Get digital or leave the market trying: why businesses have to change their approach to logistics

Recently Kazakhstani market of logistics offers a lot of new opportunities. Everything predicted by different experts has come true: great geographical location and the calm political situation has turned the country into the Central Asian logistical hub that supports trade between two huge centers of trade in Eurasia – China and the EU. Transport corridors through Kazakhstan’s territory are two times faster than sea routes around the continent.

However, it is not so easy for many Kazakhstani companies to adjust their business processes to these new opportunities. Costs of transportation are getting higher, their trucks are too old and the many processes aren’t as transparent as they should be. Moreover, some logistic companies from neighboring countries that can no longer enter Europe are now trying to make business here in Kazakhstan which increases the competition in the market. On top of this, the country’s government has allowed Russian and Belarussian truck drivers to change cargo while in Kazakhstan.

Digital economy challenges

In 2021 transport logistics accounted for 6.5% ($11.2 billion) of the national GDP in Kazakhstan. In developed countries, this rate is about 13-14% on average. The future of Kazakhstani logistics is still promising, although companies must adjust their internal processes to a new reality. First of all, they need to focus on digitalization, which is one of the priorities for the government.

The digital economy is nothing more than a transition to digital products, processes and business models. So far, the level of penetration of digital solutions in the industry is relatively low. In the banking area, in trade and in the public sector, the tempo of digitalization is much higher. Therefore, cargo owners, carriers and expeditors must start with the basics. For instance, they need to introduce digital document flow, order distribution and delivery monitoring.

Electronic document flow in Kazakhstani logistics is a rare thing, even though it is the first step a company should take when starting the process of digitalization. This step doesn’t require big efforts or money to be implemented. Any business in Kazakhstan can now exchange digital invoices and work acceptance requests. Moreover, the same scheme might be applied to any company from other EEU member states. The digital document flow saves time and lowers costs.

The distribution of orders is a key business process in logistics. Cargo owners look for contractors and carriers look for customers. No one can talk about the optimization of a business and its growth if he relies solely on personal contacts and table sheets in Excel. Kazakhstani participants in the logistics industry already have access to professional digital platforms where they can find customers or carriers. For example, cargo carriers can now see all the cargo available for transportation. They can also choose the most convenient options with orders in two directions from point A to point B and back.

Once a business learns the basics of such a platform, it can acquire knowledge of using more complicated and effective tools. For example, a cargo owner can use an automated system of order distribution, when the system picks a reliable carrier on its own. This system isn’t biased; it works around the clock and has no room for corruption.

Another process that has already been automated in Kazakhstan is routing and delivery monitoring. This task is crucial for big companies and motor parks. Satellite navigation and mobile apps for drivers can help logistic specialists a lot. The process of routing is implemented automatically, while the system can track every movement of a truck and knows when it stops. As a result, a company can lower the risk of lost or stolen cargo and increase the discipline of a driver if he decides to go over the speed limit or go out of the way.

There should be no doubt that the deeper digitalized a logistic company is now, the more competitive it will be in the future. The transition of the entire logistic industry to digital is not an advantage, it is a necessity. When the entire economy turns digital, only tech-savvy companies will be able to take advantage of the new opportunities the market now offers.