8
Contents
- Contents 1
- Logistics 2
- Visibility into movement 6
- Information systems in logistics 6
- Literature 12
Logistics
After the terrorist attacks on September 11,
automotive manufacturing came to a temporary halt at the General
Motors Corp. and Ford Motor Co. pickup truck factories in Ontario,
Canada. Why? Just-in-time (JIT) deliveries were delayed at the
Canadian border. Delays at the Mexican border caused Ford to also
shorten production for about two days at two of its Mexican
assembly plants.
While the Wall Street Journal and Reuters packaged
this news in articles about the need to rethink JIT manufacturing,
theres another slant to consider: Logistics matters. According to
AMR Research (Boston, MA), organizations spend 11% of their
revenues on logistics, yet it is one of the last core business
processes to be automated. More often than not, logistics is an
in-house, manual process involving phone, paper, email, fax, and
home-grown inventory, warehouse, and transportation management
systems.
Dont make the mistake of thinking logistics is
only about accurately storing and moving inventory. Its also
knowing where your stuff is throughout the supply chain, and
finding alternative shipping modes and routes to quickly get around
delayed and irregular shipments. And as with so much else in
factory automation, good logistics is a competitive advantage.
The definition of “logistics” is complex or
simple. According to the Council of Logistics Management (CLM, Oak
Brook, IL), logistics is “that part of the supply chain process
that plans, implements, and controls the efficient, effective flow
and storage of goods, services, and related information from the
point of origin to the point of consumption in order to meet
customers requirements.” AMR Research says logistics is simply “the
management of inventory in motion or at rest.”
Numerous industry initiatives fall into this
field, including quick response, continuous replenishment,
efficient consumer response, and, mostly in manufacturing
industries, JIT and vendor-managed inventory. The common theme in
all of these is to create some sort of smooth and fast pipeline
from material source (supplier) to material consumption (customer),
while responding to the real-time dynamics that occur from changing
customer requirements, routings, transportation modes, and
international trade requirements, to name a few constraints.
Two characteristics separate logistics software
from many other types of software, particularly enterprise resource
planning (ERP). Logistics applications are execution systems, not
planning systems. Second, they are real-time systems capable of
making sub-second decisions based on a colossal amount of data at a
far more granular level than ERP.
Modern major logistics execution systems include a
broad array of applications and modules. The major ones are as
follows:
Inventory management systems (IMS) ensure the
availability of products by linking customer demands, product
reservation, and allocation processes.
Order management systems (OMS) provide real-time
visibility into the entire order lifecycle, ensuring against lost,
delayed, or corrupted orders. For example, the OMS from Provia
Software Inc. (Grand Rapids, MD) manages products, orders,
shipments, and delivery information by customer. It also produces
the appropriate billing materials, as well as communicates directly
with customers and suppliers through electronic data interchange
(EDI), Internet/intranet, and other communications modes. It
controls billing for all product-handling costs (such as receiving,
storage, and labeling), and applies it to the specific customer
based on prenegotiated agreements. Plus, it can process complex
orders that require future shipment or staggered delivery dates,
multiple consignee delivery, or back-ordered product.
Warehouse management systems (WMS) tell you in
real time what you have and where your inventory is within whatever
it is youre calling a warehouse. At the very least, the software
system manages receiving, storing, picking, and shipping product.
It is usually integrated into a plethora of automation, including
bar code and radio frequency (RF) technology, pick-to-lite systems,
ERP, and EDI. Typical WMS verify barcoded or radio-tagged incoming
inventory against purchase orders downloaded from ERP, EDI, or OMS.
The system will also tell people what warehouse location to store
that material, often through printed storage/put-away lists or
through RF terminals on forklifts. Likewise, it will prioritize
picking operations and direct operators when and where to pick. In
both the put away and pick, the WMS will update its inventory
database as required. Additionally, leading WMS might perform other
functions, including order management, work-load management and
labor planning, cross docking, replenish primary pick locations,
cycle counting, supplier return/stock rotation, performance
reporting, proof of delivery, compliance labeling, and manage
productivity-based employee payments.
Transportation management systems (TMS) focus on
freight movements and physical distribution. The Web and
workflow-based transportation application from Arzoon, Inc. (San
Carlos, CA), for example, helps companies determine the best
routing and transportation mode for their products, helps select
carriers based on service levels and rates, creates a delivery
schedule, determines rates, and optimizes the total shipping costs
against service and delivery constraints, and international trade
requirements. A separate Arzoon application for global trade
contains a centralized rules database with trade regulations,
tariffs, and duties for nearly two dozen countries. The application
automates the proper handling of the proper trade documents by
emailing them to the proper officials.
TMS will automatically send shipping notices,
manifests, carrier information, and other updates to all interested
parties in the supply chain as required, as well as receive
requests for updates about the status of shipments. TMS also often
monitor and initiate freight payments, as well as monitor reverse
logistics, and domestic and international shipping.
Yard management systems (YMS), such as from
Provia, extend the warehouse beyond the physical four walls of the
plant by controlling the activities of trailers on the dock and in
the yard to the point of scheduling both inbound and outbound
trucks, In so doing, it effectively expands the amount of storage
locations and lets you cross dock using partial or entire
trucks.
Third-party logistics (3PL) providers are not a
technology, per se, but they are a major element in logistics.
According to a recent 3PL survey by Cap Gemini Ernst & Young
(Detroit, MI), the primary services contracted from 3PL providers
include inbound and outbound transportation, cross-docking,
warehousing, freight bill auditing/ payment, and freight
consolidation and distribution. But this set of services is
changing. “3PL providers should now focus on capable information
technology, effective management and relationship processes, global
responsiveness, and deliver-ing comprehensive, integrated solutions
that create real supply chain savings,” writes John Langley, Jr.,
survey author and The Logistics Institute professor at the Georgia
Institute of Technology.
Implementing logistics applications are
quick--less than six months is typical. Also quick is their return
on investment (ROI), which is often well within 18 months. ROI is
based on several measures. According to Supply Solutions, Inc.
(Southfield, MI), a supply chain management systems provider, these
measures include 30-70% inventory reductions (work-in-progress and
in-transit), slashed administrative costs, improved manufacturing
efficiency, the elimination of premium shipping and part shortages,
predictable production requirements, precise production scheduling,
accurate production orders, significantly reduced “just-in-case”
and excess inventory, improved use of limited resources, lower
labor requirements, reduced overtime costs, reduced premium freight
charges, and peace of mind. Add to that such items as faster order
velocity and order fulfillment response times, more inventory
turns, and less expediting in manufacturing, warehousing, and
shipping, to name a few areas.
According to Deby Veneziale, Chief Product Officer
for Arzoon, the companys logistics resource management software can
deliver “hard-dollar savings of 5% to 15% of logistics costs by
minimizing maverick transportation spending by suppliers and
employees, optimizing carriers and transportation modes, reducing
exposure to customs compliance liability, and eliminating many
manual processes.”
Visibility into movement
The goal, of course, is visibility in all areas
of logistics. “Customers are demanding visibility into the status
of their orders--when its going to ship and when it leaves the
door--they want a copy of the bill of lading and the packing list,
and they want to go onto the Internet and click on a parcel number
to know immediately what the status of the shipment is. This is all
standard in a visibility solution,” says Ken Lewis, President and
CEO of Provia. The warehouse manager wants to know if a problem is
beginning to brew before being blind sided.
Interestingly, logistics is probably one problem
where throwing technology at it is good. “Just outsourcing the
physical processes of logistics is not going to give you the huge
hits in logistics savings,” says Veneziale. “To move shipments and
do it right, youve got to share [huge amounts of] logistics
information with the right players at the right time, let certain
players execute on that information, allow other players just to
view that information, and let other players set up the business
rules.
“Till now, what was always lacking was the
technology and automated workflows to bring that information to the
players so they could all do the right thing--and the same thing.
Companies did it with people in the past because they didnt have
the technology to do it. Today the technology exists.”
Information systems in logistics
Automatic vehicle location (AVL) archiving systems
bring a variety of benefits to companies that operate trucking
fleets. Businesses with other types of vehicles like buses,
couriers, ambulances and many others benefit as well. AVL or “GPS”
systems are among the most cost-effective, service and compliance
enhancing investments companies can make.
To derive maximum value from an AVL system it is
advisable to identify the vendor with the best overall combination
of leading-edge technology, price and fleet management expertise.
While it may seem obvious, the ultimate purchase decision should be
based not on p
rice alone but value delivered.
If it is determined that two vendors offer similar
capabilities that deliver approximately the same value, emphasis
can then shift to price making for an easier purchase decision.
Executives with responsibility for purchasing an AVL system should
be confident they are selecting the vendor most capable of solving
their particular needs. However functionality and cost vary
considerably one vendor to another. An automated DOT driver logbook
is a good example of functionality offered by relatively few
vendors.
Know which questions to ask and how precisely your
company will benefit. Involve the right departments in the
evaluation process. Besides executive management, appropriate
personnel representing financial control, operations and safety and
information technology should participate in the selection
process.
A determination needs to be made whether passive
or real-time tracking makes sense for your company. A sensible
approach for many first-time AVL buyers is to install a passive
system that can be inexpensively upgraded to a real-time system. If
a passive system is purchased without a convertibility feature, the
investment will be lost if the decision to go real-time is
made.
GATCO Technologies is one of a few companies with
a passive system that can be upgraded to real-time (they also
provide an automated DOT driver logbook). Qualcomms system has a
DOT driver logbook too.
What key benefits do real-time interactive AVL
systems bring?
Today, demanding customers almost expect to know
where their carriers vehicles are throughout the course of
delivery. Savvy fleet operators exploit real-timing tracking by
granting their customers access to the delivery status of their
vehicles. This unburdens fleet personnel from having to track down
the status of vehicles in transit so the morale and productivity of
fleet operators is improved and customers are placated.
Some companies like to monitor the mechanical
performance and security of their vehicles in transit. Emergency
alerts indicate malfunctioning refrigeration units, lock tampering
and other applications that vary by operation. A comprehensive AVL
system includes panic button functionality for 911
emergencies.
An interactive system is necessary for fleets that
utilize dynamic optimization-based vehicle routing and scheduling
systems for managing complex trucking operations. Sophisticated
decision support tools of this kind optimize assignment of vehicles
and outstanding orders in real time taking into account vehicle
locations, committed orders, vehicle availability, outstanding
order time windows and historical demand profiles in regions of
delivery.
AVL systems that are capable of reporting the
status of multiple vehicles simultaneously reduce the cost of
picking up inbound freight (backhauling). These systems disclose
the closest available truck to the vendor from whom goods need to
be transported.
Real-time systems can be very affordable if
purchased from companies with leading-edge proprietary
technologies. For example, GATCO Technologies has lowered the cost
of real-time reporting dramatically. They invented and patented a
method of transmitting short bursts of data from moving vehicles
without expensive cellular connection charges.
AVL systems benefit purchasers in a variety of
other ways. Key areas are these:
Development of "smart routes" Routes will evolve
that get the same work done with fewer trucks and drivers when a
good planning tool is combined with a good GPS product. Most AVL
vendors can tell you exactly where your resources are at any time.
But by itself, this information does not provide the means for
improving the operation. However when actual performance is
compared against a plan, fleet operators are provided a “road map”
for improvement. GATCO Technologies an AVL provider, teamed up with
Paradox Software Company, Inc. a logistics planning software vendor
to provide solutions for continuous improvement of logistics
systems. Companies using this combined technology can expect to
reduce the resources they need to transport goods
significantly.
Improved driver performance. Experience shows that
once drivers know they are being monitored, their driving habits
change for the better. Improvements are realized through reductions
in speed and costly engine idling, elimination of unauthorized
routes and stops as well as less time spent at authorized
stops.
Compliance. Staying in compliance with regulators
is a tedious, labor-intensive, costly proposition for many
companies. For example, fleet operators whose vehicles travel in
multiple states must keep track of those miles so the right fuel
tax can be paid. At the same time, keeping in compliance with
drivers hours of service regulations is a top priority. AVL systems
that provide automated and tamper- proof DOT driver logbooks and
allocate miles by state without driver participation virtually pay
for themselves just in these areas alone.
Incentive pay programs. Reduced to its simplest
terms, incentive pay rewards the driver for performing the job as
quickly and safely as possible. Actual trip data generated by the
AVL system can be used to develop drive and stop standards to
develop an incentive pay plan for drivers.
Defending drivers involved in accidents.
Incontrovertible trip data protects drivers who may be wrongly
assigned blame in accidents. For example, a driver accused of
running a stop sign and causing an accident can prove he was
stopped at that very stop sign.
Defending against fraudulent claims. Some
companies are targets of fraudulent claims against their vehicles.
Trip data can be reconstructed showing a vehicles exact location at
any time so this can be used to successfully repudiate the “eye
witness” testimony of unscrupulous criminals.
Reduced liability insurance. Monitoring and
reducing driver speed reduces accident probability. Insurance
companies look favorably at companies that control their drivers
speed and some offer reductions in liability premiums.
Fuel and maintenance savings. Monitoring and
controlling vehicle speed and engine idling reduces fuel consumed
and engine wear extending engine life. The longevity of vehicle
components like gearboxes, axles, and break liners is extended as
well through reduced wear.
Financial analysis and reporting. Actual
operational data produced by an AVL system can be soundly
integrated with financial data for accurate profit and loss
reporting and transportation ratemaking.
A few considerations in selecting the most
suitable vendor are these: Decide what functionality is most
important to your business and identify which vendors systems are
best capable of delivering this. Many lower-priced systems provide
vehicle location but do not automatically report miles by state and
do not have DOT driver log capability. Negotiate with vendors who
understand the intricacies of fleet operations. Ideally, the vendor
should have persons on staff who have successfully managed fleet
operations themselves.
Develop a list of questions: What distinguishes
the vendors technology? Does the vendor hold patents? How will
drivers like the system? How much driver interaction is required?
Is voice communications needed and does the vendor provide this?
Can the system be upgraded from passive to interactive? How is the
quality of the maps and how fast do they load? How fast does the
system execute reports? Does reporting capability exist that
compares actual with planned data? What kind of training and
customer support is accessible? What maintenance support (hardware
and software) is offered?
Develop a vendor “short” list:
Just because a vendors name is well known does not
necessarily mean their product (or price) is best for your company.
Take into account the total cost of the system: hardware, software
licensing, installation, maintenance, upgrades and communications
charges. It is not uncommon that vendors sell hardware relatively
inexpensively but charge expensive (and recurring) messaging or
reporting charges for their systems. It is unwise however, to
purchase a system of this kind based on price alone. The ultimate
purchase decision should be based on value delivered.
Once a “short” list of vendors is identified,
there can be no substitute for testing the vendors system on your
fleet in your environment. Calculate a return on investment
analysis. A system that provides the right functionality should
rapidly pay for itself in well under a year.
In the ideal relationship, fleet operators and AVL
vendors function as partners. Find a provider that is committed to
working with you. The vendor should be willing to customize its
reports specific to your business and make modifications to its
system if necessary. Finding the best AVL vendor is not easy. A
better understanding of what you need and asking the right
questions makes it easier. Companies that operate vehicles face
enormous pressure to control their costs, comply with governmental
regulators and to continually enhance the future performance of
their fleet. AVL technology helps in so many ways it should not be
overlooked.
Literature
1. http://en.wikipedia.org/wiki/Logistics
2. Creveld van, Martin. 1977. Supplying War:
Logistics from Wallenstein to Patton. Cambridge: Cambridge
University Press
3. Engels, Donald W. 2006. Alexander the Great and
the Logistics of the Macedonian Army. Berkeley: University of
California Press
4. Roth, Jonathan P. 2003. Logistics of the Roman
Army at War (264 B.C. - A.D. 235). Leiden/Boston/Koln: Brill