They know what raw materials they have on hand practically down to the molecular level. They know the whereabouts of each SKU in storage at any given moment. They can track an outbound item to a particular carton at a specific dock door. But once their merchandise leaves the DC, many logistics managers find themselves plunged into darkness. After their outbound shipments pass through the gates, they drop out of sight. No one knows exactly where the items are or when they're expected to arrive at the next transfer point.
But what if those managers could obtain better visibility of their products as they hurtle through the supply chain? With detailed info on a shipment's whereabouts, they could alert customers to changes in delivery plans, improve security, and provide an audit trail for regulatory compliance. They could see what was happening to products as they moved through channels and react when exceptions occurred. Better yet, they could cut back on buffer inventories stockpiled as a hedge against delays. "The better visibility you have, the less inventory you need to keep," says Steve Banker, service director, supply chain management for ARC Advisory Group. And that can mean serious savings, he says. "Inventory reductions are the greatest bucket of savings to be had in the supply chain."
The advantages of monitoring products in transit seem clear and the technology's available, so what's holding companies back? In some cases, it's a reluctance to share data with outsiders. But perhaps a bigger hurdle is the difficulty of creating a structure that allows for such collaboration. "Most companies have good data systems to run their own businesses," says Greg Johnsen, executive vice president of marketing and sales for GT Nexus. "The challenge is getting that data out to customers so it can be visible."
Every move you make ...
The technology needed to provide a window into the supply chain has been around for some time now. For example, companies that exchange data with trading partners via EDI (electronic data interchange) have long had the option to transmit advance ship notices (ASNs). When products leave a facility, notices are sent electronically to the receivers, alerting them that their merchandise has been shipped and notifying them of which products were sent and when they're expected to arrive. This allows customers to pre-schedule how to handle the receipt, down to details such as which door it should enter and where the items should go once they arrive.
Then there's mobile resource management (MRM), a technology that allows users to track their assets' whereabouts at any given moment. While ASNs let users know what they can expect and when, MRM delivers real-time visibility on what's in motion.
Mobile resource management systems typically use a GPS (global positioning system) receiver that determines the location of a truck in transit. The information is then relayed via software and a wireless connection back to the main terminal to provide real-time location information on any items on that particular truck. In the more sophisticated versions, sensors on trucks, like those that measure temperatures in refrigerated environments, can provide additional data that can be relayed through the system. If temperatures rise above the desired range, for example, the MRM system can issue an alert to either correct the problem or to check the product upon arrival.
Until recently, MRM software was quite expensive and only big players, like large third-party logistics providers, could afford to use it. But recent technological advances could change that. Now, a simplified version of a mobile tracking system could conceivably consist of a Nextel phone with a GPS chip inside.
The rental option
In the meantime, a new option has become available for companies unable to swing the investment in software, servers and infrastructure once required for visibility. Called the "on demand" model, this option basically allows them to "rent" software that's located on servers owned and administered by a third party known as an ASP (application service provider) on an as-needed basis.
The advantages of this model are many, beginning with significant cost savings. A typical use may cost only 10 percent of the investment required to host such a system internally. "Now we see little companies with just 10 trucks in their fleet monitoring their assets," says Banker. "It can be done for as little as $20 each month per truck."
Another plus is that the ASP takes responsibility for security. Data are stored on large servers at multiple locations managed by the application service provider. The ASP maintains the firewalls and security systems needed to protect the data from online intruders and keeps the software up to date. In addition, integration is relatively simple; members can gain access to information using common Web browsers and share data through EDI or XML standards.
Typical users of on-demand systems include importers, exporters, 3PLs and carriers. Once a company joins the network, it can link up with other members in the system to share data on available inventory, advance ship notices or status messages on products in motion. The system can support complex multi-move, multi-country product flows.
Xerox, for example, currently uses the GT Nexus platform to share data, including ASNs and status reports, with four international freight forwarders, seven ocean carriers, two customs brokers, domestic third-party logistics providers and multiple carriers. With the system, Xerox can track products by purchase order, SKU or line item. The company, which uses more than 1,500 suppliers, has complete visibility into all orders, inventory and shipments globally.
The price for all this? Pennies compared to a large-scale software and server installation. Companies typically recoup the startup costs for linking into an on-demand system in a little over a year. But if the investment is small; the payoff is big. Once they've signed on, they suddenly have invaluable visibility of assets on the move—not to mention the nearly priceless opportunity to react if something goes awry.