Chile and United States

The role of digitization in the logistics crisis

Bnamericas Published: Tuesday, August 09, 2022
The role of digitization in the logistics crisis

In the last two years, the logistics sector has been suffering a crisis of capacity after the lifting of restrictions imposed during the COVID-19 pandemic led to explosive increases in demand.

This led to a debate about the slow modernization of the sector, especially in ports, where experts have observed delays in the digital transformation of processes.

BNamericas speaks with Alex Moon, director of Samsung SDS Chile, about digitization solutions for the logistics sector, which of them will be the most important in the current context and his views on the Chilean case in particular.

BNamericas: What do you think are going to be the most important digitization solutions for the logistics sector in the next 10 years?

Moon: On the shipping side, they're looking at how to implement virtual control, using 5G networks, where their ships are in the Pacific, from Santiago [Chile]. That allows for immediate reactions and you can't do that without 5G.

5G is a data route that can allow a person to operate a machine in Santiago from the US, because it allows data transmission at enormous speeds. Shipping companies are already applying this to react quickly.

Other solutions that will be more important would be artificial intelligence, blockchain, virtualization and IoT (internet of things). That's in applicable logistics.

In South Korea we're currently testing a blockchain prototype, which allows information to be kept in its original state.

The most important thing today after the pandemic is e-commerce, which has accelerated the automation of warehouses after the pandemic, and now all the processes within the warehouses.

We have two types of logistics operation, one for factory or wholesale importation, with cloud services. And then there's the retail sector, which requires another kind of operation to serve each customer separately.

BNamericas: How do you see the affordability of 5G terminals?

Moon: A large company with a lot of resources has an advantage in that it can try different technologies to find the one that works best for it, but not all companies have that capability.

The digital transformation specifically allows us to optimize the management of information and analyze where I am and if I'm right or wrong with much more clarity in a multidimensional way. Having this, companies can see where to automate, and that helps with competitiveness.

What a company with fewer resources can do is choose scaled application of digitization, making solutions compatible.

BNamericas: What role will digitization solutions have in solving the current crisis we see in the logistics sector?

Moon: Many people tend to confuse digitization with the concept of automation, while also confusing logistics problems with all kinds of political, economic and social problems.

The logistics problems we're currently talking about are mostly a value chain problem.

After a very depressed period in the pandemic, demand soared due to the stimuli that we saw in countries like the US or Chile, and that meant that [supply] couldn't be produced at the same rate as demand, and when those levels were matched we ended up with very massive volumes that the terminals couldn't handle.

There was at least one episode in California where there were 50 or 60 ships waiting to enter port.

What I want to say is that the digital transformation is aimed at seeing reality as data, and today the digital transformation is to say that we've advanced a million times what we had when that process began in the 1980s.

On that basis, what we do in the logistics sector is to provide a platform that allows us to digitize all logistics operations and that allows me to create a world where I can use various tools for analysis and find costs.

Logistics is a very broad and deep concept and the dilemma is to simplify it, because the essence of this dilemma is to have better performance at a lower cost, and digital transformation makes it possible to achieve this result in different ways.

Now we even have simulation tools that allow us to identify costs or problems before carrying out physical logistics actions.

And going back to the question, indeed digitalization cooperates and contributes to solve many of the current problems in the logistics world. To be able to have a database where thousands of parameters and statistics are stored would mean virtualization through digital transformation of the reality of the logistics world, thus creating the intersection of the two worlds, the real and the virtual.

And being able to extract the best tool, the solution to apply at the right time, turns out to be an effective and efficient tool.

Digitization can avoid many problemsYou can take appropriate measures in advance. Obviously, it's not going to predict a pandemic, a war – if only it could – but it puts the different alternatives within our reach in a timeframe that we could say in certain circumstances could be immediate.

BNamericas: In the current discussion on logistics, it has been claimed that there is a delay in digital transformation and that a great opportunity has been lost in the last decade to advance with this process, especially in ports. Do you agree with that?

Moon: Yes. The port sector has invested a lot lately after the overcapacity I mentioned earlier. We have a situation where there are few people, with few resources.

The US recently got very serious about the issue. They called on lots of companies to help the port sector and Samsung was one of them.

BNamericas: What opportunities does Samsung SDS see in the Chilean market given the difficult political and macroeconomic times the country is undergoing?

Moon: I'm worried in that respect, since it comes right at a time when we want to insert ourselves more into Latin America and Chile especially.

What we see is that, regardless of the change, Chile has to move forward. All Chileans and foreigners who live here want a better Chile.

They may have different ideas on how to do it, but everyone is thinking about what needs to be improved.

Regardless of the current instability in Chile, we want to see what things are needed in the country's logistics market and how we can help with the application of digital solutions. Together with them, we want to grow in the domestic market and, consequently, in the international market, and to develop day by day.

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