Digitalization Critical to ‘New Normal’

By Sven Hermann

Consulting company ProLog Innovation conducted a market survey in January 2020 at the Forum Project Logistics in Bremen, an annual event where freight owners and service providers meet and discuss market expectations, trends and technologies.

That event was exactly two weeks before the first confirmed Covid-19 case in Germany. A normal beginning of the year, a normal event, and five months later we have to speak about a 'new normal' in the post-coronavirus future, whenever that will be.

But what is that new normal? New to us are terms like “low-touch economy” and “contact-free economy,” but there are no new answers on how to deal with it. Agility, remote work, digitization of processes, automation, end-to-end value optimization, etc. – we have discussed these topics for years. In our latest survey, respondents answered that market differentiation through digital integrated end-to-end solutions seems to be the No. 1 strategy for logistics service providers. But still, and especially in global breakbulk and project cargo, it seems normal to dismiss the digital transformation as a buzzword, and not to prioritize it as a main necessity for all.

Now Covid-19 pandemic speeds up the economic shift from physical to digital, and presents a more precarious future for traditional logistics services providers than ever before. So, I asked cargo owners, freight forwarders, packaging, container and insurance companies in recent days about their expectations, lessons learned and plans for the near and far future to deal with this current situation.

Andreas Ulrich, head of shipping logistics of SMS group, mentioned: “German mechanical engineering will maintain its competitive advantage if we are able to accelerate the use of advanced technologies. Especially in logistics, that means we have to making it work with our partners. Encourage and support them by developing further digital capabilities will push us together to a higher level of digitalization.”

Joerg Breker, senior executive expert logistics of thyssenkrupp Industrial Solutions, said: “Our competitive advantage comes from speed, a shorter lead time than our competitors, and reliability. To get faster and more reliable means using and developing new digital end-to-end planning and management tools particularly to create greater visibility across the supply chain.”

Breker’s colleague Andreas Wiegeler, team lead logistics, comes to a similar conclusion: “We have to stop optimizing supply chains based just on component costs. Together with our suppliers and logistics service providers, we have to shape just-in-time and just-in-case supply chains that create the most value and are resilient enough for our complex and uncertain world.”

An additional look on the procurement perspective lead to the following findings from Gerd Hofmann, director global procurement of Grob. “It was impressive to see how well the logistics chains in Europe worked during the lockdown. In conjunction with a close collaboration with our suppliers, we managed to avoid significant material shortages. At the same time, all of us observed how vulnerable the global value chains are when individual links break. I am convinced that companies will design their future supply chains more flexible and pure low cost country sourcing will be replaced by a more local for local driven approach.”

Johannes Stemmer, director digital transformation of BEUMER Group, said he assumes: “Companies learned that it’s indispensable nowadays to operate digital and decentralized. Coronavirus forced us to think and act more digital. It helped us to identify weak points in our supply chains and communication. Some of them we solved immediately. Covid-19 so to say made us in some ways stronger and more resilient.”

Yes, a crisis can make us stronger and it’s a good “time to start redesigning supply chains to optimize resilience and insurance coverage for projects,” said Urte Jessica Boelke of Lampe & Schwartze. “And we have to talk about better risk management – main keys to it: more transparency and better teamwork between project owners and logistics service providers, especially in early project stages.”

A fundamental requirement for that will be the replacement of familiar paperwork with the ongoing digitization and automation of processes. “This will help to optimize the entire logistics industry with all partners throughout the transportation chain,” said Andreas Sedlatschek, head of category management logistics of Voith Group. Investing in IT will make a competitive difference.

Thomas Dahmen, managing director of Siempelkamp Logistics & Service GmbH, is convinced that “we will further invest in digitization and smart tools. We are already on the right track with a very good focus on data transparency along the supply chain, but we still see a lot of possibilities for future improvements.”

Mario Schulz, director of supply operations Germany of Outotec, comes to the following conclusion: “Due to the required flexibility in, and the nature of our business, I believe that in the near and far future, the factor human is still a key, but the digital integration of our partners like freight forwarders and carriers, will play a major role. The focus of the freight forwarders shall be the digital cooperation with carriers, which benefits the digital work between the forwarders and the industry.”

So how about forwarders and logistics service providers? Are they ready for more digitalization and still optimistic for the future? Henrique Wohltmann, managing director of Hansa Meyer Global Holding, gave a positive response and already has plans for the future. “Internally we were able to switch rapidly to home office mode. Our project management and customer support were not affected during the last weeks. And as we called ourselves transport architects already before coronavirus times, our main goal is to plan and build resilient transport chains. We plan to expand our services. An additional consultancy division will focus in particular on risk management in project logistics and we are currently bringing together a new IT and innovation network.”
 
Patrick Rehberg, CEO of PTS Logistics, said he “was impressed by our ability to change and our speed to adopt to the new situation. This will last as a core value that drives our business to the future. To accept the VUCA (Volatility, uncertainty, complexity and ambiguity) world, we plan for now and the future to invest more and continuously in the agile and digital transformation of our company.”

Christian Leopold, managing director of CHS Container Group, has a concrete agenda: “We not only have to ensure robustness of our IT systems and enable remote work. For the coming months, our goal is to strengthen our customer relationships with new digital experiences. We will invest in our digital transformation to stay in a strong market position.”

Joerg Kloepper, new head of IT of Dettmer Group, shared an optimistic outlook for his company. “The Coronavirus has brought our company from presence to almost 100-percent remote work, and that within a week. We are currently taking this acceleration of digitalization in the company very seriously, and are using this tailwind to realize further digital projects in a timely manner. Quickly adapting to customer needs, among other things this flexibility within the group makes us fit for the future.”

It’s good to hear that many executives in our business seem to take proactive steps within the crisis and try to put their companies in a better position. We all have to accelerate digitalization, this should be normal to us. And only together we will pass this digital bridge over troubled water in uncertain times.

Sven Hermann is founder and managing director of consulting company ProLog Innovation, and professor for logistics and supply chain management at NBS Northern Business School in Hamburg.
 

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