Expert Column Post COVID-19 & Challenges of Logistics Distribution Platforms

For the past two years, the global COVID-19 pandemic has reminded us that new viruses can continue to emerge in the future. There are two reasons why this is not just an infectious disease. First, it caused supply chain instability for companies, which overshadowed all existing business logic and practices . It also made employees and customers realize that their previous work patterns and lifestyles need to be completely changed. In particular, in the case of the distribution center where the confirmed case of COVID-19 occurred, the logistics system was stopped and the workers had to suffer from anxiety that they might have been exposed to COVID-19. On the other hand, quarantine rules such as epidemiological investigations targeting close contacts and conducting complete disinfection of the complex in the logistics center did not actually help quarantine.

Although most workers complained of anxiety about COVID-19 and the difficulty of continuously working while smelling sanitizers, it is true that it is not enough to properly prevent the logistics distribution process. In addition, the new virus, Monkey Pox, has been spreading again before the COVID-19 is completely over. One of the British researchers identified it as a human-made strain, which has been around since 2017, through genetic analysis. It means the virus is caused by humans, not by other factors such as animals. In other words, we are currently facing a situation in which we must seriously recap all work processes previously considered as business practices.

The World Economic Forum (WEF) surveyed and presented the top 10 most serious risks worldwide over the next decade through The Global Risks Report 2022.

According to the global risk reports, five environmental factors are ranked among the top 10 most serious risks: failure to respond to climate change, extreme weather, loss of biodiversity, human environmental degradation, and natural resource crisis. Next, there are three social factors: Social solidarity confrontation, livelihood crisis, and epidemic. Followed by, the others are identified as geographical and economic crises. This demonstrates that a serious crisis is coming not only for the environment but also for our society in the future.

Through the ranking above, we can see what should never be missed in business as well as human life over the next decade. Then, what should the logistics and distribution business contain on their platform?

Why Digital Transformation Fails Currently, the hottest issue in the entire industry is digital transformation. It is usually defined as a system that applies digital innovation technologies such as artificial intelligence, cloud, big data, Blockchain, and the Internet of Things to industries. Digital transformation is also applied in the field of logistics and distribution, but the probability of failure is much higher. Despite introducing the latest digital technology capabilities, they are not as successful as expected. What is the reason of it?

Although digital transformation tends to actively construct logistics platforms and connect multiple networks, the reason for the limitation is that even though the core and end goal should be the business model, it only remains focused on adding cutting edge features. In other words, this is a similar way to wearing only a new functional outerwear without changing the trendy business model.

The most active field in the logistics industry in nowadays is also a logistics platform that utilizes digital technology which is suitable for e-commerce environments. Especially, with the integration of logistics and distribution, digital platforms that are more convenient and efficient than before are developing like the last mile. Securing a stable supply chain is a key source of flow and convenience in an e-commerce market environment. In particular, the unexpected uncertainty in the global supply chain that emerged after the COVID-19 pandemic has become an important task for logistics companies to solve. The strategic direction of most logistics companies is focused on eliminating uncertainty, and how to apply digital technology to solutions is also an essential task.

The book Why Digital Transformations Fail, written by CEO of Transformant Tony Saldanha, who is in charge of consulting companies that promote global digital transformation, explains several reasons why digital transformation fails. One of the reasons is that companies recognize the need for digital transformation and strive for digitalization such as platform development, artificial intelligence, and cloud construction through technologies, but most companies fall into silo in the process. In other words, digital technology is used in terms of work efficiency, but it does not match each other, so it does not reach the solution and falls into isolation. This is because the strategy of the entire company remains not fully applied to the business model and remains in a traditional industrial model platform aimed at maximizing profits, such as cost reduction and speed improvement. Therefore, in the end, companies tried digital transformation, but they remain unable to apply it to business models through old fashioned innovation.

The company's DNA cannot be innovatively changed and applied to the business model. So what is the essential business DNA today? The answer lies in the innovation of business models suitable for the business era where new viruses and eco-friendly coexist after the COVID-19 pandemic.

The main purpose of the digital logistics platform is a network that reduces overall logistics costs and enables complex and demanding import and export logistics tasks transparently and efficiently by establishing a blockchain platform for tasks such as settlement and verification. Of course, digital technology has helped this very innovatively. With the application of blockchain technology, all transaction participants can prevent forgery of transaction information and manage logistics distribution history. An environment has been created in which several participants in the supply chain can trust each other. Furthermore, by connecting with customers throughout the entire stage of the business, such as production, distribution, and sales, services close to their needs are possible.

However, one of the essential platforms is the safety and hygiene requirements that customers need. Transition to a Purpose-Driven Enterprise for Hygiene and Safety The COVID-19 pandemic gives a lesson that companies around the world should switch to purpose-driven companies. This change has led to the current goal of securing human safety and hygiene from profit maximization in the past. The main point of view is that the business model must change from a traditional product-oriented corporate system to a value delivery system. In other words, the perspective that pursued profit maximization and work efficiency as priorities in the past has changed. It is an era in which profit maximization and work efficiency are achieved through security of customer safety and hygiene.

if the logistics distribution system was regarded as a process from planning products to making and selling products, In the existing value chain, it should now change to a value delivery system that reflects the values pursued by consumers and new issues of the times.

Nowadays, logistics and distribution companies are not just in the process of delivering products. With the introduction of the fulfillment concept, it is transcending the previous concept of logistics by integrating all processes from a single view until products are created and delivered to customers. Digital technologies are appropriately used in the delivery value chain of logistics distribution. In the supply process, automation occurs in tasks such as inventory and warehouse management, inventory due diligence, and store management. In the customer attraction process, AR/VR enhances the customer experience. We need to recognize that the front lines of customer experience are hygiene and safety. In the sales stage, technology is applied to the payment and delivery system to simplify payment and streamline delivery. Hygiene and safety in the delivery system are effectively delivered to customers. Customers want to know how logistics and distribution are occurring to customers, and logistics companies should inform them accurately. How the platform by the blockchain is handled within the delivery system at the level of cost reduction and efficient work has become an important concern. This eventually enables a circular business to continue to occur in customer relationships. In other words, manufacturing and logistics distribution companies should be connected in a series of processes as a network, not a business model that sells, delivers, and terminates once.

Recently, the management of domestic logistics distribution and imported goods from customs clearance to final consumers has been strengthened, and consumers' awareness has been increasing. Changes in the business model that establish hygiene and safety as core values are required only in terms of cost reduction and work efficiency. We should be able to answer the question, 'Does our company have a business model that is eco-friendly and carries out hygiene and safety in the entire process of logistics?' This is a key task directly related to the survival of the company and is also a task of the platform in the future.

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