2013-2014 Transport & Logistics CIO
Report
CIOs Weigh In: Investment Plans, Solution Sourcing & CIO
Career Trajectories
For further details, please contact: Sarah Reynolds
eft
world phone: +44 (0)207 375 7243 US Toll Free: 1 800 814 3459 Ext. 7243 [email protected]
Table of Contents
I. Introduction... 4
II. Methodology and Approach... 4
III. Profile of Respondents... 4
IV. Investment and Innovation………... 6
V. Current IT Challenges and Vendor Selection Processes ………..… 10
VI. Big Data, Cloud, Mobility and Sensor Technology ……….…………... 14
VII. The Strategic Role of the CIO ... 24
VIII. Conclusions ... .. 25 List of Charts Geographic Region ... 4 Annual Revenue ... 5 Business Type ... 5 IT Investment Trends ... 6
Primary Reason for Investing in New Technology ... 7
Intended Investment Areas for 2014 ... 7
Outsourcing vs. Building In-House ... 8
Technological Innovation vs. Core Business Activities ... 9
Largest Business Challenges for Logistics and Transport Companies ... 10
Top Challenges when Providing Solutions to Customers ... 11
Where Logistics IT Executives Source New Solutions ... 11
Vendor Selection Time ... 12
Reasons for Increased Selection Time ... 12
Reasons for Decreased Selection Time ... 13
Criteria Sought in Vendors ... 13
Person Involved in the Vendor Selection Process ... 14
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Plans to Use an Outside Firm to Develop Big Data Strategy ... 15
The Impact of Big Data on Company Performance ... 16
Big Data Technologies Used ... 16
Big Data Technologies that Executives are Considering Investin ... 17
Areas of Big Data Application ... 18
Planned Budgeted Investment in Big Data ... 18
Use of Cloud Technology ... 19
Public vs. Private Cloud for Users ... 19
Public vs. Private Cloud for Non-Users ... 20
Reasons for Using the Cloud ... 20
Applications Used in the Cloud ... 21
Reasons for Not Using the Cloud ... 21
Sensor Technology Use for Cloud Users ... 22
Sensor Technology Use for Non- Cloud Users ... 22
Uses of Sensor Technology ... 23
Mobility Priorities of Cloud Users ... 23
Mobility Priorities of Non-Cloud Users ... 24
Who the CIO Should Report To ... 24
I. Introduction
HP partnered with eft to survey transport and logistics Chief Information Officers about their plans for IT investment, solution sourcing, and the strategic role of the CIO. Respondents included transport-related organizations of various sizes and geographic locations, and from shippers, trucking and intermodal, 3PL, and other industry segments. Specific survey questions and responses are shown below.
In the Conclusion of this report, HP offers a summary of CIO responses to their key challenges and opportunities: with a clear focus on driving business performance, operational efficiencies, and cost controls. Based on those survey findings, HP also offers a clear vision of how transport CIOs expect to leverage IT as a key enabler to improve asset utilization, supply chain visibility, and customer service.
II. Methodology and Approach
This survey was conducted in February 2013 with responses solicited by targeted e-mail lists, select trade association memberships, various related-industry databases and other targeted methods. No individual responses were
analysed, but rather all responses were consolidated.
III. Profile of Respondents
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Just over a third of respondents surveyed work for a company with an annual revenue of over $1 billion.
Of the entire survey group, just under half of the respondents represented transport or logistics companies, while solutions providers and consultants represented the next largest group, making up 29.95% of the total. Retailers and manufacturers accounted for 20.32% of respondents.
This report, the first of three, analyses the reponses of transport and logistics executives only. Parts two and three will analyse the responses of manufacturers/retailers and solution providers to the industry respectively.
IV: Investment and Innovation
This section of the report deals with areas and levels of investment, the trade-off between innovation and core business practices, the types of technology invested in and whether to outsource vs. build solutions in-house. The survey asked respondents to indicate their level of IT investment in 2014. The majority of respondents (67.19%) indicated that they would be increasing their IT spend for 2014. This marks a slight increase on last year’s figures, where 63% indicated that they would be increasing investment. Delving deeper into the results, 3PLs indicated in the majority that they would be increasing their investment for 2014, alongside freightfowarders. Meanwhile, ocean carriers, couriers and intermodal companies indicated that there would be no change in their investment plans in the majority.
When asked to specify what is driving the increase in investment, the most common theme was that of needing to keep up with industry trends, with variations on ‘to stay with the times’ and ‘to keep up with the ever-changing industry’ a stand-out response. Second in driving increased investment was the need to keep up with customer demand, with ‘client needs’ ‘increasing customer requirements’ appearing numerous times. For a full list of text responses, please contact Sarah Reynolds at [email protected].
Respondents were asked to select their number one reason for investing in new technology. To make operations quicker and more efficient led the field by some way, with almost a third of respondents selecting this answer. Of more or less equal importance were lowering operartions costs, innovation and fulfilling customer requirements. These results are consistent with those of 2012/13 and 2011, with efficiency taking the top spot now for 3 years running. See the 2012-2013 report here.
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Respondents were then asked to specify specific areas of technology investment for 2014, with participants able to select all relevant areas. Leading the way for 2014 by a fair margin was Warehouse Management. Business
Applications’ Modification & Performance, Electronic Data Interchange and Transport Management came in 2nd, 3rd and 4th place. Interestingly Transport Management, Business Intelligence and Mobile Technology took the top 3 spots in the 2012/13 report.
For each of the areas of investment above, we then asked respondents to choose whether they saw more benefit in consuming the solution as a service or operating it themselves in-house. For the majority of areas, participants saw more value in outsourcing the solution vs. operating it in-house - of 24 areas, respondents saw more value in outsourcing in 18, vs. just 6 where the perceived benefit of operating in-house was greater.
The top 3 areas for in-house building were Route Planning, Business Intelligence and Business Applications’
Modification and Performance. On the outsourcing front, the areas with the most perceived benefit were Cloud, GPS & RFID.
The next question focused specifically on business process outsourcing, asking respondents to give their level on 3rd party involvement when it comes to this practice. Although of the three options, the most selected answer was that companies are not considering leveraging a 3rd party in the next 12 months, when we combine those who currently leverage, or would consider leveraging a 3rd party in the next 12 months, it appears as though the majority of respondents (54.69%) are behind outsourcing this function.
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The final question in the section asked respondents to compare technological innovation to core business activities in terms of priority. The most popular answer by some lead was that both generally take equal priority. Somewhat encouragingly, 32.8% see innovation as taking higher priority than core business activities. Analysing the data further, of the business types surveyed, only freight forwarders rated innovation as a higher priority than core business activities. When exploring the data alongside annual revenue, only companies with a revenue of between $50-250 million gave priority to innovation over core business activities. This perhaps suggests that these companies have more scope for investment in innovative technology solutions when compared to both their more established (higher revenue gaining) and less established competitors.
V. Current IT Challenges and Vendor Selection Processes
In this section of the report, we explore the current challenges that logistics IT executives face in their business as a whole and when providing solutions to their customers. We als explore vendor selection processes and issues. We asked respondents to select the top 5 business challenges that they’re currently facing. Improving business operations processes to streamline knowledge transfer and enable collaboration took the top spot, with integrating the supply chain to meet client expectations and creating a single source of truth taking the second and third spots. For visual purposes, the complete text for each option does not appear on the graph below. You can find the full text list of options below the graph.
We then asked respondents to select their top 3 challenges when providing IT solutions to customers and partners. The most common challenges here were providing custom-made solutions, alongside integration with customer IT systems in joint first place, followed by providing adequate visibility to customers. These results are similar to last year, although integration with customer systems took the lead by a fair way in 2013.
Be more efficient in maintenance operations to reduce risk of equipment failure, down time, undue replacement cost, etc. Improve business operations processes to streamline knowledge transfer and enable collaboration
Rapidly integrating (for on-boarding and on-going adherence) the supply chain (E.g. clients', suppliers', partners') business processes and data to meet client Identify (I.e. catalog) and exploit the activities/business processes common to multiple clients, for efficiency, while offering differentiation
Obtain information from supply chain, consolidate, federate, make it available across the enterprise - "single source of truth" Modernize legacy applications to better address new market opportunities and challenges
Balancing asset utilization, route optimization, meeting the variety of customer obligations, and product mix Reinvent how my company operates in order to be more attractive to new talent and on-board them swiftly
Model client solutions which leverage the breadth of multi-modal supply available
Increase operational safety so the operations environment does not cause harm to people and physical assets
Modernize legacy applications to minimize reliance on the institutional knowledge and IT skill set presently available only in an aging workforce Comply with governmental, regulatory, and industrial conventions
Make informed decisions about long term capital investments and business strategy to optimize the network and manage capacity
Reduce risk associated with information security and the denial of service, loss, change, or manipulation of corporate data
Rapidly, and in real time, allocate/re-allocate assets (equipment, facilities, and people) to meet fluctuating demands and operational conditions
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When asked to select where they find out about new IT solutions, most logistics IT executives chose conferences as their favoured method. This was followed by internal research and encouragingly, customer requirements . The placement of customer requirements as the third most popular method shows that logistics IT executives may be listening to their customers more than in previous years.
When asked to indicate the time that vendor selection takes, executives mostly responded that vendor selection time has stayed the same. Just over a third of participants cited that vendor selection time has increased, a decreased from 40% on last year’s results.
We asked those who had selected ‘Increased’ to the question above, to give their primary reason behind choosing this answer. Almost a third of respondents gave the board’s desire to be more involved in the decision making process as their top reason.
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We also asked those who indicated that vendor selection time had decreased, to indicate why this might be. The most popular answer here was that internal efficiencies have improved.
Respondents were then asked to indicate what they look for when selecting solution providers, rating each area on a scale of very important, to not important. Rated as most important was matching requirements. High quality and good customer service also rated highly.
Finally, we asked participants to indicate who is currently responsible for the vendor selection process. In the majority of cases, the CIO is involved. Other individuals cites in the ‘other’ category were ‘VP of Sales’, ‘Supply Chain Management Team’ and ‘The IT Steering Committee’.
VI. Big Data, Cloud, Mobility and Sensor Technology
The next part of the survey looks at big data, cloud, mobility and sensor technology, in particular at the prevalence and effectiveness of these technologies within the walls of transport and logistics companies.
Firstly, we asked respondents to indicate the level of big data use at their company. The majority of respondents (60.94%) indicated that they are either intending to invest in the technology in the next 12 months, or have already done so.
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To those who indicated that they are currently using ,or considering investing in big data technologies, we asked whether they are planning to use outside firms to develop their big data strategy and practice. The results here were close, with ‘Yes’ just receiving more responses.
We also asked this group to what extent they thought big data will provide competitive differentiation for their company. Executives mostly have a positive view on big data’s possibilities, with the majority of respondents indicating that it will at least have a reasonable impact on their business. 13.5% view it as a total game changer. These results are a slightly more in favour than last year’s which can be found here.
We then asked this group to indicate all big data technologies that they currently use in their business. Analytics makes for the most popular use, with data integration and dashboards following in second and third places. Given the current capabilities of big data technologies, this is unsurprising.
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Later we asked the same group to identify which of the above areas they were considering investing in in big data terms. Analytics once again took the top spot. However, the next couple of areas differ from areas currently used, suggesting that big data as a whole is taking on a greater priority in terms of investment. It would seem from these results that the gains from currently invested in big data technologies warrant the need for increased investment in other big data areas.
We then asked this group to indicate the specific business areas to which they are applying big data analysis. The most common areas for big data application appear to be for capacity management analysis and product and market segmentation. The area of smallest application is towards analysing human data from social media, which, given the nature of the logistics industry is unsurprising – we know that this area of application is more commonly used in marketing consumer products. However, logistics executives should start to incorporate human data into their big data thinking, as demonstrated by this article written by supply chain thought leader Lora Cecere.
Finally, we asked this group what their planned budgeted dollar investment is for big data analytics tools in 2014. The majority of respondents selected that they are planning to spend between $0-$1 million on big data analytics tools. A small proportion of 10.8% are planning to spend between $1.5-$2 million. Upon further analysis of the results, it appears that all of the companies who have this higher budget allocation for big data, are themselves companies that have an annual revenue of over $1 billion.
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We then opened up the survey to all participants to judge the level of cloud technology use, asking simply, whether it is currently employed in their organizations. Around two thirds of participants are currently making use of cloud technology.
For those who selected that they are using the cloud, we asked what the best option for investment is. Most selected that hybrid (a combination of public and private) is the best option.
We also posed this question to those who indicated that they’re not currently using the cloud, to investigate which is the perceived best option. Again, hybrid was perceived to be the best option, although public was perceived to be of much less value.
We asked cloud users to rate their most important reasons for choosing to use the cloud. Applications rated as the most important overall. However, when combining ‘Quite Important’ with ‘Most Important’, storage ranked the most popular answer.
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We then asked cloud users to indicate what specific applications they are using in the cloud. The most commonly used application is for storage services, followed by customer relationship management, with the applications not being planned for the cloud being warehouse management and ERP.
For those who are not currently using the cloud, we asked for the reasoning behind this decision, asking respondents to select all reasons that apply. The most popular answer by some way was due to security risks, followed by lack of control.
We then raised the issue of sensor technology and its uses separately to cloud users and non-users. Cloud users are, in the majority either currently using or exploring its use. Responses from non-cloud users on the other hand, sees a higher proportion of non-sensor technology users, although the majority are still either considering or using the technology. As a combined total, ‘Not used but exploring’ was the most popular answer.
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We then asked those who had indicated that they are using or considering sensor technology, to indicate its areas of use. GPS and RFID ranked as the most popular areas of use.
The final question in this section addressed the issue of mobility priorities. Again, we addressed the question separately to cloud users vs. non-users.
Users’ highest priority lies in applications, followed by data and device management. Non-users, on the other hand, rated cost control as their third biggest priority. When combined, voice interestingly came out as the third most popular answer.
VII. The Strategic Role of the CIO
The final section of the report concentrates on the strategic role of the CIO, addressing the role of the CIO within the organization and the position of the CIO on the management board.
Firstly, we asked respondents to indicate who the CIO/Head of IT should report to. The majority of respondents indicated that they should report to the CEO.
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Finally, we asked participants to state whether their CIO/Head of IT currently sits on the executive management team or board. In the majority of cases, they do. Further analysis of the results indicates that all repsondents from companies with an annual revenue of $0-5 million have a CIO that sits on the board. Of companies with a revenue of over $1 billion, three quarters stated that their CIO is on the board, while a quarter stated that their CIO is not. When filtering by business type, all types of transport companies, except Ocean indicated in the majority that their CIO is on the board.
VIII. Conclusions
As seen in this survey, a majority of firms in the transport and logistics sector plan to increase their IT investment in the coming months and years. CIOs indicate the focus of those IT investments will be to improve the efficiency of their transport-oriented businesses, primarily by strengthening business operations and company-wide cost controls.
Working on a consultative, solution-oriented basis, HP continues to partner with transport and logistics firms to drive operational and cost efficiencies. Most transport organizations are pursuing those objectives through enhanced asset utilization, enabling growth through improved client management and sales support systems, the integration of custom solutions, and greater supply chain visibility.
The majority of respondents have data and analytic initiatives underway, with sensor data now a primary driver behind efforts to improve capacity and utilization and to provide precise cargo tracking. Mobility increasingly allows transport firms to scan and transmit data on an anywhere/anytime basis. Over 90 percent of respondents indicate they are investing in public or private cloud solutions designed to balance security, efficiency and cost savings. The survey indicates that IT is now accepted as a key business transformation enabler. As a result it is critical that business and IT are strategically aligned.
Want to Learn More?
The survey results and issues presented in this report will form the foundation of discussion at 2014’s Logistics CIO Forum, taking place in Dallas, March 4th & 5th.
The summit will delve into the best strategic opportunities for big data analytics, explore the gains to be made from IT innovation and the strategic role of the CIO
Speakers include lined up to discuss and debate the key issues facing IT in the logistics industry include : Bill Stobbart, SVP, IT, Penske Truck Leasing
Phyo Kyi, VP & CIO, Phyo Kyi, VP & CIO, Purolator Jeff Jones, VP of IT, UPS SC Solutions
Eric Kulikowsky, Senior Director of Supply Chain, Philips Mark Ohlund, CIO, Armada Supply Chain Solutions Plus many more !
Join your peers over 2 days and benefit from:
High-Level Case Studies from the industry’s innovators – learn best practices and benchmark against your peers
Unrivalled Networking – meet and mingle with the most forward-thinking executives in your industry In-Depth Topic Breakdown – benefit from a deeper understanding of key challenges, with in theory, in
practice and interactive sessions
Passes are complimentary for senior IT and operations executives working at a transport or logistics company. Register online to save your space: https://secure.eyefortransport.com/cio/register.php
About eft
Established in 1998, eft has become one of the leading providers of business intelligence, independent research, news and executive level events for the supply chain & logistics industries. eft has two primary focuses:
1) To provide executive networking opportunities in the supply chain & logistics industries via the more than 15 events, we annually organize and host in North America, Europe and Asia and online via the tens of thousands of users of www.eft.com. The events are designed to complement and enhance the business connections available through our online network, and bring together the industry elite. Regularly attended by CEOs and senior
management from the transport and logistics industry and Heads of Supply Chain of major companies, the events focus on current developments and latest trends, and are enhanced by high level, exclusive networking
opportunities.
2) To deliver industry education through dozens of industry reports, surveys, newsletters, webinars and senior-level presentations at leading events.
