100% Digital logistics:
still a utopia in 2023

Wed | 23 Aug 2023 | Simacan Solutions

100% Digital logistics:
still a utopia in 2023

Fully automated handling of transport orders is regarded by many carriers as the holy grail in their operations. After all, a super-efficient and real-time order-to-cash process will (turbo)boost business profitability. But 100% digitalisation has a lot more to it than most organisations think. The tricky part: do other organisations accept your data as the truth?

Those who consider digitalisation* think of comprehensible transport networks, humanless and fully automated order-to-cash (O2C) processes and smart planning systems that optimise entire supply chains in real time. Logically, this is seen as the ultimate step in transport management; it offers huge benefits. Not only will it dramatically increase internal efficiency - thus the profit margin - carriers can also offer shippers much more added value. For instance, of sustainability by providing shippers insight into how they can reduce their carbon footprint.

Digitalisation in logistics: What to consider?

A misconception is that with the digitalisation of the transport execution management processes, financial processing is also fully automated. The idea behind this is; a platform like Simacan identifies and records all vehicle movements down to the minute. So basically you know which driver is doing a job for a customer. The assumption therefore is that every mile driven can then be billed instantly, error-free and without discussion. Of course, a very attractive vision for the future! But until this day (2023) still a bit too black and white, for the following reasons:

1. What are the agreements for unscheduled trips?

Transporters drive scheduled but also unplanned trips. If a shipper outsources a trip to a logistics provider, that trip is usually planned from A to Z. It has been agreed upon in advance which locations (stops) that trip should serve; what freight should be included; and based on the mileage and/or duration, a price has also been agreed. In this case, an automated system is perfectly capable of determining in retrospect whether the planning was carried out correctly. And sends out the invoice. The shipper - if both use a platform such as Simacan - has exactly the same (post-trip) transport execution data as the carrier. So systems are able to interact and automatically check whether the invoice is correct before quickly processing it for payment.

However, the tricky part, transporters also perform many unscheduled tasks. A truck and its driver could be hired out to a shipper or a fellow transporter for a day. Then it’s not known in advance which trips this driver will drive that day. There are also 'in-between trips' where a truck driver takes a freight to a different depot or drives the truck to the car wash. Usually, these kinds of activities are not scheduled in a planning system. But are arranged ad hoc by planners and/or drivers. This saves bureaucracy and, more importantly, it gives transporters the flexibility to respond to current developments. But this flexibility and ad hoc decisions are difficult to 'interpret' by an IT system afterwards.

So, if an action is not scheduled, but miles are driven, an IT system cannot determine to whom those miles should be allocated!

2. Discussions on hourly billing

Trick question: if a truck and its driver is hired out to another company for eight hours; but it was idle for one hour out of those eight hours; can the transporter bill seven or eight hours? That question can only be answered if you know why the vehicle was idle for one hour and what was agreed. Was there an occupied loading dock, with waiting time? Was it because of a traffic jam? Did the driver go for lunch? How this should be accounted for depends entirely on what was agreed upon. If there were no agreements made beforehand, digitalisation won’t be of any use because there will always be discussion. The result is that people have to be involved again, to asses the situation and discuss who will pay for what.

3. Which data is accepted as ground truth?

So automatic order-to-cash is only possible if agreements between organisations are unambiguously defined and accepted by both parties. And that is often where the shoe pinches. Suppose a shipper schedules a trip from A to B, the carrier has to agree with the driving time the shipper charges for this. Which route planner is considered leading for this?

Even trickier are agreements on delays. An example: What is settled if a driver has to wait for an hour at an occupied loading dock? This is complex because there can be different causes. Was it the driver's fault because he was late, missing his time slot? Was the driver held up by a truck in front of him that arrived late? And what if that truck in front of him is a colleague working for the same company?

Simacan is able to bring clarity to situations that raise discussions. Because our platform provides clear data insights into what happened. But more importantly, parties should start with making mutual agreements about what the outcome or decision will be in all situations that can occur. An IT system cannot make decisions on its own; making judgments is still human work. Computers can make decisions, but they do so based on the instructions and algorithms programmed into them by humans.

Standardised transport protocols and clear logistical agreements

100% Digitalisation of transport management processes is certainly possible but requires much more than just tracking and recording vehicles and shipments. Logistical parties need to decide in advance what action must be taken in all the different situations. These must become standardised protocols and all stakeholders must accept how IT systems determine the outcome financially afterwards. Especially for the latter, there is still a long way to go. This requires trust. Organisations will only dare to fully automate their financial handling if they are sure an IT system will make ‘the right decision’.

Our advice is: start with digitalisation of your transport processes now. Decide which systems you want to (continue to) use. And examine at how and whether other systems can interact with them. But be aware that for fully automated processes, very clear protocols and agreements must first be established to guarantee 'correct' outcomes. So besides digitalisation, start taking stock, start standardising, plan and start making concrete agreements and protocols. The holy grail is definitely in sight... but 100% digital logistics is still a utopia at this point in time.

* Digitalisation is necessary before digital transformation is possible. Digitalisation is when data from across the organisation and assets are processed using advanced digital technologies, leading to fundamental changes in business processes, which in turn can result in new business models and social change.

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