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Supply chain visibility isn't just about improving customer service. It can also save you a lot of money.
The uncertainty principle in quantum physics says, in essence, that you cannot know with precision both the location of a particle and its momentum at the same time. The better you measure one, the less you know about the other.
For a very long time, the much larger-scale world of physical logistics has had its own uncertainty issues. Knowing where goods are—with a supplier, in the DC, or en route to a customer—and whether they're moving on schedule remain key goals of those managing their companies' physical distribution networks. So, too, is the ability to intervene when those shipments go awry.
As supply chains become more complex and global businesses come under increased pressure to keep inventories lean while still providing good customer service, these capabilities become ever more important.
Fortunately, managers today have increasingly better access to tools that give them both visibility across their supply chains and the capability to control the movement of those goods. Much of the innovation in this area has come from companies that specialize in visibility software—whether traditional installed software or Web-based applications delivered on demand. But software developers no longer have the market to themselves. Other types of companies, including material handling equipment suppliers and third-party logistics service providers, have gotten into the game, offering tools designed to keep close tabs on inventory, wherever it may be.
Inside or out?
Where a shipper turns for visibility tools depends in large part on the particular need it wants to address. A supply chain executive will likely want a global view, while a DC supervisor wants to see what's coming in the door, what's on the shelves, what's moving through the system, and what's heading out the door.
"Visibility is a somewhat undefined term," says Jerry Koch, corporate marketing and product manager for Intelligrated, a company that specializes in material handling solutions. "If I'm a shipping supervisor, my needs are far different than an inventory planner's."
For tracking the whereabouts of items at the DC level, Intelligrated offers a warehouse control system (WCS) that includes visibility of products moving within the facility's four walls beyond that provided by warehouse management systems. Intelligrated's WCS "spans a lot of capabilities, from order processing to inventory management to people planning tools to execution monitoring and historical tools," Koch says. These capabilities also include real-time performance monitoring that allows supervisors and managers to make adjustments to current work flow.
Executives looking for a more global view have a whole other array of options, including tools provided by third-party logistics service providers. For example, APL Logistics, the 3PL arm of NOL group, offers visibility tools tied to its other service offerings, says Tony Zasimovich, the 3PL's vice president of international logistics services. The company's tracking tools include SeeChange, an end-to-end supply chain visibility system for international shipments being managed by APL Logistics. The tool allows customers to obtain detailed information on shipment contents plus a variety of event-based alerts through a Web-based portal.
Knowledge is power
Over on the software side, a number of developers are now marketing systems that provide visibility as well as capabilities to manage what you see. One such provider is Sterling Commerce, an IBM company. "We can give an end-to-end view of what is going on," says Pete Wharton, senior product marketing manager for Sterling's selling and fulfillment software suite.
For supply chain managers, that end-to-end visibility is critical, he argues. "When you can look at global inventory as opposed to siloed inventory, you can reduce inventory levels. You don't replicate safety stocks over every location." One Sterling customer, Sargento Foods Inc., for example, has gained significantly better control over its transportation operations using Sterling's tools. (See sidebar.)
Another benefit of global visibility, he says, is that it allows managers to deal with inbound disruptions more efficiently—for instance, by redirecting shipments or proactively notifying customers of order delays. "One of the things we saw coming out of the recession is that retailers have jumped on global visibility and the ability it provides them to direct inventory to a particular location," he says.
Wharton sees particular benefits for inbound operations at DCs. "The challenge is you have procurement placing orders. It's not unusual that the first time [a DC manager learns of an incoming shipment] is when it turns up at the warehouse. Visibility can provide significant lead time. You can plug that into the receiving process for things like scheduling doors and allocating labor, and how you stage goods and receive them into the warehouse."
Heads in the clouds
Not so very long ago, if a shipper wanted access to visibility software, it had to buy it. But that's no longer the case. More and more of these software tools are now available on demand. Sterling's fulfillment and visibility tools, for example, are offered both as installed software and on a software-as-a-service basis.
That's a big plus for shippers, says Greg Kefer, director of corporate marketing for GT Nexus, a company that offers a cloud-based platform linking shippers, suppliers, carriers, and other participants in international supply chains. The on-demand delivery option makes visibility tools available faster and at lower cost than installed systems, he explains.
Like Sterling's Wharton, Kefer is quick to point out the many benefits of enhanced visibility. For starters, he says, there's the potential to reduce transportation spend. As an example, Kefer points to retailers, which change out SKUs eight to 10 times a year, or in the case of fashion retailers, even more often. "They use a disproportionate amount of air freight because they cannot risk putting goods in an ocean box and waiting three and a half weeks for it to get here."
But visibility tools can potentially change that, he says.
"I'm not saying you can do away with the air piece, but good visibility across the supply chain can allow you to treat containers as warehouses. You can see down to the pallet, carton, or SKU level, even to style, size, and color. If you can put a percentage into ocean containers, you can take away some of those 747 charters. A lot of these companies are beginning to move in that direction. If you can trust data, you can do more of a mode mix."
A related benefit, he says, is the ability to avoid superfluous movements. Knowing what's coming in can help prevent unnecessary reallocations between DCs, Kefer explains. "If you get a demand signal in New York and you don't have the SKU, you might put in a call to the West Coast DC. Then, about the time the truck reaches Nebraska, four containers come in. Visibility of that can [save users] tens of thousands of dollars a day."
Dollars out, customer satisfaction, leaner inventory: Those are the goals. Or, put in other terms, the principle is to eliminate uncertainty.
Walk into almost any grocery store in the United States, and you'll find Sargento Foods' products in the cheese aisle. The privately held Plymouth, Wis.-based company makes and distributes shredded, snack, and specialty cheeses and other items to grocers and retailers around the country.
But grocers' shelves are not the only destination for the company's products. Its food-service division supplies customized cheese products to many of the nation's largest restaurant chains. And its food ingredients division provides sliced, shredded, and diced cheeses to other food manufacturers.
Managing the distribution of these cheeses to its varied customer base—and doing it efficiently—requires keeping a good handle on how and when the products ship and when they are delivered. But with a complex network like Sargento's, that's easier said than done.
Much of the difficulty stems from the amount of load planning required. "Many of our customers order less than full truckloads," explains Keith Hartlaub, general manager for Sargento Transportation LLC, a wholly owned subsidiary of Sargento Foods. But shipping orders out as partial loads would be both costly and inefficient. So the company has worked hard to combine these orders into more economical multiple-stop truckloads—a task that requires consolidating shipments from all three product divisions, organizing the loads by lane, and then selecting the best carrier from its base of prequalified motor carriers as well as its own fleet.
To do this, the logistics team needs good visibility into the various carriers' lanes, rates, accessorial charges, and more. But up until a few years ago, it couldn't count on having that. "We had a system that we utilized to organize loads and put them together," says Hartlaub. "But the old system was very limited in what we were able to do."
To obtain the visibility it needed, the company implemented a transportation management system (TMS) from Sterling Commerce. The software, part of Sterling's fulfillment suite, is designed to let users view, plan, execute, settle, and analyze inbound and outbound transportation moves.
"It allows us better visibility into the carriers we are choosing," says Hartlaub. "We are able to rank them by whatever criteria we choose. More visibility into the carriers lane by lane is more cost efficient."
Today, all orders flow from Sargento's enterprise resource planning system to the TMS. "Planners get visibility into the TMS and pull those orders together, combine them into truckloads, and choose the most efficient route," he explains. "We know what our costs are going to be."
The system also allows Sargento to get status updates from carriers while loads are on the road.
One of the biggest benefits for Sargento and its carriers, Hartlaub says, has been the ability to transact business electronically. Truckers now can invoice Sargento immediately upon delivery. "We used to get a large quantity of mail," he says. "Now, we can start the process the day the final delivery is made. It works well for us and has reduced the cost of invoices."
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