I recently read an article from “Gartner First Thing Monday” on the evolution of the enterprise application (aka ERP) and it got me thinking on how it would relate to the transportation / logistics industry.
Enterprise applications started with a model based upon the manufacturing and distribution industries. It’s for that very reason that enterprise applications have had relatively little penetration in the transportation / logistics industry beyond financials. The cost and complexity haven’t been the real barriers, as both big and small enterprise applications have struggled to be successful. The real reason is that most business processes in transportation / logistics are inter-enterprise.
Transportation / Logistics is about companies coming together to move goods. In particular, when you look at freight forwarders, 3PLs and NVOCCs, their work involves coordination of not only their customers, but the asset (and other non-asset) logistics companies that actually move the freight. If you add the requirements of global trade compliance, this situation gets even more multi-party as additional brokers and government regulatory agencies also become part of the logistics process. When I think about the current strategies and complexity for enterprise applications, I shudder at how the traditional enterprise model would work in multi-enterprise commerce. Multi-enterprise means that complexity has gone went way up and the longevity of the business processes went way down. Few companies will be able to endure 3-7 year implementations and 7-10 year business process upgrade cycles. Multi-enterprise business processes are way too dynamic. Time to value, not functional completeness, is, and will continue to be, the big value driver. The same goes for flexibility versus rigid standardization.
It’s also not just about the multi-enterprise application strategy and architecture, it’s about the connectivity and community. Logistics companies have 100s to 1,000s of trading partners. If you don’t have the pre-connected relationships, it can take years to get make a multi-party application work – cloud or not.
The other challenges to connectivity, and establishing a community, are the sophistication of communication and the transient nature of the relationships. There hasn’t been the development of communities based upon enterprise application standardization, because of the “overhead” required to get enterprise applications network aware.
Building point-to-point connections is based on the “80/20” rule – you would get the big volume connections, but not necessarily the bulk of the trading partners that consume all of the management time. In addition, business relationships come and go, and are more temporal than ever. For example, we see this in Europe, where Western European Logistics Service Providers (LSPs) are using Eastern European carriers. These carriers are mostly small and technologically unsophisticated. The LSPs use one carrier this month and another one next month, all based upon price and availability. Yet, these LSPs want to manage their freight, and track it in real time, as it moves across Europe. In the traditional models of connectivity, these trading relationships are ignored, because IT organizations don’t have the multi-enterprise tools to react to rapid entrance and departure of partners, nor provide the “low / no tech” and temporal connections.
Lastly, I doubt that successful multi-enterprise applications will be successful if there approach is “all or nothing” standardization. Unlike accounting, business relationships are quite unique and personal. Look at all of the order management systems you have seen over the years that have been highly enhanced / modified / augmented / you name it, because the “standard” approach of the enterprise application didn’t address the business relationship and value drivers. And, this was only for an outward looking enterprise application. Revenue always gets its way, in the end, with IT. Successful providers of multi-enterprise applications will need to be able to have modular and flexible solutions that can allow companies to assemble, change and disassemble their business process, and include the highly inevitable “other” applications that will exist in each of the trading partners, regulatory agencies etc.