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Information Technology: A catalyst for business process innovation in the logistic services industry

Fueled by corporations that look at outsourcing as a way to reduce costs and gain a competitive advantage, the logistics services industry continues to grow and thrive. However, logistics service providers (LSPs) continue to struggle in this ever-changing industry dominated by acquisitions and low-margin environments. To survive in these harsh business surroundings, LSPs are developing different success strategies, ranging from a focused approach on core competencies to an expansion approach whereby companies move into completely new segments. As a result, three distinct business models seem to be evolving.

by Till Dengel

Future LSP Business Models

The Impact of Technology

As companies aggregate vast amounts of data, connectivity and visibility become essential factors in making sound business decisions. Moreover, an integrated IT solution is paramount for companies that wish to streamline operations, achieve financial and strategic objectives and meet customer expectations. But which technology mix is best-suited for your company's business model? Answering that question requires taking a closer look at today's IT environments.

Currently, most IT systems are monolithic - hard-wired and often times reliant on humans as the interface to connect complex landscapes. At the same time, core operational processes rely on this infrastructure and there is no way to simply switch one landscape off and turn on a new one. The transition needs to be performed in small, digestible steps by leveraging existing investments and using a common language to connect legacy and future systems.

New opportunities including services-oriented-architecture, support this paradigm by using principles, such as web services, and combine it with the necessary business semantics and process logic needed to enable customized business processes. A service oriented application and integrated business processes platform can drive innovation and enable business change by running services developed by in house IT departments or outside vendors. The objects and services are used to compose end-to-end business processes called composite applications. This approach has many generic advantages, including cost containment by reusing services and lower cost of change through business process.

The LSP industry and, in particular each future business model mentioned earlier, can greatly benefit from such business process innovation. Yield innovators achieve lower costs by optimizing operations and increasing automation with standardized IT platforms. Portfolio innovators rely on flexible IT infrastructures that can be easily tailored to quickly changing customer needs. Finally, orchestration innovators see connectivity as core since it allows for increased visibility into processes, lower costs and smooth execution to ensure customer satisfaction.

Conclusion

Information technology is a major cornerstone in the evolution from today's business models to future models. Each model requires a different view on IT and will derive a different strategy. Since no single model will exist on its own, it will become even more important that one IT platform can support various business models.