The Internet of Things (IoT) will help DHL deliver you things
IoT is taking over the logistics business
DHL advocates that by 2025, IoT has the potential to generate up to 1.9 trillion USD in additional value for international logistics industry [1]. Gartner describes the situation more broadly that by 2020 half of major new business processes will incorporate some elements of IoT [2]. Being competitive in the industry where every dollar counts and price for services plays a big role requires using every possible opportunity to increase efficiency. IoT might revolutionize the whole value chain by streamlining processes and therefore increasing net margins of companies that rely on international and local deliveries [3]. In the last 5 years, DHL launched several initiatives with IoT leaders such as Cisco and Huawei, with the ultimate goal of optimizing DHL’s operations – from fleet management to employee monitoring [4]. In other words, and rephrasing the famous saying, if you can measure something, you can improve it.
In 2015 DHL and Cisco jointly run a trend research on the implications and use cases of IoT for the logistics industry [5]. The conclusion is that once more objects become connected to the Internet and tracked in real time, the main challenge will be to effectively manage the information flow and corresponding flow of physical objects such as containers or parcels. DHL and Huawei launched a pilot to improve “inbound to manufacturing” (I2M) logistics for an automotive site in China [1]. I2M logistics in the automotive industry requires the right automotive parts to be delivered to the right location and at the right point in time. As it can be seen from the Toyota case, even the smallest deviation from the process can greatly affect the overall productivity, so the speed and accuracy of this type of logistics is a vital part of the customer promise [6].
The solution that is piloted in China is fairly simple – each batch of automotive parts is tagged with a chip that uses the cellular connection and constantly transmits data about a truck’s location and status. Similar tracking devices are also installed in the receiving docks. A real-time system analyses the data and directs drivers to the most appropriate dock. The greatest value of this system is its timeliness – each of 100 trucks should be at the right dock (out of 30 docks) when the particular part is needed at that specific dock. Another similar system, this time in collaboration with Cisco, is run in smart warehouses in Germany and identifies on the fly how operational activities of employees change in different areas of the warehouse. These are just pilots that yet have to show their return on investment, but they can be implemented on a company-wide scale in 5-10 years from now [7].
As more devices and physical objects are becoming connected to the internet, an appropriate focus on security becomes vital [8]. The more current supply chains rely on the digital world the more they become vulnerable to cyber threats. With the benefits of more data sources comes a new vector of attack through multiple entrance points – each one of millions of sensors can become an open door for hackers. For instance, in June 2017 cyber-attack Petya almost shut down TNT Express, FedEx’s ocean freight subsidiary, and it might not fully recover in the foreseeable future [9]. It seems that logistics companies are following the trend of using data to streamline operations, however, I would recommend significantly investing in the resistance to digital attacks from day 0. This does not mean developing a solution from scratch or acquiring a startup right away, but it is important to at least design the data flow and exchange with an eye on safety. Companies, such as Gemalto [10] or CyberX, provide a ready-to-implement solution that is installed as a proxy between data-suppliers, e.g. sensors, and data-consumers, e.g. warehouse management. For an initial pilot and implementation, this might be enough, but the main question is – what’s next?
Questions:
- As all companies have an opportunity to implement some sort of IoT, how would a particular company, e.g. DHL, gain a competitive advantage over its competitors, e.g. Fedex, that is also following the trend [11]? Should DHL rely on someone’s else expertise, build its own department or buy another company?
- Companies do a lot of things to protect their assets physically – guards, fences, security cameras. How can a company ensure that by relying on IoT it doesn’t expose its crucial operations to villains that are thousands of miles away from the assets at risk?
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References:
[2] https://www.gartner.com/newsroom/id/3185623
[3] http://www.businessinsider.com/internet-of-things-logistics-supply-chain-management-2016-10
[5] https://www.dpdhl.com/content/dam/dpdhl/presse/pdf/2015/DHLTrendReport_Internet_of_things.pdf
[6] http://www.dhl.com/en/logistics/supply_chain_solutions/what_we_do/inbound_to_manufacturing.html#.Wguv4RNSzBI
[8] https://www.forbes.com/sites/gilpress/2017/03/20/6-hot-internet-of-things-iot-security-technologies/#564f5e5f1b49
[9] https://www.itnews.com.au/news/petya-damage-to-tnt-express-systems-is-likely-permanent-468600
[10] http://www.gemalto.com/iot/iot-security
[11] https://www.rcrwireless.com/20160929/big-data-analytics/fedex-iot-tag31
This article raised two points in my mind. The first one you address, which is, once everything is connected to the internet, what are the cyber risks on the business? With such complex logistics and a promise to customers of the right delivery to the right place at the right time, DHL’s mistakes can have reverberating effects through the supply chain. That fact makes their IOT infrastructure a tempting target for hackers. I’d recommend they think design and practice their threat identification and response plan before implementation. The other question this article brings to mind is, with the ability to create efficiencies and reduce costs, how does the new value get distributed? In other words, should IOT improvements mostly benefit DHL’s bottom line, or should they pass on the cost reduction to their customers? How do they make this decision? I would think that pricing stays the same and DHL gains the benefits from its technology improvements, but with new technology developments they need to prevent new competitors from entering the market as well.
What would keep me up at night if I was running DHL is the concern that you address, which is the security of the system, its vulnerability to cyber attacks, and the far-reaching consequences for the company, its partners, and customers if an attack were to occur. When I think back to the field trip at the IBM X-Force Command Center, one of the more important takeaways for me was that while companies are very aware of the possibility of cyber attacks and breaches, they have been slow to develop and actually practice thorough processes to deal with these potential events. It’s surprising because how a company deals with these extreme situations often determines the future of the company. DHL leaders, therefore, need to make sure that the right systems are put in place and that all employees are properly trained so everyone can work effectively together if the company’s systems were to be attacked.
Interesting topic to read and questions asked! I personally believe that IOT is going to change all aspect of our life and logistic is definitely one that will benefit from IOT.
Aside from the cybersecurity risk mentioned in the essay, there are 2 other areas of interest I would like to explore:
1) How soon the wireless communication infrastructure – which is invisible – could support the increasing needs of data generated by IOT. 5G is aimed to connect the world and one of its most important advancement is to support IOT and could potentially solve the infrastructure issue, but I am doubtful how quickly it could be adapted in the market and especially in the IOT space.
2) Are companies ready to implement IOT? The essay mentioned about collaboration with Cisco and Huawei, I think that is definitely a smart move. For logistic companies to implement IOT, it is crucial for them to work with companies with communication expertise on protocal development etc to gain the competitive technological advantage. However, I don’t see such advantage would last long for one single company and I see it will eventually roll out to the whole industry, especially the major players.