International and domestic logistics operations are often managed by separate departments using different logistics management technology.
This antiquated approach creates a critical disconnect in the supply chain between product sources and stores.
Forward-thinking companies – led by the retail and consumer goods industries – are now seeking solutions to merge disparate operations through transportation management platforms. However, these same companies have discovered numerous technological and structural hurdles, as well as potential benefits, as these initiatives take shape.
There are good reasons why fully integrated logistics platforms are a rare occurrence. International and domestic transportation systems grew up separately. There are few technology providers in the market that have functionality for both activities, let alone do either particularly well.
Now that systems have matured it should no longer be impossible to integrate international and domestic operations. Most new systems are built on Web-based platforms using service-oriented architecture to let components talk to each other across applications, departments, and companies. Plus many IT providers that were known exclusively for their domestic platforms now have international capabilities and vice-versa.
“The offering that’s out there is typically 75 percent of the way there,” said Nikki Baird, managing partner at RSR Research. “There are a lot of disparate parts and pieces and companies rely on a lot of third-party systems for data. That’s where it gets challenging, bringing this all together to get a clear picture of what you’re looking at.”
While this challenge isn’t completely resolved, bigger issues have since been found in the supply chain organization itself.
“Many companies are not internally structured to have a single view of logistics,” said Fabrizio Brasca, vice president of global logistics for JDA Software. This prevents some companies from bridging the product source-to-store shelf gap.
Brasca sees the focus of many retailers shift to end-to-end planning and execution from the origin to distribution center or potentially directly to the store. This hinges on the technology’s ability to plan all of a company’s moves end to end, while providing the agility to re-route or divert goods in transit.
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| “There are a lot of disparate parts and pieces and companies rely on a lot of third-party systems for data. That’s where it gets challenging.” |
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Nikki Baird,
managing partner, RSR Research
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An enabler of this convergence may come from an unlikely source. Mandates from regulatory agencies in the European Union and United States have forced companies to keep track of more supply chain data. Many shippers apply the highest standards to their supply chain to manage these compliance demands uniformly on a global basis, which has a beneficial side effect — a wealth of data at their fingertips.
“You can be responsive to inventory movement if you are aware of it,” said Tom Kozenski, vice president of product strategy at RedPrairie. “Suppliers get better when they see your demand accurately, and purchasing departments get better and more efficient when they can see what suppliers are doing.”
This kind of transparency also links the costs of multimodal transportation with the final value of the goods. Previously merchants at the end of the supply chain could not account for transportation costs, but visibility allows determination of cost and profit throughout the process.
“This seems counterintuitive but the reality is some will see a benefit from cost-effectively limiting opportunities and telling a merchant they can’t do something if it will eat up the profit margin,” Baird said.
For many this is uncharted territory. Companies considering unifying their supply chains need to make a strong case for short-term return on investment to keep chief executives happy and ensure funding throughout the life of the project. A good start is critical to this success.
“The first step should always be design and modeling analysis,” Brasca said. Comprehensive analysis from both an aggregated supply chain and granular transportation perspective allows companies to flesh out and quantify the value of potential strategies.
RedPrairie’s Kozenski believes the key for companies is to determine what collaborative tools are needed and what business processes to put in place. “If they can figure all that out and document it, they’re half way home to being successful,” he said.
“Understanding what kind of data you have and the quality of it are also important first steps,” Baird added, cautioning that a company shouldn’t necessarily view gaps in data as barriers to starting the process. Gaps will exist in many systems no matter what and companies should see a return on an end-to-end solution long before all the gaps are filled.
New systems must also communicate across partners and it’s nearly impossible for many to achieve this with disparate internal systems. Accessing data and managing its movements through the supply chain are critical requirements not all existing infrastructure can meet. Thus, some are turning to the cloud.
Cloud technology providers can store data and make it available across an entire network, delivering visibility. These platforms allow information to be shared node to node in virtually real-time, because they’re using a single database while limiting security concerns.
Retailers are looking to deploy unified transportation management platforms and these systems will soon be able to look at inventory across warehouses and even in transit, which will further impact how they buy product and fill orders.