Artificial intelligence, big data, Internet of Things (IoT), augmented reality, autonomous driving, digital twin and other cutting-edge technologies have important use cases and applications in various logistics scenarios, effectively realizing the digitalization and visualization of the entire logistics and supply chain flow, while fostering the integration of business, logistics, capital and information. The application of new energy, new materials, automation and other technologies have effectively reduced enterprise logistics costs and improved work efficiency, while also enhancing the positive impact brought about by the logistics industry on the broader environment and society.
Digital transformation is the key development trend in supply chain, and the further popularization of various cutting-edge technologies applied in the field of logistics and supply chain will inevitably accelerate the advancement of this trend. As we embark on a new year, here are the top 10 logistics technology trends to look out for in 2022 and the corresponding impact on the broader ecosystem and society at large.
1. Large-scale Commercial Applications of RFID-based Identification Technology to Accelerate Digital Transformation
Compared with traditional barcode technology, radio frequency identification technology (RFID) has outstanding advantages such as large amount of stored information, non-contact identification, long identification distance, high recognition rate, and reusability.
Currently, the technology is mainly used in the retail sector. Wal-Mart, Tesco, Metro, Decathlon, Uniqlo and other FMCG retail giants are vigorously promoting the application of RFID technology to drive the transformation of their logistics and supply chain. Compared with stores that do not use RFID technology, stores equipped with RFID technology have reduced their product shortage rate by 16%, and the number of orders processed manually in- store has dropped by 10%.
Due to the complexity of the operating environment in the logistics industry, RFID accuracy has been around 80%, and cannot be applied to real-life scenarios. In 2021, Cainiao achieved 99.8% RFID accuracy by optimizing chips and identification algorithms. The breakthrough of this key technology makes the large-scale commercial application of RFID technology in logistics settings possible, and is expected to become the third-generation identification technology after barcodes and QR codes. At present, Cainiao has applied this technology broadly across its value chain, such as its biodegradable packaging and cross-border parcel tracking.
The new supply chain management system created with the help of RFID and other innovative technologies can realize the digitization of logistics information, and strengthen the transparency of information spanning goods, assets, human resources and other elements.
2. Autonomous Vehicles to Spur the Next Trillion Dollar Logistics Business Segment
Manufacturers such as Tesla have brought driverless technology into the consumer car market. In addition to technological advancement, policies and supporting regulations in the field of autonomous driving are gradually opening up. In Japan, L3 regulations have been implemented, while in Germany, the production of Mercedes-Benz L3-class autonomous vehicles has been approved.
In the field of logistics, driverless application scenarios are more abundant. Autonomous driving technology can realize the unmanned and mechanization of logistics operations such as loading and unloading, and transportation to bring about cost reduction and efficiency enhancement.
In parallel, it also serves to drive innovation in the logistics industry by facilitating technology adoption in the areas of line haul transportation, short-and medium-distance distribution, warehousing operations and last mile logistics. Due to the constraints of vehicle technology, policies and regulations, the large-scale commercial application of autonomous technology will see its first breakthrough in the last mile logistics settings via express courier deliveries.
Judging from the latest developments, last mile logistics sees the highest cost and is also the segment that has achieved the widest adoption of low-speed autonomous driving technology. These days, with the growth in volume of courier delivery, the shortage of courier personnel in developed cities has become more prominent. In this context, the value of autonomous technology in last mile logistics is becoming increasingly pronounced. Especially following the outbreak of the Covid-19 pandemic in 2020, contactless deliveries became the most viable and practical solution to mitigate logistics disruptions while ensuring consumer safety. In recent years, Cainiao, Meituan, Google, Amazon and other industry players have ventured into autonomous driving technology for their last mile logistics.
In real-life application scenarios, Cainiao has deployed the largest number of autonomous vehicles across China. During Double 11 Global Shopping Festival in 2021, Cainiao released data revealing that over 350 autonomous logistics robots have been deployed in more than 200 colleges and universities across the country.
With the development of 5G, AI and other technologies, the impact of low-speed autonomous vehicles will be further amplified in 2022, with operations cost greatly reduced after large-scale commercialization. Herein, we expect the rise of the next trillion-dollar logistics segment.
3. Hydrogen Energy to Transform Line Haul Trucking
Hydrogen energy is one of the new energy sources that possesses the highest potential in the world. Today, lithium batteries have gradually entered the consumer car market, but for long-distance trucks, lithium batteries are not the best option. Compared with pure electricity, the advantages of hydrogen fuel with high power density, long cruising range and short hydrogenation time meant that it is a much more superior option for trucking logistics.
On the other hand, traditional trucking logistics for long-distance trucks has always generated significant carbon emissions. According to IDTechEx, despite representing only 9% of the global vehicle stock, large diesel truck engines represent 39% of the transport sectors’ greenhouse gas emissions, and about 5% of carbon dioxide emissions from fossil fuels.
Driven by the latest trend of energy conservation and emission reduction, hydrogen energy models that are more in line with the efficiency needs of logistics operations possess marginal difference from its traditional fuel counterpart. This meant that logistics companies will be more inclined to make the switch to hydrogen energy vehicles, and on the reverse, truck drivers will also be able to readily adapt to the new vehicles.
It can be predicted that starting next year, hydrogen fuel cell technology will enter the commercial fast lane, and set off a huge transformation in the field of trucking logistics.
4. The Digitization of Supply Chain Will Become an Industry Standard
The internet has had a huge impact on people’s lives and the broader consumer industry. After more than ten years of rapid development, the consumer internet sector has gradually reached the point of saturation. However, digitalization penetration in manufacturing is still at a relatively low level, and we can expect further developments in the industrial internet sector.
The China Smart Logistics Development Report released by Deloitte’s Logistics and Transportation Team reveals that by 2025, the scale of smart logistics market is expected to exceed RMB 1 trillion. Some analysis shows that if digital transformation can expand the market by another 10%, it can create more than US$ 200 billion in new value every year.
The pandemic has raised companies’ awareness of the pertinent need to digitalize their supply chain and accelerate digital transformation across the entire value chain. At the same time, with the advent of new technologies such as 5G, AI, big data and blockchain, we will witness an acceleration of digital transformation in the supply chain sector with momentum extending from the consumer end to supply side.
In the future, the digitization of the supply chain will not only be reflected in the digitization of a single industrial element or a single field, but also focus on the broader network collaboration and value creation of the entire supply chain ecosystem to achieve greater synergies.
At present, multinational FMCG brands such as Procter & Gamble, Unilever, Nestlé, domestic SAIC-GM-Wuling, Baowu Group, Xu Fuji, Wuliangye are partnering Cainiao to transform their digital supply chain. Beyond that, China’s small and medium-sized enterprises are also building an interconnected digital supply chain system to aggregate resources to achieve greater optimization, while improving their capacities for risk mitigation and management.
5. XR Technology to Enhance Operational Efficiency, Safety and Accuracy for Frontline Workers
Extended Reality (XR) technology encompasses virtual reality (VR), augmented reality (AR) and mixed reality (MR) technology concepts. It is combined with IoT, big data analysis technology and AI to produce a real and virtual environment that fosters human-computer interactions. The environment has the characteristics of high dimension, over-the-horizon, efficient guidance, and seamless communication, which creates a smarter working environment for employees.
China’s “14th Five-Year Plan” lists virtual reality and augmented reality industries as key industries in the digital economy for the next five years. In fact, the application of XR technology in the entertainment industry such as games and movies is relatively mature. In the industrial settings, XR technology has also been broadly implemented by players such as Haier, Gree, Schneider Electric, SAIC and State Grid, in certain high-risk environments to ensure safer, more efficient operations. For example, Boeing now uses AR glasses to assist their technicians in wiring aircrafts, reducing production time by 25% and significantly reducing error rates.
In the field of logistics, the application of XR technology has also delivered initial results. In particular, AR technology can integrate the virtual and real world in a variety of combinations, thus providing more possibilities for efficient frontline operation in the logistics industry. For example, in Cainiao’s smart warehouse, employees can greatly improve picking efficiency, reduce picking error rates, training time and cost with the use of AR glasses. In the area of transportation, beyond cargo loading and inspection, AR technology and equipment can also replace traditional navigation systems to provide dynamic real-time navigation in truck driving conditions.
In future, relying on the XR system, logistics companies can digitalize various operation scenarios to improve work efficiency and reduce costs. There is no doubt that XR technology will increasingly play an active role in the global supply chain, from warehousing optimization, employee training to modern transportation development.
To be continued in Part II…