IT outsourcing is gaining in popularity.

Here are the facts: 82 % of companies have already outsourced certain aspects of their IT. It is companies working in transportation and logistics (82 %) and in retail and trade (83 %) that most commonly employ the services of external IT providers. These numbers from the Bitkom Digital Office Index 2016 show that logistics companies in Germany have been rethinking their strategies – something that only a few years ago would have been unthinkable. Due to the relentless pressure on the logistics industry to optimize, companies are constantly developing new solutions to make their supply chain even more efficient. Each step in the value chain is to be smart, connected, and communicating. Data generated during this process can only be managed by IT infrastructures that are state-of-the-art at all times.

If they are to support a smart logistics ecosystem, IT infrastructures will need to fulfill certain basic requirements. Flexibility and scalability are, of course, the most important aspects. “IT systems need to grow alongside the company,” Jens Heinrich, Managing Director of Ehrhardt + Partner Xtended (EPX), explains the ‘pay as you grow’ idea. In his role, he deals with IT infrastructures in the logistics industry on a daily basis. Jens Heinrich knows: “A top performance and the non-stop availability of data are crucial.” Companies need secure access to a protected and centralized system. Ideally, the IT infrastructure can also be accessed and controlled using mobile devices, regardless of time and location. Mobile operating systems already function on the basis of an innovative ‘bring your own device’ approach. In the best case scenario, staff members can even access warehouse processes right from their smartphone. “Each company will need to decide for themselves whether they have the resources to build such an IT infrastructure, or whether they prefer to work with a fully integrated solutions specialist,” Heinrich adds.

Focusing on their core business

Many logistics operators do not have the necessary in-house expertise to build or maintain a functioning IT infrastructure. Such companies are faced with installations, updates, time-consuming management tasks, and the cost of constantly having to acquire new hardware. It is for this reason that external service providers allow especially the smaller companies to access technological solutions whose development and maintenance would typically far exceed the capabilities of their own in-house specialists. Which is why many logistics operators prefer to rent IT capacities in the cloud. “The server cabinets are located in high-security data centers. If a company requires additional capacities, they simply activate additional cloud space,” Heinrich explains. This helps companies to save on the high cost of hardware. Ongoing support offered by the service provider ensures security and professional operation of the IT infrastructure at all times. “The logistics operator can then focus all of their attention on their core business,” says Heinrich.

When selecting the right IT partner, organizations need to make several fundamental decisions. Where should the data be managed? Is there a secure connection from that location to the logistics center? Also, is the system performance going to be sufficient? “IT systems today are a business-critical component. If they fail for hours at a time, this may lead to delivery bottlenecks or to production outages,” Jens Heinrich explains. To avoid such a scenario, the data should ideally be hosted in Germany and connected to the customer’s location(s) by way of managed data lines. Due to the data being stored in a German data center, and thanks to the data’s point-to-point transmission via managed data lines, these data fall under the special protection of Germany’s Data Protection Act. Highly redundant servers, such as IBM PureFlex systems, ensure adequate system performance. Only data that is stored redundantly will prevent downtimes to the logistics workflow. Here, a specialized provider will mirror all data across multiple locations. In the case of a fire or other disaster, the servers automatically switch over to backup. A highly responsive early fire detection system as well as cutting-edge fire extinguishing systems protect data in the case of an emergency. Furthermore, the power supply must also be designed for high redundancy since a power outage may result in significant data loss. Modern data centers, for instance, include Diesel-powered emergency power generators that ensure an autonomous power supply for up to four days. In addition to the technological precautions, there also exist physical safety installations: safety fences, barbed wire, and lightning rods have become the standard. Ideally, an access control system allows access to authorized users only. Such data centers are classified as Tier 3+ and are certified in accordance with ISO standard 27001, thereby ensuring a maximum in safety, security, and protection.

Cloud-based process optimization

Deciding on a suitable IT infrastructure opens new doors for organizations. A cloud-hosted supply chain execution system (SES) or other software solution, such as a warehouse management system, can also help capture all the data coming from additional logistic elements and store them in the cloud. “Ideally, everything that is in motion communicates with a centralized, cloud-based piece of software. The wealth of data thereby generated can result in an added value that significantly increases a logistics operator’s performance and efficiency,” Jens Heinrich says. “In the future, many innovative solutions will come from such centralized data sources.” Experts sum up this topic under the term of ‘predictive analysis.’ Empirical values in the form of data collected will be used to make predictions about future decision-making. This will result in all logistics processes, such as bin assignment within the warehouse, gradually being optimized, thereby reducing efforts e.g. with picking processes. Modern apps supporting truck drivers with their tours also take advantage of centralized data analytics. During their routes, drivers are supplied with real-time information, helping them respond immediately to any changes to the delivery workflow. Developers are already thinking far beyond the field of logistics, as Heinrich explains: “Following this pattern, we see more and more companies outsourcing entire ERP systems to the corporate cloud.”

Companies are rethinking their strategies

Acceptance of cloud-based solutions is increasing by the week. “In the past, people used to think that the cloud was not secure. Today it is the opposite: cloud-based solutions frequently fulfill significantly higher security standards than in-house solutions,” Heinrich explains. “Ever since cloud-based solutions have successfully made their way into people’s private lives, many companies have started to rethink their strategies as well.” In the future, we can expect further increases in speed. Coverage is improving, too. “The cloud is part of our future,” Heinrich asserts with confidence. “Private hosting is of strategic importance to organizations. There will be no way around the cloud in the long run.”