Supply chain professionals have said for years that integrated planning and execution is the Holy Grail for market responsiveness and operational efficiency. But often they think of this as integrating demand planning with supply chain execution. However, additional and more immediate benefits can be achieved by integrating transportation planning with warehouse management. This allows both systems to understand the constraints under which each function operates so that plans are not created that cannot be executed within the needed timeframes.
To learn more about the specific benefits of constraint-based transportation planning and warehouse management, Real Results contributor Jim LeTart turned to a panel of industry experts for their insights. Panel members included ARC Advisory Group’s Steve Banker and JDA Software’s Fabrizio Brasca and Tom Kozenski.
The success of transportation plans and warehouse execution are often limited because the transportation management system (TMS) and warehouse management system (WMS) don’t readily interact with each other. How can companies integrate WMS with TMS to gain full visibility into constraints in both areas?
Banker: A yard management system (YMS), which includes the dock door scheduling functionality, has historically been the system most helpful in coordinating the activities of both the transportation and warehousing departments. In some suppliers’ systems, YMS was part of the WMS; in other suppliers’ systems, it was part of the TMS. Having managers from both departments have visibility into dock door schedules, however, is really just a starting point. Better visibility would occur if both transportation and warehousing system users can get the appropriate alerts from each other’s systems. For a warehouse manager, this might mean that the TMS sends an alert when a truck is delayed and will not arrive at a dock at the expected time. For a transportation manager, it might mean being alerted that inventory that was thought to be ready to ship, is not ready — perhaps because of spoilage or breakage. The visibility is improved if there is common master data and user interfaces.
Kozenski: I agree with Steve that it needs to be more of an iterative process than just visibility into constraints. I like to refer to it as “continuous optimization.” Best-laid plans tend to change after the initial plans are laid — carriers fail to arrive, inventory gets damaged, orders change or are cancelled. The TMS and WMS need to optimize and re-optimize continuously through the day or work shift in order to minimize both labor and freight costs.
Brasca: Let me put my “idealist” hat on and position a different perspective. I think the challenge that needs to be addressed is this isolated view of these currently very individual domains. We use terms like integration, visibility and sharing, which implies the bridging of isolated capabilities that by definition yields latency. The way I like to frame the thinking here is there needs to be a greater tangible adoption of a unified view of logistics as a whole. When I plan my transportation, which should happen at a network level to maximize value and scale, I need to do more than just see what is happening at the warehouses, I need to think like one entity. Downstream constructs such as dock scheduling and facility flow path need to be considered upstream, eliminating the latency created by simple integration.
Banker: Going forward I think we will also see the use of social media type functionality built into the TMS, WMS and other complementary applications. Private online chat groups — including warehouse managers, transportation planners, other internal departments and customer managers as well — will interact to solve, or at least mitigate, unexpected shipment problems. For example, imagine that there is a problem with a shipment to a company’s most important customer. To work on this problem, it might be helpful to have a private chat group that includes the company’s pertinent supply chain personnel, but also the account manager for the customer, and a supply chain manager at the customer site.
How can companies optimize both WMS and TMS to leverage the strengths of each? What’s the right approach?
Kozenski: Both the WMS and TMS applications do a great job of optimizing within each of their domains. They are both well-equipped to deal with changes that can (and will!) occur. They just need to know about the change. Companies should look at their own business and determine if they have to deal with changes to fulfillment plans on a regular basis. If they do, they are likely making manual decisions on how to deal with them. That would make me believe that they are not making the optimal decision that will lower the overall costs and maintain on-time deliveries.
Banker: I think the answer is probably different for different supply chains. In general, however, there is more money spent on transportation than on warehousing. So optimal transportation plans are typically developed first and the warehouse fulfillment activities are scheduled to support those moves. The sooner a warehouse manager knows the transportation plans, the better they can plan the exact amount of warehouse labor that will be needed.
As Tom suggests, there are joint constraints that do need to be understood for optimality. These include how long it takes to load a certain size truck at a certain dock door (loading times can be different based upon equipment) and how much inventory can be staged near the dock door.
Brasca: Steve is correct in that it will clearly vary by type of supply chain, but the general school of thought that I have been advocating is — like we do with many things — to look at the problem from the top down. Transportation, if looked at from a standpoint of maximizing value and scale, is fundamentally a network problem, whereas warehousing is typically location-centric. Therefore, it stands to reason that transportation planning should come first and flow into warehouse execution. There are two points, though, that I would challenge readers to consider: first, to minimize latency, integration is not enough. The transportation solution needs to truly think like a warehouse. Second, there is no reason these processes have to be serial. There are activities in the warehouse such as labor planning that can occur upon initial visibility to order demand as opposed to waiting for the specifically built loads to appear from transportation.
Nothing ever stays the same, so how can companies achieve greater agility and responsiveness with iterative planning and execution?
Kozenski: I think the business value of integrating planning and execution is that it allows all parts of the business to agree that the plans are achievable. A forecast that tries to ship more product than a warehouse can handle, or requires a fleet larger than the trailer assets a company has available to it, is not a viable forecast. This is where an understanding of the warehouse and transportation constraints is important. Planning needs to take these constraints into account. These constraints are not static bits of data. They dynamically change for each day of the month. Therefore, the planning application needs to check and verify with the TMS and WMS for the impact it has on each day or shift.
Banker: I would add that for the warehouse manager, a cockpit where he can see the status of wave completion supported by the ability to easily move people to tasks that have suddenly become urgent is another key function needed. And in TMS, the ability to continually re-optimize, but re-optimize in a way that is not too nervous (not like starting from scratch but keeping most legs in place), is the critical functionality.
Brasca: I very much agree with my peers here. Tom stated it well, that these processes need to be extended upstream to an organization’s forecasting and planning processes. And as per Steve, iterative planning is great but it cannot be “twitchy” and must always be focused on what is practical.
What are the benefits of integrated warehousing and transportation to the top and bottom line?
Kozenski: The benefits are far-reaching. The top line is improved because of the customer satisfaction provided through real-time flexibility of handling order changes and achieving optimal performance metrics such as on-time delivery, perfect order, order fill rates, increased sales and on-shelf availability.
The bottom-line benefits can include lower freight costs, lower labor costs, improved throughput, better utilization of capital equipment (such as fleet assets and warehouse forklifts), and lower overtime costs.
Brasca: I think Tom hit all the key metrics, but let me add an additional perspective. Supply chains, particularly those affected by the growth in consumer-driven demand, such as retail and consumer goods, need to become more agile. Agility, however, can be expensive. I think the approach that we are advocating here creates that notion of agility while mitigating and maybe even reducing overall supply chain costs.
Banker: I agree. The main savings would be from reduced freight spend and the labor savings in the warehouse.