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Closing the IT-Gap: Cost-Effective Ways to Manage Logistics Technology

Closing the IT-Gap: Cost-Effective Ways to Manage Logistics Technology
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In the logistics and supply chain industry customers are demanding more technological capabilities from their service providers. The annual Third-Party Logistics Study analyzes the gap in what customers deem necessary in the IT capabilities of services providers compared to their satisfaction of current capabilities.


As you’ll see in the figure below, the gap has decreased over time, but logistics businesses are still not satisfying customer needs.

 

IT_Gap.png

Source: 2016 Third-Party Logistics Study

 

It’s easy to understand that with the influx in innovative technology becoming available it may be hard for businesses to keep up with technological expectations in a way that is cost effective to them. To do this, businesses will need a strategic plan on how to stay on top of industry trends and manage IT.

In this article we review the importance of properly planning IT investments in a way that closes the technological gap and adds value to the organization. For this, businesses need to be able to build an effective technology organization that is capable of executing the vision while not breaking the bank.

 

The Key is Strategic Technology Planning

Technology without strategic planning results in business inefficiencies and lost opportunities.

Having a team of technology professionals that can drive the technology-side of the business, bring innovative logistics solutions, and add value to your customers is invaluable – it closes the gap.

New economic models like the shared economy has opened new opportunities for SMEs to access a large pool of qualified talent by using technology service providers. For those still hesitant about outsourcing their technology operations, there is still the option of building your own I.T. department or using a hybrid model.

Let’s review each of these models comparing them in four critical ways:

1. Industry Knowledge

2. Operating Costs

3. Technical Skills

4. Operational Effectiveness

 

Option 1: Build an In-House I.T. Department

An “In-house I.T. department” is one or more technology professionals permanently employed by the company with the objective of planning, implementing, and managing all the technology operations of the business.

1. Industry Knowledge 
One great benefit of having an in-house IT department is having a technology team with logistics technology experience. The logistics industry has very specific technological needs that do not resemble other industries. An in-house I.T department will become attuned to the technologies required and the priorities of the industry and the business.
 

2. Operating Costs 
Hiring technology talent is extremely expensive. This is not to say you should be trying to avoid costs here. Avoid the mistake of hiring underpaid or unexperienced professionals if you want to avoid serious headaches. How expensive can it get? Consider the following salary statistics from the United States Bureau of Labor and Statistics:

• Computer Support Specialists: $51,470 per year or $24.75 per hour.

• Network & Computer Systems Administrators: $77,810 per year or $37.41 per hour.

• Software Developer: $100,690 per year or $48.41 per hour.

Additionally, consider that the average annual salary increase for technology professionals is 3.98%, with the lowest being 1.9% and the highest 7.7% as per the 2015-2016 Dice Salary Survey.


3. Technical Skills
Computer support specialists, system engineers, and software developers, all require a different set of technical skills. With the proper budget companies can hire professionals who are qualified, certified, and specialized. Specialization is important considering the complex nature of technology. But accessing pools of qualified professionals can be a challenge due to the current I.T. talent shortage.


4. Operational Effectiveness
On-site staff can respond quicker to technical problems and have higher levels of engagement with company personnel, so they can better understand business needs. This leaves the business well-positioned to deliver on business needs and shift priorities without having to wait for the vendor to be available. In addition, on-site personnel allow the business to maintain higher control of its systems.

 

Option 2: Hire a Logistics Technology Service Provider

An “I.T Service Provider” or “Managed Service Provider (MSP)” is a company that implements, manages, and provides technology support and strategic guidance to businesses. Manage service providers are used by many businesses who want access to world-class technology capabilities, cut expenses, and or remain in touch with innovative technology trends.

1. Industry Knowledge
There are MSPs that specialize in logistics technology, for logistics businesses wanting to outsource IT this is the way to get the most out of an IT service provider.

Non-logistics MSPs are able to provide generic technology solutions and tech support. Due to the lack of specialization, generic MSPs lack understanding of specific logistics technologies (RF handhelds, wireless warehouse, RFID, dimensioning systems, WMS/TMS, etc.) and technological trends driving the industry.


2. Operating Costs
Costs vary depending on the provider, but a report from ReportLinker shows that C-suite executives have seen overall technology cost reductions between 10-30 percent by outsourcing their technology operations to a third party.


3. Technical Skills
Established technology service providers give businesses access to a specialized technology workforce. Teams at these organizations are certified by organizations like the Computing Technology Industry Association (CompTIA) and technology vendors like Microsoft and Cisco so you don’t have to worry about finding qualified talent.


4. Operational Effectiveness
MSPs can be very effective in implementation, management, and keeping up with the evolution of technology. But if they lack industry knowledge, are under staffed, or are not properly aligned with your business you can expect to find operational challenges. Industry focus, ongoing planning and communication, and proper staffing levels are critical to operational effectiveness.

 

Option 3: Use a Hybrid Model

For those companies that can afford it, this could be the best approach.

A mix of in-house and outsourced technology management results in high business alignment, operational effectiveness, and cost savings.

In this model, the business builds a small in-house I.T. team consisting of at least one technology leader whose role is to align technology with business needs, protect the interests of the company, and track the operations of the technology service provider.

1. Industry Knowledge 
In this model the compound experience of a Logistics specialized MSP and a business oriented IT leader enables the company to make strategic technology investments and accelerate ROI. The shared understanding of customers’ needs, industry trends, and logistics technology allows the business to effectively exploit industry opportunities.

2. Operating Costs
This is not as cost effective as outsourcing all technology operations to a service provider. However, this hybrid approach remains more cost effective when compared to hiring a full I.T. department.

3. Technical Skills
The technical skills in the Hybrid Model reaps the benefits of the combined technical experience of the service provider and the internal I.T. team. This provides the business with access to a large pool of experienced technology professionals that if properly managed will significantly accelerate engineering efforts and shorten technology adoption lifecycles.

4. Operational Effectiveness
Operational effectiveness also gets a boost when operating in this model as long as roles and responsibilities are clearly defined between the two teams. By strategically moving non-core I.T functions to a service provider the in-house technical team can focus on core competencies.

Partnering with the right technology provider expands access to innovative logistics technologies and experts, all directly impacting the capacity of the company to execute and compete.

 

Because technology requires a team of technically and industry experienced professionals you need to consider more than just cost when deciding on your approach for managing technology. You’re in business, so being cost effective will always be a priority, but keep in mind the other factors that will affect the success of your business in the end.

Did we miss any critical points to consider when deciding on a strategy for technology management? Let us know in the comments below.

 

Is Your Logistics Business Falling Behind in Technology
 

 

Hector Sunol

Hector is a Co-Founder at Cyzerg and the Anser Induicus Foundation with over 12 years of experience leading IT operations for large and small businesses. He holds an MBA in Management and Bachelor's degree in Information Technology. Hector has a passion for books and creating opportunities for others to grow. You can follow him @TiconSunol.

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