Recently, I participated in the yearly CIO Logistics Forum with Henrik Olsen, Head of Business Architecture & Development from DSV, a global supplier of transportation and logistics. The topic: Streamlining Logistics Operations & Automate B2B Processes.
During the presentation, Olsen observed an increasing demand from customers (e.g. manufacturer of goods) for lower prices, improved service and real-time data integration, and freight haulers asking for higher rates to compensate for increased costs.
With price pressures coming from both customers and freight haulers, one of the few ways to improve profit is to increase operational efficiency through automation of B2B interactions and internal processes.
Typically, automating these processes becomes challenging as more and more customers move away from supporting Electronic Data Interchange (EDI). This is especially true for mid to small-size customers who cannot afford to keep up with the demand for EDI integration.
These smaller customers “dictate” their preferred way of integrating and exchanging information. This integration is typically driven through an email-based solution and/or through a web portal, often using Excel as the interchangeable format.
A typical scenario might go like this:
- An email with an order is generated directly from the customer’s Enterprise Resource Planning (ERP) or Transportation Management System (TMS).
- The transportation and logistics supplier receives the email with the shipping order request and, processes the information.
- The customer requires near real-time update of tracking information posted to their logistics web portal.
Of course, this process is simple for customers since they don’t have to support EDI, and they will choose to only engage transportation and logistics suppliers who allow them to deliver the data in this flexible manner.
For the suppliers, this order becomes more difficult and expensive, as the entire customer integration process becomes manual.
The good news is all these manual processes can be automated, and this is exactly what Henrik explained in his well-received presentation.
DSV plans to automate a considerable amount of these B2B non-EDI interactions, and take advantage of the higher freight prices and better margins that they can obtain from smaller customers. This is what I like to call the long-tail effect (see diagram), where technology like EDI is too expensive and complex to implement for low volume customers, but alternative solutions are available to facilitate the automation and integration between business partners.
Many transportation and logistics companies all over the world are finding alternatives to EDI where integration costs with smaller customers can be reduced as much as 100 times through complete automation of previous manual B2B processes. The result is a substantial increase in profits and improvements in the bottom line.
Many thanks to Henrik Olsen for presenting on this important topic. If you are curious to see how this works, I recommend you watch this short video.
Stefan Andreasen, Corporate Evangelist Kapow at Kofax.