supply chain visibility - SEKO Logistics [PDF]

SUPPLY CHAIN VISIBILITY TECHNOLOGY SOLUTIONS IN THE MARKETPLACE FOR THOSE NEW TO SAAS

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Introduction With the overabundance of buzz words and theories in the supply chain today, end to end visibility is certainly one of these practices that have been attempted by many and achieved by some. The supply chain software companies all have their strength and weaknesses with visibility. Putting visibility all together from an inbound supplier to the ultimate consumer has always been a challenge even for the best of them. The solutions do exist but the cost is also out of reach for most medium businesses. With the advent and acceptance of the web based cloud model or SaaS applications, it is becoming easier to attain more seamless connections from sourcing to consumption. Along with all of the marketing notoriety of the cloud model also comes the ability to deliver these applications on hand held devices like the smart phone and tablets. Users are changing the way they interact and view critical real time data that affect the efficacy and increased profitability of their businesses.

What is it? The supply chain as commonly defined by most as a chain of events that starts from the planning of needs, to the sourcing of product from a supplier, to distribution storage or using products for manufacture and finally consumption by the end user consumer. The final step of shipping to the end user customer is one of the most critical, visibility can add to the circumvention of expensive customer service issues. End to end visibility is the capability to see products through software applications as they move through this logical chain of events. In essence, the logistics operators are seeing inventory in the various states of supply chain status. This is usually accomplished by providing a view of data through supply chain software products like supplier management systems (SMS) on the front end. Warehouse management (WMS) or manufacturing systems (MRP) can show on-hand or work-in-process inventory and finally transportation management system (TMS) for the execution and tracking all the in-transit products. By providing a single view across all of these software systems then produces end to end visibility which will synchronize the flow of products in a more efficient and predicable manner. Visibility of this entire supply chain process is usually spotty at best for most and sometimes very expensive with multi-million dollar ERP systems that claim to do it all. If the user is using a third party logistics provider, it can be even more difficult to see all of this movement within this single view. The following will address why this is important to the hard goods seller. SEKOLOGISTICS.COM

• SUPPLY CHAIN VISIBILITY – SOFTWARE TOOLS FOR THOSE NEW TO SAAS

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Why is it needed? Now that the supply chain definition has been described along with the commonly used software tools providing this visibility, let’s look at the benefits of visibility achieved by using the ideal set of supply chain software tools. Each industry and market vertical will have its own visibility characteristics to be addressed, but for purposes of this discussion, distribution of finished goods will be the primary focus. Visibly as it pertains to raw materials for manufacturing is most critical on the inbound portion of the supply chain. With carefully synchronized procurement vendor management systems can provide not only visibility but can also build in the correct timing of raw materials to meet the manufacturing sequencing necessary to pull off a just in time (JIT) raw material inventory methodology. Additionally, this must also integrate with the transportation management system in order to see materials that are in transit. This combination accomplished is critical to keeping the manufacturing process running without delay and keeping inventory carrying cost at a minimum. Visibility and control in moving goods for the retail industry focus on holding down excess inventory yet insuring that stock outs will be held to a minimum or not occur. Inbound visibility through a supplier management system will allow long lead time items to be moved by more the most efficient modes of transportation to keep the product on the shelf. An example of this would be the ability to see product quantities and ready dates from suppliers that would allow the inventory to be shipped by air while the remaining quantities are shipped by ocean. The result of these combined shipping modes would reduce transportation cost by not shipping all products by air.

How to get it There are many options today to achieve the desired results of the visibility and control of the products moving through the supply chain. This can range from the product typically offered by the ERP companies to specific products offered by supply chain software companies. They will all differ in price and functionality depending on how deep the functionality needs will be. With the Cloud model platform, the initial cost and time to production has been greatly reduced when compared to the older deployed systems. The first step is to gather the basic business requirements needed to make the business more effective. This can range from using a supplier management package to gain visibility and compile vendor performance information or to impact reducing transportation costs by using a transportation management system. With a good representation of the business needs, the next step is to match the needs to SEKOLOGISTICS.COM


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the functionality of the products. One of the more effective ways to logically match the product to the requirements is to build a spread sheet of requirements then rank or weight the requirements by the highest priorities. When adding prospective products to the list, those products can also be quantified and weighted to the requirements they address. Each line item will have a numerical equivalent to the extent of meeting the requirement on that line. If a product feature meets or exceeds the requirement, then it is awarded a 5 and if it is less than a direct match it could be a 3. Once this process is complete a total score will be complied and compared then to all of the products evaluated. Surprisingly it will probably show how each product will have its own strength and weakness in relation to the requirements and how the quantitative scoring can provide the best comparison between products.

Supply Chain Basics The next objective is to look with more detail at the supply chain components to understand the challenges that need to be addressed with the software products in the industry such as: SMS, TMS, WMS, etc. There have been hundreds of books and articles written on the subject of defining the supply chain and how it is optimized. We will use this simplistic definition of the supply chain in its most basic form to more easily define each segment’s challenging issues.

Demand Planning At the starting point of the supply chain and the source of inbound product flow is demand planning or the forecasting phase. This functionality is usually based on many factors to give the best estimate to the product amount needed at the right time and right location. The better the forecast the more efficient and productive the entire supply chain will be. Hundreds of various programing algorithms have been created and used to achieve the nirvana of inventory accuracy. Usually demand planning is made up of a combination of many components such as consumption history, trend analysis, seasonal factors, cultural influences, fads, lead times and many other mathematical strings that ultimately predict the quantity and timing of products entering the supply chain. If the real world could produce a demand planning module that was 100% accurate there would be little need for supply chain visibility, however most systems are far from 100%.

Inbound Product Management The next major stage in the supply chain flow is the procurement and sourcing of products and raw materials from suppliers. The goal is to consider production lead times, add transportation time, handle unforeseen delays and then land those products on time in the right locations. SEKOLOGISTICS.COM


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The challenges of managing this function typically is timing of product receipt involving real time visibility, problem resolution, sourcing alternatives, production delays, weather interruptions, and others. The ideal manner to manage this process would involve the combined visibility of the system that initiated the order (purchase order), the system that manages transportation and the vendor selling the product. With enough information from these sources visibility of the product can be seen anywhere along the inbound path. The retail industry has used Vendor Compliance Programs for many years to give visibility and automation to their receiving process by using an EDI advanced shipping notice (ASN) and barcoded product ID. The inbound operation and visibility still remains one of the most challenging segments of the supply chain. Companies will outsource the entire process to a third party logistics company to manage pickup, consolidations, and optimize transportation to the destination.

Distribution and Storage of Product This stage in the supply chain process is more complex and can get extremely complex with multiple locations of distribution facilities. Distribution of finished goods can be managed in a couple of different scenarios. Large retail companies may use their distribution warehouses to perform cross dock functions instead of storing products for future consumption. Cross docking involves highly synchronized supply chain automation and may be very difficult to execute where products have long lead times. The key synchronization is matching the inbound inventory to the outbound demand almost in real time so when the inbound goods arrive at the dock they are immediately put on an outbound load without any storage. The biggest challenges in distribution centers are to know the location of products and how to optimize labor to pick, pack and ship outbound products. Some of the industry leaders in distribution logistics will analyze the outbound cost to move the product in the door and out the door. A typical example would be the cost to fulfill a product order in a health and beauty aid warehouse would be $.78 when considering total cost to move and store.

Outbound Product - Shipping Once the sales order has been picked and packed, shipping will be needed. The decision to select a mode may be necessary depending on the shipment weight and the needed transit time between freight and parcel. Carrier selection will then be needed to optimize the lowest cost shipping method for each mode. International shipping will add another list of SEKOLOGISTICS.COM


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requirements needed to meet government and customs standards in moving product across international borders. In those cases where carriers do not fit the shipping requirements, shippers will revert to a manual process such as “routing guides” that will allocate a specific carrier for specific lane and mode. The need and challenges in this portion of the supply chain relates to better planning of shipments, better carrier and rate selection, routing automation, document automation and greater visibility to both outbound and inbound shipments. Organizations such as Amber Road provide Country Guides, which provide users with the applied, comprehensive, country-by-country information required by exporters and freight forwarders to meet customs documentation, packing, design and other export/import necessities. The guide is written by shipping professionals so that the delivery of information may be as detailed and applicable as the global shipping process can often be. In addition to what is required, Amber Road provides a variety of how-to information on the planning of shipping documents, plus a variety of contacts where additional shipmentspecific information can be obtained. As it is an on-line service, country pages are immediately revised as changes occur as Amber Road becomes aware of additional useful information about a country. When shipping a product, whether it be overseas, air cargo or a domestic move, the carrier or freight forwarder must be aware of packing, labeling, documentation, and insurance requirements. A crucial component of the shipping process is ensuring that each container, package, truck, etc. is packed correctly so that it arrives in good condition. In order ensure commodities are delivered in a safe, regulatory and professional fashion, regardless of size, carriers and customers alike must make sure: a) The container is provided with proper bracing and weight is evenly distributed b) Space is being optimized to its greatest extent so as to avoid additional shipping charges c) Users have been properly advised on the most appropriate mode of cargo transport Software applications which provide a “Pack-it” or Load Planning feature provide users with the ability to pack a container, cube or even truck and physically see how much volume has been taken up, how much space is left, how many of the selected containers it will take to move the parts and even the most efficient way to pack each piece. Load planners prevent organizations from sending partially-filled containers, thus providing for additional cost benefits. Comprehensive offerings such as these are relatively new to the industry and are welcome advantages to investing in supply chain software offerings. Multi-leg shipments across international borders can become more complex when SEKOLOGISTICS.COM


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considering a move from China to the United States. International shipments involve many steps in the process that are still handled manually in many cases. A shipment like this would have steps like pickup, consolidations, drayage to port, load vessel, arrival at customs, customs clearance, drayage from port, to transportation to the door of the recipient.

Software Tools of the Trade Now that the challenges of each supply chain segment have been laid out, the generic software disciplines will be described to illustrate how specific automation will assist to minimize or eliminate the basic needs associated with each stage. There are hundreds of software companies that build a product or a suite of products that will address the needs of supply chain automation. Each company will have its strength and weakness when compared to the overall marketplace. The ERP software companies are now producing some if not all of the product categories that will be described in the document. One of the key elements in the use of supply chain software will be the connectivity between the best of breed systems and the enterprise operating systems (ERPs) used to run the day to day business.

Demand Chain Management Once the demand planning is complete the next step will be to procure products from the suppliers whether it is finished goods, assemblies of finished goods, or raw materials. Typical Purchase Order Management Systems will usually center on the entire procurement process from requisition approval, to purchase order, to delivery, then to invoice and settlement. With supplier collaboration increased the result usually deepens the relationship between the buyer and seller which makes the buying process easier for both parties. The central theme of the supplier automation is to keep the workflow free of paper and handle the process with digital information. The second most important function is how unexpected events can be quickly reversed. Using event management to directed alerts to the process stakeholders will let them manage these exceptions and ultimately accelerate products through the procurement workflow. In a perfect world, adding transportation tracking to the delivery of the product especially in an international shipment adds valuable visibility to the process and facilitates better planning for the receiving party. So with integration to the enterprise, supplier collaboration, transportation updates, and exception event management the results will reduce cost of the procurement process and deliver products in a manner that is more timely and efficient. SEKOLOGISTICS.COM


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Warehouse Management The storage and movement of products through a warehouse to a business or the consumer in the most efficient manner is the objective of the warehouse management system (WMS). Digital connectivity to both the enterprise systems and to the outside world will automate both the receiving process as well as the sales order fulfillment process. Accuracy of the on-hand inventory should reach 99.9% and the visibility to that inventory now becomes instantaneous. A WMS can become complex when considering product types, product velocity, head count, building size, order quantities, material handling automation, and others. The features of a WMS will need to fit the distributor’s needs: 1. Real time inventory locator – All products in the facility are linked logically to a numbered location whether it is a rack, floor or shipping dock location, it is then all visible. 2. Product Unit of measure – In order to most efficiently store pick and pack products, the system must know each product’s unit of measure from pallet, to case, to interpack to an each. 3. Product attributes – Certain products will require unique identification either at the each level or the group level like serial number capture or lot number capture and identification. 4. Task management – The system is always prioritizing tasks including putaways, replenishment of pick faces, picking, packing and shipping. By using this WMS brain the flow of product is optimized by matching the task to available personnel creating the optimal move. 5. Paperless – This entire product movement process should be accomplished through a wireless network of handheld devices with data collection tools like barcode scanning or an RF ID reader. Users can then accomplish all product moves by just scanning a location and a product. 6. Interface to the business – No WMS is an island so it must connect to the company’s enterprise system. The better systems have well defined application program interfaces (APIs) and integration tools to assist in building system interfaces. The single most important WMS benefit is the lowering of the cost to store and ship products to the buyer. In the case of a 3PL doing fulfillment for a hard goods distributor, the WMS becomes a necessity to manage comingled inventory ownership. Tracking the movement and storage of product needed to calculate fulfillment charges is also a function of the WMS. SEKOLOGISTICS.COM


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Transportation Management Transportation services must be well understood when automating with a Transportation management system (TMS). Many companies attempted to build a TMS that would handle all modes (LTL, TL, parcel, etc) and ship from anywhere to anywhere but most have failed to deliver on this promise. Most systems today specialize in one mode or several modes but rarely can one system be everything to everybody. As the complexity of the transportation process increases it becomes more difficult to define the logic that will be needed to automate the process. In reviewing this software vertical, the focus will be the over-the-road transportation in domestic US shipping. With that in mind, the most common transportation modes in the domestic market would be parcel, less than truck (LTL) and full truck (FTL). The TMS that will reduce cost to an organization will have these basic features: 1. Planning – Building loads or packages out of multiple sales orders going outbound, to consolidate multiple loads to similar destinations, and load planning for specific vehicles to name a few. 2. Mode and rate shopping – The ability of the system to search the carrier base for the optimal carrier for the shipment with considerations given to transit time, cost, and performance. In certain cases, transportation modes could be different depending on the weight and DIM being in-between parcel and LTL modes. 3. Single point of execution – With all transportation execution going through the same system, the overall management of the company’s transportation activities becomes more efficient. 4. Visibility – More easily attained when a single TMS is utilized and increased visibility adds many positive attributes to the supply chain as a whole. With the advent of cloud computing and web services connectivity, the newest trends in TMS are the ability to direct connect to the carrier instead of rating through a table based replication of the carrier rating structure. With direct connections to the carrier all of the shipping functionality can be achieved like: rating, pro number issue, electronic dispatch and confirmation, track and trace, POD and invoicing. Without direct connections, batch based EDI would have to be utilized compromising the real time flow of data and visibility.

Platform The marketplace is clearly being segmented into two distinct software platforms; the traditional method of licensing software and deploying the system on the premises and the cloud or SaaS software where it can be accessed over the web and rented as opposed to SEKOLOGISTICS.COM


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being outright purchased as in the deployed model. The deployed model usually had an edge on the cloud model when compared to each other on the grounds of total cost of ownership and security over a 5 year period. However, the market seems to have accelerated the acceptance of the cloud model because of a shorter implementation cycle to results and higher ROI figures in the first five years.

Cloud and SaaS Advantages As this model has taken shape over the last 10 years the marketing push and support in the last few years has seemed to increase the rate of adoption even by the largest global corporations. The internet is now more readily available to more devices like smart phones and tablets supporting this model in gaining even more momentum. Not all applications are best suited for the SaaS model, usually those applications that are more dynamic and mobile, involve multiple locations and multiple users tend to be the best fit for the cloud. Looking at the supply chain dynamics the cloud model fits this application very well. Another example of a good fit for the cloud model would be customer relationship management (CRM) systems where system use and the need for data are spread across a very large cross section of users in a very dynamic and changing environment.

Mobile Computing With the advent of more SaaS based applications mobile devices will be used in the delivery of these applications more and more over time. With the current trends in the market, mobile devices will outnumber laptop computers in the next year and surpass traditional desktop computers forever. Our hand held computer/phones/tablets will become predominate for the human interface of the future. This is why the cloud model will continue to flourish and gain more velocity in surpassing the same applications used in the old deployed model.

Logistics Industry The third party logistics industry is segmented into various areas of expertise; international forwarding, customs brokerage, warehousing and fulfillment, transportation brokers, and variations of all of the above. As logistics services companies have become a commodity it is becoming harder and harder to differentiate and select logistics partners based on their strengths. As a means to increased services and differentiation in the logistics services business more suppliers are developing supply chain management software applications in the SaaS SEKOLOGISTICS.COM


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model. This not only provides clients with robust, cost effective solutions but because of the ease of delivery and rapid time to utilization the payback is very attractive to the business across the board. The combination of the logistics services and robust supply chain software offerings is an extraordinary opportunity to better manage the entire supply chain instead of just handling pieces of the process in the traditional way of outsourcing logistics.

Summary With the technology shift from the traditional deployed software models to the cloud model of providing supply chain visibility and execution, there are many solutions in the marketplace that can drive better ROIs than previously attainable. The challenge is the integration of the various best of breed software components to operate in concert with the existing enterprise systems. In the past, medium sized businesses where looking at high six figure solutions, now there are alternatives to solve these challenges with highly cost effective cloud based computing. The emergence of supply chain software providers in the cloud that span the entire supply chain is happening now. This shift will provide the smaller hard goods manufacturers and distributors more efficient and collaborative supply chains which ultimately lower cost and increase profitability. ___________________________________

SEKO Background SEKO is a world class global logistics provider of international and domestic transportation, warehousing, customs brokerage, international compliance, project management, home delivery and supply chain technology offerings. SEKO’s growth has exceeded the industry norm because of its high level of strategic logistics and software solutions that have created higher value for customers.

SEKO Software-as-a-Service Products SEKO has been making substantial investments into building cloud based affordable supply chain management software creating a new era of SaaS services. With all of these tools accessible through the web, SEKO customers become self-serving for the information they need, now. The SaaS solutions available through SEKO can be completely carrier and broker agnostic, meaning that the customer can use outside carriers and suppliers to insure that the supply chain is optimized with the best partners possible.

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