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What is Logistics 4.0? Everything you need to know about digitization & logistics

| Author / Editor: Jonas Scherf / Theresa Knell

(Source: CC0 / CC0)

Digitization is a major challenge for logistics. Read on to find out what Logistics 4.0 actually means and where it is used.

Digitization and automation are also having an impact on the logistics industry. Until recently, the World Wide Web was mainly used as an access portal to information and consumption, but it is currently undergoing a rapid digital transformation towards the "Internet of Things and Services". As this development progresses, platforms for “intelligent” products will emerge that connect people, data and machines. This has significant consequences for the logistics sector, especially with regard to the speed, flexibility and controllability of its processes. Against this background, Logistics 4.0 is becoming increasingly important for companies that want to position themselves successfully on the market. Learn more about this topic in this article:

Logistics 4.0 - what exactly does that mean?

Logistics 4.0 in the narrower sense implies the networking and integration of logistics processes within and outside of trading companies and production facilities, right up to decentralized real-time control of logistics networks. Corresponding solutions include Cyber-Physical Systems (CPS), which consist of embedded systems interconnected via communication networks. Man and material act as “endpoints”. Other components include assistance systems such as devices with autonomous intelligence and decision-making capabilities such as cameras, detectors and self-driving cars. The question “Does Logistics 4.0 still need people?“ is therefore the subject of controversial debate.

DDigital transformation, especially the networking of logistics processes, provides more transparency in the supply and dispatch chains and thus improves improves supply chain management. This is how digitization and automation help to achieve intralogistics 4.0. In the long run, even the cargo itself could become intelligent and organize its own transport autonomously. Our whitepaper on the subject of "Intralogistics 4.0" reveals everything that needs to be taken into account on this path.

The goals of Logistics 4.0 are cross-company automation and optimization of material flows and resource utilization in both inbound and outbound logistics. As a prerequisite and consequence of digitization, an interactive flexibilization of business models, processes and partner networks is created.

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Without Logistics 4.0 there is no Industry 4.0

Industry 4.0, the fourth industrial revolution, is on everyone's lips. While over the years mechanization (industry 1.0), mass production (industry 2.0) and automation (industry 3.0) have made their way into production, digitization is now following, i.e. the Internet of Things and Services. This offers outstanding growth opportunities and competitive advantages for companies that welcome the associated new technologies and innovations. According to forecasts, digital transformation and automation can increase productivity by around 30 %.

Some of the main objectives of the fourth industrial revolution can only be achieved if logistics are adapted accordingly. These adaptations include in particular the main features of industry 4.0 such as

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

Only by successfully implementing Logistics 4.0 can companies create the necessary foundations to master the future challenges of Industry 4.0: For instance, paperless processing of transport orders with digital waybills or pallet exchange in the digital age are important basic requirements for industry 4.0 to function properly.

How does Logistics 4.0 work?

Logistics 4.0 is not only planned once and then maintained in the same form for all eternity. It is constantly learning new things, constantly adapting to new requirements and is therefore continuously being implementing.

Logistics 4.0 focuses on the use of new, innovative technologies, such as as forecast-based supply chain management. With this and other new technologies, the following logistical key figures can be optimized:

  • Delivery reliability
  • Delivery quality
  • Delivery flexibility
  • Ability to deliver
  • Service level

To achieve this, companies must create and implement new concepts for planning, controlling, monitoring, and implementing information and material flows in Logistics 4.0. The aim is to include all levels of corporate logistics in the digital transformation and to identify suitable technologies for optimization.

Solutions for Logistics 4.0 are aimed equally at internal and external processes. For example, increasingly complex and global value chains and networks require completely new approaches to supply chain management in order to coordinate material and information flows from raw material suppliers to customers more efficiently.

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Digital transformation as a consequence of changing consumer behavior

For many people, especially for digital natives, constant use of smart devices such as smartphones, tablets and data glasses is part of everyday life. Some of them are constantly online, sometimes even on several channels at the same time. They see the associated possibility of continuous localization as just as self-evident as the short-term generation and redirection of requirements. As a result, the need for improved product and service individualization is growing, while ownership of certain things is becoming less important.

New models of the sharing economy are replacing numerous consumer goods or services. An increasing number of customers is using and paying for a car only when they need it, booking private accommodation instead of hotel rooms or opting for carpooling instead of taxis. Some of these sharing economy ideas can already be found in logistics. In Sweden, for example, there is the DHL app "My Ways", which enables working people to take a parcel for their neighbors on their way home from the city center in the evening. UberRush is currently setting up a service in the USA with the aim of organizing transports faster than usual, at a price below regular parcel costs.

These effects of online trading on logistics are transforming the market. The former state-owned company DHL became a technology leader thanks to a clever digital transformation strategy, while Amazon put its customers at the center of its business processes and created a new logistics standard. Zalando also excels not only as a smart online shoe retailer, but as a professional in the field of reverse logistics. Old business models, including several traditional mail-order companies that have resisted digitization for too long, have lost their market position and in some cases have disappeared completely.

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Practical example: Digital supply chain as a prerequisite for Logistics 4.0

It is not possible to implement Logistics 4.0 with paper delivery notes or with non-transparent or manual processes. On the contrary: Digital documents will determine logistics in road freight transport in the future. An end-to-end digital supply chain is the basic prerequisite for the Internet of Things. Companies that want to rely on Logistics 4.0 must therefore abandon manual procedures as quickly as possible.

Shippers, for example, can integrate transport service providers into their own digital processes via mobile order management. This is made possible by electronically connecting drivers via mobile terminals, which extend the digital supply chain into the driver's cab. The hardware required for this consists of conventional smartphones or tablets, that are also available as robust versions.

The prerequisite for this procedure is the use of a logistics platform by the shipper that is suitable for mobile order management and equipped with a corresponding interface. Mobile terminals only need to be equipped with an app linked to this platform, which forwards the digital freight documents to the drivers. Customers later sign directly on the display, whereupon the papers are automatically archived in the shipper’s system. At the same time, the GPS function of the mobile devices can be used to locate the position of the transport vehicle in real time.

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As part of the digitalization process, shippers can also implement individual mobile order management. However, this poses a great challenge because each customer needs to be provided with their own hardware and software which constantly has to be kept up-to-date. In the long term, only solutions that are provided on logistics platforms and used by as many shippers and forwarding agents as possible are likely to be sustainable. Ultimately, Logistics 4.0 is not only about creating a digital supply chain for individual companies, but also about making various value and supply chains compatible with each other and networking them.

Which technologies are used in Logistics 4.0?

There is a wide range of innovative logistics 4.0 technologies to choose from. New solutions are added almost on a daily basis. Especially in view of the technology-driven nature of the market, companies are faced with the great challenge of developing concrete solutions and applications for their own requirements.

An important component of the logistics reality of the future will be the Cyber-Physical Systems (CPS) mentioned above, which include embedded systems such as equipment, buildings and means of transport as well as logistics, coordination and management processes and Internet services. The tasks of these systems include:

  • to capture physical data by means of sensors and to influence physical processes by means of actuators,
  • to evaluate and store the collected data and to interact actively or reactively with the digital and physical world,
  • access globally available data and services as needed.

In order to complete these tasks, the CPSs are interconnected via digital networks and also have various multimodal human-machine interfaces that provide differentiated and dedicated possibilities for communication and control (e.g. languages and gestures).

In the course of Logistics 4.0, logistics service providers or manufacturing companies will jointly use warehouses, distribution centers and transports as well as reversed logistics chains. The resulting global logistical super networks enable significantly faster and more efficient deliveries. Thanks to the Internet of Things, web-based, i.e. non-material, "Logistics on Demand", "Logistics as a Service" and "Logistics Marketplaces" will also be created. Companies wishing to benefit from the advantages of such networks should address the following trend developments:

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On-demand delivery

The delivery of goods takes place exactly when the customer needs them, independently of the short-term nature of the demand and the service times of the established logistics companies. This results in new competitive models for the first and last miles. Examples for this service strategy are MyTaxi, My Ways and UberRush - but also in Germany something is happening, because same-day delivery is now available in many German cities, too.

Multi-channel models

An increasing number of companies use several sales channels simultaneously. All channels must be served according to their specific requirements while at the same time be efficient. This can only be achieved with the help of newly developed standard processes, which are applied on a modular basis depending on the respective demand and sales channel.

Logistics 4.0 for e-commerce and B2C market activities

Due to the growing importance of e-commerce and B2C market presences, logistics volumes are becoming ever larger, while individual orders are becoming more fragmented. Overall, logistics will have to handle more damage and returns in the supply chain in the future. At the same time, electronic commerce and B2C provide small businesses and traders with an easy access to customers around the world. Together with the super networks already mentioned, this results in direct contact with customers without traditional gatekeepers such as wholesalers and importers, but perhaps instead via logistics service providers and logistics platforms.

These developments can only be realized if all logistics employees, starting with the dispatcher up to the manager, have the necessary knowledge of logistics 4.0 as well as the necessary skills. These include above all:

  • the ability to recognize growth opportunities and the realization of logistics strategies,
  • the recognition and evaluation of the potential of new technologies,
  • the pragmatic realization of cooperations along the supply chains,
  • the improvement of internal collaboration between development, marketing, sales, human resources and IT,
  • the utilization of leadership skills to avoid mistakes, to motivate Generation Y or to successfully lead an international team consisting of many nations.

Since such employees are not easy to find, the battle for logistics talent is likely to intensify in the future. Our whitepaper "War for Talents" highlights the lack of skilled workers in logistics.

Ultimately, when recruiting, the most important thing is to profitably combine technologies, super networks and existing knowledge in the company in order to make logistics 4.0 a success.

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What are the advantages of Logistics 4.0?

Companies that rely on digitization and automation can create significant competitive advantages by reducing their costs and at the same time increase customer satisfaction by transporting goods and minimizing delivery errors. Among other things, you or your company can benefit from the following advantages of Logistics 4.0:

Ensuring data quality

The collection and processing of data is one of the most important functional areas within networked systems. Not only product-specific master data is important, but also the evaluation of connections. In times of digitalization, data quality is an important prerequisite for qualifying as an attractive partner for other companies.

More scope in negotiations

Companies that can rely on an international network of contacts have more leeway in price negotiations. It may well be worth investing in contacts and looking for suitable partners abroad as well. As a rule, this also improves your negotiating position at home.

Global resource procurement

Thanks to global networking, companies are no longer dependent on domestic resources alone. Global sourcing also enables medium-sized and smaller companies to gain access to raw materials and supplier parts all over the world.

Opening up new sales markets

International networks make your company' s offer available to interested parties on all continents. Digital transformation makes it easier to identify new sales markets. If you make your services and goods available to international partners at an early stage, your chances of establishing yourself successfully and sustainably on the market will increase.

This article was first published by MM Logistik.

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