Last week UPS finally announced its new Supply Chain Symphony solution. This is described as “a new tool that integrates various supply chain components, including shipping, warehousing, and inventory management, into a single platform”. That’s marketing speak for a visibility portal. But this one may be rather different as this solution now encompasses almost all of their other technology solutions for global supply chain management…

UPS, along with all of the other integrated carriers, FedEx, DHL, etc. pioneered the ability to track and trace shipments on a global basis. This capability was a game changer for these companies in providing customer information about shipment location and ETA’s.  In contrast with the very basic – or often non-existent – capabilities of conventional carriers, transportation service providers or freight forwarders. But their track and trace systems were not true supply chain ‘visibility’ systems.

As we have covered many times in briefs and features for Ti, the real benefits of supply chain visibility can only be gained from having a complete picture of the entire supply chain, including inventory, orders and shipments (orders often comprise multiple shipments). In order to achieve this requires data from the myriad of applications and systems scattered across the chain. Many of these systems are owned and operated by supply chain partners or service providers. They may also use different references to identify inventory, orders and shipments. Assuming it is possible to get the data, it is still a fiendishly complex task to make sense of it and respond to what it is saying.

If it can be done, there are huge operational gains to be made in areas of proactive alerting, efficiencies related to inventory management and rapid responses to external shocks or unexpected global events. Done well, it can save a fortune in lost opportunity costs, as well as boosting customer service levels.

Many companies have been providing general visibility solutions for many years, most of them have sought to replicate the track and trace solutions used by the integrated carriers. They have tried to link and share data from various transport modes, air, ocean, road, rail, as well as integrating the order and warehouse management systems used by logistics service providers. Add to this the number of actors in any large supply chain, including suppliers and partners interlinked though many tiers of the network, and the challenge is multiplied.

Some have done a good job attempting to address this and have gained market share as a result. But most have struggled, not least because of the levels of investment necessary to establish a large enough footprint to cover global operations. Also, there have been huge technical challenges in integrating older systems with data architectures that were never designed to act as nodes in a global data sharing network.

This has resulted in a patchwork of information sources and an incomplete picture.

It is true that the ubiquity of the Internet and the adoption of cloud services and global standards have provided a universal platform for data exchange, but there remain many systems that are isolated.

In this regard UPS may have a better chance, as they have the resources, the technical knowhow and perhaps most importantly, they have existing customer relationships. They have also been thinking about the challenges for a while – they announced that more features will follow in the coming months as customers respond. They understand how to design and operate very large information systems reliably, which is a big deal in a 7/24 operating environment.

However, I do not think UPS is looking to provide visibility solutions to all of their customers, especially the very large global clients they have. They are looking at the huge numbers of small and medium sized companies that have been growing their businesses over a period of years (including the pandemic), embracing the lessons of e-commerce fulfilment and the growing demand from customers for more information.

Many of these companies have realised that as their businesses have grown, they have needed to use technology in almost every area of their operations. So while most companies are able to use some of the common cloud services for selling, fulfilment and shipping, they were not designed to support the customisable features found in expensive inventory and warehouse management applications, features that growing companies are demanding. A solution that can provide a pathway towards this level of capability would therefore be quite compelling.

An end to end supply chain visibility solution that can be tailored to the requirements of individual shippers via customisable dashboards could potentially be transformational. The provision of a reliable, accurate and flexible capability will build trust and, importantly, expectations in the market. It is also obvious that many of the potential users are already sharing data with many of UPS’s larger clients through other pathways and so it may be more efficient (and hopefully easier) to migrate those exchanges onto the Symphony platform. This kind of migrational behaviour is what drives the fabled Metcalfe network effect that should accelerate the utility of the solution.

Despite the positive case being made in this piece, there are no guarantees things will turn out as described. As mentioned above, many companies have been trying to do this for years. Although many of the technical challenges can be addressed, it is commercial aspects that may be the most problematic.

Companies may not wish to place their trust in a single vendor, because, however large or ‘trustworthy’, buyers like choice. So, will UPS support interconnections or data sharing with customers who also move part of their shipment volume through competitor carriers? More to the point will those competitors accept API calls from UPS, albeit using authorised customer account numbers? If they don’t, the customer may have a choice to make as to which carrier he favours with his business.

Many independent vendors have tried promoting the ‘neutral’ stance in the market, but have failed to realise that pricing is a huge issue. Business models that do not recognise that customers with huge volumes of transactions want to cap volume charges at very low levels as they cannot pass on those charges, and have serially failed. Investors in visibility startups that did not recognise the eye watering sums necessary to establish a global service that then need support for a very long period of time, often hundreds of millions of dollars. This has resulted in several management changes in concert with refinancing and debt write-offs. The best illustration of the scale of investment required are the costs Amazon was willing to incur for years while building its logistics operation.

So as well as UPS understanding the level of expense required (and they do have some advantages here), the pricing must be pitched correctly.

UPS will need to have a nimble and agile management team controlling this operation. Many unexpected challenges will occur and customers have become accustomed to mechanisms that support immediate engagement and resolution. The many instances where this has not happened have seen huge social media storms, which may have a fatal impact on perceptions. The analytical and deliberate nature of UPS will have to adapt to this environment. Carol Tome, the UPS CEO, seems to have a much better grasp of these challenges than some of her predecessors, but it may be very disruptive to existing management hierarchies. Unfortunately UPS does not have a great track record in nurturing innovative management philosophies that sidestep conventional process. Solutions like Symphony are designed to do just that.

Finally, if the demand really gets going, they may be overwhelmed by support requests for interconnections with partner systems. How this is managed may be critical to the viability of the whole initiative.

If this is a success, it is unlikely it will be an overnight one, but it should force many of the other players to respond, which will benefit the sector as a whole and every customer of supply chain services…  which is essentially all of us!

Author: Ken Lyon

Source: Ti Insights

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