This has led to the creation of complex technical setups that often fall short of delivering the desired levels of operational efficiency and stakeholder experiences.
In these situations, the first question we often hear is, “What platform could best enable me to support my operation and provide my customers with a seamless experience?” Increasingly, we are finding the answer is “none”. Though market solutions in the logistics space have come a long way in the past years, there is still commonly no silver bullet technology platform that can effectively service all of the different business models a diverse enterprise may operate, nor be able to support at an optimal level all of the transportation modes and regions it services.
In our experiences and deep work across the industry, the silver bullet is not in a singular technology; rather, it is in the technology strategy an organization deploys. In this article, we will discuss our recommended approach, and how logistics companies can leverage it to drive a significant competitive edge, turning technology into an advantage.
Embracing the inevitability of a complex technology footprint.
Logistics organizations frequently expand through acquisitions, absorbing companies with unique specialties and technological infrastructures. According to research, the industry experienced unprecedented M&A activity during the pandemic, with deal value soaring to $150 billion. While some consolidate these acquisitions under a single brand, others operate independently, resulting in a complex technology landscape.
Each acquired entity brings its own set of processes, capabilities, and systems; some exist out of necessity to support the business model or type of products or services they supply. In many cases, maintaining uniquely specialized capabilities across entities creates business value and therefore need to be persevered and well-supported by technology – while other capabilities are commoditized. It’s those common areas of capability where merged logistics companies can find synergies; the silver bullet isn’t software but a sound strategy that enables the business agenda.
For example, the new executive leadership team for one of our clients (a global logistics, managed services, and consulting provider) was recently seeking to produce a business-driven technology roadmap to align IT with a firm strategy – targeting growth and the integration of their many different entities to operate as one.
The company’s 14 entities had operated independently over many years, each establishing unique processes and technical footprints. In many cases, these business units (BUs) had different expertise and models that justified using different transport management systems (TMS); for example, one business unit has metal coil expertise, and another manages products requiring routine sample testing and specific handling and storage procedures. For these BUs, there was a clear need to utilize separate management software that excelled in very different functions.
In contrast, some of their other BUs provided complimentary services that could be cross sold to customers, but their disparate systems limited their ability to identify those situations and execution of the customer experience was clunky and disjointed.
In summary it was neither practical nor advisable to move all of the business units to a singular technology platform. Instead, the question became, “How to leverage an efficient technology stack and enable seamless customer experiences across the enterprise?” Their answer was to embrace the fact that technical complexity will continue to exist but mask the complexity by leveraging their data and taking control of the customer experience.
Creating a competitive advantage despite complexity.
While achieving a fully consolidated technology stack may be elusive in situations like these, it is essential to prioritize delivering a unified experience to external stakeholders. This entails concealing the intricacies of the technological landscape while providing a cohesive interface to customers, vendors, and partners.
For example, our client’s businesses were different enough that it wasn’t logical for them to unify on a single platform. Instead, we designed a strategy for them to appear as a single brand using a consolidated data platform, a robust data orchestration layer, and a targeted set of customer-facing user interfaces. In doing so, we developed a strategy for the client to present a unified front to external stakeholders while optimizing their backend systems for efficiency and scalability.
In another example, one of our clients faced similar challenges due to aggressive M&A activity that moved faster than they could reasonably migrate new acquisitions into their preferred TMS platform. We found that establishing a robust ‘data hub’ that could consolidate transactional information from their various TMS solutions enabled them to develop a set of portals that were not only useful to customers and vendors but also provided significant advantages to sales and finance operators tracking deliveries and addressing claims.
In pursuing this goal, both logistics companies found ways to unlock competitive advantages, including streamlining operations, identifying cross-selling opportunities, and positioning themselves to drive innovation through machine learning and generative AI (including features like dynamic pricing and improved automation). All of these can be nice gross margin levers where incremental profit gains can otherwise be hard to realize.
In the long term, our clients discovered that this approach allowed them to build a technology ecosystem that was adaptable to organic and inorganic growth because it was relatively agnostic of business structure. Thus, they enabled future M&A without requiring unnatural or forceful technology consolidation when targeting companies that provide new services or support different markets.
Solving the puzzle: a strategic approach.
Our approach at Cuesta revolves around building structures that align with each client’s unique value proposition. This involves identifying opportunities for differentiation while efficiently managing backend complexities. We help clients make informed decisions that balance customization with standardization by conducting thorough market studies and evaluating various technological scenarios.
Rather than resorting to extensive customization, which can be time-consuming and unsustainable, we encourage companies to be open to leveraging packaged solutions where capabilities have been relatively commoditized and focus the customization efforts on those areas that can truly make an impact and differentiate them. We recently performed a market analysis study to glean insights into prevailing logistics technology trends. We found that an alternative “hybrid” software strategy, including custom solutions where appropriate, is often appealing, as it offers the potential to control highly differentiated capabilities. When we work with clients, we recommend a personalized approach to determine the ideal solution to their complex tech footprint since there is no one-size-fits-all answer.
Complexity is inevitable in the ever-evolving landscape of logistics. However, companies can thrive amidst diversity by strategically embracing complexity and focusing on delivering seamless experiences to stakeholders. Through a blend of innovation, strategic planning, and technological prowess, logistics organizations can navigate the intricacies of their tech ecosystems while driving sustainable growth and differentiation. By partnering with experienced consultants like Cuesta, logistics companies can chart a course toward technological excellence and operational efficiency in an increasingly complex business environment.
