The Big Things In Logistics
published: cw 18, 2007 in Supply Chain ManagementBig things do not happen every day in a discipline and practice like logistics or for that matter in the supply chain. A big thing may be more in the line of a new standard. Forbes.com visited with Adrian Gonzalez, an analyst for the ARC Advisory Group and its specialist in the supply chain.
The “big things” can probably be counted on the fingers of one hand since their impact must be broad and deep. A longer range bar code reader doesn’t cut it, nor does a faster forklift, nor the application of logistics to a warehouse in rural India.
Forbes.com: Adrian, where are the new opportunities or big things in the logistics business today? Is there a YouTube waiting to be discovered?
Gonzalez: A year after launching, people were viewing 100 million video clips and posting 65,000 new videos every day on YouTube. Unfortunately, there is no YouTube opportunity in the logistic industry today. At least none that I can see–if it existed, I’d be chasing it, hopefully getting rich in the process.
What about the much-touted RFID [Radio Frequency Identification]?
RFID was billed as the next big thing a few years ago, when Wal-Mart and the U.S. Department of Defense issued their mandates. Investors quickly poured money into RFID-related companies, and many business plans, particularly in the software industry, were updated to show increased sales and profits projections as RFID adoption accelerated. But, although much progress has been made in this area, RFID essentially remains a niche solution today, on a long, evolutionary, not revolutionary, path to ubiquity, just like its predecessor, the bar code.
Well, what was the last big thing that did occur in logistics?
It is the invention and global adoption of the standard shipping container. Malcolm McLean, founder of Sea-Land Service introduced container shipping in 1956. The impact on port productivity in the decades that followed was dramatic. Simply stated, global trade as we know it today would not be possible if the time to load and unload a ship was still measured in weeks instead of hours. The shipping container, however, was not an overnight success. It took years for the International Longshore and Warehouse Union (ILWU) to accept it and for port operators to invest in the required infrastructure. Another critical milestone was the standardization of container sizes and corner fittings by ISO, which was enabled by Malcolm McLean’s decision to release his patent in this area.
Are you saying that time is required and that the scale of change be digested?
Yes, big things don’t occur overnight. There are so many parties involved in the movement of goods, across so many countries, and it often takes a lot of time to get everybody’s buy-in.
So what up ahead is the next big thing in logistics?
It is solving the data quality issues that continue to plague most companies, a problem that will only get worse if companies don’t address it seriously today. Whenever I ask companies what was the most difficult or time-consuming part of a software implementation process, “Collecting and cleaning up the data” is almost always the answer I receive. And when companies fail to achieve the expected benefits from a software application, poor data quality is often the culprit. These answers haven’t changed in the eight years that I’ve been with ARC, which is very discouraging.
How will this poor data quality problem be solved?
First, data quality management must become a strategic initiative for companies. Like Social Security, it’s the big problem in the room that everyone agrees needs to be solved but everyone is afraid to tackle.
Second, companies must work with industry peers and trading partners to develop and adopt electronic messaging and document standards. Yes, these types of initiatives have existed for many years, and companies still insist on customizing the standards. But can companies quantify the business value they’re getting by deviating from these standards? Most cannot, and if there is value, it is arguably minuscule compared to the potential value whole industries can achieve by adopting true messaging and document standards.
Finally, I believe many companies will use standards-based logistics communication and process execution networks, a fancy term for the “logistics utility companies,” to exchange electronic information and execute business processes with their trading partners, customs and regulatory agencies that companies use.
How will these so-called logistics utilities develop?
It was a collection of things, over a period of 10 to 15 years. Certainly, the rise of “on demand” or “software-as-a-service” and Transportation Management Systems [TMS] will play a role. By default these TMS providers create large networks of shipper, carriers and consignees. Many of these networks already exist today, as well as in areas outside of transportation. Over time, several of these networks will eventually emerge together, thus creating industry leaders with critical mass.
Is there a core reason companies will decide to standardize and outsource to a logistics utility company?
Yes, there is. Companies will decide to truly standardize and outsource because, as supply chains become more global and fragmented, working in a non-standard environment will become too costly and complex, and companies will realize that building and maintaining logistic communication and process execution networks in-house is not a core competency.
Source: Forbes
----- Advertisement -----
Use this powerful tool to expand your professional vocabulary and ensure that everyone on your team is speaking the same language. www.theKnowledgeTransfer.com |
 paperback student version $ 19,99 hardcover executive version $ 29,99 |
print terms
