Challenge 4: Limited Resources Means Relying on 3PLs
Another challenge faced by logistics departments is dwindling staff. Because many enterprises underestimate the level of logistics sophistication that their globalization efforts demand, they downsize the one department that needs more resources — not less. Some enterprises have turned to third-party logistics (3PL) companies for help. Unfortunately, the core competency of 3PLs is to expedite traffic, not necessarily to reduce a company's transportation costs.
Challenge 5: Escalating Fuel Costs Increase Transportation Fees
Rising energy costs result in higher transportation fees for trucks, ships, trains and planes. Since enterprises cannot alter the limited supply of fuel in the world, they're turning to technology to help them mitigate other components of their logistics cost equation.
Three primary forces had to converge to provide best-in-class enterprises a cost-effective, practical solution to their logistics' problems: 1) a secure, ubiquitous World Wide Web with a fast connection, allowing easy access to real-time information; 2) the ability to organize that data into a format that assists managers to make intelligent, well-informed decisions; and 3) technology advances to support permission-based access to a global user community.
Ubiquity of the Internet
Ten years ago, when the Internet was still an unproven entity, it was viewed skeptically by enterprises. Since then, dramatic improvements in firewalls, IP protocols and load-balancing tools have made the Internet more secure, reliable and scalable. Browsers are now an accepted application user interface. And high-speed access has accelerated the adoption of the Internet as a practical day-to-day business tool. Today, enterprise employees use Explorer, Netscape, Safari and other browsers to quickly search for information, buy goods and even pay bills.
Emergence of Web-based technologies
The declining costs of bandwidth have made it possible for complex technologies to be delivered over the Web. These technologies are being developed and deployed by application service providers (ASPs). Enterprises that used to invest costly resources to develop their own applications or buy off-the-shelf software solutions now subscribe to hosted applications for a fraction of the cost of older technologies.
The ASP revolution made it possible to deliver information-rich, price-comparison engines over standard Internet browsers and — this is the important benefit — start making sense of the information. One of the more effective products of this revolution was the real-time reverse auction. Overnight, anyone with an Internet connection could find product information and compare apples-to-apples costs for travel on Expedia and Travelocity or hunt for bargains on eBay. Information that had previously been held hostage by a select few was now available to everyone online. In a free information society, competition abounds.
The Next Step: SaaS
Software-as-a-Service, or SaaS, is the next evolutionary step of the ASP model. Cutter Consortium, an Arlington, Mass., research firm, states that the transformation of the software business model from packaged products — like off-the-shelf solutions — to Web-enabled subscription services like SaaS is one of the most significant present-day trends in the IT industry because of all the benefits they offer enterprises:
- Low overhead and involvement
- Little need for IT manpower
- Immediate return on investment (ROI)
- Guaranteed cutting-edge technology
SaaS applications provide support for multiple users, multiple applications and multiple platforms. Since they run on the Web, enterprise employees can use them on any computer with Internet access. The SaaS provider takes care of all updates and maintenance to the system; the enterprise is off the hook for IT support. In today's rapidly changing world, updates can be made at a moment's notice at no additional cost to users.