Planning And Implementing The Right Technology For Logistics
The importance of the business processes of logistics—the sourcing, moving, and distributing of goods—have increased significantly over the past several years. No longer are these processes overlooked or assumed to be working satisfactorily, as companies are operating supply chains around the world. With customers wanting and needing their products faster, better, and cheaper—and supply chains increasing in scale and complexity—more executives are recognizing logistics as essential for profitable growth.
Logistics has also increased in importance as the risks of supply chain disruptions have become more visible. Severe weather events, labor actions, and terrorism concerns have brought logistics to the front pages and tops of C-level agendas. Late deliveries, missing products, or shortages impact not only other businesses but many consumers.
With this increasing significance and global scale, companies are seeing the need for improved technology. The tracking and tracing of goods moving around the world is critical, as are the effective planning and performing of supply chains from end-to-end (from suppliers to end users or consumers). Many companies ship and receive literally thousands of items each week. The costs of freight to the average company can amount to 20% or more of its revenues; and, the performance of its logistics processes can impact 20% or more of its sales.
The essential technologies for logistics fall into two major categories: planning and execution. Below are some perspectives and observations for each of these areas:
The planning of logistics is essential, as it is largely a physical set of processes that require infrastructure and capital assets to carry out. Transportation capacity must be planned and scheduled, and the same for facilities. Not planning for the arrival or departure of containers, pallets, or packages, can disrupt operations and businesses in serious ways.
Logistics planning technology is available as a component of ERP systems, as well as in separate applications. Whether or not separate planning software is needed depends on the volumes, complexities, and business requirements of the particular company.
Logistics planning applications address several important questions, such as:
• How much product and volume is needed and expected over the next year, and the next 3-4 months?
• Where is the product and volume expected from, and where will it be received (inbound)?
• Where will it be shipped to and from (outbound)?
• How much will be stored and distributed, and where (inventories)?
• How will capacities be impacted?
Obviously, logistics planning software must integrate with other systems, including those that support sales, production, procurement, and finance. Integrated Business Planning (IBP), if done correctly, will drive the logistics plans.
Software and applications that support the execution of logistics are essential, primarily because even the best of plans are never without forecasted errors, or unexpected disruptions. The flows of goods (goods in motion) are subjected to many touchpoints (including multiple trading partners), as well as other opportunities for delays, errors, or even theft.
The number one need expressed for the past several years has been for increased visibility of goods in motion (i.e., where are my shipments?). While there have been substantial improvements in technology for this goal, there remains gaps in the global chains that have as many as 5-6 different entities handle the freight—freight forwarders, ports, carriers, logistics service providers, suppliers, and retailers or other customers.
Beyond visibility, there are other critical business requirements for logistics technologies. These can be categorized within three logistics operations:
Transportation Management Systems (TMS) support the planning of shipments, their routing and scheduling, total costing, freight bills and audits, and all related moves of freight. As the largest spend of most any company’s logistics budget, transportation must be planned and managed totally and carefully.
Warehouse Management Systems (WMS) support the receipt, storage, and distribution of all inventories and products that are to be handled at a logistics facility.
The efficient operation of each logistics facility is essential for not only total cost management, but also for the distribution and fulfillment of “perfect orders,” which is the primary operations objective.
This category also includes, for the fulfillment of online orders, the Distributed Order Management (DOM) process, which supports the allocation of inventories and/or stocks to the various facilities (and/or stores). In a multichannel operation with sales channels that also include online or mobile ordering of products, the DOM must determine from where, and how, to fulfill the customers’ orders.
Lastly, the logistics facilities often need to control the operations of material handling equipment, which provides for automation of various operational functions. The Warehouse Control System (WCS) supports the integrated operation of all such equipment.
3. Total Logistics:
This category includes the balance of the integrated logistics execution requirements. It covers the complete flows of goods (visibility), the execution of the logistics operations (deliveries and customer services), and the performance of the processes (dashboards and/or control towers). These special applications are not found in most ERP systems, and are fundamental to effective logistics operations.
Logistics technologies are investments that can produce tangible ROI, inasmuch as they are designed for decision support of significant expenses. They are also based on tangible topics, such as the flows of goods, the storage and retrieval of customer goods, and the delivery and fulfillment of customer orders. The development of sound and compelling business cases is facilitated by the ability to measure and track benefits directly to operations.
The critical success factor, however, is the ability of the organization to make effective use of the technologies. The effective use of change management methods, along with the adoption of leading practices, often makes the difference in whether the planned ROI and payback are realized. It is not enough to expect technologies to improve logistics performance; it requires people, processes, and technologies to function as “one” for true logistics success.
Media Partner: CIO Review | B2B Online 2020
Press Release: CIOReview | Newgioco