Logistics is 90% Software - the Other Half is Labor

The decision to invest in software enhancements can be overwhelming when considering that many large companies spend as much as 30% of annual revenue on information technology systems.

Another great goes to the great beyond.

The passing of Yogi Berra last year resurfaced a list of his best one-liners.

“Baseball is ninety percent mental and the other half is physical,” is certainly fitting to the importance of software to winning in logistics.

Sports are physical endeavors that depend on intelligence to outfox the competition, make the right calls, and execute plays flawlessly.

Similarly, logistics involves physical labor yet relies more and more on software integration to get things done, cost effectively.

Yogi’s logic holds true. Logistics is 90% software. The other half is labor.

Drive logistics strategy with software enhancements
The more systems talk to each other, with standardized data, the more optimized your logistics strategy will be to enhance visibility, flexibility, and scalability.

The decision to invest in software enhancements can be overwhelming when considering that many large companies spend as much as 30% of annual revenue on information technology systems.

A report by Software Advice®, a company that helps buyers choose supply chain management software, indicates large businesses (more than $1 billion in annual revenue) spend nearly $300,000 annually for supply chain management software. The study also identifies that enterprise system integration is considered “very important” to improve speed and accuracy in business’ supply chains.

While corporate leaders recognize the importance of supply chain excellence, most are not well versed in software technology. Large budgets and high expectations place software system investment under intense scrutiny. CEOs turn to their IT and operations leadership for enlightenment on the most effective path forward.

The question is – how to convince board members that spending a quarter million dollars annually is the best investment to achieve market differentiation, revenue growth and profitability.

Logistics software adds value to transform, grow, and run a business
Logistics management software enables real time visibility, data-driven decisions, faster and more accurate inventory processing, and lower cost-to-serve.

Paper-based transactions are no longer adequate to monitor thousands of SKUs and process hundreds of orders each day. Additional labor may only escalate costs without a significant impact on productivity improvement. Fortunately, logistics management software provides agility to transform businesses to meet the demands of a high velocity, service-driven economy.

The power of integrating procurement, inventory, order and transportation management systems is the ability to orchestrate the back and front ends of the supply chain. Real-time data builds the right stock, in the right amount, in weeks - not months. Warehouse management systems automate inventory slotting, order picking and communication with material handling equipment to improve accuracy and velocity of product through the facility.

Faster throughput, efficient use of labor and elimination of waste reduces costs. Faster delivery and complete and accurate orders meet customer expectations. Satisfied customers buy more. Smarter shippers operate more profitably.

Sustained investment builds a competitive infrastructure
Be an early adopter of new logistics software to gain and sustain a competitive advantage. Because software solutions evolve at a rapid pace, plan to upgrade at least every five years or when significant functionality changes warrant. Leverage the lower cost of new solutions and improve productivity through expanded capabilities.

  • Identify specific opportunities and take action to integrate legacy and commercially available software with customized solutions to maximize benefits for value-add and data driven activities.
  • Ensure compatibility and expandability across your network, vendor partners, customers and company divisions.
  • Seek industry and customer service differentiators. For example, omni-channel inventory visibility and flexibility to move goods to the point of demand. Reverse logistics solutions speed the cycle to cash from return to vendor credit or secondary channel sales.

In your business, do you have software integration expertise? Do you rely on legacy vendors to upgrade your old system? Do you have a research and development team to identify, test, and implement emerging software solutions for market differentiators?

Answers to these questions identify where you are on the path to 90% software and the other half labor. If you are in the low-tech or outdated software group, it is time to invest in logistics software solutions. To do so cost-effectively and with positive results, seek knowledge, options, and experience.

Identify partners that enhance the value of your business. Are there unique software solutions to expand your business vertically? Are there third-party logistics companies offering innovative solutions to differentiate you from your competitors?

Use logistics software solutions to sustain growth and create market leadership.

Be System-Agnostic
To maximize ROI for logistics technology upgrades, consider multiple vendors or third-party collaboration. A single vendor will fit commercially available solutions to your operation. One size does not fit all in logistics. There are too many variances in product handled, velocity of goods from warehouse to customer, and multi-channel customer expectations.

Develop a plan using a “best scenario” approach. Use technology in a non-traditional way to enhance capabilities and solve C-Level issues. Consider benefits beyond cost per unit. Seek flexibility to adjust to market change or potential acquisitions and divestitures. Select a system and vendor with demonstrated results for reduced costs and improved productivity in operations similar to yours.

Configure systems and where needed customize software to your operation’s inventory and order profile. Build in flexibility to meet current and future needs. Assume the system platform and its underlying software will become less effective or obsolete within five years. Build a return on investment scenario of 2-3 years or less for the best value.

Alleviate internal constraints through outsourcing
Business case development and presentation for approval is time consuming, complex, risky and may be a once a year opportunity. Problems and solutions are abundant. Addressing these issues with solid research, analysis, and recommendations requires experienced project managers. Internal resources are often preoccupied with maintenance and “firefighting.”

They know there is a better way but do not have the time to pursue it. Outsourcing logistics projects under strong internal leadership and resources adds value to the process through knowledge, multiple vendor experience, and the ability to develop solutions quickly.

Collaboration between a business and a 3PL for outsourced warehousing and systems integration enables a solution in significantly less time. It is always better to get ideas from multiple subject matter experts than to rely on a single point of view.

Transform your logistics strategy with flexible, integrated software solutions. Grow your business through innovative software applications to differentiate your company. Run your business by including logistics technology solutions for agility in the market, cost reductions, revenue growth and bottom line results.

Be a leader and make your logistics operations 90% software and the other half labor.

Article Topics

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FedEx Supply Chain, developed a strong reputation by delivering commodities to businesses. Over the years, our vision to provide innovative, integrated supply chain solutions made us a leader in value-added warehousing and transportation services. As a FedEx Supply Chain customer, you’ll benefit from the combined strength of GENCO and FedEx — logistics expertise and a global transportation network.

View FedEx Supply Chain company profile


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