LSPs 2.0: Next level of evolution of Logistics Service Providers

Prelude

One of the consequences of a “Big Data world”, created by innovations such as IoT, is the challenge faced by Supply Chain managers in analyzing the mass of information generated and making timely, fact based decisions. Running logistics operations at any scale requires the support of information systems. The difference between then and now, is that sophisticated technology is ubiquitous now and available at significantly lower cost.

The application of technology in Supply Chain management operations has always been focused around specific areas of functionality. Even complementary systems for planning and forecasting, materials and requirements planning and accounting systems, all of these were designed as separate functional programs. The trend of this type  of existing IT systems landscape is one of the key challenges Logistics Services Providers (LSPs) of today need to overcome.

LSPs -The Current Landscape

The business models for funding technology acquisitions and support are changing so fundamentally that many large LSPs will have to exploit new business models. Concurrently, they are managing a very complex transition away from legacy solutions.

As mentioned earlier, information systems underpin all logistics operations, as shown in the figure below. However, as illustrated, the information flow between systems happens in silos because the functions themselves are not seamlessly integrated.

Capture.JPG

For decades, only the big players have been able to invest in large , scalable solutions supporting individual operational functions. Now, the paradigm shift resulting from the evolution of cloud services and mobile computing is challenging every aspect of the Industry

LSPs -The Current Challenges

LSPs today are having to operate in a much more networked and collaborative world. They are now required to integrate with a variety of different systems and services across the operating spectrum. At the same time, streams of data from a range of devices and sensors need to be captured and processed to support ever increasing visibility demand.

The key elusive goal – true Supply Chain visibility

The closes approximation of Supply Chain visibility in the current context are the track and trace systems operated by global integrators. The systems provide great visibility as long as the order remains in the system of the integrator. As soon as they transition into the domain of other operator, the information flow either pauses, develops a lag or disappears completely. Such scenarios sometimes trigger a series of Mergers & Acquisitions (M&As) between various logistics systems vendors.

The architect of these M&A efforts are attempting to provide a single solution platform that can support all of the operational needs of an LSP but no such single solution exists in reality (many exist though in marketing materials).

LSPs 2.0 -Visibility, Visibility and…..Analytics !

As mentioned earlier, LSPs today are having to operate in a much more networked and collaborative world.

However, Cloud technology and IoT has enabled realignment of cost for technology services from an inhouse focused capital expense, to a more flexible subscription based operating model that is disruptive.  Large, established LSP players need to quickly identify how they can migrate critical operating data onto cloud operating platforms. Small LSPs can exploit these new platforms and provide solutions to customers quickly.

The reason I believe LSPs need to make this move is because in my mind, the inherent flexibility of new solutions means that they can implement and adapt to whatever the client needs, often within days, or maybe hours. These new platforms will be immensely scalable, highly secure and are all subject to reduced cost, while capability is increased thanks to “Moore’s Law”.

A major advantage of the approach mentioned above is the increasing availability of technological components to enable total, global supply chain visibility. However, the most efficient logistics operators will need to become experts in  managing process flow. As the barriers between functional silos are falling, being able to control the flow of orders and shipments relies on instant and accurate data. That is why a Supply Chain visibility system, of which track and trace is just one component, needs to be a critical component of LSP 2.0.

The visibility platform will need to act as a link between various operational systems running across the Supply Chain. Leading LSPs have started exploring the adoption of an operations “Control Tower” to monitor and manage Supply Chain activity on a global basis. An simplified representation of such a Control Tower is shown in the illustration below.

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Conclusion

Although Supply Chain visibility has been talked about for many decades, and even more so from LSP parlance, it is still difficult to achieve.  This is obviously not due to lack of data but due to the quality of data and the lack of capability to integrate and interpret the data.

Control towers are an important innovation in this respect. Eventually, powered by AI, Supply Chain and Logistics management decisions will be made seamlessly to deliver customer service , while minimizing inventory. They will also provide LSPs with an important new product and lead to their reinvention as valued Supply Chain coordinators.


 

Views my own.

 

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