Lean Corner

What are the challenges of operational excellence in logistics?

How to Optimize Logistics and Reduce Costs with Operational Excellence
Key challenges and levers for achieving operational excellence
Environmental challenges at the core of concerns
Concrete initiatives by industry leaders

Delivering more goods, faster, and more efficiently—these are the challenges facing players in the logistics sector in an increasingly globalized world of trade. Supply chains experienced significant disruptions during the COVID-19 crisis, leading to extended delivery times and even shortages of components in some industries.

However, the sector quickly returned to strong growth: the turnover of the global logistics sector increased by 5.8% on average over 2022 and 2023. This growth shows no signs of slowing in the coming years, driven by the rise of Asian, African, and South American markets.

Operational excellence is therefore becoming critical for logistics players to tackle the challenges that lie ahead in the years to come.

How to Optimize Logistics and Reduce Costs with Operational Excellence

Operational excellence in a logistics context

Operational excellence, through methodologies like Lean Management and Six Sigma, aims to maximize production efficiency by minimizing all types of waste, ultimately ensuring maximum customer satisfaction. Its application in logistics introduces numerous challenges, such as managing goods and information flows simultaneously, inventory management, and international transportation logistics.

Global supply chains are further complicated by factors like rising customer expectations, increasingly complex products, and customized demands. Additionally, uncertainties prevail in an unstable global environment where international trade continues to grow.

The goal of operational excellence is to ensure smooth flow management while minimizing waste and maximizing added value for the customer.

Objectives and different strategic approaches

What are the objectives of operational excellence in a logistics context? The ultimate goal is, of course, to ensure sustainable long-term growth by deploying a continuous improvement approach across the entire value chain of the company, rather than focusing on isolated processes. Specifically, we can identify four key contributions of operational excellence in logistics:

Reduction of operational costs

Reduction of inefficiencies: optimizing delivery routes
Improvement of customer satisfaction: achieving faster and more reliable deliveries
Increased resilience to disruptions: ensuring high-quality service in all circumstances

Two types of joint actions can help achieve these objectives. Long-term actions, such as redesigning the overall supply chain to identify inefficiencies (a logistics master plan can be a very effective tool), and shorter-term actions, such as optimizing business processes or implementing real-time management of certain activities.

Key challenges and levers for achieving operational excellence

The growing complexity of supply chains

To address cost challenges and remain competitive in an increasingly intense market, manufacturers worldwide have, in recent years, opted to source certain components or raw materials from abroad—sometimes even from other continents.

As a result, global logistics exchanges are becoming ever more critical, as manufacturers must meet delivery deadlines for their clients. Any delay in the supply chain could have devastating effects on the end consumer. In 2021, the European bicycle industry became a victim of this globalized supply chain: sourcing difficulties for certain components from Asia caused delivery delays of 5 to 12 months for some manufacturers, with the repercussions of this crisis felt as late as 2023.

According to KPMG’s 2023 report “The Future of Supply Chain,” customization is also an increasing challenge, as clients demand tailored products and services. Retailers are adapting their purchasing processes, forcing them to improve stock management and last-mile delivery capabilities.

Logistics sector players are therefore under mounting pressure, facing a growing number of stakeholders in a geographically diverse environment, while also needing to meet increasingly stringent requirements.

In this context, collaborative tools such as iObeya make it possible to streamline communication and centralize information to better manage these logistical challenges. Thanks to dedicated templates – such as supply monitoring, supplier risk management or supply chain performance management – companies can improve their responsiveness to disruptions and optimize their processes.

Some companies like Sanofi are also exploring using iObeya with their suppliers to strengthen coordination and transparency within their supply chain. This approach, which requires a gradual implementation and close work with each partner, generates significant benefits in terms of collaboration and efficiency.

Environmental challenges at the core of concerns

Issues related to climate change and decarbonization have become imperative for the logistics sector. According to Deloitte’s 2022 report “Transforming Logistics: A Sector Fit for the Future,” achieving net-zero emissions is one of the three major trends expected to shape the industry in the coming years. The same report predicts that road freight volumes will double by 2040.

Several actions can be taken to address environmental constraints, with the first being a shift in transportation methods. For instance, using alternative means for last-mile delivery, such as cargo bikes, could be a suitable solution. Simpler measures, such as optimizing delivery routes with digital tools, can also significantly reduce environmental impact.

E-commerce and last-mile delivery

The recent surge in e-commerce, particularly since the COVID-19 pandemic, has required a proliferation of shipment and delivery points for online orders. Logistics operators must now adopt a more agile model capable of managing “many-to-many” flows, which will increase the number of shipping locations and collection or delivery points.

This increase in local exchanges necessitates adapting last-mile delivery models to solve a critical equation: increasing the number of urban delivery routes to meet demand while simultaneously reducing the carbon footprint of the entire logistics chain.

Faced with these challenges, the application of the Gemba method – a key concept of Lean Management – is essential. Gemba, which means “the real place” in Japanese, encourages companies to directly observe and analyze operations in the field to identify areas for improvement.

In the context of e-commerce logistics, this means going out into the field to understand the challenges of delivery drivers, optimizing routes according to local constraints (traffic, regulations, accessibility) and identifying friction points in the shipping and receiving processes of packages.

The Gemba approach thus makes it possible to:

Optimize flows by analyzing bottlenecks and adjusting processes in real-time.
Reduce costs and carbon footprint by finding more efficient solutions, such as pooling deliveries or using low-emission vehicles.
Improve the customer experience by ensuring more accurate delivery times and making it easier to manage pickup and drop-off points.

By integrating Gemba into logistics thinking, companies can not only meet the growing demands of e-commerce, but also make their operations more sustainable and resilient to market changes.

In addition to Gemba, the VSM (Value Stream Mapping) method makes it possible to optimize the supply chain by mapping value streams. It is a Lean Management tool that helps visualize all processes, from order placement to final delivery, to identify high value-added activities and eliminate those that generate waste (waiting times, unnecessary journeys, superfluous stocks).

In the context of e-commerce, the VSM helps to:

Identify inefficiencies in last-mile delivery (e.g., wait times for delivery drivers, redundant routes).
Optimize coordination between the various players (warehouses, relay points, carriers).
Reduce delivery times by eliminating unnecessary steps and streamlining the exchange of information.

By combining Gemba and VSM, companies can not only make their logistics more responsive and agile, but also align their operations with sustainability and cost optimization goals.

Human resource management

According to the International Road Transport Union (IRU) report published in June 2022, the global shortage of truck drivers continues. The situation is becoming concerning with more than 2.6 million unfilled positions in 2021, including more than 400,000 in Europe and 50,000 in France. Despite an estimated rate of 10,000 job creations per year, specialists anticipate a significant increase, predicting up to 2 million job vacancies in Europe by 2026.

The persistent shortage of truck drivers is part of a broader context of transformation in the logistics sector, where companies are not only facing a shortage of manpower, but also adapting their working methods to the new demands of the market. Among these developments, the rise of digital tools requires new skills, forcing the sector’s players to review their approach to recruitment and training.

The need to use complex digital tools requires new skills to be able to exploit them and extract added value. The consulting firm McKinsey & Company highlights in its report ‘Supply Chain: Still vulnerable’ published in 2024, an awareness of the logistics sector in this direction and a change in the way we approach the recruitment and acquisition of new digital talent. While most companies were turning to the market to recruit, the year 2023 has seen more and more manufacturers favor in-house training to upskill their employees on digital tools, mainly because of a significant shortage of new young talent on the market.

In this context, opting for intuitive solutions such as iObeya, which are easy to use, makes it possible to speed up training and reduce the time needed to develop the skills of teams and thus overcome workforce challenges more easily.

Leveraging digitalization to increase efficiency

To address these numerous challenges, professionals in the logistics sector must integrate and effectively utilize digitalization to make their operations more efficient.

Digital twins are among the tools that can deliver significant value. Deloitte highlights their relevance in logistics due to their ability to gather and distill complex data into simpler, more visual formats, enabling a holistic view of the potential impact of hypothetical changes.

A digital twin can also facilitate operational efficiency improvements. For instance, when a company needs to select the location for a new logistics platform, all relevant data—such as customer and supplier details or historical delivery flow information—can be input into the digital twin. This tool can then determine the optimal location to minimize costs, ensuring the investment yields maximum returns.

Artificial intelligence also has a crucial role to play, as noted by BCG in its recent article “Bold Moves for Logistics Service Providers.” AI can be particularly impactful in planning and scheduling. Proper utilization of AI algorithms allows for the analysis of structured and unstructured data sources, such as financial supplier information or weather forecasts, enabling early warnings about potential disruption risks.

Concrete initiatives by industry leaders

Amazon: Technology driving operational excellence

The American giant Amazon stands as a benchmark for leveraging technology to achieve logistical efficiency—and for good reason. In 2017, the company established its Innovation Lab, focusing on areas such as mechatronics and sustainable packaging. With a total investment of €700 million, this division has developed and implemented more than 1,000 technological innovations across Amazon’s European warehouses.

Among these innovations is the automated guided cart, designed to transport empty bins throughout the distribution center. In terms of packaging, a new technology uses multiple cameras to analyze the item to be packaged, creating custom-sized paper bags on demand. This innovation has reduced packaging weight by over 26 grams per parcel, a significant reduction when multiplied across millions of packages shipped each year.

Thanks to these cutting-edge technologies, Amazon reported delivering more than 7 billion items globally in 2023, either on the same day or the following day.

DHL: Leveraging augmented reality

DHL, a global leader in transport and logistics, is also a trailblazer in innovative developments. Since 2018, the group’s Supply Chain division has implemented an augmented reality solution in its distribution centers. This innovation, called “Vision Picking,” equips select operators with smart glasses, providing real-time instructions on which items to pick or store. The results have been impressive, with order preparation productivity increasing by an average of 15%. Employees have also expressed satisfaction with the lightweight technology, which poses no hindrance during use.

Another key benefit of this innovation has been the halving of training and onboarding times for new hires. DHL plans to expand the application of augmented reality to other areas in the near future.

UPS: Delivery route optimization

Optimizing delivery routes has become a critical focus for many companies, as the potential benefits in time savings and carbon footprint reduction are substantial. UPS has been a pioneer in this domain through its ORION navigation system. This system leverages proprietary analytics technology and relies on accurate mapping data. To meet this need, UPS patented a process that utilizes its big data infrastructure to provide ORION with more precise and constantly updated maps. If a speed limit changes, a bridge is closed, or a route is blocked due to construction, the system is updated immediately, offering an alternative route to the driver in under 30 seconds.

In a 2020 article, UPS reported that this innovation saved the company 160 million kilometers and nearly 40 million liters of fuel annually. The system continues to be refined every year to achieve greater efficiency and further cost reductions.

Conclusion

Operational excellence in logistics is far more than a mere performance objective; it represents a comprehensive transformation approach that integrates process optimization, technological innovation, and adaptability to economic and environmental challenges. By combining proven principles such as Lean Management and Six Sigma with modern solutions like automation, digitalization, and sustainable initiatives, logistics players can not only reduce costs and improve customer satisfaction but also enhance the resilience of their supply chains against disruptions.

The Lean approach, combined with digital collaboration platforms like iObeya, allows information and issues to be centralized in a single hub, facilitating decision-making and continuous improvement. By streamlining the sharing of information throughout the organization – including suppliers – these solutions optimize the management of logistics flows and contribute to better responsiveness to unforeseen events.

As external pressures such as globalization and regulatory demands continue to intensify, companies must position operational excellence as a strategic cornerstone to meet the ever-evolving demands of the market.

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