Hello everyone. This is Hide Usui from Tokyo Electron Device America Inc.
It has been six months since our news release on HAKO-FLO Services, a logistics management system that supports automation and efficiency in logistics warehouse management, we have had firsthand experience talking with a number of logistics professionals in their real voices through business meetings site visits.
We have seen some companies have established DX-related promotion departments to develop and implement solutions to improve their own logistics issues.
The term DX (Digital Transformation) has become widely used in the business world, and I think this means that many solutions are expected to be developed under the keyword of DX as a means to solve issues in the logistics industry.
In this blog, I would like to clarify the current situation and issues surrounding the logistics industry today, and introduce the kind of required solutions. In several installments, we would like to consider this issue from various perspectives.
■ What is logistics DX anyway?
What does logistics DX mean in the first place?
The Japanese Ministry of Land, Infrastructure, Transport and Tourism’s “Recent Logistics Policy” (released on January 22, 2021) defines logistics DX as “reforming the way logistics has been done in the past through mechanization and digitalization.”
Mechanization can simplify and generalize the work process done by people. Although there is an introduction cost, it is likely to reduce labor costs associated with the work, avoid human error, and ensure safety by eliminating the need for people to perform hazardous tasks.
Digitization, on the other hand, targets digitization of paper-based information management and operations, and more efficient operations using tools and applications.
While mechanization and digitalization are closely related, it seems that another important point in logistics DX is to enable people to more efficiently perform tasks that are currently performed by people. And the final goal is to standardize logistics.
■Current status of DXing logistics
DX is being promoted in various industries, but in fact, the logistics industry has a tough time making progress in DX. One of the reasons for this is that there are many processes throughout the supply chain, and many companies are responsible for these processes. It is not easy to standardize a system involving multiple companies.
In addition, Japan is ranked 28th out of 64 countries in the Global Digital Competitiveness Ranking 2021 published by the IMD International Institute for Management Development, which is also used as an international index. Japan is ranked low compared with other Asian regions like Hong Kong (2nd), Singapore (5th), Taiwan, China (8th), and South Korea (12th), so the promotion of DX by the entire country is an urgent theme.
In addition, there is a concern that relying on the “2025 cliff of the legacy systems” will reduce international competitiveness.
So we are in a situation where we must promote DX in the difficult logistics industry.
■ Why is Logistics DX important?
One of the challenges facing the logistics industry is the shortage of labor. With the rapid growth of the e-Commerce market in the wake of COVID-19, non-face-to-face transactions have been established as a new way of life and will continue to be so.
As the number of packages increases, so does the workload, and thus the need for manpower to handle the increased workload. Is it enough to have manpower? If manpower increases, labor costs will increase, which in turn will be reflected in logistics costs.
As a result, logistics costs are then reflected in the price of goods…
As we are a semiconductor trading company, we are involved in the distribution of semiconductor products and network equipment on a daily basis, so the impact of rising logistics costs is familiar to us. Recently, it was reported in the news that in April 2022, the price of Umaibo (a well-known Japanese snack bar), which had been sold for 10 yen, increased by 2 yen to 12 yen. This is due to the impact of soaring distribution costs.
Computers, semiconductor chips, and snack bars all be affected by the rising cost of logistics.
In fact, logistics costs have continued to rise over the past few years, with the 2021 survey showing a logistics cost ratio of 5.7%, the highest in the past 20 years.
Logistics DX can be a means to solve these problems. By promoting logistics DX, we can expect to see a positive cycle of numerous benefits, such as: reduction of labor shortage->reduction of labor cost, reduction of workload->improvement of service quality, reduction of logistics cost->more affordable products.
In the next issue, I will look at actual existing logistics DX initiatives, using our HAKO-FLO solution as an example.