nullSupply Chain Visibility and Logistics Collaboration
Point of ViewSupply Chain Visibility and Logistics Collaboration
Point of View
David A. Hance, Northeast Region, Stamford, CT
Naoji Takeda, Northeast Region, New York, NY
M. Christopher Herrera, Northeast Region, New York, NY
John Scott, Northeast Region, Roseland, NJ
April 2001Final Draft Digital Markets and Supply ChainTable of ContentsTable of ContentsObjective
Introduction
Supply Chain and Visibility Collaborative Logistics Solutions
Major Attributes
Value Propositions of Visibility/Collaborative Logistics Solutions
Visibility and Collaborative Logistics Solutions Landscape Analysis
Vendor Matrix
Andersen Point of ViewObjectiveObjectiveThe objective of the Digital Markets/Supply Chain Team’s “Point of View” is to gain a comprehensive understanding of evolving Supply Chain Visibility and Collaborative Logistics solutions and how it will impact enterprise users.
Focus will be on:
Understanding solution from the entire Supply Chain Management perspectives
Articulating functionality and benefits
Landscape of fragmented solution setsnullIntroductionIntroduction: IllustrationIntroduction: IllustrationToday, 67% of supply chain executives conduct transactions with transportation providers manually (i.e., face-to-face, phone, fax, or mail). Less than a quarter use EDI and less than one-tenth use the Internet.
Morgan Stanley Dean Witter Research, August 2000Logistics Challenges Are RealLogistics Challenges Are RealHow can I? What Do Users Want from B2B Connectivity?What Do Users Want from B2B Connectivity?According to AMR’s interview of 152 executives on their views of the relative importance on the marketplace functionalities, SC Visibility and logistics-related functions (Order Status/Tracking and Transportation management) were among the highest in importance.Source: AMR Research November 2000nullSupply Chain Visibility and Collaborative Logistics SolutionsSupply Chain Visibility and
Collaborative Logistics DefinedSupply Chain Visibility and
Collaborative Logistics DefinedDue to the advent of the Internet technology, B2B eCommerce and collaborative technology, a new category of much fragmented Supply Chain Management tool has emerged; Supply Chain Visibility and Collaborative Logistics.
Supply Chain Visibility tools enable enterprise to monitor, track and control all executed order shipments across its extended supply chain. Typical this includes inbound logistics from suppliers and outbound logistics to customers. Real-time freight data from logistics service providers (Carriers, Freight forwarders, Customs brokers) as well as trading partners (suppliers and customers) are validated and aggregated to provide an end-to-end status visibility. Tracking of goods at various levels (Customer Order, BL#, Container and SKU level) are made possible by common data modeling.
Collaboration happens at various levels of logistics service providers. Enterprise-Service Provider collaboration includes exception contract negotiations, tender/acceptance, alerts messaging/workflow and scheduling. Also Supplier-Customer collaboration will also be enhanced by feeding real-time inventory visibility into APS module to provide Capable-to-Promise (CTP) information to customers.Supply Chain VisibilityCollaborative LogisticsSupply Chain Management LayersSupply Chain Management LayersSupply Chain Planning (SCP)
SCP is a system of applications that enables demand planning and forecasting, materials procurement and production scheduling.
Typically, SCP systems are used for forecasting and preparation of manufacturing/assembly processes.
Supply Chain Execution (SCE)
SCE is a framework of applications that enhance the productivity of the storage, preparation, logistics and delivery of completed products.Adopted from AMR ResearchVisibility / Collaborative Logistics
ScopeTraditional View vs.
New Supply Chain Management ToolsTraditional View vs.
New Supply Chain Management ToolsSupply Chain Planning (SCP) tools were developed separately from Supply Chain Execution (SCE) tools. As a result, they both require unique ERP interfaces. This “ERP centric” model often resulted in customer demand not fulfilled properly—theoretically perfect supply chain plans not executed properly due to missing linkages between planning and execution systems.
Visibility and Collaboration components, however, began linking plans and results of various supply chain activities at or close to real-time basis. Also these components enabled enterprise to collaborate with trading partners and logistics service providers. Visibility component is the eyes, and Collaboration is the mouth to communicate for an enterprise. With better visibility and communication, an enterprise can leap benefits from functionality from each component solutions (APS, ERP, TMS and WMS).New ViewTraditional ViewSupply Chain Visibility—How it Fits to Existing SytemsSupply Chain Visibility—How it Fits to Existing SytemsPlanningExecutionData
InterfaceITLSDatabaseWMSDatabaseTMSDatabaseOMSDatabaseAPSDatabaseERP ApplicationERP Application Supply Chain VisibilityCollaborationSCP SystemSCE SystemSource: AMR Research, 2000Extended Trading CommunitySingle Interface
Visibility
Event Tracking
Performance & Compliance Management
Distributed Data Mgmt
Alert Mgmt
Workflow CoordinationFinancial ServicesSuppliers3PL & TransportHubs & ExchangesCustomersConnecting Logistics Trading PartnersConnecting Logistics Trading PartnersEnd-to-End Visibility ScopeInternet Collaboration EngineSupplierOcean
CarriersPlantsAir
CarriersAssemblyGround CarrierWarehouseCustomerLogistics CollaborationLogistics CollaborationLogistics Collaboration facilitates data exchange among all parties within fulfillment chain. This is not demand forecast collaboration between customers and suppliers such as CPFR (Collaborative Planning Forecasting and Replenishment).
Logistics Collaboration focuses on executed orders to be fulfilled as planned. CPFR focuses on demand forecast and fulfillment plans to be accurate.Suppliers
Carriers
Customs Brokers
Freight Forwarders
Warehouses
CustomersManage purchase orders, ensure order compliance
Procure services, monitor inventory movement, monitor performance
Procure services, Expedite customs clearance, monitor performance
Procure services, monitor inventory movement, monitor performance
Procure services, monitor inventory level, monitor performance
Fulfill orders, improve customer service ASN, Packing Slip, Shipping information
Service bid, Pick up information, Estimate time of arrival, route information, proof of delivery
Service bid, service contract, document request, Estimate time of clearance,
Service bid, Pick up information, Load information, Estimate time of arrival, route information, drop off information
Warehouse receipt, shipment confirmation
Inquiries, expedite requests, delivery confirmation Purchase Order
Service tender, Pick up information, Planned time of delivery
Service offer, Product information and import documentation
Service tender, Pick up information, Planned time of delivery
Pick, pack and ship orders
ASN, Visibility information, Exception Alerts Purpose of CollaborationCollaboration WithOutgoingIncomingInformation ExchangeMajor Attributes of Supply Chain Visibility ToolMajor Attributes of Supply Chain Visibility ToolGlobal
Multi-modeInternational TradeConnectivity
and
ContentTransportation PlanningTechnologyLogistics Process AutomationProduct TrackingCollaboration EnginePerformance Management and
IntelligenceTransportation PlanningTransportation PlanningMany of visibility solutions have been developed from traditional transportation management systems (TMS) and inherits many of their planning functionality. The most important benefit from integrating transportation planning with visibility functionality is the ability to simulate on real-time: supports decision maker in exception handling process by assessing what aftereffects may be (e.g., reject this order because a more important customer’s order would be delayed, or attempt to transfer it to another facility because profitability level is high).
Functionality
Routing, rating and optimization (domestic and international)
Order Consolidation
Equipment Utilization
Commingling of Orders
Rate Analysis
Continuous Movement Management
Benefits
Transportation Cost Reductions
Customer Service Commitments
Enable complex merge-in-transits and multileg, multiroute transportation planningLogistics Process AutomationLogistics Process AutomationThis functionality supports day-to-day operations of logistic/traffic departments. Major processes include procurement of logistics services, contract management, booking and tendering, payment and settlement. The automation of the logistics processes required to execute the delivery of goods helps reduce internal operating costs of logistics organization.
Functionality
Internet-based RFP to carriers and service providers
Contract Management using central data depository
Shipment/Load Tendering process automation with carriers
Automated payment support for freight payments based on actual carrier performance
Support for freight audits and compliance reporting
Benefits
Reduced administration and operating costs
Reduced Order Cycle timesLogistics Process Automation (Continued)Logistics Process Automation (Continued)The logistics processes automation should address end-to-end logistics activities. GoodsTrans-
portation planStrategic
Plan (Contract
Neg.)TenderCarrier PickupsDeliversInvoice
MatchIn transitInvoice to
ShipperPay AuditEDI / XMLEDI / XMLEDI / XMLCarriersFulfillment ProcessSettlement ProcessPlanning ProcessEDI / XMLWhseDepotDepotProduct TrackingProduct TrackingTrack and Trace function enables an enterprise to locate key assets and associated contents instantaneously and precisely within the supply chain.
An important aspect is the ability to Monitor: Many solutions provide real-time tracking of supply chain objects and events including visibility into actual inventory levels, orders, shipments, production and supply–even down to ATP numbers of individual SKUs. Also the solution must support Multi-Mode and International geographic coverage.
Functionality
Monitor orders, shipments, inventory at client–defined supply chain milestones
Data model to support linkages among various tracking units (i.e. orders, BL #, SKUs, serial numbers, ASN #)
Event notification to alert diversion from planned performance (late shipments and partial shipments due to carrier noncompliance or accidents)
GPS integration and environmental monitoring (temperature, etc.)
Benefits
Improve order fill rates and customer service level by expediting supply chain events
Reduce inventory and safety stock levelCollaboration EngineCollaboration EngineCollaboration Engine facilitates communication and data exchange between an enterprise and customers, suppliers, transportation carriers and service providers. Collaboration takes different forms depending upon the partners, from a simple exception alerting to complex negotiation process support over the Internet.
Functionality
Notify: supports real-time exception management via message system, which can alert a decision maker that attention is required
Control: allows in-process adjustment, such as shipment diversion or order expediting
Business Rules: create predetermined business rules to expedite exception handling and inter and intra-enterprise workflows
Benefits
Reduce cycle time by eliminating phone calls, fax and paper communication
Ability to respond quicklyPerformance Management and IntelligencePerformance Management and IntelligenceUsing a common data model and analytical tools, most solutions offer functionality to Measure: provides various Key Performance Indicators (KPIs) data so that decision makers can assess supply chain performance.
Functionality
OLAP tools are usually capable of creating various reports as well as any other ad hoc reports
Service level analysis allows a company to perform its own scorecard analysis of on-time delivery for a customer or the entire customer base
Carrier and service provider performance and history can be easily obtained
Landed cost analysis—a company can plan profitability of selling merchandise by summarizing all potential supply chain costs beyond FOB price
Benefits
Improve negotiation ability with carriers and service providers with concrete historical performance record
Plan and manage own supply chain better with comprehensive informationInternational Trade SupportInternational Trade SupportAs Supply Chain Visibility solutions target large, multinational enterprises, it is critical to support international trade of goods. Many of this functionality are provided by partnering with best-of-breed providers such as Nextlinks and Vastera.
Functionality
Import and Export Customs Compliance process management
Customs compliance contents
Trade Document Management
Benefits
Expedite customs clearance process
Save administrative costs and cycle time
Proof of “reasonable care” for potential customs audit and penalty risksConnectivity and ContentConnectivity and ContentConnectivity is the most important foundation of visibility applications. Most solutions offer an ASP model data aggregations service. The various data form (EDI, XML, Web) from logistics partners are aggregated, validated and cleansed prior to be made available as visibility information.
Also it offers logistics contents such as carrier records, availability, spot transactions, as well as tariff and customs compliance contents via connections with specific content providers and B2B marketplace.
Functionality
Data management service
EDI/XML translation
Partner connectivity services
Benefits
Low-cost connectivity—Connect with all trading partners without building a custom EDI link with each partnerTechnologyTechnologyAs Visibility applications will be used by many different parties and deployed globally in most cases, it is important that the application architecture is Internet-enabled and scalable. Many of Visibility tools developed by 3PLs did not survive largely due to its proprietary technology and inflexible data modeling. Many vendors use EAI such as Tibco and Webmethods for enterprise integration.
Functionality
Internet-Enabled Database
ASP/Hosted environment for connectivity layer
Secure environment
Use of EAI (Enterprise Application Integration) to easily integrate with various enterprise applications
Benefit
Scalability
Adaptability
SecuritynullValue Propositions of Visibility/Collaborative Logistics Solutions Value Propositions of Visibility/Collaborative Logistics SolutionsValue Propositions of Visibility/Collaborative Logistics SolutionsVisibility/Collaborative Logistics Solutions offer similar value propositions to most of SCM applications. The solution acts as a conduit to link all disparate SCM applications and trading partners to deliver higher level of integrated benefits.
Visibility/Collaborative Logistics Solutions can not deliver all the benefits by its own.Revenue Opportunity
Reduce Stockouts
Cost Savings
Inventory Cost
Transportation Cost
Warehousing Cost
Administrative CostReduce Time
Order cycle time
Lead time
Planning cycle time
Event response timeCustomer Service
Improve order fill rate
Respond customer inquiry
Enable ATP (Available to Promise)
Enable CTP (Capable to Promise)Financial ValueFinancial ValueVisibility/Collaborative Logistics Solutions offer a significant financial value when properly integrated and implemented with planning systems.
A company can benefit from improved availability, transportation cost reduction in short termFinancial ValueCustomer ServiceTimeRevenue
Inventory Cost
Transportation Cost
Warehousing CostImprove forecast accuracy and fulfillment capability
Improve supply chain planning capability
Improve forecast accuracy and fulfillment capability
Plan distribution network so shipment skips warehouse
Improve carrier management and negotiation by better information
Consolidation, load/container optimization, route optimization
Automate communication with logistics partners and manage logistics data
Improve warehouse management operation via improved inbound/outbound planningAssist accuracy via fulfillment capability improvement
Direct contribution from fulfillment visibility, planning and simulation capability
Assist accuracy via fulfillment visibility and planning improvement
Direct contribution from fulfillment planning/ simulation capability
Direct contribution from logistics process automation and intelligence capability
Direct contribution from transportation planning capability
Direct contribution from logistics process automation and connectivity
Assist accuracy via fulfillment visibility improvement Medium
Large
Small
Medium
Large
Large
Medium
Small
Objectives
CategoryImpactHow does it help?Impact of Visibility/CollaborationStockouts reduction
Improve inventory availability
Lower safety stock level
Increase direct shipment
Reduce freight and service rates
Optimize transportation
Reduce logistics administration costs
Reduce handling cost
Overall ApproachFinancial Value—How It Can Translates into ROCFinancial Value—How It Can Translates into ROCCustomer Service ValueCustomer Service ValueFinancial ValueCustomer ServiceTimeCustomer service is one of the most important objectives of Supply Chain Execution initiatives.
Visibility tools offer significant customer service improvement opportunity from fulfillment capability enhancement.
The opportunity to improve customer service should be evaluated at both tactical and strategic levels.Order Management
PlanningTrace orders within extended supply chain
Plan and replan fulfillment plan based on customer request (i.e., rush orders)
Improve fulfillment planning and control executed orders and transportation
Shipment documentation, packaging requirements using WMS functionality
Provide availability of inventory at hand and current production plan
Provide availability of inventory based on constraints, production and sourcing capabilities
Collaboratively plan demand-based forecast and replenishment with customersVisibility tool will provide order status. Customer self-service is also possible
Direct contribution from fulfillment planning/ simulation capability
Direct contribution from fulfillment planning and intelligence capability
Assist from logistics process automation and intelligence capability
Direct contribution from fulfillment visibility, planning and simulation capability
Assist accuracy via fulfillment visibility and planning capability
Assist accuracy via fulfillment visibility and planning capability Large
Large
Large
Medium
Large
Medium
Small
Objectives
CategoryImpactHow does it help?Impact of Visibility/CollaborationRespond customer inquiry on existing order status
Accommodate changes in existing orders
Improve on-time delivery rate and fill-accuracy
Improve shipment compliance/quality
Respond with ATP (Available To Promise) on future orders
Respond with CTP (Capable To Promise) to collaboratively plan demand
Collaborative Planning Forecast Replenishment (CPFR)
Overall ApproachSpeed ValueSpeed ValueFinancial ValueCustomer ServiceTimeCustomer service is one of the most important objectives of Supply Chain Execution initiatives.
Visibility tools offer significant customer service improvement opportunity from fulfillment capability enhancement.
The opportunity to improve customer service should be evaluated at both tactical and strategic levels.Many vendors also claim that the solution can be implemented within a short period of time–less than 6-month period, much shorter duration than ERP or SCP systems implementations.Move from monthly/ bimonthly to weekly orders
Improve supply chain planning capability and execution capability
Roll demand