Working towards making your Network Work!
One of the well known challenges supply chains face is to tackle the operational variabilities that exist internal and external to the organization. In our highly networked world which is seeing an insatiable appetite to exploit collaboration, external variability has caught the attention of managers and practitioners. Lets us discuss few perspectives here around Transportation solutions and processes enabling this.
As always the buyer-seller relationships nurtured in different stages of the supply chain often is dictated by the Bill of Material [BOM] of the products sold. Margin pressures have compelled marketers and manufacturers around the world to partition the BOM often internationally and take advantage of economical sources of raw material and labor thus bringing down Cost of Goods Sold. That said, it has also resulted in longer lead times in terms of fulfilling orders. With orders and shipments spanning across continental borders, (not to mention the amount of documentation that tags along at each step), it's a no brainer to understand that variability in processes have increased manifold. Partitioning the BOM and outsourcing a portion of it to another country of origin often results in reduction in the responsiveness of the supply chain. This in turn makes it necessary to have higher inventory buffers and cash buffers.
The logistics ecosystem which the future supply chains are bound to create is often imagined by experts to be a garden. Every trading partner is a part of this garden and the moment it comes on board, it is linked by means of material flow, cash flow or information flow. The success of the ecosystem is based on how well the new trading partner is made an essential part of it, much like how a new plant blossoms in the garden. The plant would bear much fruit and make the garden look wonderful depending on how well it receives nourishment from the soil and how with time its roots grow and become entrenched. Similarly, greater synergies would result in supply chain efficiencies and increase the new trading partner's ease in exchange of goods, cash or information. With synergies maximized and interoperability being seamless, fears of operational uncertainty can be doused with great confidence.
APICS also has identified Variability (along with Velocity) as a key area or what it terms as a principle to be considered at the network design stage. The principle statement "Leverage worldwide logistics" by APICS reflects that emphasis. This focus on leveraging the world wide scheme of things and enterprise wide networking with trading partners is a true value enabler. This fact has always been in the forefront in terms of strategy for solution vendors and more so in the recent past. I happened to attend a webinar hosted by Descartes Systems Group on networked transportation management last week and found the philosophy to be aligned to this larger theme. A networked TMS underlines the fundamental premise that every business is an information business and the prime strategic consideration of information as a resource.
Descartes' TMS claims to be a third generation networked TMS which caters to the organizational coverage which is much beyond the typical transportation management department of a shipper or a 3 PL company. Its value proposition is around collaborating with the diverse stake holders for a higher visibility of goods flow process and more importantly information. The various touch points addressed here are regulatory agencies, carrier portals and systems, customer interfaces, LSPs, supplier portals right up to mobile platforms. This way most transactions within the larger organization carried out on a daily basis is very well taken care of in a single space. So what would an integrated business look like in a TMS context?
An example of an integrated workflow could start from receiving PO/SO where orders are converted in to shipments which represent the lowest unit in transportation planning. A simplistic case would be aggregating orders from the same origin to destination combination and consolidating into shipments. A complex scenario would to create multi-stop shipments with orders from different OD combinations plugged in. Consolidation also would mean incorporating appropriate rating structure as a part of the contract management. Depending on the most optimal way of consolidation, the rating structure would account for LTL, TL or parcel mode of transportation. A parcel shipment rating would need to have the rating structure brought in by the individual carriers and build it in into the rating process. Also, a robust rate modeling would also allow surcharges (for eg fuel surcharge) and accessorials (eg last mile white glove services) to be factored in. Most advanced TMS providers also have built in the capability to model and optimize consolidation and routing based on the facility involved. A cross dock, a pool point or a logistics hub (for zone skipped parcel shipments) is a prudent way to cater to unique business models and optimally use different modes like TL,LTL and parcel. A recent area of interest is where planning intelligence takes a leap is by suggesting the best mix of a private fleet vis a vis a dedicated or on hire carrier mix. Once the Carrier mix is determined it becomes clear, that for execution of shipments what considerations play in. The appropriate for-hire component of the mix is tendered to the best carrier and what follows is a communication framework with partners including drivers, carrier companies,3 PLS ,right up to the appointments to be scheduled at the docks to the detail of the dock door and time slot. Often real time messaging, track & trace are enabled exploiting mobile platforms and On board computers. Transportation business being the dynamic part of the supply chain is accompanied may times with change in ownership or title of the goods transported. This makes it an imperative to have a fool proof, and industry complaint documentation structure in place, again to make sure that the larger ecosystem thrives on exchange of the three key elements. All processes also need to have regulatory rules built in for example Hours of service /Driving rules mandated by Department of Transportation should be an essential part of a TMS while calculating transit time and scheduling of shipments.
In retrospect, Descartes' solution theme revolved around the heavy focus on the network and going beyond the typical TMS way. From being remarked in the 2009 Gartner's report (the first time it was included in the study) of being "undifferentiated" and "confusing" in terms of the many pieces it is providing as a solution, Descartes has moved ahead. A niche player in 2009 to have secured a place in the visionary list in 2010; Descartes in my opinion has left behind the confusion to an extent and has been successful in giving the unified theme of a networked business enabler. It has also made incremental steps in plugging the gaps that exists between them and the leaders in the space. Being one of the very few players having a logistics messaging network spanning across 160 countries and claims to be connecting 25000 + partners, Descartes' Global logistics Network is a clear differentiator enabling collaborative trade. Solutions and business process enabling the visibility across the shores and organizational fences are a clear encouragement to the larger issue of tackling supply chain variability (at least from a supply perspective). More so with economic factors effecting the fluctuation of input costs in this industry, it's a given that, networked intelligence helps!
Esteemed readers, how has been your experience with initiatives to network with the larger Supply chain ecosystem? What are the challenges that are top of mind while making partners interoperate? Would be great to know your views on this.
