The central challenges for logistics in 2022 - and how to solve them with the right tools | HCLTech

The central challenges for logistics in 2022 - and how to solve them with the right tools

The central challenges for logistics in 2022 - and how to solve them with the right tools
June 20, 2022

As per a Fortune Magazine report, almost 94% of the Fortune 1000 companies faced pandemic-induced supply chain disruptions. Most logistics leaders experienced these disruptions first-hand, as COVID-19 exposed the weaknesses of traditional workflows in the existing supply chain logistics.

For instance, lack of upstream and downstream visibility, legacy demand management processes, lack of resilience to demand variability, and unexpected outages due to reliance on manual effort across logistics operations had shattered supply chain during the first wave of lockdowns.

Companies that dealt with logistics were forced to analyze their logistics processes and supply chains. They understood that the change in customer behavior and expectations would barely roll back these unexpected logistics challenges even when the pandemic subsided. B2B and B2C shoppers alike - expected faster deliveries and tracking capabilities as they took to digital channels to fulfill their needs.

It became clear that companies needed to optimize supply chain management and logistics (SCML) quickly. For many, the answer came from a new generation of SAP for logistics and non-SAP tools, which promised to address challenges such as inconsistent tracking and increasing transportation costs. These tools enabled them to build truly resilient and agile supply chains.

While these tools are flexible and can adopt to the enterprise’s varying needs, businesses must understand the ups and downs of extensively tweaking software capabilities to fit their needs. While solution providers like SAP provide industry-specific best practices content to help organizations thrive on the benefits of standardization, most will need to find a middle path between standardization and customization to compete effectively in today’s business ecosystem.

Organizations need to find a middle path between standardization and customization to compete effectively in today’s business ecosystem.

Understanding the logistics industry’s central challenges

While the pandemic affected the logistics sector deeply, many of the issues that surfaced were present beforehand. These persistent issues include:

Increasing transportation costs

While the Russia-Ukraine conflict has triggered the recent volatility in fuel prices, transportation costs have increased over the last few years. Several trucking businesses predict that the rates of annual contracts will rise by double digits this year because of strained capacity.

In addition, Europe suffers from a short supply of heavy goods vehicle drivers, with a shortage of around 400,000 throughout their land. Similarly, road transportation rates have increased by 23% in the US amidst rising freight spending and increased input costs for logistics players. In sum, transportation costs are going up univocally across the globe,

Inconsistencies in tracking

Despite the benefits of IoT, many brands continue to follow manual tracking processes. Using spreadsheets and multiple software for the same activity decreases workforce productivity and reduces efficiency.

Limited visibility of shipments

Modern-day consumers expect visibility of their orders. However, a lack of visibility throughout your supply chain can cause issues that can seriously hamper your goods' flow. Unnecessary delays become the norm without end-to-end transparency, as do warehouse operational inefficiencies.

Fragmented communication

A logistics supply chain begins with manufacturing and ends with the final product getting delivered to the customer. Unfortunately, OEMs often suffer from a lack of an integrated communication channel. This deficiency leads to fragmented communication that adversely impacts delivery times and efficiency.

Empty miles

Empty miles, also known as non-revenue miles, have plagued the logistics industry for years. They lead to unnecessary cost increases, adverse environmental impacts, and negatively affect the efficiency of both carriers and shippers.

Delivery delays

The spiraling effect of the pandemic caused factories to shut down and led to a series of labor-shortage-related issues. In addition, they have siloed and fragmented legacy processes that negatively impact the delivery times.

For example, customers must wait for up to twelve months to get their hands on a Tesla Model X or Model Y. Smartphone shipments have also been seriously delayed because of chip shortages; several brands have delayed new launches and greatly increased waiting times for people pre-ordering their products.                

What is the way out for the logistics industry?

Given the growing list of challenges that the logistics industry faces, viable solutions are needed now. Luckily, there are solutions available. For example, digitization and collaborative logistics can tackle most existing issues and enable enterprises to plan, control, and monitor the movement of goods with greater ease.

Many logistic players have embraced digitization and have adopted a host of SAP and non-SAP solutions to address existing and emerging challenges. For example, SAP's Digital SCM (supply chain management) has enabled logistics players to move away from transactional SCLM and toward a strategy-driven, digital, and sustainable approach. In addition, the solution enhances their resilience and mitigates potential future disruptions with agility and data-driven actions.

An introduction to SAP tools for supply chain logistics

SAP Performance Benchmarking report found that while 73% of organizations planned to track their raw materials and other assets in transit and planned to manage exceptions and respond to the insight, only 5% did so. The primary reason why only a small percentage of companies could achieve it was the lack of requisite tools. As a result, many brands have started adopting specialized tools to cater to their specific logistics-related needs.

SAP has many on-premise and cloud-based logistics management tools that enable companies to garner real-time insights into their supply chain. These tools also allow companies to identify potential bottlenecks and prepare for risks before they arise.

SAP Digital SCM tools enable companies to become intelligent enterprises by integrating data and processes, building flexible value chains, innovating with industry best practices, and understanding, and acting on customer and partner  challenges. These tools can eliminate traditional silos and ensure a positive customer experience by revamping the enterprise’s focus on logistics and other vital processes.

The following tools are part of the SAP Digital SCM landscape:

Extended Warehouse Management (EWM)

SAP EWM is an integrated and highly flexible warehouse management solution that provides complete visibility and control over the inventory. It is a comprehensive on-premise and cloud warehouse solution that offers real-time control of distribution operations and multichannel fulfillment. In addition, it excels at managing warehouses and material flows and offers deep analytics and billing features for warehousing needs.

Transportation Management (TM)

SAP TM is a complete solution built to easily manage single-stage and multistage transport networks. It is an on-premise and cloud-based product that includes interactive freight tendering, transportation demand planning, and more to generate real-time KPIs for business operations. In addition, it supports both shippers and logistics service providers across different transportation modes, such as road, ocean, air, and train. It offers an array of functions, such as state-of-the-art transportation planning, charge calculation, and the carrier invoice settlement process.

Yard Logistics (YL)

SAP YL prepares logistics for the future. With its help, logistics brands and others involved in yard management can maximize their visibility into their yard processes while previewing planned workloads in real-time. It is a 360-degree tool that aids in optimizing yard processes by making them more efficient and transparent for easier management.

SAP Business Network for Logistics

The SAP Business Network for Logistics is an open logistics network that provides a central entry point for managing all logistics-related transactions and exchanging documents with business partners. It is a secure inter-company collaborative tool that enables enterprises to connect with business partners. This connection ensures holistic planning and real-time, cross-network visibility into logistics processes.

Other non-SAP tools for alleviating your logistics issues

In addition to SAP tools, several other solutions offer additional capabilities to further build on the functionalities provided by SAP Digital SCM tools. These include –

  • project44 – A real-time transportation management software that integrates with SAP TM and offers complete shipment cycle and workflow automation, and in-transit visibility.
  • ShipERP – A parcel shipping solution that integrates with SAP TM and enables advanced shipment management.
  • UberFreight – A logistics and supply chain management solution that integrates with SAP Business Network for Logistics and SAP TM to offer rich insights on spot shipping rates from Uber carriers.
  • 4Kites – A visibility solution provider that integrates with SAP TM to enable real-time views of loads on a map.
  • XPS – A logistics tool that seamlessly integrates with SAP EWM and SAP TM and enables users to inject automation throughout supply chain workflows.
  • Everstream – A supply chain risk assessment and monitoring solution that works with SAP Business Network for Logistics and enables users to minimize logistics risks by sending real-time insights related to potential risks in a simplified manner.
  • Shippeo – A supply chain visibility platform that integrates well with SAP TM and offers improved visibility to European logistics providers.

The best way forward

New software and tools can go a long way in eliminating challenges, but true success can only come from understanding their capabilities and carefully planning their implementation. Targeted SAP and non-SAP solutions have shown promise in tackling these challenges and gearing logistics operations for a digital-first world. However, try to remember that implementing these solutions takes time and resources, and a single wrong step can jeopardize the result. Most organizations use one or more of these three strategies to introduce new software to their workforce.

Best practices

SAP solutions usually come with industry-specific best practices, which help enterprises to model digital workflows in alignment with what works best in the industry. In other words, best practice content from SAP accelerates the implementation roadmap, reduces the cost of transitioning to digital workflows, and helps organizations leverage the benefits of standardization with aggregated industry knowledge. Moreover, HCLTech’s pre-configured solution templates and best practices can further enhance the value-added delivered by SAP products out-of-the-box.

Customized approach

While the standardization approach uses best practices, a customized approach tweaks the software to implement as-in processes in the new system. This is possible owing to the flexible nature of SAP tools. While a customized approach might reduce the need for change management, it entails writing custom code to influence system behavior. Moreover, a customized approach makes upgradeability difficult and attracts higher maintenance costs.

Hybrid

As the name suggests, the hybrid approach has elements of both best practices and customized practices. It focuses primarily on best practices while allowing enough space for minor customizations. It gives the workforce enough time to get used to the new software without impacting their efficiency and overall performance. Moreover, a hybrid approach could be essential to retain some processes that bring a competitive advantage to a business and deliver a better experience to internal and external stakeholders.

Wrapping up

Today, most logistics and shipping companies choose to deploy enterprise software by following a hybrid implementation approach. In other words, they tend to leverage the benefits of standardization by implementing best practices while having enough room for minor customizations for an improved overall experience. Most of the time, it compromises customization and best practices. What matters the most is to find the right balance between the two. Too much customization will lead to costly maintenance, but too many best practices won’t support business user needs.

In addition, understanding which capabilities are best developed and deployed using SAP or non-SAP tools is critical in accelerating innovation and realizing quick ROI on the way. At HCLTech, we excel at helping logistics providers transform their operations digitally at scale and in the process, lowering costs and achieving customer excellence. Our customized and integrated solutions will enable you to gain a competitive advantage and get the requisite traction. These SAP for logistics industry solutions are also instrumental in allowing organizations to be resilient and overcome their challenges.

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