The implementation of artificial intelligence, machine learning, and blockchain technologies in cargo transportation, which gained popularity among Russian companies in 2023, is expected to continue in the new year, according to analysts.
How digitalization affects the industry, what problems market participants face, and why the efficiency of delivery today strongly depends on the quality of implemented innovations, the editors found out from the CEO of JSC "Traffic," Mikhail Petrov.
Market Transition to Digital Solutions
The logistics sector in Russia is a rapidly growing industry, especially in the field of small and medium-sized businesses. According to the Ministry of Transport of Russia, in the third quarter of 2023, the turnover of transport companies increased by 13%, and the number of newly registered freight carriers exceeded the number of liquidated companies by 1.9 times compared to the previous year, which indicates an active development of the freight transportation market. The latter, according to analysts of our company, is largely due to the introduction of digital technologies. However, almost all leading players in the market agree with this, adding that the pace of development of delivery services depends on the speed of implementation of digital tools. By the way, increased interest in the industry is also noted from investors on the Moscow Exchange, who are ready to invest in IT technologies that increase the efficiency of cargo transportation.
For logistics companies, the main advantage of implementing innovations is to reduce the cost of sending cargo, by approximately 7-10%. Digitalization also has a positive effect on delivery speed. Thanks to new tools, carriers can reduce the delivery time of goods by 15-20%, which in the future should seriously increase the overall efficiency of transport companies. Among the main innovations in our field, we can highlight the use of artificial intelligence, blockchain, cloud technologies, robotic process automation (RPA), and the Internet of Things.
A Step into Digitalization Through the Legislative System
In December 2021, the Russian Government approved a strategy for the digital transformation of the transport industry until 2030. In 2024, this document will be one of the key ones in matters of regulation and implementation of digital tools. Special attention should be paid to the federal project "Regulatory Regulation of the Digital Environment" of the national program "Digital Economy." As part of the national project, the "Program to Support Digitalization for Small and Medium-Sized Businesses" was launched. One of the priority areas of support was the logistics industry, in which it is planned to ensure a smooth transition to new technologies without harming the sector.
In the period from 2021 to 2023, the Ministry of Transport approved a number of draft laws on the digital transformation of the transport complex. The purpose of the resolutions was to accelerate the integration of digital solutions into the economy. For the logistics market, this will create conditions for the development of high-tech business, increase the efficiency of freight operators, and encourage companies to switch to domestic software. In the future, the industry expects support from the state for the electronic transportation document platform and the launch of a national digital platform in the field of logistics.
Artificial Intelligence and Machine Learning
The use of artificial intelligence and machine learning is one of the main attributes of logistics digitalization. Today, these technologies are primarily implemented in the field of forecasting using predictive models. Accurate demand calculation allows logistics companies to correctly determine the volume and timing of deliveries, maintain optimal inventory levels, avoiding excess or shortage of goods. Currently, these solutions are actively integrated into supply chains. In addition, thanks to AI and machine learning, daily forecasting of fuel consumption, route optimization, recognition of dangerous situations on the roads, and monitoring of the condition of the vehicle fleet and drivers occur. Thus, innovations optimize human resources for performing routine tasks.
The Russian government has long developed a technological "roadmap" that includes a plan for the development of more than 60 promising technological solutions. Artificial intelligence is one of the priority areas. According to Dmitry Chernyshenko, Deputy Prime Minister of Russia, today more than 52% of large organizations are implementing artificial intelligence in their activities. By 2025, the contribution of this area to Russia's GDP may be up to 2%, according to the calculations of the developers of the Government's "roadmap." In addition, as part of the national artificial intelligence strategy until 2030, which was approved in 2019, a package of measures is provided to support AI solution development companies and support the implementation of such solutions in Russian enterprises. Special emphasis is placed on the development of the education system and infrastructure: as far as I know, 6 research centers have already been opened, and dozens of software manufacturers are receiving grants for development.
Blockchain and IoT Sensors
Blockchain is an important area of development in the transport industry, which ensures transparency and security of processes in the supply chain. According to a PwC survey, more than 50% of companies with a global presence are implementing one or another blockchain initiative. Large corporations use blockchain for supply chain management, digital identification, payments, and other tasks. Russia has long had implemented blockchain projects in the field of logistics and cargo insurance. For example, Renaissance Insurance, together with the Delovye Linii Group, uses blockchain principles in its insurance products, which reduces the risk of errors and reduces data processing costs. An automated approach to payments leads to a significant acceleration of the payment process itself and, as a result, an increase in customer satisfaction. Among other blockchain projects in the field of insurance, the Tsunami platform, numerous developments by Sberbank and other banks deserve mention.
One of the main advantages of blockchain is to increase the security of data storage. Unlike previous systems, an immutable electronic registry securely stores information about customers, products, and buyers, preventing modification or deletion, which facilitates dispute resolution. Cybersecurity today is an extremely important aspect that leading market players should pay attention to. According to Kaspersky experts, in the first half of 2022, the share of computers in transport and logistics on which malicious objects were blocked almost doubled compared to 2021 — from 17.9% to 34.1%. In 2023, the number of cyberattacks on Russian companies in the second quarter increased by approximately 40% compared to the same period in 2022. The most significant attacks last year were attacks on the IT resources of a large railway company and electronic transport invoices at customs. To solve these problems, it is necessary to develop and improve the IT infrastructure in the market, increase the level of employee knowledge about digital hygiene, support innovative projects in the field of cybersecurity and domestic software manufacturers.
Another significant part of digitalization is IoT sensors. They allow real-time tracking of the location of the cargo, monitoring its temperature and storage conditions. In the railway industry, predictive sensors are popular when monitoring the condition of wagons. They collect various data about the condition of wagons, such as vibration, temperature, pressure, brake pad wear, and other parameters that may indicate potential problems. Then the collected data is analyzed and models are created that can predict the probability of failure of a particular system or part in the wagon. Thus, all new locomotives and wagons of Russian Railways are already produced "digital", with a set of sensors.
The Future of Freight Transportation in the Digital Ecosystem
The course towards digitalization, outlined in 2023, will continue in 2024. Over the next 3–5 years, a global digital transformation will take place in industry, which will seriously increase the efficiency of supply chains, speed up delivery, and reduce logistics costs. Thus, thanks to digital transformation, autonomous vehicles are already available, and in the future it will be possible to deliver goods using drones. In turn, online freight platforms continue to expand the range of services provided. Modular and individually customizable solutions for different business needs are already available on the market.
It is worth noting not only the growth, but also the speed of development of digital transformation in the logistics industry: solutions related to electronic document management and digital queues are being implemented particularly quickly. A telling example is related to trade relations between Russia and China. It is known that in 2023, trade between the two countries almost doubled and exceeded $200 billion. Understanding that the load on transport hubs has seriously increased, the Government is using new digital tools to optimize transportation. In particular, an electronic queue has started operating for freight vehicles at three border crossing points, including Zabaikalsk on the border with China. From March 1, 2024, carriers will be able to book the date and time of the crossing online, including through Gosuslugi. Thus, the state continues to introduce digital tools that allow the industry to develop even more dynamically.
