Digital transformation means a continuous process of innovating products, services, and operations through digital technologies such as artificial intelligence (AI), cloud, big data, and blockchain, and transitioning into new digital-based business models. Digital transformation goes beyond merely adopting an interesting new technology or two; it represents using technologies to improve processes and workflows, increase performance, innovate services, and enhance customer experience.
Nike already attempted to combine sports and digital through its “Nike Plus” products and app. In 2017, the footwear company announced the “Consumer Direct Offence” strategy aimed at doubling its sales through digital-based production and direct connection to consumer feedbacks. By boosting its direct to consumer (D2C) business, Nike is expected to nearing its ‘second heyday.’
As such, leading firms across industries pursue digital transformation to innovate customer experience, build new business models, and rewrite industrial landscapes. Changes in Logistics Environment Brought on by COVID-19 Recent changes have highlighted the need for digital transformation in the logistics industry as well.
After the COVID-19 outbreak was officially recognized last year, countries across the world implemented lockdowns and other disease control measures. These actions affected logistics firms especially hard by reducing traffic, delaying shipping, and increasing time and money required for logistics. In Europe and other regions, local disease control measures disrupted domestic logistics as well, making it impossible to comply with delayed shipping dates. The United States went further and imposed a 14-day docking restriction on ships returning from China.
Changes in the global supply chain have rattled the logistics market to the core as well. Factory shutdowns caused by the spread of the disease resulted in unexpected delays and discontinuation. On top of the shutdown, the twenty years of globalization process has reached its limit, and firms and other stakeholders are now bracing for the reshuffling of the global supply chain. Industries heavily relying on parts supplied from emerging countries such as China, which experienced difficulties with adapting to the situation. In response, developed countries began to come up with ways to increase the operation of domestic production facilities.
These changes have highlighted the need for reducing complexity and expanding visibility through digital transformation. In addition, the unprecedented growth of the online distribution market has rapidly boosted the volume of parcel delivery cargo, which is expected to continue in the foreseeable future.
The pandemic has also fueled the growth of online shopping, as the shutdown of offline marketplaces promoted customers in their 50’s and 60’s to join consumers in their 20’s and 30’s, who constitute the main customer base for online marketplaces. According to eMarketer, a market research firm, the global online shopping market is now worth USD 4.28 trillion, a 27.6% growth from the previous year. Online distribution is expected to take up around 20% in the global retail sales. Experts predict that the massive group of newly converted online consumers will not return to traditional ways even after the end of the pandemic. Startups: New Possibilities for Digital Transformation in Logistics To overcome the challenges of COVID-19, businesses need to save time and costs, streamline workflows, and make their processes visible. To achieve these goals, businesses are currently looking to digital services. The importance of digital transformation in the logistics industry has been highlighted for years now. However, logistics represents a complex system consisting of shipping companies, truckers, shippers, warehouse owners, and customs brokers. Its transformation cannot be achieved by the efforts of a single business. The international logistics process is not readily available for transformation to digital technologies because it is made up of countless ‘connections.’
However, various startups have utilized digital capabilities to propose new possibilities for logistics innovation. These logistics startups expand the concept of logistics by combining and merging with other industries. They drive the growth of the logistics industry by applying Internet of Things (IoT), big data, AI, blockchain and other new technologies and improving their process efficiency and cost efficiency.
Flexport adopted digital technologies into traditional maritime transportation. It was evaluated at USD 3.3 billion by Softbank Vision Fund in 2019 and attracted investments totaling at USD 1 billion. Its success brought the world’s attention to tech-based logistics startups. Also known as “Uber in the Sea,” Flexport reduced the time requirement for transportation services by developing online booking services and automating its processes using the cloud technology. The company currently caters to the logistical needs of around ten thousand customers across more than 200 countries.
Various Korean companies also provide digital logistics platforms capable with integrated quotation, booking, consulting, and tracking functions. SDS Sets Out to Build Success Cases for a Digital Logistics Platform As the COVID-19 pandemic fuels the demand for digital transformation in the logistics sector, experts point to ‘logistics platforms’ as the key element of digital transformation. The world has seen an extensive growth of needs for a single platform for meeting a full range of needs, ranging from carrier selection, quotation, streamlining of work processes, reliable payment, real-time visibility, and data-based service improvement.
A number of traditional logistics companies and digital startups have tested their mettle in the digital transformation business by developing their own digital logistics platforms. However, none of them have achieved visible outcomes so far. Startups have weak foundations in traditional logistics despite their technical strengths, whereas traditional logistics companies need time to transport their extensive legacy infrastructure to new platforms. With the two sides showing distinctively different strengths and weaknesses, few companies have provided platform services encompassing the overall flow of logistics services from quotation to payment.
‘Cello Square,’ a digital forwarding service by Samsung SDS, is a case worth the attention. Samsung SDS offers a unique structure, which is widely recognized as optimized for digital logistics platform business that combines Korea’s largest IT service provider and a global logistics giant, providing logistics services at 230 sites across 37 countries with 78 airlines, 206 shipping companies, around 1,000 logistics operators, and 7 courier service providers.
- Revenue Year 2020 KRW 5.7 trillion 52% of Company Revenue
- Employees 4,660 Worldwide(As or December 2020)
- Business Locations 37 countries 58 branches 230 sites
- Global 3PL Ranking 20th NO.1 in Korea NO. 5 in APAC JOC.com
- Traffic Volume Global Top 10
- Blockchain Capabilities Global Top 50 Forbes
- CIO100 Customer Innovation 5 years in a row IDG
- Supplier of the Year Lead Logistics Provider
- Global Logistics Network 37 countries, 58 branches, 230 sites, 5,000 experts (as of 2020.12)
- Logistics Experts across Different Fields
- 1:1 Communication with customers
- Guide to logistics service & Consultant
- Fast Issue identification
- Daily operation
- Quotation and shipping management
- e-Commerce seller
- Cello Square
- Covers all aspects of import/export logistics
- 1 Quotation
- 2 Booking
- 3 Transportaion/customs clearance
- 4 Tracking
- 5 Communication
- 6 Payment
- Courier services
- Airlines/shipping companies
- Logistics centers
The company also attracted the attention within the industry with its ‘Amazon FBA Maritime Transportation Service,’ by which the company deliver products to Amazon’s logistics centers in the United States and Japan for small and medium exporters in Korea and offer consultations on the countries’ complex customs clearance procedures. Samsung SDS also plans to develop packages consisting of those specialized services, so the customers can conveniently access the preferred services, similar to travelers choosing travel packages at travel agency websites.
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