The Top 100 Logistics IT Providers & Market Research Survey
Inbound Logistics reveals the latest logistics technology trends influencing the supply chain sector—and 100 companies that are breaking new ground and leading the market.
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Big data has hit logistics with a bang—and for good reason. Given the breadth and depth of global supply chains, the explosion of function- and vertical-specific logistics technologies, the collective power of social media and cloud computing, and a continued emphasis on cost reduction, there are few limits to how granular shippers can take analysis. What emerged as a byproduct of data-mining business intelligence systems is now sweeping the supply chain sphere, creating new expectations for logistics managers and technology vendors alike.
Information is power, and companies are quickly appreciating the value they can distill by harvesting and harmonizing mass quantities of data across the supply chain, and providing a common platform for unique departments and business partners to collaborate around.
Big data also creates challenges. With so much information accumulating in and coursing through various functions within an organization—and among external partners—there is equal need for human and artificial intelligence that can make sense of this miasma.
Context also counts. A wealth of subjective information provides little value when a company is looking for contrast. Logistics managers need to bounce and benchmark data off external market intelligence and historical performance to find areas for improvement. Big data creates an intelligence vacuum that needs to be filled within an organization, through technology suppliers, or via third-party resources.
Inbound Logistics' annual logistics technology issue serves a similar purpose. Our research and analysis provides a landscape perspective of how technology companies are approaching the market, where they are investing in development, and the challenges they see through their customers. As always, our Top 100 Logistics IT Providers list accompanies this market overview, providing a dot-matrix sketch of solutions providers IL editors have chosen as best in class.
Surveying the Logistics IT Landscape
Companies seeding the cloud with logistics technology in the mid-2000s created a deployment model that has now become standard. Five years ago, 10 percent of surveyed technology vendors offered some form of locally installed product. In 2013, that number is half. Thirty-six percent of companies provide hosted solutions (versus 27 percent in 2009) while the majority—59 percent—offer a combination of both.
Hosted solutions provide IT buyers more flexibility and scalability in how they opt to use the technology. On-demand applications also raise expectations by expediting lengthy implementation cycles—once a considerable barrier for smaller IT buyers.
There has been a similar progression in how developers price their product. System-based cost structures remain the prevailing option (76 percent), while transactional, pay-as-you-go subscriptions continue to grow (64 percent in 2013, compared to 51 percent five years ago). Sixty percent of surveyed technology companies offer per seat/user pricing.
For these reasons, the technology market has become increasingly accessible to companies of all sizes. Variable cost and deployment models have made initial investments much more palatable for small and medium-sized businesses (SMBs). Moreover, Software-as-a-Service eliminates maintenance and upgrade expenses associated with legacy systems. The technology market that has emerged is increasingly utilitarian in its customer segmentation. Only 10 percent of surveyed vendors specifically sell to large companies; 15 percent exclusively target SMBs. The overwhelming majority (86 percent) serve both.
A more telling indicator is the industries technology companies serve. Because many smaller shippers do not have the personnel to properly collect, digest, analyze, and execute against big data, they are relying on third-party logistics companies.
This has created new traction for IT vendors to sell to service providers (see Figure 1). Ninety-two percent of companies surveyed serve 3PLs, warehouses, and carriers, followed by retail (83 percent), manufacturing (81 percent), and wholesale (75 percent). And, at 51 percent, e-business represents an opportunity for solutions developers as e-commerce continues to shape a new trajectory for supply chains.
Figure 1 Industries Logistics IT Providers Serve
Sensing New Demand
The maturation of logistics technology and the means of deployment created a stratified and balanced market. Supply chain management (68 percent), transportation management (66 percent), optimization (63 percent), and routing and scheduling (55 percent) comprise the top tier of offered solutions (see Figure 2).
Shippers are tasked with converting the supply chain from a cost center to a profit center. "The supply chain becomes more of a value chain, and the cost of logistics and transportation is one primary element to evaluate," shares one survey respondent.
Figure 2 Solutions Logistics IT Providers Offer
Functional solutions allow companies to optimize and reduce costs with a degree of specificity. The key, then, is linking these unique areas within the broader supply chain. This is where cloud networks empower technology deployment by blending visibility and data so companies can drive efficiency and tear down walls across siloed functions.
Cost reduction and visibility remain the two greatest challenges for IT buyers (see Figure 3), according to 89 percent and 72 percent of respondents, respectively. Visibility and integration depend on one another, and the swift emergence of cloud networks, social media, and big data have created a more complex IT ecosystem to navigate. Optimization, in all its forms, is a means to eliminate redundancies and standardize transportation and logistics processes. Technology is increasingly embedded in these processes—not just tacked on—so integration becomes that much more important.
Figure 3 Logistics IT Buyers' Top Challenges
Solutions are also becoming more customizable, with greater emphasis on bundled packages or managed services—which plays into the value proposition of many 3PLs. IT vendors are following suit, further blurring the lines between service provider and solutions developer. This trend is readily apparent inside the warehouse, where materials handling integrators are helping companies mine synergies among equipment, mobile devices, and warehouse management systems to find the best solution.
E-commerce is a major contributor to this change. Consumer expectations for product availability and timely service are changing at broadband speed, and supply chains need to keep pace. This extends to other verticals as well—notably retail. The capacity to quickly identify demand changes or supply chain exceptions—and act on these changes—is a competitive differentiator that requires synchronization across industry and functional areas.
These needs place greater pressure on companies to better capture point-of-sales data, forecast demand, and manage inventory. It forces them to rethink omni-channel fulfillment. More consumers purchasing product online inevitably impacts returns. Reverse logistics solutions will grow in importance. Currently, 35 percent of IT companies provide this capability.
Big data is also changing the way companies approach supply chain design. Network optimization is a fluid exercise for many companies—at home and abroad. Changing demand patterns, lane rate analysis, new sourcing locations, port strategies, contingency planning, economic trends, and even sustainability mandates have raised the importance and value of predictive analytics. Thirty-eight percent of IT vendors provide modeling and simulation capabilities that allow shippers to better visualize their supply chains.