Closing The ‘IT Gap’ For Third-Party Logistics

outsourcing

The modern supply chain manager faces a broad range of challenges that shift from day to day. They may be tasked with outsourcing or selling off part of the supply chain to reduce cost structure, or have to dig into regulatory requirements surrounding issues like conflict minerals. They may have to open up new channels of distribution in other countries, or face an unexpected challenge from non-traditional competitors.

That triple challenge of globalisation, margin pressure, and technology change can severely limit business performance for even the most well run companies.

As supply chain managers respond to these challenges, they often choose to outsource elements based on lower operating cost, technical sophistication, and scale of the outsourced provider. While gaining those distinct advantages, the consequences include increased management complexity, loss of visibility, reduced operational control, and a lack of responsiveness.

Increasingly, they struggle to address these consequences and often dilute their original benefits by hiring more staff, performing manually intensive data gathering and analysis, or implementing costly point solutions for every type of integration, analytical, and management requirement.

At the end of the day the original challenge remains: how to capture the benefits of outsourced operations while retaining the critical visibility, operational control, and responsiveness modern businesses demand?

Connecting & Orchestrating Beyond Your Walls

The operating diversity of today’s modern supply chains creates numerous execution challenges for supply chain leaders. Dealing with suppliers, factories, transportation providers, distributors and customers represent a significant variability of information, systems, integration points, and more, across this wide range of entities.

Just maintaining visibility is a real challenge, but managers need a big-picture view of inventories and real-time supply chain activity. They must be able to plan, execute, and critically be positioned to rapidly and optimally adapt to both demand and supply shocks. Sadly, the systems that are available are rarely up to the task of creating a supply chain that’s agile and responsive.

As many as 93% of supply chain owners agreed that IT capabilities are a necessary element of 3PL (third-party logistics) expertise, yet only 59% agreed that they were satisfied with current 3PL capabilities, according to the 2016 20th Annual Third Party Logistics Study conducted by Capgemini Consulting.

This IT Gap Needs To Be Closed

The ability to make systems connections rapidly and then effectively orchestrate data gathering, application tasking, and business role applications across a diverse set of systems is highly desirable. To do it in a consistent and repeatable manner positions you to flexibly respond as you hire a new transportation company, take a new factory online, or open up a channel to new customers. Only by creating and managing end-to-end links can you achieve the control and adaptability you need to orchestrate value creation.

Dealing With Internal Systems

What happens internally with most companies is an interesting parallel with the external diversity and disparity. Over time, supply chain managers have bought different applications, they’ve built new databases, they’ve built data warehouses, introduced a services-based architecture, and employed new analytics platforms. The result is a very diverse mix of resources internally that mirrors the complexity of your external supply chain.

The challenge of supply chain management process orchestration is to connect the dots. You may need to query the current state of your internal inventory, to interact with an application to predict inventory activity, maybe execute some predictive analytics and then write those predictive results into a warehouse where they’ll be pushed to web-based services, and eventually signal to the factory that they need to increase production by five percent.

That kind of orchestrated workflow can require a very long, drawn out, resource-intensive integration process to create.

Bridging The Gap

The traditional way that people orchestrate activity across these disparate platforms is to lay out and build a very comprehensive systems integration infrastructure. But it requires a long-term, multi-million-dollar investment to bring in, install, configure, and manage that layer of infrastructure. And the time you spend building that intermediate layer is time you should be spending configuring the business experience and the process experience you want.

It’s time for a fresh approach to this problem. What would be better, faster, and cheaper is a non-invasive layer that can be configured and re-configured as required to extract whatever you need from your existing systems and orchestrate end-to-end value creation across the diverse systems and operating entities of your supply chain.

At the end of the day, a supply chain manager is on the hook to create value from a supply chain perspective within the broader business. These elements are crucial to fulfilling that ambition: being able to rapidly connect, interact, and extract value from those diverse systems, deal with the variation that you see between and among those different platforms, and quickly adapt to create new workflows to solve different business problems.

Tom Fountain

Tom Fountain is Chief Technology Officer for business orchestration software provider Pneuron, based in New York. He was previously CIO at global agribusiness Bunge. He’s held senior CIO roles at Honeywell and GE as well as product management, intelligence officer, and engineering positions with Dell, the Central Intelligence Agency, HP, and Martin-Marietta. He holds a degree in electrical engineering from Massachusetts Institute of Technology, an MS degree from Duke, and an MBA from Duke’s Fuqua School of Business.