SUPPLIER LOGISTICS MANAGEMENT The Next Strategic Layer of Competitive Advantage
Supply chain executives are in the hot seat given the flat economy and a slowdown in revenue growth. They are challenged by senior executives to find new and innovative ways to reduce cost, while still meeting customer needs. However, in today's customer-centric environment, meeting customer's expectations is not a competitive advantage, but a fundamental necessity of existence. Delivering products on time, at a higher level of service, is now a standard expectation, leaving limited room to leverage performance as a sustainable competitive advantage.
To reduce costs and gain a competitive advantage, supply chain executives need to focus on supplier management inefficiencies in their supply chain. Ignoring upstream supply chain activities can be costly. For instance, it has been estimated that the food and beverage industry loses $7 to $12 Billion per year through incorrect data flows between suppliers and retailers. Additionally, when European consumer goods and food retailers lost more than $17 billion in inventory last year, they could only explain about 41% of these losses. Results like this point to the strategic advantage supply chain executives can obtain by focusing on improving their fragmented and complex supplier logistics networks. Through improved supplier logistics management, supply chain executives can provide senior management the silver bullet they are looking for to minimize operational inefficiencies, reduce costs and gain a sustainable competitive advantage.
This is Part Three of three-part note.
Part One covered how Technology Enables Supplier Logistics Management.
Part Two covers the Seven Fundamental Issues Targeted by Supplier Logistics Management.
|(1)||Kraft In Sync with Shaw's Supermarkets' Consumer Goods Technology, Ralph Bernstein, June 2001|
|(2)||Unexplainable Losses', Traffic World, John Parker, June 4, 2001|
Supplier Logistics Management Targets Seven Fundamental Issues
With the Internet as the road and Net-Native applications the vehicle, supply chain executives have the opportunity to drive significant efficiency improvements and cost reductions through Supplier Logistics Management (SLM).
SLM enables companies and their suppliers to successfully synchronize information; thereby, allowing companies to extend supply chain optimization and process flows to their supplier base. With SLM in place, companies can target seven fundamental supply chain issues facing the management of successful supplier fulfillment:
- Order Visibility and Event Management
(see Part Two of this article)
- Inbound Planning and Optimization
(see Part Two of this article)
- Information Synchronization
(see Part Two of this article)
- Supplier Management and Compliance
- Forecasting and Capacity Management
- Resource Scheduling
Supplier Management and Compliance
Historically, supplier management and compliance have been an administrative and labor-intensive headache for both companies and their suppliers. Companies typically devote teams of individuals to ensure suppliers comply with corporate routing guides, ordering instructions and appointment scheduling. Suppliers, on the other hand, are flooded with frequently updated paper based routing guides from multiple customers. (For example, one large retailer sends its' suppliers routing guide updates as frequently as every two weeks.) In addition, long hours are spent on the phone waiting to schedule appointments. SLM brings efficiencies to both suppliers and their customers by reducing overhead for both entities. By leveraging a customized on-line, inbound routing guide, paper correspondence is rendered obsolete and inbound carrier selection and shipment tendering is completely automated.
Through appointment scheduling automation, suppliers and carriers, can schedule pickup and delivery appointments without human intervention. On average, shippers and consignees spend upwards of 40% of their time on the phone scheduling and managing appointments(3). (As an example, one large grocery chain frequently keeps suppliers on hold for upwards of an hour to schedule an appointment, while one large retailer does not answer appointment requests of suppliers until the next day).
By adopting technologies such as integrated voice response and PDAs, carriers have the opportunity to reschedule appointments when they anticipate pickup or delivery problems due to weather, traffic or other operational problems. Mutual benefits exist as companies become more flexible to free dock space. In addition, for carriers, excessive wait time due to late pickups or deliveries is eliminated. Companies enjoy improved labor management at facilities as well as strengthened relationships with carriers.
Automating routing and appointment scheduling processes allow companies to successfully measure and monitor supplier and carrier routing guide and appointment compliance. By proactively identifying and addressing potential weak points, these types of metrics enable companies to keep a pulse on their supply chain. Taking full advantage of the compliance benefits that SLM offers enables companies to redirect employees from tactical operations, such as appointment scheduling and vendor compliance, to more strategic operations such as process improvements and customer care.
|(3)||Overdriveonline, Martin Labbe Associates Study for Truckload Carriers Association, August 1999|
Available-To-Promise (ATP) Commitments
The goal of ATP is to ensure that companies make real-time service commitments to customers through a quick evaluation of supply chain constraints.
Too often companies commit to order delivery dates without considering all supplier constraints. Transportation service restrictions are typically not considered when committing to delivery dates. This overlook results in a trickle-down effect that communicates unrealistic delivery dates and creates a disruption in the flow of goods; sending ripple effects down the supply chain.
SLM circumvents this issue by factoring supplier sourcing locations and transportation transit and service restrictions to determine accurate delivery dates. By providing accurate transit and service requirements, companies can produce an achievable plan with compliant supplier dates and attainable customer commitments.
Forecasting and Capacity Management
Without an information hub capturing actual order and shipment history, companies struggle to determine seasonal equipment requirements and actual shipment volumes when negotiating carrier contracts.
Through a dynamic stochastic mode, companies capture all information related to inbound order and shipment flows and provide the tools to enable the successful creation of daily, monthly, quarterly, and yearly equipment forecasts. The output of this model allows companies to plan for seasonal capacity requirements and ensure managers are equipped with adequate information to negotiate favorable capacity commitments and contract terms.
Upon the creation of these highly effective forecasts, managers can leverage Supplier Logistics Management solutions to manage carrier commitments; ensuring flawless execution and minimizing potential service disruptions.
When limited to no visibility of inbound activities, companies often struggle to determine the labor requirements for their facilities as well as the assets (such as containers, trailers and railcars) available in their supply chain network.
By leveraging appointment scheduling, inbound consolidations and order visibility aspects of SLM, companies can more accurately forecast their resources and better identify available assets in their network.
Automated appointment scheduling offers logistics managers a clear picture of the resources required for a day's work. This enables appropriate staffing; thereby, eliminating costly overtime and nonproductive time. Inbound consolidations help to minimize the number of power units and trailers arriving at a facility. This reduces the number of labor resources required for a facility.
Finally, with improved order visibility, companies now have the ability to see, in real-time, when assets are actually going to arrive. This visibility assists a company's outbound planners in the efficient movement of assets through the company's supply chain, allowing them to take advantage of continuous move opportunities and private fleet utilization.
Because SLM is still in its infancy, it offers companies a tremendous competitive advantage. By implementing an SLM solution, supply chain executives will experience a dramatic impact on the bottom line, including efficiency gains in process management, increases in inventory velocity and reductions in inventory and transportation costs.
Executives will observe a cultural shift among their employees as employees begin to consider the impact of their actions, not only within their own organization, but also across all suppliers. This holistic supply chain view will improve supplier relationships and ultimately improve the process of delivering products to market. Supplier Logistics Management offers supply chain executives the next generation of supply chain technology which will enable their companies to soar beyond competition.
This concludes a three-part article discussing how SLM solutions offer supply chain executives the next generation of supply chain technology.
About the Author
Mr. Buelow is a Product Manager at Elogex Inc. and has several years ofindustry experience in supply chain software and strategy. Buelow was previously a Senior Consultant in the Supply Chain Strategy Group at iXL and prior to that was a Senior Consultant and Business Analyst at Optum Inc. He has helped developed the Internet strategies for such Fortune
500 companies as GE Polymerland and Danaher and successfully implemented transportation management software at Federal Express Logistics, Skyway Logistics, Ticona, Monsanto, and Solutia.