Global digital transformation spending in logistics will reach $ 75.5 billion by 2026, growing at a CAGR of 8.8% from $ 45.6 billion in 2020, according to ReportLinker's newest report . The spending on logistics digitization has been driven by the Covid-19 pandemics for the last two years and it will even speed up in the future due to the Russian invasion of Ukraine. Who will be faster in embracing innovations has a lot to gain, according to Paulius Insoda, CEO at NFQ Technologies, international IT company, helping global brands to create innovations, which recently opened its Polish branch in Krakow.
In the last four years, the China-US trade war and the Covid-19 pandemic have caused a major disruption in global supply chains. The Russian invasion of Ukraine and sanctions imposed on Russia for doing so is the latest event to rock global supply chains even further. This will have major long-term consequences for the supply chain and logistics industry, including accelerating the movement by Western companies to reduce their dependency on China for components and finished goods and on Russia for the import of raw materials. All this will lead to more localized, or regional, sourcing strategies, backed up by increased investment in digital transformation.
The trend of supply chain localization is well illustrated by the recent announcements about bringing the production back to the US soil in the solar, semiconductor and biotech industries . You can also expect similar moves from German carmakers that depend on components from Ukraine. The war has hard hit their suppliers in the country and their plants are idle now as they struggle to figure out a new supply chain system, which most likely will lead to bringing manufacturing and operations back to Germany or other EU-based countries from Ukraine.
Expect more supply-chain localization and digitization
The process has already been happening for some time as indicated eg by Axios' 2020 survey among 3,000 firms in a variety of industries - including semiconductors, autos, and medical equipment. The survey revealed that companies in about half of all global sectors in North America already at that time had an intent to “reshore.” The pandemics and war in Ukraine have changed these plans into an urgent need.
“The supply-chain localization trend is in line with an increase in spending on innovation and digital transformation. It is due to the need to revamp existing models and add flexibility to business operations to ensure omnichannel delivery, reduce costs and meet the ever-shifting consumer demand. This reason for digital transformation was indicated by 65% of logistics, supply chain, and transportation executives in a recent survey conducted by Forbes Insights, ”said Paulius Insoda , CEO at NFQ Technologies.
It is not specific technologies that count, but the idea
Among the technologies mentioned as such that can best help the logistics industry optimize and stabilize the operation of supply chains are the Internet of Things (including autonomous delivery vehicles, intelligent warehouses), Artificial Intelligence (e.g. for data analysis and automation), and Blockchain (including applying self-executing digital contracts in goods distribution). However, as NFQ CEO explains, It doesn`t matter which tech stack or tools you choose. What matters is what you do with it.
“Thinking and the idea behind the technological solution is what matters for business the most. To choose one or another technology and to state that the technology itself is a key to success is simply a brag and not true,” explained Paulius Insoda.
The NFQ CEO adds that an idea is a key that opens all doors. This is well illustrated by the example of the German digital logistics and warehouse management system Alaiko launched in 2020. The idea for this solution – which boiled down to offering e-commerce companies a platform that automates the delivery and warehousing of goods – was so innovative that NFQ from the company implementing this project also decided to become one of its investors. Alaiko is currently on the right track to becoming another European unicorn.
Where is room for disruption in the supply chain and logistics industry?
Companies making efforts to stabilize and optimize their supply chains and build a competitive advantage should, first of all, be interested in everything surrounding full automation of processes, digitalization, reduction of manual labor work - these things are disrupting the logistics market right now.
“This is because thanks to automation companies can significantly increase the speed of operation, dependence on manual work, and thus also the scale of their business. For example – the use by our client Atlantic Express of the solution for automated order processing and driver assignment let it quadruple the number of orders processed every day while relieving customer service with a tool for clients to keep track of their cargo," said Paulius Insoda.
The CEO of NFQ also points to sustainability (including e-vehicles, shared economy mobility solutions) as the area in which there is the greatest field for disruption by both existing and new players in the logistics industry. An example of such solutions from the NFQ portfolio, which appeared on the market just a few years ago and which have already managed to gain a very strong position, is a mobility company providing rental services for vans per minute, or Plugsurfing – charging stations for electric cars.
In the future, also AI and ML-based software based for reducing manual work in supply chains should become more and more popular. At this point, AI/ML in the logistics industry is mainly the basis for solutions that transform vast amounts of raw data into system-usable analytics enhancing business decision-making. However, the scale of solutions based on AI/ML should grow rapidly, summarizes CEO of the NFQ.
Additional information about NFQ
NFQ is an international IT company that employs more than 800 people in all its branches worldwide. The company provides both digital strategy and execution to entrepreneurs who seek scaling and competitive advantages enabled by software engineering and product development, business digitalization, business intelligence and data science. NFQ also provides UX, UI, CRO and consulting services, for travel, omnichannel retail, transport, logistics and sharing economy businesses across the globe. NFQ has successfully built high-competence software engineering teams to work on the core of KAYAK and drive technology for the world’s leading vacation rental marketplace HomeToGo. In the past NFQ has also built a leading flight search platform Swoodoo in Germany and DACH. The market at the time saw it as the best technological solution in the sector.