Supply chain visibility is a hot trend in many organizations today. The ever-increasing need for visibility is due to the increase in supply chain complexity. There are many issues organizations face including the movement of goods across borders, supply chain security, and several other aspects all worth noting. Forward thinking organizations are capitalizing on technology innovations and deploying visibility and analytical tools in their supply chain to provide more visibility and gain a strategic advantage in the marketplace.
Transportation Costs and Operations
Spiraling fuel prices, labor shortages, increased competition and reduced inventories have increased transportation costs and reduced profits. As a result, shippers are looking for ways to get better visibility into their overall operations. Organizations need to take a holistic approach and implement the right tools to manage their transportation costs to achieve long-term savings. Shippers need to rethink operations and spend management in order to achieve a complete view of the supply chain.
One approach has been to combine system level data into a central repository and apply analytics. Through platform consolidation and the reduction of disparate systems, they are able to improve their data model, metrics, and gain visibility into their spend which provides the opportunity to better manage their transportation operations. In order for this holistic approach to be truly effective, it has to include both operation data along with carrier cost consolidation and invoice aggregation.
The logistics industry has evolved dramatically in recent years, and even the industry terms have begun to change. What used to be called a “warehouse,” is now known as a “delivery center or node” and is often referred to as a “fulfillment center,” aligning with the emerging trend of omni-channel fulfillment. In the past, it was sufficient just to have visibility into the pallet or case level, but shippers are now faced with the issue of “eaches” or “Single line Orders.” With more controlled or regulated and high-value items such as pharmaceuticals, dual use, and electronics being shipped around the world, shippers are now more accountable than ever and need to know the exact location of each item – down to the individual device. They are expected to provide continuous notifications and alerts to the consumer about where each item is in the delivery lifecycle.
In addition to needing visibility into the location of inventory, shippers also need to determine the best mode or method of shipping that inventory, which may now come from a store directly to the consumer, direct from the manufacturer or from a fulfillment center to the purchaser. Omni-channel fulfillment and direct shipping options have created even more factors that need to be taken into consideration and without visibility into all of the data about the various shipping options; it is difficult to make the right decision for the business.
A Traditional Approach to Reduce Transportation Costs
Traditionally, organizations have taken three different approaches to improve their transportation spend. First, in a single carrier environment they would look to shift modality. The shift in modality (from Next Day to Ground) typically reduced the cost of shipping by increasing the delivery time frames. The second approach was to choose an alternative carrier within their network. Companies began looking for alternate carriers to move goods at a reduced price compared to their incumbent carrier. This multi-carrier approach has proven effective as companies were able to compare costs across different carriers and then make their selection based on time in transit and/or total cost. Lastly, companies would look at the distribution of shipments to determine if they were being shipped from the optimal location, i.e. fulfillment center, store, etc. in attempt to get closer to the customer. This approach was the beginning of the omni-channel fulfillment model and has resulted in the need to better manage the Operation and the total cost of the goods being shipped.
Many organizations today are looking closely at their transportation networks and seeking alternate carriers that can offer the same services at reduced costs. One trend that is continuing to gain momentum is that companies are choosing regional carriers as an alternative to the traditional tier one carriers to provide next day ground services at a significant savings compared to next day air. By adding additional carriers to their existing networks, they are able to look at shifts in modality and select different carriers and services for a lower price and in some cases shorter delivery cycles.
Companies are now entertaining a fourth option: direct dispatch or drop ship, where goods are being shipped directly from the manufacturer to the consumer with merge in transit components to complete the fulfillment process. Since not all of the orders or line items are sourced from one supplier, several suppliers or LSPs may be involved to complete a single order.
Visibility Equals Profitability
Advancements in technology have created new opportunities for organizations to make more informed decisions about their shipping operations, in order to improve their bottom line. Visibility into transportation spend provides the information organizations need to choose the right carriers and shipping options.
Some organizations believe they have sufficient visibility into their operations. They may look on a weekly basis at an exception management process around cost allocation in order to determine where their resources are going. But, these weekly snapshots only provide a fraction of the information that a real-time visibility solution can.
Carrier costs are a major area where organizations often inadvertently overspend. For example, many organizations only look into carrier costs when there is a variance, and they might not be aware of the daily choices that impact their bottom line. A visibility tool can provide data visualizations and even automatic alerts, dashboards and KPIs. This enables the organization to be much more proactive in terms of examining spend, and to therefore be more strategic in carrier selection. Visibility can also provide a competitive advantage when renegotiating rates and terms with carriers.
A real-time snapshot of transportation spending can go a long way in helping the organization to adjust its operations. This financial view of the network can then prompt an analysis of spend from an operational level, leading the organization to make adjustments to streamline and save money.
Another area in which organizations tend to over-spend is on non-discounted services such as same day couriers and next day early morning shipments. Often, the customer is not available to sign for the item and may actually need to call for pickup. By stepping back and taking a look at their shipping needs, organizations may find that the customer would be just as happy with two-day shipping, which would provide a significant cost savings.
Visibility in the Real World
One company decided to turn to a visibility solution to get a better understanding of its transportation operations, which led to significant savings. It examined trends by ZIP Code to see what regions it was shipping to, and found that many items were being shipped to the same ZIP Code in which the organization was headquartered. By digging into the data a little more, the organization found that it was actually shipping items out of the building and then back in, rather than using the internal mail system. It was able to make a large cost reduction in its overall transportation budget just by eliminating these in-building shipments.
By implementing a visibility solution, another global organization found that it was spending $50K a year in address correction fees. Many organizations focus on reducing freight costs (i.e. envelopes and packages), but they do not think to look at miscellaneous or accessorial fees, such as address correction or residential fees. These fees can actually cost 100% more than the total freight charge. An address correction fee, for example, can cost $10 where the total freight charge may be as little as $8-10.
A retailer with a bridal registry noticed the same issue. Many of its customers moved after getting married and did not update their addresses in the system, leading to recurring fees. The organization worked with its bridal registry department to get more information from customers to address this issue.
Visibility into where they were spending unnecessary money armed these organizations with the power to take action. Instead of paying recurring fees, they were able to devote resources into updating incorrect addresses. This behavioral awareness is a substantial benefit to the organization that visibility tools can provide.
Visibility Is Gaining Velocity
The need for visibility and supply chain analytics is here to stay. In the past, there was a misconception that transportation operations could be managed through ERP, internal cost allocation or by allowing category managers to look for opportunities for optimization within their individual budgets. According to a newly released “2014 MHI Annual Industry Report — Innovations that drive supply chains” study from Deloitte and MHI, the supply chain executives they surveyed recognize the importance of analytics and view it as the top strategic priority for supply chains, with nearly 80 percent rating it as “very important” or “moderately important.” Most also plan to increase their investments in this area.
Organizations both large and small are now taking a more holistic approach to managing their transportation networks and implementing multimodal solutions and visibility tools to tie disparate systems together and provide a single view into all aspects of their supply chain.
Visibility extends across the entire organization. By taking a systemic and proactive approach to managing transportation spend, and by making the necessary adjustments within the organization, real cost savings can be achieved.
Larry Lewis is Director, Global Transportation and Shipping Product Marketing, Kewill.
Transportation Costs and Operations
Spiraling fuel prices, labor shortages, increased competition and reduced inventories have increased transportation costs and reduced profits. As a result, shippers are looking for ways to get better visibility into their overall operations. Organizations need to take a holistic approach and implement the right tools to manage their transportation costs to achieve long-term savings. Shippers need to rethink operations and spend management in order to achieve a complete view of the supply chain.
One approach has been to combine system level data into a central repository and apply analytics. Through platform consolidation and the reduction of disparate systems, they are able to improve their data model, metrics, and gain visibility into their spend which provides the opportunity to better manage their transportation operations. In order for this holistic approach to be truly effective, it has to include both operation data along with carrier cost consolidation and invoice aggregation.
The logistics industry has evolved dramatically in recent years, and even the industry terms have begun to change. What used to be called a “warehouse,” is now known as a “delivery center or node” and is often referred to as a “fulfillment center,” aligning with the emerging trend of omni-channel fulfillment. In the past, it was sufficient just to have visibility into the pallet or case level, but shippers are now faced with the issue of “eaches” or “Single line Orders.” With more controlled or regulated and high-value items such as pharmaceuticals, dual use, and electronics being shipped around the world, shippers are now more accountable than ever and need to know the exact location of each item – down to the individual device. They are expected to provide continuous notifications and alerts to the consumer about where each item is in the delivery lifecycle.
In addition to needing visibility into the location of inventory, shippers also need to determine the best mode or method of shipping that inventory, which may now come from a store directly to the consumer, direct from the manufacturer or from a fulfillment center to the purchaser. Omni-channel fulfillment and direct shipping options have created even more factors that need to be taken into consideration and without visibility into all of the data about the various shipping options; it is difficult to make the right decision for the business.
A Traditional Approach to Reduce Transportation Costs
Traditionally, organizations have taken three different approaches to improve their transportation spend. First, in a single carrier environment they would look to shift modality. The shift in modality (from Next Day to Ground) typically reduced the cost of shipping by increasing the delivery time frames. The second approach was to choose an alternative carrier within their network. Companies began looking for alternate carriers to move goods at a reduced price compared to their incumbent carrier. This multi-carrier approach has proven effective as companies were able to compare costs across different carriers and then make their selection based on time in transit and/or total cost. Lastly, companies would look at the distribution of shipments to determine if they were being shipped from the optimal location, i.e. fulfillment center, store, etc. in attempt to get closer to the customer. This approach was the beginning of the omni-channel fulfillment model and has resulted in the need to better manage the Operation and the total cost of the goods being shipped.
Many organizations today are looking closely at their transportation networks and seeking alternate carriers that can offer the same services at reduced costs. One trend that is continuing to gain momentum is that companies are choosing regional carriers as an alternative to the traditional tier one carriers to provide next day ground services at a significant savings compared to next day air. By adding additional carriers to their existing networks, they are able to look at shifts in modality and select different carriers and services for a lower price and in some cases shorter delivery cycles.
Companies are now entertaining a fourth option: direct dispatch or drop ship, where goods are being shipped directly from the manufacturer to the consumer with merge in transit components to complete the fulfillment process. Since not all of the orders or line items are sourced from one supplier, several suppliers or LSPs may be involved to complete a single order.
Visibility Equals Profitability
Advancements in technology have created new opportunities for organizations to make more informed decisions about their shipping operations, in order to improve their bottom line. Visibility into transportation spend provides the information organizations need to choose the right carriers and shipping options.
Some organizations believe they have sufficient visibility into their operations. They may look on a weekly basis at an exception management process around cost allocation in order to determine where their resources are going. But, these weekly snapshots only provide a fraction of the information that a real-time visibility solution can.
Carrier costs are a major area where organizations often inadvertently overspend. For example, many organizations only look into carrier costs when there is a variance, and they might not be aware of the daily choices that impact their bottom line. A visibility tool can provide data visualizations and even automatic alerts, dashboards and KPIs. This enables the organization to be much more proactive in terms of examining spend, and to therefore be more strategic in carrier selection. Visibility can also provide a competitive advantage when renegotiating rates and terms with carriers.
A real-time snapshot of transportation spending can go a long way in helping the organization to adjust its operations. This financial view of the network can then prompt an analysis of spend from an operational level, leading the organization to make adjustments to streamline and save money.
Another area in which organizations tend to over-spend is on non-discounted services such as same day couriers and next day early morning shipments. Often, the customer is not available to sign for the item and may actually need to call for pickup. By stepping back and taking a look at their shipping needs, organizations may find that the customer would be just as happy with two-day shipping, which would provide a significant cost savings.
Visibility in the Real World
One company decided to turn to a visibility solution to get a better understanding of its transportation operations, which led to significant savings. It examined trends by ZIP Code to see what regions it was shipping to, and found that many items were being shipped to the same ZIP Code in which the organization was headquartered. By digging into the data a little more, the organization found that it was actually shipping items out of the building and then back in, rather than using the internal mail system. It was able to make a large cost reduction in its overall transportation budget just by eliminating these in-building shipments.
By implementing a visibility solution, another global organization found that it was spending $50K a year in address correction fees. Many organizations focus on reducing freight costs (i.e. envelopes and packages), but they do not think to look at miscellaneous or accessorial fees, such as address correction or residential fees. These fees can actually cost 100% more than the total freight charge. An address correction fee, for example, can cost $10 where the total freight charge may be as little as $8-10.
A retailer with a bridal registry noticed the same issue. Many of its customers moved after getting married and did not update their addresses in the system, leading to recurring fees. The organization worked with its bridal registry department to get more information from customers to address this issue.
Visibility into where they were spending unnecessary money armed these organizations with the power to take action. Instead of paying recurring fees, they were able to devote resources into updating incorrect addresses. This behavioral awareness is a substantial benefit to the organization that visibility tools can provide.
Visibility Is Gaining Velocity
The need for visibility and supply chain analytics is here to stay. In the past, there was a misconception that transportation operations could be managed through ERP, internal cost allocation or by allowing category managers to look for opportunities for optimization within their individual budgets. According to a newly released “2014 MHI Annual Industry Report — Innovations that drive supply chains” study from Deloitte and MHI, the supply chain executives they surveyed recognize the importance of analytics and view it as the top strategic priority for supply chains, with nearly 80 percent rating it as “very important” or “moderately important.” Most also plan to increase their investments in this area.
Organizations both large and small are now taking a more holistic approach to managing their transportation networks and implementing multimodal solutions and visibility tools to tie disparate systems together and provide a single view into all aspects of their supply chain.
Visibility extends across the entire organization. By taking a systemic and proactive approach to managing transportation spend, and by making the necessary adjustments within the organization, real cost savings can be achieved.
Larry Lewis is Director, Global Transportation and Shipping Product Marketing, Kewill.
