This article was originally published on LinkedIn, and can be read via this link.
By Dan Blacharski, Founder and Editor, Techie.com
Transportation is often the biggest cost in the supply chain for retailers. Establishing visibility into the supply chain rightfully has a tight focus on product, manufacturing, and the channel, but neglecting to implement a transportation management system as part of the visibility strategy can cause critical errors and unnecessary expense.
The supply chain is a living organism. “What we’re trying to do is inject this living system component into an application, whereby we can understand that our business is not static. It’s an entity that continues to change, and as your distribution requirements change, so should your transportation system,” said Brad Forester, principal of JBF Consulting.
“If you have an efficient transportation management system, you can get supply chain visibility,” said Forester. “Once inventory is loaded into the channel, there’s very little from a transportation standpoint that can be done to minimize the impact of over-forecasting or misrepresenting demand.” The problem that occurs too often, is that over-estimating demand and over-supplying the channel results in more than product markdown costs – it results in unnecessary freight costs as well. And with the narrow margins faced by many retailers, extra freight costs can mean the difference between a profit and a loss.
While shipping too much product into the channel results in higher than necessary freight costs, another hidden cost factor is the delays that can sometimes result from lack of freight visibility. Joining supply chain visibility with a transportation management system will help to avoid these delays – and more efficiently fill the right amount of product to the channel, at the right time. “We’re very dependent on our rapidly growing network of LTL carriers,” said Francis Manzo, President of South Bend, Indiana based Drewrys Brewing Company. “Just recently we suffered a delay because of the sub-zero weather we experienced here in the Midwest. Trucks weren’t rolling, and our distributors were running low, and in a few cases ran dry. And if our distributors don’t have product to sell, that costs us both in terms of lost sales and in the public relations boost we usually get from a consistent market presence.” Drewrys’ rapid growth has put the brew in five states in less than a year, with distributors in three more states coming on board within the next month. The company is considering a cloud-based transportation management system to help ease the challenges faced by this expansion.
That’s just the sort of issue that integration of predictive analytics, supply chain management and transportation management can solve. Although the software certainly can’t control the weather, it can predict demand based on weather, ensure the channel is supplied ahead of time, and examine all possible freight alternatives.
Visibility to the physical product flow from a transportation systems standpoint is central to overall supply chain visibility.
Those alternatives can be essential for a large retailer bringing in products from the Asia Pacific region, for example. Most large US retailers import from China, Thailand, Taiwan, and Vietnam, and the majority will ship over water and bring product into the West coast ports. Yet it’s never as simple as it should be. “There are a lot of challenges,” said Forester. “There are backlogs, labor disputes and union issues, and the physical product flows are challenged. Things just don’t necessarily flow evenly.” Having a system that examines all freight possibilities could provide a solution. “From a cost standpoint, if we configure our transportation system to have visibility coming in from the ERP system, we can see and respond to the input from our China shipments. Then the transportation management system could determine that, instead of bringing containers into the West coast port, they could pull them through the Panama Canal, run around the cape and go into the East coast port.” Such visibility could help balance risk, by highlighting other ports that might be available, determining the cost differential between each port, and the transit time delta between each route.
The supply chain is highly transit dependent, according to Forester. “It’s the transportation time between raw material supplier, co-packers or component suppliers; time involved in shipping from the Pacific Rim to the west coast port. And they will get backlogged. Visibility to the physical product flow from a transportation systems standpoint is central to overall supply chain visibility.” Establishing that visibility into both supply chain and transportation is easy to understand conceptually – but often difficult for even the largest organizations to execute.
Forester cites an example of a multibrand, multinational firm with multiple product lines, with each brand running a different ERP system. “Each might have a different set of master data, and visibility at a corporate level requires master data organization across all systems, including warehouse management, ordering, and transportation. This is where organizational supply chain visibility often breaks down. It’s not in any one system, it’s in the implementation of systems to support a business process. And I don’t think many companies have yet figured out how to implement supply chain visibility as a business process, because it requires so much system integration,” said Forester.
Forester has seen large retail companies who have supply chain visibility as a number one goal, yet “it comes down to a myopic implementation of discrete systems like the transportation system, the warehouse management system, the ERP ordering system – and they’re all implemented within a bubble.” From a supply chain systems standpoint, there needs to be harmony between the warehouse system, the transportation system, and the ERP backbone. “The results will yield visibility. It’s challenging and costly. But the technology is there.”
Growth may be challenging, and as market requirements change so do transportation requirements. You may need to start thinking about backhauls, pulling in returnables, or dunnage – things you didn’t have to do when you were a smaller operation. And as the business changes, the system has to keep up. This is where big companies and little companies alike fail. They install a system and walk away, thinking it will handle everything, but it never works like that. The system needs to live and breathe. It must change and adapt.”