenance and lifecycle management.
- Practical services
Support and maintenance, accounting for spare parts, and equipment testing are the major part of the integrated logistics support plans. Usually, ILS includes obsolescence management to replace equipment and vehicles, mitigate risks and hazards, and preserve the high quality of service.
With great digital power comes great responsibility. Securing all logistics data within one entity is always preferable to sharing it with numerous third-party organizations, but integrated service providers need to worry about more than protecting employee health or preventing product fraud. They need to implement cybersecurity measures that protect their customers' financial and business data, prevent data leaks, and maintain digital hygiene during information exchange.
Integrated logistics solutions
Due to the very complex nature of integrated logistics systems, ready-made logistics solutions are currently non-existent. Instead, there are custom-developed solutions based on technologies proven to revolutionize supply chain coordination and disruption prevention.
- AI and machine learning
The use of AI-powered supply chain management software provides integrated logistics providers with a wide range of benefits. Minimizing the risk of human error is one of them, as AI tools are currently implemented to recognize defects and evaluate the quality of materials, facilitating the work of human employees. The efficiency of AI is further evidenced by Gartner estimating that nearly 50% of supply chain organizations will be investing in AI-based applications and analytics by 2024.
Naturally, the potential of AI doesn't stop at analytics. Major logistics companies are currently thoroughly exploring the concept of robots fueling logistics operations, autonomous vehicles transporting the cargo, and self-managed machines assisting around warehouses. However, major e-commerce companies such as Amazon are expected to spearhead the advance of smart systems managing warehouses and AI-driven trucks.
The largest benefit of ML algorithms for 3PL companies remains their powerful analytical capabilities, putting them in charge of such factors as weather, climate, and real-time disruptions, allowing for more agile route planning. Additionally, conversational AI facilitates customer management and employee onboarding, streamlining a large fraction of training and education tasks.
Explore the diverse role of AI in logistics and supply chain management
- Cloud computing
Using the cloud for integrated logistics allows stakeholders to make use of the flexibility and scalability offered by the technology. By enhancing logistics operations with cloud-native applications, platforms, tools, and integrated solutions, companies can manage their supply chains without being limited by the on-premise systems.
In addition to agility and more efficient resource management, cloud technology empowers integrated logistics with options to oversee operations in real-time data. As a result, dispatchers, vehicle drivers, supply chain managers, and warehouse workers can track other departments' performance, coordinate actions, and become better at making independent decisions. Cloud-based visibility sheds light on emergencies, unexpected challenges, and sudden risks while providing the means to connect with relevant experts and solve such issues on the spot.
- Transportation management systems
Transport management systems (TMS) streamline logistics operations by providing advanced features for controlling and assessing the transportation of goods across various carriers.
A modern transportation management system is often enhanced with intelligent automation capabilities, which allows it to reduce fuel costs, keep delivery timely and unaffected by unforeseen factors (traffic jams, changes in weather, car accidents), and generally monitor carrier performance. Additionally, TMS can assist with carrier selections as they automatically gather, compare, and visualize data, letting dispatchers and managers control data, performance, and costs and assess the quality of service.
- Digital supply chain twins
The digital twin technology has fully come out of age and now enriches logistics processes with descriptive, predictive and diagnostic value. Expected to increase their value and surpass the $26 billion mark, digital twins are implemented by such major players as DHL and CNH Industrial, offering a more detailed perspective on their assets (packages, containers, materials, equipment) and revealing new opportunities to optimize performance.
While the digital twins technology is quite complex, enabled through the combination of cloud computing, AI, APIs and high-precision sensors, the unique and detailed insights it can deliver increases its demand across logistics service providers. In integrated logistics, creating digital copies of trucks, individual products and even containers allows to dissect potential flaws or visualize the journey of the product/cargo/vehicle with maximum accuracy. With full visibility enabled and real-time information fed into the network, logistics leaders can map their strategies with greater certainty, provide departments with robust collaborative data, and make well-researched business decisions.
- Blockchain technology
Blockchain has been a powerful asset in removing data silos from supply chain management and introducing new transparency to product journeys. Companies like Maersk and Walmart have been investing in platforms and solutions designed to make such transparency available to their partners and customers and generally create a new future of supply chain management.
However, it’s worth mentioning that while the benefits of blockchain make it a very attractive choice for integrated logistics solutions, the current adoption rate for the technology remains slow. To accommodate the capabilities, companies need to build an ecosystem and invest in a technological overhaul across their enterprises, departments, and data storage.
Additionally, harnessing blockchain technology for logistics needs extensive onboarding for less savvy partners and employees. Therefore, the potential of blockchain must be weighed cautiously against the potential of setbacks and risks of organizational resistance in the enterprise.
- Big data analytics
Nearly 74% of supply chain executives see big data analytics as one of the most game-changing elements of superior supply chain management and integrated logistics. With big data analytics technology, managing logistics data yields fewer blind spots and gaps while revealing underlying factors and patterns affecting performance.
The use of big data analytics solutions for logistics enables workers to assess data from a large number of sources and systems (from market analysis to historical shipment data, to warehouse reports, to TMS analytics), adding a new layer to the integrated logistics providers' awareness of their potential.
How to implement integrated logistics the right way?
Successful logistics operations are based on precision, accuracy, and dedication to providing an intuitive and safe journey of goods and products regardless of destination. Integrated logistics takes that point even further by making such benefits visibility, quick data processing, and availability of easy-to-use technology accessible to employees and workers.
Flawless experience means seamless transition from one process to another, superior data visibility, and across-the-globe availability, empowering all workers in every department with exclusive data and problem-solving capabilities.
If you want to harness the power of innovation and unlock the full value of integrated logistics for your enterprise, let’s chat! Having successfully concluded on the diverse range of transformation projects for businesses operating in the logistics sector, we will help you optimize and accelerate all core parts of your logistics ecosystem by developing a tailored product that matches your goals.
Together with our cloud architects, UI/UX designers, analysts, and engineers, you’ll ideate a concept of your innovative solution and then build it, putting best industry practices, your exclusive needs, and years-long resilience into its core.