The barriers between market players are coming down as traditional tier one vendor tools become more accessible to all types and sizes of logistics businesses.
Several technology trends are impacting the way logistics companies manage their business. Mobile devices such as PDAs, smartphones and tablets have become more affordable, making the hardware accessible to all sizes of organisations. With developers building ever-more mobile functionality into their software, the gap between tier one and tier two software has narrowed down to such an extent that leading functionality has become available to all at an affordable price.
A third trend noticed is the push for efficiency. Given productivity, competitive and financial pressures, it’s not surprising that logistics companies are particularly focusing on software tools that will help achieve efficiencies by streamlining workflows and reducing operational costs.
These three trends have combined over the last 12 months to encourage a more holistic approach to mobility. Logistics companies are moving well beyond simple bar code scanning and are introducing a wide range of mobile-based processes and systems across the business, from electronic manifesting, sign-on-glass delivery systems, and item level inter-company traceability to depot audits, pallet management and fatigue management. The idea of capturing data at the source of activity is extremely appealing, especially as a way to speed up processes by reducing the need to re-enter data, and removing time lags affecting the flow of information.
Recently, the mobility focus has shifted slightly to concentrate on the value of mobility as part of an integrated whole-of-business or ERP system. When all software works together as an integrated whole, data only needs to be captured once for it to become immediately available to all users, across all systems as required. This is where the real ROI of mobility lies and is likely to be the subject of continuing investment in 2015.
One good example is the flow of data from logistics to in-cabin telematics and GPS systems with the three systems working together to automatically optimise delivery routes while also accounting for fatigue management.
Mobility is also changing the logistics business by redesigning processes. Mobilisation is forcing companies to rethink their process flows, review how things are done and find ways to use technology to make improvements. Traditional backend tasks such as building the manifest, for example, are being shifted to the warehouse floor to reduce costs and improve timeliness.
EDI has been around for so long that it has effectively become commoditised. Once only feasible for large operators, it is now a commonplace tool among businesses of all sizes. However, this gives rise to a new set of expectations, especially from smaller organisations that seek more from their software investments but can’t afford to rely on a consultant every time they need to make a change. This has encouraged software vendors to introduce new tools that give customers more control over their EDI experience.
In comparison with EDI, the market for cloud ERP systems appears to be slowing. The potential of the cloud was a much-discussed subject in 2010 and 2011; however, concerns over data integrity, data security and data ownership have proven to be major hurdles, resulting in resurgence in demand for on-premise systems. Business conservatism around the cloud is unlikely to dissipate until these issues are fully resolved.
Changes in technology are helping to create a far more level playing field for logistics organisations. With the same technologies and functionalities becoming available to all, and the same opportunities for efficiency through automation, competition within the industry is about to heat up even more.
Given the level playing field when it comes to technology, it wouldn’t be surprising if smaller operators begin to successfully bid for contracts with large retailers. In some instances, their greater agility may prove to be a decisive advantage.
It’s touted as the greatest technology shift since the internet, yet the cloud isn’t necessarily the right choice when it comes to achieving real business benefits.
Proponents of cloud platforms and services point to flexibility, reliability and cost reductions as key reasons for their adoption. They argue that renting access to computer and storage resources is far better than investing in your own hardware and software.
However, when it comes to deploying complex logistics software applications, using a cloud platform or service may not be the best solution for your organisation. Implementing the software on-premise, or on your own hardware in an external hosting centre, is likely to deliver much better results.
Key reasons the cloud may not be the best option for complex logistics applications include:
A key selling point for cloud platforms is that you no longer have to worry about the physical servers that underpin them. Most users don’t even know, or care, where the data centre happens to be in which their data is stored and applications are running.
While this may sound appealing, it also raises the issue of security. How can you be sure the servers on which your business now relies are secure when you don’t even know where they are? How can you implement the stringent protection tools that you have in place internally?
Any cyber-attack that causes disruption to your ERP software will have a significant impact on business operations. Relying on a platform where you cannot control security is a risky decision.
No two businesses operate in exactly the same way. For this reason, software deployments have to be customised to ensure they meet an organisation’s unique requirements. Unfortunately, however, cloud-based software solutions can’t be customised. While they may offer numerous features, you can’t add anything extra to them. If a particular feature or capability that you require is not there, there’s nothing you can do but wait and hope it appears in the future.
On-premise or hosted software deployments provide the option to develop and add new capabilities as they are required by the business. An organisation’s needs change over time and the support needed from a software system changes, too, so having the ability to make those changes is vital.
Cloud vendors say their platforms are less costly to use than investing in on-premise hardware and software. While this may be the case for small businesses, it’s not always true for mid-sized and larger organisations.
Purchasing access to a cloud-based logistics software system on a per-user basis may seem initially to be cost-effective, but this changes over a longer timeframe. A better approach is to purchase your software under a lease payment agreement. The monthly payments may be slightly higher but, after four years, you will own the software licence outright. If you had opted for the cloud service, you would own nothing and the payments would have to continue for many more years.
Having your software running on-premise or in a purpose-built hosting centre ensures you have access to it at all times. This occurs via your local area network if the application is in-house or via dedicated VPN links if in a hosting centre.
Cloud-based software services, on the other hand, must be accessed via the public internet. This means any disruptions to internet connectivity mean downtime for your business. It’s another factor that is out of your control.
Cloud software service vendors highlight the point that you will no longer have to manage the physical hardware supporting your software, but this may not be as big an issue as they’d have you believe.
Management of on-premise hardware can be handled by an IT services company under a fixed-price contract. This allows equipment to remain within the organisation, without being an ongoing burden for IT teams.
The cloud clearly has benefits for certain areas of business and its use will continue to grow in the years ahead, however, it’s certainly not be the best option when it comes to complex logistics operations. Make sure you have considered all the factors and options before deciding which option to take for your next deployment.
They might not be glamorous and often attract little attention, yet pallets are the oil that keeps global supply chains running smoothly. As a standardised storage and transportation tool, they play a vital role for logistics companies of all sizes.
In Australia, the pallet business is dominated by two large players, CHEP and Loscam, who between them control a sector worth tens of millions of dollars each year. It’s not uncommon for a mid-sized transportation company to be paying tens of thousands of dollars a year in pallet leasing fees.
For this reason, efficient tracking of pallets is an important yet often overlooked necessity. Failure to accurately account for the usage and location of pallets can result in transportation companies paying leasing fees for pallets that are no longer within their operations.
While individual pallets may cost only cents per day in leasing fees, when a transportation company has thousands in circulation, the bills can mount very quickly. Proper tracking allows the transfer of this cost once pallets have reached their final destination or have been handed over to another carrier for on-shipping.
For example, if a truck carrying 50 pallets arrives at a customer’s warehouse, the trucking company needs to ensure that they are transferred and become the financial responsibility of the recipient.
This can be achieved by shifting the pallets from the trucking company’s pallet account to the account of the recipient. Should the recipient not have an account with the relevant pallet company, they remain on the trucking company’s account but a record is generated to show they are now under the control of the recipient.
The situation becomes more complicated when freight is transported to a destination depot before being repacked and palletised for local distribution. It is all too easy for the pallets to be moved on but for the responsibility (and therefore leasing fees) to remain with the original transportation company.
For example, a shipment of 600 cartons of zucchinis packed on 100 pallets may be transported from the Lockyer Valley in South East Queensland to numerous customers in New South Wales as far south as Sydney.
Through this journey, a pallet of zucchinis could pass from the grower to the transport company and through two or three depots. The transport company might stop during the journey at multiple customer sites where some pallets of zucchinis are delivered and some empty pallets picked up from previous deliveries.
At the final destination in Sydney, the remaining pallets of zucchinis are delivered and empty pallets from both CHEP and Loscam pallets are given to the driver for the return journey. At this point the transfer dockets put responsibility (and therefore rental) for the pallets back onto the transport company.
Cost accounting in these scenarios is complicated by the time delays that come into play. The originating depot, which has ultimate responsibility for their pallets, may not be sure whether a pallet has made it all the way through to the end customer. It may also have no way of knowing how many empty pallets have been exchanged and are being returned.
In most cases, it is a matter of waiting until all drivers have returned. Only then can paper pallet dockets be examined to see exactly which pallets are where – and who should be paying for them. Dockets need to be reconciled with the original consignment note, and then reconciled with the physical pallet count once a month. This entire process is highly inefficient and prone to errors.
It should be noted that the pallet providers themselves have absolutely no incentive to track their pallets because they make money regardless of where in the supply chain they happen to be. As long as they are the responsibility of a transport company, the pallets are making money for the provider.
Further challenges emerge as a result of pallet theft which, unfortunately, is rife within the logistics sector. Even when theft is not an issue, it is easy for pallets to be forgotten by a driver and then fall off the radar. This can happen when paperwork is not completed correctly or a load of empty pallets is put on a trailer and simply forgotten.
The solution to the complex and costly task of pallet management lies in better collection of data. Rather than relying on drivers to create paper dockets and returning them to the central depot, data needs to be collected and sent each time a pallet changes hands.
Drivers can be equipped with smart phone or tablet devices that allow them to collect data about pallets during pickup, delivery, and when empty pallets are being returned. This then occurs at the actual time of exchange, removing lag and ensuring accuracy.
Data collected on the devices can be fed into the transportation company’s back-end systems, allowing accurate tracking of pallets and efficient charging of lease rates to customers and other carriers as is appropriate.
To further streamline the system, pallets can have RFID tags attached. This allows easy identification of individual pallets and ensures the accuracy of captured data. Tags can be scanned by the mobile device, capturing the individual pallets details and tying it to its geographic location.
By shifting to a real-time data capture system, transport operators can significantly improve their overall pallet management practices and ensure they are not paying unnecessary leasing charges for things that have been handed over to customers or returned to the originating depot. The result is greater efficiency and an improved bottom line.
Ten or so years ago, IT departments were enthusiastically adopting best of breed software policies. Different software applications had areas of particular strength, so it made some sense for a company to cherry pick its way through the market offerings, choosing only those applications that best fit the company needs.
Companies purchased ERP [enterprise resource planning] software, warehousing systems, financials software, customer resource management systems, supply chain management systems, asset management systems, transport systems and more. Rather than requiring one big deployment project, the best of breed policy allowed IT departments to focus on discrete needs and to purchase and implement applications over a period of years. Because each solution typically involved a limited number of people or departments, the impact of the deployments was contained. There seemed to be less “bad press” or disruption to the overall business compared to a major integrated systems deployment.
Fast forward to today, however, and things have changed. Software vendors have realised that there is far more money to be made by offering stronger, more comprehensive, tightly integrated ERP suites. Over the past few years vendors have been actively acquiring technologies and developing their systems, so that today, the market offers a wide range of integrated solutions for every need.
The passage of time has also helped to highlight an underlying problem with the best of breed policy: best of breed is a tunnel vision policy that ignores the need for a holistic view of the business. Disparate systems may work well on their own, but they can’t always talk together easily or effectively. This has a major affect on management’s ability to view the business and negatively impacts business agility.
It can be a nightmare trying to integrate best of breed applications to create a cohesive whole that is capable of sharing data, supporting workflows and facilitating automation and process efficiencies.
The problem with integration starts with deployment. A business must be able to import existing finance, distribution and data, customer contact information from sources such as spreadsheets or an accounting package.
The second and more critical integration issue is the need for the ERP system to work seamlessly with other systems such as manufacturing and distribution systems, or with the systems used by suppliers and customers. For example, if a business deals with any of Australia’s major supermarket chains, it is likely to receive orders online via an Electronic Data Interchange [EDI] system. A collection of best of breed applications will have difficulty dealing efficiently with an EDI order. In these circumstances, staff often find themselves double entering data into different systems, dealing with different databases that between them, hold multiple versions of the truth. Trying to ascertain the exact status of an order – from production, sales and distribution systems – can be all but impossible.
Compare this to an integrated ERP suite that receives and processes the order, automatically forwarding information from one department to the next so that the order is accepted and documented, picked, dispatched and invoiced as quickly and effortlessly as possible. The transaction is reflected in production plans and inventory. Right across the business, the flow on effect is noted and actioned.
To get around the problem of isolated applications, companies may try to integrate their disparate systems but there’s always a lingering concern over whether modifications or future application upgrades will affect the integration and whether further development will be required with each change to the system.
Moreover, it takes time and money to establish integration between applications that were never designed to talk to one another. Although a fully integrated ERP solution may initially appear to cost more than a selection of disparate applications, once the cost of integration is factored in, the best of breed solution is quite likely to emerge as the more expensive approach.
Individuality is an interesting and engaging trait in a person but when it comes to software, consistency in appearance, operation and performance is important. Within an integrated solution, every module is designed to work the same ways as all the others. Once staff learn one module, they pretty much know how the others are going to operate.
When using best of breed software however, every application has its own unique characteristics. Screens, short cuts, command keys will all differ. This makes it harder for staff to learn the systems. It takes longer for new staff to become productive and, because each application works differently, there is a higher potential for error.
There’s one more major differentiating factor between best of breed and integrated ERP solutions. The former approach involves dealing with multiple suppliers for deployment, support, maintenance and training. There are many relationships to be established and managed. The latter involves just one supplier. When things need to be modified or customised, or if the business wants to provide input on the future direction of the software, there’s just one relationship to deal with, and one organisation to contact.
The changes in the market over the past decade have turned the tables on the best of breed versus integrated ERP solution debate. Due to the problems of integration, lack of uniformity and the sheer number of vendors involved, best of breed solutions have become more complex, more costly and more time consuming to deploy and manage when compared to integrated software suites. When you look at the lifespan of business software, the changes and upgrades that will occur over that time, the costs to maintain the system and the business benefits that accrue from free flowing data, it’s clear why organisations are choosing to ditch their best of breed policies in favour of integrated ERP suites.