Invest KOREA

There are varying opinions about the origin of Korea’s smart logistics. Generally, it can be originated to ‘rocket delivery’ by Coupang which began in 2014 with the slogan ‘Wow the Customer!’, benchmarking Amazon’s ‘Fulfillment Delivery Service’ .Coupang has emerged as First Mover in the distribution/logistics market by continuously investing in logistics infrastructure (logistics information system, automation facilities, establishment of logistics center, etc.) and pursuing customer-oriented strategies. Since then, various companies followed in its footsteps, expanding smart logistics.

The Korean smart logistics market is rapidly growing due to increasing demand for cost effective logistics and supply chain solutions from various industries. The rising expectations from customers and logistics cost management are playing an important role in shaping the future of the logistics market. Technological development in artificial intelligence, IoT, and blockchain are changing the market ecosystem. Increasing data volume of the growing E-commerce market and digital transformation are expected to serve as a crucial factor in driving the growth of the smart logistics market.

The domestic delivery market has continued to grow at fast pace, recording an average annual growth rate of 10 percent, driven by the rapid growth of e-Commerce (delivery usage per person in 2020 was 65.1 times per year, and 122 times per person per year in the economically active population). The demand for it has also skyrocketed due to expansion of non-face-to-face activities, stimulated by the COVID-19 pandemic, and is likely to grow rapidly in the future. The movement to introduce smart logistics also has been accelerated to maximize logistics efficiency like cost-cutting by establishing automation facilities on logistics sites through new technologies including AI and ICT.

Looking back on the trends of automation equipment application in Korean logistics centers over the past 10 years, Multi Stacker Crane (MSC) and Multi Shuttle System (MSS)—smart automation storage system—have been actively introduced in response to the need for highly-efficient logistics centers to accurately and swiftly handle increased volume of goods and small-quantity low-frequency multi-items.

Also, Smart Picking System (SPS) of the Goods to Person (GTP) mode has been introduced since 2015 in earnest to make the picking process, which accounts for more than 50 percent of operating cost of logistics centers (Tompkins et al. 2003), more efficient. Recently, Robot Picking System (RPS) and Mixed Palletizing System (MPS)—more advanced method of smart picking system converged with robots—are under consideration.

All in all, the distribution and logistics centers are expected to actively adopt various smart logistics automation equipment to improve productivity and resolve the shortage of manpower.

The Korean government put forward the ‘Korean New Deal’ (July 14, 2020) as a national development policy—equivalent to the US’s New Deal Policy—as a way to overcome the crisis and lead the global economy in the post-COVID-19 era, when it was faced with serious economic depression and structural transformation brought about by COVID-19 while it was working towards an economic paradigm shift and dealing with low growth and deepening polarization. In addition, the government announced the ‘National Logistics Basic Plan (2021-2030)’ on July 1, 2021 as a new blueprint for the development of the logistics industry in the coming decade in a rapidly and drastically changing logistics environment in the post-COVID-19 era.

This can be seen as a plan which considers the aging population, decreasing productive population, urban concentration, smart urbanization, growing middle-class, and increasing importance of quality of life.

In the case of Strategy 1, 「Establish high-tech smart technology-based logistical system and work towards digital transition」, it will be pursued to create a highly efficient, visible, seamless, and unmanned logistical environment through automation and robotization of all logistical process including transport, storage, unloading, and packaging on the logistics site, which used to be manually done, thereby establishing ultra-connected and intelligent logistics.

Aside from numerous tasks regarding economic efficiency, expandability, and flexibility for the smart logistics industry, a rapid digital transition on the logistics site is inevitably required by transition due to low-growth society, urban concentration, dropping birth rate and growing aging population, and growing importance on the quality of life brought by the COVID-19 pandemic.

The system where the national government gives the ‘Smart Logistics Center Certification’ to logistics facilities equipped with excellent efficiency, safety, and environment-friendliness through deployment of advanced and automated facilities, equipment, and systems, and provides them with administrative and financial benefits, has been in place since April 2021. The certification enables low interest-rate loans needed for the construction of logistics centers or purchase of advanced and automated equipment, as well as the government’s support for up to 2%p of interest cost. For such benefits, it attracts increasing attention from relevant companies, and is expected to play out as a positive factor in expanding investment in smart logistics infrastructure.

The continued growth of the e-Commerce market, changes in the market that require quick delivery, shortage of manpower on the logistics site, and increasing demand for the work environment and safety are likely to accelerate the transition to smart logistics. In addition, the automation market growth of the intelligence level is expected, led by the wholesale distribution and online sectors.