Executive IT Corner
with Biju Kewalram
Global IT systems are a unique and increasingly crucial part of the logistics industry. But many organizations fail to recognize that IT should be considered a competitive tool and not simply a productivity opportunity. This is especially true of the small-to-medium logistics companies and forwarders that don’t have access to capital (funding or human resources) that large multinationals do.
So what are the key areas to focus on when it comes to creating competitive advantage through IT? Let’s look at a handful:
Single point status for shipments.
Fifteen years ago, I worked on a system that synchronized data between freight forwarding agents in different parts of the world so that statuses for all shipments were available to all other agents in the network at the same time. (The term agents is used here to refer to owned branch offices as well.) The key objective then was to make sure that the information was equally updated for all points in the global network to answer local customer phone queries.
But the advent of the web and related technologies changed customer expectations. Today, logistics providers’ networks need to provide a single point for the whole global network where information is updated continuously.
The requirement to make information continuously available on one server changes the competitive opportunities for participants. A traditional operational function involving the updating of supply chains has now become part of a marketing and branding experience. Logistics networks that realize this are creating an entirely new type of customer experience.
To take advantage of this, logistics networks need to focus their IT energy and dollars on the website first and foremost — this is where competitive advantage comes from.
Shared freight handling — multiple parties, multiple regions.
Flowing from the need to provide one point of status for shipments worldwide, the next immediate need is for networks and branch offices to establish a unified technology approach to their internal operations systems. These “back office” or operations systems should be the primary source of status updates. If they are not, they need to be changed, as secondary systems for status tracking as a separate function can impose up to a 30 percent overhead in transaction processing.
Debate often rages about whether or not it is necessary for a logistics network (a network of agents or owned offices) to be on the same system worldwide. Contrary to intuitive opinion, it is possible for different countries to be on different systems and still achieve the single point status required. This is achieved through database-level integration (the highest degree of difficulty) or EDI type of connectivity (a lower degree of difficulty, but still hard to achieve with any degree of widespread participation).
However, implementing and, more importantly, maintaining this on a continuous basis can quickly become inefficient. While harder for independently owned companies in a global network to achieve a single system, the availability of off-the-shelf systems today that can cater to global requirements should at least make the consideration of a shared platform a high priority discussion item for networks. Similarly, companies that have one or more internal operational systems in their global organizations should look to consolidate those systems.
Shared customer acquisition.
With the nature of international shipping transactions and Incoterms governing the particular transaction coming into play, most sales activity that generates a shipment is conducted at both ends of the transaction. Regardless of whether a shipment is prepaid or collect, customer relationship activity occurs at both ends of the transaction.
Consequently, it becomes necessary for global logistics networks to collaborate in customer acquisition. Companies that are able to share leads, pricing, purchase order tracking, and routing instructions are ahead of the curve in acquiring customers. System functionality needs to allow the sharing of this information.
Unfortunately, logistics networks that have effectively implemented systems to enable the acquisition of customers on a collaborative basis are rare and this is an area of competitive opportunity for networks of smaller agents to compete against the larger companies. In return, multinational companies can use this as a way to broaden the gap.
Outsourcing (or other cost reduction opportunities).
It should be required in 2014 for any new system plans to be conceived and designed with an intertwined outsourcing strategy. Logistics networks, in particular, are global and should be ideally placed to take advantage of outsourcing. The majority of the logistics industry is involved in outsourcing itself.
The three key areas where outsourcing plays an integral role in conjunction with IT are business process outsourcing (BPO), data entry outsourcing and IT development itself. Introducing a new system is the perfect opportunity to consider process redesign. Unfortunately, too many organizations consider system implementation in isolation of this opportunity, leaving money on the table for companies that are more nimble.
It is generally a bad idea, however, to undertake a system change purely to enable outsourcing.
This is no longer an area where multinational companies have advantage from economies of scale and I believe this is an untapped area of opportunity for logistics networks, particularly those comprised of agency relationships to coordinate and compete.