Improved shipment visibility produces inventory savings
David Hannon, News and Transportation Editor -- Purchasing, 3/4/2004 2:00:00 AM
Shippers looking for the "killer app" in the track and trace technology market may be sorely disappointed. The wide variety of technology options available today for tracking shipments across various modes means each purchasing and logistics department has to evaluate its needs and find the right solution for its business.
For some companies, an off-the-shelf tool may fit perfectly. For others, a homegrown application might be just what the logistician ordered. But as with any technology evaluation and deployment, finding the right track and trace tool requires a close examination of a logistics organization's priorities. Once those priorities are established, finding the right tool for the job is much easier.
"You have to make sure you do enough planning," says Mary Nave, director of transportation at chemicals maker Old World Industries. "You need to have some idea of what you want from a system before you start evaluating options. You can add reports as you go along, but if you do not have a plan and a rough idea of what you like, it will be much more difficult."
If it's not there, build it
While finding the perfect tool for the job is nice, there are a lot of buying and logistics organizations that simply cannot find the right technology (at the right price). This is the boat Nave found herself in. In her 20 years of work in transportation, Nave was constantly on the lookout for a software tool that could effectively track and manage the chemical manufacturers' rail car fleet. Old World ships up to 40% of its chemicals by rail, mostly bulk quantities of ethylene oxide, glycol, methanol, sodium hydroxide, and runway deicer.
"I go back to the days when you had to call someone to get an update or when we had to go to each railroads' Web site to track the cars," Nave says. "That was very manual and time-consuming."
She says all of the off-the-shelf tracking tools she found were very expensive and did not integrate effectively into the company's existing systems. But when Old World took over a tank car fleet that brought its total to 600 cars, finding an effective tracking system suddenly rose on the priority list. The internal resources and manpower were simply not available to manage such an extensive fleet.
To start, Nave found Steelroads.com, a free, online resource set up by the railroad industry to provide accurate railcar tracking data. Old World worked with Steelroads to extract the data the company needs from its database. From there, Nave worked with the Old World internal IS team to develop a multifunctional database application (based in Lotus Notes) to store and analyze the tracking data provided by Steelroads. Because the tool was built in-house, the information is customized to present reports on each terminal location, which allows Old World to better track and use its tank car fleet.
While it took some searching and work developing the internal application, Nave is quite satisfied with the final product and says developing a tool in-house is a realistic solution for a company that cannot find what it needs off the shelf.
"I can tell you in 15 seconds how many empty cars we have at a terminal waiting to load, how many empties we have at customers' locations, and how many are coming back as empty," says Nave. "This system is not just tracking the cars, but it is massaging the data as it comes back to us. For instance, we have a maintenance section of the database that sends automated messages to us when we have to send a tank car in for repair. We have automated exception reports to tell us if a car is going in the wrong direction or is outside the normal transit time window."
On the inbound side, the system helps improve inventory planning and sourcing activity. In fact, Nave says Old World has moved some shipments from barge to rail because the inventory planning advantages in the new tracking system more than make up for the cost savings seen in the slower barge shipping.
"A barge may take a month or more while a rail car may only take 10 days. It cuts the shipment time and allows you to manage the inventory better so you don't need to have as much raw material sitting there taking up capital."
While the technology has helped make the railcar tracking easier, the ETA data provided by the railroads is still less than perfect. To address this fact, the homegrown system has an ETA calculator built in that bases transit times on past averages through historical data on an individual lane.
"If we incur a new lane through a new customer, then we give an average transit time until we have at least three movements in order to determine an average historical transit," says Nave. "What the railroads give you is a trip plan, which is based on historical data on segments of the haul from one station to the next.
In this system, if a car misses a train that departs from a certain city, a new plan is automatically generated. And if a car misses a train three days in a row, the trip plan continues to update with a new ETA every time. The system also generates an exception report when an average transit is exceeded so Old World can update its customer.
Tracking in and out
New York-based chemicals distributor Biddle Sawyer sources bulk chemicals from Japan, India, China and Taiwan and sells to U.S.-based die manufacturers and pharmaceutical companies. More than 90% of what it buys from the Asian market comes across the Pacific by ship and is then trucked either directly to a customer or to a warehouse.
The preferred method is to ship direct to customers, because Biddle Sawyer does not have its own warehouses and does not want to hold expensive inventory. As much as half of what it buys is shipped direct to customers. But selling direct to customers requires a detailed knowledge of where shipments are and when the customers will receive them—not something that ocean shipping was particularly known for in the past. There is a big difference between telling a customer a shipment is just late and telling that customer it was delayed at a certain border by four hours and then re-routed but will be arriving in a certain port on this day at this time.
Historically, Biddle Sawyer used its accounting systems to track shipments by invoice dates and carrier's estimated arrival dates. But Andy Chavkin, CFO at Biddle Sawyer, wanted to find a system that could not only track location of shipments, but calculate total cost for shipments imported from overseas.
"A lot of the packaged software we reviewed focused only on purchased costs and if you're an importer there are extra charges that need to be considered," Chavkin says. In terms of tracking shipments, Biddle Sawyer's traders needed to see the position of products both inbound and outbound, because the two cycles are so closely related.
Chavkin and his team eventually selected a system from the Venture Information System Co. (Visco), a software geared specifically for buyers and importers that tracks ventures instead of shipments. Tracking individual shipments or purchase orders from overseas suppliers can make cost calculations very difficult. By tracking a venture, or the collective purchase orders for a certain customer or shipment, the total costs are more accurately assessed. In addition to general shipment information, Visco's tool provides access to packing lists, estimated times of departure and arrival, and accrual-based costing.
"Getting updates along the way allows us to make better decisions in terms of sales and purchasing," says Chavkin. "We do both buying and selling of chemicals, so by knowing exactly what is where both inbound and outbound, we can decide if we need to buy more or less of a certain chemical. It's basically an inventory control system that feeds into our accounting system, which allows me to manage the operation from point of purchase to point of sale.
Closer to home
While there are a number of different tools and models for tracking shipments, there is another tracking and tracing priority on the logistician's radar. For large manufacturers shipping high quantities of trailers and containers, tracking those assets in a yard can be as complicated as tracking them on the road or rails. There may be no worse feeling for a logistics professional than knowing a container made it halfway around the world, but gets lost in the company's own receiving yard.
One solution to that problem is using a local asset-tracking technology. WhereNet (Santa Clara, Calif.) offers a wireless technology developed for tracking large assets on corporate or hospital campuses, but is now being used to track shipping containers. When trailers come into a yard, they are outfitted with a tracking tag (or if they are private fleet containers, the tags are permanent) that sends a 2.4 GHz signal to antennas around the yard and the trailer's position can be triangulated.
Gary Latham, director of industry marketing in WhereNet's automotive group, says large OEMs using the technology on its dedicated fleets have even set up the system so the tag opens the gate to a yard automatically. Containers without a tag are routed to a guard shack to be signed in.
Another local application of this technology is inventory management—tracking inventory levels within a plant. Readers monitor the level of inventory in bins and automatically reorder supplies when needed.
"The supply chain can see the consumption as it happens," says Latham. "There is no lost time and it shows you true real time consumption-based demand."
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