Advances in communications and technology have allowed instantaneous communication almost anywhere in the world, accelerating the pace of change. Companies can now rapidly shift manufacturing operations to lower cost geographies, delivering more profitability and passing along savings to their customers. However, globalization has also highlighted the challenges associated with managing this complexity, especially the availability (and usefulness) of information about the supply chain. Many companies have products and inventory in their supply chain to which they have little-to-no visibility until it lands in a consolidation or distribution center, or may have full visibility but struggle to aggregate all of the disparate pieces of information together to form a cohesive and actionable view.
A typical supply chain will have many partners and suppliers (raw materials providers, manufacturers, drayage, airlines, ocean carriers, customs brokers, outsourced warehouse operators, etc.), most of whom will have varying technology capabilities and standards about exchanging data. There are relatively few supply chain data standards and no information "brokers" to create the standards (think Federal Reserve banks or stock exchanges in the financial services industry). Therefore, most companies are left with the challenge of defining their own standards and mapping the available data from their partners to meet these standards. The usual result is incomplete, inaccurate, and out-of-date information that is difficult to understand or actionable. This is where a lead logistics provider (LLP) or 4th-party logistics provider (4PL) can add real value to streamlining the supply chain, by defining data standardization, managing exceptions, and providing a streamlined, "clean" view of supply chain information. This in turn allows the company to focus more time on planning and optimization and less time dealing with escalations and exceptions.
An LLP is a combination of logistics engineers and supply chain professionals that take over some or all aspects of the day-to-day operations of their customers' supply chains. Their value proposition is similar to other outsourcers or aggregators: they take what most companies think of as back office operations and manage them as a commercial proposition, delivering economies of scale and expertise that comes from managing multiple customers' supply chains. The costs of outsourcing this type of service are usually paid back in spades from savings in inventory turns and transportation costs that come from improved visibility and management to the supply chain.
The heart of any LLP is its technology offering-the tool set that captures data from different portions of the supply chain, collates and standardizes it, and allows LLP personnel to manage issues and exceptions to minimize or eliminate their impact. The capability of this tool set should be a prime consideration when evaluating an LLP as a potential partner. You should ensure that the LLP has the technology capabilities to truly address the data challenges of a global supply chain. Aside from the usual questions on security, scalability, disaster recovery, etc., here are the seven key technology questions you should consider when reviewing supply chain technologies:
• Global consistency and reliability - In order to manage today's complex global supply chains, an LLP must have a single system that is available globally, from L.A. to Laos. Some LLPs offer systems that can support a regional or local supply chain, but that cannot be deployed or supported across oceans or time zones. The system also needs to take into account the infrastructure realities present in many developing parts of the world. Even today, internet connections may be slow or unreliable in certain countries or regions, and an LLP's system needs to be capable of dealing with those contingencies by being able to operate in "kiosk" or stand-alone mode until connectivity can be restored.
• Flexibility - Two companies, even in the same industry, may have very different approaches to managing their supply chains. Custody for inventory may be taken at receipt, or may be vendor-owned until sale; configuration may happen at origin, at ultimate destination, or both; carriers may be selected based on lowest cost or best performance. An LLP's system needs to be capable of adapting to the customer's unique requirements and provide the data in an appropriate format and level of detail. Just as importantly, the system needs to be capable of rapidly adapting to changes in the requirements as business needs change. Finally, the system needs to be able to deal with catastrophic events and their impacts on the supply chain, like volcanoes in Iceland or flooding in Thailand. Business decisions about how freight is routed and how orders are prioritized can change rapidly, and the system should be able to nimbly support those changes.
• Data validation & standardization - The key to truly addressing the data integrity woes of a modern supply chain is to avoid the age-old rule, Garbage In, Garbage Out. An LLP system should be capable of capturing the company's data requirements and the rules associated with "good" and "bad" data. Any data received should then be flagged for cleansing by LLP staff prior to transmitting that information. Also, the system should maintain a "Rosetta Stone", or translation tables unique to that company, that translates the various data elements received from partners and suppliers into terms the company's systems can understand. Because of their involvement across multiple companies, most LLPs can update these translations quickly for multiple customers as supplier or carrier standards change, enjoying economies of scale that most IT departments supporting their supply chain divisions do not.
• Visibility across the supply chain - True end-to-end visibility is a dream for companies for many reasons. Some small or niche suppliers may not have the technical capability to provide data electronically from their systems. As a result, visibility to those providers may be in a separate offline report or may be managed by the local operation. In order to overcome this, the LLP's system should be capable of handling multiple types of data input from suppliers: EDI, XML, spreadsheet uploads, data entry into web portals, interactive voice response (IVR), etc. Another challenge is that certain suppliers may only be able to interact in their own, local language or currency. Therefore, the LLP's system must be multilingual, including support for double byte languages (like Chinese). Also, the system should support multiple currencies, including handling multiple sources of data on exchange rates. All of this data should be aggregated together and provided to you as a single, seamless feed of data that can be used for visibility from ultimate origin to ultimate destination.
• Manages your business rules - How long should shipments be held before consolidation? How should a partial receipt of goods be handled? How should a carrier be selected? Businesses run on rules, and the LLP's system should be capable of modeling those rules and streamlining the processing around them. And, of course, this "rules engine" should be flexible and adaptable to changes based on demand, seasonality, or changing business conditions. Many companies do not have all of their business rules centrally defined or understood, so you should begin by inventorying your most critical business rules and ensuring that these can be handled by the LLP. Once you are comfortable and make your decision, a good LLP will know the questions to ask and will help you catalog your disparate business rules and capture them in their rules engine.
• Exception management - A truly efficient LLP manages by exception in your supply chain, allowing transactions within normal tolerances to flow while focusing their time and attention on the situations that exceed those tolerances (late deliveries, partial receipts, etc.). The LLP's system should have robust exception management and alerting capabilities to ensure that the LLP's operators are aware of exceptions as quickly as possible to mitigate any impacts of those exceptions to your supply chain. It should also be capable of raising alerts to you and your systems when the situation warrants so that you can take the appropriate planning and execution actions.
• Robust reporting and analytics - Many companies have advanced ERPs that provide standardized reporting on elements of the supply chain, and once the LLP helps solve your data woes you may be able to get access to all your information using those tools. However, other companies struggle with dated systems or deficient reporting capabilities, and even companies with great tools may not have everything they need. Therefore, the LLP's system should provide a robust reporting capability that goes beyond simple "canned" reports. You should be able to define your own, custom reports, schedule them, and distribute them as you see fit. There should also be an analytics capability that lets you see different aspects of the performance of your supply chain.
In the absence of a global supply chain data standardization body, LLPs are uniquely positioned to give companies the next best thing: business and IT solutions that consolidate data and present an end-to-end view of the supply chain. The key is choosing an LLP partner that has the operational know-how and systems capabilities to provide visibility, proactive exception management, and optimization for today's complex global supply chains.
Source: CEVA Logistics
Keywords: Supply Chain Visibility, EDI Communication (XML/EDI), Global Trade Management, Business Process Management, Business Intelligence & Analytics, ERP & Enterprise Systems, Event Management, Technology, Third-Party Logistics, Logistics, Business Strategy Alignment, Supply Chain Security & Risk Mgmt, Supply Chain Analysis & Consulting, Global Supply Chain Management, Data Validation & Standardization, 4PL, Exception Management, Business Rules
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