For years, the mantra in logistics was "information about the shipment is more important than the shipment itself." That may be a stretch: You don't go to the store for a carton of data. That being said, information technology (IT) has never been more pervasive in this business than it is today. It is no longer about automating manual processes. It is about leveraging data to make everyone's business better. That is a quantum leap.
|CHRIS ELLIOTT||ABTIN HAMIDI||MARIO HARIK||MONICA WOODEN|
DC Velocity asked four IT leaders for their views on how their disciplines fit into today's logistics world. They are Abtin Hamidi, vice president of sales for Cargo Chief, a broker whose IT platform connects shippers and carriers; Chris Elliott, senior consultant, strategy services for consultancy Blue Horseshoe; Mario Harik, CIO of transport and logistics service provider XPO Logistics Inc.; and Monica Wooden, founder and CEO of transportation management systems (TMS) provider MercuryGate International Inc. The four addressed where the logistics industry needs to fully embrace IT, what will drive the business for the balance of the decade, and how to cope with the 800-pound gorilla: Amazon.com Inc.
Q: It's been said that transportation and logistics companies—with some exceptions—are latecomers to IT. Is there one area where the most work needs to be done to bring businesses up to competitive speed?
AH: Converting EDI (electronic data interchange) to APIs (application programming interfaces). Our industry is still primarily built on legacy systems, and although they are secure and scalable, they can't meet the new demands of the continuously changing environment. By upgrading to modern systems, we can set ourselves up for faster, more robust integrations. The result will be the improved and automated communications that many of us have come to expect.
CE: Replacing aging infrastructure and systems implementations. Many companies are operating on systems installed in the late '90s and early 2000s, when capital budgets for logistics systems were looser. Bringing systems up to date will enable increased functionality and can make data easier to access.
MH: Legacy technology can make it difficult to rapidly customize applications to meet customer needs. It's a challenge to move fast or to innovate on these aging systems. There are a few scalable packaged solutions, but they're also plagued by legacy technology. Modernizing these platforms enables automation, self-service marketplaces, and big data algorithms, and ultimately makes it easier to match capacity and demand. This is a big reason why we've chosen to develop our own systems—a cloud-based platform gives us the flexibility to deploy new software very quickly.
MW: In the past, large companies with significant transportation budgets were the primary beneficiaries of transportation and logistics IT solutions. The advent of cloud-based solutions has made it possible for companies of all sizes to access transportation management systems (TMS) and other technology tools and realize cost savings and improved efficiency. One of the most significant areas of opportunity is transportation optimization. In the past, companies may have viewed optimization solutions as too expensive, too difficult to implement, or not user-friendly. However, in today's market, there are many cloud-based solutions that are affordable and easy to use for any business.
Q: All of you work in logistics, but in your own unique subsegments. What area within IT will deliver the most profound benefits for logistics operations over the next two to three years?
AH: Developing technology to connect the world in different ways and collecting data for creating better outcomes for all concerned. Our technology, and the data that is derived from it, results in more profitable carriers, which in turn means better service for shippers.
CE: Cloud computing. In the next few years, we are going to see increased functionality from cloud-based logistics solutions and greater potential to integrate applications. This will allow people to access applications from mobile devices anywhere they have an Internet connection. The benefits are the ability to be more agile and flexible in how solutions are delivered and how data is displayed by the business.
MH: Automation is impacting everything we do. We're seeing tremendous value in using our IT to match freight with capacity—that's in both truck brokerage and intermodal. And we're using sophisticated technology in our logistics facilities, including advanced robotics. Not too far down the road, we expect automation in the form of autonomous vehicles.
MW: There are a number of trends that we are following, such as e-commerce and omnichannel fulfillment, as well as the IoT (Internet of Things) and GPS-enabled mobile devices. We view predictive analytics and big data as very promising in terms of providing information that will support more informed decision-making in real time by logistics practitioners.
Q: What feedback do you get from businesses as to why they are reluctant to make investments in IT services?
AH: Until recently, there wasn't a need for transportation companies to make huge changes. Change would come only in response to a crisis. In addition, the available solutions were too expensive and required extensive change management that was not always welcomed by the culture. All of transportation is like a legacy business—which by definition tends to be slow to adapt to change. A "tipping point" will occur within the next 18 months. Over that time, reduced IT costs will lead to increased adoption. These factors will force companies to commit to a tech approach instead of an old-school brokerage approach.
CE: Cost is the excuse that's given, but in reality, businesses have a hard time explaining the benefits to senior management. For shippers, logistics is seen as an expense, and it is challenging to justify the increased expense of IT investments versus the benefits. A lot of companies have been burned in the past by not being able to demonstrate an ROI [return on investment] on their logistics IT investments. This makes senior executives wary of new investments without a lot more due diligence.
MH: Many companies in our industry have legacy systems that are 30-plus years old. These systems are built on obsolete technology and are not upgradeable. It would be a risky, years-long process for them to replace these mainframe systems with a new platform. This technical debt is inhibiting innovation.
MW: Companies may be reluctant to invest in IT systems that they deem too costly, too cumbersome, and incompatible with existing systems. On the other hand, if companies do not evaluate and invest in an IT solution, they must often deal with disparate systems that cause inefficiencies and decisions made in silos. These become manually intensive processes and make it difficult to maximize profit, growth, and customer satisfaction.
Q: All of you, to one degree or another, touch trucking. Will we see autonomous tractor-trailers on the road by the time the decade ends? If so, what restrictions, if any, will be placed on their operation?
AH: Self-driving trucks will be on the road within the next 18 months. The physical component is developed; the only thing missing is data. Initially, about 10 to 15 percent of vehicle miles will be converted to self-driving trucks. What happens to pricing? People don't know how to price, but self-driving could stabilize it, as well as ensure that more drivers can come home every night and have a stable income. Flat rates could become prevalent on busy, stable routes like Chicago to Los Angeles.
CE: Platooning, at a minimum, should go live by decade's end. That means there will be an active driver in the lead truck, with the other trucks following. The challenge will be in regulating the operations to demonstrate trucks can operate safely on the interstates. Restrictions could vary from needing someone to take control, to not allowing operations outside of very specific routes.
MH: They will be with us sooner than later. Several truck manufacturers are piloting more advanced autonomous vehicles now. There will be regulatory and cultural hurdles to overcome, so industrywide adoption is still a number of years out. But that's where we are headed.
MW: With the rapid changes in technology, it is difficult to predict if we will see autonomous tractor-trailers on the road by the end of the decade. In our view, safety is the primary issue that will need to be addressed in regard to the operations of autonomous tractor-trailers.
Q: How has omnichannel fulfillment, and by extension the "Amazon effect," changed the way logistics services are executed? And how will it shape the future of the industry?
AH: Consumer behavior has changed everything. The shift in consumer buying habits has had the biggest effect on trucking. Before, consumers expected to receive orders in a week. Now, it's within a day. Predicting demand is the key, not working to stabilize inventory levels. Trucking must shift with retailers, becoming more agile and efficient. Obtaining and leveraging data will be critical.
CE: The biggest impact is in the changing of customer expectations. Customers now have inflated expectations about the speed of logistics services. This requires companies to provide greater access to cross-channel inventory, direct inventory to the best location in and across channels, and move shipments faster around the world. The current challenge for many companies is enabling this faster tempo. Whether you are B2B [business to business] or B2C [business to consumer], the expectation is that you are able to quickly react to customer demands. However, many companies don't have the processes and systems in place to make this change.
MH: Omnichannel, and particularly the direct-to-consumer component, has reshaped logistics and transport forever. The entire supply chain has to run like a well-oiled machine so the retailer can keep its promises and its brand is protected. Returns must be just as seamless. None of this is possible without technology. This means focusing on automation, quality, and overall increased labor productivity to service the end consumer in a cost-effective way.
MW: Companies planning to emulate the Amazon model must develop robust omnichannel fulfillment strategies. This environment is increasing the use of parcel by a wide range of companies. In the past, many transportation management systems separated parcel shipping from other modes. Today's robust TMS platforms natively support parcel along with all other modes, allowing companies to consolidate shipments across modes, customers, and business units. This results in cost savings in transportation spending and efficiencies in the holistic management of transportation processes.