skip to main text

Logistics insights Expert Column Post-COVID19 Logistics and Digital Transformation

Registration dateSEP 14, 2021

Post-COVID19 Logistics and Digital Transformation
Background of Digital Transformation in the Logistics Industry Digital transformation is all the buzz in the business world. There was a time when digital transformation was suspected of being a marketing jargon or a temporary fad. However, coronavirus Disease-19 (COVID-19) changed everything; now, businesses pursue digital transformation as if (or because) their life depends on it. Faced with massive global changes and challenges brought on by the pandemic, businesses require efficiency, visibility, and elasticity brought on by digital technology. Companies with preexisting digital capabilities are enjoying new opportunities amid a crisis.

Digital transformation means a continuous process of innovating products, services, and operations through digital technologies such as artificial intelligence (AI), cloud, big data, and blockchain, and transitioning into new digital-based business models. Digital transformation goes beyond merely adopting an interesting new technology or two; it represents using technologies to improve processes and workflows, increase performance, innovate services, and enhance customer experience.
Digital transformation is no longer a word reserved for digital technology companies such as Google and Amazon. Recent changes have prompted traditional manufacturers and service providers to accelerate the transition into digital business. Starbucks is expanding its traditional brick-and-mortar business model into a mobile business model through digital transformation in the form of the ‘digital flywheel’ strategy, which combines order, payment, reward, and personalization services based on customer data.

Nike already attempted to combine sports and digital through its “Nike Plus” products and app. In 2017, the footwear company announced the “Consumer Direct Offence” strategy aimed at doubling its sales through digital-based production and direct connection to consumer feedbacks. By boosting its direct to consumer (D2C) business, Nike is expected to nearing its ‘second heyday.’

As such, leading firms across industries pursue digital transformation to innovate customer experience, build new business models, and rewrite industrial landscapes. Changes in Logistics Environment Brought on by COVID-19 Recent changes have highlighted the need for digital transformation in the logistics industry as well.

After the COVID-19 outbreak was officially recognized last year, countries across the world implemented lockdowns and other disease control measures. These actions affected logistics firms especially hard by reducing traffic, delaying shipping, and increasing time and money required for logistics. In Europe and other regions, local disease control measures disrupted domestic logistics as well, making it impossible to comply with delayed shipping dates. The United States went further and imposed a 14-day docking restriction on ships returning from China.

Changes in the global supply chain have rattled the logistics market to the core as well. Factory shutdowns caused by the spread of the disease resulted in unexpected delays and discontinuation. On top of the shutdown, the twenty years of globalization process has reached its limit, and firms and other stakeholders are now bracing for the reshuffling of the global supply chain. Industries heavily relying on parts supplied from emerging countries such as China, which experienced difficulties with adapting to the situation. In response, developed countries began to come up with ways to increase the operation of domestic production facilities.

These changes have highlighted the need for reducing complexity and expanding visibility through digital transformation. In addition, the unprecedented growth of the online distribution market has rapidly boosted the volume of parcel delivery cargo, which is expected to continue in the foreseeable future.

The pandemic has also fueled the growth of online shopping, as the shutdown of offline marketplaces promoted customers in their 50’s and 60’s to join consumers in their 20’s and 30’s, who constitute the main customer base for online marketplaces. According to eMarketer, a market research firm, the global online shopping market is now worth USD 4.28 trillion, a 27.6% growth from the previous year. Online distribution is expected to take up around 20% in the global retail sales. Experts predict that the massive group of newly converted online consumers will not return to traditional ways even after the end of the pandemic. Startups: New Possibilities for Digital Transformation in Logistics To overcome the challenges of COVID-19, businesses need to save time and costs, streamline workflows, and make their processes visible. To achieve these goals, businesses are currently looking to digital services. The importance of digital transformation in the logistics industry has been highlighted for years now. However, logistics represents a complex system consisting of shipping companies, truckers, shippers, warehouse owners, and customs brokers. Its transformation cannot be achieved by the efforts of a single business. The international logistics process is not readily available for transformation to digital technologies because it is made up of countless ‘connections.’

However, various startups have utilized digital capabilities to propose new possibilities for logistics innovation. These logistics startups expand the concept of logistics by combining and merging with other industries. They drive the growth of the logistics industry by applying Internet of Things (IoT), big data, AI, blockchain and other new technologies and improving their process efficiency and cost efficiency.

Flexport adopted digital technologies into traditional maritime transportation. It was evaluated at USD 3.3 billion by Softbank Vision Fund in 2019 and attracted investments totaling at USD 1 billion. Its success brought the world’s attention to tech-based logistics startups. Also known as “Uber in the Sea,” Flexport reduced the time requirement for transportation services by developing online booking services and automating its processes using the cloud technology. The company currently caters to the logistical needs of around ten thousand customers across more than 200 countries.
Other startups also attracted attention by addressing various pain points of logistics customers. Freightos provides online price quotation/comparison services for the online cargo transportation market. Shippo pools the shipping needs of small e-commerce businesses and refers them to international shippers. Thanks to Freightos, shippers no longer need to compare prices by exchanging phone calls and emails. Once quotation requests arrive from a shipper or a forwarder, the startup uses the transportation contract data from carriers to recommend the best prices and options in real time. Shippo uses its own application programming interface (API) and web interface to match e-commerce businesses to various carriers. It expanded the beneficiaries of shipping service discounts to include small e-commerce businesses.

Various Korean companies also provide digital logistics platforms capable with integrated quotation, booking, consulting, and tracking functions. SDS Sets Out to Build Success Cases for a Digital Logistics Platform As the COVID-19 pandemic fuels the demand for digital transformation in the logistics sector, experts point to ‘logistics platforms’ as the key element of digital transformation. The world has seen an extensive growth of needs for a single platform for meeting a full range of needs, ranging from carrier selection, quotation, streamlining of work processes, reliable payment, real-time visibility, and data-based service improvement.

A number of traditional logistics companies and digital startups have tested their mettle in the digital transformation business by developing their own digital logistics platforms. However, none of them have achieved visible outcomes so far. Startups have weak foundations in traditional logistics despite their technical strengths, whereas traditional logistics companies need time to transport their extensive legacy infrastructure to new platforms. With the two sides showing distinctively different strengths and weaknesses, few companies have provided platform services encompassing the overall flow of logistics services from quotation to payment.

‘Cello Square,’ a digital forwarding service by Samsung SDS, is a case worth the attention. Samsung SDS offers a unique structure, which is widely recognized as optimized for digital logistics platform business that combines Korea’s largest IT service provider and a global logistics giant, providing logistics services at 230 sites across 37 countries with 78 airlines, 206 shipping companies, around 1,000 logistics operators, and 7 courier service providers.
[Samsung SDS Logistics Service Overview] Samsung SDS Logistics Service Overview Samsung SDS Logistics Service Overview (Source: Samsung SDS)
Cello Square provides instant quotation for each sea/air routes by section and allows users to compare transportation costs and time in accordance with cargo weights and types, place of origins and destinations, and transportation schedules. Shippers can use Cello Square to track real-time positions and abnormalities in transported cargos. Once transportation is complete, Cello Square automatically processes invoices from multiple logistics operators. The platform also provides reports detailing various logistics data, allowing customers to identify ways to reduce their logistics costs. Click on Logistics, Cello Square Unlike Cello Square 3.0, which focused on international courier services, Cello Square 4.0 covers all international transportation needs, including sea and air forwarding services. The single platform encompasses all import/export procedures by providing a full battery of services including simple and fast quotation and booking, real-time tracking, and status management with chatting and dashboard features. The platform also reduces overall logistics costs by ensuring the transparency of payment and validation of international cargos and reducing tedious and repetitive works.
[Features of Cello Square] Features of Cello Square Features of Cello Square (Source: Samsung SDS)
Along with Cello Square, Samsung SDS offers specialized services utilizing the company’s digital technology capabilities. The Premium Transportation Control service allows customers to monitor products and equipment that are high-priced or sensitive to temperature, humidity, or impact, and Cello Square also suggests the optimal packaging boxes depending on the product and quantity and provide constant temperature sea transportation for fresh food products using smart boxes.
[Key Functions of Cello Square] Key Functions of Cello Square Key Functions of Cello Square (Source: Samsung SDS)
Samsung SDS also launched the ‘Air Reforwarding’ service, which includes reasonable fares and repackaging services utilizing Samsung SDS logistics centers in Dubai, Miami, Hong Kong, and other key stopovers. The service lowers long-distance air cargo fares for shippers. For stable provision of the service, Samsung SDS ensured that customers can identify fine detailed shipping status and issues at each stopover on mobile.

The company also attracted the attention within the industry with its ‘Amazon FBA Maritime Transportation Service,’ by which the company deliver products to Amazon’s logistics centers in the United States and Japan for small and medium exporters in Korea and offer consultations on the countries’ complex customs clearance procedures. Samsung SDS also plans to develop packages consisting of those specialized services, so the customers can conveniently access the preferred services, similar to travelers choosing travel packages at travel agency websites.

▶ This content is a work protected by the Copyright Act of the Republic of Korea. The contributor holds the copyright to this content.
▶ Any secondary processing and for-profit use of this content is prohibited without prior consent.

Nam Do-Yeong, Reporter Nam covers IT software, hardware, and electronic industry for the tech magazine Tech MNam Do-Yeong, Reporter Nam covers IT software, hardware, and electronic industry for the tech magazine Tech M