The Cloud Technology Opportunity for Logistics Service Providers

Supply chain technology is becoming mission-critical for global companies. One reason for this is that companies are outsourcing more, in order to raise profitability. 86% of logistics service providers (LSPs) said their shippers increased outsourcing this year over last, according to a recent Capgemini survey. For shippers, greater outsourcing means reduced control over their processes, which are now scattered across the world.

Today’s global supply chains span oceans and continents and contain a panoply of raw materials providers, suppliers, manufacturers, ocean carriers, retailers, and LSPs. To deal with the added complexity, companies are demanding better insight into their supply chains; they want to advance their supply chain capabilities, and have greater visibility and agility. This requires IT investment in advanced supply chain technologies. Yet it also demands that whatever solution takes shape significantly curbs operating costs.

This is especially important for LSPs, who run critical parts of the enterprise supply chain. Because of this, companies expect high IT capability and competence from their LSPs. Technologies in areas of Cloud, Supply Chain Visibility, Collaboration and Order Management are among those in high demand. Advanced commercial cloud solutions are replacing home grown software systems because of their ability to connect large supply chain partner networks together.

Leading LSPs have recognized that while they are not IT developers, they can provide a robust, outsourced capability for their key customer base, using the same advanced platforms that major companies are using themselves.

It Takes a Platform

The visibility technology customers demand is not only expensive to develop, it’s difficult to keep current. Many LSPs mistakenly think that proprietary technology will lead to market differentiation. But proprietary technology usually costs a lot of money without providing any unique benefits:

Proprietary systems make it difficult to get customers on board. Every customer has different IT infrastructure and working processes. For customers, adopting and integrating with a new, siloed proprietary system is risky. It may not take into consideration all the idiosyncrasies of their business, and can be frustrating. For the LSP, lengthy, untested onboarding procedures can incur significant costs and poor customer experience.

Developing proprietary systems robs customers of a crucial aspect of transformational technology—networks. With supply chains being global and involving many carriers, suppliers, LSPs, and other partners, shippers want the flexibility and access to provide them with easy, agile options. Proprietary systems don’t offer this. Many top LSPs already have advanced technology, bought off-the-shelf from commercial vendors, and pay lower costs and have easier access to global networks.

Proprietary solutions require heavy development with each use case. Lessons and improvements from one case do not easily become part of the next, because the software architecture is not scalable. Commercially available platforms are scalable, and bring the benefit of improvements from hundreds of use cases. These platforms are continually growing and evolving, to the benefit of everyone participating.

LSPs can help their customers by adopting technology that eases onboarding, visibility, and access to network partners. As shippers try to move up the supply chain maturity curve, LSPs need to ask themselves: what role can I play in guiding this growth?

The Cloud Advantage

Instead of trying to stand out with proprietary solutions, it makes sense for LSPs to command powerful existing commercial solutions—and use them strategically to gain competitive advantage.

Cloud-based platforms in particular provide value because they can scale across infrastructure and organizations. A commercial cloud supply chain platform can deliver the highest quality levels of service and visibility to customers while reducing IT and deployment costs. Cloud centralizes data, making it easy to have a single, up-to-date reality for all partners in the supply chain. Since the software is centralized, its features can be customized then easily deployed to all clients. Such a configurable platform can meet the unique needs of a customer and also provide the open connectivity that integrates easily with disparate systems, suppliers, and other logistics providers.

The other main advantage of the cloud is that it’s architecturally best suited to support community. And that’s exactly what’s happened in the logistics space. LSPs can now join a platform where the largest fortune 1000 companies and dominant LSP players manage their supply chains with the latest technology. The features of such best-in-class software will benefit LSPs’ customers. A network community frequently updates and enhances its platform. This provides economy of scale, and lowers the total cost of ownership.

Best of all, a cloud logistics platform offers a low barrier to entry into the market. Non-platform LSPs will struggle to win a platform-based customer. Platform customers can get up and running quickly, so they can collaborate with their partners. A unified system speeds going to market by reducing maintenance overhead and onboarding costs.

The Strategic LSP

Cloud technology creates unity not only in technology, but services. LSPs can play a role in the merger of the physical and financial supply chain – something that’s increasingly desired by customers. They can provide end-to-end visibility from pre-PO forecasts to end customer delivery. They can also improve execution overall with automated processes and flow-based solutions.

The value of LSPs wielding cloud-based supply chain networks is massive. By harvesting the unique aggregate power of network data, LSPs can provide transformational services to their shippers and help them advance their supply chain maturity. In this capacity, they become strategic to their customers, and indispensable. All the while, they can still differentiate themselves.

LSPs can customize and adapt common cloud platforms to reflect their own unique and truly differentiated processes. Commercial airlines use common aviation technology from Boeing, Airbus, Lockheed, etc. Yet they compete through service. By allowing well-established platforms to handle the technology, LSPs can compete by focusing on customer service and the expertise/experience they offer in operating on a cloud platform that they can extend to their customers.

In the LSP world, using cloud technology means offering unique value to customers. As customers demand greater strategic value from their supply chains, LSPs can stand out by offering a legitimate chance to raise customers’ supply chain performance. Using a well-established technology platform behind these offerings will be the key to freeing up the resources to focus on innovation, differentiation, and the customer experience.

JohnUrban-125x143John Urban is Executive Vice President and General Manager at GT Nexus. Mr. Urban has over 20 years of experience in executive management, operations and sales with global transportation and technology companies. Prior to joining GT Nexus in 1999, Mr. Urban was an executive with American President Lines, Ltd. (APL), one of the world’s largest ocean liner companies and part of the $4.7 billion NOL Group. He held several executive positions with the company in Asia, North and South America. Before APL, Mr. Urban was President of NPSC, a domestic intermodal carrier. Prior to that Mr. Urban was vice president of Sales and Marketing for BRAE Corp., a provider of transportation equipment financing, leasing and management. Mr. Urban began his professional career as an Account Executive for IBM in its large systems group, following his graduation from the Krannert Graduate School of Management at Purdue University, where he earned an MBA. He received his Bachelor of Science in economics from St. Bonaventure University, Olean, NY.