There is an exciting feel to the logistics and distribution industry at the moment. Yes it is beset by fuel problems, both the cost of the stuff and the damage it does to the environment. But the underlying structure of the industry is evolving fast and although in the past this arena was hardly known for leading edge use of technology, these days a company with a poor technology infrastructure is likely to struggle.

Coping with consolidation

There has been a great deal of consolidation in the market over the last few years, with many acquisitions and mergers. This has not only meant IT departments have been heavily involved in integrating systems from merged companies, but also that as the market has become increasingly competitive IT directors are playing a more important strategic role in using technology to support business innovation.

This is particularly true when using optimised systems to reduce costs and improve efficiencies. DHL Logistics is ahead with its planned integration with UK logistics company Exel, that its parent company Deutsche Post bought at the end of 2005 for £3.7 billion.

The organisation had said it hoped to complete the integration in two to three years, but Nigel Underwood, CIO of DHL Logistics, is hoping to conclude the integration work by the end of this year.

“The key thing has been that this is our integration project, not our customers,” he says. “People have been very focused on it and we wanted it to be positive for our customers. While we have been doing it we have had some good customer wins from Toys R Us and the NHS and are really pleased that the acquisition has been positive for our customers.”

Changing landscape

Of course the industry is expert at distribution, supply chain, warehousing and freight forwarding systems, with large organisations employing sophisticated database tools and techniques, but the arrival of the internet, together with mobile technologies, has changed the landscape. Combine this with the highly detailed delivery information and it makes for a far more effective business and it all needs a sound technology backdrop.

Royal Mail, for example, uses a database with the details of 27 million delivery addresses to ensure that its largely automated sorting and interpretation systems deliver business benefits in the form of improved efficiency and a higher quality service. “As a 27 million item database it is enormously critical to us, and helps drive the business using address interpretation,” says David Burden, group technology director.

Knock-on effect

The optimisation of distribution is also having a knock-on effect on many of the large business customers of the logistics firms, which are increasingly under pressure to prove their social corporate responsibility credentials.

By ensuring effective distribution channels, with full loads and reduced routes, they are not only reducing their overall emissions, but also saving costs at the same time.

Web-based applications for customers, as well as close online partnerships with third-parties, are ensuring further efficiencies and cost savings in the industry, where often the value of customers’ goods has gone down, even though transport costs, because of oil prices, have risen. There are some geopolitical concerns to take into account that are hanging around the web-based product offerings, but the industry is taking a sensible balanced approach to these. BA’s CIO, Paul Coby, says the company’s key achievement in the last 12 months is its continued success in the online space. “It has been a huge success, moving from niche to mainstream in a very short time. Around 60 per cent of check-ins are done using self-service now in terminal four.”

The emphasis for the year ahead is on making sure that Terminal Five (T5) is ready for business next year. Many of the new systems like the resource allocation planning system are already in. “Making all the business and system changes in advance is important,” says Coby. ”

In an increasingly competitive industry sector, IT is increasingly critical, and CIOs are an integral part of the corporate business strategy.