Digitization in Logistics: How Logistics Automation Works

Digitization in logistics took a big leap forward as a result of the Corona pandemic, as comprehensive changes in the area of process automation were unavoidable at the same time as margins were falling. 

In addition to the pure digitization of players in the logistics chain and the optimization of goods and warehouse management, operational coordination at the digital level and thus data exchange also had to be optimized in order to remain competitive.

Digitalization offensives now go beyond mere collaboration between employees in the home office and represent decisive competitive factors for the strategic positioning of the logistics service provider in the supply chain.

The combination of high customer demands due to advancing automation of logistics and the latest developments on AI and low code offer software vendors and IT houses the opportunity to differentiate themselves from the competition through state-of-the-art software modules.

Digitalization in logistics Definition

Logistics 4.0: Definition

Logistics 4.0 describes the impact of digitization on the area of transportation and supply as well as the support and co-design of digitization and automation through cross-company and cross-functional coordination tasks of logistics.

This involves changes in the three main areas of logistics:

  1. Transportation: Transportation logistics providers take care of the physical movement of goods from one place to another. This can include services such as truck, rail, air and sea transportation. These providers may also offer value-added services such as packaging and customs clearance.
  2. Warehousing: Warehouse logistics providers take care of the storage and distribution of goods. They provide storage space for inventory and provide services such as order processing, picking and inventory management. They may also offer value-added services such as packing and assembly.
  3. Logistics management: Logistics management providers handle the coordination and management of the entire logistics process. This can include services such as transportation management, inventory management and supply chain optimization. They can also offer value-added services such as customs clearance and reverse logistics.

Some logistics providers offer a combination of the above services, while others specialize in one or two areas. Not only the choice of the right logistics provider, but also the right software modules, depends on the specific needs of a company and the type of goods to be shipped.

The digital transformation ensures greater transparency in the supply and shipping chains by networking logistical processes, thus improving supply chain management. 

Challenges

Digitization brings with it a number of challenges that companies need to solve.

Due to the enormous amounts of data, the Data Privacy a central aspect. For this, reliable solutions must guarantee the security of all company data.

The increase in the amount of data provides a Increased process and information complexity. It is important to have a suitable application that can cope with the complexity and relieve your employees in this respect. 

Generally should be used for the Acceptance of the change by the employees be taken care of. A rethink is necessary in the context of work organization, as people and robots now no longer just complement each other, but work together. Especially since the digitization of logistics is not a process that can simply be completed, but requires continuous adaptation.

Digitization in logistics symbols

How does Logistics Automation work?

Digitization in logistics pursues 4 central goals:

  • Networking
  • Decentralization
  • Real-time capability 
  • Service orientation

Logistics processes are being networked, leading to greater transparency between companies and suppliers, which can improve the entire supply chain. The changes are aimed at the 6Rs, for example: 

The richtige product in the rquality to the right time on richtigen place in the richtigen quantity to the right costs.

The goal of digitizing logistics is to develop cognitive logistics based on existing data that is not only capable of learning, but also communicates with each other and is capable of making decisions on its own so that human intervention is no longer necessary.

These cyber-physical systems are designed to increase the efficiency and effectiveness of all information and material flows within and across companies. 

Concrete improvements in the individual areas of logistics: Examples

In order to benefit from the advantages of Logistics Automation, it must be applied and implemented in all areas of logistics. Below you will find a few examples of how this can look.

Warehouse Logistics:

  • Smart shelves
  • Trade ads
  • Data glasses (pick-by-vision)
  • mobile robots
  • Optimized travel routes

Transportation logistics:

  • Intelligent truck
  • Intelligent containers
  • Intelligent pallets

Procurement Logistics:

  • Inventory measurement via sensors
  • Automatic retrieval

Production logistics:

  • Digital factory
  • Customized production

Distribution logistics:

  • Loading optimization
  • Route selection

Information Logistics:

  • Paperless
  • Digital
  • Real-time
  • data analytics
  • Resource conservation

Advantages of digitization in logistics

You can derive the following benefits from the digitization of logistics:

  • Ensuring the data quality of product-specific master data incl. the evaluation of correlations
  • Better implementation possibilities through international contact network 
  • Opening up new labor markets through international networking

Logistics 4.0 technologies

On the one hand, logistics companies have to develop concrete solutions for their own requirements, but on the other hand they can rely on system houses and specialized software providers who have developed state-of-the-art IT solutions for the industry...

An important part of this is the aforementioned cyber-physical systems (CPS), which include embedded systems such as devices, buildings, and transportation, as well as logistics, coordination, and management processes, and Internet services.

Your duties will consist of:

  • the acquisition of physical data by means of sensors and to act on physical processes with the help of actuators
  • the evaluation and storage of the collected data and, on this basis, to interact actively or reactively with the digital and physical world
  • Access to globally available data and services on demand 

CPSs are interconnected via digital networks and have multimodal human-machine interfaces that provide differentiated and dedicated means of communication and control (e.g., languages and gestures).

Through Logistics 4.0, manufacturing companies and logistics service providers will share warehouses, distribution centers and transports as well as reverse logistics chains. These comprehensive flows of goods, finance and information will enable comprehensive improvements for all logistics value chains, whether transport, warehousing or logistics.

Specifically, the following technologies, for example, can give your logsístics company an advantage:

  • Document Management System (DMS) for intelligent, digital document management via OCR (Optical Character Recognition)
  • Automation and robotics: Automated warehouses, robots for picking and packing, and autonomous vehicles for transport and delivery help to increase efficiency and reduce costs in the logistics industry
  • Internet of Things (IoT) and sensor technology: Using IoT devices and sensors, the location and condition of goods can be tracked in real time, enabling better inventory management and route optimization.
  • Blockchain technology: Blockchain can be used to create a secure and transparent digital ledger of transactions that can improve transparency and trust in supply chain networks.
  • Artificial Intelligence (AI) and Machine Learning (ML): AI and machine learning can be used to analyze big data, optimize routing and planning, and predict demand, enabling logistics companies to make more informed decisions.
  • Cloud Computing: Cloud computing gives logistics companies on-demand access to powerful computing resources that can be used to store and process large amounts of data and support the development and deployment of new logistics technologies.
OCR VS EDI Symbols

OCR vs. EDI: Digital document capture put to the test

In the digitization of logistics companies, the use of EDI (Electronic Data Exchange) interfaces was often relied on in the past. Thereby arise high development costs, especially when connecting two logistics partners. 

This connection works and is only worthwhile if the exchange between the partners is extensive and the partners maintain extensive business contacts. 

In addition to pure intelligent document management, OCR, on the other hand, offers the possibility of digitally connecting smaller partners and thus optimizing processes.

In order to present a fully comprehensive picture of automation and document exchange between companies, the various technologies, in this case EDI and OCR, should be used together.

EDI and OCR: The difference

OCR is the technical term for optical character recognition - also called text recognition. It describes the process of recognizing texts from raster graphics, e.g. scan results, images or PDF files, and digitizing them.

Electronic data interchange (EDI) refers to the electronic exchange of business documents, such as orders, delivery bills and invoices. These documents are exchanged between business partners in the form of structured data and without manual intervention. There are defined standards for this that apply internationally.

Digitization in logistics 3 Symbols OCR

Digital document capture with OCR

With OCR, you can digitize almost anything that is on paper, such as delivery bills, invoices or complaints. Digital documents such as PDFs can also be read very easily.

A good example of a IDP SoftwareThe most advanced AI OCR application that you can customize yourself is Konfuzio's cloud-based AI OCR application. The application is suitable for both low-code and high-code developers who want to create custom AI solutions for intelligent document automation.

You will benefit from the following aspects in particular:

  • No hardcoded rules
  • Customizable AI
  • No rigid layouts
  • Scalable
  • Multilingual document processing
  • Handwriting recognition

To learn more about Konfuzio and how you can integrate the OCR application into your business, please visit here.

The great advantage of OCR is that you can use the method independently. You get your system to independently understand incoming document types, regardless of origin. If you use EDI, you first have to get your business partners on board before going live. 

If a high number of documents or documents with many items is part of your daily business, the setup time of the OCR software is definitely worth it for you.

Digitization in logistics 3 Symbols EDI

Digital data exchange with EDI

EDI is an alternative method for the exchange of data, which is characterized by a high initial coordination effort with customers and suppliers, but does without PDF documents. EDI already works digitally throughout as an interface format due to the exchange of data via structured files such as JSON, CSV or XML. 

Accordingly, the advantages of EDI are:

  • Higher speed
  • Increased business efficiency
  • Less multiple processing and reduced stock shortages in the warehouse thanks to immediate processing of electronic business documents

It is foreseeable that EDI and the digitization of data will become standard, as it is already increasingly a criterion for supplier selection in larger companies. 

The Disadvantage of an EDI interface is that all partners must interface with all other relevant partners to exchange information. 

The more partners a company has in the logistics industry, the more interfaces have to be built. It can be seen very quickly that the number of interfaces to be built grows exponentially compared to the number of participants in the supply chain and thus the interfaces very quickly expensive can be.

In addition, interfaces are usually only worthwhile for logistics partners who have a high volume of one data exchange make necessary. Smaller logistics service providers and those used in a lower frequency are mostly not applicable for the interface from an economic point of view.

It is important that not only you introduce EDI in your company, but also that your business partners switch over. Otherwise, no one will be able to use EDI. 

Tip: If you are now thinking about introducing EDI, you should check your ERP system for appropriate interfaces and, if they are not sufficient, consider switching.

In summary: Advantages and disadvantages of OCR and EDI

BenefitsDisadvantages
OCRCan be introduced unilaterallyLess efficient data exchange than EDI
Fallback to thousands of suppliers if one does not offer EDI
EDIFully digital data exchange, complete automation, provided customers and suppliers connect EDI as interfaceEach partner must implement EDI in order to use it
Higher speedHigh initial coordination effort with customers and suppliers

Conclusion: Combine OCR and EDI for all-round success

The OCR process ensures fast optimization through electronic processing of documents, which is especially worthwhile if you have a large number of documents or items. You can implement and use the application directly without having to consult with your business partner, which allows you to act quickly.

Nevertheless, you should also keep an eye on EDI, as it can be a worthwhile investment and fully digital integration, especially for large suppliers and customers. However, to make good use of the interface, you need to get your business partners on board.

More on the topic:

No matter what you decide: The fact is that digital document capture digitizes and optimizes a large part of logistics. Not only do you save time and reduce errors, but you also lower process costs. 

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