Why is Logistics Full of Laggards?!

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Transform or Perish

The supply chain logistics industry has always been well-known for its reluctance to embrace new technology, but why is that? And perhaps more importantly, are we starting to see this change?

"Logistics is the backbone of global trade, but at the same time has been a fragmented industry and a slow adopter of new technologies.”

- Ed Spiegel, Entrepreneur in Residence at 500 Startups

In simple terms, we can put this reticence down to fear and uncertainty. A safe and steady evolution has always been preferable to a drastic revolution, but with 43% of CIOs stating that resistance to change is the biggest impediment to digital success, isn’t it time for us to change this culture?

A big part of the fear comes down to the perceived scale of the changes required. The legacy “rip and replace” approach to transformation was extremely costly, rigid and provided no guarantee that similar scale changes wouldn’t be required in the next 5 years.

Given such uncertainty over the return on investment, it’s really no wonder that many logistics companies have traditionally focused on smaller, less risky projects with a clear and quick time-to-value.

Digitalisation has made this legacy mindset dangerous though, having propelled us into a period where we really have no choice – it’s simply a case of “transform or perish”.

The traditional market has been disrupted by a new breed of tech-savvy businesses who, using technology as an enabler of agility, have forced more established companies to re-evaluate their strategies if they want to stay in business.

Competition is Driving Change

"Staying ahead of the curve requires inspiration, innovation, and a commitment to explore new trends early on."

- Bill Meahl, Chief Commercial Officer for DHL

Despite the historic trend of under investment in IT across the logistics sector, there are signs that things are changing.

Last year, Gartner forecasted that the global transportation industry would increase IT spending by 1.9% to $130 billion in 2017. That trend seems to be continuing, with the 2018 Global CIO Survey finding that 79% of IT leaders have seen their budgets either upheld or increased this year.

This is likely due to the increased understanding and awareness of the benefits of new technology, with the supply chain itself now recognised as a key differentiator between competitors.

“Supply chain used to be a function. Now it is a value-add and it is fundamental to your customer’s experience.”

- Kim Breland, Director of Finance for Supply Chain Operations at Sprouts Farmers Market

It seems this is well understood by 3PL/4PL providers, a segment of the industry that continues to grow with shippers increasing their reliance on outsourcing critical supply chain management and execution tasks.

With so many businesses relying on 3PLs to provide fully integrated, end-to-end IT services, IT capability has become a key differentiator. In fact, competitiveness is the top reason 3PLs are investing in digitisation and automation, with 33% of respondents to the 2018 Third-Party Logistics Study citing it as the cause.

WHAT ARE THE MOST IMPORTANT TECHNOLOGIES FOR SUPPLY CHAIN MANAGEMENT?

What are the most important technologies for supply chain management?

Fig. 3: Excerpt from the 22nd Annual Third-Party Logistics Study 2018

Agility is Key

The ability to remain competitive really stems from something else – the ability to adapt, as-needed, to address changing business environments, customer expectations and other political, regulatory and environmental challenges.

The most successful business leaders understand that technology is the enabler of modern agility and we see this being reflected in policy shifts across the board.

In 2017, CEOs identified IT-related projects as the second most important strategic business priority (beaten only by “growth” at No.1) – the highest ever seen by Gartner.

CIOs are now taking a centre-stage role in leading the charge, with 52% of respondents to the 2018 CIO Survey stating that creating a more flexible and nimble technology platform will be key to managing change.

With 28% also stating that implementing agile methodologies is a focus to help improve agility and responsiveness, IT leaders are recognising the need not just to implement new technologies, but to drive cultural changes with them from the top-down.

Invenio’s specialist consultants are helping businesses around the globe to modernise their supply chains using the best innovative solutions and modern best-practice methodology. Read the case study of our work with Universal Music Group to find out more, or contact us directly to discuss a solution tailored to meet your specific business needs.

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