The integration of digital technologies in areas such as storage, order management or transport represents for many companies a strategic lever to improve the efficiency and control of the various processes.

To push companies in this direction is the need to increase productivity to cope with the change in consumption and customer expectations.

In fact, more and more people are shopping online, are attentive to eco-sustainability and require delivery models that are as flexible, traceable and customizable.

Digital logistics , in addition to optimizing the various activities, providing full visibility and reducing company costs, offers a new management and data-driven approach , with the advantage of offering a more analytical and global vision of the company.

The digitalization of logistics processes is certainly not without obstacles, but it is undoubtedly also the most efficient strategy in the long term and will represent a must for the companies of the future.

Although persuaded of the opportunities offered by technology, many companies are still hesitant to embrace change, perhaps because they are unsure of what the ROI of digital logistics is.

Yet there has never been a more favorable time to make the transition to digital , thanks also to the tools that facilitate investments of this type such as the New Transition Plan 4.0 envisaged by the Government .

So let's try to understand what the true ROI of digital logistics is and if it is really worth investing in digital.

Why invest in digital logistics today

The growth of interest in the new solutions offered by logistics 4.0 is linked to the advantages deriving from their implementation in the company, just think:

• To improving productivity
• To warehouse optimization
• Increased visibility and traceability
• To the increase of safety
• The decrease in management costs
• To the simplification and optimization of decision-making processes

Digitization, in fact, allows the use of technologies that are able to transform the entire corporate structure.

Tools such as IoT , Cloud, Artificial Intelligence, Big Data and Machine Learning allow significant savings in terms of time and costs, simplify processes and workflows, communication and sharing in real time and increase connectivity in favor of omnichannel models .

In this way , digital logistics optimizes and improves the productivity of the entire supply chain , making collaboration between suppliers, company personnel, sales staff and marketing staff easier, also passing through the warehouse and last mile deliveries.

The digital transformation in the logistics field also has the enormous benefit of allowing the monitoring of the goods at any point and at any time and to be able to manage stocks by automating their movements.

Furthermore, an increase in profits is also due to complete traceability : this is because thanks to the data collected it is possible to better understand the behavior of consumers so that they can be satisfied more easily.

Thanks to predictive maintenance technology, plant operations are increased and maintenance costs are reduced.

The machine learning algorithms available to new machinery are able to identify normal operating conditions and failure conditions and provide an alert to identify any damage to the equipment before it becomes a problem.

Finally, another aspect that should not be underestimated is that linked to sustainability . In fact, more and more technologies are useful both to reduce costs and to respect the environment.

Just think of the trucks with lithium-ion batteries, which manage to reduce energy consumption and CO2 emissions, and require low maintenance.

Digital transformation: how to introduce it in the company

Many companies fail to calculate the ROI of digital logistics because they have an unclear and defined vision of the goals they want to achieve.

Increase operational efficiency? Digitize data and facilitate sharing? Integrate touchpoints or automate work? These are just some of the possible goals that management may want to achieve.

Each company, in fact, has its own characteristics and needs and consequently the difficulties to be faced will be different, as well as the objectives to be pursued.

For this reason there is no one-size-fits-all solution, but it will be necessary to evaluate the needs of your business reality and move accordingly by following in principle 4 steps:

1. Analyze the starting situation and set goals
2. Establish the available budget
3. Identify the most suitable resources
4. Measure the results

Let's see them in detail.

1. Analyze the starting situation and set goals

A good strategy must always be designed with specific, achievable and measurable goals in mind.

So first you need to find the strengths and weaknesses of your company and identify which areas or activities should be improved and would benefit the most from digital transformation, also examining the software and devices already available.

Once the problems have been identified and what you want to achieve through the implementation of technologically advanced solutions, you can move on to the next step.

2. Establish the available budget

Once the objectives to be achieved have been set, the best strategy must be developed to achieve them, taking into account the available economic resources .

It therefore becomes important to be able to produce a projection of the results of digital transformation projects, so as to be able to have a first estimate of the expected ROI of digital logistics .

3. Identify the most suitable resources

Investing time and money in implementing technologically advanced solutions without having the human capital capable of managing them could wreck even the best of projects.

Logistics 4.0 provides for a continuous exchange of information that involves the entire logistics chain, making IT and digital knowledge necessary to be able to carry out an increasingly large number of tasks.

It is therefore good to identify immediately if it will be necessary to adapt the skills of collaborators already present in the company , who could benefit from specialized training courses, or new hires to have qualified personnel.

4. Measure the results

As for any other type of investment, even the one for digital logistics, requires a careful and scrupulous analysis of each activity so as to be able to measure the results.

For monitoring to be effective, it could be useful to distinguish the final objectives (e.g. increase the number of shipments) from the intermediate goal that is intended to be reached within a certain time frame (e.g. increase shipments by 15% in the first 6 months).

It is important to clearly identify what the KPIs will be , i.e. the performance indicators, which will have to be monitored over time, proving to be useful both for quantifying the ROI of digital logistics and for making any adjustments during construction.

Being digital, however, it is not always easy to measure the success or failure of a project.

For this purpose it could be useful to create two types of KPIs :

• The first group includes all those indicators capable of evaluating the progress of the company in the digitization of its current business model, measuring the impact on the activity compared to traditional operating methods

• The second type of indicators includes all the interesting ones to evaluate company growth and profits as well as margin metrics for digital platforms.

Only by carrying out a timely and constant monitoring activity will it be possible to measure the effectiveness of the digital strategy adopted.

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How to measure the ROI of digital logistics?

Many companies allow themselves to be discouraged by the costs necessary to digitize their business and by doubts about the actual economic return on investment, which may not live up to expectations.

However, working step by step and methodically and setting concrete and achievable goals that can be measured with the right KPIs , embarking on a process of digitization is not so unthinkable.

The first thing to do is to get informed and, if necessary, choose the right partners for the digital transformation so as to be guided in the change and more easily identify which technology is more useful to achieve the goal that has been set.

As we have seen , one of the most frequent evaluation errors when examining the relationship between ROI and digital transformation is to use traditional metrics that combine variables such as amortization period, internal rate of return, or break-even analysis.

We focus on the result obtained and the expected profit, perhaps dividing it by its cost, without considering, however, that digital transformation is a long-term investment and that once the processes have been digitized, they are not always measurable with the usual metrics.

Companies that implement an automated system or plant in their warehouses, for example, get an average return on investment over 5 years.

However, some advantages are immediate and easily calculated such as: cost reduction, greater speed in goods handling and punctuality and efficiency in deliveries, while others, such as the increase in the level of service, are decidedly less tangible.

In fact, there are little quantifiable intangible benefits, just think of the improvement in customer satisfaction of those customers who can count on a stable online presence, with various omnichannel points and with flexible and personalized deliveries.

Finally, when measuring the ROI of digital logistics, all those improvements should be taken into consideration which, while not directly impacting logistics processes, improve communication between departments, with customers or within the entire supply chain.

This type of benefit is difficult to measure with simple mathematical formulas, yet it represents an opportunity for companies both to develop more efficient ways of working and to identify new solutions and improvements related to services and processes.

In a nutshell we could therefore say that among the tangible advantages useful for analyzing the ROI of digital logistics we find:

• Greater flexibility related to automation and smart devices
• Increased productivity of all resources such as plants, work and energy
• Higher quality, resulting in lower returns, thanks to better control of activities
• Faster delivery times
• Reduction of the risk factor: the greater reliability of the processes translates into a lower variability of the flows of operating income expected from the investment

Instead, among the intangible advantages that should be taken into consideration in the analysis of the return on investment we have:

• Greater capacity for collaboration and networking between departments or with other players involved in the distribution chain thanks to the integration of data and processes
• Improvements from a human resource management point of view
• Increase in customer satisfaction
• Introduction of new skills and organizational models that can be functional to increasing the innovative capacity
• Greater dynamism and ability to establish itself also on international markets

It is therefore evident that in order to calculate the ROI of digital logistics it is necessary to identify both the tangible benefits linked to the introduction of new technologies and the more intangible ones .

In conclusion: what is the real ROI of digital logistics?

As we have seen, to identify the ROI of digital logistics it is first necessary to understand all the dynamics related to the return on investment of such a complex operation, which really includes many variables.

Undoubtedly, greater productivity is one of the most immediate advantages to be identified together with that linked to energy saving , deriving from investments in 4.0 solutions such as the use of Big Data for the definition of predictive consumption models.

On the other hand, it may be more difficult to quantify the intangible benefits linked to the digital innovation process.

What is certain is that with a well thought-out project, the introduction of cutting-edge solutions today digital logistics increasingly represents a strategic lever to improve company efficiency with an eye to the future.