BUSINESS AND LOGISTICS

produced by DIAMOND, Inc.

Using Digital Platforms to Build
Sustainable Supply Chains
The “king of integrated logistics” is achieving a major transformation. Amid the drastic changes in thesocial environment around logistics, which include population decline and decarbonization, what does
a socially-acceptable sustainable supply chain look like? Nippon Express is using digital transformation
as the starting point to turn its strategy toward building an open “digital platform” that goes overindividual optimization.

Digital strategy at Nippon Express has accelerated. In 2017, the company established the Logistics Engineering Strategy Division at its head
office to speed up installation of automatic andlabor-saving equipment in warehouses as well as
taking part in proof-of-concept experiments forautonomous driving and truck platooning. In thearea of introducing automatic and labor-saving
equipment, Nippon Express opened NEX-ALFA,a cutting-edge showroom-style logistics facilityin Tokyo in July 2020. It is also introducing automated guided vehicle (AGV) devices and automated guided forklifts (AGFs) in its warehouses
all over Japan.
In addition, the company established a new
Digital Platform Strategy Division in April 2020
to build platforms for each customer industry,launching a serious initiative to integrate themanagement of entire supply chains.
A strong sense of crisis about the future of
the logistics industry lies behind the company’s
new focus on digitalization. Takashi Masuda,
Director and Executive Officer with responsibility for corporate and financial planning, says,“The way the logistics industry looks may havechanged dramatically by the late 2030s. By thatpoint, I expect the work in warehouses will bealmost fully automated and automated driving

will have been realized to a considerable degree. The work of ‘logistics’ itself will never beeliminated, but it is possible that machines androbots will have taken over most of the workthat was done by humans. We have a strong
sense of crisis about what a logistics company
like Nippon Express will have as its ‘pillar ofbusiness’ at that point.”
If the majority of logistics work is automatedby machines and robots, it will be difficult forlogistics companies to exhibit the operational
strengths they had built up over many years andto differentiate themselves from competitors. Itwill also facilitate entry into the industry fromother sectors. “At the moment, other industries
have already begun entering logistics as a newbusiness domain, and the faces of the players arechanging,” points out Takashi Masuda.

Backcasting from the Future Image for
Reflection in Management Strategy
In this environment, from last year to this year, a
dedicated digital transformation (DX) team within the Corporate Planning Division at Nippon
Express brought in outside experts and others
and predicted the changes that could take placein the logistics industry over the medium to long–1–Nippon Express

Nippon ExpressHaruyasu Toda

Takashi Masuda

Executive Officer
With responsibility for
Digital Platform Strategy Division
General Manager, Digital Platform
Strategy Division

Director and Executive Officer
With responsibility for
Corporate Planning Division andFinancial Planning DivisionBUSINESS AND LOGISTICS

Expanding the Platform Strategy into
Semiconductors after Pharmaceuticals
So what is a socially-acceptable sustainable supply chain? The first step in realizing this is theplatform strategy being implemented for eachindustry. Haruyasu Toda, Executive Officer
with responsibility for digital platform strategy,stresses, “The method of individual customization for each company is reaching its limits interms of efficiency. Tailor-made logistics mayappear very helpful in the short term, but assets
can even turn into liabilities at some point intimes of dramatic change. Platform-type services
that lead to solutions while solving issues thatare common to each industry are more effective
in times of risk and dramatic change and canensure sustainability.”
Based on such a strategy, Nippon Express
has already developed a digital platform thatcan provide total management of ordering anddistribution channels for the pharmaceutical industry with plans for full-scale operation soon.
In the pharmaceutical industry, quality maintenance in compliance with Good Distribution
Practice (GDP) is a pressing theme, and, as partof this, temperature management and preventing counterfeit pharmaceuticals based on ensuring traceability are common industry issues.

Therefore, as well as attaching IoT sensor tags
to products to constantly monitor for deviationsin temperature during the shipping process,Nippon Express has developed a mechanism
using blockchain technology that allows all thestakeholders making up the supply chain, including pharmaceutical manufacturers, wholesalers, medical institutions, and logistics companies, to share information via the cloud while
ensuring security.
Haruyasu Toda explains the important thing
is being open, which allows anyone to participate. He says that if all the stakeholders can workon a single platform, it dramatically increasessocial efficiency. In addition, even when a situation such as COVID-19 arises, the supply chain
as a whole forms “one team,” which increases its
resilience, enabling it to survive diverse risks.
Digital transformation is the key tool in achieving this.
Nippon Express is looking at expanding thedigital platform to the semiconductor sector
after the pharmaceutical industry. There has
been an unprecedented boom in demand forsemiconductors, underpinned by 5G demandand demand for remote devices due to theCOVID-19 pandemic. However, one of thecommon issues in supply chain and transportation processes is handling “vibration.” Manyof the semiconductor manufacturing devices
delivered to semiconductor manufacturers areexpensive products, costing several hundred
million yen per device, but they are vulnerable
to vibration, which creates difficulties in transportation. Haruyasu Toda says while vibration
was mainly handled manually in the past, by attaching IoT sensor tags to devices, it will be possible to visualize “what happened where” in realtime, which can lead to future improvements, aswell as being able to know whether the vibration
itself is within the permissible range in the formof data.
Moreover, it will become possible to increase
product yield rates by visualizing vibration whentransporting semiconductor chips to assembled
product manufacturers as well. Haruyasu Toda
indicates the enthusiasm for the horizontal
deployment of the platform strategy, saying, “I
think there is plenty of value in building a digitalplatform in the semiconductor industry as well.
There must also be pressing common issues inany other industry. For example, there might beissues such as individual identification of counterfeit brands and fabric in the apparel industry,
and the construction of new supply chains that
go beyond the traditional network of affiliates isa major issue in the automobile industry where arapid shift to electric vehicles is taking place.”

Shifting Investment Strategy to a Digital
Focus
Changes in the approach to investment strategy
are also required to accelerate the digital platform
strategy. Takashi Masuda observes that investment at logistics companies has been mainly focused on tangible fixed assets such as land, warehouses, and vehicles up until now, but intangible
fixed assets, such as digital investment, will be-

Direction of Digital Transformation at Nippon Express[Medium to long term] Business domains that could
become “future pillars.” Management/company-wide
strategy/social perspective
Business domains (value provision to customers)

term. The hypothesis generated was the scenario
described above. Takashi Masuda emphasizes
the importance of the backcasting approach,saying, “It is only a hypothesis, and the situationis changing all the time. Nevertheless, what is
important is that we backcast from the predicted
future image and make fixed-point observations
about what is happening at the moment andwhat kind of changes are taking place in ourcustomers’ industries while making incremental
corrections to be ready for the future.”
What will Nippon Express do as its businessto make its presence felt in the logistics industry
at that point in time? One answer to this question is “solutions.” Takashi Masuda explains, “Forexample, the global supply chains of corporations have been disrupted due to the COVID-19
pandemic. If you look at how inventory is held,
while consolidating inventory is desirable interms of management efficiency, it is necessary
to hedge against risk through dispersal. We believe that presenting solutions to these kinds ofcustomer issues from a perspective that takes inthe entire supply chain based on DX is the direction we should take and will be something thatdifferentiates us from competitors.”
It is also predicted that the development oflogistics into social infrastructure will proceed atincreasing speed going forward in conjunction
with changes in the social environment, such as
population decline and carbon neutral. Takashi
Masuda points out, “It is becoming a society inwhich ESG and the SDGs will be valued more.
In the future, cross-industry supply chains thatare efficient and environmentally-friendly in society as a whole and not just in individual companies (smart supply chains) will be required.
The future will be an era in which logistics that
does not contribute to society will not survive.”DX (Digital InnovativeBusiness Transformation)

New business(Business Transformation)

New

Enter new business domains
utilizing digital technology

Enter new business domains

Digitalization
Current

Current businessStreamline and reduce laborin current business utilizing
digital technology

Not required

Required[Short term] Initiatives including streamlining incurrent business, suggestions from sites, current
business, and technology

Utilization of digitaltechnology as key sourceRelationship Between Digital-related Measures Originatingin Current Business and DX
Corporate Planning
Division, Nippon Express

Business domains

NewMeasures calculated
backward from 2037
Varying degrees of digitaltechnology evolution anddeepening, and progressof Group projects

Links with digitalization measuresoriginating in current business on aline calculated backwards

Group divisions/each company

Current

Digital-related measuresoriginating in current
business
2020

come more important going forward. Warehouses
can be leased rather than owned or removed fromthe balance sheet through securitization, but benefiting from the digital sector is difficult without
direct investment. Takashi Masuda states, “Tangible fixed assets are important for a logistics company, but in-house ownership of everything is
not always necessary, and it is important to lookat the balance. Going forward, it will actually beessential to invest in mechanisms that will manage the platforms.”

Creating Value Based on a Perspectivethat Goes Beyond Logistics
Takashi Masuda says, “In developing digitalplatforms, it is important to have an overall viewof the supply chain as a whole, including distri-20XX (distant future)bution channels rather than simply grasping thescope of logistics in a narrow sense. The key tosuccess or failure lies in whether Nippon Express
can consider the streamlining of total supply
chains from raw material procurement throughto the arrival of products on store shelves as achallenge for itself.” He indicates his confidence
about this, stating, “In this regard, our strength isthe breadth of our customer base. By providing
services to a wide range of customers rather thanfocusing on specific industries, developing theplatform strategy should be enable us to demonstrate our competitive edge. I believe it is ourmission to build new social infrastructure andprovide it in a sustainable manner.”
Nippon Express’ challenge to become a company that constantly adds value to change has
only just begun.

NEX-ALFA, Cutting-Edge Logistics Facility— Realizing faster, more secure, and seamless logistics from warehouse receiving through shipping —RACK FORK AUTO

An unmanned,
laser-guided forklift
automates receiving and shipping
operations on highstorage racks.

EVE

A robot transports
product shelves,
dramatically improving productivity through picking“without walking.”

AutoStore

Robots on a grid
perform receiving and shippingof tightly packedcontainers.

THOUZERA robot that automatically followsworkers, replacing a dolly, with amaximum speed of 7.5km/h andmaximum load capacity of 120kg.

AGV

Automatedtransports cango under andlift up racks andtow pallets.

Projection Picking System®

Nippon Express opened NEX-ALFA (Auto Logistics Facility), a cutting-edge, showroom-style logistics facility, in Tokyo in July 2020. While actually operating the AutoStore robot storage system
and automated transport robots, it will increase the ability to propose order-made logistics solutions integrated with Nippon Express’ front-line capabilities.

–2–

The system employs
image processing
technology to prevent
mistakes in picking
and makes it possible
to sort 36 items at atime.