Descartes is one of those companies that have weathered many storms and lots of changes in the industry. As technology user sophistication has grown, Descartes has kept up and often led the transportation and global trade sector in providing a platform for 21st century business.
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Each year old and new customers visit Florida for Descartes’ customer and partner conference, Evolution. Although most of the focus this year was on new and emerging technology, there was a brief moment during the keynotes for a look back at Descartes’ own evolution.1 This back-story and genesis was not the topic, per se, but it is instructive to understand Descartes’ strategy today.
Descartes first launched with routing and a DSD2 offering in the late eighties—the days of on premise. The TM technology market was really in its infancy with entrepreneurial founders focusing on elements of a transportation solution. By the mid-‘90s, enterprises large and small (shippers and service providers) began to eschew in-house development and turned to the software sector to provide solutions. This was a real catalyst to competition and the race to ‘have it all,’ encouraging VCs and a lot of M&As. Descartes started their M&A direction with acquisitions of routing, optimization, and other software products. These were early days for TM, which got another boost from the internet, a natural environment for multi-party/multi-enterprise solutions. In 1998, Descartes again seized this opportunity and transformed themselves to a ‘network,’ launching their Global Logistics Network (GLN).3
As the internet drove outsourcing and more globalization, business was no longer content with allowing carriers to manage their ‘black art’ and insisted upon transparency and visibility from carriers, LSPs, and trading partners; and rich systems from the technology community to manage every aspect of trade and transportation, end-to-end. That journey has taken many decades for the tech industry and their customers.
Think of it: the ‘old way’ involved making lots of phone calls followed by a flurry of faxes. That cost, Ed Ryan, CEO of Descartes said, about $25 per transaction. Today, online transactions cost only about $2. Of course, the reduction in cost is probably much greater, as that original estimate does not reflect the human time and expense. A transaction used to take from 1 to 4 hours or even days, depending on the transaction complexity and the number of people involved in the transaction. (And still, you got the delivery when you got it.) Now, transaction times are in seconds with access to the broadest options in service partners. Gone, for most, are the filing cabinets filled with paper, where reconciling a shipment’s invoice could take an investigative reporter. Today’s online transactions, of course, use systems that audit and manage all the charges and payments.
The drive for ever more efficiency and accuracy as well as enhanced customer services is central to enterprises and their service providers today. Omnichannel, global trade, and enriched service offerings are transforming logistics. These forces have set Descartes on their ‘quest,’ as Ed Ryan said, to prove that in international trade, out- or insourcing, home and same-day delivery, transportation, well managed, can be a competitive advantage. So acquisitions have continued in the last few months with the addition of such firms as Datamyne (for global sourcing and market research) and Pixi* for ecommerce fulfillment. Descartes’ vision is to provide control of the whole process—from importing, inbound management, pooling, warehouse, and fulfillment to outbound through to on-site customer services; from each mode—air, ocean, ground carriers; and each entity in the process—supplier/shippers, freight forwarders and brokers, 3PLs, OEMs and retailers, with visibility all managed from the network (GLN™). Today Descartes can support it all, and more.
Last Mile/Last Minute/Last Word
Ken Wood, Executive Vice President, Product Strategy pointed out in his session that transportation is not just a necessary chore, but today represents the essential ingredient of the etailer's brand. Not only is online shopping growing as a percentage of overall retail sales, but firms who are killers at delivery are capturing more and more of the share. If customers know they can count on the delivery precision they need, they just won’t risk turning to someone else for their time-definite needs. Amazon’s example of 49% of sales on the Monday before Christmas is a case in point. Consumers feel ‘brand X’ just won’t get the job done.
Ken pointed out that logistics firms have a lot of options in the inbound side from drop ship, DC bypass, pooling, optimizing the yard, consolidation and cross docking, and rerouting. In fact, retail today is not just about the storefront or web shopping, but controlling the flow of logistics from the source through importing and managing a variety of choices in storing, moving, and routing. Logistics choices are no longer dictated by where you are in the chain (supplier, carrier, DC/Pool Operator/Consolidator/3PL, store, or customer). Thus the shipper or retailer’s solution becomes rich and deep with optimization choices. See Figure 1.
At the conference we met and heard from representatives from retailers and brands such as CVS, Abercrombie, Chico’s, Stein Mart, Guitar Center, Hallmark, and Buckle, to name a few. These companies have revitalized their transportation strategies through strategies such as managing inbound from suppliers, pooling, store delivery and transfers, and improved yard operations.
And as Chris Jones, Executive Vice President, Marketing and Services pointed out in his session on retail trends, on the outbound side shippers can have differentiating capabilities and options to offer their customers, since not everything can be—or has to be—delivered through a parcel carrier.4 Today we cannot rely merely on 3rd parties, but need control of the entire process from order through customer feedback (of hopefully, a job well done). And that means uniting all the different delivery options available from LTL, private fleet, parcel carrier, and so on. Disjointed non-Omni technologies don’t allow for the best service and the most optimized costs. (Read Optimizing the Customer Experience with Exceptional Home Delivery for more on these ideas.)
Best practices today include modernizing mobile to include not just driver routing, but a full customer-service platform from pre- to post-delivery. Retailers such as Home Depot, Woolworth, John Lewis, SHOEPASSION.com, Cabela’s, Wayfair and Best Buy are making a name for themselves with exceptional Omnichannel and home-delivery services. Exceptional delivery is not confined to retailers, of course. At the conference we also heard from American Hotel Register, who supplies everything from toilet paper to those elegant sheets at all the hotel chains. That is a never-run-out scenario, like the grocery sector, with a huge catalogue of SKUs; and a huge combination of items, unique to each delivery, has to be executed with precision.
Speaking of grocery, Descartes has a heathy food distribution customer base, which not only uses routing and scheduling, but the latest smart mobile technologies: drivers use iPhones, tablets, and so on. It is amazing today how rich the range of mobile-resident applications is: routing, e-invoicing, proof of delivery; food quality/temperature control; customer services; as well as fleet management elements.5 Essentially, this provides a paperless transportation platform.
Many retailers we met have taken big steps and made huge investments in insourcing their logistics, developing and managing private fleets, building Omnichannel warehouses for internal and consumer fulfillment, and so on. They know that their brand and their customer loyalty depend on exceptional service.
Figure 1: Descartes’ View of Logistics Control and Management from Source to Consumer
Logistics Breaks the Glass Ceiling
One area in which Descartes has provided profound thought and technical leadership is the home delivery process. Here, logistics professionals have the opportunity, as Chris Jones said, to break the glass ceiling of logistics. Descartes has worked with major retailers to get away from just struggling with the ‘free and fast’ thought process of home delivery to thinking about services that make home delivery a revenue generator—a revenue center. The successful service providers don’t think just about the route, time, and cost, but the customer, their lifestyle and their needs. Many consumers will pay more for their needs to be fulfilled. The trick is to understand your consumer base and design services around that which consumers perceive as valuable. That is a different approach than logistics folks are used to thinking about.
When these premium services and the supporting technology, infrastructure, and personnel are proposed and the investments are justified through revenue generation, it creates “a different conversation,” says Chris, with a different set of players in the room. Those players (merchandising and store operations, which are close to the customer, the products, and the services) may lead or at least intensely partner with logistics. Chris said, in fact, Descartes has seen that the most successful projects had real cross-functional involvement.6 They were not only successful, but had the most dramatic impact on transforming the overall business to Omnichannel.
Retailers are notorious for the lack of internal partnership between logistics and merchandising. But we have found the tide turning not only with home delivery, but the inbound process as retailers think through allocation strategies as well as store transfers, click and collect, and other ‘behind the purchase’ inventory and transportation strategies. Pooling and DC hold-back, rather than allocating the entire collection into the stores, bring merchants into the logistics game and vice versa.
Manufacturers and Ecommerce
Another area where Descartes is playing an active role is in ecommerce for brands and manufacturing. With the Pixi* acquisition, Descartes can support the needs of manufacturers in B2B or B2C commerce.7 Manufacturers need to learn ‘on-time, on-site’ in markets of one. One time, on time, on site installations, and returns/reverse logistics (and Omni at that8) are all challenges that require real finesse in logistics.9
These kinds of tasks often require a portfolio of applications from various tech providers: for example, warehouse, ecommerce/order, administration/order promising, fulfillment, transportation management, mobile, fleet management, parcel. Most enterprises also have an ERP that picks up some of this load (today that might include order promising and fulfillment).
In the recent past, ecommerce apps and transportation were worlds unto themselves. But with the increased importance of last mile + service, creating a suite that completes the order through delivery is significant. ERPs are struggling to declare they can play this game, but the truth is that even the biggest and richest ERPs just don’t have the transportation or mobile competency to do it. So Descartes’ investment here is noteworthy and important to the market.
Logistics/Forwarder Services More Needed than Ever
Even though this article, so far, has a decidedly enterprise focus rather than on carriers/LSPs, Descartes has a leadership position with international service providers. Not only have their GLN, rating, back office management and document management been a mainstay of their business, but in the last few years Descartes made bold and significant moves in the customs and regulatory compliance area.10 Whether a stand-alone broker or broker services within the freight forwarder organization, Descartes manages a great portion of the international service business.
Customs information, security, and customs filing is a jewel in the crown for today’s international service providers, since most nations have or will adopt paperless standards. And with so much uncertainty surrounding trade agreements, practices, and regulations, with NAFTA, Brexit, and the TPP in flux, keeping up is difficult, yet essential, for the shipper and forwarder to ensure frictionless freight moves and government compliance. With the technology platform enabling integration to all the carriers, freight forwarders have new opportunities for expanded business in this dynamic world.
Air Cargo Transportation
Early on, Descartes invested in positioning themselves firmly within the air cargo transportation industry. Today they hold a pre-eminent position and serve the industry with a partnership with IATA.11 Like most Descartes applications, it is like a mirror image—the forwarder and carrier seeing, communicating, and transacting on common data.
Including the Smaller Players
One of the many encouraging things we heard about at Evolution is the effort being made to include smaller enterprises. Previously, Descartes and other big brand TM tech companies were more focused on the larger enterprises. However, Descartes has made a strong effort to provide lighter, less expensive solutions for smaller or infrequent users. Of note was the acquisition of OZ Development, which has served the small- to mid-market and partnered with SMB ERP player NetSuite, for example.12 This push to service the smaller players has benefits across the chain, since if each entity’s costs are a bit less, it adds up to considerable savings in aggregate.
Transportation is one of the most data-intensive, often complex, and difficult to manage to the minute processes known to business. And with globalization, home-delivery-enabled customer services, and dynamic product and transportation sourcing options, the needs of the logistics function continue to expand. Descartes’ robust investments in product architecture, development, acquisitions, and services—their continued quest—will ensure they lead the market as we head into the next decade with our transforming global supply chains.