ShipmentOptimizer allows shippers to account for variables in complex supply chains.
By Eric Johnson
In mid-February, Singapore-based APL Logistics unveiled a new product aimed at revamping the way large shippers handle their overall supply chain planning.
The product, which APL Logistics dubs ShipmentOptimizer, is notable not just for what it does, but for how it’s delivered, and who’s delivering it.
“We identified a need in the market three to four years ago,” Thad Bedard, APL Logistics’ director of strategic account management, told American Shipper. “We didn’t see a tool that would truly optimize international shipments.”
Bedard, who is based in Portland, Ore., looks after some of APL Logistics’ largest global apparel and retail shippers.
APL Logistics tested the product last year with a pilot customer whose supply chain was more complex than most, the idea being to test the bounds of the system.
“The pilot customer was probably one of the most complex in terms of their business rules,” Bedard said. “If we could get it to work for them, we could get it to work for anybody.”
The background to the development of the new product goes like this, according to company spokesman Lur Boon Lee. When APL Logistics conceptualized ShipmentOptimizer, there was no pre-existing optimization software in the market that could cope with the complexities of international shipments and deliver against key transportation objectives concurrently.
As a result, APL Logistics bought Oracle Transportation Management software, which, like other popular transportation management systems, was primarily used for domestic transportation. The company then worked with Oracle to re-work the tool’s underlying algorithms.
“Based on APL Logistics’ deep expertise and understanding of international shippers’ supply chain needs, we customized the tool to accommodate planning and optimization of end-to-end international, multimodal shipments for the first time,” Lur said.
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| “The pilot customer was probably one of the most complex in terms of their business rules. If we could get it to work for them, we could get it to work for anybody.” |
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Thad Bedard
director of strategic
account management, APL Logistics
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The “magic serum” behind the ShipmentOptimizer is in blending constrained-based planning logic with schedule-aware container optimization packing algorithm and column generation-solving algorithm. The latter is a mathematical way for problems with multiple variables to be solved in a non-linear way.
“Domestic transportation applications use linear models,” Bedard said. “There might be five variables, and a linear model will look at each one in sequence. That works okay if you have a limited amount of scenarios. A truckload from L.A. to Denver — it’s complex, but not that complex.”
The complexity of an international shipment — taking into account multiple modes, numerous potential routes, and various governmental agencies that may or may not touch that shipment — creates a far greater pot of variables.
For instance, a container moving from Vietnam to the United States generally contains multiple ocean legs. But there could be various permutations of suitable transshipment options. For example, the container could go direct, or it could tranship via Singapore, or Hong Kong. Multiply that by the different origin-destination port-pair options, and those variables increase quickly.
Layer on top of that the different U.S. domestic modes (rail or truck, 40-foot intermodal box versus transload to a 53-foot container) and potential routes, and now you have a lot of potential scenarios to process. And inside that container, various constituent parts of the shipment will be governed by different business rules, creating a vast number of scenarios, Bedard explained.
“The linear model will take too long because of the complexity of rules that shippers put on these shipments,” he said. “No one has ever used this particular algorithm for this problem. People have tried to use other optimization tools, but with the linear model, it chokes on these many variables.”
That’s where column generation, which is used in grocery pricing and airline seat optimization, comes in.
“Column generation carves out the scenarios by looking at like characteristics, and focusing on that,” Bedard said. “It could be the arrival date, it could be the kind of product — either the color or the size. If you think about a big multinational retailer, the holding company brand could have seven brands underneath it. There are sometimes complex rules governing which brands can co-load together. Column generation is not new. But because of the way we’ve applied it in ShipmentOptimizer, optimization performance improves dramatically.”
All three of APL Logistics’ current rollout customers for the ShipmentOptimizer are apparel companies, and Bedard said the fashion sector lends itself to the product.
“This is a meaty, powerful tool,” he said. “We’re looking at customers who have big, complex global networks. It takes some resources to get it up and running, so it works best when it has a big task to undertake.”
The main advantage is the speed derived from automating planning processes that are normally undertaken in a longer or more manual way. Bedard said business rules can be tweaked within 24 hours “without a lot of manual intervention. Without rules, it can take weeks, sending emails out with documentation with the rules, then manually checking that the rules are being followed.”
Tweaked business rules can be reflected digitally when the system next runs its daily auto-update process, so it can take less than 24 hours to get 100 percent compliance globally. This speed becomes increasingly critical as markets become more uncertain — sourcing locations become compromised, ports get congested, a strike chokes a terminal, service providers alter their rotations.
“It’s multi-modal, and end-to-end, and once you take the business rules, and routes, and layer rates on that, it gets really interesting,” Bedard said.
ShipmentOptimizer is meant to complement a transportation management system. Whereas a TMS is execution-based, the APL Logistics product proposes shipments plans that a TMS carries out. It can be integrated into any TMS on the market.
As for how the product is offered, Bedard said it is a managed hosting service that APL Logistics offers to customers.
“Typically, APL Logistics would set up a customized platform in a server dedicated to the customer’s global supply chain, integrate it with the customer’s other pre-existing systems (like TMS, warehouse management systems, and order management systems), train users including vendors and other logistics service providers, then manage and maintain the system,” he said.
“Customers would usually pay us a management fee for the core international freight management service we provide, along with whatever applications in APL Logistics’ Supply Chain Technology suite we deploy for the customer as part of our differentiated overall offering — ShipmentOptimizer included.”
The notable bit about the delivery model is that APL Logistics, a full-service third party logistics company, is offering a customized version of Oracle Transportation Management, something typically seen from consulting companies. APL Logistics is essentially offering the OTM tools in conjunction with its 3PL managed services.
“We are not a software company and so we don’t sell software on a standalone basis,” Bedard said.