Cloud Competing: Small forwarders embrace virtual IT to survive

Dollars and sense

The experience of Saddle Creek is becoming an increasingly common way to do business as SME forwarders seek ways to stand out in the crowded 3PL arena – at least for those companies that would rather grow and evolve than be swallowed up by competitors in this rapidly consolidating field. Evan Puzey, chief marketing officer for Kewill, a multimodal logistics software provider, said that by offering greater process automation and reducing human error, cloud platforms empower today’s forwarders to achieve better customer service via technology. “Cloud computing gives freight forwarders – particularly the small- to medium-sized forwarders – the logistics toolkit they need to remain nimble in a highly competitive market with thin margins,” he said.

According to a joint 2016 report by Kewill and logistics analysis firm Transport Intelligence, cloud systems that charge a monthly subscription fee rather than large, upfront expenditures, can help level the playing field for SME forwarders. “The significance of this is that the operating costs of cloud solutions are very low and their ability to scale, also ‘on demand,’ provides tremendous flexibility,” the report said. “Success or failure of a forwarder can come down to its buying power in the market – to drive down rates – and its ability to execute efficiently and with the lowest-possible overheads. The importance of technology to freight forwarders cannot be overstated.”

With the cost savings allowed by the cloud, smaller forwarders may be able to offer other value-added services, like warehouse management, customs brokerage, and the receiving, handling or distribution of goods, Puzey said.

The types of cloud systems currently on the market are too numerous to list, but some include CHAMP Forwarding Systems Logitude World, the Cleo Integration Suite, CSA Software’s Web-Trak and World-Trak systems, ShipHawk, Infor SCM for Logistics and Logisuite Air Export. Most cloud systems, Puzey added, offer supply chain functionality that is almost indistinguishable from more complex legacy systems, “all for pennies on the dollar.”

“We all know the cost of fuel is going to go up,” Congro explained. “So we want the client to know that we have an infrastructure that can find the lowest transit cost options.” Sometimes, this entails shipping merchandise to Saddle Creek’s clients from multiple buildings. “We need a method to be able to decide that, when an order comes in, we’re best able to fulfill that product – but which [warehouse]?” he added. “What’s closest to the customer? Which one has the inventory? Can one of those warehouses ship it complete? Is one of those warehouses behind today?”

Beyond the undeniable cost-savings of a cloud platform, there is also the lifting of the burden of responsibility, Congro said. For instance, in a traditional on-premises IT system, he explained, the vendor will help set up the hardware for the client, but once it is operational, it is generally up to the customer to monitor the performance of the system, make updates or add patches. “So, if there’s a performance problem, you always have to go through these troubleshooting steps – is it a hardware issue? Is it a bandwidth problem due to high activity?” he said. “But when the system is a ‘cloud,’ maintenance is the responsibility of the vendor. So, who better to diagnose what might go wrong with the system than the people that wrote the system for themselves?”

The cloud also provides automatic systems for redundancy, for backups, for disaster recovery – all of which are the responsibility of the vendor partner – allowing the forwarder to focus on its core business instead of on IT distractions, Congro added.