In 1492, a global shipping “first” achieved by Christopher Columbus produced the stunning news that: 1) the world was not as flat as it appeared and 2) international transits weren’t as perilous as originally imagined.
Today, it seems the opposite is true, at least in terms of supply chain management.
Globalization has leveled the competitive playing field between countries, turning the expression, “the world is flat,” into a fundamental economic truth. And as more businesses have begun transporting goods internationally, most have discovered they’re more – rather than less – prone to risk.
The sources of this enhanced risk are easy to see, because the average international shipment involves multiple modes, varying infrastructures, thousands of additional miles, substantially increased lead time, more government agencies, increased regulation – and a product consumption landscape that can change dramatically between the time a product leaves the factory and the time it ultimately reaches its final destination. And any of these things can work a number on delivery reliability.
By contrast, the remedies are harder to come by.
“In the past, when supply chains were mainly domestic, companies could usually navigate through most shipping challenges by drawing from their years of experience and accumulated knowledge – knowing which combinations of routes, carriers and distribution center activities worked best for their particular supply chain. They also could use optimization. Or they could use a combination of the two,” said Dr. Rajiv Saxena, vice president of global supply chain engineering at APL Logistics. “International shippers don’t have that history yet.”
Nor, until recently, did they have powerful enough optimization tools.
“Optimization at its core is a technique that is supposed to pick out the very best solution based on all of the potential options and constraints,” Saxena explained. “There are a lot of tools on the market that can do this domestically, because the universe of potential routes and carriers that companies can use is large but manageable. By contrast, the universe of potential international shipment options and techniques is far larger and more variable – and that’s been a problem for developers.”
How International Shipping Optimization Adds Up
Saxena doesn’t exaggerate. Today there are:
• Approximately 50,000 merchant ships carrying internationally trade cargo
• 8,200 seaports worldwide
• 1,000 cargo airports worldwide
• More than 400 liner services providing regularly scheduled sailings
• Several international modal considerations such as air, air-sea, sea-air, all water, water combined with a transload or water plus mini-land-bridge
• Five standard ocean container sizes ranging from 20 to 53 feet
• And many additional land transportation shipping requirements that must be met before and after global shipments sail or fly.
Shippers also must decide:
• Whether to use full containers or opt for less-than-containerload
• How to load containers at origin – single-country consolidation, multi-country consolidation, co-loading or premium/expedited shipping
• And how to unload containers at their destination.
“Plus even these lists grossly oversimplify the challenges at hand, because each company also has its own complicated production schedules, vendor policies, and supply chain rules to consider,” commented Saxena.
The net effect is a staggering number of potential shipping permutations and scenarios to consider – and too much information for even the most robust of traditional optimization tools to fully accommodate.
The Improving State Of Optimization
This is not to suggest that international shippers haven’t done their best to apply optimization – or that they haven’t succeeded, at least to a degree. In fact, many frequently have used it to empower decisions such as how to make a preferred delivery date, maximize loading efficiency or minimize door-to-door shipping costs. But the emphasis is on the word “or.”
“For a very long time, international shippers could achieve one of these objectives with an optimization tool or perhaps two if they were very fortunate. But they couldn’t quickly and easily achieve all three,” said Saxena.
Fortunately this scenario changed in 2011, when a team of engineers from a large global third-party logistics provider and a major software company made a breakthrough.
By using a column generation algorithm platform instead of the linear algorithm that fuels most logistics optimization tools, they were able to develop ShipmentOptimizer, an optimization product that could handle a far larger number and variety of inputs – and crack the challenge of simultaneous optimization.
The tool, which was introduced in 2012, can concurrently identify all possibilities for a company’s global shipment, rule out several of these possibilities by weighing them against that company’s business rules, and prioritize the rest to arrive at the ideal reliable mode, load, carrier, route and booking recommendation, all within a couple of hours. It also has the capability to immediately update and re-optimize this recommendation at any time in the life of the shipment just in case any element of the shipment’s scenario changes – which is a big advantage.
Other Options
But even this new-and-improved form of optimization isn’t a panacea for every potential international shipping risk.
“The most successful international supply chains start with the kinds of good supply chain plans and decisions that optimization enables. But they’re also just as reliant on world-class execution – and the strategic use of things like visibility tools, premium services, and available supply chain expertise,” Saxena advised.
For example:
• By routinely checking on scheduled production milestones and comparing them against overseas vendors’ confirmed purchase orders to ensure things are happening on schedule, a company can learn about international orders that won’t be ready to ship even before they finish being manufactured – while there’s still ample time to come up with a Plan B or manage recipients’ expectations accordingly.
• By occasionally engaging in diversification – bringing goods into a different port, using a different carrier or mode or trying out a different supplier on a limited level – companies not only can become more familiar with available back-up resources, they’ll also be able to deploy them more readily should an issue like weather or labor dispute arise, because they’ll already have an established relationship with those entities.
• By proactively allotting some budget funds for expedited transportation options – thinking in terms of “when” such options will be needed rather than “if”—companies can elect to spend the money on time-definite ocean shipping, air shipments, or expedited land transportation when a shipment’s prompt delivery date is essential.
• And by working with logistics providers or consultants that already have a footprint in certain global markets, companies can essentially give themselves the benefits of years of experience in those markets – and enhance their ability to make experience-based decisions about shipments to or from those markets – almost overnight.
“No one single tactic, tool or technique can guarantee a company smooth sailing through an international supply chain each and every time,” said Saxena. “But many of them working in concert can certainly bring them much closer to that goal.”
Sailing The Ocean Blue
Like Columbus’s voyage, the story of globalization has the potential to travel in any number of exciting directions as it continues to unfold.
We know for instance, that nearsourcing has begun to gain traction with many North American companies, that many thriving manufacturing venues like China and India have become equally burgeoning consumer markets, and that imminent events like the Panama Canal expansion could change the game on many levels.
We also have seen that any number of events ranging from the meteorological to the manmade can alter the efficacy of even the best-designed global shipping plans in the blink of an eye.
However we also know that the practice of supply chain management is also in a state of continuous change – and that as the development of programs like ShipmentOptimizer attests, it often is change for the better.
“Whether it’s a more robust optimization tool or a new genre of service, everyone from carriers to 3PLs to systems developers alike is working toward creating solutions that will help companies more confidently and capably navigate what are still unfamiliar waters to many,” Saxena said.
In other words, stay tuned. Because easier and more reliable shipping is already on the horizon.
Today, it seems the opposite is true, at least in terms of supply chain management.
Globalization has leveled the competitive playing field between countries, turning the expression, “the world is flat,” into a fundamental economic truth. And as more businesses have begun transporting goods internationally, most have discovered they’re more – rather than less – prone to risk.
The sources of this enhanced risk are easy to see, because the average international shipment involves multiple modes, varying infrastructures, thousands of additional miles, substantially increased lead time, more government agencies, increased regulation – and a product consumption landscape that can change dramatically between the time a product leaves the factory and the time it ultimately reaches its final destination. And any of these things can work a number on delivery reliability.
By contrast, the remedies are harder to come by.
“In the past, when supply chains were mainly domestic, companies could usually navigate through most shipping challenges by drawing from their years of experience and accumulated knowledge – knowing which combinations of routes, carriers and distribution center activities worked best for their particular supply chain. They also could use optimization. Or they could use a combination of the two,” said Dr. Rajiv Saxena, vice president of global supply chain engineering at APL Logistics. “International shippers don’t have that history yet.”
Nor, until recently, did they have powerful enough optimization tools.
“Optimization at its core is a technique that is supposed to pick out the very best solution based on all of the potential options and constraints,” Saxena explained. “There are a lot of tools on the market that can do this domestically, because the universe of potential routes and carriers that companies can use is large but manageable. By contrast, the universe of potential international shipment options and techniques is far larger and more variable – and that’s been a problem for developers.”
How International Shipping Optimization Adds Up
Saxena doesn’t exaggerate. Today there are:
• Approximately 50,000 merchant ships carrying internationally trade cargo
• 8,200 seaports worldwide
• 1,000 cargo airports worldwide
• More than 400 liner services providing regularly scheduled sailings
• Several international modal considerations such as air, air-sea, sea-air, all water, water combined with a transload or water plus mini-land-bridge
• Five standard ocean container sizes ranging from 20 to 53 feet
• And many additional land transportation shipping requirements that must be met before and after global shipments sail or fly.
Shippers also must decide:
• Whether to use full containers or opt for less-than-containerload
• How to load containers at origin – single-country consolidation, multi-country consolidation, co-loading or premium/expedited shipping
• And how to unload containers at their destination.
“Plus even these lists grossly oversimplify the challenges at hand, because each company also has its own complicated production schedules, vendor policies, and supply chain rules to consider,” commented Saxena.
The net effect is a staggering number of potential shipping permutations and scenarios to consider – and too much information for even the most robust of traditional optimization tools to fully accommodate.
The Improving State Of Optimization
This is not to suggest that international shippers haven’t done their best to apply optimization – or that they haven’t succeeded, at least to a degree. In fact, many frequently have used it to empower decisions such as how to make a preferred delivery date, maximize loading efficiency or minimize door-to-door shipping costs. But the emphasis is on the word “or.”
“For a very long time, international shippers could achieve one of these objectives with an optimization tool or perhaps two if they were very fortunate. But they couldn’t quickly and easily achieve all three,” said Saxena.
Fortunately this scenario changed in 2011, when a team of engineers from a large global third-party logistics provider and a major software company made a breakthrough.
By using a column generation algorithm platform instead of the linear algorithm that fuels most logistics optimization tools, they were able to develop ShipmentOptimizer, an optimization product that could handle a far larger number and variety of inputs – and crack the challenge of simultaneous optimization.
The tool, which was introduced in 2012, can concurrently identify all possibilities for a company’s global shipment, rule out several of these possibilities by weighing them against that company’s business rules, and prioritize the rest to arrive at the ideal reliable mode, load, carrier, route and booking recommendation, all within a couple of hours. It also has the capability to immediately update and re-optimize this recommendation at any time in the life of the shipment just in case any element of the shipment’s scenario changes – which is a big advantage.
Other Options
But even this new-and-improved form of optimization isn’t a panacea for every potential international shipping risk.
“The most successful international supply chains start with the kinds of good supply chain plans and decisions that optimization enables. But they’re also just as reliant on world-class execution – and the strategic use of things like visibility tools, premium services, and available supply chain expertise,” Saxena advised.
For example:
• By routinely checking on scheduled production milestones and comparing them against overseas vendors’ confirmed purchase orders to ensure things are happening on schedule, a company can learn about international orders that won’t be ready to ship even before they finish being manufactured – while there’s still ample time to come up with a Plan B or manage recipients’ expectations accordingly.
• By occasionally engaging in diversification – bringing goods into a different port, using a different carrier or mode or trying out a different supplier on a limited level – companies not only can become more familiar with available back-up resources, they’ll also be able to deploy them more readily should an issue like weather or labor dispute arise, because they’ll already have an established relationship with those entities.
• By proactively allotting some budget funds for expedited transportation options – thinking in terms of “when” such options will be needed rather than “if”—companies can elect to spend the money on time-definite ocean shipping, air shipments, or expedited land transportation when a shipment’s prompt delivery date is essential.
• And by working with logistics providers or consultants that already have a footprint in certain global markets, companies can essentially give themselves the benefits of years of experience in those markets – and enhance their ability to make experience-based decisions about shipments to or from those markets – almost overnight.
“No one single tactic, tool or technique can guarantee a company smooth sailing through an international supply chain each and every time,” said Saxena. “But many of them working in concert can certainly bring them much closer to that goal.”
Sailing The Ocean Blue
Like Columbus’s voyage, the story of globalization has the potential to travel in any number of exciting directions as it continues to unfold.
We know for instance, that nearsourcing has begun to gain traction with many North American companies, that many thriving manufacturing venues like China and India have become equally burgeoning consumer markets, and that imminent events like the Panama Canal expansion could change the game on many levels.
We also have seen that any number of events ranging from the meteorological to the manmade can alter the efficacy of even the best-designed global shipping plans in the blink of an eye.
However we also know that the practice of supply chain management is also in a state of continuous change – and that as the development of programs like ShipmentOptimizer attests, it often is change for the better.
“Whether it’s a more robust optimization tool or a new genre of service, everyone from carriers to 3PLs to systems developers alike is working toward creating solutions that will help companies more confidently and capably navigate what are still unfamiliar waters to many,” Saxena said.
In other words, stay tuned. Because easier and more reliable shipping is already on the horizon.
