Visibility into movement 6
systems in logistics 6
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
While the Wall Street Journal and Reuters packaged this
news in articles about the need to rethink JIT manufacturing, there"s 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.
Don"t make the mistake of thinking logistics is only about
accurately storing and moving inventory. It"s 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
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 you"re 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
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
According to Deby Veneziale, Chief Product Officer for
Arzoon, the company"s 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.”
The goal, of course, is visibility in all areas of
logistics. “Customers are demanding visibility into the status of their
orders—when it"s 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, you"ve 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 didn"t have the technology to do it. Today the technology exists.”
Information systems in
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 price alone but value
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
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). Qualcomm^s system has a DOT driver logbook too.
What key benefits do real-time interactive AVL systems
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
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 vehicle^s exact location at any time so this can be
used to successfully repudiate the “eye witness” testimony of unscrupulous
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
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
Develop a list of questions: What distinguishes the
vendor^s 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 vendor^s 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 vendor^s 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.
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