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Sunday, 13 October 2013 22:00

Savvy shippers: Big data puts powerful logistics tools in hands of more companies via outsourcing

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Big data is transforming the logistics industry and enabling service providers to offer sophisticated supply chain management tools to more middle market companies.

Logistics providers have developed supply chain management tools that provide real-time data, tracking and forecasting to efficiently manage assets. Increasingly, they’re leveraging the knowledge they gained by working with large OEMs, food processors and other firms to push those tools downstream in the supply chain.

[LIST: Top Logistics Providers]

The trend is leveling the playing field and providing middle market companies access to more data and efficiencies that help them be more competitive. As a result, more companies are outsourcing their supply chain management functions to third-party logistics providers, or 3PLs, that offer the technology.

“All this information is significant business intelligence,” said Les Brand, CEO of Grand Rapids-based Supply Chain Solutions Inc. “We can also tell who is competing where and who is buying from whom. We have so much access to … the mashup of data.”

But just as the logistics industry has become increasingly important for manufacturers and other companies in West Michigan to effectively manage their costs, the sector is being threatened by a shortage of skilled talent – spanning the gamut from truck drivers to senior-level managers.

“The 30,000-foot view is the logistics industry has been on a growth trend for several years,” said John Zevalkink, CEO of Columbian Logistics.

Companies like Columbian invested heavily in warehouse management, yard management and labor management tools. Thanks to the growth of more sophisticated technology, IT and human resources functions – which had been about 10 percent of the company’s payroll – have grown in size and importance, Zevalkink said.

“Ten years ago, many people would have taken warehousemen and tried to teach them inventory controls, but that doesn’t happen anymore,” he said. “Today, you have to hire someone out of a university supply chain school who knows how to use the tools.”

What is likely the single most important innovation in the logistics industry over the last decade is the development of more sophisticated information technology assets that not only collect data, but can also be manipulated to help track, manage and coordinate fleets and inventory, said Bret Wagner, associate professor of integrated supply management at Western Michigan University.

Mining data for efficiency

The takeaways for all parties in the logistics industry — from shippers to 3PLs to carriers — is that big data is only going to further transform how, when and where goods and materials are shipped. Mobile devices, trailer tags, social platforms and other inputs are generating reams of data, but companies need to invest in the ability to process the data to react to real-time demand and capacity fluctuations, Wagner said.

“The biggest thing coming is big data, data mining and in-memory computing,” Wagner said.

In-memory computing (IMC), for example, allows companies to perform simulations using their existing logistics networks to help them test for various scenarios and provide better forecasting data.

“In logistics, you just have volumes of data, and the challenge is now how do you use that data to make business decisions,” Wagner said, noting the integrated supply management program at WMU focuses on gathering and analyzing such data.

“Compared to when the program started 20 years ago, there has been a broad move toward having IT make so many more things possible,” he said.

Supply Chain Solutions Inc. has invested heavily in information technology as of late, Brand said.

“We have major investments in all of our technology from the supply chain products we develop ourselves to help in projects, to the 3PL software products we use to develop all of our outsourced work,” he said. “Just the decision support tools we need to think about all the different variables to manage a global supply chain — designing networks so they’re most effective, managing inventories the most effective way and collaborating with others in a regional to regional environment — it’s very complex without the right tools.”

The data the company generates is most effective when it can work across various platforms to identify opportunities to improve performance, Brand said.

Outsourced logistics moves downstream

Increasingly, that data is being put to work for smaller companies. While once out of reach for middle market companies, the tools — many of which were developed in partnership with large, Fortune 500 companies — are now accessible through outsourcing, sources said.

“There is a strong trend in more companies outsourcing logistics services to third party providers,” said Columbian’s Zevalkink.

Behind a greater move of companies outsourcing logistics services are several issues, mostly related to manufacturers and other producers not wanting tie up their resources in fixed costs such as people or facilities because they want to avoid becoming over-extended should the economy again take a dive.

“Companies want to continue to focus on their core competencies, and while that’s not really a new concept, we are seeing a fair number of companies outsourcing (logistics) for the first time,” said Blair Thomas, director of customer care at Columbian Logistics. “The other side of the equation is that after companies battened down the hatches during the recession, moving into the recovery, they are hesitant to invest in high-cost items like new warehouses.”

Companies want to focus on growing production and increasing capacity, Thomas said, or they want to fill their buildings with new equipment. To that end, it’s not just Fortune 500 companies looking to ship their goods globally that are on the front end of the move to outsource logistics functions.

“We’re seeing much more middle-market companies that are outsourcing,” Zevalkink said. “We’re seeing more companies in the $50 million to $500 million range and most of what they’re looking for is talent that they don’t have to provide internally.”

The increased business has led Supply Chain Solutions to expand to meet the needs of clients in getting their products to new markets, Brand said. The push to access new markets drove the company to pursue two international-related acquisitions this year. In July, Supply Chain Solutions acquired the international business unit of England Logistics of Utah and followed up with a deal in August to purchase Illinois-based Vanik International, an international freight forwarding operation. Right now, the company is in the process of integrating the new assets and international licensing, Brand said.

“Most of the Tier 1 and Tier 2 companies in the state are doing some sort of logistics outsourcing,” Brand said. “We have a lot American companies (doing work in China and elsewhere overseas), and it just makes sense for us to try and help them in those markets.”

A talent bottleneck

But while more companies are benefiting from state-of-the-art logistics tools, many of the logistics service providers are struggling to find the right IT talent and managers — on top of an acute truck driver shortage.  

Even during the economic downturn while there was a lull in hiring, students graduating from the supply management program were finding jobs in the field, but mostly out-of-state, said Wagner of WMU.  

“Right now, you already see a shortage of talent. Students graduating are getting multiple offers,” he said.

The profile of the supply chain management programs at WMU, Michigan State University and the University of Michigan have been bolstered by strong showings in rankings from industry groups and national media. Logistics and supply chain industry knowledge is one of the state’s biggest strengths, he added.

But even as schools can turn out more graduates, companies are finding difficulty filling a number of available senior-level positions.   

“Hiring the right talent has been an issue, and we’ve worked very hard at it, investing more in human resources,” said Thomas of Columbian Logistics. “We generally have to reach outside the state.”

While the hiring pinch is a challenge, mid-level recruitment is getting easier thanks to a good number of young college graduates looking to break into and move up in the industry, he said.

However, the larger talent issue weighing the whole industry down is an “unending” driver shortage making it nearly impossible to stay at full staff. Hiring at the top and bottom of the industry continues to be a problem, Thomas said.

Nationally, the American Trucking Association says the industry currently has a shortage of 20,000 to 25,000 drivers, a shortage that could balloon to 239,000 over the next decade if the current market trends persist. The industry needs to recruit about 100,000 drivers per year just to keep up, according to the association. In Michigan, there are 48,220 tractor-trailer drivers as of last year, according to U.S. Bureau of Labor Statistics data.

While Supply Chain Solutions doesn’t have any fleets or warehouses of its own, Brand said the shortage of drivers still impacts the company’s ability to find and contract out the resources that clients need.

“We’ll go out to the market and contract for particular transportation or warehousing (services) to meet a client need,” he said, “so we’re very concerned about having enough trained, safe drivers in the workforce.”

Read 5676 times Last modified on Friday, 11 October 2013 10:58

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