On Second Thought
with John Tabor
Supply chain risk has become a hot topic lately with concerns about rising transportation costs, regulations, and capacity issues. As I write this column in early December the Los Angeles-Long Beach port disruption has already dramatically affected this year’s holiday selling season. Tens of thousands of containers sit idle on ships, in ports or transportation providers’ yards loaded with inventory that was supposed to already be on store shelves.
As the retail industry increases focus on omni-channel sales, it is now more important than ever to know where your goods are at any given time. Why would you risk relying on someone else to provide you updates on your inventory’s location when you could monitor its location via GPS to within 50 feet in real-time? The reason you can’t is because existing technology has not been fully deployed to do so in this capacity.
GPS technology is no longer a staple to prevent losses, it has become one of the many tools used to better manage your assets in motion. Merchant teams can now watch their items in transit and validate lead times which can promote changes in safety stock and in turn lead to improved EOQ (economic order quantity). When precisely executed, it can increase turns and prevent margin erosion.
In trucking today, you basically have a virtual and dynamic yard management system without boundaries. The ability to understand the type of trailer/tractor combinations to make decisions in real-time based on their location can be the difference between deadheading and a sales uptick.
Under current U.S. Food and Drug Administration and other global governmental regulations, we as shippers need to ensure our supply chains are compliant. Good Distribution Practices (GDP) is being implemented throughout the global pharma supply chain and the Food Safety Modernization Act (FSMA) is changing the landscape of food transport and storage.
FSMA, the most sweeping reform of U.S. food safety laws in more than 70 years, was signed into law by President Obama on Jan. 4, 2011. It aims to ensure the nation’s food supply is safe by shifting the focus from responding to contamination to preventing it. The law requires individuals who transport food with time/temperature controls to ensure the maintenance of the transportation cold chain during operations. This includes pre-cooling the vehicle, loading and unloading operations, and the transportation. These laws are expected to be enforced this year.
For years pharmaceutical companies have used temperature data loggers to document various conditions of the product during transport and in-transit storage. As technology changes GPS devices are becoming a popular tool to monitor various environmental conditions during transport. Use of these new GPS technologies provide real-time data not only for monitoring security and location within the supply chain, but also allow instant decisions to recover product falling out of predetermined conditions. GPS technologies even reduce labor costs by automating real-time data via email or SMS, reduce possibilities of errors, and expedite product delivery to market.
Here’s an example of how this technology is being used in the food industry today: A company produces a type of peanut butter spread in Canada. The product will spoil (the oil may separate from the rest of the ingredients) if it exceeds a temperature of 85 degrees Fahrenheit. Its distribution model requires the use of full truckloads from Canada to Chicago. Once in Chicago, the product is broken into smaller shipments and sent to warehouses and distribution centers across the country, eventually ending up on a store shelf near you. The company occasionally experienced large spikes in the number of jars that were returned due to spoilage. Before GPS technology, the company could not hold anyone accountable for the spoilage because it touched too many hands. The company now embeds portable GPS devices into its product cases and sets them up to both email and text message the traffic manager as soon as the device senses that it’s nearing the 85-degree-temperature threshold. Now the manager can instantly zoom onto the exact location of the product and contact the warehouse or trucking company hauling the spread to advise them that they risk product spoilage.
One of the most effective uses of these new tracking technologies is enhancing security, product integrity and inventory management. One of these devices operated within a robust software platform can provide segregated information to users based on their job descriptions. Security personnel assign routes and stops, allowing alarms to be generated if the product moves outside these predetermined routes. Meanwhile, quality assurance staff manages product integrity through predetermined ranges for environmental conditions such a temperature, humidity, light exposure and vibration. Supply chain and inventory management staff have real-time visibility to the product in the supply chain and make adjustments to ordering and inventory levels caused by delays.
As global regulations mature and become fully implemented, we as shippers are responsible to ensure any company involved in our supply chain is compliant with those regulations. This compliance must be implemented and understood top-down and bottom-up within a company. As shippers, it’s important to collaborate internally as to the most effective ways to use new technologies, as well as externally when auditing our supply chain vendors for regulatory compliance.
I personally look forward to the aggregation of GPS data, as it will eventually be used as one of the primary drivers for enhanced risk mitigation strategies within our mutual and intertwined supply chains.
Tabor is a 25-year loss prevention expert and principal of All States Supply Chain, a supply chain security and logistics consulting firm. He can be reached by email.
This column was published in the January 2015 issue of American Shipper.