Are We at a Tipping Point for Logistics Technology Value?

I’m beginning to wonder if we have hit an inflection point where investment in logistics technology will broadly create business performance gaps. We recently partnered with several organizations to look at business strategies, tactics and logistics technology. The message was clear – investing in technology was the number one strategy. However, success doesn’t necessarily look so certain as there was clearly a difference in spending between the “haves” and “have nots”. Will we see a spread in financial performance in the years ahead that can be tied to logistics technology investment?

Two Studies, Four Compelling Data Points

With DC Velocity and the Georgia Center of Innovation for Logistics, we conducted a study called “Transportation Management Strategies and Tactics of Top Performers” that covered shippers and logistics services providers (LSPs). In that study, there were two questions that tell a compelling story.

1. How are you preparing for macroeconomic, industry and regulatory changes (select 2 answers)?
   “Invest in technology” was the top answer for 63% of the respondents, and was 21 points higher than “change strategy”. It was the #1 response regardless of respondent category (good and bad financial performance, transportation importance to management and transportation spend). So, most believe transportation management technology is critical, but do they “put their money where their mouth is”?
2. How will transportation management IT spend change over the next 2 years?
   While spend is up overall for 60% of the respondents, the following chart paints an interesting picture of who will really spend the most money. Those who believe transportation management is a competitive advantage and those who have leading financial performance will clearly outpace those who think transportation management is a basic need/necessary evil and have mid to below financial performance.

Taking another perspective, we worked with the Airforwarders Association on the “Benchmark Survey: Forwarders and Brokers” which covers their strategies, tactics and technologies. In that study, we asked two very similar questions to the transportation management study. Here we see the same story unfolding.

1. How are you preparing for macroeconomic and regulatory changes (select 2 answers)?
   Again, “Invest in technology” was the top answer (63%) for all respondents, and was 15% higher than the next answer. It was 73% for those respondents who considered themselves “top financial performers”.
2. How will your IT spend change over the next 2 years? As the previous study indicated, IT spend will be up with 64% of the respondents indicating they will spend more. However, there is an even more dramatic difference when evaluating those who will increase their spend the most, as seen in the chart below where the gap between top and bottom financial performers is clear.

Since so much of the advanced logistics capabilities are technology-enabled today, it’s hard not to draw the conclusion that, over time, those that spend more will have more capability and, done right, will create greater competitive advantage via logistics. Visibility, value-added services and customer-facing capabilities were cited in both studies by top performers as the strategies and tactics that they are using to grow and differentiate – they are all technology-driven. Clearly, for many companies, this is a more strategic and longer-term view that can be hard to sell to management.

Sitting on the technology “sideline” or focusing on traditional transportation and logistics tactics such as cost cutting will only make the gap worse. In both studies, only the bottom performers have “cutting costs” as their top tactic. Cutting your way to success sounds like self-prophecy to me. How is your company driving investment in logistics and transportation technology? Let me know.

As Executive Vice President, Marketing and Services, Chris Jones <CJones@descartes.com> is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations 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 and Associate Director Operations & Technology for Kraft Foods.