Monthly Archives: July 2023

Sustainability Begins in SRM

We recently broke records in global temperature. RECORDS IN GLOBAL TEMPERATURE! If sustainability isn’t on your mind now, then obviously you don’t have a mind that is working because not only does it mean the planet is in very dire straits*, but

  • the acceleration of natural disasters is going to intensify beyond anything that was predicted (and a five-fold increase was recently predicted)
  • natural resources (and food) are going to get scarcer faster as fires destroy our usable lumber and crops
  • hurricanes are going to drench and destroy coastal cropland, possibly long-term
  • rapidly melting polar ice caps are going to raise sea level, drown our richest coastal farmlands, and damage our coastal (shipping) infrastructure
  • rapidly heating equatorial zones are going to dry out our freshwater lakes and canals (like the Panama canal we rely on for shipping)

… and that’s just the tip of the rapidly melting iceberg. (There’ll soon be no more dildo icebergs for Dildo, and that won’t be a good thing. Canadians rarely get angry, and when they do, that’s bad. the doctor, who is about as Canadian as it gets, has never seen a Newfoundlander angry, and when that day comes, he’d rather not be one province away … so please make sure that day never comes!)

Unless we lower

  • fossil fuel energy production and utilization
  • clean water utilization
  • waste byproducts
  • dependence on non-renewable resources that are getting more expensive, and environmentally damaging, to mine

environmental and societal damage is going to only intensify. We need to be sustainable. But sustainability has to start at the source — and the consumer is NOT the source (it’s the sink, and anyone who’s studied networks will tell you that by the time you reach the consumer, the product has been produced, the service has been rendered, and there’s nothing consumers can do to undo the damage that has been done … sure we can do our best to consume less and waste less, but the damage starts at the mine or the farm and propagates through the supply chain).

As a result, sustainability starts with the source supplier, and must be maintained throughout the entire supply chain.

And at the end of the day, for a Fortune 500 / Global 3000, it doesn’t matter if a CEO gives up the corporate jet — it matters only if they instruct their company to be sustainable in all aspects of operations and force their supply base to do the same.

Why? The aviation industry as a whole contributes 2.5% of worldwide CO2 pollution. 2.5% overall! So how much do you think one private jet contributes? Not enough to really matter. (On average, it’s like removing the emissions of 400 cars, and while that sounds significant, once you realize there’s over 300 million registered vehicles in North America that contribute to about 30% of GHG produced, it’s barely a drop in the CO2 bucket [giving it up for show while your factories pollute unhindered is not the solution]; and FYI, most of that vehicular CO2 production is NOT our private automobiles, its commercial transportation [as we have catalytic converters, there’s no laws that can be enforced mandating equivalent technology on ships in international waters].)

In comparison, a coal burning energy plant will generate about 2.26 pounds of CO2 per kWH, or about 7 Billion pounds of CO2 annually (which is over 3 Million Metric Tonnes) in an average 500 megawatt coal power plant. (In comparison, a private jet burning an average of 5,000 pounds of jet fuel per year at 7 pounds of carbon dioxide will produce only 35,000 pounds of CO2 a year. This is still a lot, but a supply chain that consumes the equivalent output in electricity in its manufacturing and shipping operations as that produced by a coal burning 500 megawatt power plant will produce 200,000 times the CO2. TWO HUNDRED THOUSAND TIMES. So don’t get distracted by the little things in your quest for improving your carbon footprint, which will soon be mandated in more and more countries globally. Your CEO should give up the jet, especially when he can still fly in those first class cabins no one else can afford, but that’s just the start of what your organization needs to do.)

And the only way to monitor and manage your supply base, require and track reporting from, and ensure improvements are made, is with SRM. It’s not just supplier development anymore, it’s supplier sustainability.

* and not the good kind of Dire Straits, the bad, bad, kind

Suite vs BoB. Which Do You Choose?

Neither!

But you need something. And there is no other option (yet). So are you doomed?

That depends. But first, let’s talk review the Primary Pros and Cons of each.

SUITE
BoB
PRO

  • one vendor relationship to manage
  • modular integration out of the box
  • consistent UX (or it’s not really a suite)
  • pre-implemented with major ERPs
  • the primary module offered by the vendor is truly Best in Class and considerably beyond the average suite capability
  • implementation is typically vendor supported, along with some integration services
  • low (subscription) cost out of the gate, pay as you need
  • today’s BoB comes with full, complete Open APIs to build your own ecosystem
CON

  • likely that only one or two modules are Best-of-Breed (BoB)
  • implementation and integration services are likely third party
  • high cost out of the gate
  • traditionally a closed ecosystem
  • multiple vendor relationships to manage
  • limited integrations out of the box to other modules you will need
  • inconsistent UX across the modules
  • limited to no ERP/MRP support in many modules

In other words, many of the weaknesses of the suites are the strengths of BoB and vice versa. But you want the strengths of both and the weaknesses of neither, even though that doesn’t exist today as no vendor does everything well, nor can they because they would need to be experts in everything. (So unless a vendor hired all the experts, and became a monopoly [and we generally agree monopolies are bad], no vendor could even come close.) Even if a vendor did hire all the experts of today, and build everything out to the best of those experts’ capabilities, they’d soon become an unaffordable mega-suite (and then still not be best in breed in anything because once they built what the experts they hired envisioned, there would be a new generation of experts they still wouldn’t have employed with new, innovative, possibly revolutionary, ideas).

So what do you do? Well, the answer is, as we pointed out in our post that asked where’s the Procurement Management Platform, acquire a platform that is designed to support data-centric end-point integrations for specific processes and organizational needs as this will allow you to select the right module for each task, configure the right procurement workflows, integrate new, even previously unthought of, modules with the Open API, and even support intake and supply chain platform integration.

But, as we noted, there’s no platform. So, unfortunately, you have to assemble your own. But at least today you can. A decade ago there were no options to do this, so either you bought a suite, and lived with it, or you bought best of breed and did extensive work to glue them together in a grit, spit, & a whole lot of duct tape situation (that would take about 69 months).

But today, all of the new best of breed applications are being built from the ground up with complete Open APIs and the newer suites are also offering you APIs to easily get data in and out as well. (Not so much on the workflow configuration / function execution front, but that’s not necessary.) [But please note that an App Store or Marketplace is not an Open API, it’s a closed ecosystem limiting you in what third party add-ons you can select.]

So you can theoretically start with the right instance of a BoB or a Suite as your base and build out the right platform over time, depending on your needs today, and how fast you can digest a new module. If you already have one or more first generation modules, you have the understanding of what these modules do and how to use them and can likely digest new versions of those modules pretty quickly, so you could start with that many modules plus one. If you have no modern S2P modules, then, as we indicated many, many times in our very long Source-to-Pay series, you need to pick a module that represents your most immediate need, start with it, and start to grow your platform from it.

Introducing aThingz: A Logistics as a Service (LaaS) Provider that is providing an end to end Total Logistics Management Solution

Over the past three articles we have

  • outlined the importance of logistics management, especially with respect to cost management, supply management, and risk management
  • outlined the major steps in logistics planning and execution
  • outlined the major modules/solutions that are currently used
  • outlined the major problems with using separate systems for each major step

… and come to the conclusion that while this methodology and modular system worked good in its day, it’s no longer good enough for logistics management in the modern world where natural disasters are a regular occurrence, global pandemics are a reality, global instability and globalization chaos is the norm, and the chances of a large company not experiencing at least one major disruption a year is now essentially zero.

The solution a global organization needs to not only survive, but thrive, is a Total Logistics Management Solution (TLMS) that covers the end-to-end process from order planning through final delivery, payment, financial analysis, and, most importantly, closed loop feedback to improve the planning versus actuals over time.

Today we’re going to introduce you to a vendor that is creating this new generation of TLMS solutions: aThingz. Founded in 2015 to solve the global logistics challenges that other vendors were not addressing, aThingz has built a modular, composable microservices-based, total logistics management solution that can bought as an end-to-end management solution, or on a microservice-based activation format, meant to fill in the gaps between existing organizational solutions. Regardless of how little, or how much, is adopted by an organization, the platform will ensure that all of the solutions are properly integrated, data is pushed and pulled automatically as needed upon changes and updates, re-calculations across the platform (be it pure aThingz or an aThingz powered hybrid platform) are done automatically on updates and changes, and the loop closed to allow for learning from, and improvement in, plan vs. actuals over time.

Billing itself as Logistics-as-a-Service [LaaS], aThingz has a composable micro-services stack that allows it to address through software any or all of the following requirements (that the client needs addressed) while also providing services to manage the logistics planning needs required by the client (if the client wants a [strong] managed logistics offering):

Process Governance
it is a process, and you need to get it right, and process governance must address

  • transformation planning (upon implementation, New Product Introduction [NPI], etc.)
  • change management
  • iterative process improvement
  • process & regulatory compliance
  • performance and financial governance
  • operational governance

Network Master Data Management
as good, synched, data is key for process implementation, and this includes

  • classification, standardization, cleansing, rationalization and enrichment
  • ongoing quality management
  • metrics and improvement
  • rules management

Supply Chain Resilience
which encompasses a lot of the impacted functions (Inventory Management, Finance, Risk Management, Procurement, etc.) and includes

  • supply and demand sensing
  • shipment monitoring and traceability
  • risk factor / risk event detection and monitoring

Forward Looking Logistics Planning
(versus traditional in-week logistics management) which includes, and which can be done on a weekly basis up to a year in advance with real-time recalculation on changes in projections, assignments, etc.:

  • order forecasting and management
  • packaging management and optimization
  • carrier volume forecasting
  • quote and rate management for carriers
  • logistics / transportation planning
  • network optimization
  • (what-if) scenario planning
  • plan communication
  • cost savings identification and tracking; i.e. the ability to track forecast vs. plan vs. (initial invoice) vs. actuals by week by carrier by order over time

For clients wanting pre-packaged solutions, they have pre-composed stacks for:

  • Demand Forecasting
  • Logistics Spend Visibility
  • Logistics (Network) Sourcing Intelligence
  • (Autonomous) Logistics Planning
  • Real-Time Transportation Visibility
  • Supply Chain Resilience

But the power of the solution shines in its end-to-end integration of their six, integrated, modules of:

ADQTM

Their primary data management platform that allows an organization to work on a common set of validated and managed data across all stakeholders of each process and manages the rules for error detection and correction and data cleansing and enrichment to ensure that decisions are highly reliable due to higher quality. Manages the key attributes that influence the processes for the higher quality outcomes, namely, the routes, lanes, suppliers, plants, parts, packaging, docks, contracted rates, carrier, and material records and that reviews, corrects, and augments details as needed.

Bruhas

Their logistics closed-loop planning, scheduling, and management solution that you can use to plan and manage rolling forecasts with detailed requirements. The solution provides flexibility in the planning horizon (e.g. 10, 20, 40 weeks) based on the organization’s needs. (Compare this to many classical solutions that might struggle to do more than few weeks out, or limit the organization to one planning horizon, which was difficult for the platform to manage when a change in week one requires rolling, compounding, changes and recalculations through the progressive weeks.) In addition, carrier forecasts and manifests are created during the planning process and are continuously updated in real time for each period based on product mix changes as well.

This module also has built in analytics and (cost saving) opportunity dashboards, transit time performance insights (to optimize inventory planning), actual truck/container (cube) utilization, and shipment (frequency) analysis dashboards. One of the great things about the planning capability is that it projects down to the container/truck by lane by week and identifies high and low variances to make sure that the buyer contracts a carrier that can increase (and decrease) capacity as needed. Another great thing about the planning capability is that the forecasting component can calculate optimal packing based on packaging options and even show you how to maximize container utilization with a 3-D visualization of the packing plan (boxes onto pallets into containers). Probably the greatest thing about this planning capability is that it walks you through the creation of the forecast to the realization of the operational (logistics) plan in a step by step process and ensures that the plan that is ultimately approved is complete, as accurate as possible, and distributed to the right people at the right time (as it forces the user through the forecast, validation thereof, operational plan draft, and operational plan review by key stakeholders, and only then does it allow approval and distribution).

Cubera

Their spend management and visibility solution allows a buyer to track and compare logistics financial performance — forecasts vs plans vs invoices vs actuals to see how accurate the forecasts end up being, how close the plans end up being, how the costs are tracking, and if performance is improving over time. In addition to highlighting variances to plan and budget, their solution provides diagnostic insights and helps the organization predict future spend.

Daksa

Their supply chain AI platform that ties it all together; that monitors, learns, corrects, and reports on the overall supply chain. On the main screen, a user sees an overall summary of the extent of their global and domestic supply chain — routes, lanes, suppliers, plants, parts, and costs; as well as high level insights into equipment, parts, packaging, plants, ports, and overall data quality – and they can drill into any area in which they need more details.

Veda

Their shipment visibility and supply chain resilience application that allows an organization to query the last reported location of any shipment at any time and all of the details associated with that shipment, track inventory in real time, and any red flags based on levels, criticality, and delays.

Integrations

Simple, fast and powerful integrations that handle a variety of data formats and file types including (rest) APIs, EDI, Excel Spreadsheets, CSV and more. Pre-built integrations and formats are available. The integration capability allows a user to manage the data streams and data files they use to define their network, suppliers, products, demands, etc., especially if they are using an ERP/MRP that doesn’t allow for API/direct integration and only supports integration by way of file exports (and imports).

With these six modules, or an appropriate subset thereof, integrated with any existing logistics modules the organization may already have, the organization will be able to

  • import demand history and initial demand forecasts
  • adjust the demand forecasts to a (rolling) order plan (40+ weeks out)
  • identify the optimal packaging, and palletization scheme
  • determine the viable shipping lanes and required (multi-modal) methods
  • collect the quotes from potential carriers
  • select the carriers
  • optimize the allocations among the appropriate carriers and plan the transport
  • communicate the plan and track the shipments
  • provide accurate costing and required cash flow forecasting

… and do so in an integrated logical, fashion that allows a buyer to holistically manage the end-to-end logistics planning and execution process in a single Total Logistics Management Solution (TLMS). Moreover, they will be able to manage their end-to-end logistics process in a solution that is continuously monitoring, suggesting, correcting, and presenting optimizations in the plans it presents for you, allowing you to go from large double-digit variances in your plan vs. actuals to low single digits over time. Taking 10% – 15% out of logistics costs through an integrated, holistic, methodology is significant, especially if logistics and inventory management collectively represents 30% to 40% of the total cost of goods sold.

So if you do not have a TLMS managing your global logistics network, we recommend that you check out aThingz at your first opportunity. The capability may impress you but, more importantly, they may be able to take 10% off your logistics spend and 3% to 5% off of your total organizational spend in a relatively short time-frame, and that’s worth it.

Stepwise Logistics Management is Problem Plagued (LMI Part 3)

In our last article, we noted that Logistics Management, in addition to being costly and risky, is not an easy ordeal. You have a lot of steps to execute in an ordered fashion, which today typically requires at least five different loosely integrated (mostly standalone) modules in a big enterprise Operations Planning solution or, more typically, a number of standalone solutions which only support, at most, endpoint data integration where the outputs of one phase can be fed into another.

While this works, there are a number of issues with using separate systems for each step, including, but not limited to:

  • Inefficiency: entering and leaving multiple systems is timely, especially if 3 or 4 steps in you realize you made a mistake and have to go back to the beginning
  • Opaqueness: you only have visibility into the output of the previous step at any time; e.g. when a carrier asks if you can use a different truck size or pallet size, and you have no details on why you calculated a certain pallet and truck size as optimal, you have no idea and have to go back to the packaging system and do the calculations all over again;
  • Cost Bloat: due to limited visibility into data and models of other systems, each step has to introduce a safety margin, leading to ever increasing safety margins; e.g. the order adds a few extra units; the packaging adds a few extra boxes of units to create some give in the packing calculations; the quote adds an extra pallet or two to make sure enough space is quoted; the contract keeps this extra space; and so on … especially since there are usually different team members, each an expert in the different systems, doing each step
  • Hidden Risks: neither of these systems are good at identifying and tracking risks, and if not propagated to the TMS or a separate risk management system, they will stay buried until they materialize (with no mitigations ready to address them)
  • No Closed Loop Feedback: tracking, learning from, and adjusting future plans and predictions vs. actuals is the only way to improve transportation planning / logistics management

Not to mention the major issues present in most of the current piece-meal solutions being used.

  • Order Management solutions tend to be dependent on the MRP and very limited in terms of how far out they can accurately plan, then defaulting to (often) decades old forecasting models; they also can’t provide any insight into the packaging requirements
  • Package Management solutions depend on accurate inputs from the order management solution and the ERP/MRP, and can only compute packaging sizes, packages per standard pallet, and standard pallets per standard containers; no real issues here, but because they don’t connect to freight (quote) management systems, the users don’t often know the best package options to choose and the best configurations to consider
  • Quote Management solutions collect the quotes, allow comparisons, and allow some to be marked as contract (for a timeframe); no real issues here either, except the fact that because they aren’t a TMS, a buyer can’t understand the full cost associated with selecting a carrier or a lane for a particular shipment, and may make suboptimal decisions
  • Transportation Management Systems plan the transportation needs a few months out (at most; most traditional systems are very limited in how far ahead they can plan due to architecture, calculation requirements, constantly changing requirements as demand shifts and issues arise, and the need to regularly start the entire planning chain over again), create the orders, distribute them, collect the shipment notifications and estimated delivery dates, and maybe track updates; not bad, but not enough anymore
  • Financial Planning Systems are usually either modules of larger operational cash-flow planning solutions and limited in transportation specific cost planning, or sub-modules of TMS, and limited in overall financial planning and cost analysis capability

In other words, the logistics solutions created in the age of logistics (when logistics was also more predictable when natural disasters were few and far between, global pandemics were more theory than reality, global political stability was greater, and so on), while great at the time, are no longer sufficient for optimal supply chain management in the modern world.

What we need is a Total Logistics Management Solution.

A Brief Introduction to the Components of Logistics Management (LMI Part 2)

In our last article we noted that Logistics Management is something that many procurement professionals overlook because most larger organizations have a separate logistics department, but it’s something that they shouldn’t because they won’t understand the true cost, the true delivery times, or the true risk of their sourcing decisions, which may, because of this, turn out to be more costly, more risky, and considerably less efficient than they expect.

In addition to being costly and risky, Logistics Management is not an easy ordeal. In order to manage logistics effectively, you need to:

  1. determine what you need and when you need it
  2. determine how to package it and how much room the packaging takes, and this requires the organization to calculate
    1. how many packages you can get on a pallet
    2. how many pallets you can get in a truck / container / rail car
    3. how many trucks / containers / rail cars you need
  3. determine the viable lanes for shipping from the suppliers to your warehouses and get quotes
  4. select the providers and plan the transport
  5. accurately cost the orders, shipments, and tariffs to make sure you have enough cash on hand to meet your obligations when your invoices come due

This typically requires five different systems, and/or modules. Namely a(n):

OM/FS: Order Management/Forecasting System
This integrates with your MRP system, looks at the production plan, looks at the inventory level, and determines the order quantities needed by week for the next X weeks based on how far out the production plan goes (which, in most systems, typically isn’t that far out, maybe a few months) and then uses the forecasting capabilities to project out a few months ahead of the average transportation time. It will also allow a user to override plans and projections, override default suppliers and carriers if there are options, and calculate any ramifications. And any related functions the organization needs around order management and forecasting. (We’re not going to go deep on any particular capability in this article.)

PMS: Package Management System
Logistics management is not as simple as calculating an order and contracting a carrier. You have to know how much space you will need for the shipment, which will dictate how many trucks, rail cars, or containers. That will depend on how many packaged units you can fit in the space, and that’s often more than a simple volume calculation, as you have to fit parts to boxes, boxes to pallets, and pallets to containers/cars. This requires more sophisticated volume and weight calculations than one would expect, which are not easy to do in a spreadsheet. Plus, if you have multiple options, you have to figure out which is best to minimize your shipping requirements.

FQMS: Freight Quote Management System
Once you know what you need, where it’s coming from, where it’s going to, how it’s going to be packaged, what kind of transport you need, and how many units (trucks, rail cars, containers, etc.), you need to find, and contract, a carrier. But the first step is to get inclusive quotes (costs per mile, fuel surcharges, handling charges, etc.) from carriers, compare and analyze them, contract one or more carriers, and then mark their quotes as contract rates, and others as quotes, but not guarantees.

TMS: Transportation Management System
Once you’ve determined your shipping needs, selected a carrier, and contracted a quote, you need to manage the transportation. You need to provide all the appropriate information to the carrier, get the pickup dates and expected delivery dates, receive and track updates, manage any issues that arise or reroutings that need to be done, identify any delays that will cause production or customer delivery risks and determine resolutions, and so on.

FPS: Financial Planning System (Cash Flow Planning)
Finally, you need to track all of the current and projected costs, and changes, so that you can manage your cash-flow and have the necessary cash when the invoices come in.

In other words, Logistics Planning and Management is currently quite an involved process that requires quite a few modules and process steps to do (reasonably) well.