Guest Commentary: The Future of Logistics Networks

Logistics networks have been around for 30 years in many forms, from cargo community systems to mode-specific and general value-added networks (VAN). In the beginning, these networks were built on highly proprietary technology that required complex integration. Their use was limited to the largest and most technologically sophisticated companies. The Internet weaned companies away from the use of proprietary networking technology, and portals made the networks more accessible to the “low tech” organizations, albeit in a limited way. Yet, traditional logistics networks have not reached much of their potential community or value. Limitations such as being a registered party, “wired” only networks and “Valueless VANs” have kept much of the logistics community from fully leveraging the network effect. The following are three technological advances that will dramatically change the value and future of logistics networks (see Figure 1).

Figure 1: Logistics Network Evolution (Source: Descartes Systems Group)

Breaking the “Registered” Paradigm:  Logistics networks work on the simple premise that all parties on the network are predefined entities. This works fine in a static world, but logistics operations are more dynamic in nature. Partners and increasingly people enter and exit the logistics process. For example, if shipped goods are damaged and a picture of the damage is needed to file a claim, how could an existing network help facilitate the process to capture the picture and connect it to the associated shipment and purchase order documents? The same challenge applies to connecting and collaborating with the three truck “no tech” operations that are casually used to move the freight. New, smart and secure messaging technologies are being developed to allow transient logistics parties to connect and collaborate through the logistics network. With nothing more than an email address or phone number, transient parties will be able to interact as part of the network. For many logistics organizations, this new messaging technology will remove the “flying blind” problem they face when they use carriers, other logistics services providers or even individuals with whom they have only a casual business relationship or no technological capability.

Merging of the Wired and Wireless Networks:  Traditional logistics networks have also been limited to “wired” connectivity. Even the Internet has drawbacks for logistics organizations – the “wired” Internet that is. Since an increasingly larger percentage of logistics workforces are in the field, tethered solutions, web-enabled or not, fail to enable the increasing majority of logistics workers. Waiting to get to a truck stop, depot or home to get to the web browser does nothing to more dynamically and better manage the mobile workforce. But, what if the network could converse with mobile devices of all kinds, from handheld applications to machine-to-machine? The network could then truly be the conduit for real-time information that could be used by multiple parties to more effectively manage the flow of goods and reduce cash-to-cash cycles. New carrier- and device-agnostic gateway technology is being developed to connect the wireless and wired worlds. With these networking advances, a broader range of logistics organizations can now participate, resulting in a larger connected and collaborating logistics community.

Greater Value Through Network-Based Applications: What was the original value driver for VANs – message movement and transformation – has become the “price of entry” and a market commodity. Yet, logistics networks are a perfect place to offer true value-added applications. Since logistics operations are mostly inter-enterprise processes, networks are great aggregators and disaggregators of information for network-based logistics applications. Because of the preexisting connections and critical mass of the community, logistics networks accelerate the time to value for network-based applications versus standalone applications. In addition, new multi-party business processes can be defined as the participants can collaborate more readily. The difference between network-based and standalone SaaS applications is the pre-integration into the logistics network, including the ability to process and publish the information moving through the network. Because the logistics network has the flexibility to move and transform messages and documents across organizations, network-based applications also provide greater flexibility than standalone SaaS or cloud applications to allow the quick assembly of the multi-party business processes most appropriate for the logistics operation.

Speed and agility have become the cornerstones of today’s logistics competitiveness. The fundamental changes in logistics network technology that are underway will increase “network effect,” accelerating time to value and flexibility of logistics operations. Going forward, logistics organizations need to view their logistics network as the enabler of new and differentiated business processes and extending their command of operations to all of the parties – static, transient and mobile — that are critical to their success.

Chris Jones is the Executive Vice President for Marketing and Services at Descartes. He has over 20 years of experience in the supply chain market, holding variety of senior management positions including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group.