Japan Logistics Sector: Automation will redefine the way companies do business

3 min read

Companies around the world are changing the way they do business, as the evolution of technology is pushing the boundaries in every sector, be it Manufacturing, Supply Chain Management or Freight & Logistics. Technologies like Shipment Tracking Systems, Internet of Things (IoT), Block Chain, Radio Frequency Identification (RFID), Artificial Intelligence (AI), and Autonomous Trucks & Drones have started to revolutionize the logistics industry. Companies cannot ignore the changing trends, and many of them have already started to adapt to them. Be it Tesla launching its driverless fleets, Amazon launching its Amazon prime Air services or Maersk and IBM joining hands to pursue the use of Blockchain technology, every company wants to be on board the flight of innovation and seize the first-mover advantage in the changing spectrum of the Logistics industry.

Globally, the Logistics Technology sector has already started to show results. The Global Warehouse Management Systems (WMS) market was valued at around USD 1.8 billion, in 2017. The global expenditure on IoT technology for the Transportation & Logistics sector stood at about USD 10 billion in 2015, and it is estimated to reach USD 40 billion by 2020.

Japan is an important logistics market, and with a Logistics Performance Index (LPI) of 3.9, it stood at the 12th position in the LPI rankings. Japan’s adoption of logistics automation and technology can be called a mix of choice and need. The country is going through the worst labor shortage in more than four decades. Labor productivity has been decreasing in recent years, and as compared to the United States, it is as low as 60%. Other challenging factors in the Japanese logistics industry are high labor costs and fierce competition. Owing to low loading efficiency (about 44%), there is a need for automation of logistics activities in Japan. Therefore, robots are not taking human jobs, but rather, are occupying the voids created due to the labor shortage, and hence, various startups have come up, with a focus on automating warehouse tasks. Japan’s largest furniture maker, Nitori Holdings, recently deployed 79 robots in its Osaka distribution center. Due to the booming e-commerce sector and the corresponding increase in demand for last-mile delivery, businesses are turning to startups, such as Ground Inc. and Acca International Co., for warehouse automation services. There are also established players, like Daifuku, the global leader in material handling systems and warehouse and logistics automation, who are instrumental in driving the logistics industry towards automation.

The use of artificial intelligence is gaining attention in Japan, due to the load on logistics infrastructure in the country. Daiwa House, in a partnership with India’s GreyOrange, has decided to use AI-enabled robots for warehouse operations, and this is expected to slash its manpower requirements by 80%. Toyota Industries, the Japanese fork lifting giant, acquired Vanderlande Industries, a Netherlands based material handling, and logistics automation company, in a USD 1.3 billion deal, in 2017. Intelligent transport systems have also emerged to be instrumental in improving the efficiency of logistics in the country. The most used ITS services include Oki Electric’s loco mobi, Hitachi KE systems’ GSP used transport system, Isuzu’s Mimamore-Kun, Yamato Transport’s See-T Navi, and Toyota’s DSRC unit. ALSOK’s Guard One and Fujitsu’s DTS-B1operation support service. Cooperative truck platooning systems have been successfully tested in Japan. The testing involved the platooning of three automated heavy trucks, moving at a speed of 80 km per hour, with a gap of only four meters between them.

Several shipping firms and shipbuilders have collaborated in Japan, to develop remote-controlled cargo vessels, and aim to launch them by 2025. The ships are expected to use IoT, which can connect a number of devices, in order to gather data like weather conditions and shipping information. It is also anticipated to be capable of plotting the shortest and safest routes. This is expected to reduce human error, and thus, decrease the number of accidents in the sea. Nippon Yusen and Mitsui OSK Lines are two companies that have decided to invest millions of dollars to develop the technology to steer their fleet of about 250 ships through very busy shipping lanes.

Different issues in the Japan Logistics sector have acted as opportunities for various technology-based companies to tap into and redefine the entire sector. In the future, this can lower logistics cost and also improve the industry’s efficiency, which has lowered due to the shortage of workforce and the increasing aging population.

Being a developed market, the Automation in Japan Logistics Sector is full of opportunities. Nevertheless, due to the presence of all the major global players, apart from the domestic players, there is high competition in the market. Hence, technology can be one of the differentiating factors for creating a competitive advantage in the Japan Logistics Sector

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  • Currently, there are 82.59 million e-commerce users in Japan. 6.33 million additional users are expected by 2021.
  • 6% of Japan’s exports and imports is by maritime transport and only 0.4% is by air transport.

About the Japan Logistics Sector

According to the Logistics Performance Index ranking in 2016, Japan stood at the 12th position with an LPI score of 3.97, which is better than countries like China, Australia, and India. Japan is currently the third largest, and one of the fastest growing, e-commerce markets in the world. Resources are scarce in Japan, but it is surrounded by the sea. Therefore, it relies heavily on imports of many raw materials and exports the processed products.

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Mordor Intelligence is a market intelligence and advisory firm operating in 14 industry segments, serving over 600 clients, worldwide.

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