Technical Controller Working at His Workstation with Multiple Displays. Displays Show Various Technical Information. He's Alone in System Control Center.

3PLs And Software Vendors: 3 Questions To Keep Innovating Your Business Models

Author’s note: I wrote a slightly longer version of this post in November 2012. I’m sharing it again today with some minor edits because I believe the topic remains very relevant today.

Most of the time, when people talk about innovation in supply chain management and logistics, the focus is on technology (e.g., AI and machine learning) or business processes (e.g., same-day delivery and omni-channel fulfillment). But what about innovation in business models? Is there an opportunity for third-party logistics providers (3PLs) and software vendors, for example, to innovate their business models to deliver greater value to clients, differentiate themselves from the competition and gain market share, and achieve greater financial success?

Of course there is.

3PLs and software vendors have been transforming their business models over the past decade (e.g., the transition to cloud and software-as-a-service, the adoption of Vested Outsourcing principles). The challenge now is to keep looking for additional opportunities to innovate. But how do you find these opportunities?

You can start by answering these three questions:

1. Is your mission statement aligned with your customer’s objectives and desired outcomes? 

As highlighted in a November 2012 HBR blog post (“When Business Models Trump Technology”), an Israeli company, Netafim, captured almost one-third of the “seemingly commoditized” micro-irrigation equipment market by changing its business model to better address the needs and constraints of its customers (read the post for all the details). According to the authors, “Netafim went so far as to change [its] mission statement from ‘making the best drip irrigation equipment for customers’ to ‘helping the world grow more with less,’ an objective far more aligned with the objectives of its customers, the farmers.”

This reminded me of a case study I wrote in 2011 highlighting Jaguar and Unipart Logistics. The two companies created the following shared vision statement, which they review at the start of every meeting between them:

“To support Jaguar dealers in delivering a Unique Personal Ownership Experience to Jaguar Drivers worldwide, ensuring industry leading owner loyalty through partnership and world-class logistics.”

This shared vision statement aligns both companies toward a common goal that both unifies and transcends the interests of each company.

Simply put, if your mission statement and objectives are not aligned with those of your customers, then an opportunity exists to change your business model to close that gap.

2. What challenges and constraints do your customers still face that you can solve or alleviate for them?

The Cloud/SaaS model emerged in large part to address a problem many companies faced: they had limited IT resources and limited (and shrinking) IT budgets. Supply chain and logistics organizations face many challenges today, such as finding and retaining talent, enabling new business processes quickly, complying with emerging sustainability regulations, and dealing with high variability in supply and demand. The idea here is to take a step back and look at all of the resources and assets you have at your disposal (including those you’ve only been utilizing internally) to see if there are opportunities to bundle, price, and deliver them together in new and unique ways to solve the problems and constraints your customers still face.

3. What is your customer’s total experience with your product or service? 

In their July 1997 HBR article “Discovering New Points of Differentiation,” Ian C. MacMillan and Rita Gunther McGrath write that “most companies, in seeking to differentiate themselves, focus their energy only on their products or services. In fact, a company has the opportunity to differentiate itself at every point where it comes in contact with its customers — “from the moment customers realize that they need a product or service to the time when they no longer want it and decide to dispose of it.” They go on to say: “We believe that if companies open up their creative thinking to their customers’ entire experience with a product or service — what we call the consumption chain — they can uncover opportunities to position their offerings in ways that they, and their competitors, would never have thought possible.”

The article outlines how to map the consumption chain, which includes answering questions such as: How do customers find your offering? How do customers make their final selection? How is your product or service delivered? How is your product or service paid for? What is your customer really using your product for? What do customers need help with when they use your product?

The bottom line is that by exploring these questions in detail, you will likely uncover opportunities to streamline and improve your existing business model and practices.

I’ll end with a quote from another great HBR article related to this topic: “One secret to maintaining a thriving business is recognizing when it needs a fundamental change.” 

Something to think about and discuss in your next strategy meeting.

Blue ocean sea working crane, Trade Port, Shipping cargo to harbor, Aerial view from drone, International transportation, Business logistics concept

Supply Chain Visibility: From Buzzword To Business Benefits

Editor’s Note: The following is an excerpt of a research report published recently, “Realizing the Full Business Benefits of Supply Chain Visibility.” The research, conducted by Adelante SCM and commissioned by Kaleris, highlights the main objectives companies have for achieving end-to-end supply chain visibility; the biggest dark/blind spots in the supply chain today; and the capabilities required to realize the full business benefits of supply chain visibility. Please visit the report page for more information about the research and to download the full report.

“Although visibility has become a popular buzzword in the supply chain literature it remains an ill-defined and poorly understood concept.”

So begins a research paper published in January 2007 (“Antecedents of supply chain visibility in retail supply chains: A resource-based theory perspective”) written by Mark Barratt and Adegoke Oke, researchers at Arizona State University at the time. In the paper, the authors define supply chain visibility as ‘‘the extent to which actors within a supply chain have access to or share information which they consider as key or useful to their operations and which they consider will be of mutual benefit.”

Barrat and Oke note that “it is assumed that if companies across supply chains have visibility of demand, inventory levels, processes, etc., that organizational performance improves.” They add, however, that “previous studies have examined the benefits, in terms of improved performance, of information sharing in supply chains, albeit mostly from a modeling/simulation perspective […] The results of these studies are generally inconclusive and vary subject to the differing structure of the supply chains under examination.”

Sixteen years later and the connection between supply chain visibility and realized business benefits remains fuzzy for many companies. The important word here is realized. Does having better supply chain visibility on its own translate into cost savings, service improvements, reduced risks, increased agility, and other business benefits?

History and experience have shown that visibility alone is not enough.

A prerequisite to achieving business benefits is having high data quality. As Barrat and Oke highlight in their paper, “the information [shared must be] accurate, trusted, timely, useful, and in a readily usable format…If the information passes this initial test it must then be incorporated into the decision making processes of the recipient who may now make a more informed decision enabled by better visibility of the sender’s current situation (derived from the shared information). It is this more informed decision making that potentially leads to improved performance.”

Simply put, without high data quality, companies could potentially find themselves in a “garbage in, garbage out” situation, making decisions based on inaccurate and outdated information. 

However, assuming this data quality prerequisite is met, making “more informed decisions” is not enough either to realize the full benefits of supply chain visibility. 

The reason companies want supply chain visibility is not just to see, analyze, and make decisions; they also want to do something with the data and insights collected. It’s the doing —  the actions taken to improve their supply chain operations, proactively address issues, and drive innovation — that ultimately delivers business value. 

From a technology standpoint, therefore, implementing a supply chain visibility solution by itself is not going to deliver much value unless it receives timely, accurate, and useful data from all important nodes and trading partners across the network, and unless shippers, carriers, logistics service providers, and other network participants also have execution capabilities like transportation management (TMS), warehouse management (WMS), yard management (YMS), terminal operating systems, and port community systems that leverage the data and insights obtained to optimize and automate business processes.

What are the main objectives companies have for achieving end-to-end supply chain visibility? What are the biggest dark/blind spots in the supply chain today? What capabilities are required to realize the full business benefits of supply chain visibility?

Those are the main questions we explore in this paper, which includes insights from a November 2022 survey we conducted with members of our Indago supply chain research community — who are all supply chain and logistics executives from manufacturing, retail, and distribution companies — to get their perspective on this topic.

For the survey results and additional insights on how to realize the full business benefits of supply chain visibility, please download the research report.


Above The Fold: Supply Chain Logistics News (June 2, 2023)

It’s going to be 90 degrees fahrenheit today.

Why would I choose to cycle 60 miles (almost 4 hours) in this heat?

Because my daughter doesn’t have a choice when it comes to dealing with the daily challenges of living with type 1 diabetes (T1D). 

It’s been more than 11 years since she was diagnosed at age 11. I made a promise that as long as I am able, there is no distance I won’t go to help find a cure for T1D.

It’s why I launched our Logistics Leaders for T1D Cure cycling team in 2016, and why I’ll be cycling 100 miles at the JDRF Ride in Burlington, VT at the end of July.

Due to work travel, I’m behind on my training, which is why I’m going out today. I’m also very behind on reaching my fundraising goal. 

How can you help? Please consider making a tax-deductible donation to help the cause. You can do so via my rider page:

If you’re a supply chain technology company or a logistics service provider, please consider sponsoring our team (a big thank you to TranzAct Technologies for sponsoring us again this year). We have a variety of sponsorship packages still available, which include many benefits, so if you’re interested in learning more, please contact me for details.

Thank you for listening.

Moving on, here’s the supply chain and logistics news that caught my attention this week:

IKEA: I Liked It So Much I Bought the Company 

Do you remember the 1979 commercial with Victor Kiam saying he liked the Remington electric shaver his wife bought him so much that he bought the company? If not, here it is:

This commercial came to mind when I saw the news that Ingka Investments, the investment arm of Ingka Group, owner and operator of 482 IKEA stores and e-commerce in 31 counties, acquired Made4net, “a global provider of cloud-based Warehouse Management System (WMS) & end-to-end supply chain execution software.” Here are some excerpts from the press release:

The Made4net omnichannel fulfillment solution will be deployed across IKEA stores and fulfillment points to modernize and future proof omnichannel operations…As a customer, IKEA will apply Made4net technology to significantly enhance how the retailer interacts with its consumers in a new era of omnichannel commerce, providing a more flexible way to shop, order and deliver products in a sustainable way. Made4net’s SCExpert™ platform will in the long term power IKEA’s worldwide fulfillment centers and store operations across 482 locations in more than 31 countries, with over 100,000 users to deliver faster, more accurate order fulfillment and improved supply chain visibility, resulting in a better experience for employees and customers. 

“Our business currently requires a better fulfillment operations system with more accurate data that better supports handling for our customers,” said Tolga Öncu, Head of Retail, Ingka Group. “Our goal is to become leaders of life at home, serving more people in an omnichannel reality, whenever and however customers choose to meet us.”

Last September, I wrote about the relatively recent trend of retailers acquiring 3PLs and/or offering logistics services. Now you have this example of a retailer buying a supply chain execution software company. What’s going on here?

I believe it’s part of the same trend I first wrote about in a March 2014 post titled, “Keeping Control: What 3PLs Must Convince Their Customers.” Simply put, a growing number of large retailers (and manufacturers) are starting to view logistics as a core strategic function, and so they are investing in assets, people, and technology to gain more direct control of their operations.

You can’t get any more direct control than buying the company.

What does this mean for Made4net’s existing customers? According to the press release, the company “will continue to operate as an independent subsidiary from its headquarters in New Jersey, U.S., and its six global offices where the company supports hundreds of global customers.” 

In the best case scenario, the investment by Ingka Group will help accelerate solution innovation in the months and years to come which will benefit all customers. In the worst case (and less likely) scenario, IKEA will pull an Amazon when it acquired Kiva years ago and eventually stop selling Made4net solutions to other companies.

Nothing surprises me any more in this industry.

And with that, have a happy weekend!

Song of the Week: “Wagging Tongue” by Depeche Mode

A passenger plane takes off from the night airport runway

What Dominates The Transportation Management Agenda In 2023?

Transportation executives have always been tasked with developing annual strategies and execution plans. And since the transportation market is cyclical, with swings in demand and capacity, every year presents new challenges. 2023 is no exception. The difference now, however, is that CEOs and CFOs are more interested in what’s happening in the market due to the supply chain shocks of the past three years. Considering this, what should dominate the transportation management agenda today? That is the high-level question addressed in Descartes’s 7th Annual Global Transportation Management Benchmark Survey, which I discussed with Chris Jones, Executive Vice President, Industry and Services at Descartes Systems Group, on a recent episode of Talking Logistics

Key Survey Findings

I began our discussion by asking Chris to share some of the key findings from this year’s survey. Chris explains that one aspect of the survey examined why two companies who implement the exact same system may have very different results.

Chris notes that while one company may have great results, another may have far less impact even though there was nothing wrong with their implementation. “What we found was that management’s perceptions of what the system could do for them had a major impact on results,” he says. “If management believes that transportation is important, they really do push the envelope [on driving change and innovation] and they perform better financially as well.

“Another factor was how well the company was doing financially, because that changes how aggressive they are. Those companies who were more aggressive in making changes during the pandemic typically saw more impact from their implementations.”

Cost and Capacity

Now that the market has swung toward relatively lower costs and greater capacity, I asked Chris what is top of mind for transportation executives. Chris notes that the driver shortage continues to be the top concern and will likely be so for the next five years or more. “But costs and capacity still came in at numbers two and three.” 

Chris goes on to explain that what is most on executives’ minds now is resiliency. Even though capacity has improved, it is still cyclical and they want to do things now to make sure they will have capacity when they need it down the road. “While they have some breathing room at the moment, they remember getting burned in the recent past and that makes now the perfect time to put capabilities in place to be better prepared in the future.”

Metrics Matter

I next asked Chris if the survey found any changes in the metrics companies are using to measure results. Chris comments that companies are still using the traditional metrics of cost and service, including On-Time In-Full. “Because those are the basics, you don’t get any credit for hitting those. 

“What is interesting are new metrics around transportation’s contribution to revenue and competitive differentiation. If you’re able to measure those you start to see where the value is. What was really clear in the survey was that companies who were top performers and who felt transportation was important were way ahead in those two metrics.”

Looking Down the Road

Another aspect of the survey I explored with Chris is what transportation management capabilities companies say will be most important over the next few years. Chris states that visibility continues to be critical, but even more so in areas such as for overseas shipments. “Are the shipments clearing customs? Are there potential problems? This can impact inventory management, as well as manufacturing plans.

“Other areas of focus are order management from the standpoint of what is coming down the road to plan for, and performance management and business analysis. Transportation generates so much data and you can learn a lot about things such as customer behavior — are they there to receive shipments, how much detention is there, for example, as well as learning what your carriers are doing. This is coming together with the rise in very sophisticated yet easy to use analytic platforms.”

Chris also had some great comments on how visibility to sustainability metrics intersects with costs and service, and shared what investments the survey found were on executives’ radar going forward. Therefore, I recommend that you watch the full episode for all of his insights and advice, and also download and read the 7th Annual Global Transportation Management Benchmark Survey. Then keep the conversation going by posting a comment with your questions and perspective on this topic.