Predictive Analytics in Logistics and Supply Chain Management Software
What’s worse for a business than a pile of goods gathering dust in a warehouse when they’re needed elsewhere? Or a truck hauling fresh produce breaking down in the heat? These are exactly the problems predictive analytics in logistics helps avoid.
Predictive analytics as a whole is enjoying a boom, with forecasts predicting a healthy 20.4% CAGR for the market sector between now and 2028. Analytics software solutions help streamline and centralize real-time data processing to drive business decision-making and growth. That’s good news for everyone, but especially for logistics companies, who happen to generate data in spades — from invoices, docking schedules, and maintenance reports to data on truck fleet mileage, inventory stockpiles, and weather forecasts.
The ability to dissect this data and turn it into actionable business insights is one of the key benefits of predictive analytics in the supply chain. The predictive analysis enables logistics operators to reduce losses, minimize risks, and meet customer demand more efficiently. This is why many companies are turning to predictive analytics in supply chain and logistics to survive the coming recession.
At Django Stars, we’re no strangers to the challenges of logistics management. It was a key feature we developed for a leading US-based corporate meal delivery company. We helped build a highly scalable and reliable system that orchestrates workplace meal delivery and keeps suppliers efficient regardless of the size of a customer’s demand.
This article explores the market landscape of predictive analysis in transportation and logistics, the benefits of logistics analytics solutions, and the challenges a company can meet when implementing them.
We’ve decided to share this information because we often encounter similar matters while delivering logistics software development services. The recommendations provided might also prove beneficial to you.
The Growth of the Transportation Predictive Analytics Market
Many factors have contributed to the stable growth of transportation predictive analytics in recent years. While economic feasibility has been key, technological availability and business future-proofing have also played a crucial part.
The COVID-19 pandemic highlighted the importance of contingency planning and company flexibility for coping with sudden supply chain limitations. According to a series of MHI and Deloitte reports on the supply chain and logistics industry, in 2017, only 30% of supply chain managers were using software to support data-driven decision-making. By 2022, this percentage had grown to 54%.
These reports highlight five key applications of predictive analytics in the logistics industry in 2023 and beyond:
- Demand forecasting (39%)
- Maintenance and asset management (35%)
- Customer interaction transparency (35%)
- Supply planning (32%)
- Pricing (31%)
Elsewhere, 2022 research into the predictive analytics market places the market size at $12.5 billion in 2022 and forecasts it will reach $38 billion by 2028.
Finally, recent advances in cloud technology and the efficiency of Big Data analytics have made solutions for predictive analytics in supply chain and logistics much more affordable and accessible to small and medium businesses. This puts the power of supply chain predictive analytics in the hands of almost any SMB looking to increase its operational efficiency.
The Benefits of Predictive Analytics in Supply Chain & Logistics Software
While predictive analytics has been around since the invention of computers, for decades, the sector struggled with limited datasets and reliance on historical data that was often hidden in obscure formats.
Nowadays, predictive analytics for supply chains can combine unstructured data from a huge variety of disparate sources, analyze it in real-time (or near real-time) and provide actionable, easily visualized insights on the go. This makes analytics accessible to every business; even those with no data analyst expertise.
Here are just some of the benefits of predictive analytics in logistics and other industries, with examples of how they’ve helped companies to thrive.
One of the biggest value drivers of predictive analytics is its ability to identify bottlenecks in processes. In turn, this helps remove inefficiencies and optimize business processes.
New Jersey healthcare provider Atlantic Health saved $70 million in labor and premium costs in three years by implementing a predictive analytics system. They were able to analyze labor costs and predict hospital productivity, which resulted in better patient outcomes, earlier discharges, and shorter hospital stays.
Faster data processing
Data is only valuable if a business or customer can act on it while it’s relevant. Enabling the timely application of corrective action is what makes analytics software useful.
Harvard University’s Project Abbie sensor technology analyzes patient vitals in real-time to detect early signs of anaphylactic shock caused by an allergic reaction. The sensor then sends a signal to a wearable device to administer a dose of epinephrine. It’s an example of early detection and fast data processing being used to literally save lives.
Increased logistics strategy effectiveness
Excess inventory means money wasted on storage, while stock-outs mean lost revenue. Using predictive analytics in supply chain management allows companies to accurately predict spikes in demand and address them fast.
PepsiCo’s Sales Intelligence Platform keeps track of stock at every one of their vendors and lets retailers know in time that they need to replenish, ensuring maximum efficiency of the company’s supply chain.
Improved resource management
Then again, simply having the needed resources somewhere is not enough. They also have to be instantly accessible when a customer needs them.
As far back as 2014, Amazon was already patenting its famous anticipatory shipping technology, which relies on logistics predictive analytics to anticipate the demand in any Amazon hub area based on historical data and real-time factors. This helps the company optimally distribute stock and enable one-day customer delivery.
Amazon’s solution also calculates the number of drivers needed daily, the routes they should take, and even the way the delivery vehicles are loaded, so the driver spends less time searching for the next parcel, improving last-mile delivery efficiency.
Effective risk prediction
While predictive analytics shines in fighting cybercrime and fraud, it can be used in any risk mitigation process. Currency exchanges use prediction tools to mitigate volatility caused by political events. Logistics companies, in turn, can enhance their plans and schedules with risk alerts based on weather forecasts, equipment maintenance status, and other factors.
Back in 2015, one in three shipping containers was transported empty, costing Danish shipping giant Maersk and Germany’s DHL billions of dollars annually. In 2018, DHL invested $350 million to build MySupplyChain — a predictive analytics platform aimed at optimizing and digitalizing their operations.
The empty container problem is nothing new. When export-oriented countries ship goods or raw materials to import-oriented countries, empty containers must be shipped back for the next haul. This implies costs of ownership, costs of transportation, and costs of repositioning, as empty containers still require ships to deliver them while carrying no goods. These costs amount to over $20 billion yearly for the top 100 logistics companies worldwide.
Maersk Line, a shipping giant responsible for transporting nearly 15% of annual global GDP, developed a proprietary solution for predictive analysis in transportation to ensure they use their fleet with utmost efficiency and can relocate empty containers in time to meet demand.
All of the above benefits help companies better allocate resources, minimize losses, meet customer demand, and stock inventory more efficiently. Predictive maintenance of equipment and vehicles also improves a company’s bottom line, as it reduces transportation downtime and increases operational capacity.
Recent research from the University of Athens highlights the efficiency of using non-destructive control methods and IoT sensors to determine the condition and expected life span of all company equipment. This enables timely and relevant maintenance instead of facing engine failures on the road.
By keeping its fleet operational, keeping a healthy stock of supplies, and optimizing resource allocation, any logistics company can gain a competitive edge. Here are some more use cases for predictive analytics in supply chain management.
Use Cases of Predictive Analytics in Logistics Software
How do the business benefits we’ve covered above translate to real-world gains? Let’s look at some key use cases for logistics analytics technology.
Combining historical data with real-time insights based on seasonality, news, natural disasters, or political events can help logistics companies make data-driven decisions.
For example, if historical data shows that people eat more grains in winter, retailers can stock up in late fall to prepare for the seasonal surge. However, it’s also important to not overstock in order to leave storage space for other products and avoid warehouse costs. Demand forecasting uses past data to make more accurate stock level forecasts and ordering suggestions for retailers.
Long-range trucking is an essential aspect of logistics. To be efficient, it requires full transparency of every aspect of a company’s trucking operations.
Factors such as weather conditions, gas mileage, driver’s health (sleepiness), truck condition, and load all weigh into the selection of the best route. Monitoring these through smart sensors, integrated communication channels, and IoT devices helps mitigate risks and ensure optimal route planning. UPS is an example of optimizing delivery routes using predictive analytics.
Allocating resources where they are really needed is one of the key benefits of predictive analytics in the supply chain. Alibaba, Amazon, DHL, and other shipping companies use smart sensors and RFID codes to track their freights and vehicles en route. This enables them to know which order is where and the ETA for each delivery. It also ensures there are no jams at depots, as truck arrivals and departures can be intelligently scheduled.
As we’ve already seen, carrying out timely maintenance based on historical incident data and information from smart sensors can help prevent major equipment breakdowns. The challenge here is to share data with the spare parts provider and retailer so that replacement parts can be delivered before the engine or any other system fails. This requires building secure data exchange channels through a collaborative platform, which takes time but ultimately improves processes all around.
Risk is intertwined with business opportunities. Some events — such as natural or technological disasters, human conflict, or the passing of a new law — lie outside the control of supply chain operators. However, other risks can be foreseen, meaning that intelligent analytics platforms can use them to shape better contingency plans and recommendations.
All these use cases help use logistics predictive analytics to optimize the operational efficiency of any supply chain operator. But there are two sides to every coin, and these benefits come with some challenges.
The Challenges of Implementing Predictive Analytics in Supply Chain & Logistics
A common problem when building and implementing a predictive analytics platform is a lack of relevant historical data. Even when data does exist, it’s often siloed and disparate and can’t be easily structured to form a training data set for an AI algorithm.
The second challenge is establishing sufficient context: learning algorithms need an in-depth understanding of all the processes involved in operations in order to decide which parameters are crucial and which can be filtered out to improve prediction accuracy.
Finally, not every logistics operator has access to the necessary human resources — in terms of Big Data analysts and software solutions architects — for designing, implementing, and maintaining an analytics platform. This is where vendor expertise can help.
How to Implement Predictive Analytics
Here are the key stages in the process of implementing transportation predictive analytics:
- Formulating a strategy for applying logistics analysis results. This helps highlight the data sources and processes that should be included to generate analytics.
- Collecting data. For logistics operators, this includes delivery notes, sales contracts, trade deals, outstanding contracts, and other information regarding company operations. It is also prudent to integrate such a platform with open public databases like weather forecasts and news aggregators to get real-time situational updates.
- Data normalization. All the source data must be structured and filtered to remove white noise and irrelevant details. This ensures that the machine learning models will be able to correctly discern important patterns.
- Proof of concept. This is a minimal investment to determine the potentially achievable benchmarks in analyzing data patterns in real-time. The ML model must be able to correctly predict outcomes known from historical data to ensure that it uses only relevant data sources in real-time analysis.
- Model training. As the model accuracy improves, real-time data sources can be added to bring the model up to speed.
- Deployment. The AI algorithm is deployed to the production environment and is able to predict potential events based on real-time data input from internal and external sources.
Correctly training and deploying predictive analytics in the logistics industry requires in-depth planning and precise execution to provide the expected results.
Logistics Software Development with Django Stars
We’ve been working on logistics and supply chain products since 2008. Django Stars are ISO certified and currently rank as the market leader in Clutch ratings of the top 50 Python & Django developers worldwide. We optimized architecture and refactored code for a leading US-based corporate meal delivery service — and built Azyan, a 20-minute food delivery platform in Jordan.
During our partnership, Azyan became one of the most popular food delivery services in Jordan, thanks to the ease of its restaurant registration process and the use of Google map coordinates to ensure accurate delivery.
Django Stars has amassed a wealth of knowledge in software development and offers flexible vendor solutions ranging from team extension to dedicated product development from scratch. We focus on building complex and feature-rich solutions that make our clients’ business processes simple, predictable, and highly scalable.
Supply chain predictive analytics empowers businesses to turn a flow of disparate data into an actionable input supporting data-driven decision-making. The market for predictive analysis in transportation and logistics is steadily growing as more companies digitize and optimize their operations to retain their competitive edge.
Minimizing overstocking losses and the bullwhip effect, correctly forecasting demand, reducing equipment failures with preventive maintenance, and saving on labor and maintenance expenses are just some of the benefits of predictive analytics in the supply chain. However, implementing such solutions requires in-depth development expertise to ensure the correctness and usefulness of predictions.
If you’re planning to improve your operational efficiency with logistics predictive analytics, contact Django Stars, and let’s discuss the ways we can make it happen.
- What is predictive analytics in transportation and logistics?
- Predictive analytics for transportation and logistics is a subset of data analytics that determines patterns based on historical data and predicts outcomes based on real-time input to reduce expenses and optimize efficiency.
- How is predictive analytics transforming logistics and supply chains?
- Predictive analytics helps both leading supply chain operators and smaller logistics companies gain improved visibility into their inventory, allocate resources correctly, and maximize their bottom line.
- What is the future of predictive analytics in logistics and supply chains?
- This market is expected to grow to $38 billion by 2028 and has the potential to save logistics companies billions of dollars annually.
- How much does it cost to adopt a predictive analytics solution in logistics?
- The cost depends on several factors: the quantity and complexity of features to implement, the existing IT infrastructure, and the complexity of synchronizing all the data sources to form a cohesive data flow. For exact numbers, contact Django Stars.