Technological advances in communications and computing have revolutionised much of the service industry with the advent of Internet-based commerce enhancing this further. Given the clear business benefits of embracing IT, it certainly begs the question, Why are logistics operations being so cautious to adopt technology?
The business of logistics is well understood. We in the industry strive to manage the flow of goods from multiple sourcing points to multiple end users. Many logistics operations have embraced general purpose Information & Communication Technology (ICT) tools such as email, networked computers or even Electronic Data Interchange (EDI) to improve efficiencies in their workforces. Nevertheless, most are far from fully exploiting similar opportunities with more focused technology, aimed at simplifying complex activities associated with the diverse functions of their business.
The fact is that our industry is under unprecedented pressure to reduce costs and improve service offerings. Management is constantly being asked to prevent mistakes and provide new and innovative reasons why customers should buy from them. Often their instinct is telling them that, as in other industries, technology can fast track them to new efficiency gains and deliver exciting adaptations to their service offerings. So are we expecting too much of the directors who control large logistics operations?
The truth is that there are a number of fear factors which make their decision-making process appear to be a leap of faith at best, or at worst, a black art. So what are the three biggest fear factors we, as an industry, need to overcome?
1.Cost Margins are low in our industry and building a case to fund a major purchase during one year, when pay back may only be realized over two or three years, is a problem. However, although this initial cost can easily be identified early in the process, there are many obscure or hidden expenses associated with it. Cost of implementation (regrettably IT projects have a poor track record of on time delivery), cost of ongoing support and the cost of internal change are all contributing factors that have to be estimated and included in the business case.
2.Application choice There is a plethora of IT solutions on offer, the navigation of which, complicates the task of integrating with existing systems even further. Understandably, managers are fearful of making a wrong decision and affecting their reputation.There is a saying you never got fired for hiring IBM however, this cannot easily be applied in our domain as there is no IBM or Microsoft-style standard for logistics technology.
3.Evaluation and mitigation of risk The desire to avoid exposing the existing business to risk is an honourable one and is not unfounded, given recent highly-publicised troubled implementations. Over-running during an implementation frequently hinders not only the project team, but the business as a whole. So is it little wonder that our management teams secretly harbour concerns about proven project or program management skills? This fear may not be openly discussed, but applying new technology is only one part of a successful implementation; changing peoples behaviours as a result is also a crucial element and managing this change process can often be seen as a daunting task. This is especially so when there is an all-consuming day job to be done. So who does the decision maker trust?
These compounding layers of fear and apprehension too often lead to the decision to do nothing. Strategies for overcoming these fears are a matter for all involved parties in the logistics marketplace to think about (company directors & IT vendors). Instinctively we know that efficiency gains can and must be realised by the use of technological solutions to stay competitive in our modern world. Technology can deliver real competitive advantage, we all know this, but there is no mistaking that imagery created by IT sales brochures claiming fast-track and plug & play are misleading. It will come as no surprise for many reading this, but in our experience successful implementations are about hard work and focus on detailed actions. To recognise real efficiency gains and profit from IT, directors must be prepared to embrace five basic principles:
1. Align IT objectives with genuine business requirements
2. Have realistic fallback and recovery strategies
3. Create clear communication channels where honest reports are regularly discussed
4. Clearly define both internal and external roles and responsibilities to establish ownership of each and every task
5. Ensure that team buy-in and change management are given equal importance to technology deliverables
By adopting these principles, these directors will alleviate the fear factors surrounding IT adoption in logistics and take a major step towards enhancing their companies process efficiency and service offering.
Ian Robinson is the director of Key3 Partners new Information Systems team, designed to bridge the widening gap between IT and operational skills in the transport and logistics sector. Key3 Partners is a logistics efficiency consultancy specialising in designing and delivering change to large logistics operations. The team is the first in Europe to use industry tailored Six Sigma tools to deliver rapid improvements to operating efficiency.