Getting off the IT slow-boat

Getting off the IT slow-boat       Until last year, healthy freight volumes and profits helped hide an inherent problem in the liner carrier industry ' antiquated information systems.
      Last fall American Shipper's 'TMS Benchmark: Status Quo ' At What Cost?' found that 65 percent of liner carriers surveyed said their revenue had increased by more than 10 percent over a three-year period and nearly 60 percent reported greater than 5 percent increase in profitability.
      However these same carriers were twice as likely to have transportation management systems (TMS) built in house, with half of them now in the age range of five to 10 years old.
      With dismally low freight rates and profit shortfalls reported since that research study was conducted, how should ocean carriers address this apparent technology shortfall today? Are there any 'quick fix' applications in the market that will allow carriers to see a quick return on investment?
      'The logistics service provider sector is the fastest growing segment of the TMS market, with sales to LSPs forecasted to reach $337 million by 2012. The success of TMS in the LSP sector is enabled by the fact that TMS vendors are adding LSP-specific functionality, such as freight forwarding and fleet management capabilities, to their solutions,' said Adrian Gonzalez, director of the logistics executive council at ARC Advisory Group, a Dedham, Mass.-based research and consultancy firm.
      'Point solutions that do not interface with any other applications which execute one function, that's what most ocean carriers are operating on,' said Greg Smith, director of transportation and logistics for Oracle Corp. 'In today's world, IT systems can share information in ways those legacy systems were never designed to do. Technology has caught up with the hype.'
      Oracle has crafted a novel approach to the LSP industry, which it has branded 'quote-to-cash.' As the name implies, this concept covers the automation of each function an LSP manages, including customer requests, quotations for services, offer acceptances, planning, execution, monitoring and settlements. In broader terms, Oracle's applications cover customer relationship management (CRM), TMS and financials.
      Oracle believes that ocean carriers ' and all LSPs for that matter ' should address technology in some capacity at this time. 'The old legacy systems today are inhibitors when systems overall are supposed to be enablers,' Smith said.
      Many technologists liken a TMS replacement or upgrade to having open-heart surgery. If TMS is the 'beating heart' of a logistics operation, then it needs to be closely cared for to keep the business healthy.
      'Existing TMS used by ocean carriers were not constructed for complex origin and destination coordination. They were designed for the port-to-port business,' said Sundar Swaminathan, Oracle's senior director of industry marketing. These legacy systems can hinder an ocean carrier's ability to expand services to incorporate the logistics activities that shippers are asking carriers to provide, he noted. 'You need more functionality to meet these needs.'
      In addition to functionality shortfalls, the costs of owning and maintaining legacy systems will only increase over time. 'They're written in legacy languages and there are fewer skilled programmers who can maintain them.' Swaminathan said.
      Clearly there's an argument for addressing TMS in today's environment. But the fact remains this is a large undertaking that will demand time and resources from liner carriers that are strapped for both. While some carriers may find the timing to be ideal, certainly many others will shy away from such an investment.
      For those liner carriers that may not have the appetite for a TMS replacement, or those that don't feel they have a 'heart problem,' Oracle points to a few possible starting points for systems modernization initiatives for them to at least consider.
      'In general, CRM is an area where LSPs have under-invested' Swaminathan said. Most ocean carriers do not employ a CRM system that's on par with those available in today's market, and many don't employ a formal CRM at all.
      Liner carriers can leverage CRM systems to create one view of the customer, gain visibility into customer issues, identify new sales and service opportunities, and create a consistent customer interface.
      Maersk Line is a notable carrier leveraging an advanced CRM offering. 'With the added efficiencies and visibility our CRM solution has given us, we are better equipped to communicate across multiple channels with all of our customers, increasing our relationship management effectiveness,' said Timothy O'Connell, director of marketing for Maersk Line.
      Looking at the opposite end of the quote-to-cash portfolio, Oracle suggests carriers consider order management and financial systems for their modernization efforts. Much like CRM initiatives, many liner carriers will find these systems as good replacements for what is currently a manually managed process, making it inherently easier than a large-scale TMS initiative.
      'Carriers who can get accurate bills out will get paid quicker,' Smith said. 'Inaccurate billing is one of the most common sources of customer complaints. Ocean carriers have to manage so there's a financial, sales and customer service benefit there as well.'
      Smith cites three main benefits to modernizing receivables activities:
      ' Shortened time that invoices remain outstanding (also called 'days sale outstanding,' or DSO), which allows carriers to minimize 'financing' their customer's operations.
      ' Reduced billing errors and ensuing customer complaints.
      ' Reduced revenue lost to extra fees, such as assessorial charges.
      Overall, it is crucial to note that none of these changes happen in a vacuum. Whether a liner carrier attempts to 'rip-and-replace' its TMS or add applications, there will be some major adjustments to the underlying business process that need to be addressed from the start.
      'First, understand your current state and the desired end state. Create a plan on how to get from one point to the other.' Swaminathan said. That includes understanding the business process changes required, not just the technology implications.
      'Bringing in new systems without re-engineering business processes is certain to be unsuccessful,' Swaminathan said.
      Swaminathan suggests that liner carrier executives, who are considering a technology modernization of any scale, develop a transformation plan and stick with it. 'Create phases, milestones and targets,' he said.