Retail Systems Research

A Case for Technology as Strategy

By Nikki Baird, Managing Partner 7/21/2009

In May, RSR published our second annual report on IT Alignment. In that report, we found something somewhat controversial: in order to truly achieve IT/Business alignment, it's not so much about IT being aligned with the Business - IT has gotten pretty good at that. It's more about making sure that the Business knows how to make the most of technology.

Now, I've often heard the cry, "We should never have to change our business process in order to accommodate a system!", but every time I've heard it I've thought, "Why not?" If it makes the process and technology work together better - and therefore makes your process more efficient - then why wouldn't you change the process to accommodate? If our industry had truly stuck to its guns on this front, there would be no such thing as eCommerce - it's a process response to a technology that enabled something completely new, after all.

In my travels, the most successful companies have won by melding technology and process together, rather than forcing one to conform to the other - give and take, where appropriate, on both sides. But where I rarely see this give and take occur is at the level of strategy. In all my years as consultant and analyst, I have never sat in an executive meeting where the CIO was called on to talk about new technologies, with the intent of examining them for their potential as a new business initiative or strategy. In fact, more often than not, I've heard that very idea pooh-pooh'd as "technology for technology's sake."

But a funny thing happens when you start looking at tech for tech's sake: it becomes an enabler for other things you never thought of. It has interactions and impacts in areas you never foresaw. And if you approach it with enough of an open mind, you may even find that it becomes a source of competitive differentiation. Which brings me to a company called Quiet Logistics.

The world of distribution operations is hardly on the cutting edge of innovation. In fact, it's been on a long, slow assimilation of advancements that have come from material handling automation in the 1970's and 1980's. What started out as controller systems for automated sortation, for example, grew and evolved into modern-day warehouse management solutions. And material handling equipment hasn't sat still either - some of the high-speed automation out there in warehouses today is breath-taking in what it can do and how it can do it. But even the latest arguable "breakthrough" in distribution operations, RFID, is still only a case of incremental faster/more accurate. It's not really step-level.

Quiet Logistics, on the other hand, has invested in something that truly is step-level. They have joined the ranks of Staples and Zappos.com in becoming Kiva customers. Kiva provides a step-level innovation in warehouse management and distribution operations (you can see a video of how it works at Zappos here). Rather than create aisle after aisle of fixed shelving and then sending armies of people roaming down those aisles, Kiva turns the whole model on its head: it stores product on "pods," and then sends robots out to pick up the pods and bring them to the people for picking. Quiet Logistics is the first 3PL out there to run its entire operation on the Kiva system, using it as a strategic differentiator in the cut-throat competitive space of eCommerce fulfillment and logistics.

What's even more remarkable is that this transformation is being led by Quiet's executives, who are about as "old-school" in the box-kicking arena as you can get, with entire careers based on the traditional material handling/movement model. As Bruce Welty, CEO of Quiet Logistics said, "You can usually find poor quality distribution for a low price, or high quality at a high price, but not high quality at a low price. We have found that we can compete on both price and quality - highest quality producer at the lowest cost. We can do things in our warehouse that no one else can do at a price that no one else can reach."

How? By using technology to enable a business process that might not have existed otherwise, thanks to Kiva's technology. The direct benefits are enormous - Quiet isn't quite ready to share results, but can report that they have achieved near-100% pick accuracy since using the Kiva system.

But it's the side benefits that are most fascinating. When you don't have massive conveyor systems and people walking every aisle, you don't need as much electricity - you don't need the power for the conveyor systems, and you don't need the lighting or the air conditioning for the people. When workers stay in one place and have the work brought to them, there aren't nearly as many accidents, and the work isn't so hard on the body - enabling ease in attracting and retaining workers in what is typically a hard, high-turnover job. And it's quiet - a subtlety you don't think of that turns out to be one of the things that Zappos employees say they like most about the system.

To me, Kiva and Quiet Logistics together are a prime example of why you should not constrain any technology to "the process" and technology should not always play a supporting role to "the business." The truth is, as technology gets more integrated into everyday lives, it's enabling things we've never done before as consumers - so why would we resist the same kind of impact in business? We've made a lot of process improvements that are step level without technology, but I'll be very surprised if there is still a lot of room for those kinds of changes in the future. Rather, the future lies in seeing the potential of what a technology can do to change the game. And the companies that are able to set that process in motion at a strategic level are the ones with the best chance of winning.

About Quiet Logistics
Quiet Logistics, Inc. is the industry's first Third Party Logistics company to deliver a complete outsourced fulfillment solution that leverages the game-changing material handling robotics of Kiva Systems. Quiet Logistics' "One Touch" fulfillment service is an alignment of best-in-class operations experience and a fully integrated technology platform with a simplified business model to improve distribution throughput, accuracy, scalability and flexibility at costs that are 30-50% lower than the competition. For more information on Quiet Logistics and its services, please visit www.quietlogistics.com.