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March 23, 2017

CPQ for Professional Services Industry

Professional Services Industry (e.g. software services, training and certification industry etc.), sales process aligns to standard Sales process of a CRM application. The products and services sold are not too complex in terms of product structure and rules around it. However, every organization has different way of pricing and providing discounts to customers. CPQ Cloud offers a solution to meet the pricing calculation needs through configuration and customization options. Professional Services sales flow also ends with project creation to track the activities based on Services sold to the customer. This can also be supported via the CPQ cloud.  

Let us look at the Lead to Quote to Project Use case for a Professional Services organization:

 


For most of the Industries, Quote to Order flow works well and hence CPQ Cloud integration with Order Management modules is readily available. However, there is no prebuilt integration between CPQ Cloud and Oracle EBS Projects. It needs to be established for this Industry specific use case.

In order to simplify this integration and determine what details will flow from CPQ Cloud to EBS Projects, we need to design the product such that all required inputs will be captured for subsequent project creation.

 

While a Service Offering is setup as a Product in CPQ, it captures attributes for Service Module, Role and against each role, details about location, rate, effort etc. Once a Service Offering is configured for a customer, it may have various modules that have several roles. Once all these details are captured against each role and activity, price can be calculated directly or Commerce process can be configured to apply pricing logic by reading other parameters like Customer rates etc. which may override manual entries or retain edits post calculations are done.

Once the quote is finalized and approved, the quote line item details for role, duration and effort can flow in specific format to EBS Projects to create project line items/activities for roles.

The solution provides the following key benefits:

Improved Quote Accuracy - A Quote may go through multiple iterations due to changes to various parameters. E.g. a role is expected at onsite for some duration, an activity duration is revised etc. CPQ Cloud automates pricing impacts to be calculated automatically for all these changes and maintains the Quote with accurate price as per planned resources for the project. Each time quote is reconfigured and submitted, it may require similar steps for pricing approval. CPQ Cloud can be configured to have approvals triggered for each change automatically.

Reduce Quote and Project data mismatch - As generally the Sales data is maintained in a separate system which may not be integrated with the project management system, it causes lot of problems due to data mismatch between what was quoted and what is planned for the project. The integration between CPQ Cloud and EBS Projects eliminates problems of data mismatch for activity durations, resource roles, rates etc.

Streamline Quote Revisions - It is a very common process to have some change request or amendment to the contract after the project has been initiated. CPQ Cloud offers Quote revision process to meet requirements for any amendments to existing project. With enhanced features like subscription ordering available now, CPQ cloud can be extended to manage change requests quote process for a project.

Here is a view of flow for amendments and change requests.

March 20, 2017

Credit Bureau Reporting in North American Financial Services Industry

Financial Services Industry is all about risk and return. This is as valid for lenders as it is for investors.

A Lender(or) a Creditor is a person or a financial institution that have provided some financial amount to borrower(s) (customer), which may or may not be backed by a security / asset, based on the policies and business model of the lender. Lender expects to earn the interest income through these lending arrangements. A borrower could be either an Individual or an Organization.

As can be interpreted from above, the underlying framework of the 'Financial Lending' is Risk and Return.

While interest earned can be easily attributed to the 'Return' factor; it is the 'Risk' associated with a lending arrangement (and borrower, ultimately) which impacts the lending behavior of the lender.

To identify the risk associated with a borrower - performance of the borrower on past loans, borrower's payment habits and information about any specific activities which can be of concern are the aspects which a lender is interested in. These key factors about the customer help the lenders forecast / predict the future performance of borrower and assessing the risk associated with the lending arrangement with the specific borrower(s).

With the knowledge of forecasted performance, risk assessed and the risk appetite; a lender can decide what kind of borrower portfolio is manageable and sustainable, and accordingly, a lender can decide to allow or deny loan to an interested party.

The information to help perform risk assessment is invaluable & of enormous importance to finance business. It has to be accurate and a true representation of past behavior of the borrower/customer. Also, of relevance is to remove bias and subjectivity from this analysis and have the analysis done on a comprehensive dataset through Statistics, and ensure that it is standardized, objective and 'acceptable-by-everyone'. Thus, the need of a centralized credit agency managing these aspects, recognized by Government and other Financial Regulators in USA was identified. This led to establishing Credit Reporting Agencies in early 19th Century.

As per the World Bank, the official definition of Credit Bureaus1 is - "A credit bureau is one of the two main types of credit reporting institutions. It collects information from a wide variety of financial and nonfinancial entities, including microfinance institutions and credit card companies, and provides comprehensive consumer credit information with value-added services such as credit scores to private lenders. Credit bureaus are privately owned and privately operated companies. As privately owned commercial enterprises, credit bureaus tend to cater to the information requirements of commercial lenders. Though there is variation in the type and extent of information they collect, credit bureaus generally strive to collect very detailed data on individual clients. They therefore tend to cover smaller loans and often collect information from a wide variety of financial and nonfinancial entities, including retailers, credit card companies, and microfinance institutions. As a result, data collected by credit bureaus are often more comprehensive and better geared to assess and monitor the creditworthiness of individual clients"

These Credit Bureau Agencies collate the financial and personal data of individuals along with other data which could be of relevance to lenders/financing business. As in USA, there is a limit to gather the personal / private information on individuals, only the fields specifically required towards Credit Reporting are collected by these agencies. The same has been detailed out in sections below. This data is processed through pre-defined (obviously well thought off, based on best practices and regression tested) mathematical algorithm to produce an unbiased, near accurate Credit Rating of the individual (or) an Organization. This information is provided on need-basis to the lenders, for use.

This document details out the Credit Reporting process associated with the individual borrowers although at a high level, it touches upon a few aspect of Business / Commercial Entities related reporting.

Credit Bureau Agencies in the USA

·         In USA, Credit Bureau Agencies can be categorized on basis of the data class they are mastering:

o   Consumer level or

o   Business / Commercial Entities level

CreditUnion.jpg

Functions of Credit Bureau Agencies

Aggregation of Data

·         As applicable for any Forecasting Model based on statistical analysis - the broader the sample size, more accurate is the forecasted behavior. The same is applicable in Financial Lending business as well and lenders strive to get correct and accurate information and information from as many sources as possible; so as to avoid or minimize risks.

·         While the sources of data can be enormous and different efforts / costs can be involved in extracting and processing the data, the Credit Bureaus have to identify the data sources which are most trust-worthy, have data on a wide variety of consumer and have been involved in providing credit to the borrower in past. These data sources are also knows as 'Data Furnishers'. 

·         In the U.S., following are typical Data Furnishers for Credit Bureau Agencies

Information / Data Type

Data Furnishers

Description

Personal Information (Name, Date of Birth, Social Security Number, Address) - Initial

Social Security Administration (SSA)

·         Typically, SSA office is the initial source of information for Credit Bureaus on individuals

·         This information is used by Credit bureaus to create a record for an individual using SSN, Name and DOB

·         However, on a stand-alone basis, this information is not of much use to Credit Bureaus as there is no financial information, payments habit here which can help prediction of future performance of an individual financially

Personal Information (Name, Date of Birth, Social Security Number, Address) - On-going

 

Financial Information (loan amount, duration credit taken for, payment behavior, missed payments etc.)

·         Creditors

·         Lenders (Registered Financial Institution)

·         Utilities (Electricity, Gas, Water) Companies

·         Renter Companies

·         Debt Collection Agencies (credit bureaus)

·         These data furnishers are the ones with whom the individuals have been in financial agreement or transaction in past or an on-going basis

·         These data furnishers provide some key information to credit Bureaus like:

o    Payment Rating and Payment History of the Customer

o    Loan/Credit Amount

o    Credit Utilization

o    Total Duration of Loan

o    Amount Paid

o    Balance on Loan

o    Delinquency (non-payment /payment misses) on account

o    Any derogatory action (like charge-off of loan, forceful repossession of asset etc.)

o    Ongoing Bankruptcy

Other Information of relevance

·         Social Security Administration (SSA)

·         Civil Courts (i.e. public records)

·         This information is used by Credit bureaus to consider changes to an individual's record in case of SSN, Name and DOB change

·         Public Access to Court Records (PACER) and Bankruptcy  courts give any information pertaining to filing of Bankruptcy by an individual to Credit Bureaus

·         These two sources can often provide information regarding Death of a consumer


Format for Data Acquisition

·         Due to the varied sources and to have a standard format for these Data Furnishers to report data; Credit Bureaus have laid down specified formats of Reporting. The formats being currently used are:

o   Metro

o   Metro 2

·         Metro 2 Credit Reporting guidelines and standards are the latest and most widely used format in which Data Furnishers provide their data to Credit Bureaus Agencies. It has been clearly defined in Credit Resource Guide and the same is updated on an annual basis to address common issues and any new updates. Use of these format(s) by the data furnishers ensures avoidance of inaccuracies in credit reporting, incorrect results and credit scores for individuals / consumers. 

·         Generally, data furnishers are supposed to generate the Metro 2 Credit Report every month accurately reflecting the activities of consumers with respect to their debt obligations and submit to Credit Bureaus.

 

Processing of Data

·         Credit Bureaus process the data through the set (internal) automated program to read the file and extract the data. Data about the specific individual from different data furnishers is compiled and ran through a standard pre-defined algorithm (proprietary to Credit Bureaus), the end result which is the generation of "Credit Score".

·         Typically, weighted average of these factors is considered for Credit Score calculation:

Captured below is a pictorial of typical factors considered in credit assessment of an individual

CreditScore.jpg

Figure 1: Factors used in Credit Score Calculation

Circulation of Credit Score and Other Credit Information

·         This resultant information computed by Credit Bureaus is available to requestors on a need basis.

·         Usually, the lenders who have been approached by consumer for a loan get a written consent from consumer for doing a 'hard inquiry' on their credit. Upon getting consumer's consent; the financing companies request this data from Credit Bureaus by passing on specific details of consumer including Name, SSN, and Address.

·         Individuals / consumers are also entitled to a free copy of their Credit Report from all Credit Bureaus (except Innovis) on an annual basis.

 

Other Aspects of Credit Bureau Reporting

This section enlists some of the other aspects related to the Credit Bureau Reporting which are of equal importance towards ensuring fair practices in Credit Bureau reporting industry and towards addressing consumer grievances.

 

Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA)

The guiding principles for the Credit Bureau Agencies and the data furnishers in USA towards consumer protections, acceptable practices and general rules are laid down by different acts and laws like:

·         Fair Credit Reporting Act (FCRA)

·         Fair and Accurate Credit Transactions Act (FACTA)

·         Fair Credit Billing Act (FCBA) and

·         Regulation B

There are two regulatory bodies formed by government to ensure that Credit Reporting Agencies and data furnishers are adhering to the above mentioned guidelines / acts and practices. These are:

·         Federal Trade Commission (FTC)

·         Office of the Controller of the Currency (OCC)  - specific to banks

 

The key principles through which all of the agencies / theories work are:

·         Accuracy and fairness of credit reporting

·         Reporting based on reasonable procedures which are fair, objective and equitable to the consumer

·         Utmost regard to be given to the aspects of confidentiality, accuracy, relevancy, and proper utilization of consumer information

 

Consumer Rights

It is recommended for consumers to review their credit reports on a regular basis or at least once every year.

·         Individuals are entitled to receive the Credit Bureau Report from Experian, Equifax and Transunion for free on an annual basis.

·         Apart from this, individuals have access to a lot of free websites which provide Credit Score information. These websites can be a good source for individuals to keep a watch on their credit score and any credit related alerts.

In case of any issue identified in their credit reports or any clarification required, individuals have the right to approach Credit Bureaus and seek clarification or raise dispute and get the correction done.

 

Credit dispute

There are different modes through which consumer can raise a Credit Dispute in case of any issues observed:

1)      Consumer can approach the Credit bureaus for getting clarification and raising dispute to get correction done

2)      Through external systems like e-Oscar, AUD or websites showing Credit scores like CreditKarma, Creditsesame, TrueCredit etc.

 

Typically, these credit disputes take a long time (2-3 months on an average and sometimes even 6 months!) towards resolution. A detailed follow-up is involved with the data furnisher and Credit Bureaus towards this. There are many instances where a consumer has sued the data furnisher or Credit Bureau upon identification of any inaccuracy in data or incorrect reporting of Credit Scores.

These lawsuits and very tedious and can prove costly for all the parties involve, so essentially, prevention is better than cure in these cases. This implies that, regular monitoring of Credit information is a key necessity from individual's perspective, to highlight any discrepancy as early as possible and get it corrected before any further impact happens due to this.


Skip Tracing

Skip tracing refers to gathering information about whereabouts of any consumer missing from a long time. Usually, the financing companies opt for skip tracing when they are not able to establish contact with a non-paying consumer through different means like:

·         Field Visit (leading to identification that consumer can no more be found on the addresses known)

·         Correspondences (leading to Return Email)

·         Phone calls (leading to no response or wrong phone numbers)


Many financial organizations take pro-active measures to keep the consumer information (home address, work address, home phone, cell phone, work phone and other details) up-to-date in their system of records. This avoids unpleasant scenarios like:-

·         Consumer skipping without making payments leading to charge-off of the account or

·         Consumer skipping while the asset couldn't be recovered / repossessed due to non-payment


Skip tracing services are a lucrative additional stream of revenue to Credit Bureaus who are gathering consumer data from multiple sources and thus creating a huge repository on individual's information.

Upon getting a skip trace request for specific individuals, Credit Bureaus can dig their databases and provide information regarding recent most addresses, phone numbers reported for the given consumers from other data furnishers. Having this 'probable' information on consumer's whereabouts can be helpful for Financing companies to "trace" the non-paying consumer and eventually secure their loaned asset or recover dues leading to minimization of losses.

Conclusion

Consumer credit information is not only a good tool to assess the credit worthiness of an individual; however, it also plays a significant role towards finalization of interest rates and other contract terms.  The credit reporting business is equally beneficial for Credit Bureau Agencies as well as financing organizations consuming the resulting information that can accordingly treat the consumer per the Credit History details and minimize the risk associated with the financing arrangement. Usually, the financing organizations consuming this credit information are also the data furnishers. Its benefits are not just limited to the Credit Bureau Agencies but for also Consumers with good credit history. Having Credit reports available and accessible to potential lenders; benefits consumers with better credit rating to easily avail loans at lesser interest rates. This benefit may have been lost without the existence of Credit Bureau Agencies

By having robust information-extraction and information-processing systems, financing companies stand to gain a lot in terms of better credit information which can help them take correct decisions and avoid potential credit disputes. 


References

1.       World Bank Definition of Credit Reporting Bureaus - http://www.worldbank.org/en/publication/gfdr/background/credit-bureau.

March 2, 2017

CPQ for Industrial Manufacturing

 

Oracle CPQ Cloud is one of the leaders in CPQ space and has strong presence in Manufacturing Industry. The product offers solution for Configurator and Pricing needs has been enhanced over a period of time to plug in features like BOM Import, Subscription Ordering and Mobile application. It fits in very well with Oracle EBS Order Management, or any other Order Management suite like SAP for that matter.

To understand CPQ Cloud fitment, let's start with drawing a simple sales process flow diagram. Let's consider different actors (Internal Sales, Partner Sales, End User) and possible flows for the Quote Management process.

Internal Sales: The Sales Rep works on integrated CRM and Quote application to look at his opportunities and creates a quote for possible conversions. While she does the complex configurations using CPQ Cloud configurator, she is notified of any constraints while making selections, recommendations for additional parts and the list of parts that keep growing based on selections made. The system maintains the BOM mapping references for parts at the backend which helps in sending details to Ordering system later. The next big step after configurations are completed is negotiating on the price with customer and applying discounts accordingly. Approvals may get initiated based on discount and margin rules setup. Once pricing is finalized and approved, Sales Rep generates proposal document and sends for document signing. There may be a few more steps for ATP check, Credit Check etc. before Contract generation depending on organization's sales process. CPQ Cloud offers Docusign integration for capturing digital signatures and reducing the time taken to complete Contract Signing process after Quote is finalized. Order is submitted to the ERP system as last step in the CPQ system. The Ordering system updates status back to CPQ on Order fulfilment. Also, Service Contract will get created in the Service Management system of the Organization.

Partner Sales: While the partner sales flow may look very similar to Internal sales, it varies as the validations and steps in the sales flow may be different. Also the approval criteria may differ as it would be driven by Partner's criteria for their margins. Channel users (Partner Sales) get restricted access as compared to Sales users (Internal Sales) in CPQ Cloud. Also, after Order placement, the Service Contract may be with the Partner and maintained in their system.

End User - eCommerce: CPQ Cloud offers eCommerce registration process that enables end user to access the Configurator as anonymous user. The user can configure product as per need and then can register to login to create Quote, accept Contract and place Order.

Let's look at possible integration touchpoints with Oracle CPQ Cloud in case of Manufacturing Industry implementation. 

CRM Integration - CPQ Cloud offers out of the box integration with SFDC and Oracle Sales Cloud (CRM applications on Cloud), for customer synch and Lead to Quote flow. The sales journey may start from a Lead/Opportunity or a Quote depending on business process of the Organization implementing CPQ Cloud.

ERP Integration - CPQ Cloud offers integration with Oracle EBS for Quote to Order Flow. BOM mapping references will enable mapping the Product hierarchy within the two applications.

Inventory Integration - For ATP check, availability of parts at the time of quote.

Credit Check - For customer credibility for larger value quotes.

Product/Part Master - To synch product and part information. In many cases it may be the ERP system for Order Management that master Product information.

Post Order fulfilment and Service Contract generation, while the service details may be captured in Service Management system, it would need integration with CPQ for Contract renewals and modifications. CPQ Cloud has recently enabled feature called "Subscription ordering" to offer solution to such needs. It enables having a repository of Assets/Installed Base to be fetched from system maintaining it to CPQ Cloud (readonly view) to allow actions for Modification in CPQ Cloud with Asset reference.

With enhancements over last few releases, Oracle CPQ Cloud has emerged as a solution on cloud to resolve pain points with Oracle Configurator (On-premise), and as a leader amongst other CPQ tools available on Cloud. Its strong configurator enables complex configurations involving hundreds of attributes and validation rules behind it. Thus it is a right fitment in manufacturing sector where it involves products/models with multiple configurable attributes and part additions based on selections made. The complexity for Manufacturing Industry CPQ implementation is more likely to be around Product structure and Configuration, the quote management process may align more to out of the box flow with a few additional steps to integrate with other systems or as per sales process flow for the organization.

February 16, 2017

Oracle Service Cloud - One Product for Multiple Service Needs in Multiple Industries

'The world is becoming smaller' is the catch phrase which I get to hear nowadays pretty often. What does it mean? Of course, the world has not shrunk but the communication channels have expanded in their mode and reach thereby bringing people together and closer to give them a feel that no matter where you are, smart channels of communication will keep you connected to your family, work and needed SERVICES. In line with this boom in communication channels the expectations from the Customer Service industry has increased manifolds with the connected customer demanding service ANYWHERE and on ANY CHANNEL.

Continue reading " Oracle Service Cloud - One Product for Multiple Service Needs in Multiple Industries " »

December 2, 2016

Simplifying the recruitment puzzle with Taleo

Taleo, a company acquired by Oracle, is considered to be one of the top vendors in recruitment and talent management.

Taleo is consistently ranked as the favourite applicant tracking system (ATS) for recruitment by recruiters and employers. It allows them to perform a wide array of functions -- measure important metrics, create candidate selection workflows, add privacy statements with the click of a button, choose from the several pre-defined and proven workflows, activate dynamic approvals, add appropriate notifications, create pre-screening and disqualification questions, manage security,  and more.

However, when candidates were asked to fill Taleo forms while applying for jobs, they appeared frustrated. They clearly did not share the same level of excitement as recruiters and employers. Their frustration cannot be attributed to mere lethargy to fill lengthy forms. In the past, job seekers were willing to go to any lengths to apply for jobs -- standing in long queues, dropping their resumes at offices, filling applications at employment boards, completing Taleo forms, and more. Today, times have changed and talent has become paramount. A skilled candidate has several options to choose from, and recruiters scramble for his / her attention. In such a scenario, it becomes imperative to sit back, think, and sensitise organizations for the needs of the candidate.

Although Taleo is a wonderful application with tons of features, an overenthusiastic requisition creator can ruin the experience for the candidates in the quest for more information. Organisations should exhibit restraint while adding questions to candidate forms, or must deploy an extremely accurate resume parsing option, which automatically fills in the fields that the employer seeks to review.

This option of resume parsing is available through several autonomous vendors, but a badly configured system continues to elude candidates the joy they seek of being able to apply for a job without redundant and relentless typing that goes on for pages. This is because not all resumes are in the same format, and not all parsing tools are intelligent enough to identify the fields and fill in the right information. Add to it the difficulty of having to update your profile constantly and the ineptness to showcase professional recommendations, certifications while making it flow into several unbearable pages.

There was a game changer, that was released by Taleo before being acquired by Oracle. It was called Universal Profile. This allowed candidates to create a single profile on Taleo with possibilities to edit or add new information whenever required, keeping the profile up to date. It allowed the candidate to use this universal profile while applying for jobs with every employer that used Taleo. Thus, this brilliant solution seemed to have solved the problem that most job seekers dreaded. However, in 2015, this feature was discontinued citing low usage and other issues, best known to Oracle. Since then, there has been a very discernible product gap. 

This concludes the story of Taleo, and why it could do with a bit of a push. The next post will explore LinkedIn announcements, and how it helps support the offerings of Taleo.


December 1, 2016

Are you availing the benefits of international trade agreements?

The total volume of international merchandise trade in the year 2015 across the world stood at US$32.2 trillion with US$15.9 trillion of exports and US$16.3 trillion of imports.The same figures for international trade in services stood at US$4.7 trillion and US$4.6 trillion, respectively. As per a recent McKinsey report, the total volume of international trade is expected to rise to US$70 trillion by the end of 2025.

We are in the times of rapid globalization, and almost all developed and developing economies of the world are promoting international trade for a host of economical and geopolitical reasons. As of today two of the world's largest proposed trade agreements -- The Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership Agreement (TTIP) are being negotiated.

Some robust trade agreements like The North American Free Trade Agreement (NAFTA), Association of Southeast Asian Nations (ASEAN), Gulf Cooperation Council (GCC), European Free Trade Association (EFTA), and such are already in place for a number of years. Still, a large number of exporters and importers across the world fail to avail the benefits of these treaties.

What is a trade agreement?

A trade agreement is a treaty between individual or groups of countries through which they aim to boost exchange of products and services. This is usually done by offering rebates in duties and/or simplifying business procedures for each other. For example, if a buyer, based in the US, imports an electric boiler made in China, it will attract a duty of 3.3 percent. However, if the same buyer imports the same product with its origin in Canada (made in Canada), it will be duty-free, since Canada and the USA are part of a trade agreement called NAFTA.

Another noteworthy point is, if the US buyer imports goods from China that have their origin in Canada, they will still be eligible for the duty rebate as per NAFTA since most trade agreements tie the duty benefits to the country of origin. Country of origin is usually the country where the goods have been manufactured or where a sizeable value addition has been done to the goods.

How does a trade agreement help?

If an enterprise gets insights into the applicable trade agreements while buying goods, then it can avail the duty benefits that its products are eligible for. A rebate or a removal of duty will directly cut down its overall expenditure and, hence, will enhance the overall competitiveness of the enterprise. To avail the benefits of a trade agreement, the business needs to provide certain documents like the country of origin certificate, etc.

Do exporters / importers avail the benefits of the trade agreements?

A recent study conducted by leading consulting company KPMG, revealed that only 41 percent of the enterprises in the US avail the benefits of all trade agreements that apply to them. The figure stands at 19 percent for India. The same study suggests that 79 percent of the enterprises in the US believe that a lack of awareness and the complexity in the regulatory documentation are the primary reasons due to which they miss out on the benefits from trade agreements.

How can Oracle GTM help avail the benefits and make organizations more competitive?

Oracle Global Trade Management (GTM) can easily identify the applicable trade agreements and generate the documents required to avail benefits. The following lists the key features of Oracle GTM:

Identifying the applicable trade agreement: Oracle GTM with its out-of-box (OOB) feature of Landed Cost Management can let any enterprise know about applicable trade agreements and their benefits. All it takes is entering the classification code of the product along with the source and destination country. With this much information, the enterprise will be made aware of the applicable trade agreement and the duty benefits tied to it.

Generating the documents required for availing the duty benefit: Once the applicable trade agreements are found, the required documents can be generated out of GTM using the feature of document generation. These documents can be further submitted to the customs authorities to avail the monetary benefits directly.

Please meet us at the Infosys Booth during the OTM SIG APAC 2016 Conference (Singapore) and we shall be delighted to showcase our GTM solutions. 

*Date Source - World Bank - https://www.wto.org/english/news_e/pres16_e/pr768_e.htm

Written by: Mohammad Haider Talat and Ravikiran Narayan Khobragade

Intrinsic trade compliance issues with SMEs

We often hear about the trade compliance issues with small and medium enterprises (SMEs) more frequently as compared to the larger organizations. Small companies are impounded with many challenges attributed to their limited trade management staff and tight budgets. In spite of their small size, there is no exemption from compliance requirement for these SMEs. The cost of non-compliance for these enterprises is very high since it may result in loss of privilege to export or import, financial loss, and disruption in the supply chain.

Challenges

Some basic challenges that these enterprises face are of the following nature:

·         Lack of know-how in trade compliance due to lack of experience

·         Failure to ramp up for the export compliance requirements of highly regulated products when they expand their product lines from products of low regulatory controls

·         Absence of senior trade compliance leadership

·         Not being aware of export / import procedures

·         Lack of trade compliance charter and in-house training program

·         Untimely fulfillment of trade documentation

·         Dependence on third-party vendors such as freight forwarders and customs brokers for trade compliance-related activities

Mitigation

To mitigate these teething or persistent trade compliance issues, these enterprises need a simple but comprehensive in-house program that ensures the following:

Hiring an experienced trade professional to design, plan, and implement a trade compliance program from a domestic or international trade perspective

1)      Concisely written trade compliance policies and periodic reviews that enable the staff to understand about the day-to-day compliance activities and take the best decision when faced with difficult situations

2)      Product classification and the applicable regulations knowledge, including duty deferment / subsidies and trade agreement benefits

3)      Government authorizations / permits requirement for export / import of products and their maintenance to reap the short / long term benefits

4)      Periodic audits and refresher training programs

5)      Informed pricing and investment decisions for sourcing the product considering regulatory requirement and free trade agreement benefits or duty reduction program evaluation

6)      Appropriate monitoring and enforcing of compliance program

7)       Preparation of systematic trade compliance mechanism to overcome trade challenges by implementing a global trade management system as per the available and allocated budget

How Oracle GTM can help SMEs to become trade compliant?

In the newer world of cloud-based compliance, systems may offer a solution that fits these SMEs needs, but the foremost and important thing is to get senior management to understand the importance of a trade compliance management program. The manageable fee structure of cloud software allows small and medium companies to make smaller upfront investments (such as license fee, annual maintenance fees, hardware procurement, etc.) and avail all the benefits of the software. These cloud implementations are usually faster than the on-premise ones. Oracle Global Trade Management (GTM) cloud-based software addresses almost all trade compliance related needs of an SME at an affordable cost.

Using Oracle GTM's cloud-based application will lead to a trade-compliant atmosphere within the company for less than a few hundred dollars a month. Cloud-deployed Oracle GTM is a multi-tenant version of the on-premise Oracle Transportation Management (OTM) where Oracle hosts the software and handles all the routine maintenance and upgrades of the system giving ample return on investment (ROI) against total cost of ownership (TCO) without any security concerns.

To know more on GTM Solutions, please meet us at the Infosys Booth during the OTM SIG APAC 2016 Conference (Singapore) and our experts shall be delighted to explain the details.

Written by: Ravikiran Narayan Khobragade and Mohammad Haider Talat

EU's proposal to modernize its dual-use regulation and its impact on various industries

The European Union (EU) controls the export, transit, and brokering of dual-use items within its territory and jurisdiction of its 28 member states*. It considers this control as an important instrument in contributing toward global peace and security.

What are dual-use items?

In simple words, a dual-use item is referred to as a good, software, or technology meant to be used by the civilian population for legitimate purposes; but can also be misused for terror attacks, international crimes, human rights violation, or the development of weapons of mass destruction.

For example, a substance that reacts chemically to release vast amounts of energy can be used in a regular college chemistry lab for educating students. At the same time, it can be possibly used in an explosive or a missile warhead. Here is another example: An electric motor that is used for generating electricity for domestic households can also be used in an armored military vehicle like a battle tank.  

According to the available statistics, export of controlled dual-use items from EU was around EUR59 billion, in 2014 alone, which is approximately 3.4 percent of the total EU exports.

How is the export in dual-use items controlled?

Through EU Regulation (EC) No 428/2009, a common EU list of dual-use items is in place and it is binding on all member countries of the EU to control the items in the list. The member countries usually place a license requirement on any enterprise involved in international trade of these items.

What is the proposal to modernize the existing dual-use regulation?

In September 2016, EU presented a proposal for a regulation to modernize EU dual-use control. The proposal aims at modifying or rather expanding the current list of items to adjust for the technological and scientific developments that the world has witnessed in the recent past.  

The main agenda of the proposal is to prevent human rights violations associated with certain cyber surveillance technologies. It is believed that if such technology is exported and falls into the wrong hands, then it could be used by repressive and authoritarian regimes to spy and intercept international communication which can pose a serious security risk to various nations and their citizens.

Which industries will be impacted and require a centralized trade management system to comply?

If this proposal is approved and enter into force, EU companies trading in cyber surveillance technologies will be required to obtain an export license and follow new procedural requirements.

Under such circumstances, it will be imperative for all those enterprises which export any of the following products to manage their trade through a robust centralized system.

  1.         Computer and network surveillance related products
  2.         Spyware manufacturing products
  3.         Information extraction software

The proposal also talks about a catch-all mechanism that allows member states to ask any exporter to apply for an export license because of human rights considerations.

This 'catch-all' clause is in contrast to the current provision according to which only the states are authorized to monitor the export. Hence, any exporter might be asked to procure a license before exporting the goods that are similar to any other goods existing in the dual-use list. Under such a circumstance, identifying and assigning the license and keeping a trail of the same manually will be an extremely challenging task for enterprises.

How can Oracle Global Trade Management help?

With its out-of-the-box (OOB) feature for license management, an enterprise can easily configure a number of licenses based on quantity or value. These licenses can be automatically assigned to the export orders involving the affected goods and makes the process hassle-free.

Further, once the quota or the value of any of the licenses reaches a critical level, the system can notify the business and the business can further apply for new / additional licenses with the relevant government authorities.

In addition, all scenarios that require any kind of export / import control measures can be modeled in the system and the entire process of screening, rescreening, and releasing sales orders can be made automatic using another OOB feature of trade compliance management.

Please meet us at the Infosys Booth during the OTM SIG APAC 2016 Conference (Singapore) and we shall be delighted to showcase our GTM solutions.  

*28 member states since no formal process of UK to exit from the EU has started as on today.

Written by: Mohammad Haider Talat and Ravikiran Narayan Khobragade

November 29, 2016

Minimizing multi-tier transportation costs with smart network routing

Oracle Transportation Management (OTM) is designed to support both shippers and logistics service providers (LSPs). In fact, OTM can be configured to manage all transportation activities in the global supply chain. It integrates transportation planning and execution, freight payment, and business process automation through a single application across all modes of transportation -- road, air, ocean, and rail shipments.

OTM's integrated option--Oracle Transportation Operational Planning--supports all transportation operations, including inbound, outbound, simple point-to-point, complex multi-modal, multi-leg, and cross-docking. It also enables us to validate a shipment through an optimized route.

Network routing is an additional enhancement in OTM version 6.3 through which the shipping cost can be reduced. It also maximizes consolidation opportunities by routing orders from different origins to destinations through a network. Network routing is a new approach to model multi-tier transportation networks. The network routing logic of OTM is a solution for different multi-leg journey problems.

When is network routing recommended?

A network is a combination of locations that represents possible routes for order transportation from a source to destination. Network routing allows multiple cross-dock facilities and also consolidation of orders when appropriate. The flow of orders through a particular network can be determined by many factors like cost of the route, time constraint of an order, equipment constraints if any, and consolidation opportunities available. Network routing can be the best solution when:

  •        The order which is being transported from a source to a destination, may require multiple shipments through intermediate locations
  •         Different choices for intermediate locations are available between a source and destination
  •         Decisions related to routing are taken at the time of planning
  •         Order volumes can impact the routing choice

In network routing the orders flow from a source to a destination via cross docks. Every region will have a representative location. Itineraries and rates need to be created for each leg in a network. An itinerary can have multiple legs and each leg can form a network. When there is a network on the itinerary leg, the network leg substitutes for the itinerary leg.

Let's take an example of orders flowing from one source region to destination via cross dock,

Source region

Xdock

Destination region

Gujarat

Nagpur

Hyderabad

Karnataka

Rajasthan

Indore

 

Within the source region, multiple locations have to be created and each location should be a part of a network leg for the network routing to work efficiently. The routing should be decided based on cost effectiveness, route availability that accounts for order routing constraints, and time constraints on orders if any. Each location will have either ship-from / ship-to / cross-dock roles.

Let's see the locations within the regions and how the network legs are formed. In the below table we can see different regions and the locations from those source / destination regions which are acting as Ship from / ship to or xdock roles and how the network will be designed.

Region ID

Location ID

Roles

Gujarat

Anand

Ship from / ship to

Surat

Ship from / ship to

Ahmedabad

Ship from / ship to, x dock

Rajasthan

Udaipur

Ship from / ship to

Bikaner

Ship from / ship to

Jaipur

Ship from / ship to, x dock

 

Nagpur

X dock

 

Indore

X dock

 

Hyderabad

X dock

Karnataka

Mysore

Ship from / ship to

Hubli

Ship from / ship to

Bengaluru

Ship from / ship to, x dock

 

The orders and their transportation legs would be similar to the below:

Order 1

From manufacturer in Anand to consumer in Mysore

Order 2

From factory in Surat to showroom in Hubli

Order 3

From warehouse in Ahmedabad to retailer in Bengaluru

Order 4

From manufacturer in Udaipur to consumer in Bengaluru

Order 5

From factory in Bikaner to showroom in Mysore

Order 6

From warehouse in Jaipur to retailer in Bengaluru

 

Thus, in the above flow of orders from source to destination region, Oracle's network routing can dynamically make an intelligent decision on when it is ideal to go directly from Ahmedabad to Bengaluru and when it should be routed via cross-dock. If a freight is already scheduled via cross-dock and to the same destination, then it would be a free ride in that case.

Let me elaborate this with the following examples:

  •      There are three orders--one is from Anand to Mysore, another from Surat to Hubli, and a third one from Ahmedabad to Bengaluru. These orders can be transported in the same route through cross- dock and the locations can be added to a single region as an efficient way of transportation planning
  •      Thus, Anand, Surat, and Ahmedabad will be configured as locations under the region of Gujarat with Ahmedabad as the cross-dock for the source location (Gujarat). And Mysore, Hubli, and Bengaluru will be under the region of Karnataka with Bengaluru as the cross-dock location for the destination (Karnataka). Similarly, for the order which should be transported from Udaipur, Bikaner and Jaipur will be the locations configured under Rajasthan region
  •       Now, for the order to flow from Gujarat to Karnataka and from Rajasthan to Karnataka; Nagpur, Indore, and Hyderabad will be taken as the three cross-dock locations
  •     So, if the itinerary leg links to a network, then OTM will use the network which has been configured for bulk planning, provided the appropriate planning parameter has also been configured

The network routing feature in OTM has many more features, which makes it the ideal option to model multiple pathways in a very simple manner. This modeling of routing also provides greater flexibility in the approach and design of networks. By making simple changes in the design of the network, any variations in operation can be accommodated as well. Thus, network routing is set to offer huge optimization benefits in OTM's routing process.

To know more, please attend our session on Network Routing at OTM SIG 2016 APAC Conference (Singapore) and we will be overwhelmed to take you through our solutions.

                                                    Written by: Julie Jose

November 10, 2016

Supply chain visibility

OTM
Oracle Transportation Management (OTM) has provided companies the flexibility to manage all transportation related activities across supply chains on one platform. Apart from minimizing costs, optimizing service levels and providing flexible models of business process automation within their logistics networks, OTM also helps organizations in mapping their highly complex business requirements from logistics domain.

What is supply chain visibility (SCV) and what role does it play in OTM?
Supply chain visibility (SCV) is the ability of parts, components, or products in transit to be tracked from the manufacturer to their final destination. SCV's major focus is to improve and strengthen the supply chain by making data readily available to all investors - including the customer - and enabling transparency and a greater understanding of product movement and overall performance. SCV monitors and controls logistics processes more effectively by reducing inventory levels with real-time monitoring of inventory and management capabilities.

Key elements of SCV
Production
Supply
Inventory
Transportation

Production: Strategic decisions regarding production focus on customer preferences as well as demand in the market. They also analyze the type and quantity of products to be manufactured and the parts or components that should be produced, and whether they should be produced at a particular plant or outsourced to a capable supplier. They must also keep in mind production quality and the capacity of the goods to be produced that will ultimately have to meet the expectations of the customer and the market. 

Supply: An organization must select a supplier that provides the best raw materials at the best possible price. Organizations should also determine what goods their facility / facilities are able to produce both economically and efficiently so that they can maintain the availability of stocks whenever required in order to support the smooth functioning of the supply chain.
Inventory: Strategic decisions in this area always focus on inventory, particularly stock-in-hand. In SCV, this aspect is a very critical issue and determining the optimal level of stock at each location is vital in ensuring customer satisfaction as demand fluctuates.

Transportation: OTM is the world's leading transport management tool providing planning and execution solution for shippers and third-party logistics providers. A single application integrates and channelizes shipment planning, execution, freight settlement, and business process automation. OTM can be implemented for varied modes of transport, ranging from full truckloads to complex multi-leg combinations of air, rail and sea shipments. As a consequence, this tool substantially brings down transportation costs, leads to an improvement in customer service and asset utilization, and helps in delivering the benefits of a flexible solution.

Objective of SCV 
Maintaining the reliability of the supply chain is critical in ensuring that a high demand for goods percolates through at all times, as in today's competitive world, meeting deadlines and achieving customer satisfaction is of utmost importance.

Business challenges of SCV
The execution phase poses formidable challenges in terms of the entire plan. Key challenges such as order modification, shipment damage, unfavorable weather, production backlog, and similar unexpected events culminates into 'delayed shipments' and leads to serious 'supply chain issues' regardless of how robust the initial plan was. Thus, organizations constantly strive to achieve real-time tracking of their goods within the supply chain. Real-time monitoring of Goods-in-transit provides companies opportunities of identifying pertinent problems and arrive at mitigation plans for reducing their impact.
Event management through visibility: Service-level agreements (SLAs) are specified for each lane which varies from one another. These SLAs need to be monitored so that, if and when any SLA is not met, a notification is sent to the Service Provider. In order to meet this requirement, a milestone monitor is setup and configured.
The entire lifecycle of orders and shipments is managed proactively by SCV through automated milestone monitoring. When pickup confirmations have not been received within a specified tolerance interval, SCV automatically accelerates shipments and status updates are received from transportation service providers using multiple communication formats such as web, XML, or mobile telephony.

OTM and its contribution to SCV
OTM in its recent versions have helped a great deal in improving the logistics business and streamlining order fulfillment and procurement to bring down production costs and lead times. In the coming years, OTM is poised to play a significant role in determining future of logistics enterprises. Improving visibility all throughout the supply chain and removing wastages/bottlenecks shall be the key tenets of implementing OTM solution. These functionalities shall undoubtedly lead to higher levels of efficiency and effectiveness across supply chains, thus meeting the ever increasing expectations of tech savvy customers who want their orders delivered in the fastest manner possible at an optimized cost.
In a nutshell, OTM and its upgraded version have largely emphasized on:
Increasing  supply chain visibility with carrier and trading partner communications
Improving operations and network performance with embedded analytics
Reducing freight costs and increasing profit margins
Increasing customer service and supply chain reliability
Reducing supply chain and compliance risk worldwide
Outsourcing transportation, production, and warehousing that has increased unexpectedly, meeting all the challenges of SCV
To know more, please meet us at the Infosys Booth during the OTM SIG APAC 2016 Conference (Singapore) and we will be delighted to showcase our solutions.
Written by: Rachana Singh

Optimization overdrive

Eventually, every business must optimize its processes. Every organization has goals - be it improving revenues, increasing its customer base, or even sustaining itself in a competitive environment. Organizations incentivize their employees to achieve their annual goals and it often works out very well. But in certain cases, such as the logistics industry, where multiple organizations collaborate and compete at the same time, and where forward integration is always looming right around the corner, the simplified focus of improving profits year-on-year may not be the best approach.

Forward Integration is ruthlessly executed by Freight Forwarders and Custom Brokers whereby they add a long list of logistics services to their portfolio, eroding the customer base from existing logistics players in the market.

An order placed by the end customer is typically subjected to multiple iterations of optimization by the manufacturer, carrier, third-party logistics (3PL) service provider, freight forwarder, etc. This article presents the downside of optimization in the logistics industry, in favor of a single meta-optimization.

Retailer's perspective

Can companies collaborate to optimize total supply chain costs? Can a company forego its immediate margins for a sustainable future?

Let us consider a supermarket in a country like Australia where land-based transportation is ubiquitous. This supermarket has its own fleet but primarily depends on 3PL service providers for most of its transportation needs. This supermarket, like most players in this segment, thrives on stocking fresh consumables and moving the items off the shelves in the quickest manner possible. To ensure this, two things need to happen:

  1.        The fresh food products need to be delivered from the vendors to the supermarkets as quickly and as efficiently as possible. Any delays from the day the food was made available by the vendor to the day it arrives in the supermarket can have significant repercussions
  2.       For the retailers, buying 3PL's transportation services should be beneficial in the long run over using their own fleet

Its transportation management system enables the supermarket to place orders, optimize, track the movement of goods, and so forth. Goods move from the vendor's location to the distribution center. This comprises the first leg of the movement. Here, workers reassemble the cartons / pallets into smaller trucks to deliver goods to all the supermarkets in a particular zone. This second leg is usually executed in the form of a multi-stop model.

It may not be obvious at first, but it is really challenging to optimize costs on first leg movement because transportation is carried out by a 3PL. This 3PL consolidates all the orders they receive from multiple customers (supermarkets, manufacturers, and other retailers) in a way that is beneficial to them. The 3PL users initiate their load plans / shipments on top of whatever optimization was already made at the customer's site.

So, for instance, the supermarket in question has a 100 orders on a given day, which are to be picked up from 10 pickup locations and be delivered to their DC within three days. The supermarket's TMS takes these 100 orders and optimizes them based on:

  1.         The distance between pickup locations
  2.       The requested delivery date of individual orders
  3.       The truck capacity in the available lanes

Based on these factors, the supermarket's TMS arrives at say, four load plans / shipments. These are transmitted via Electronic Data Interchange (EDI) to the 3PL's TMS system.

The 3PL TMS system receives multiple load plans / shipments from multiple customers. This system also receives unplanned orders placed by smaller customers who don't have their own TMS systems yet.

The 3PL TMS performs an additional consolidation. It considers the very same factors that the upstream TMS has already considered, thereby disputing the original plans. The following scenarios are then possible:

  1.         The original load plan / shipment received from the upstream system considers a capacity limit of, say 4000 cubic meters, in a certain lane and the volume utilization achieved was around 82 percent. The downstream TMS can achieve a better volume utilization by upgrading a smaller truck to a larger truck and consolidating several other orders / shipments, effectively achieving a volume utilization of 98 percent. Of course, this is subject to slight changes to the original plan received from the supermarket
  2.      3PLs make the delivery to the doorstep, however, the supermarket only negotiates for the delivery to be made to their DCs. After the picking and packing is done, the supermarket has to buy the 3PL services a second time for the second leg of the movement. Instead of two shipments for the same order, a 3PL can make one delivery for a single price, thereby reducing the cost

3PL's perspective

Let us consider a 3PL in the same region as above. They would have their own fleet but a majority of their business operations are based on established contracts with multiple carriers. Some carriers specialize in providing line haul services between states while other carriers are more focused on regional deliveries.

A 3PL's buying behavior could be best described as follows:

  1.       Buy the whole truckload (TL) space if it is between major cities like Sydney and Melbourne, Perth and Brisbane, etc. This is because volumes are high and relatively stable, albeit subject to seasonality issues from time to time. Additional expenses such as fuel surcharge and accessorial costs are levied on the whole truck. Individual cartons, pallets, and consignments that make up the truck do not influence the cost of a TL. The 3PL has to make sure they maintain healthy volume utilizations on these trucks. The profit and margin that the 3PL makes on each carton / pallet / consignment is directly proportional to the truck's volume / weight utilizations. So, hiring a full truckload is only practiced on lanes where the 3PL has huge volumes
  2.      Buy less than truckload (LTL): This contract is based on the consignment's volume, weight, or other dimensions. The carrier would levy an additional fuel surcharge on each consignment. The total truck's utilization does not influence the profit and margin the 3PL makes on each carton / pallet / consignment. This is adopted for home deliveries where the customer is more than happy to upgrade to an 'expedited' service or an 'air overnight' service in place of a 'general' service. It is also useful in return deliveries where products purchased earlier are being returned to the manufacturer such as when a mobile phone that is ordered online arrives home with a manufacturing defect. If it is left to the 3PL, they would choose to negotiate only LTL rates for these and many other scenarios within the city limits. But some carriers that operate in remote locations demand fresh contracts that are neither TL nor LTL
  3.      Hourly hire: Here, carrier charges are truck-agnostic, so to speak. The 3PL will be charged only after the consignment is delivered to the recipient. It is at this point that the number of hours spent in delivering the consignment are recorded and relayed back to the 3PL. Most of this is automated; for instance, the driver of the truck opens up an app to get the recipient's signature. This app records the milestone achieved (proof of delivery) and electronically submits it to the 3PL. Since all the milestones are tracked, the 3PL's TMS can ascertain the number of hours spent on the job

Let us look at 3PLs in Australia. The 3PL's TMS receives thousands of orders every day. These orders are planned based on fixed routes that make use of their depot locations across the country. The depot locations serve as cross-dock facilities for line haul movements, typically carried out by TL carriers. Optimization is ruled out in line haul scenarios owing to the way contracts are negotiated with these carriers. The first mile and last mile carriers usually charge the 3PL based on each consignment's weight and volume.

With this in mind, let us look at their planning / optimization model. On a given day, let us consider that a 1,000 orders were placed by different customers, with each order also bearing a carrier and service nominated on them. The nominated service is used by the 3PL as a reference point for charging their customers. The 3PL's TMS can only optimize the first leg movement and the line haul movement. The last mile cannot be optimized because the customer has already nominated a carrier and the service.

Since the last mile cannot be optimized, the 3PL creates a load plan / shipment based on the requested delivery date (RDD) alone. So, the TMS segments all available orders and delegates different shipments based on what has to be delivered in N days, N+1 days, N+2 days, etc.

It is not the most efficient of planning scenarios. These load plans are then electronically submitted to the last mile carrier. The last mile carrier takes these shipments and consolidates them with other shipments / orders that it receives from other customers. So the downstream carrier's TMS essentially discards the planning that was performed in the upstream 3PL's TMS system.

In this case, the following scenarios are possible:

  1.        The 3PL's TMS creates three shipments to be delivered today, tomorrow, and the day after tomorrow respectively. These shipments have the earliest start time of yesterday, today, and tomorrow respectively.  When the carrier receives these shipments, and their TMS looks up available trucks to optimize, it is limited due to the time window sanctions imposed by the 3PL's TMS system
  2.      The carriers can benefit by maximizing their volume utilization. Ideally, a carrier should be allowed to switch between small and large trucks based on the delivery time windows of the original orders. But the original orders and the original time windows are not visible to the carrier. The carrier's TMS is fed processed data from the 3PL's system

Residual cargo carrier's perspective

Containerization has evolved from a novel idea to a global phenomenon over the last century. Container freight stations may be owned by carriers, the government, or a third party warehousing player. When it comes to ports, the port authority of that country plays a crucial role in determining the inbound and outbound volumes.

In the international movement of goods, the sea ports, the respective container freight station (CFS) locations, the availability of residual cargo carriers, and the distance between them influences the extent of optimization. For instance, a shipment from Shanghai to New York can be achieved in:

  1. A single-leg voyage all the way from the port of loading to the port of discharge
  2. Multi-leg voyage with the first cross-docking at Singapore and onwards

Ships usually have dedicated routes with the vessel schedules being fixed. There are simply far too many documents to fill out at each port and the volumes are just too high to be able to carry out a multi-pickup or a multi-delivery mode of transportation. There are also cutoff times for goods to arrive at all the ports, beyond which goods may not be considered for documentation purposes. For these reasons, all ocean-based modes are direct shipments, from port to port.

Let us consider the CFS in Singapore. Singapore is a cross-dock facility for many carriers. For instance, if a retailer in North America is planning to stock the goods before Christmas, they may place their orders with their supplier in Shanghai as follows:

  1.         Male garments with a delivery time window of four months
  2.       Female and kids garments with a delivery time window of three months
  3.       All footwear with a delivery time window of three months
  4.       Promotional products with a delivery time window of one month (so that the products can be displayed months before release)

Now, let us add similar orders with similar time windows from Beijing to a Latin American retailer to this mix.

Since the routes are fixed between Shanghai and North America, and between Beijing and Latin America, the only scope for optimization is in cross-docking at the CFS in Singapore. When the carrier's TMS receives the orders listed above, they would be consolidated with other orders into 20FT or 40FT containers on the next outbound vessels from the respective ports. Of course, the urgency of sending an order outbound depends on the requested delivery dates by the customer. Having said that, the first leg movement's objective would be container capacity utilization. If there is an outbound vessel that can carry about 80 percent of all the orders placed, they will be shipped right away, without considering the delivery dates. These shipments would reach Singapore and hibernate in the CFS based on the urgency, as dictated by the delivery time windows.

When the next vessel is scheduled to leave after, say a month, the residual cargo from earlier orders would be shipped in it. But if all the shipments can only make up to 10 percent of the ship's capacity, the original carrier would outsource it to another carrier. This outsourced carrier would take all such residual cargoes and reach the Singapore CFS where the goods are deconsolidated to be warehoused / shipped for the future.

Herein lies the problem. The original cargo carrier would have his own dedicated ships and would try to optimize in order to achieve the highest container utilization. So, the original carrier would wait until a cutoff time in order to give himself a decent chance at accumulating multiple orders into a single vessel. After the said cutoff time, the original carrier would make the decision, either to ship it himself or to outsource. During this time, the residual cargo carrier is also giving himself a decent chance to consolidate shipments.

Thus, the following scenarios are possible:

  1.        The residual cargo carrier has enough shipments with him to load the next vessel before the original cargo carrier can place his outsource orders. Now, the original carrier has to wait for the next vessel, and if it proves to be too late, he may have to consider an aerial route
  2.       The residual cargo carrier commits to a vessel schedule but does not have enough shipments to load on board

Conclusion

This brings us to the question of seamless optimization. Can the logistics industry evolve to overcome the above predicaments? Can multiple TMS systems interact and collaborate to benefit everyone involved? Can upstream and downstream systems intelligently predict the optimization of each other, without having to work in isolation?

In the case of the retailer in Australia, instead of committing to load plans / shipments created in their TMS system, they could submit a draft of their shipment plans to the downstream TMS. The downstream TMS can run a consolidation plan on all the draft shipment plans received from multiple customers. After a certain period of time, profit, margin, and other key performance indicators (KPI) can be compared between consolidation plans executed on draft shipments and the same plans executed on committed shipments for better planning.

In the case of the 3PL, instead of sharing the processed shipment plans with the carrier, raw orders can be submitted to the carrier. The carrier can run a draft iteration of optimization on the orders received from the 3PL for a given month and submit the draft shipment plans back to the 3PL. The 3PL can review this output. The original orders usually drop in with constraints such as their compatibility with other stock keeping units (SKU), whether to refrigerate, to be handled carefully for fragility, etc. The original orders also have the delivery time window, nominated carrier, and type of service specified on them. If the carrier's submission of the draft optimization satisfies all these conditions, the 3PL can accept the draft shipments or make amends to these draft shipments before finalizing. Initially, this may have to be handled by transportation managers from either side. But as the interface evolves, the carrier's TMS can be made intelligent to track the acceptance ratio of all the draft plans that it submits to a certain 3PL. These acceptance indicators can be used in predicting the acceptance from the upstream or downstream TMS', and adjusting the plans accordingly to gain better acceptance and so forth.

The residual cargo player can request submissions from all the original carriers in the area. A constant feed of all the residual cargoes can be submitted via an automated interface between all the carriers. The residual cargo carrier can execute an iteration of optimization at the end of every day to verify container capacity utilizations. The system can track the percentage of utilization of containers and the next outbound vessel. A notification can be sent to all the carriers once the residual cargo carrier's iteration yield exceeds a certain percentage. This will enable all the original carriers in the area to plan and execute their shipments in a much more efficient manner.

TMS systems working in isolation are inferior to TMS systems collaborating, thereby achieving an all-encompassing system. An omniscient TMS system like this can iron out inconsistencies over a period of time, rule out uncertainties, and may even prove to be resilient in times of unforgiving global economic changes.

To know more on optimizing logistics, please meet us at the Infosys Booth during the OTM SIG APAC 2016 Conference (Singapore) and we shall be delighted to showcase our solutions.

Written by: Kranthi Sagar Askani

September 17, 2016

Decoding GST for Oracle Customers

 

As India gets ready to implement the new GST law, the question on top of most of the IT leaders, finance leaders is regarding the readiness of the IT systems to meet the new requirements.

Are the changes to the system simple or complex? How long will it take to solution and implement the change?  Has this been done before? Can you speed up the process? When do we start with work to be ready on time? These are absolute valid concerns and need immediate attention.

Infosys has been working on building the solution to help enterprises move to new GST law smoothly and quickly. The Infosys solution

-          Uses the Infosys 'Tax Assessment' framework to understand the likely impact areas.

-          Uses the Infosys pre-built solutions, templates to solution the requirements

-          Uses the Infosys Intrak implementation approach to implement the solutions

Note, the solution has not considered Localization patches which Oracle may come up with. As of now, Oracle is still working on the localization patches. 

Assessment - Infosys Tax Assessment framework:

The Infosys Tax Assessment framework, has been built based on our experience in implementing tax solutions across the world for VAT, Sales tax regimes in Americas, EMEA, and APAC.  The framework ensures the tax impacts - easily and in a structured way without any misses.

The Infosys Tax Assessment framework, discusses the impacts within the below five boundaries.

1.       Master Data

2.       Tax rules ( defaulting tax on business transactions)

3.       Cutover Impacts

4.       Business documents

5.       Reporting and Accounting

The provision of 'Credits and Refunds' have also created a lot of confusion and anxiety.  The Infosys framework has been tailored to assess the likely systemic requirements around credits and refunds.

1.       Master Data -

Master data like supplier master, customer master, legal entity setups, General Ledger accounts and Part master needs to be enriched with the new tax registration details and exemption details to meet the GST law requirements.

GST Requirements on Registration:

As per the Model bill, the existing dealers would be automatically migrated. The new GSTIN will be a 15-digit GSTIN based on IT PAN.

Liability to get registered: Every supplier should be registered if aggregate turnover in a Financial year exceeds 0.9 million / 9 Lakhs INR (0.4 million / 4 Lakhs INR if the business is registered in North Eastern States and Sikkim).

 

Liability to pay tax:  will be after crossing the threshold of 0. 5 Million / 5 Lakhs INR for NE states and Sikkim and 1 Million / 10 Lakhs INR for Rest of India. Small dealers having sales below 5 million INR can also adopt the Composition scheme and pay flat of about 1 to 4% tax on turnover.

The tax is also determined based on the type of item, hence the parts should also be categorized using HSN Code.

2.       Tax Rules (defaulting tax on business transactions)

The tax rules default the tax rates on different transactions - P2P transactions and O2C transactions.  The Infosys 'Tax Assessment' framework helps building a tax matrix capturing all the tax rules in a single matrix, considering all the tax determining factors like party, place, product and process. The tax matrix ensures all tax requirements are correctly captured and are easily understood. Based on the tax matrix, the tax rules will be configured.  The tax rules will cover branch transfers and job work (OSP) transactions.

GST Requirements impacting tax rules:

·         GST is based on supply of goods or services against the present concept of tax on the manufacture of goods or on sale of goods or on provision of services.

·         GST will be Destination based tax against the present concept of origin based tax.

·         Local Transactions - will attract Dual GST With the Centre and the States simultaneously levying it on a common base

·         Interstate Transactions - will attract Integrated GST (IGST) would be levied on inter-State supply (including stock transfers)

·         Import Transactions - will attract IGST would be treated as inter-State supplies.

There are also likely to be multiple rate based on the type of item

·         Merit Rate

·         Standard Rate

·         De-Merit Rate

·         Zero rate taxes for certain items

 

3.       Cutover

The cutover from an old solution to a new solution is likely to impact the transactions which are mid-way in the end to end process. For example a PO created under an old tax regime might have old tax related data. When an invoice is created by matching the invoice to the PO, it might result in multiple taxes - one with old tax rates, statuses and the other with new tax rates, statuses.

The Infosys solution is able to identify the potential areas of impacts and leverage pre-built solutions to quickly identify and resolve such issues.

  

4.       Business Document -

Tax related information for e.g. tax registration details are usually printed on business documents like shipping documents, bill of lading, AR Invoices, purchase orders. Considering the refund / credit balance, the GST TIN of the buyer and seller should be printed on the AR invoices. The Infosys 'tax assessment framework' specifically poses questions around the business documents and invoices numbering. This is critical and is often missed, leading to penalties and non-compliance issues.

 

5.       Reporting and Accounting

The Infosys 'Tax Assessment Framework' finally looks at the reporting and the accounting requirements.  The monthly, quarterly, yearly, ad-hoc reporting requirements are captured as part of this step. The reports used for reconciliation with the general ledger and the number of GL accounts needed for reconciliation and reporting.  Companies may want separate accounts for Input IGST, Input SGST, Input CGST, Output IGST, Output SGST and Output CGST for easy reconciliation and credit tracking.

GST Requirements on reporting:

The Model GST Law proposes following reports

Monthly

Quarterly

Annual

Others

GSTR 1- Outward supplies

GSTR 4 - Quarterly return for compounding Taxpayer

GSTR 8 - Annual Return

GSTR 5 - Periodic return by Non-Resident Foreign Taxpayer (Last day of registration)

 

GSTR 2-Inward supplies received

 

 

ITC Ledger of taxpayer(Continuous)

 

GSTR 3-Monthly return

 

 

Cash Ledger of taxpayer(Continuous)

GSTR 6 - Return for Input Service Distributor (ISD)

 

 

Tax ledger of taxpayer(Continuous)

GSTR 7 - Return for Tax Deducted at Source

 

 

 

 

GST Requirements - Credits and Refunds

This is probably the most controversial change suggested by the Model GST Law. The credit claim process has been a topics of hot discussions as it could have big impact on the cash flow and even margins of the enterprises.

Below are the details of the credit and refund process.

Tax Credits to be Utilized as below

Conditions to Claim Credit

Timelines

Input CGST to be utilized against output CGST and IGST

Possession of tax invoice

One year from the invoice date

Input SGST to be utilized against output SGST and IGST

Receipt of the goods/ service

Credit pertaining to a financial year cannot be claimed after filing the return (for September) of the next financial year or the filing of the annual return for the year to which the credit pertains - whichever is earlier

Input IGST to be utilized against output IGST, CGST and SGST in the order of IGST, CGST and SGST

Payment of tax charged on the  invoice by supplier

 

 

Filing of GST return

 

 

Match the claimed credits with the vendor tax liability. In case of a difference / discrepancy, excess credits will be disallowed to the recipient.

 

 The above requirements are likely to lead to the following systemic requirements

·         A systematic way to automatically calculate the credits

·         A systematic way to do a vendor account reconciliation

·         The need to do a vendor reconciliation will need an ability to upload the vendor data from GSTN into Oracle.

·         A form to view the GST balance and ability to write-off credits which cannot be claimed

 

Solutioning using Infosys Accelerators -

We have a pre-built repository of ready-to-deploy solutions, which will help enterprises shorten the time to solution and then to develop the solutions. The solutions cover all the areas mentioned below

S Num

Item

Infosys Accelerator

1

Master Data

Re-usable solution to enrich master data

2

Tax rules ( defaulting tax on business transactions)

GST Tax Matrix, Pre-Built GST Configuration Templates

3

Cutover Impacts

Pre-identified components and pre-built solutions to correct cutover impacts.

4

Business documents

Re-usable solution to fix business documents

5

Reporting and Accounting

Pre-built reports, solutions to meet the reporting and accounting needs.

 

Refunds and Credits:

The Infosys solution for claiming refunds and credits will require developing the following programs and solutions to track credits, perform vendor reconciliation, claim credits and write-off credits.

·         Tracking Credits - A custom form will be developed to track the GST credits.

·         Vendor Reconciliation - Two custom programs will be built

1.       A custom program will be built using API provided by GSTN, to upload supplier data.

2.       Custom program will be built to automatically list the unreconciled items with reason code e.g. Goods in transit.

·         Claim Credits - A custom program will be built to automatically claim credits as per the GST rules

·         Write-off credits - The custom form to track credits, will include the ability to write-off credits.

 

Timelines:

The Infosys solution will enable enterprises to freeze the GST solution in 5-8 weeks, leveraging the Infosys 'Tax assessment framework' and pre-built solution repository.The likely timeline for the solution will be as below.

 

 

 

 

India GST Plan.PNGIn Conclusion:

Considering time frame-work of 1-2 months for solution finalization plus implementation effort of 2-4 months, it is prudent for organizations to start the work on GST immediately, to be ready for the 01-Apr-2017 launch.

 

 

 

 

 

September 8, 2016

Internet of Things (IoT) in field service management (FSM)

In today's competitive world, real-time data and innovative service methods are vital for field service enterprises to ensure customer delight, increase revenues, and expand profit margins.

The IoT explained

The Internet of Things (IoT) allows machines to communicate with each other (M2M communication). It is built using a combination of networks that comprise of data-gathering sensors, devices, big data, analytics, and cloud computing, which communicate via secured and encrypted channels. Connected devices enable efficient predictive maintenance by constantly providing information on a machine's performance, environmental conditions, and the possibility of failures. IoT can connect machines on the field in order to record incidents in real-time into a semi-intelligent 'Gen-X' FSM system.

Integrating IoT with FSM software applications

Field service organizations always strive to consistently provide the best service experience to their customers, by ensuring immediate repair and maintenance of their equipment and machinery. By collecting data about the machine's health and performance from IoT sensors, organizations can leverage predictive and preventive field service to minimize device downtime.


Three primary traditional FSM challenges

Here are three primary issues that challenge the current reactive scenarios:

    Field technicians execute the job and fix the equipment after the issue is reported. However, the delay can impact business continuity, which in turn affects the operating profit margins


    Adding more field technicians and service trucks to the field comes at a cost and sometimes the increased capacity remains under-used


    Assigning more work to existing field teams can have a negative impact on SLAs and first-time fix rates. Even worse, it can increase the cost of travel and overtime

Essentials of a new-age FSM solution

A field service management system that integrates device sensor data, technicians, customers, and technology is the key to address these issues. It should function in a predictive and preventive mode with the following features:

    The FSM process, which includes issue identification, communication, incident creation, scheduling, and assignment can be automated, thereby ensuring zero disruption in machinery operations and no or negligible downtime. This not only increases productivity, but also expands operating profit margins

 

    Most FSM products can also automate incident creation, scheduling, assignment, and invoicing processes. Using IoT, we can predict upcoming issues based on sensors data analysis and auto-creation of incidents based on preset threshold rules

The workflow of a FSM system with IoT integration

Here is an outline of the flow of incidents in a typical IoT-enabled FSM system:

1.   Data from the equipment's sensors is collected and transmitted, using secured and encrypted channels, to a big data storage


2.   Big data management and analytics is used to parse and analyze for refined sensors data


3.   The IoT command console is configured with predefined threshold rules to identify errors and monitor the device's health and performance


4.   Incidents are auto-created in the FSM system whenever errors are detected


5.   Auto-scheduling, routing, and dispatching of field service technicians against the incidents is done based on customer entitlements, location, product, skills required for the job, technician's availability, parts availability, etc. via the FSM system


6.   A field technician performs the job at the customer's site; records the effort, parts used, travel time, and any expenses incurred; and then bills the customer


Workflow of Field Service Management application using IoT.