15 January 2020
Digitization of logistics management as a prerequisite for cost reduction

On January 15, Vladimir Salamatov, General Director of the International Trade and Integration Research Center (ITI), acted as a moderator at the expert discussion Supply chain management in the digitization of local and global markets held as part of the 11th Gaidar Forum which took place on January 15 and 16, 2020 at the Presidential Academy in Moscow.

Experts agree that digitalization of logistics is boosting industry development and that it will have a multiplier effect. For a number of years, public authorities, including customs authorities, have been actively participating in the search for ways to solve certain problems in logistics by using the opportunities provided by Industry 4.0.

«If we turn our attention to the ERAI index which was devised and published by UTLC ERA (United Transport and Logistics Company — Eurasian Rail Alliance) — a company organized by the three railway companies of Russia, Kazakhstan and Belarus — we’ll see that this index provides us with up-to-date information about the cost, speed, and time of shipment of all kinds of goods from the Chinese border to the European border. As one of the panelists here is a representative of Baltika, a company producing drinks, we looked at the dynamics of shipments of this category of goods from Europe to China and back, we looked at the times in transit, and we saw that, true, all the efforts made — including those of the customs authorities — gave us a reduction of up to 25 per cent in the time in transit for containers shipped by UTLC,» Vladimir Salamatov told the audience.

Marsel Shabanov, Head of Business Intelligence & Project Management Department, Baltika Breweries LLC, pointed out: «Digitalization is part of your survival kit. Any company which doesn’t engage in digitalization and digital transformation in the near future will not only lose a competitive advantage — the very survival of their business will become problematic.»

The speaker stressed the fact that the traditional approach to supply chain management is getting obsolete because it can’t quickly react to the changing market conditions.

«Why are quick response and speedy customs procedures actually important for cross-border shipments? That’s because at all stages of cargo transit we’ve got continuous communication between a large number of participants of the logistic process. This, of course, is bound to cause some difficulties. Now, if we could upload huge amounts of data into the system in one go but then only take the information that we actually need at each particular stage of cargo processing or transit — that would, of course, have a colossal effect,» Vladimir Salamatov pointed out.

An opportunity to control the whole logistic route for baby food products in order to trace a product through the whole supply chain to the consumer is now offered by two major food companies — Carrefour and Nestle — who have jointly developed a blockchain-based platform IBM Food Trust.

By uploading the QR code from the product packaging, a user can obtain data about the origin of the ingredients, as well as the date and place of manufacturing. The platform has greatly raised the level of customers’ trust because it demonstrates the rigorous standards that are applied to production of organic food products. This information is particularly important for consumers of baby food products.

Chinese customers and professional jewelers can now receive full details about the origin and the characteristics of diamonds using Everledger — a mini application built into the Chinese WeChat messenger. The application lets a user buy a diamond by paying for it through the WeChat Pay online payment system, receive a certificate with the diamond’s unique characteristics, and verify its origin through the blockchain-based Everledger platform.

The application was jointly developed and launched by the Russian diamond producing company Alrosa and the maker of WeChat — the Chinese company Tencent. Alrosa expects that the project will boost diamond sales in China.

On the whole, the participants of the discussion were almost unanimous in their opinion that digitalization in logistics was vital. Among the most expected changes in the logistic services market, the experts emphasized the share economy, market whitening, product labeling and electronic document management.

The Gaidar Forum traditionally takes place at the beginning of the year in Moscow. The 11th Gaidar Forum Russia and the World: Challenges of the New Decade was held at the Russian Presidential Academy on January 15 and 16, 2020. The event united around 18,000 participants from more than 30 countries, including 600 speakers who represented the scientific community, the political circles, and financial and business elites. For the full list of sessions, see the official website of the 11th Gaidar Forum.