IT in the Supply Chain – Digital Strategy or Strategy for the Digital Era?

As the presentations and discussions progressed at EFT’s 17th CIO Forum (Amsterdam, 16th-17th February), a recurring question on the nature of supply chain operations emerged – What, in 2016, does IT mean to supply chains?

The two days of conversation left the distinct impression that the logistics industry is entering a phase of seismic change in the way it utilises information. At a very fundamental level, logistics service providers face threats, competition, disruption and opportunity on a massive scale, all of which are driven, in part at least, by a sea change in IT capacity and capability. And, just as the changes brought about by the evolution of computing power will be as complex as they are profound, so too will the adaptation of the logistics industry need to be if logistics service providers are to flourish in the digital era. The question of where IT sits in supply chain operations requires that LSPs assess and understand what information and data mean at the strategic, tactical and operational level, and that this knowledge is used to judge the scale, scope and sophistication of the LSP’s need for IT.

Certainly, no LSP should be entering 2016 under the impression that enhanced IT capabilities aren’t for them – the added competencies available from a well-conceived and implemented IT system offer too many points of competitive advantage to ignore. The delegates and speakers at the Forum were unequivocal – those LSPs best placed to succeed will be those most able to leverage the efficiencies, advantages and service improvements that sophisticated IT systems enable. Indeed, that IT should be a part of an LSP’s future, at all levels, is no longer up for debate. The questions in the years ahead will be around appropriateness and implementation – what IT systems and capabilities will better enable the LSP to achieve its strategic vision, and how capable is the LSP of both implementing that system and leveraging its advantages? Put simply by one speaker – LSPs need to decide which fight to have, and commit wholeheartedly and ceaselessly to winning that fight.

But that IT systems should be embraced by LSPs and integrated into operations is perhaps a conclusion many will have already reached – that the world is simply becoming too complex and too rapid to manage without automated, online and globally accessible systems will surprise few. For those at the Forum, the debate has now moved on to focus on the extent to which IT can mitigate these challenges, and the scale of opportunity those systems create. Once a clear understanding of the most appropriate models to effect operations is determined, IT can be aligned with strategy, and work to realise IT’s capacity to drive rigor in service execution and value creation can begin.

Answers to the question of what IT means in 2016, though, does not produce a harmonious chorus. IT will not only mean different things within and between the various logistics markets, but also across varying business models. Some LSPs will require digital strategies to ensure rigorous, coherent and uniform execution of operations across clients and geographies – IT will be integrated and essential to creating and capturing value at the tactical and operational levels. For others, IT will need to take on a more strategic role, and will be a fundamental part of all activities – not only managing information flow to drive operations, but taking on a central role in driving efficiency, pushing change programmes forward and more closely aligning the needs of clients with the capacity and capability of the LSP. For this group, IT will be necessarily wide-ranging, encompassing not only the traditional TMS, WMS and inventory management systems that provide visibility and flexibility to clients but also Big Data systems that drive efficiency, and communication capabilities that link shippers with end-users to provide high-quality experiences, amongst many other capabilities to provide a strategy for the digital age.

But even with an understanding of what IT means to the LSP and a clear conception of how it can be used to further the implementation of strategy, LSPs are still left with a number of questions. The most significant of these concern the who and the how of IT strategy, or broadly speaking, whether to undertake the development and implementation of the systems in-house or to outsource the development and implementation to third parties. As well as figuring out which approach best allows for IT capabilities to be aligned with business needs and strategic vision, LSPs will also need to consider the skills possessed within the organisation, as well as its attractiveness to skilled workers, before deciding which approach offers the best outcomes. Certainly, though, in an era of cloud-enabled SaaS and outsourced IT infrastructure, LSPs are positioned to create sophisticated IT systems in a cost efficient manner. An approach which mixes the in-sourcing of design and knowledge and the outsourcing of execution may well prove the most popular over time.

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