There's a good reason why real-time information on product location, both at rest and in transit, doesn't always flow smoothly between modes and across borders. And it has nothing to do with technology.
The culprit is much older than the silicon chip - it's human behavior. For all the technological resources at the command of shippers and logistics providers, users have yet to exploit them fully. The reason lies in an outmoded conception of competitive advantage, combined with a desire not to look bad in the eyes of the customer.
When it comes to information, inventory tracking has always been the top priority of shippers. Knowing where an item is in the supply chain can mean the difference between pleasing a customer and losing it to the competition. So companies over the years have embraced even the crudest solutions, from live phone calls to automated 800 numbers to sporadic faxes.
Today, the tools are far more sophisticated. Electronic data interchange (EDI), with its reliance on third parties to relay information, represented carriers' first stab at standardizing order status messages. Now, the internet is revolutionizing the way supply-chain partners communicate. The fledgling Extensible Markup Language (XML), along with numerous industry efforts at standardization, promises to create a smooth flow of up-to-the- minute data on where an item is and when it's due to arrive.
As with so much current technology, vendors are able to provide far more than users need. Managers of even the most tightly controlled supply chains don't want minute-by-minute reports on the progress of their goods. "They want to see the exceptions," says Chris Newton, senior analyst of electronic fulfillment with AMR Research Inc. in Boston. "If a delivery to a major client or customer is going to be delayed, they want as much advance notice as possible." For supply-chain managers today, no news ought to be good news.
Any effective tracking system will be keyed to a series of alerts that helps shippers stave off disaster. Steve Banker, director of supply-chain research with ARC Advisory Group Inc. in Dedham, Mass, speaks of the concept known as "Delta T." Devised by Vigilance Inc. of Sunnyvale, Calif., it measures the period within which a shipper can react constructively to an alert. Shippers and software vendors are working to lengthen that time span, by triggering alarms at the earliest possible moment.
Given shippers' historical need for status information, it's surprising how vague and undefined the discipline is. Consultants can't even agree on a name; for instance, AMR calls it Supply Chain Event Management, while ARC prefers Supply Chain Process Management. Whatever the term, the application creates total inventory visibility outside an individual enterprise or corporate "silo," with built-in alerts and workflows based on previously set guidelines. For example, an international shipment might be stuck in port due to the lack of a document. The system will alert the shipper to the delay and trigger the process that generates the necessary paperwork.
The means of capturing data vary widely, depending in part on the vendor's area of expertise. One promising tool is the radio frequency identification (RFID) tag, which has become a popular way of registering equipment as it passes through checkpoints. The general public is growing familiar with RFID at places such as tollbooths. On the logistics side, it is frequently used to manage containers, pallets and trucks. Newton says RFID has now been refined to the point where it can include data on the contents of a shipment. Shippers may not want a barrage of updates, but when they do get information, they want it at the SKU level.
The Hard Reality
All of which is possible today, at least in theory. Satellites can instantly pinpoint the location of a shipment anywhere on earth, Banker says. The reality is that inventory tracking systems often fall down on the basic requirement of data accuracy. And for that, don't blame the software.
"The technology is there to capture as much detail as you want," says Newton. "But someone has to put that data into the system. That's where things are falling apart."
One reason lies in the quality of links between multiple partners. Logistics exchanges, the latest wrinkle in internet applications for the supply chain, claim to have repositories of essential data on shipment location. But they may lack solid ties to every carrier or logistics vendor in the loop. And some of those nominal partners may be hoarding information in hopes that they, not the exchanges, will be the shipper's ultimate source of status information.
The problem of data accuracy stems from the tendency of materials management systems to treat inventory as an asset -
An even bigger problem is the lack of candor on the part of some carriers. They may not want to tell consignees about items that are running late, in hopes they can make up the time prior to delivery. Newton tells of one trucker that claimed the ability to correct delays while in transit 70 percent of the time. Given that record, it preferred not to tell the customer that it had ever fallen behind.
Banker says truckers won't permit vendors such as Qualcomm to provide satellite signals directly to shippers, for fear of creating unnecessary panic over supposedly late shipments. A more basic reason might be the carrier's fear of tarnishing its image-or even fear of punishment by the shipper. The problem is especially acute in global logistics, where moves are more complicated and partners might not even agree on essential metrics. A trucker might consider its job done when the trailer reaches a distribution center, notes Banker. But if the vehicle sits there without being unloaded for eight hours, have the goods truly arrived?
Pressure from shippers with time-sensitive supply chains will likely cause carriers to share more accurate data. Still, the question of who will relay that data to the end user remains unresolved. As in the case of supply-chain management software, the field is rife with candidates from various disciplines. Point solutions vie with comprehensive software houses, internet-based exchanges, carriers and third-party logistics providers.
A Tool for Tracking
One 3PL that wants to play that role is ACS Logistics, a subsidiary of Singapore-based APL Limited. Born as American Consolidation Services, ACS has long since branched out into multiple logistics functions, with a focus on the retail industry.
NetTrac, ACS's web-based inventory tracking tool, has separate components for ocean, land transport (including customs clearance) and exception management in SKU-level detail. Tony Zasimovich, vice president of sales, marketing and customer service, says the software can harmonize key definitions among logistics partners for events such as shipment arrival. Customers, he says, are demanding complete and accurate visibility of product from all providers, down to the "last mile" before delivery.
Zasimovich admits to a shortfall of accurate data from underlying carriers. "It's getting better," he says, "but it's not where it needs to be." The best feeds come from vendors with sophisticated information technology applications. But problems persist across the board, with carriers of all modes.
NetTrac is evolving to allow for more user-defined exceptions and requirements, as well as the use of XML standards in a web-based mode. The goal, says Zasimovich, is to make users' global supply chains faster and more responsive to change.
When an underlying carrier controls the entire shipment, the job of tracking is relatively straightforward. TNT International Express monitors more than 3 million consignments a week from pickup to delivery, says Tony Faia, director of sales and customer service. It can track by purchase order, part number, consignment number, or any other means selected by the customer. TNT also works with upstream vendors, starting the tracking process before taking possession of the shipment.
Things get more complicated when additional parties are being managed in a third-party environment. That's the job of another TNT unit, TNT Logistics, which oversees goods in transit and within distribution facilities. In the first instance, it relies on the Vector21 transportation management system of CTI Logistx, focusing mainly on inbound movements to manufacturers. In the second, it utilizes enterprise resource planning and warehouse management systems from software vendors such as J.D. Edwards and Catalyst.
The tools keep track of vendor-managed inventories and components that are kept close to the assembly line for quick delivery. In Houston, TNT Logistics runs a materials center for Compaq Computer, providing status information on some 200 suppliers from around the world.
The quality of tracking data is especially good in the automotive sector, says Mark Morrison, senior vice president of TNT Logistics. There, the rate of non-conformance by suppliers is less than 1 percent. The task now is to transfer that discipline to the electronics and consumer industries, whose suppliers continue to lag. Transportation providers outside the TNT family must conform to a high level of data accuracy in order to get the third party's business, Morrison says.
i2 Branches Out
Dallas-based i2 Technologies Inc., which began life as a provider of supply-chain planning software, has branched out into numerous areas, including transportation and logistics. Its inventory tracking tools reside within the suite of products known as FreightMatrix. The company's Global Logistics Monitor (GLM) is intended to bridge the gap between planning and execution, providing visibility that can trigger both reactive and proactive measures, says product manager Ian Gittens.
GLM can hook up to any ERP or planning engine, says Craig Clark, vice president of operations with FreightMatrix. It can monitor documents, orders, order lines, transportation equipment, or physical inventory. Information is conveyed either through EDI or a web browser, depending on the sophistication of the party providing it. While GLM is not a planning tool, its system of alerts triggers other i2 components, such as Trade Optimizer, to re-plan an order based on unforeseen changes. Alerts can also be transmitted to a warehouse management system.
The quality of data fed into GLM "could be better," Gittens admits. The vendor has received out-of-sequence messages from the value-added networks (VANs) that transit EDI messages between parties. But the thrust of GLM has been to reduce, not add to, the rules for getting data into the system. It has the ability to inform the user that information is either incomplete or non- compliant.
Gittens says the increasing use of standards such as XML should make for smoother and more accurate data transmissions. Darren Ward, director of FreightMatrix solutions, foresees the development of a series of standards templates keyed to each industry, allowing for faster time to market.
The development of internet-based standards for transportation is crucial to developing fast and accurate tracking systems, says Beau Browning, director of marketing and supply-chain execution with Atlanta-based Logility Inc. Logility, a software provider for business-to-business commerce, is working with the Voluntary Interindustry Commerce Standards (VICS) committee to define standards for collaborative transportation management (CTM).
VICS is the group that first published standards for collaborative planning, forecasting and replenishment (CPFR) for the retail industry. Now it is taking a similar approach to transportation. In addition to tracking, CTM standards will cover the assembly of orders into shipments, selection of mode and carrier, load tendering, scheduling and payment.
Several pilots are under way or planned, including one between retailer Best Buy and Sharp Electronics Corp. During that test, Best Buy gained shipment visibility by changing the terms of payment from prepaid to collect. In the process, it reduced order lead times by as much as six weeks, Browning says.
EDI Still Rules
In the absence of fully developed XML standards, EDI remains the backbone of most inventory status reporting. And because the technology relies on batch processing, it rarely ships data on a real-time basis. Users can, however, view reports over the internet, Browning says. Alerts come via EDI, e-mail or even calls to a user's cell phone. Logility's future capabilities will include an interactive component, allowing shippers to execute on-the-spot changes in a shipment based on predetermined criteria.
The system will be smart enough to do nothing, if it determines that the carrier can make up time on a late shipment. That feature might help to allay carriers' fears of being punished for temporary tardiness. In any case, says Browning, the largest less-than-truckload carriers, small-package handlers and a handful of truckload leaders have already shown themselves willing to provide the necessary information. "Outside that group," he says, "there's a lack of technology and desire."
Atlanta-based SynQuest Inc., which sells planning and execution software for real-time management via the internet, combines visibility with a high degree of intelligence, says Chris Jones, executive vice president of marketing and corporate development. It's not enough to tell a shipper where its product is, he says. The message must be supplemented by an understanding of what it means to the supply chain. If a certain vehicle hasn't reached the paint booth, for example, the color could be changed to account for a late arrival. Or a trucked shipment might be shifted over to air.
SynQuest, too, is able to work with incomplete data from upstream sources. Its planning and tracking engine is keyed to messages that were actually received. Jones says information gaps can be the fault of a manufacturer or shipper as much as the carrier. And while the quality of data is improving, he adds, not everything comes through on a real-time basis today.
Vigilance makes a software product that sits atop other systems to allow for visibility across the supply chain. Individual tracking packages are either proprietary in nature, as with FedEx and United Parcel Service, or focused on a discrete part of the chain-at the factory, in the warehouse or in transit, says Director of Marketing David Busch.
The problem of data accuracy, he says, stems from the tendency of materials management systems to treat inventory as an asset, so that key information is kept secret from outsiders. Several contract manufacturers serving a common customer, for example, might be reluctant to share their respective inventory positions. Electronics pioneers such as Dell Computer and Cisco Systems Inc. have made progress toward creating a more trusting environment, but there's work to be done.
The emergence of private exchanges on the internet should help. Busch believes contract suppliers and original equipment manufacturers are more likely to share data in such in a non-public atmosphere. If so, that raises questions about the effectiveness of giant public exchanges such as the automotive industry's Covisint.
A Bird's-Eye View
Irista, headquartered in Milwaukee, touts visibility in three separate areas of order fulfillment-order, warehouse and transportation management. Its latest product, Irista Vision, cuts across those "silos" for the first time in a web-based mode, says Scott Rischel, vice president of industry marketing. Alerts can prompt an individual to take action, or trigger an adjustment within the system itself.
Rischel calls carriers' failure to part with data "the biggest hurdle of all." But the fault isn't entirely intentional. The chief reason "is that they don't have the business processes in place to get that accomplished." Parcel handlers are doing a better job than LTL or truckload carriers, he says, although the biggest truckers are making headway.
One of the newest entrants into the supply-chain software marketplace, San Mateo, Calif.-based Arzoon.com Inc., has designed a transportation management trading network that claims to cover all modes, foreign and domestic. Much of the information is real-time, although some carriers still rely on batch processing of data, says Bill Tarbox, vice president of product strategy.
The top-tier carriers are doing a good job of furnishing the data, says Tarbox. Any failures are less a function of mode than a lack of profitability among the vendor in question. And not every carrier is up to speed in a technological sense. The challenge, he says, lies in "getting carriers to realize the value of information in their network."
Vendors, meanwhile, are working hard to advance their technological prowess. One focus is on making systems smarter about predicting snags in the supply chain. According to Banker, that would require the use of neural networks, computers with millions of separate processors that can work together on complex problems, in the manner of the brain. Neural nets are often employed to create expert systems, which can make key decisions without the need for human intervention.
Cost is a major barrier. A neural net can run more than $5m, versus up to $1.5m for traditional supply-chain management software, Banker says. And Jones doubts whether expert systems will be of any value, because they are rules-based and insufficiently adaptable to the needs of a complex supply chain.
Still, it doesn't take science to tackle the biggest obstacle to better inventory management: inaccurate and incomplete data. Carriers, suppliers and producers are just beginning to realize that competitive advantage no longer derives from secrecy, but from collaboration.
Experts say improvements won't be long in coming. "It's better than it was six months ago," says Zasimovich. "I think we're going to get there in the next year or so."
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