Myths, principles & concrete approaches: Digitalization in logistics

As generally perceived, digitalization is always slightly mystical, a state to strive for, but which no one ever really achieves. That may also be the case for the absolute final completion, but this is often not even necessary. Digitalization should not be an end in itself, but should move processes away from paper and personal presence, and into computers and the Internet, to make people's lives easier or to make the process more cost-effective.

In principle, every elimination of a paper form into an app is already digitalization, because something that “physically” existed is now digital. On the other hand, however, a digital consultant's remark is also true: “If you digitalize a ‘garbage process’, you will get a digital garbage process.” In most cases, digitization also involves a change in approach, or digital principles are embedded in the new process.

Digitalization may be supposedly new, but it still runs according to a few rules that are not so new at all:

Speed beats perfection

The most important principle: the first player on the pitch wins. Was WhatsApp technically superior, and was the solution already perfect? No, of course not, but WhatsApp was the first to take that route; it achieved a free entry and was the first messenger ready on the market. Speed trumped perfection here. The existing basic function was already so impressive that the other convenience features could simply wait.

Winner takes is all

Name another social media platform for individual users other than Facebook! Who were you all, StudiVz, MyFace? There were a few, but in the long run the market leader displaced all the other players and captured the field for itself. That exists in a few applications, for example, not only Facebook but also WhatsApp.

A few other messengers are still alive here, but considerably below the perception threshold, etc. Over time, many competitors have been ousted or acquired by this one market leader. Amazon and Facebook, as well as Apple, have shown here how digitalization works - the bigger solution wins out (completely or mostly) against the smaller ones, and new small solutions struggle to establish themselves.

Data is the new petroleum

Data is said to be the petroleum of the next century. At the moment, it is still hard to imagine that in many industries the majority of the profits will no longer come from the core product, but from the sale of data on its use. An illusion at present, because implementing this rule is proving to be extremely difficult up to now. Data is collected in many different places, although very little is being done with it today. In many areas, however, data is still entirely unavailable.

Engines from the last century simply do not have sensors installed to constantly measure shaft speed and oil temperature, so these data are simply not available for older automobiles. Often, however, it is not even clear what can be done with such data. And no-one is going to pay if there is no benefit.

Sensible, feasible digitalization already comes to meet us today, anywhere and at any time. A vacation process that is no longer paper-based but runs in a system (or at least via e-mail) constitutes applied digitalization and, in an era of pandemics and home offices, can no longer be made available in any other way.

For example, taking this one step further and transferring it to core processes, digitalization can transfer a delivery note procedure or order-picking process from paper to software. The benefits are obvious here: in most cases, the processes run faster, travel times are saved, and there is no longer any need to transcribe changes.

The logical continuation of digitalization is the transfer of business processes into an integrated system that supports and optimizes the teamwork of the processes per se. Here, with the S4/HANA-based extended digital supply chain, SAP SE offers a solution that natively supports users when integrating and networking processes.

But, of course, it is still the case that the process must be lean, sensible, and adequate to satisfy all the customer's needs. This is where consultants like us come in to help, advising customers not only on implementation in the SAP system, but also on optimizing processes in the supply chain.

Naturally, there are also other vendors offering software to support business processes, either very generally or with a clear focus on the supply chain. BlueYonder would be one example, with a focus on your customers' logistics and supply chain processes, and with a local emphasis in North America.

Conclusion

Digitalization is a topic of our time and will not go away again. Integrating everything and all processes is probably no longer stoppable, at least in those places where it makes sense. A temperature sensor in sneakers is certainly technically possible, but I at least can't think of any benefit that a user or advertiser might want to pay for.

For many other areas, there are already ideas or ready-made applications that sound crazy at first glance but still work: An elevator manufacturer uses a microphone to listen to the elevator door as it opens - from this he can detect wear and tear on the elevator and offer maintenance before anything gets seriously damaged.

In my view, what remains important is that digitalization is not an end in itself and should always support people. Then we will create more decent jobs in many exciting areas.