Supply chain best practices preach the benefits of end-to-end, integrated business processes. We regularly hear analysts and industry experts tell companies, “Your supply chain is fragmented and you must connect it.” And while some traditionally silo-based groups are doing better at sharing information and connecting their supply chain, most organizations are not planning and executing across functional domains to create a truly interconnected and collaborative supply chain.
Demand planning, transportation planning, and execution are a prime example. While companies are effectively optimizing these functional areas independently, they are rarely considering them together to better match supply with demand. Transportation plans are not considering the ever-changing demand pictures, while demand and transportation planning are not in concert with execution. As a result of using stale demand, transportation plans often have products being sent to the places where they are not needed the most. And we all know that plans become irrelevant once “real world” execution activities occur. This is especially true for fast moving consumer goods that are heavily promoted, as their demand pictures change drastically over a short period of time. This disconnection translates into missed opportunities.
This disconnect stems, in part, from technologies that are not integrated and don’t operate in real time. Planning applications that run in batch are separate from execution systems. The information that was used to create the plan is typically 18 or more hours old, and by the time the plan is executed, the landscape has inevitably changed. Supply chains operate in real time, and technology is not keeping up.
So what is needed to support the end-to end process of tying demand to transportation?
- Real time information about demand. In the retail world, some companies are able to publish their POS up to four times per day. Understanding the latest demand is a key starting point.
- Visibility to supply. It is critical to understand the inventory positions in the value chain. This means knowing what is in stores, distribution centers, in transit, on containers, etc.
- Inbound logistics tied to outbound logistics processes. By knowing the latest demand, and where supply is located, it is important to then tie together what you have coming in with what is going out. Synchronization of the inbound and outbound logistics processes is critical to be able to respond to supply-demand match situations.
- Last minute reallocation of supply to demand. Integrating logistics into the order allocation process can drastically improve same-store sales as well as minimize stock outs because products can be proactively re-allocated based on a real-time supply and demand snapshot. This is especially important in a global logistics environment where long product lead times are the norm and demand has typically changed by the time a product arrives at its destination port.
- Planning tied to execution. Planning and execution must be integrated to create a true ‘sense and respond’ environment. In logistics, this is vital because as common events occur – weather interruptions, labor issues, or traffic delays – the planning system must sense the impact these ‘unforeseen events’ will have and respond with a new executable plan. The technology to support this must be able to capture real time information and incrementally re-plan only the impacted portion of the supply chain based on the latest information.
- A technology solution offered on a single platform that supports end-to-end, multi-party processes to enable the above. Without a technology solution to support the dynamic nature of the information, it would be manually impossible to effectively manage demand and transportation together. This is especially true in a global logistics environment.
- For global logistics needs, direct relationships with physical providers on the above mentioned network to offer freight forwarding, ocean freight, etc. tied directly to carrier dispatching for immediate response and real time track and trace.
Companies that have successfully tied demand to their transportation planning and execution processes have been rewarded with reduced stock outs, increased sales (especially during promotional periods), along with decreased inventory. Additionally, they have reduced overhead costs by eliminating inefficient manual processes attributed to information breakdowns within and across the supply chain.
Greg Brady is Founder, CEO, and Head of Research and Development at One Network Enterprises. Mr. Brady founded the company in 2002 and is a renowned supply chain and technology visionary. Before that, he led i2 Technologies to high growth and market leadership for seven years, both as CEO and head of worldwide operations. Previously, Brady was vice president of worldwide applications marketing for Oracle and held positions at J.D. Edwards and at McCormack and Dodge. He holds a Bachelor of Science from Indiana University.