When we think of the logistics industry and the structure needed to make modern supply chains run smoothly, we often overlook the importance of the computing technology used. As the importance of our global supply chains is thrust into the spotlight in the midst of the pandemic, it may be surprising that many of the biggest players in the logistics industry today still run on outdated mainframe systems that can hinder their overall ability to drive agility and improve order accuracy — and this oversight can cost them in the long run. 

As more and more competitors move into the logistics space, companies are forced to compete for customers, ultimately adding more weight to the importance of the tools that they utilize — especially as many of today’s customers accept no excuses for delayed shipments. Some of these companies utilize edge-in modernization and digitization strategies that only help to modernize the front-end pieces of their technologies in an effort to improve their overall customer experience, but the ones that will be most successful in the long term will be those that fully transition their legacy systems to the cloud. 

Modernizing to the cloud allows logistics providers to scale horizontally, adapt to changes on demand in real-time, more accurately track assets and provide greater accuracy than traditional, manually tracked paper and pen systems. Whether it’s freight shipments on tankers, trains and planes or ground transportation en route directly to the consumer, adopting cloud technology can keep companies agile by centralizing essential data and enabling them to reorganize wherever it’s needed most. 

The Trouble With Legacy Systems

Systems that continue to rely on mainframes hinder an organization's ability to move to cloud based applications — ultimately reducing their ability to become more agile and innovative, scale appropriately and maintain a competitive edge against other players in the space. In addition, maintaining these systems costs companies much more money in the long term due to a mix of factors, including a limited pool of talent and an even smaller pool of skilled developers that can assist with updating and maintaining these systems, and other budgetary concerns. This is because legacy systems often include expensive licensing fees that were bundled in with the original code, leaving companies to constantly renegotiate these agreements, which can be especially costly and time consuming. As a result, getting off of these mainframes should be the first step for companies undergoing a digital transformation.

As today's business demands continue to shift, logistics companies running on their legacy systems will continue to hold back as technology continues to develop and become even more advanced.

Cross-Sector Setbacks 

Continuing to avoid the issues driven by legacy systems can seem like a logical business decision when aiming to cut costs, but their hidden issues can build up into much larger challenges over time — and these issues will come to light sooner rather than later. In fact, earlier this year we saw this play out in the government sector during the most stressful moments of the COVID-19 pandemic. Most states within the U.S. still utilize mainframes to administer necessary services, and despite their failing technologies, continue to put off modernizing to the cloud. Widespread panic ensued after many states realized their outdated systems couldn't handle the influx of unemployment benefits requests caused by so many sudden job losses — knocking these services offline entirely and leaving states scrambling to find the necessary solutions to repair their broken technologies.

Logistics companies are vulnerable to parallel scenarios, especially in the face of so much uncertainty surrounding traditional delivery systems and various travel and import restrictions imposed on certain regions. As a result, the ability to adapt quickly has never been more important for the logistics industry — but if organizations continue to delay their modernizations to the cloud, their overall flexibility will continue to be negatively impacted down the road.

A Modernization Strategy

Many logistics companies are fearful of the “rip and replace” method of modernizing legacy systems, also known as “rearchitecting” or "re-engineering", where companies do away with their legacy systems entirely and then try to recreate its wealth of functionality with newly written applications. This method not only requires significant financial resources and manpower, but the potential for lost business intelligence, downtime for customers and the steep price tags that come with this strategy eliminate its benefits. In fact, the failure rate of these kinds of projects is as high as 70% according to a study by Deloitte LLP, with consequences of billions of dollars lost. Many companies are also unaware that there are alternative options for automating the modernization process. In fact, conducting a deep, automated assessment with qualified professionals before beginning a project for IT modernization can alleviate the anxiety that comes with change and ensure companies are pursuing the best-fit strategy for their needs.

Following a system assessment, setting — and sticking to — a detailed timeline for modernization is one of the most important aspects of a project and is vital to ensuring businesses successfully complete it. The disconnect between aspirations and execution can be tied back to fear, which means that fear causes more than just discomfort — it’s costing companies major long-term savings.

For organizations looking to make a change, fear has no place in their long-term IT goals. Rather, by committing to action and identifying a modernization strategy that’s free of the risk of downtime for their specific systems is essential for confident project management.

When pursuing a modernization project, most organizations follow one of four following strategies when beginning the data migration off of their mainframe:

• Rehosting: In this process, companies get rid of their outdated mainframes by transferring their unchanged procedural code bases and primary functions into a new computing environment. This ensures that companies can retain key legacy knowledge from within their existing systems while ensuring they are capable of thriving in a fast-paced business environment.
• Rewriting: In some cases, starting over in a modern environment is the best approach for a company. In the rewriting process, professional developers manually re-create the existing legacy system and its applications within a newer, more optimal environment for business function. However, this approach holds a high risk of failure — and tends to hold a significantly higher price point and longer project duration than other strategies.
• Automated refactoring: This approach involves IT experts migrating a system’s procedural code bases to modern, object-oriented languages using specialized tools crafted specifically for the job. If a company needs immediate cloud migration and cloud-ready application stacks, this tends to be the most effective strategy. 
• System replacement: When companies pursue a system replacement, this approach is often viewed as an emergency exit, as the entirety of the legacy system and its applications are taken offline and out of service. The system is then replaced with off-the-shelf software solutions from third-party vendors, which are expensive and not designed to meet each company’s unique needs.

Moving away from legacy mainframes to the cloud is essential for the evolving logistics industry as they juggle more responsibility and stricter customer demands than ever before. However, learning to manage various cloud solutions at once will give companies an edge as more and more competitors start to move into the logistics and shipping space. The world’s logistics industry is counted on to change lives and keep our society running smoothly — and the best way to ensure quality service and continued growth is to invest in cloud infrastructure. The sky's the limit — so what are logistics organizations waiting for?

Brandon Edenfield is global managing director of application modernization at Advanced software company.