The term “logistics” has its roots in the Roman military, but when we talk about “supply chain”, it is a relatively new term, dating back to the 1980s. It is essential to understand the concept first before innovating or creating new projects for making our businesses grow. One of the definitions that I like the most is that Supply Chain is the management of the physical, financial, and information flow between trading partners that ultimately fulfills a customer’s request.
When we think about this definition, we probably realize that in our business the main focus is, for example, transporting material, and that the financial or the information part of the equation is not relevant enough. If we put together the three concepts, we realize that supply chain does not fall only under the operative umbrella but involves finance and information technology. Therefore, our solutions have to be integral.
In our quest for innovation, software is a key component, in addition to the warehouse management system, the transportation management system, and the ERP, just to mention a few, but they are not the innovation themselves. It is the business model and process that will make the difference. In order to reduce costs, optimize inventory, and increase productivity, you need a strategy. How are you and your client integrated? What about your suppliers? Do you engage in a collaborative environment? Are your systems talking with your client’s and supplier’s applications?
"You have to empower the data through visibility and analytics. A new dimension of business is then created, based solely on information"
Once you are running in an efficient ecosystem, it is still not enough. You have to empower the data through visibility and analytics. A new dimension of business is then created, based solely on information. If you are the collaboration pillar, and you can put together all the data from your systems, as well as your clients’ and suppliers’ systems, then you have a new super power, the power of information. You have the potential to see the future by analyzing the past, you can manage risk, you can allocate inventory to the proper warehouses and channels. You can see patterns where others cannot.
The supply chain platform of today is all about maximizing value across the entire chain, not only one part it, such as transportation. Keep in mind what metrics you need and how you can measure your partners and yourself. It is very simple for software to apply a formula and come up with a KPI, but if there isn’t a person within the organization that understands each metric and tracks performance, there will be no evolution and, therefore, no innovation.
Another key factor to consider when building your logistics platform is integration. It is very important to keep an SOA (Service-Oriented Architecture) philosophy. Normally, a company grows with several distributed IT assets that are not interconnected, therefore the platform is very difficult to adapt when needed. In an SOA environment, the information silos are eliminated, thus simplifying the platform, gaining flexibility, and reducing costs.
As you can see, the need for a smart infrastructure is essential, the world is asking for an omni-channel solution: user-friendly B2B and B2C, machines and sensors everywhere generating information, trucks connected to the platform, intelligent replenishment, route optimizations, which are now in the algorithms. But we have to embrace the future with a sense of reality. Let us consider first thing first. We can’t ask for a network of machines to send orders to our WMS, if our WMS is still struggling with the basics. Every company has to evolve at its own pace, so keep the focus on your level of maturity and grow accordingly.
If you are a 3PL, the quality of service is the basis to achieve your ultimate goal, being a strategic partner to your customer. The first thing you have to offer is trust. If you are providing inventory optimization, it has to work; if you are offering omni-channel fulfillment, it has to work, too; if you send a simple inventory report, it has to be accurate. Once you have earned your client’s trust and have become strategic partners, only then does the real collaboration begin. Maybe your client is aware of the demand and together you elaborate a plan, or maybe the IT applications get interconnected allowing greater visibility for both parties and leveraging key decision processes.
As a CIO, we have a huge responsibility in an area that inspires little to no gratitude: Business Continuity. Every user expects systems and applications to work every minute of the day and nobody calls up to thank you for having the WMS up and running all day. But if one day the applications are down for an hour, users may feel as if the entire year the platform was unstable, so not only should your smart infrastructure be geared towards offering added-value services to the supply chain, but it should also provide business continuity, disaster recovery, and security.
At the end, we are not alone; we work better as a team. My message for any CIO interested in supply chain management is to work side by side with the COO and the CFO. Create a collaborative platform to improve visibility and do not stop until your data warehouse has enough quality data that your client understands and trusts. This is the type of relationship that persists over time.