The most critical yet least intuitive impact of digital transformation in logistics is its effect on labor shortages. Introducing modern technologies in the field tackles the problem from both ends by attracting more workers and decreasing the demand for labor. Many operators are turning to technological solutions as the labor crisis persists. As reported by The Descartes Systems Group, three-quarters of logistics companies struggle to fill positions [1]. About 100K truck driver positions cannot be filled in the UK, with similar numbers in major European countries. This issue reaches beyond drivers, labor shortages in logistics affect all areas of operations: transportation, warehousing, planning, and even customer service. Let’s explore how digital transformation in logistics can become a solution to the crisis.
Using technology to mitigate labor shortages in logistics
The implementation of data science and AI has been transforming supply chain and logistics for several years. Approximately 43% of logistics operators claim to use AI and ML in their operations [2]. These technologies streamline the entire supply chain and enhance processes from predictive analytics and route optimization to customer service and warehouse management. Research from Harvard finds that AI can improve the productivity of skilled workers by up to 40% [3], translating to a decrease of about 29% in the need for labor. However, digital transformation in logistics is not limited by the adoption of AI. Let’s look at how a complex of modern technologies optimizes operations in all areas of logistics.
Read more: Supply chain digital transformation: a quick guide
Minimize idle time for drivers
Route optimization is the number one task of digital transformation in transportation, addressing multiple industry challenges at the same time: reducing drivers' work hours, cutting costs, and decreasing carbon emissions. Shell International finds that route optimization can reduce CO₂ emissions by up to 253% and save thousands of human hours [4]. While routing technology may appear to have reached its peak from a consumer perspective, specialized software can still make a significant impact by factoring in required clearance, multiple stops, time windows, dynamic re-routing, load optimization, and more.
IoT solutions may track drivers and vehicles in real-time, providing updates on vehicle status, location, and compliance with the planned route and schedule in a unified system. This helps logistics managers control their fleets and make informed decisions quickly. Collecting and analyzing this data internally allows for the development of ever more efficient route optimization tools.
The second big step of digital transformation in logistics is integrating the route optimization system with the appointment scheduling solution. This allows logistics companies to pre-book loading docks or delivery times at warehouses and retail outlets up to a minute. The enhanced precision reduces drivers' waiting times, fuel consumption, and, thus also, damage to the environment.
Creating digital platforms for asset sharing can enhance efficiency even further. These platforms enable companies to share surplus capacities or underused assets, such as transport space, storage facilities, or equipment, reducing the number of trips and, thus, required drivers.
Optimize warehouse management
56% of operators state that warehouse management is negatively impacted by the labor crisis. Digital transformation can automate the planning work and increase the productivity of warehouse workers. While most logistics operators have already adopted advanced tools for inventory management, there are more areas of warehouse management that can be automated:
- Optimized loading: AI algorithms streamline the collection and dispatch process, which are the most labor-intensive tasks in a warehouse. The system can plan the best loading configurations to maximize space utilization, minimize material handling, and reduce transportation costs: sequence in which the items have to be loaded, the best packing layout, weight distribution, and more. In cases of last-minute changes to orders or inventory, an algorithm can quickly reevaluate and adjust loading plans. For example, if an item is suddenly out of stock or an additional order comes in just before dispatch, it can instantaneously recalculate the optimal loading strategy without significant delays, ensuring the dispatch process remains on schedule.
- Quality control: Computer vision technology can inspect and verify products at different stages of the fulfillment process. This automated inspection helps in detecting damages, errors in labeling or packaging, and other quality issues, significantly reducing the need for manual quality checks and the likelihood of shipping defective products.
- Worker scheduling: AI enhances labor management by predicting labor needs based on fluctuating order volumes, seasonal peaks, and historical performance. This predictive scheduling helps ensure that staffing levels are always aligned with demand, which optimizes labor costs and boosts productivity.
All these systems ensure that the resources are used with maximum possible efficiency. This boosts employee productivity and relieves the need for extra labor.
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Improve work conditions
While the previous sections focused on decreasing the need for labor, tapping into digital transformation can also attract much-needed human resources. 52% of frontline logistics workers are willing to switch employers based on the technological tools used by the company [5]. It's logical—digital tools can directly enhance work experiences by simplifying job roles, reducing stress, and improving communication. Additionally, for some positions, gaining experience with innovative systems and tools can provide valuable career opportunities. Lastly, being known for its technological innovation can be a big boost to the company’s image.
Automated HR systems can effectively allocate human resources and ensure workers are satisfied and their concerns are addressed promptly. These systems can also streamline the recruitment process, from job ads to application filtering based on set criteria. They can manage complex scheduling, considering required skills, workers' time off, and other conditions, tasks that would normally take many human hours. They also allow for quick adjustments and real-time updates, vital in a dynamic logistics environment.
Employee self-service portals are another way to create an attractive working environment. Letting employees independently manage their personal information, check pay slips, request time off, and enroll in benefits packages will lessen the HR department's administrative workload. These self-service options also enhance data accuracy and speed up employee request response times.
So what stands between you and digital transformation?
Most logistics companies are not starting from scratch when it comes to technological infrastructure; the challenge emerges from the need to consolidate these IT systems. 34% of logistics operators are managing eight to nine different technology solutions in their transportation operations alone, and 37% have five or more distinct solutions in their warehousing operations [6].
This fragmentation of technology solutions complicates the seamless integration of data and processes, posing an obstacle to achieving streamlined, efficient operations. The challenge, therefore, lies not just in adopting new technologies but in harmonizing and integrating the superabundance of existing systems to create a cohesive and functional IT infrastructure. Choosing an outsourcing provider that has a grasp on divergent technologies and can integrate or configure them is thus extremely important.
Read more: Innovation in logistics: trends, technologies, and use cases
N-iX makes digital transformation easy
N-iX helps enterprises in logistics and transportation to update their legacy platforms and implement innovative technology. With over 21 years on the market and over 200 data experts, we have a broad range of experience delivering data, AI, computer vision, and IoT solutions across industries.
For example, N-iX engineers partnered with a leading global supplier to develop a web service to enhance a client's legacy logistics solution for allocating cargo containers to vessels. This solution addressed inefficiencies in resource distribution and information accuracy, resulting in a significant boost in the efficiency and cost-effectiveness of the client's logistics services.
Read more: More efficiency in logistics with app modernization
References:
- How Bad is the Supply Chain and Logistics Workforce Challenge, The Descartes Systems Group 2024
- Statista
- Navigating the Jagged Technological Frontier, Harvard Business School 2023
- Transforming logistics, Delloite 2022
- Deskless Not Voiceless, Workplace
- Digital logistics, McKinsey 2023
