Reaching beyond the four walls
Sharing real-time information across the supply chain is the final link in building a highly responsive network of suppliers, customers and outsourcing partners.
By Roberto Michel, Editor at Large -- Modern Materials Handling, 7/1/2005
Until most recently, the focus of early real-time systems has been within the four walls of the plant and warehouse. But that's not the case today.
What's happening outside the four walls with suppliers, customers and outsourcing partners requires at least as much real-time coordination of events and shared business processes including what some people call collaboration. It's no easy task, say the experts. Collaboration is highly dependent on both the quality and visibility of trading partner data and the ability to make sense of the data.
"If you want to know that something shipped from your supplier at 4 p.m. yesterday, you can only know that in real time if your supplier's systems are real time," explains Steve Banker, service director with analyst firm ARC Advisory Group (781-471-1000). "So if you want to have better visibility and control throughout the extended supply chain, you need to work with key trading partners to make sure they are able to provide you that real-time data.
This need for inter-enterprise visibility has given rise to a class of software ARC calls logistics visibility and control (LV&C) solutions. LV&C blends alerting functionality with workflows to respond to exceptions, and analytics to track partner performance. LV&C solutions have grown at a 20% pace over the last few years, so companies are deploying them. However, Banker says there are fundamental challenges in coordinating supply chain activities that go beyond any single software package.
First, trading partners must capture and communicate data in a more real-time fashion. Second, they must have the right software systems to monitor and react to events.
Eventually, says Banker, visibility solutions with score carding functions will permit companies to continuously improve logistics operations in much the same way that Six Sigma tools are used to fine-tune manufacturing processes. For instance, he says, a company can track on-time delivery performance, or responsiveness factors, such as how quickly carriers accept load tenders. Says Banker, "You use these solutions not only to make for a more reliable supply chain, but also to understand the responsiveness of your key trading partners."Business context On one hand, real-time data provides instant updates about what has actually been shipped, when it will arrive and related information. The end result is, of course, heightened readiness and planning at the destination to make best use of the receipts immediately. But that's only half the benefit of real-time information that is shared across enterprises.
The other operational goal, most observers agree, is to be able to react to exceptions before they snowball into major disruptions. "Alerting and analysis are both extremely important, but the real issue is: What are you going to do when faced with an unexpected event?" says Prashant Bhatia, director of product management with Manhattan Associates (770-955-7070).
For Lanier Worldwide, a distributor of copiers and related document management solutions, an LV&C system (Provia, 616-285-3311) is helping it provide better customer service. The Atlanta-based company has the solution integrated with its warehouse management system, says Greg Wilson, Lanier's manager of service parts logistics. As transactions happen at its warehouses, they are reflected in the LV&C system within a couple of seconds.Based on configurable subscriptions to events, the solution combs its record of real-time transactions, looking for exceptions like a shipment being late or a back-ordered line item, and sends alerts to the appropriate stakeholders. "You have to build the subscriptions, but that is a fairly simple, interactive process," Wilson says.
On any given day, says Wilson, 250 to 300 users access the system, mostly sales support and other administrative personnel who need alerts and quick access to order fulfillment information. More recently, Lanier's marketing people have begun using trend data from the system to get current snapshots of products being bought, rather than relying only on billing data with about three weeks of latency.But the main focus of the system, says Wilson, is to get customer's questions answered more quickly, and provide early notification of events that might delay orders. "This system really helps with customer relations, and at the end of the day, that's what we are all here for," says Wilson.
Better supply chain coordination also may require systems that model business processes and service level expectations between trading partners, says Mayur Goyal, manager of market development, transportation and logistics, with Yantra (978-513-6000). The foundation, he says, is shared business processes. "We believe visibility is a business process challenge, not an event management problem," he says. "For instance, what are the business rules, or service level agreements, you need to adhere to? You need some system in place to synchronize all of these activities."Methods and drivers
Most experts see globalization and the broader use of outsourcing as increasing the complexity of supply chain coordination.
In lean manufacturing environments, globalization is forcing a change to greater use of electronic communications, according to Doug Bonzelaar, a principal and lean expert with consulting firm 2Think (616-546-5483). "The bottom line is that with the nature of today's distributed, global economy, some of the pure visual methods for lean have to change," he says. "Rather than using a physical kanban card or kanban tote as the means for signaling, companies have adopted bar codes or electronic kanbans as lean replenishment triggers [to increase efficiency]. And in the future, RFID might serve as a trigger."
There is some disagreement on just how long it will take for RFID tags to become a factor in real-time supply chain management (click on www.fourwalls.mmh.com for more details), but most experts say it eventually will have an impact. ARC's Banker notes that other technologies, such as global positioning and mobile resources management systems used by truck fleets, are already having some impact.But even the most plugged-in supply chains need to be designed properly in the first place. Mark Morrison, senior vice president of business development for third-party logistics provider TNT Logistics, says TNT has spent over a decade assembling its supply chain execution solutions, including warehouse management systems. It has dubbed these its "Matrix" solution, and uses it to plan and operate distribution networks for clients such as Michelin North America, for whom it manages 18 sites.
But TNT's systems also include network planning tools that analyze the best placement of facilities and inventory over the long term. "We establish a network plan first, and that sets the foundation for the practical, day-to-day execution," Morrison says.
Visibility solutions are still needed, says Morrison. TNT uses inventory visibility, he says, to facilitate order aggregation and transportation consolidation. Electronic data interchange and RF-enabled warehouse management systems also are foundation pieces for TNT's more real-time view of inventory and shipments. Says Morrison, "You shouldn't underestimate the importance of visibility of materials in transit, particularly when some of our supply lines are extending well beyond North America to China, other parts of Asia and Eastern Europe."
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