While RFID (radio frequency identification) initiatives by Wal-Mart and the Department of Defense have been dominating the headlines lately, another acronym - HOS - is having an immediate impact on warehouse and distribution operations nationwide.

In January, new regulations that reduce the HOS (hours of service) for transportation drivers - the number of consecutive hours a driver is allowed to be on the clock before taking a mandatory break - went into effect with little fanfare. Yet, in the short term the new regulations may have as big an impact on supply chain costs as RFID. And as with RFID, effective use of supply chain execution solutions like warehouse (WMS), transportation (TMS) and yard management (YMS) will be key to compliance while controlling costs.

'Companies are going to look for new order fulfillment and transportation strategies for their shipments,' says Adrian Gonzalez, director, logistics executive council, ARC Advisory Group (781-471-1000). 'To be successful, they're going to automate those strategies with technology.'

Automating those strategies will put WMS, TMS and YMS in the driver's seat.

'There is a huge opportunity for the warehouse, the yard and the transportation department to work together,' says Matt Menner, director, sales-transportation for Manhattan Associates (770-955-7070). Menner calls this process 'load management from the in-gate to the out-gate.' The concept describes a truly integrated suite of supply chain applications that can synchronize the activities on the road, in the yard, and inside the distribution center in the most cost-effective way.

The new definition of hours of service is the primary reason that synchronizing warehouse, transportation and yard activities is so important.

Under previous regulations, a driver was limited to a 15-hour day. But only the hours spent in the driver's seat were counted as on-duty. For that reason, it wasn't uncommon for a driver to cool his heels in the driver's lounge while his trailer was loaded or unloaded – that time didn't count.

Under the new HOS regulations, a driver is limited to 14 consecutive hours on duty, regardless of where those hours are spent. 'The productivity of drivers is going to go down and transportation rates are going to go up,' says ARC's Gonzalez.

Wal-Mart, for instance, estimates the changes will cost the company $25 million for new drivers and equipment just to carry the same amount of cargo.

Popular transportation strategies will also be affected. For instance, many companies have been consolidating less-than-truckload (LTL) shipments into a full truckload (TL) with multiple stops. Under the old regulations, the price per stop went down. The new rules reverse the economics.

'Instead of multi-stops driving costs down, the cost is going to go up dramatically with each stop,' says Brian Hancock, vice president and general manager, Schneider Logistics (920-592-2955).

Likewise, live loads and unloads—a common practice in just-in-time supply chains—are also going to become more expensive because of the cost of having a driver sitting idle at the dock.

Those costs can be mitigated in part through new transportation strategies, says Erv Bluemner, product management group leader for RedPrairie (877-733-7724). 'We have customers who are looking at the comparative cost of a single driver versus a combination of moves with a team of drivers to minimize the cost factor.'

Another strategy likely to emerge is the use of the trailer in the yard as an extension of the warehouse. That allows drivers to 'drop and hook,' that is drop off a trailer and hook to another waiting trailer to get immediately back on the road.

But these new strategies will only work if companies have systems in place to coordinate the transportation plan with the order fulfillment plan and the movements of trailers in the yard. After all, when a driver shows up to drop and hook, a loaded trailer better be ready for pick up.

'The link between the transportation, yard and warehouse management systems is going to have to be seamless,' says Hancock of Schneider.

Most important of all, the changes in hours of service mean that these applications will have to take a new constraint into account, says John Pulling, chief operating officer for Provia Software agrees. (877-776-8421) 'The amount and cost of driver wait time and the cost of demurrage will now have to be worked into the equation to create the optimal transportation and order fulfillment plan,' says Pulling.

Pulling this together may give a boost to a trend already underway – the integration of warehouse, transportation and yard management systems into a suite.

To get more out of those applications, supply chain execution providers are also adding features like appointment scheduling to manage the loads coming into and leaving from the docks. Other applications take the shapes and sizes of pallets, their stackability, and orientation into account to get the most out of the space and minimize the number of moves.

But in many cases, those applications acted independently of one another – the TMS created a transportation plan and then the WMS created an order fulfillment plan.

The challenge is to get those applications working in concert with one another to find an optimal solution for filling and shipping an order. 'A TMS system can give you the best cost based on carrier costs, but it won't manage the driver stops. That's where the WMS and YMS combination come into play,' says John Pulling.

The real goal of bringing this functionality together is to get an optimal plan for both filling and shipping an order based on all the constraints in an enterprise, including the hours of service.

'The idea is that the optimization engine can look simultaneously at inbound freight; the capacity of the yard, docks, staging areas and storage areas; available inventory, labor and equipment; driver wait times and costs; and customer service requirements,' says Pulling. 'Based on all that information, the optimizer creates an optimal schedule that is handed off to the WMS, YMS and TMS to execute.'

When the orders are handed off, they would go first to a WMS system to determine the mix of parcel versus truckload shipments as well as the number and sizes of boxes and pallets that will be on an order.

That information is then passed to the transportation management system. The TMS will build truckloads, multi-stop and parcel shipments based on whatever parameters are most important. Those might be the lowest shipping cost, or it may be built around customer service levels. The TMS will then tender those loads to the appropriate carriers.

Meanwhile, truckload and LTL shipments will be passed to the yard management system for appointment scheduling. The YMS will look at all the available dock and yard space, and then create the best plan to handle incoming and outbound trailers.

Now that both a transportation and yard plan have been created, the orders are sent back to the WMS to coordinate the pick, pack and load operations with the appointments scheduled by the yard management system.

The new HOS regulations will present new challenges. But with warehouse, transportation and yard management systems on the clock, companies can keep their drivers behind the wheel.

Click on the icon to learn more about integrated supply chain software solutions. (The brave new world of supply chain software -  July 2001)