Information technology could transform logistics
By Elena E Murphy -- Purchasing, 11/5/1998
There's no question that technology can improve data communication and benefits both shippers and carriers. The Web, electronic data interchange (EDI), and custom software enable standardization, reduce errors, and speed up the entire shipping transaction. The challenge shippers face is choosing the solutions that best fit their transportation data requirements and that ensure greatest efficiency.After all, as Dale Hayes, VP of electronic commerce and technology marketing at UPS, sees it, simply automating already inefficient processes is pointless. Instead, companies are sifting through their transportation data management systems to locate what can be improved by using the Web or new software solutions.
One issue that has a major impact on how shippers use the new technologies is data standardization. According to Ross McCullough, senior director of electronic commerce marketing at UPS, even though the Internet is "chipping away at the compatibility issue," carriers need to have a range of ways for their customers to tailor the information to their own systems.
For example, shippers have to decide whether they want raw data or if they want formatted information. Shipment tracking, proof of delivery (POD), and on-time delivery reports are still the most highly requested and accessed Web information formats, but some shippers want to track trends within the data itself. One size, in this case, doesn't fit all.
For instance, Sandy Chavis, manager of logistics shipping and receiving at tiem (Toyota Industrial Equipment Manufacturing), Columbus, Ind., says that she is working with tiem's third-party logistics provider to tailor the information in its reports. Chavis requires an on-time pick-up summary, mileage, volume, and on-time arrivals from eleven "milk runs" by 70 suppliers, in addition to more standard information she has the logistics company track.
In other situations, shippers process the data captured by the carrier. These shippers seek results in the data that may not be available if the carrier bundles information. For example, companies can locate a specific glitch in on-time delivery by a supplier to a particular location, which might not be apparent in a monthly report.
Faster, cheaper, better
One advantage of automated information exchange is cost reduction. An example is Roadway Express' exchange of information via EDI with the logistics branch of a department-store-chain customer. Says Martha Lucey, market manager of electronic commerce: "The goal is data integrity throughout the system." That means data and information are available faster, are more accurate, and provide more details about the shipment than in the past. This is important since receivers often don't have enough information when a shipment arrives to handle it most efficiently.
With automatic access to standardized information, shippers don't need to re-key data several times. This reduces the chance of errors. LTL carrier Viking Freight is planning to add two-dimensional barcodes that will include bills of lading and other information to ensure accurate delivery reports. The company plans to upgrade drivers' hand-held computers so they can scan in the information at pickup. That eliminates waiting for information to be sent to Viking's system and added manually. Eventually, customers will generate their own stickers featuring the more detailed barcodes before pickup.
The more efficient flow of data and information also speeds up PO fulfillment and payment transactions. Motie Finney, transportation systems analyst at Osram Sylvania, Westfield, Ind., says his company has reduced transaction time by up to 50% since it began using EDI to download information into the company's ERP (enterprise resource planning) system. The time saved is critical in transactions for larger lamps that distributors and retailers don't keep in stock.
UPS' Hayes says that MicroAge's computer distribution branch, Pinacor, checks its information on the Web and automatically integrates the numbers with its credit collection process without calling UPS and re-keying the information. That has cut the transaction time from over 30 days to 14 and minimizes human error. McCullough at UPS adds that JIT systems such as Walmart's grocery distribution also require uniform information to operate smoothly.
To make decisions about technology infrastructure, shippers focus on flexibility and cost-effectiveness. They need to be able to evolve without re-investing in an entirely new system each time. To gain marketshare on those terms, carriers continue to standardize software, reports, and Web interfaces. McCullough notes that carriers, computer producers such as Dell and Compaq, semiconductor producers such as Intel, and other organizations participate in IT standards-setting bodies that work with ansi (American Nationals Standards Institute) so that customers will increase their use of Web-based electronic commerce.
Carriers leverage data for better service
Carriers now have an expanded role in supporting initiatives such as JIT inventory management, reduction of cycle time, and lowering overhead costs. After all, some transportation information only benefits a company if another piece of the supply chain has the same access.
For instance, because of the growing number of JIT practitioners, carriers deploy technology to improve the exchange of information among themselves, shippers, and receivers. This is important for more than just production line flow; large companies make staffing decisions based on the arrival of large shipments, notes Viking Freight's Carter. To support JIT initiatives, Roadway Express reports whether a receiver accepts shipments only on certain days, by appointment, or under other guidelines, which may affect the shipper's schedule.
Access to transportation data also affects how customers distribute freight. To cut costs, Osram Sylvania's Finney says his company now provides zip codes to one LTL carrier so the carrier can place lamp shipments in the appropriate terminals, thus reducing the number of times the products are handled. Since the product is fragile, any damage means Osram Sylvania has to send another shipment and process another transaction.
To lower overhead costs, Osram Sylvania has been able to capture information about LTL carriage to eliminate some warehouses. This in turn has reduced the number of LTL carriers that the company uses, boosting volume for the remaining carriers as well as Osram Sylvania's leverage.
tiem's Chavis says that she plans to reduce safety stock from three days to two and eventually to one day. By gathering delivery data over the course of the year, she determines which suppliers are prepared to manage inventory on a tighter turnaround. Then she works with production control to cut safety stock. This process continues to boost inventory space and cash flow.
Shippers also use transportation data to consolidate production cycles. By gathering information about product demand, they determine which products should enter the market at particular times. The pattern of demand affects where the shipper locates a distribution center, whether it's their own or a third-party center. For instance, FedEx holds $10 million in inventory for Bay Networks at a Memphis-based FedEx distribution center. This is a cost-effective way to outsource supply management.
Taking transportation data analysis a step further, some carriers and shippers share information to anticipate demand. According to Roadway's Lucey, this communication may eliminate the need for forecasting. The emphasis shifts from shippers developing a static expectation through a forecast to using transportation data reports to adapt their production-cycle management systems.
Transparency throughout the supply chain should place responsibility for inventory management where it will cost the least. Logistics, manufacturing, and purchasing may share the responsibility to different degrees, and the information gathered can help determine the appropriate infrastructure and relationship with a transportation partner.
Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
Now Playing:
