April 2012 | Commentary | Checking In

IT: Advantage @Light Speed

Tags: Logistics I.T.

Keith Biondo is the publisher of Inbound Logistics magazine.

A professor at a well-known university recently remarked at a logistics conference, "Information technology is not a source of competitive advantage. It makes good systems better, and bad systems worse. It allows companies to do stupid things at the speed of light."

Maybe. But IT can be a change agent that will almost always open doors to competitive advantage.

When Inbound Logistics magazine first covered technology's impact on "traffic management," its use was limited to faxing routing guides to trading partners. The advent of fax technology acted as a change agent by allowing companies to rapidly disseminate routing instructions to many vendors. How did they do that before? By phone? By mail? Few companies were large enough to afford private networks. Fax was a source of competitive advantage for those that used it to control the inbound flow.

Fast forward to today. Dunkin' Donuts just announced a historic shift in the way it interacts with its 10,000 franchisees, granting them almost complete supply chain control through a new national franchisee-owned distribution cooperative called National DCP. Driven by integrated logistics technology, Dunkin' executives and franchisees view this new decentralized demand-driven distribution system as positioning them for expansion while achieving greater supply chain efficiencies and outflanking competitors.

How could that market differentiation be possible without logistics IT?

In March 2012, Amazon.com Inc. bought Kiva Systems for $750 million. Kiva provides software linked with hardware and robots that amps the picking, packing, processing, and shipping of retail products bought online or via phone order. "Amazon has long used automation in its fulfillment centers, and Kiva's technology is another way to improve productivity by bringing the products directly to employees to pick, pack, and stow," says Dave Clark, Amazon's vice president of global customer fulfillment.

But you can get the same results by buying the system, so why buy the company? I think the reason was implied in Amazon CEO Jeff Bezos' recent statement: "The best customer service means the customer doesn't need to call you." Faultlessly and efficiently matching demand to supply, tens of thousands of times each day, is the only way to deliver that kind of customer service experience. And the only way to accomplish that, and still maintain great margins in a thin-margin business, is through technology.

That's why an online retailer buys a technology company. Bezos must think logistics IT is a source of competitive advantage. I agree.