Technology is the asset
Third-party logistics (3PL) firms may pride themselves on managing freight transportation assets without owning them, but this doesn't mean they're truly asset-free.
The 3PL's assets are generally made up of its people and information systems, both into which companies pour millions ' and in some cases billions ' of dollars each year to support and grow.
Miami-based Ryder Systems, a $6 billion global 3PL, makes investments in technology on par with some of the biggest in the supply chain management industry. The company's supply chain division employs about 225 IT staff across seven countries, said Kevin Bott, Ryder's chief information officer, in a recent interview. This is roughly equivalent to the staffing requirements of Ryder's fleet management division, which includes the company's truck rental and leasing business.
'Most companies' IT departments support their own operations,' Bott said. 'Our IT department supports our customers' critical operations. If our systems do not work, our customers may not be able to operate and recognize revenue.'
Control Tower. A little more than a year ago Ryder introduced its concept of Control Tower, which in basic terms is the company's approach to packaging people, processes and technologies.
'With Control Tower, we are managing the supply chain for our customers,' Bott said. 'Control Tower is Ryder's approach to managing our customer's demand-driven supply chain, overseeing the flow of physical goods, information and finances both forward and backward.'
Bott added this is not just a portfolio of applications and technologies. 'The technology is there to support the people and the processes. Twenty years ago we could have run Control Tower on faxes and phones, but it would have required much more manpower,' he said.
'In the supply chain arena, Control Tower includes almost every application we have, integrated with our customers' systems and their trading partners and suppliers,' he said. The applications included in Ryder's Control Tower align with several major categories:
' Transportation management systems (TMS). A customized version of i2's Transportation Manager.
' Warehouse management systems. Ryder uses several WMS programs, including one developed in-house and one purchased from Manhattan Associates.
' Enterprise resource planning (ERP). Ryder is an SAP shop itself but interfaces with customers that run on SAP, Oracle and other homegrown ERPs.
' Supply chain event manager. Ryder Online, an in-house developed system, includes the 'dial tone' connectivity. It is essentially the traffic cop between the TMS, WMS, ERP and other systems.
Control Tower also covers several specific applications that don't necessary fit into the four main categories. 'We have a financial settlement suite that includes a homegrown audit tool. The freight payment application is licensed from JD Edwards,' which is now part of Oracle, Bott explained. 'Our purchase order management system was developed by Ryder for the automotive industry.'
Much of Ryder's portfolio, including the Control Tower, is built around the company's deep experience in servicing the demands of sophisticated automotive industry supply chains. Clearly the current environment will call for 3PLs to look outside that market segment for future growth.
'Moving forward we plan to grow the scale of Control Tower by adding new customers and new industry verticals,' Bott said. 'Adding more verticals will require changes and enhancements to Control Tower. Automotive is an inbound focused supply chain. Retail for example is less vertically integrated.
'Control Tower is only one year old. This is still a fairly new offering for Ryder,' he said.
A particularly unique ' and important ' piece of Ryder's portfolio is its Ryder Online platform and the 'dial tone' that it provides to users. 'Supply chain event manager, or Ryder Online, is the glue that holds everything together,' Bott said.
Ryder's 'dial tone' utility provides customers with connectivity to the network and basic visibility. 'Dial tone is the entry level at which we integrate other technologies. The data sets are universal ' like a dial tone,' said Jim Moore, vice president of sales for Ryder System.
'Everyone expects the dial tone to be there when you need it,' Bott said.
The 'dial tone' serves as an integration point that allows customers to connect to Control Tower and leverage Ryder's applications as the need demands. Instead of forcing all customers to abandon their own systems they can use Ryder's entire portfolio, or just parts of it.
'Many Ryder customers operate on their own systems,' Moore said. 'Today service oriented architecture eliminates onerous integrations.'
Build Or Buy? Since the early days of the IT age, systems developers have been forced to make tough decisions when it comes to building or buying applications and technologies.
'About 14 years ago, when I joined the company, 95 percent of our systems were developed in-house,' Bott said. 'Then we went through a period where we bought everything. That's when we brought in i2 Technologies applications and others.
'Over the last seven to eight years our decision to build or buy has been made case by case depending on our needs,' he said. 'Each application is a strategic decision.'
'We will make or buy the technology that's the correct fit,' Moore said. 'For instance, we built one of our warehouse management systems but also deploy a handful of third-party WMS according to customer requirements. We do use third-party software. We were one of the first users of i2 Technologies' applications and we remain a large user.'
Like most 3PLs, Ryder always looks at ways to expand its services portfolio, which often demands new IT investments. 'Right now, we're looking at bringing more global trade-related systems into our offering,' Bott said.
And let's not forget that these efforts ' and investments ' do not end with buying or building technology. 'From an IT standpoint we are regularly upgrading. About three months ago we upgraded i2's Transportation Manager. We recently upgraded our WMS as well,' Bott said.
Ryder's approach to technology illustrates the inherent complexity involved in assembling and maintaining what amounts to a massive asset that serves the needs of demanding supply chains.
'We've arrived at this position in part because there is no technology or vendor that does it all,' Moore said.
Clearly it would be a whole lot simpler if there was a single solution. But then what value would a company like Ryder add?