Reshaping Old Ways as U.S. to China Exports Expand
Editor’s Note: The following article is the first in our new monthly column on IT trends. Chris Jones is Executive Vice President, Marketing and Services, Descartes Systems Group, a company that provides IT solutions for a wide variety of logistic service providers and industry verticals.
By Chris Jones, Descartes
Chris Jones – Executive VP, Marketing & Services, Descartes Systems Group
With the current surge in U.S. exports to China emerging as a bright spot in today’s turbulent economic climate, savvy Logistics Service Providers (LSPs) are taking advantage of game changing technology innovations that support a new wave of collaboration that is reshaping old ways of doing business.
The burgeoning Chinese middle-class is driving a growing appetite for U.S. products. American exports to China have climbed nearly 50 percent in value since 2008 (source: US Census Bureau). The flow of goods includes an increasing volume of American agriculture products, coal, airplanes, medicine and disposables that can be mined for metals (source: Reuters).
Although such statistics might initially sound as a boon to logistics service providers (LSPs) in U.S.–Asia trade lanes, the export rush has prompted fierce competition for thinner slices of the margin pie. As such, these businesses are searching for innovative ways to operate better, differentiate themselves, and connect to trading partners while creating ‘stickiness’ in their relationships to best take advantage of the expansion in the export sector.
Collaboration: Old vs. New?
More and more, both LSPs and the shippers they serve are turning to collaboration to operate more efficiently and compete more effectively. However, today’s collaborative communities and the IT infrastructure that supports them, are a far cry from the members-only trade associations and rudimentary dot-com “collaboration” portals that proliferated in the late 1990’s and early 2000’s.
Trading partner communities today are dynamic and self-organizing. Across supply chain ecosystems, the notion of static, long-term relationships is not the norm. Today’s competitor could be tomorrow’s partner. Transient or casual relationships are more prevalent as logistics organizations move from one relationship to another to reduce costs. Logistics is also a service business with relatively low barriers to entry, especially in Asia. What was considered value-added yesterday becomes industry standard today. In the battle to differentiate, LSP’s constantly assemble and reassemble their processes and partners. Competitive advantage is all about time-to-market with new services. Rapidly connecting to partners and being able to collaborate with them in a meaningful way is paramount in this strategy.
Web-based community collaboration technology platforms are no longer “experiments” and are able to drive real and significant results. They offer changing innovations able to support business processes and workflows unique to these self-organizing trading partner communities and can enable great efficiency in the movement of goods across parties and borders. Robust and deep functionality is available that provides participants the ability to collaboratively manage shipments, book transportation, provide status updates, meet customs and security filing requirements, receive and pay invoices, report on performance and much more without big IT departments and huge capital outlay.
Hi Tech/Low Tech: No One Need Get Left Behind
Another important factor is the tremendous opportunity to leverage logistics data stemming from purchase orders, transportation documents, and regulatory filings and so on. The ability to capture and validate this data where it is generated helps ensure accuracy and reduces latency, while passing it though to relevant parties in the trade chain for repurposing creates speed and contributes to “stickiness” among partners. LSPs that adopt technology to effectively participate in this, especially in U.S.–Asia trade lanes where lead times can be long, variability is rampant and shipment/inventory tracking can be critical, stand out. They have more potential to better scale and capture market share.
The key is being connected. Across Asia, there are many regions where IT infrastructure is still developing. The leading community collaboration platforms recognize that there are many players with varying levels of technology sophistication. Technology is architected to be flexible and provide options to a broad spectrum of parties to connect and participate. Low-tech companies need options to connect and enter data manually via web forms or email while larger players may stream-in data via EDI and XML integration. This allows smaller operations to have access to the same resources as larger players – the essence of free trade.
The current growth in the US-Asia export sector is a point of light for new business acquisition and growth of ‘wallet share’ for LSPs who can effectively connect and collaborate across the communities in which they operate.