Explain the benefits of proper integration of technology into logistics systems.
?Explain the role technology plays in modern logistics systems.
?Show how technology is reducing the cost of logistics.
One platform, many uses
Rising logistics costs and capacity constraints are encouraging companies to take a more strategic approach to transportation management systems (TMS). Instead of using the systems to wring savings from only one segment of their supply chain, theyre using a single technology platform to support several software applications. Until recently, most users of TMS focused on tools that met only the tactical demands of their day-to-day operations. Unlike “point solutions,” which focus only on one set of problems, these kinds of tools collect and integrate not just data about current transportation operations, but also about sourcing, forecasting and planning throughout the supply chains of a company and its partners. In logistics technology parlance, its known as “business agility.” Best Buy has adopted this approach.
Companies used to be thrilled if they could use software to shave a few thousand dollars from their annual trucking bill. Now they want more – and theyre finding it with transportation management systems.
Rising logistics costs and capacity constraints are encouraging companies to take a more strategic approach to TMS. Instead of using the systems to wring savings from only one segment of their supply chain, theyre using a single technology platform to support several software applications.
When Cemex wanted to upgrade its transportation management systems, the Mexican cement manufacturer contracted with i2 Technologies for technology applications covering supply-chain strategy, demand planning and transportation modeling, planning and management. Cemex said it has saved $4.5 million.
USCO Logistics, a subsidiary of Kuehne & Nagel, recently deployed a new tool from Oracle Transportation Management that enables USCOs buyers, vendors and carriers to share a single business process that operates on one technology platform. USCO said the arrangement has reduced its inventory expenses.
Until recently, most users of TMS focused on tools that met only the tactical demands of their day-to-day operations. “Companies used to be focused on making a small improvement here and another small improvement there,” said Jeff Woods, a Gartner Group analyst and author of a recent study of TMS tools. “Now, technology actually matters.”
Unlike “point solutions,” which focus only on one set of problems, these kinds of tools work in tandem with other tools that optimize a shippers entire supply chain. They collect and integrate not just data about current transportation operations, but also about sourcing, forecasting and planning throughout the supply chains of a company and its partners.
In logistics technology parlance, its known as “business agility.” The approach uses technology to anticipate changing conditions and needs, and then to respond without extraordinary costs. To work effectively, this approach requires a tight link between transportation planning and execution. The combination results in what Woods calls “dynamic re-planning and responsive execution.”
Best Buy has adopted this approach. The electronics retailer uses several products from the i2 Supply Chain Management platform, including tools to plan demand and replenishment, develop supply- chain strategy and optimize markdowns. Eric Morley, Best Buys director of transportation, supply-chain operations, said this approach “provides increased visibility from end to end by integrating forecasting, planning and execution capabilities.”
The new tools have helped Best Buy cope with fuel costs, driver shortages and trailer shortages by making it easier to anticipate various transportation-related options and analyze their short- and long-range costs.
The new kinds of TMS tools fit into the following categories:
— Strategic planning: Used during the strategic planning process (ranging from every six months to three years), these tools answer such questions as how to match warehouses with customer demand and supplier locations. These tools enable companies to model processes, facilities, inventory, transportation, supplier and customer demand to answer top-level strategic questions about the configuration of their supply chain.
— Strategic sourcing: These tools reduce freight costs and administrative costs, minimize the number of carriers, and improve carrier performance and compliance by ensuring that the company uses the right mix of carriers. The most advanced of these tools enable users to analyze transportation spending, forecast changes, select carriers for bid processes, automate multiround negotiations, analyze bids and load the information into other TMS applications.
— Tactical planning: These tools use simulations to help answer such questions as whether a new customer will require additional freight capacity on a route. The most advanced of these tools take data about historical orders and shipments and apply changes in volume or other factors to create a picture of transportation activity throughout a projected period.
— Collaborative tactical planning: These tools help companies find ways to cut costs by linking transportation processes and commitments across two or more companies.
— Operational transportation planning: These tools use inbound, outbound and transfer orders to generate shipment plans that include modes, pickup times and carrier selection. The tools model a range of operational constraints (such as customer lead times), asset constraints (such as the need for refrigerated trucks) or dock-door constraints. “Constraint-based optimization” systematically studies more combinations for transportation plan options than a company could do manually. They also enable companies to plan more accurately, reduce the number of shipments and distance traveled, and cut their use of expensive modes of transportation.
The Gartner study rated i2 Technologies and Oracle as the top- rated vendors of the new TMS products. Oracle Transportation Management was originally developed by G-Log before it was acquired by Oracle last year. Major shippers and third-party logistics providers deploying Oracles TMS include DuPont, Exel and Halliburton. Woods said that despite i2s recent financial problems, it is “an important player in the market, and in many cases, they have the most sophisticated product.” Other vendors who rank as technology leaders in the Gartner report are Manhattan Associates, SAP and Sterling Commerce.
Woods cautioned that not every shipper needs the most sophisticated of the new TMS tools. Companies need to start by asking themselves how sophisticated they really need to be. A shipper that has only moderate transportation requirements “may be better off with a simplified hosted offering or an offering from a vendor with which the user has an existing relationship, rather than dealing with all the complexity of one of the more sophisticated packages in the market.”