Embrace Technology To Maximize Supply Chain Efficiency; But Beware the Systems Pill

RF scanning. Automated task interleaving. Pick to light. Electronic commerce. All tools that can enhance productivity and speed information transfer to create a more efficient supply chain. But did you know that, of the 300,000 warehouses in the U.S., less than 5,000 have true warehouse management systems?

As for the other 295,000, many are working quite well, thank you. But the current buzz about warehouse management systems and supply chain software has led some companies to assume they need to play "catch up" to quickly bring to their organizations the productivity enhancements heralded in trade articles and seminars. They view technology as the "systems pill" that will solve their business problems and allow them to (finally!) get a good night’s sleep.

Do logistics professionals need to make greater use of available technology to drive positive business results? Yes. But unless the systems solution is driven by knowledgeable people who clearly understand the business challenge and apply technology appropriately to this challenge, the systems pill can have serious side-effects.

One side-effect is technology that provides a solid short-term solution but cannot adapt to future needs. System designers must carefully assess the functionality required to allow your company to grow over time and adapt to changing logistics requirements. Without this systems flexibility, logistics executives are doomed to continuously request funding for new or customized systems, feeding the board room perception that logistics is just a cost center or, worse yet, a black hole of continuous investment.

Another side effect of the systems pill is overspending by companies that rapidly implement technology without a careful ROI analysis. These companies may end up with automation that looks impressive during warehouse tours but actually retards productivity on the floor and leads to unhealthy inflation of the balance sheet.

Third Parties Offer Systems Perspective Grounded In Experience

Despite the risks inherent in the systems pill, information and operations systems for logistics management will continue to be vitally important in leveraging logistics to a achieve a competitive advantage. That’s good news for third party logistics providers. Within the last decade, there has been a direct positive correlation between the role of systems in improving logistics programs and the increasingly important role of third party providers. Here’s why:

• 3PLs must continually invest in logistics systems to support their core business. This allows shippers to avoid systems development efforts by tapping into tap an existing infrastructure. Many Fortune 500 companies have flat or declining information technology budgets, and logistics systems are well down the priority list for corporate systems investments. Do your logistics systems have same resource allocation as enterprise, financial, marketing and manufacturing systems?
  
• 3PLs provide expert advice based on real-world implementation. Focused professionals who’ve put in literally hundreds of hours analyzing business challenges and designing distribution solutions tend to make correct decisions.
  
• 3PLs must be accountable for profitably meeting agreed-upon service levels. This incentive drives logistics providers to adopt and implement technologies that deliver an attractive ROI, or risk extinction.

The Lure of the Internet

One of the most exciting tools for applying systems to logistics management and changing the way we work is the internet. The shared network of the world wide web can link supply chain systems and partners through one identical, user-friendly interface accessible by anyone with a web browser. This enables complete and seamless supply chain integration, while still allowing providers to develop the unique software required for their specific applications.

But today the internet remains more promise than panacea. Those in search of the systems pill also are hustling to catch up to early adopters of internet commerce by implementing applications that are too often long on technology, but short on real value. We need to recognize that the race to logistics excellence is not in a 100-yard dash. The race eventually will be won by those who focus their time and energy on understanding the business challenge, then use information and operations systems as tools to continuously improve processes.