By Steve Dunne, EMEA Staff Writer
With more than 5,000 employees in over 40 global locations, Logistics Group International GmbH (LGI) provides highly complex supply chain solutions to multiple industries. In this article, Christoph Frank, Head of Process and Technology Solutions and Strategy at LGI, talks about the organisation’s shift to the cloud and how making the business case is often about internal trust and making decisions as if you were the owner of the business.
Can we start by getting some background on you, your career journey and your current role with LGI?
In my current role, I’m the Head of Process and Technology Solutions and Strategy. We decided to combine process and IT, so I wear a number of hats. I’m responsible for IT overall, and for a small digital team. My role also includes managing our process and factory planning team, our lean team and our learning academy. So that's my current job, managing approximately 90 people. Previously, I spent three years at a large truck and bus manufacturer. There, I was responsible for something called the ‘House of Digital’, where we completely transformed process and IT for the entire sales and aftersales process worldwide. For example, we deployed salesforce.com and moved a lot of old applications into the cloud.
Before that, I spent five years leading Amazon’s entire transport logistics operations for central Europe. Anything happening outside of the logistics centres was basically mine or my team's responsibility. And before that a couple of years at Boston Consulting and at Daimler for five years. My role at LGI has brought everything together, from automotive and e-commerce, through to logistics and the supply chain. In short, the IT process and the supply chain have been focal points in my entire career so far.
For our readers who aren’t familiar with LGI, could you explain what the business does?
LGI is what we call a complex contract logistics company. We have roughly 5,000 employees. Every day, we serve customers in multiple segments. We’re seeing huge growth in what we call lifecycle management and end-to-end services. This is not only supporting the logistics side but delivering value-added services around the logistics, bringing goods to and collecting from the customer, and steering the supply chain for our customers. That's our growth area through to 2025.
For example, in our automotive and industrial division, with customers like Daimler or Porsche, we manage the logistics to their production lines. We even support pre-assemblies to support what they do with certain parts of their supply chain.
The second division is electronics/healthcare. We serve large customers, like HP, bringing products, such as laptops and printers to Europe. Here the value-added services we offer, include updating firmware, exchanging parts and moving them to redistributors.
Our third division is focused on fashion/lifestyle and e-commerce, where we deliver goods to companies’ stores, but also directly to e-commerce end customers. On top of that, we have an air and sea freight division serving our customers in this domain.
The challenge we had in 2019 was that our data centres were growing old and there was a real need to upgrade the hardware. And secondly, our customers require 100% uptime. Some sectors can be very unforgiving about downtime and there are huge fees attached for unplanned outages.
LGI is experiencing consistent growth, and you have 5,000 employees across more than 45 sites globally. How do those factors influence your IT infrastructure and how you approach the delivery of technology across your business?
When I joined, IT was in something I would call hibernation mode. IT was viewed purely from a cost perspective. Do everything as cost effectively as possible. With our new CEO, Bernd Schwenger, this has changed, because we really know that we have to be an enabler and a driver for our business. We have over 40 sites, we have plenty of customers, and we are very good at being very customer centric. What we lacked was standardisation and digitalisation. I inherited a zoo of applications, a zoo of different processes.
One of the key examples is the HCM space where, due to mergers and acquisitions and organic growth, we didn't even have one HR system and process in place. When we started the journey, that's actually where we said: "Look, I can only automate in IT and be efficient if I have one central tool for HR.” This mindset has carried forward and having a vision for how IT should be delivered is quite a powerful thing.
When did the journey to the cloud start and what were the main considerations for the business?
At a fundamental level, before my time, we actually moved to Office 365 because the on-prem version was out of service, and it was the most efficient way. The challenge that we have is that in this logistics space with warehouse management systems and transport management systems, it’s still very much an on-premise world. Many software application providers are probably 10–15 years behind the curve. There's no cloud native or anything like that.
I see a lot of value in the SaaS product delivery methodology, such as feature updates. I don't even have to worry about what's coming in the next release and keeping software up to date. This frees the team up to spend their time more strategically.
The challenge we had in 2019 was that our data centres were growing old and there was a real need to upgrade the hardware. And secondly, our customers require 100% uptime. Some sectors can be very unforgiving about downtime and there are huge fees attached for unplanned outages. At that point our team has actually said: "Well, you know what? Hosting hardware is simply not our core competence as a logistics provider."
So, we started the journey to look for, first of all, an infrastructure-as-a-service provider. Next, we looked at software-as-a-service (SaaS) for our key applications. From O365 and now Workday. I see a lot of value in the SaaS product delivery methodology, such as feature updates. I don't even have to worry about what's coming in the next release and keeping software up to date. This frees the team up to spend their time more strategically.
How do you approach the business case for cloud technologies and how does that differ from the traditional on-premise software world where you're trying to make the business case for those deployments?
One of the reasons I joined LGI was that I have been at other large enterprises where these kinds of budgeting processes take up a lot of time. You have to make business cases that are sometimes complete guesswork. At LGI we fortunately are more entrepreneurial. It doesn’t mean we are loose with cash or simply throw it around. What's great is that the senior management team is very open and they understand there’s an enabler and there’s a driver, and you can make a case for that. That’s not to say we have to plan for every Euro saving we need for the project because that’s often guesswork. The important thing is to make decisions as if it were my own company, and that’s what we did with the HR system from Workday.
By the same token, you have to be able to account for, and drive the benefits of, any IT decision. What are the savings, the value and the added benefits from moving to the cloud – and the knock-on impact to the business? That’s how we think about it.
In the end, you have to do it, and you have to then make sure that you get the benefit out of it, and that's the hard part. But I would rather spend time on getting the benefit out of it rather than arguing for the benefit for five years and the next wave is already over.
What are the added-value benefits and improvements that cloud computing drives further down into the business?
I’d start by saying having accurate data is key. If you have one system and one process across the entire group, then you have the same process, the same data, and you can actually rely upon it. Some might say you can get those with on-premise but it’s certainly more difficult. The second point I alluded to earlier is upgrades and maintenance. I have spent such a lot of time in my logistics career, thinking about upgrades, bugs, fixes, patches etc. How do we deploy them? How do we test them? What’s the business impact? SaaS just goes such a long way in eradicating those problems. Because of the way new versions are delivered, there’s an appetite for innovation internally. It wasn’t like that before. If something worked, people didn’t really want the new release because of the work involved in pushing it out.
The third point would be that in the logistics software space, if I want a feature, I need to pay for it. I then pay the software supplier to deliver that feature. That’s just not the case in the SaaS world. Whether it’s salesforce.com or Workday, my subscription buys me innovation, it provides me with a roadmap for the future. Even if I don’t turn on all of these features, the fact that someone else is thinking about that software development, testing it and rolling it out, that’s so powerful. Hopefully we’ll see more of this in the future in the logistics space as software vendors catch up.
Having accurate data is key. If you have one system and one process across the entire group, then you have the same process, the same data, and you can actually rely upon it.
Wrapping up, for IT leaders still early in their cloud journey, how should they be thinking about that business case and defining the value of cloud to their organisation?
Start by asking: “If this was my own money, would I put a bet on it?” I think if you follow that rule, you can shortcut many of the decision-making processes. The second question would be is it a one-way door or a two-way door? In other words, is it so costly I can’t get out of it if it turns out to be the wrong choice? Because very often if you do a two-way door, it's no problem actually correcting yourself after a year. If it's a one-way door, you should be very, very comprehensive in analysing what it means.
I think making that case, and also trying to get business leaders to understand what the decision will help the business do better; where they could create value; and where they could also work with their own teams to configure and maximise the value of the solution is how businesses should be thinking about the cloud and its value.
