Why Is In-transit Visibility (ITV) in the Supply Chain Important?

Picture this: a customer service representative (CSR) gets a frantic call from a customer asking about parts. In this scenario, the customer is waiting for the supplier to deliver critical parts for a product which is scheduled on the line in a few hours. The customer service department's initial step is to check the order status where the item will be identified as being delivered, en route for delivery, awaiting customs etc.

Usually, tracing the shipment to a particular order is more complicated than just opening up the order status screen. If a product is en route, the CSR should be able to connect the item with the delivery truck and provide an estimated time of arrival (ETA) at the customer's location. At times, it's very crucial for customers to have this information in order to figure out if they should reschedule a production line or just wait for the product. But the hurdle in answering this question is figuring out how far a truck driver is from the delivery location and if the inventory can be located in-transit with a third-party logistics provider (3PL).

More and more companies are trying to realign their supply chain due to competitive pressures, by identifying new areas for revenue and improving overall customer service by providing on-time delivery of products with fewer errors in shipments and fewer damaged goods. Usually an organization's supply chain creates the rhythm for the whole organization. Wouldn't it be great to see inside a truck at any given time during the transportation process to figure out which finished goods are being delivered and which items the organization will be receiving?

Having the ability to identify, change, and monitor shipments from origin to destination gives an organization reliability, flexibility, and transparency within the entire supply chain. With the use of in-transit visibility (ITV) capabilities an organization will be able to meet the challenges of rapidly increasing fuel prices and changes in regulatory requirements, and provide customers with premium services without increasing the total cost of operations.

To further explore ITV, it's beneficial to understand the origin of the concepts. The ITV concept originated from the U.S. Department of Defense (DoD) in the early 1990s. It was mainly used by the DoD to achieve better visibility to track goods within the supply chain in war zones. Now, the ITV concept is being adopted by many transportation companies to provide extended visibility for their customers and used for an organization's internal operations.

A technical report written by Asvin Goel on In-Transit Visibility provides a complete overview, defines the concept, and answers the following questions: How is ITV achieved? What value does ITV create for the organization's supply chain? How is value created by ITV's implementation to the overall performance of the organizations supply chain measured? In the next two sections, our main focus will be on the overall concept of ITV. We will examine how an organization's transportation operation benefits from ITV and how it can be integrated with software solutions.

The ITV Concept

Visibility is the ability to obtain information or data easily and accurately. Within a supply chain, visibility plays a vital role. There are three levels of visibility within an organization (collectively, usually called total asset visibility): in-stock, in-process, and in-transit. In-stock and in-process visibility are within the organization's walls. ITV refers to the ability to track items or goods moving within the supply chain logistics or at a 3PL provider location. ITV applications have the ability to manage products receiving value-added services such as custom packaging and re-packaging either through internal operations or by 3PL providers. ITV tools are commonly used in the transportation industry to bring efficiency and profitability into the transportation of goods. ITV applications have the ability to understand and track the status and location of inventory and shipments from their original destinations to delivery destination, which provides accurate visibility into the supply chain, thus eliminating fuel consumption, waste of time, and resources.

ITV can create value based on the capabilities of each contributor within the transportation network. ITV can provide real-time updates on assets which are in transit. This capability can be used by manufacturing and planning teams to run short-term forecasts, identify transportation bottle necks, and provide proof of delivery and compliance to customers in real time. It will also make the organization capable of invoicing or allocating shipments in transit to customer-specific orders. ITV will help an organization's customer service department provide an ETA to customer inquires as well as raise any alerts for late deliveries or road blocks caused by customs, traffic, etc.

With ITV, organizations can eliminate any risks and optimize tasks for truck drivers. By rerouting or expediting shipments, a delayed shipment can be resolved in real time because a dispatcher will be able to communicate with the truck driver.

What Are the Benefits of Integrating ITV with Software Solutions?

With increased visibility into the supply chain, an organization will improve its forecasting, planning, inventory, and overall service to its customers. Here is a list of benefits an organization is expected to achieve within its supply chain (see In-Transit Visibility):

  1. Reduced transportation costs
  2. Reduced inventory holding costs
  3. Reduced depreciation costs
  4. Reduced average lead time
  5. Reduced lead time variability
  6. Reduced vulnerability
  7. Improved compliance
  8. Improved on-time delivery performance
  9. Reduced backorder costs
  10. Reduced lost sales
  11. Improved efficiency of succeeding processes
  12. Increase speed of payment

When looking at the benefits mentioned above, a question arises: How will some benefits complement the information feeds into the software solutions used to communicate information throughout the value chain (providing inventory and material visibility inside and outside the organization)?

  1. Lower transportation costs: This can be achieved by linking the transportation management system's (TMS) functionality with ITV for creating specific or modified routes based on delivery, location, driver, and equipment availability. ITV-facilitated procedures linked to TMS modules will most likely bring reduction in costly routes; use of cheaper routes (which does not affect on-time delivery performance); identification and resolution of bottlenecks beforehand (frequent updates from ITV can provide an ETA to arrange efficient methods of handling of goods without creating bottlenecks); and use of intermodal transportation (inbound and outbound shipments can be coordinated to reduce wait times of shipments and on-hand inventory). As well, by reducing the overall transportation cost organizations can bypass some of the associated links within the route to provide higher customer delivery rates.

  2. Reduced inventory holding costs: With the use of ITV, organizations can update their TMS and warehouse management system (WMS) periodically to provide information about available material as well as information regarding freight mode (rail, truck, container or air cargo containing inventory). This will help the organization to reduce inventory holding costs by removing doubt from the transportation process. This means that organizations don't need to hold inventory on hand or create safety stocks for goods in order to deal with uncertainties in transportation. Organizations with highly-priced products or short product lifecycles will benefit because ITV will eliminate the tie-up of financial resources as well reduce the depreciation value of products.

  3. Reduced depreciation costs: Having the ability to identify a freight that's going to lose product value is crucial for an organization's bottom line. The ability to connect ITV with quality management functionality will enable the dispatcher to work within the TMS and supply chain management (SCM) systems to identify new routes or delivery locations. It's necessary for sensitive or perishable products to be tracked through the transportation process. With the help of ITV, a product can be delivered through change-in-route processes or by realigning the delivery to a different customer location, and the goods won't lose their value due to environmental, temperature, and other issues. By identifying and quickly taking appropriate actions while the product is in-transit, an organization can reduce the depreciation cost of a product.

  4. Reduced average lead time: A TMS helps in providing an average lead time for all the different routes and products being delivered. A TMS provides information to a CSR and dispatcher concerning transportation times from one location to another, withholding of goods at customs, and awaiting change in transportation mode. By creating a link between custom brokerage and a TMS, ITV can help reduce average lead time by providing insight to brokers about goods (inbound into customs) and creating appropriate channels to process paperwork without having to wait at the border or terminal. Also, if a shipment is arriving via a container, a truck can be at the port to receive the container without delay. With appropriate measures, an organization can use ITV to create better transportation lead times for products.

  5. Improved lead time inconsistency: Predicting delays in transportation can be made possible by implementing mobile technology. With ITV functionality connected to a TMS and SCM system, a dispatcher can coordinate an alternate route with the driver for shipments already in transit and provide the same arrival time as originally estimated.

  6. Improved compliance: By applying ITV to all products being shipped, any non-compliance issues are identified and appropriate actions are taken. In order to achieve optimal results, an organization can implement the International Trade Logistics (ITL) capability within a TMS. This will provide the organization's quality management team with insight on non-compliance issues. The cost of non-compliance issues are high for transportation organizations and the creditability of an organization is jeopardized when facing non-compliance issues. ITV allows organizations to locate fleet based on inventory or shipment at any given time and are aware which items on the fleet comply with regulations (temperature, environment, packaging, etc.). With help of ITV, an organization will be able to either recall the product/shipments or reroute it to a destination before non-compliance issues take place.

  7. Enhanced on-time delivery performance: On-time delivery is often a key performance indicator (KPI) for an organization's transportation process. By using ITV, a CSR can provide an enhanced customer service experience by linking the customer portal to freight information in real time. Usually, with better on-time delivery, organizations can see cost reductions in areas of inventory, backorders, and lost sales. It also brings efficiency in the overall transportation process.

  8. Reduced back-order costs and lost sales: When customer orders cannot be filled on time, a backorder or lost sale issue arises. To reduce back-order costs and lost sales, organizations can use ITV to reallocate shipments to customer orders either on backorder or withdrawn due to delay in shipments. It's vital to have the TMS, SCM system, and CRM system communicate appropriate information between the CSR, production planner, forecasting team, and dispatcher to handle delayed and missed shipment issues. When reallocating shipments, the planner, CSR, dispatcher, and driver need to communicate the information in real-time. As the planner and CSR shuffle the demand between orders to eliminate the backorder issue, the dispatcher coordinates the new route with the driver. Appropriate use of ITV will reduce the cost of back orders, and eliminate delays in revenue, and there will be no loss of customer satisfaction. Also, ITV will improve the overall flexibility, reliability, and transparency of the supply chain.

  9. Improved and more efficient processes: By using ITV with TMS, SCM, and CRM applications, an organization can plan its processes accordingly. This will not only improve the process but make the subsequent processes more efficient. The information from ITV will help the dispatcher identify which workforce requirements are needed at any given time for loading and unloading shipments, what equipment will be needed, and how much warehouse capacity will be used. As well, it will help reduce cost and increase revenue for all the tasks associated with the transportation processes.

  10. Faster payment process: In order to see bottom line results it is important that an organization links an accounts payable financial module to TMS. With ITV, an organization will be able to speed up the payment process by providing information of delivery (IOD), which will initiate the invoicing process, as well as a proof of delivery (POD), which can be created earlier and attached to the shipment. The ITV process will be linked to financial systems to create a trigger that can send the invoice to the customer electronically resulting in easy verification of invoices and faster payments.

To understand the value generated with ITV, the organization needs to reevaluate its current applications (how each point in the supply chain communicates and feeds information upstream and downstream), and use best practices in defining the transportation roles. ITV can be achieved in global supply chains with help of various decision-makers and stakeholders. With each group's inputs an organization can realign its objectives, goals, and deliverables for all parties. Also, by using ITV an organization can significantly improve on-time deliveries, reduce transportation costs, and increase performance of the overall transportation chain. The right level of visibility can be brought into the entire supply chain, which will give a competitive edge to the organization.

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