Furthermore, due to the low entry barriers and severe service homogenization in the logistics industry, the entire industry is experiencing severe "involution," resulting in a long-term state of increasing revenue but not increasing profits.
This can be seen from the ratio of China's total social logistics costs to GDP over the past five years: from 2017 to 2021, the ratios were 14.7%, 14.8%, 14.7%, 14.7%, and 14.6%, respectively. Although the ratio in 2021 decreased by 0.1 percentage points compared to the previous year, it is still far from the long-term stable level of 8% to 9% in developed countries.
This reflects both the significant room for improvement in my country's logistics development and the fact that the demands of the national economy on the logistics industry have shifted from speed and scale to quality improvement and structural optimization—a transformation towards quality and efficiency. The pillar behind this is the power of digitalization.
Currently, with the support of technologies such as cloud computing, artificial intelligence, the Internet of Things, and 5G, the logistics industry is accelerating its integration with modern technology. Based on this, digital transformation is becoming an indispensable process for logistics companies in their development. Through digital transformation, logistics companies can optimize and upgrade every link in the transportation process, achieving transparent, intelligent, and standardized management, ultimately reducing costs and increasing efficiency.
Three ways digital logistics reduces business costs
1. Optimize the logistics system and improve logistics management.
To reduce logistics costs, businesses must understand their actual logistics situation, establish a logistics cost database, and analyze their logistics system. By comparing basic data, they can identify the reasons for excessive logistics costs and make improvements. With a comparative foundation, they can set goals and build a new logistics system.
Enterprises can reduce logistics costs by using data to inform decisions, optimizing logistics processes, and improving logistics management. This can be achieved by establishing a dedicated digital logistics management department, professionalizing logistics management, adopting modern logistics concepts, and re-evaluating the enterprise's logistics system and operations. By learning from advanced logistics management methods and combining them with the enterprise's own specific circumstances, companies can find ways to improve logistics management and effectively reduce logistics costs.
In addition, businesses can leverage digital technology to improve their logistics systems, shorten transportation distances, reduce inventory levels and turnover processes, and improve storage efficiency through reasonable inventory levels. This is also an effective way to reduce logistics costs. For example, in terms of capacity management, capacity has always existed in the industry. It is a logistics transportation model that has been accumulated through repeated transactions by cargo owners, logistics companies, and drivers in pursuit of maximizing profits. It is a natural result formed based on the characteristics of the industry.
In the existing transportation supply chain, there are formal commercial and contractual relationships between upstream cargo owners and logistics companies, with a high degree of standardization. However, the layered subcontracting downstream leads to lengthy and opaque processes, resulting in gray areas. Digital logistics can also solve this contradiction.
2. Reengineer business processes and select logistics models
In order to adapt to the current competitive landscape, logistics management departments of manufacturing enterprises must carry out market- and customer-oriented process reengineering, transforming functional management into process management. Through process reengineering, they can establish market-oriented, customer-focused processes that use customer evaluation as the service assessment result and reflect operational efficiency and effectiveness, thereby better meeting customer needs.
In addition, the process reengineering also includes transitioning the original performance evaluation indicators based on functional departments to a performance evaluation indicator system based on business processes. The revised performance evaluation indicator system should be able to appropriately reflect the overall operation of the enterprise and the operational relationship between departments at each node of the process, thereby promoting the efficient flow of funds, information, value and workflow in the entire logistics system, and thus achieving the smooth and efficient operation of the entire logistics system. Digitalization has had a significant impact on and promoted the reengineering of cargo transportation processes.
Digital logistics significantly enhances the information management capabilities of logistics companies. At the same time, by connecting with transportation and tax departments and exchanging data, it breaks down information silos, enables dynamic control over the entire business process, and helps companies grow into composite enterprises that combine offline freight transportation organization capabilities with online platform-based data operation capabilities.
3. Improve the management system and establish logistics information systems.
Minimizing total logistics costs is of particular importance for enterprises in building and optimizing their logistics systems and finding ways to reduce costs. With increased awareness of logistics management and pressure to reduce costs, many companies are turning their attention to logistics information technology.
Faced with technological innovation, smart logistics, based on in-depth research into the characteristics of the times, proposes higher requirements for technological research and development. In the design of various terminals—sensing, transmission, cloud, and application—it maximizes the application of big data technology to improve information acquisition, transmission, and processing capabilities, further enhancing the convenience of smart logistics. Research on Big Data-Based Smart Logistics Management Models: Analysis of current mainstream logistics models and strategies for innovation in enterprise logistics management models.
For a company, controlling logistics costs is not simply about improving the efficiency of its own logistics, but rather about optimizing logistics costs throughout the entire supply chain, from product completion to the end customer. To further reduce logistics costs, corporate management should shift its focus from managing the company's "internal supply chain" to managing the "end supply chain" from customers to suppliers.
Since optimizing local logistics efficiency cannot guarantee a cost advantage for enterprises in competition, they must rely on the construction of modern information systems to effectively connect the various functional elements within the logistics system with external strategic partners, forming a rapid logistics response system.
The world has undergone tremendous changes in recent years, and the pandemic has brought various challenges, making uncertainty the norm. But amidst all the uncertainties, one thing is certain: the trend towards digitalization remains unchanged. Digitalization used to only allow some businesses to thrive, but today it's crucial for their survival.
This demonstrates that digital development has become a direction actively explored by major logistics companies, and even one of their core development strategies. Based on this, more and more companies are likely to rush into this field. It is foreseeable that a digital transformation has quietly begun, and the digital development of the logistics industry will become a crucial cornerstone for the high-quality development of enterprises and the entire industry. At the same time, it will also be a key link in reducing social logistics costs and improving logistics efficiency. Logistics companies empowered by digitalization will create more value for customers and society.
In the past, digitalization was merely a means for businesses to improve their lives; today, it's crucial for their survival. In the current complex international climate, compounded by the impact of the pandemic, the logistics industry faces various uncertainties. However, one thing is certain: digital development is the inevitable path for logistics companies in the future. The road to digital transformation is long and arduous, but perseverance will surely lead to success.
