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Contents 1
Logistics 2
Visibility into movement 6
Informationsystems in logistics 6
Literature 12
Logistics
After the terrorist attacks on September 11, automotivemanufacturing came to a temporary halt at the General Motors Corp. and FordMotor Co. pickup truck factories in Ontario, Canada. Why? Just-in-time (JIT)deliveries were delayed at the Canadian border. Delays at the Mexican bordercaused Ford to also shorten production for about two days at two of its Mexicanassembly plants.
While the Wall Street Journal and Reuters packaged thisnews in articles about the need to rethink JIT manufacturing, there's anotherslant to consider: Logistics matters. According to AMR Research (Boston, MA),organizations spend 11% of their revenues on logistics, yet it is one of thelast core business processes to be automated. More often than not, logistics isan in-house, manual process involving phone, paper, email, fax, and home-growninventory, warehouse, and transportation management systems.
Don't make the mistake of thinking logistics is only aboutaccurately storing and moving inventory. It's also knowing where your stuff isthroughout the supply chain, and finding alternative shipping modes and routesto quickly get around delayed and irregular shipments. And as with so much elsein 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, andcontrols the efficient, effective flow and storage of goods, services, andrelated information from the point of origin to the point of consumption inorder 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 consumerresponse, and, mostly in manufacturing industries, JIT and vendor-managedinventory. The common theme in all of these is to create some sort of smoothand fast pipeline from material source (supplier) to material consumption(customer), while responding to the real-time dynamics that occur from changingcustomer requirements, routings, transportation modes, and international traderequirements, to name a few constraints.
Two characteristics separate logistics software from manyother 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 acolossal amount of data at a far more granular level than ERP.
Modern major logistics execution systems include a broadarray of applications and modules. The major ones are as follows:
Inventory management systems (IMS) ensure the availabilityof products by linking customer demands, product reservation, and allocationprocesses.
Order management systems (OMS) provide real-time visibilityinto the entire order lifecycle, ensuring against lost, delayed, or corruptedorders. For example, the OMS from Provia Software Inc. (Grand Rapids, MD)manages products, orders, shipments, and delivery information by customer. Italso produces the appropriate billing materials, as well as communicatesdirectly with customers and suppliers through electronic data interchange(EDI), Internet/intranet, and other communications modes. It controls billingfor all product-handling costs (such as receiving, storage, and labeling), andapplies it to the specific customer based on prenegotiated agreements. Plus, itcan process complex orders that require future shipment or staggered deliverydates, multiple consignee delivery, or back-ordered product.
Warehouse management systems (WMS) tell you in real timewhat you have and where your inventory is within whatever it is you're callinga warehouse. At the very least, the software system manages receiving, storing,picking, and shipping product. It is usually integrated into a plethora ofautomation, including bar code and radio frequency (RF) technology,pick-to-lite systems, ERP, and EDI. Typical WMS verify barcoded or radio-taggedincoming inventory against purchase orders downloaded from ERP, EDI, or OMS.The system will also tell people what warehouse location to store thatmaterial, often through printed storage/put-away lists or through RF terminalson forklifts. Likewise, it will prioritize picking operations and direct operatorswhen and where to pick. In both the put away and pick, the WMS will update itsinventory database as required. Additionally, leading WMS might perform otherfunctions, including order management, work-load management and labor planning,cross docking, replenish primary pick locations, cycle counting, supplierreturn/stock rotation, performance reporting, proof of delivery, compliancelabeling, and manage productivity-based employee payments.
Transportation management systems (TMS) focus on freightmovements and physical distribution. The Web and workflow-based transportationapplication from Arzoon, Inc. (San Carlos, CA), for example, helps companiesdetermine the best routing and transportation mode for their products, helpsselect carriers based on service levels and rates, creates a delivery schedule,determines rates, and optimizes the total shipping costs against service anddelivery constraints, and international trade requirements. A separate Arzoonapplication for global trade contains a centralized rules database with traderegulations, tariffs, and duties for nearly two dozen countries. Theapplication automates the proper handling of the proper trade documents byemailing them to the proper officials.
TMS will automatically send shipping notices, manifests,carrier information, and other updates to all interested parties in the supplychain as required, as well as receive requests for updates about the status ofshipments. TMS also often monitor and initiate freight payments, as well asmonitor reverse logistics, and domestic and international shipping.
Yard management systems (YMS), such as from Provia, extendthe warehouse beyond the physical four walls of the plant by controlling theactivities of trailers on the dock and in the yard to the point of schedulingboth inbound and outbound trucks, In so doing, it effectively expands theamount of storage locations and lets you cross dock using partial or entiretrucks.
Third-party logistics (3PL) providers are not a technology,per se, but they are a major element in logistics. According to a recent 3PLsurvey by Cap Gemini Ernst & Young (Detroit, MI), the primary servicescontracted from 3PL providers include inbound and outbound transportation,cross-docking, warehousing, freight bill auditing/ payment, and freightconsolidation and distribution. But this set of services is changing. “3PLproviders should now focus on capable information technology, effectivemanagement and relationship processes, global responsiveness, and deliver-ingcomprehensive, integrated solutions that create real supply chain savings,”writes John Langley, Jr., survey author and The Logistics Institute professorat the Georgia Institute of Technology.
Implementing logistics applications are quick—less than sixmonths is typical. Also quick is their return on investment (ROI), which isoften well within 18 months. ROI is based on several measures. According toSupply Solutions, Inc. (Southfield, MI), a supply chain management systemsprovider, these measures include 30-70% inventory reductions (work-in-progressand in-transit), slashed administrative costs, improved manufacturingefficiency, the elimination of premium shipping and part shortages, predictableproduction requirements, precise production scheduling, accurate productionorders, significantly reduced “just-in-case” and excess inventory, improved useof limited resources, lower labor requirements, reduced overtime costs, reducedpremium freight charges, and peace of mind. Add to that such items as fasterorder velocity and order fulfillment response times, more inventory turns, andless expediting in manufacturing, warehousing, and shipping, to name a fewareas.
According to Deby Veneziale, Chief Product Officer forArzoon, the company's logistics resource management software can deliver“hard-dollar savings of 5% to 15% of logistics costs by minimizing mavericktransportation spending by suppliers and employees, optimizing carriers andtransportation modes, reducing exposure to customs compliance liability, andeliminating many manual processes.”
Visibilityinto movement
The goal, of course, is visibility in all areas oflogistics. “Customers are demanding visibility into the status of theirorders—when it's going to ship and when it leaves the door—they want a copy ofthe bill of lading and the packing list, and they want to go onto the Internetand click on a parcel number to know immediately what the status of theshipment 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 problemis beginning to brew before being blind sided.
Interestingly, logistics is probably one problem wherethrowing technology at it is good. “Just outsourcing the physical processes oflogistics is not going to give you the huge hits in logistics savings,” saysVeneziale. “To move shipments and do it right, you've got to share [hugeamounts of] logistics information with the right players at the right time, letcertain players execute on that information, allow other players just to viewthat information, and let other players set up the business rules.
“Till now, what was always lacking was the technology andautomated workflows to bring that information to the players so they could alldo the right thing—and the same thing. Companies did it with people in the pastbecause they didn't have the technology to do it. Today the technology exists.”Information systems inlogistics
Automatic vehicle location (AVL) archiving systems bring avariety of benefits to companies that operate trucking fleets. Businesses withother types of vehicles like buses, couriers, ambulances and many othersbenefit 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 advisableto identify the vendor with the best overall combination of leading-edgetechnology, price and fleet management expertise. While it may seem obvious,the ultimate purchase decision should be based not on price alone but valuedelivered.
If it is determined that two vendors offer similarcapabilities that deliver approximately the same value, emphasis can then shiftto price making for an easier purchase decision. Executives with responsibilityfor purchasing an AVL system should be confident they are selecting the vendormost capable of solving their particular needs. However functionality and costvary considerably one vendor to another. An automated DOT driver logbook is agood example of functionality offered by relatively few vendors.
Know which questions to ask and how precisely your companywill benefit. Involve the right departments in the evaluation process. Besidesexecutive management, appropriate personnel representing financial control,operations and safety and information technology should participate in theselection process.
A determination needs to be made whether passive orreal-time tracking makes sense for your company. A sensible approach for manyfirst-time AVL buyers is to install a passive system that can be inexpensivelyupgraded to a real-time system. If a passive system is purchased without aconvertibility feature, the investment will be lost if the decision to goreal-time is made.
GATCO Technologies is one of a few companies with a passivesystem that can be upgraded to real-time (they also provide an automated DOTdriver logbook). Qualcomm’s system has a DOT driver logbook too.
What key benefits do real-time interactive AVL systemsbring?
Today, demanding customers almost expect to know wheretheir carriers’ vehicles are throughout the course of delivery. Savvy fleetoperators exploit real-timing tracking by granting their customers access tothe delivery status of their vehicles. This unburdens fleet personnel fromhaving to track down the status of vehicles in transit so the morale andproductivity of fleet operators is improved and customers are placated.
Some companies like to monitor the mechanical performanceand security of their vehicles in transit. Emergency alerts indicatemalfunctioning refrigeration units, lock tampering and other applications thatvary by operation. A comprehensive AVL system includes panic buttonfunctionality for 911 emergencies.
An interactive system is necessary for fleets that utilizedynamic optimization-based vehicle routing and scheduling systems for managingcomplex trucking operations. Sophisticated decision support tools of this kindoptimize assignment of vehicles and outstanding orders in real time taking intoaccount vehicle locations, committed orders, vehicle availability, outstanding ordertime windows and historical demand profiles in regions of delivery.
AVL systems that are capable of reporting the status ofmultiple vehicles simultaneously reduce the cost of picking up inbound freight(backhauling). These systems disclose the closest available truck to the vendorfrom whom goods need to be transported.
Real-time systems can be very affordable if purchased fromcompanies with leading-edge proprietary technologies. For example, GATCOTechnologies has lowered the cost of real-time reporting dramatically. Theyinvented and patented a method of transmitting short bursts of data from movingvehicles 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 evolvethat get the same work done with fewer trucks and drivers when a good planningtool is combined with a good GPS product. Most AVL vendors can tell you exactlywhere your resources are at any time. But by itself, this information does notprovide the means for improving the operation. However when actual performanceis compared against a plan, fleet operators are provided a “road map” forimprovement. GATCO Technologies an AVL provider, teamed up with ParadoxSoftware Company, Inc. a logistics planning software vendor to providesolutions for continuous improvement of logistics systems. Companies using thiscombined technology can expect to reduce the resources they need to transportgoods significantly.
Improved driver performance. Experience shows that oncedrivers know they are being monitored, their driving habits change for thebetter. Improvements are realized through reductions in speed and costly engineidling, elimination of unauthorized routes and stops as well as less time spentat authorized stops.
Compliance. Staying in compliance with regulators is atedious, labor-intensive, costly proposition for many companies. For example,fleet operators whose vehicles travel in multiple states must keep track ofthose miles so the right fuel tax can be paid. At the same time, keeping incompliance with drivers’ hours of service regulations is a top priority. AVLsystems that provide automated and tamper- proof DOT driver logbooks andallocate miles by state without driver participation virtually pay forthemselves 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 safelyas possible. Actual trip data generated by the AVL system can be used todevelop drive and stop standards to develop an incentive pay plan for drivers.
Defending drivers involved in accidents. Incontrovertibletrip data protects drivers who may be wrongly assigned blame in accidents. Forexample, a driver accused of running a stop sign and causing an accident canprove he was stopped at that very stop sign.
Defending against fraudulent claims. Some companies aretargets of fraudulent claims against their vehicles. Trip data can bereconstructed showing a vehicle’s exact location at any time so this can beused to successfully repudiate the “eye witness” testimony of unscrupulouscriminals.
Reduced liability insurance. Monitoring and reducing driverspeed reduces accident probability. Insurance companies look favorably atcompanies that control their drivers’ speed and some offer reductions inliability premiums.
Fuel and maintenance savings. Monitoring and controllingvehicle speed and engine idling reduces fuel consumed and engine wear extendingengine life. The longevity of vehicle components like gearboxes, axles, andbreak liners is extended as well through reduced wear.
Financial analysis and reporting. Actual operational dataproduced by an AVL system can be soundly integrated with financial data foraccurate profit and loss reporting and transportation ratemaking.
A few considerations in selecting the most suitable vendorare these: Decide what functionality is most important to your business andidentify which vendors’ systems are best capable of delivering this. Manylower-priced systems provide vehicle location but do not automatically reportmiles by state and do not have DOT driver log capability. Negotiate withvendors who understand the intricacies of fleet operations. Ideally, the vendorshould have persons on staff who have successfully managed fleet operationsthemselves.
Develop a list of questions: What distinguishes thevendor’s technology? Does the vendor hold patents? How will drivers like thesystem? How much driver interaction is required? Is voice communications neededand does the vendor provide this? Can the system be upgraded from passive tointeractive? How is the quality of the maps and how fast do they load? How fastdoes the system execute reports? Does reporting capability exist that comparesactual with planned data? What kind of training and customer support isaccessible? What maintenance support (hardware and software) is offered?
Develop a vendor “short” list:
Just because a vendor’s name is well known does notnecessarily mean their product (or price) is best for your company. Take intoaccount the total cost of the system: hardware, software licensing,installation, maintenance, upgrades and communications charges. It is notuncommon that vendors sell hardware relatively inexpensively but chargeexpensive (and recurring) messaging or reporting charges for their systems. Itis unwise however, to purchase a system of this kind based on price alone. Theultimate purchase decision should be based on value delivered.
Once a “short” list of vendors is identified, there can beno substitute for testing the vendor’s system on your fleet in yourenvironment. Calculate a return on investment analysis. A system that providesthe right functionality should rapidly pay for itself in well under a year.
In the ideal relationship, fleet operators and AVL vendorsfunction as partners. Find a provider that is committed to working with you.The vendor should be willing to customize its reports specific to your businessand make modifications to its system if necessary. Finding the best AVL vendoris not easy. A better understanding of what you need and asking the rightquestions makes it easier. Companies that operate vehicles face enormouspressure to control their costs, comply with governmental regulators and tocontinually enhance the future performance of their fleet. AVL technology helpsin so many ways it should not be overlooked.
Literature
1. http://en.wikipedia.org/wiki/Logistics
2. Creveld van, Martin. 1977.Supplying War: Logistics from Wallenstein to Patton. Cambridge: CambridgeUniversity Press
3. Engels, Donald W. 2006.Alexander the Great and the Logistics of the Macedonian Army. Berkeley: Universityof California Press
4. Roth, Jonathan P. 2003.Logistics of the Roman Army at War (264 B.C. — A.D. 235). Leiden/Boston/Köln:Brill