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Is a sustainable, profitable supply chain within reach?

November 19, 2023

Wildly inefficient—that too often describes the state of our global supply chain. With 90 percent of worldwide trade relying on shipping and $13 trillion spent on logistics annually, the industry is a behemoth. Yet, it lacks data-based decision support and information sharing—problems compounded by the complex web of hundreds of thousands of companies involved in the movement of goods. Even with goods moving in massive container ships, the industry struggles to track and manage their journey.

What’s the issue? The critical concept in play: understanding proceeds action. And to achieve the needed understanding the right data, visibility, and analysis are critical. Seeing data together in context of location, on a map, provides that visibility and creates a natural analysis to support planning and better decision-making. Supply chain leaders agree. A McKinsey survey concluded that only when executives have a clear picture of each supply link can they effectively manage their network.

McKinsey noted three factors as essential to avoiding supply chain disruptions: visibility, scenario planning, and reliable data. Global leaders in manufacturing, distribution, and retail take a geographic approach to all three. By incorporating time and place into the analysis of asset movements, geographic information system (GIS) technology provides valuable insights and analytics for fixing supply chain inefficiencies, streamlining operations, and managing risk.

Achieving Real-Time Visibility: It sounds simple, but logistics companies need to know the exact location of containers and assets, at any time. Ledger-based systems suffer from latency and require manual data stitching from disparate sources. This leads to difficulties in tracking goods and increases the risk of missing critical delivery dates. But real-time visibility from sensor data layered onto GIS maps can empower cargo owners with the insights they need to make proactive decisions and avoid disruptions. The decreasing cost of sensors and connectivity is prompting more companies to invest in adding the technology to their shipping containers.

One major IT company took real-time visibility to another level, making a GIS-powered digital twin of its service supply chain. The technology helps this Fortune 100 company achieve visibility and scenario planning to deliver fast and effective support despite global complexity.

Unlocking Efficiency and Capacity: Profitability in logistic ties directly to efficiency gains. It follows then that, by optimizing asset utilization, logistics companies can achieve significant cost savings. For example, the implementation of location-based routing and sequencing at one major shipping company resulted in 235 million fewer miles driven per year, leading to increased capacity and reduced environmental impact.

Cutting-edge location and data management technology are creating this more profitable and resilient supply chain. In a recent Esri & The Science of Where podcast, Dan Pimentel, President and CFO at ESP Logistics Technology, discussed the topic with John Lenahan, Head of the Global Commercial Services team at Esri.

“It has to be a technology solution,” Pimentel said. “Once you start to take time and place into consideration for the assets that are flowing through an environment, that’s the most powerful identifier for those goods.”

Pimentel noted a need for standardized datasets across the industry, which would require extensive change management and coordination among numerous stakeholders. With or without that standardization, the use of location as a unifying factor can bridge the gap between disparate datasets and enable better analytics.

Environmental Impact and Sustainability: There’s more at stake than lost revenue. Efficiency improvements in logistics also have a positive environmental impact. The reduction in miles driven and the optimization of asset utilization contribute to lower pollution levels, particularly in major port cities and regions heavily reliant on logistics activities.

“When you think about it, there’s 17 million containers in the world, 37 million commercial trucks just in the US, and 5,300 ocean carriers,” Pimentel said. “Knowing location intelligence for these assets and positioning them better to increase their utilization … companies can increase capacity up to 20 percent.”

Predictive Spatial Analytics: Another feature of GIS technology is its ability to reveal predictive efficiency insights such as analyzing whether a supplier’s reliance on fossil fuels will become cost-prohibitive if oil prices rise. GIS modeling can show the feasibility of suppliers switching to clean energy based on locally available resources, and whether those changes would significantly reduce carbon emissions. This information can guide next steps for manufacturers and retailers—new partnerships, product strategy adjustments, or equipment investments—with greater precision and efficacy. GIS-powered analysis also incorporates external data, like climate predictions, to test suppliers’ resilience against events such as worsening wildfires or extreme heat or sea level rise.

Advanced awareness helps suppliers shore up operations against potential hazards, while empowering manufacturers and retailers to protect their supply chains by working with producers that are actively managing climate risks.

Supply Chains of the Future: As we round out 2023, it’s important to note that 70 percent of retail sales are made from October to December. The goods being sold now are available because of plans made nine months prior. Even with this lead time, supply chain disruptions persist and late-arrival seasonal goods, even if just a day or two behind schedule, end up in the discount bin.

In short, the logistics industry is ripe for a transformation, one that leads to sharper planning, smarter use of assets, more sustainable and efficient operations, and far fewer disruptions. Real-time visibility through the integration of simple sensors and advanced location technologies like GIS will be foundational to this transformation.

by Brian Cross


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