Penske’s $8.7m investment in IT outlines the importance of information management to LSPs

Penske Logistics has just spent $8.7m on a new “state of the art” data centre in Ohio. The new server is co-located at a third party facility with Penske Logistics’ staff having operational control and ownership of the resources. This is not unusual. Yet, it might be useful to ask the question, why is a logistics service provider willing to outsource the ownership of key physical assets such as trucks or warehouses, but feels it necessary to own and control its IT infrastructure?

The question is even more pertinent as Penske does not operate within the sectors of the logistics industry experiencing the most intense transformation, such as e-retailing driven home delivery services. Penske Logistics’ main exposure is to the automotive and engineering sectors as well as conventional grocery retailing. However, Tom McKenna, VP of Logistics Engineering and Technology at Penske Logistics, explains that the company needs its own in-house capabilities despite the attractions of cloud based solutions. “Certainly, standardising across multiple customers at a low price is attractive, but strategic relationships such as lead logistics provider or 4PL agreements require something different”. Issues such as interfacing with SAP systems are important as are concerns about criticality. Penske does use Customer Resource Management cloud based solutions but it needs its own technology options to fulfil its strategic differentiation.

Surprisingly, the demands on Penske Logistics information systems have evolved quite slowly. McKenna says the base functions haven’t changed that much, but what is required today is more breadth; “timings are more real time and there is much greater detail. Visibility has always been there, but the richness of data hasn’t and that means upgrading the infrastructure and how we get that”. Undoubtedly, better visibility is a key function such as the ability to utilise mobile phones and tablet PCs, but these are a means of delivery not new functionality. “People are looking for more data and to move that data faster and certainly this means greater demands on our servers but the technology has increased over the years and can keep up …and virtualisation is an example of that,” added McKenna.

In terms of how information is used, the biggest development is that of analytics or ‘Big Data’. Part of the expansion in processing power is to enable Penske to deliver more and better quality data to its customers. The greater power of new technology has in the words of Tom McKenna,  “opened doors to expand analytics” giving the ability to drill down to much greater depth in operations and offering the potential for more precise control, although there remains the need for clean and synchronised data.

The sort of investment seen at Penske Logistics simply reasserts the centrality of information systems to logistics providers. Although from the outside it may appear that logistics service providers are defined by their transport or warehousing assets, in reality both the management of company resources, but also the management of supply chain relationships with either customers or suppliers, pivot around the management of information. This explains why the grip of logistics service providers on information provision must be so tight.