Category Archives: Logistics

Logistics Improves on Both Sides of the Atlantic

West of the Atlantic, there are two big logistics bottlenecks. One is the US border with Canada (where documentary requirements make in-transit goods a cumbersome process). The other is the US border with Mexico, where there have been long standing conflicts over cross-border trucking. East of the Atlantic, you have EU security programs that are not compatible with US programs, and also make for bottlenecks.

In the last few weeks, progress has been made on two of the three big bottlenecks as the US reaches agreement with Mexico on cross-border trucking and agrees to mutual supply chain recognition with the EU (jocsailings.com).

As per the article in Logistics Management, on Wednesday, July 6, U.S. Transportation Secretary Ray LaHood and Mexico’s Secretaría de Comunicaciones y Transportes Dionisio Arturo Pèrez-Jàcome Friscione signed documents to resolve the long standing conflicts between the trucking industries of the two countries that resulted from the elimination of the pilot program for cross-border trucking in 2009 as part of the Omnibus Appropriations Act. (In response to the act, the Mexican government stated it would place tariffs on roughly 90 American agricultural and manufactured exports as payback. The tariffs amounted to $2.4 Billion of American goods.)

The agreement, focussed on a safety-first program, will lift these tariffs and provide opportunities to increase Mexico-bound US exports and create job opportunities. Furthermore, Mexico will provide recriprocal authority for US carriers to engage in cross-border long-haul operations in that country.

In addition, as per this article in JOC Sailings, the US and EU plan to implement mutual recognition of their supply chain security programs by the end of October. Specifically, mutual recognition between CBP’s C-TPAT and EU’s AEO program will occur, as per the joint statement between the European Commission and the US Department of Homeland Security. Once this is achieved, cargo will flow more smoothly between the US and the EU.

TMS Requires 100 Million, Does ERP Require 1 Billion?

A recent article over on Logistics Management that put[s] the spotlight on ERP had a great quote from Ben Pivar, Vice President and North American Supply Chain Lead for Capgemini regarding Transportation Management Systems (TMS) Pivar says that the economics of installing a TMS package on a client server, for example, doesn’t really work until you have nearly $100 million in freight spend and that’s why on-demand is so popular in that space.

SI has to agree. Unless a firm has tens of millions in freight spend, the costs of installation, maintenance, and usage tend to dwarf the benefits of using a TMS system. However, what’s even more important to note is that enterprise ERP (from a top vendor) is, on average, at least five, if not (usually) ten times, more expensive to install, integrate, maintain, and use than TMS. This would seem to indicate that the economics of traditional ERP don’t make sense unless your company has 1 Billion in spend, or at least 1 Billion in revenue. In other words, unless you’re a member of the Fortune 2000 or Global 3000, traditional end-to-end on-premise enterprise ERP is probably not for you. And it would appear that Oracle, one of the largest players, tends to agree. Why do you think it has advertisements stating it has 98% of the Fortune 500? It’s not just because the Fortune X, it’s target market, provide it with its biggest deals. It’s because Oracle also understands that unless a company has reached a critical mass, given the cost of the system, the company won’t get the advertised return (which is a key to keeping the company as a high-paying customer year after year).

However, every organization needs a good transaction store and data repository as analysis is key to supply management success. So what does this mean if you’re not one of the lucky ones? Don’t look at a a tradtional on-premise end-to-end ERP from a big boy. Look at either a newer, smaller, slimmed down offering from a smaller player, possibly based on an open-source solution (like Compiere), a suite from a provider that maintains its own transaction store, or a newer, slimmed down, SaaS offering from a traditional provider that can integrate with some BoB solutions in the cloud and offer an effective hybrid solution. Just don’t go for the billion-dollar solution, because your organization likely won’t get a return from the millions it will cost.

Three Good Suggestions from the CTA. Will the RCC listen?

On February 4, the US and Canada, under the leadership of Prime Minister Stephen Harper and President Barack Obama, created the Regulatory Cooperation Council with a two year mandate to promote economic growth, job creation, and benefits to consumers on both sides of the border through increased regulatory transparency and coordiation.

In an effort to focus the committee on priority issues, the CTA (Canadian Trucking Alliance) has submitted three suggestions to help remove costly regulatory barriers to the efficient movement of goods, as per this recent article in Canadian Transportation and Logistics on “CTA offers suggestions to streamline flow of goods between Canada and the US”.

The suggestions the CTA offered are as follows:

  1. Streamline the process for moving “in-transit” goods.
    The rules are different in the US and Canada, with the former requiring more documentation and advance notice ever since the introduction of 10+2 and related security acts. The US rules would need to be harmonized for this to happen, which is a good idea (at least where Canadian goods are concerned) since the US is Canada’s largest trading partner and it would implement the spirit of NAFTA.
  2. Provide the industry with greater flexibility to reposition foreign empty trailers using foreign drivers.
    As per the article, there is a cost associated with current restrictions that require “spotting” of an empty foreign trailer to the pick-up point of its return load home. Unnecessary costs. GPS can track the truck for future audit if there is any question that the truck went off route, and if there’s a concern regarding unauthorized transports, the truck can always be inspected after unloading and before loading.
  3. Cooperate on the establishment of a North American standard for proven fuel saving devices.
    If one country approves a fuel saving device, and the other doesn’t, it could impede the flow of goods from one country to another if the vehicle is stopped at the border. Moreover, given the amount of fuel used by the transportation industry, the goal should be to be as green as possible.

All great suggestions. Will the council listen? And will they take action?

Cross-Docking Challenges, Part II

Part I noted how cross-dociking can be a great way to cut transportation costs if done right, because handling of goods while in transit, adds labor and time, which in turn costs the organization hard dollars and profit, but also noted that cross-docking is not without its challenges. It then went on to define eight of the biggest cross-docking challenges faced by an average organization.

This post is going to address what an organization can do to address each of the challenges and see the ROI from cross-docking that it expects to achieve.

Unpredictable Customer Demand
There are two things an organization can do to address unpredictable customer demand. It can restrict cross-docking to primary distribution centers, or it can invest in reusable multi-level packaging. In the first case, when a container hits a primary port or DC, it will use cross-docking to divert the inbound product to the regional DCs, but will not use cross-docking to divert the goods from the regional DCs to the stores. In the second case, it will package small goods in smaller bundles, and if the boxes are too small to allow for efficient handling, it will place those boxes in larger, recyclable boxes or reusable containers and then, depending on demand updates, break the boxes or containers down to ship the revised quantities to the end locations.

IT System Support
This is easy — the organization invests in a new TMS (Transportation Management System) or WMS (Warehouse Management System) that is designed to support the organization’s cross-docking needs. Such a system will also likely come with advanced analytics, modelling, simulation, and/or optimization capabilities that will help the organization identify additional opportunities for cost saving.

Changing Business Dynamics
Cross-docking has to be part of the network (re)design, and not just an ad-hoc afterthought, and the contracts have to be written with the same flexibility as the shipping, distribution, and (temporary) warehousing contracts. This way it is no more risky than the other supply network activities and no less ill-fitted than the rest of the network should dynamics change.

Supplier Reliability
The organization has to build appropriate performance metrics into its sourcing contracts and establish appropriate SRM/SPM/SD (Supplier Relationship Management / Supplier Performance Management / Supplier Development) programs to insure that suppliers have, or build, a track record of on-time delivery.

Carrier Reliability
The organization has to build appropriate performance metrics, penalties, and out clauses, into its logistics contracts and establish appropriate monitoring policies and procedures to make sure its carriers deliver on time.

Facility Design
The organization has to select facilities appropriate to its crossdocking needs or invest in the necessary leasehold improvements to insure its cross-docking operations run smoothly.

Shelf Life
The organization has to adopt a FGIFGO (First-Group In, First-Group Out) policy and allow for newer products, with about the same shelf-life, to be sent out if currently cross-docked. If the product on the shelf has 27 days life, and product in the truck has 30 days left, there’s not much difference and it should send the product currently on the truck out if it can cross-dock. However, if product on the shelf has 14 days and product on the truck has 28 days, then, unless it can guarantee the product on the shelf will go out in the next 24 hours, it has to send out the product on the shelf. For each product, it has to define “close-enough” time-bands, and accept substitutions within the same time-band that are “close-enough”. (Unless, of course, there is product on the shelf about to expire, in which case it can define an override.)

ROI
The organization implements the right group of policies and procedures that will minimize touch and maximize ROI.

In other words, while cross-docking presents challenges on the road to success and cost savings, each challenge can be overcome and an organization that perseveres will see significant cost reductions in its logistics and transportation spend.

Cross-Docking Challenges, Part I

Cross-Docking can be a great way to cut transportation costs if done right, because handling of goods while in transit, adds labor and time, which in turn costs the organization hard dollars and profit. But cross-docking is not without its challenges. A recent piece over on Supply Chain Digest on how interest in cross-docking is high, but challenges are many did a great job in summarizing some of the largest challenges.

Unpredictable Customer Demand
The organization might know with 95% certainty that it is going to sell 500,000 units of its new mobile phone in the United States, but it may have a hard time predicting at a granular level which markets are going to take off first, and which markets will be the hottest. That can make it difficult to determine whether to route 500, 5,000, or 50,000 to a local DC.

IT System Support
Many TMS (Transportation Management Systems) and WMS (Warehouse Management Systems) were not designed to support cross-docking. Consider these quotes from participants at the recent WERC (Warehouse Education and Research Council) annual conference who said that “the WMS wants the goods to be in a pickable location before it can allocate the goods to the DC orders” and that, in the ERP system, “goods received one day simply could not be allocated for orders until the following day”. How can an organization support cross-docking if the systems don’t support it?

Changing Business Dyanmics
In some organizations, the business dynamics, which depend on local and global market conditions, can be as unpredictable as the customer demand.

Supplier Reliability
In order to cross-dock goods from four different suppliers onto the same outbound truck, all four suppliers have to ship the required quantities on time.

Carrier Reliability
In order to cross-dock goods from four different source locations onto the same outbound truck, all of the carriers have to deliver on time.

Facility Design
The facility needs to be designed to accommodate the crossdock process. If the facility can only support two trucks at a time, for example, it is hard to cross-dock off of four trucks onto one.

Shelf-Life
First In, First Out (FIFO) principles can also add complexity, because companies in expiration date sensitive industries, are reluctant to ship a more recently manufactured/received product if older product is sitting on the shelf, even if that requires extra handling than would be the case if inbound receipts were crossdocked for cross-docking customers.

ROI
At some companies, cross-docking is still “high touch,” resulting in higher processing costs than the organization initially thought was possible.

So what can a company do to overcome these challenges and get benefits from cross-docking? Stay tuned.