Closing the logistics technology gap

Global supply chains have never been more complex and difficult to manage than they are today. In fact, the traditional linear model that the term ‘supply chain’ describes doesn’t accurately reflect the fact that it has been replaced by a nonlinear network of multiple parties. Parties that are scattered across the globe working together to move goods from one location to another within a specific timeframe. This presents both opportunities and major headaches for medium-sized 3PLs and forwarders.

Logistics providers can now leverage technologies to help their customers significantly reduce the costs and complexities of managing their global supply chains. But for medium-sized organisations, that’s easier said than done.

The industry giants can offer technologies they develop in-house to provide shippers with real-time visibility over their entire supply chains. These companies have thousands of employees and can afford to invest in developing their technology products and services, and are able to scale to work with businesses of any size. They can not only offer their customers end-to-end supply chain solutions, they can also lead the installation and user training processes for their customers, and are responsible for maintenance, troubleshooting and rolling out new features. As a result, shippers have come to expect this service  from all of their logistics providers. That is creating a technology gap between what shippers demand, and what most medium-sized 3PLs are able to deliver.

Closing this gap is critical to long-term growth. So the primary question for medium-sized logistics providers is: ‘do we build our own technologies, or buy from an outside developer?’ Figuring out the answer requires examining the benefits and challenges to both approaches.

Medium-sized companies typically do not have the same budgetary or manpower resources at their disposal. They continue to rely on outdated technologies and processes that were not designed to manage the complexities of today’s global supply chains.

Imagine the competitive advantages you could gain by providing your customers with real-time input to their demand planning and sales forecasting functions. Or mine your wealth of data to create new product bundles, value-added services, and delivery options based on actual consumer needs. Doing requires first determining whether you want to develop the solutions in-house, or partner with a third party developer.

Do it yourself

The maturation of public cloud computing makes the development process easier and more cost effective than it would have been just a few years ago. Using online tools to develop solutions in-house eliminates the need to spend money and time installing and maintaining the necessary IT systems.

There are downsides to this approach. The company is still responsible for the entire development process, including handling all customer service-related issues, and ensuring future updates roll-out to customers on-time and without disrupting their businesses.
This will likely require hiring additional IT staff with expertise in software engineering and application development, and regularly training sales teams on how to sell these solutions to customers.

Buy, don’t build

Alternatively, the company can offload all of those costs and risks by partnering with a vendor that provides its customers with a customisable cloud platform and the expertise to guide them in how best to incorporate these new functions and capabilities.

In this model, the technology vendor leads the effort to quickly ramp up the 3PL’s customers with the right solutions and technologies that address their unique needs. The vendor delivers a system that provides a complete, live view of global supply chains, produces reports, and offers dashboards that provide shippers with real-time information and enables them to communicate instantly with their supply chain partners 24/7 anywhere in the world.

Mitigating partnership risks 

There are no guarantees about the long-term viability of a vendor’s products, or even the vendor itself. Consider these three key criteria during the evaluation stage:

Industry expertise: look for an executive leadership team that has experience in helping companies manage their supply chains.
They will understand first-hand the challenges you face.

Ease of implementation: it’s critical that the solutions provider oversee the implementation and on-going maintenance and update of processes for your customers. They’re the software developers, you’re the logistics provider.

Immediate cost-savings: The benefits of cloud computing are negated if you or your customer have to install and manage expensive systems on-premises. So look to a cloud platform provider that does not require you or your customers to make a significant upfront investment in hardware or software. Ideally, you can first take the product for a test drive to conduct your due diligence. Ask the provider if you can also invite any of your internal stakeholders or customers you would like to participate.

There is a third option, but I don’t recommend it: Build new modules for your existing ERP system to automate processes such as tracking shipments. This approach cannot possibly scale with your customers’ evolving needs. You’ll lose them to competitors that are able to roll out new features and functionalities in just weeks.

Closing the technology gap is critical to any 3PL and forwarder’s long-term growth and success. Shippers are placing a heavier reliance than ever on outsourcing, and that comes with fragmented responsibilities and a loss of control. To make up for it, they need better insight into their supply chains. Therefore, the partner that can help shippers advance their capabilities and gain greater visibility and agility creates a distinct competitive advantage.

Darren Palfrey,
Chief Operating Officer, Gravity Supply Chain

2017-08-23T08:20:01+00:00 June 14th, 2017|Ask the Experts|