Three Pillars of Shipping Accuracy
Alchemy Magazine, July 16, 2002- By Sue Garrison, Executive Editor

Shipping accuracy depends on organizations working together more closely to share the information they gain in the course of doing business. Alchemy spoke with a manufacturer, a 3PL provider and supply chain software vendor to see how each side views its role in building the accurate order.

The Manufacturer's Decision: Hand Off, But Remain Close to Data

Liberty Richter has been wise to the fact that it doesn't need to do it all to be successful. The company whose mission is to be, "The Premier Marketer of Imported and Domestic Specialty Foods in the United States," leaves production to others so it can do what it does best: manage small, premium gourmet food brands, such as Weight Watchers dry products and Horton's Butter Rum Cakes.

In line with that thinking, the Saddle Brook, N.J., company has also outsourced its warehousing operations and transportation. John McLennan, vice president of finance/controller, says that handing over day-to-day management doesn't mean giving up control or forgoing shipping visibility.

Why did you outsource your warehouse and transportation functions?

John McLennan, V.P., Finance/Controller: We had managed our own warehouse for many, many years. In 1988, our parent company at the time bought two companies, Liberty Imports and Richter Brothers, and merged them. As you would expect, there were layoffs. Competition increased, brands left and by 1991, the folks here could not manage the warehouse cost-effectively, leading the company to lose millions of dollars. In order to save the company, Liberty Richter went to public warehousing.

The first year after switching, we recruited new brands to import and market. This, coupled with the warehouse savings, allowed the company to break even. Every year since, we have grown through brand acquisition, representing additional brands and finally, organic growth. We've gone from losing millions to a return on capital employed of 22 percent.

How does outsourcing these functions affect your ability to control shipping accuracy? How does it affect how close you are to information that could give insights into trends or problem areas and assist in analytical business decision-making?

McLennan: To facilitate the visibility of our product at [the warehouse], we utilize the Internet to obtain information from their system in real time. Our Blinco Systems Inc. 3rdwave Food enterprise [including supply chain and global logistics management] system gives us good visibility of what products are at what warehouse. It allows us to do such functions as verify quantities on hand, when a container was received and when shipments have left, just to name a few.

We are able to remain close to our information. If we do get out of synch and an item is scratched from an order when our system says we have product on hand, we begin investigating immediately. I feel we lose very little insight to the logistics, and it allows us to focus on what we do best—and that is sales and marketing and the analytics associated with those functions.

How do you internally support sales and marketing as they relate to logistics?

McLennan: We can slice and dice the information so many different ways. We've got lot codes, and we can sort them based on date receipt so we can monitor how things are turning. We run reports continually to look for those things [such as a product's expiration date] so we can go out and run a promotion before it goes bad in the warehouse.

The 3PL Provider's Role: 'We're Right in the Middle'

For manufacturers large and small, third-party logistics (3PL) providers can take logistics complexities off their hands and offer services, such as tracking, managing and analyzing data and documents—any or all of which can speak to the issue of improving shipping accuracy.

BDP International, a U.S.-based global logistics and transportation provider that serves more than 4,000 customers worldwide, realizes how instrumental those services are to its business. One of BDP's main services is to provide a unifying infrastructure that allows manufacturers to see data, documents and execution-oriented information from an operational perspective in ways that perhaps they can't even do internally with their own systems.

BDP is working on a Web-based infrastructure that will tie into its TRADEPAQ for Logistics software—for automating its document preparation, generation and management processes, as well as providing integration functionality with customer data—and enable customers to view documents via a Web-based front end.

How do you work with customer data that comes from disparate systems?

Mark Stocksdale, director, software development: We receive a lot of the information electronically from our clients. It might even be from different business units working on different operating systems. As part of BDP's value-added service, we will take that information, aggregate the data and make the data common between the business units. Those different business units can then come into our data warehousing environment, which is Web-enabled, and use the common data elements and reporting tools to find out where their shipments are and how they're doing from a forecasting standpoint.

How are you working with customers to improve their shipping accuracy and the processes that support it?

Michael Ford, vice president, quality/regulatory compliance: One of the things we've seen is our customers looking at certain cost initiatives and at their supply chains and trying to take any costs out. To do that, you have to take a picture and a baseline of where you're starting from.

What BDP has is a lot of important information that the customer may not necessarily have readily available in their system, especially with regard to international shipments. From a domestic point of view, they may understand their trucker bills and the invoicing of the commercial dollars. But in looking at the international flavor of that order—if it's going out over air or ocean—systems sometimes lose visibility there, and they need information to back it up to support the information that's in their own system.

Where BDP assists clients is working with them to identify what information is critical to their needs and then making sure we submit it and give it back to them on a timely basis so they can do their trending. Is it trending on a cost basis? Is it trending on a performance basis, meaning if I've given a commitment to a customer to get it overseas, how good is that commitment? Am I meeting it?

How do economic factors affect the shipping accuracy picture and your role as a 3PL provider?

Jennifer Gold, director, project management: As the economy has changed in the past couple of years, we've been instrumental in being able to help customers from a visibility perspective. As exports have gone down in volume and imports have risen because of the strength of the dollar, when people think about changing manufacturing capabilities and figuring out where they're going to source stuff, data warehousing, trending kind of information can help them make those decisions.

Often, we're right in the middle of those international moves, those imports and exports, and we have some of the critical information, documentation and data that can contribute intelligence to the decision-making process when economics and world factors influence their business in tangible ways.

The Vendor's Take: Technology Supports Relationship-Building

Alchemy asked Penny Yardley, senior systems consultant for Transentric, a supply chain technology software provider, to share her thoughts on how manufacturers, suppliers and 3PLs can collectively improve visibility and accuracy throughout the supply chain.

What are companies looking for in terms of technology to improve shipping accuracy?

Yardley: They're looking for a very tactical tool that allows them to handle things that are causing them issues right now and quickly identify what they need to focus on. They're also looking for a tool that allows them to see strategically: How do I need to change things and make them better to save costs, save materials, provide better customer service, reduce my inventory?

How has the relationship changed between manufacturers and suppliers in recent years relative to shipping issues that affect both sides?

Yardley: [In multiple company scenarios,] they weren't necessarily working in the most constructive way, because it was very difficult to get all the information that you needed together in one spot and because there wasn't a good way to view the same information at the same time. The difference [now] is a more collaborative view of [things]: If I can make things good for you and I can tell you much earlier in the process what's happening on my end, it not only helps me, but it helps you plan better.

Especially on the rail side, where shippers have so much tied up in private assets, if they can find a way to do more to lower safety stock that's needed on hand, or they can provide true visibility of what the actual transit time is and when they can expect something, [they will] feel very comfortable that if a product isn't going to arrive on time, that they'll be notified.

Which functions are companies most comfortable handing off to an outside party to manage for them?

Yardley: Collecting data, making sure it's valid and complete, providing easy-to-use tools to slice and dice — those are the things that I see very large to medium-sized companies making decisions often to outsource. In addition, if they have internal systems that do provide good slicing and dicing, many times they're looking for a third party who will help them collect all of the information they need and maybe do some preliminary data scrubbing, using industry reference files and validation tables, and then pass it on to their systems.

SIDEBAR
How to Take Corrective Action ­ Now

It's inevitable that plans will change or go awry somehow: Carriers run late. Goods go out of stock. Customers make last-minute demands. Yet despite the hitches, manufacturers and suppliers are expected to come through.

Event management software, which issues alerts to users based on pre-set conditions or exceptions to the norm—such as, "Tell me if Product “A” doesn't arrive on time"—offers real-time insights into what's happening in the supply chain. Gaining those insights—and being able to act upon them—is important to improving shipping accuracy.

As Mark Holmes, director of logistics solutions for Tilion, an event management software provider, explains, "The further back in the supply chain that you notice an exception, the more flexibility you have in enhancing your shipping accuracy." Real-time views into what's happening early in the process offers companies greater options to correct or make up for problems in the easiest, most cost-efficient manner, he says.

Early event management tools alerted users mostly to after-the-fact events, such as: Carrier “B” has picked up a load. But Holmes says that some tools are now taking a more proactive stance, allowing for in-transit views, for example, as well as providing analytics and metrics to measure and monitor carrier or supplier performance that affect overall shipping accuracy.

3PLs have been—and continue to be—at the forefront of offering event management as a value-added service to their customers. But Michael Sherman, chief technology officer for Viewlocity, which offers supply chain management software, says that as companies reassess which functions their 3PLs should manage versus which should stay in-house, they're increasingly using event management on their own.

Sherman cites one customer, a wireless provider, which makes its money by activating cell phone services. The company uses a 3PL to move its freight, but decided to keep event management in-house for making important business decisions. "In this environment, having the right product at the right time when critical sales are made is critical," he says. "Because of this, monitoring of sales stock and the churn cycles of specific phones in specific regions and dynamic allocation of orders and potential diversions in transit is important to making sure you have successful generation of sales in the field."

Using event management for activities outside the scope of the 3PL is why companies such as Nike have brought event management in-house. While it has no plans to give up its 3PL provider, Nike management decided that exception management could help resolve internal issues such as internal inventory transfers and warehouse-to-warehouse movements that don't involve its 3PL. Reducing 3PL dependency makes sense for some companies, Sherman says, whereas others value their 3PL's services and want them to be responsible for event management.

3PLs, he says, are now at the forefront of what event management is evolving into: adaptive execution, which helps companies recover from the failure of even their best-laid plans. Adaptive execution spurs real-time corrective action in a closed-loop process, which Sherman says is actually "enforcing the action." These constraint-based systems will, for example, go beyond alerts to inform users what actions are available and the costs of choosing those actions, driving back to operational systems via the execution plan.

Alchemy © 2002 Putman Media

For related information, please go to:
3rdwave Food
3rdwave CGD (for consumer goods distributors)
Liberty Richter Article on Global Visilibility