Jere Kolehmainen 26.05.2020 6 min read

The importance of integration capabilities for logistic and supply chain aggregators

An aggregator refers to a networking e-commerce business model, where an intermediary organisation collects data from multiple different sources and brokers that data in form of a service within an industry. Some of the most successful companies which are operating on an aggregator business model are surprisingly familiar. Uber in transportation, Airbnb for accommodation and Netflix in entertainment to name a few.

 

The aggregator business models can be found in almost any industry and many start-ups do choose this model because the entry point into this line of business is very low. Without going in too much detail on what it takes to build a successful aggregator business, I will rather focus on the importance of integration capabilities. Data is the oil of today. The more accurate data the aggregator has on hand to a broker, the more valuable the service is to the paying customer. Getting to this data and being able to broker it to other applications, is where it gets a bit tricky. Logistics aggregators face a daunting task in building these business essential connectivity networks and here is why.

 

It is widely known that the entire logistics industry is lagging behind other industries in digitization efforts and has struggled with the lack of the unified standards for decades. Key industry players have been investing in custom data formats to serve their own needs and the gap between modern API systems and EDI based legacy systems dating back to the 80’s has only widened.

 

There is a huge demand for EDI to API expertise within the industry and especially among the aggregators. Whether the logistics aggregator is focusing on supply chain visibility, ocean freight bookings or last-mile delivery, they have to go and get that data somehow. The data is not only scattered behind different interfaces it is also divided into thousands of different variations of EDI formats that need to be transformed before uploaded to a modern API system. This is the reality every logistics aggregator will face when coming up with their own integration strategies.

 

Just imagine building and maintaining all your B2B connections with the entirety of your partner network which is not only growing but also constantly changing. In a worst-case scenario this will remove the scalability element completely out of the business. No company can really grow if they must continually invest more time and money into back end operations instead of sales and marketing.

 

This is also a very competitive sector, which is why it makes sense for aggregators to outsource their integrations. Focusing on one’s core business is a wisdom that applies across all industries. You can’t do everything on your own, at least not very efficiently. Everyone is looking for scalability and by outsourcing integrations in a programmatic way you can at least clear one of the major hurdles in integrations.  

 

Even though data is a commodity it is also an integral part of an aggregator's business. When an aggregator is looking to partner with an integration provider, they should entrust that responsibility with a company that understands both the EDI and the API world and has the ability to build extensive connectivity networks in a cost-efficient way. Since efficiency and scalability go hand in hand, the aggregators integrations provider can either be supporting the growth or obstructing it. Picking the wrong partner in the beginning can be a costly mistake especially if you have a contract you cannot get out of. Luckily the SaaS and iPaaS industries are moving towards subscription-based models which will eradicate the risky multiyear deals in the future.

 

Connectivity challenges exist still today because there is no easy way to solve them. The sheer volume and accuracy of the data that aggregators have available through their platform will determine how successful the platform will become. Customers rely on this data to make well-informed decisions when evaluating how efficient their supply chain is running. The better the data quality is, the better customer satisfaction will be.

 

Youredi today works with multiple industry aggregators, from contracting platforms to booking and visibility platforms. Based on our years of experience in helping our partners attain their aggressive growth strategies we know what we are talking about. You can’t do everything on your own. Even though, data quality and quantity are integral to success, no industry aggregator can truly say that building integrations is their core business. Putting all that effort into building integrations can easily sidetrack any IT company from their actual core business and maybe unintentionally give the competitive edge to a rival.

 

 

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Jere Kolehmainen

EMEA Sales, Youredi

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