What the Logistics DX Joint Venture Asks Us
News has reported that FCC Techno and YE Digital have established a joint venture to promote logistics DX. This move itself is welcome as a sign of accelerating digitalization in the industry.
However, what we want business leaders to consider is this question: “Does outsourcing to a joint venture mean our company’s logistics DX is complete?”
The short answer is “No.” Entrusting IT to an external specialist company is a completely different matter from defining IT as a management strategy. Understanding this difference determines the success or failure of DX.
Just “Outsourcing” IT Won’t Solve the Problem
The logistics industry faces chronic labor shortages and the “2024 Problem” (overtime work caps under work style reform laws). Against this backdrop, many companies tend to think, “Let’s just leave it to a DX specialist firm.”
However, past cases show that many projects completely handed over to external vendors have failed. The reason is clear: management has not defined the purpose of IT implementation—”What do we want to solve?”
For example, even if you introduce a Warehouse Management System (WMS), if the on-site workflow doesn’t change, it ends up being just a “replacement of paper with digital.” This won’t generate a return on investment (ROI).
The joint venture between FCC Techno and YE Digital certainly possesses advanced technical capabilities. But how to integrate that technology into your own operations is a decision management must make. If you delegate even “what should be done” to external experts, it won’t become your company’s competitive advantage.
“Objective Function Fragmentation” Hinders Logistics DX
A typical pattern of logistics DX failure is “objective function fragmentation.” This is a phenomenon where different departments have different goals for IT.
For example, the logistics department seeks “improved delivery efficiency,” the sales department wants “real-time inventory visibility,” and the accounting department demands “cost reduction.” Each request is valid, but trying to achieve them all with a single system complicates the design, ultimately leading to none of the goals being met.
The root cause of this problem is that management has not defined the “overall optimization” of IT. Each department introduces tools independently, resulting in data that cannot be integrated, leading to increased silos. This is arguably the biggest reason why DX is not progressing in Japanese companies.
Listening Only to Frontline Voices Is Not Enough
Many executives think, “Let’s listen to the frontline and introduce IT.” However, listening only to frontline voices cannot achieve overall optimization. Frontline staff can only propose improvements within their own scope of responsibility.
For instance, delivery drivers want “route optimization,” while warehouse staff want “picking efficiency.” If you systemize each individually, data won’t link, and overall efficiency won’t improve.
What management should do is listen to frontline voices but ultimately define “what state the company aims to achieve.” Then, decide how to leverage IT. You must not get this order wrong.
Understand “Business Structure” Before Selecting Specific Tools
For logistics DX success, first understanding your company’s business structure is essential. Specifically, you need to visualize the following three things:
- Current workflow (who does what, and how)
- Data flow (what information is generated and used where and how)
- Bottlenecks (where time and costs are incurred)
If this visualization is not done, introducing a WMS or TMS (Transportation Management System) right away will have limited effect. Worse, digitizing existing inefficient processes risks fixing those problems.
For example, a logistics company systemized its warehouse picking process, but because the initial product placement was inefficient, work time was hardly reduced. This is a classic case of introducing tools without understanding the business structure.
The “3 IT Categories” Management Must Define
When advancing logistics DX, management should classify IT into the following three categories and apply different criteria to each:
- Business IT (directly linked to growth and revenue): Improving delivery efficiency, developing new services, etc. Prioritize speed, tolerate some risk.
- Management IT (for decision-making and reproducibility): Real-time inventory visibility, demand forecasting, etc. Prioritize integration and data consistency above all.
- Administrative IT (for stable operations and cost control): Payroll, accounting, etc. Prioritize stability and cost reduction.
Many companies introduce systems under the banner of “just do DX” without being aware of this classification. As a result, Business IT and Management IT clash, and operations continue without data integration. This is precisely the structure that yields no ROI on IT investment.
Summary: What Management Must Define Before Handing Over to a Joint Venture
The establishment of the joint venture between FCC Techno and YE Digital is one means to accelerate DX in the logistics industry. However, this is merely a “means,” not an “end.”
What management should do first is define the “objective function” for their own logistics operations. In other words, clarify “why are we pursuing DX?” and “what state do we aim to achieve?” Only then should they decide how to utilize external resources like the joint venture.
IT is not a “technical area to leave to specialists.” It is a management resource that management itself should define and design. It is no exaggeration to say that the success or failure of logistics DX depends not on technical capability, but on how management approaches IT.
Does your company view IT as “something to outsource”? If so, now is the time to rethink that mindset.
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