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Management' Utilizing the Internet to Enhance Logistics Competitive e Advantage

Of the business functions of the modem enterprise, logistics has had perhaps the most visible impact on the economic condition of society. Historically, it has been the role of logistics to solve the problem of product distribution by providing for the efficient and speedy movement of goods from the point of manufacture to the point of consumption. Today, this basic role of logistics has been greatly accentuated -by the continuous, downward spiraling of all facets of product cycle times, com ,pounded by a relentless acceleration in _marketplace demands for quick response customizable services, and self-activating ordering systems. In addition, logistics functions must now be able to link customers with suppliers through both physical and now Intemet-driven channels. In such an environment, the key to logistics competitiveness is to utilize the best service partners and technologies to ensure that the most timely information and efficient business systems can be leveraged in the ,pursuit of value~added processes driving the cycle of supply chain procurement .manufacturing, and delivery ~In fact, the tremendous challenges and strategic opportunities for logistics com petitive advantage posed by today’s global and Internet-driven environments requires redefinition of the logistics concept and the evolution of a new term - logistics resource management (LRM). Similar to the recent transformation of customer service and purchasing functions into CRM and SRM, the use of the term LRM is meant to convey a similar expansion of traditional logistics activities to encompass the multifaceted concept of supply chain management with its focus on trading partner collaboration, the removal of channel barriers causing excess costs and reduced cycle times, the espousal of Intemet technologies that facilitate information and transaction data collection and flow through the supply pipeline, and the creation

of agile, responsive organizations linked together in a single-minded pursuit of .superior customer service In this chapter the elements of logistics management in the Internet Age will be examined. The discussion begins with a review of the function of logistics and its evolution to logistics resource management the structure and key capabilities of LRM, the chapter proceeds to describe the different categories of LRM available today and the array of possible Web-based toolsets driving logistics performanc measurement and warehouse and transportation management Afterward the use of .third-party logistics services is reviewed The different types of logistics service providers, the growth of Internet-enable providers, and the challenges of choosing a logistics partner that matches, if not .facilitates, overall company business strategies is explored in depth


ana ement has evolved from Over the past quarter century, the science of logistics m g t'tive weapon providing today ’s enterprise purely an operational function to a compe 1 with the capability to leverage Internet technologies to closely link the farthest regions ,of the supply channel with market demand found anywhere in the globe. Originally t nd cost-effective warehousing and ° ° ' ` the mission of logistics was to provide efficren a transportation utilities that .enabled companies to deliver products in support of I the a e of e-business, modern logistics ` “‘ ’ ' internal marketing and tinancra. objectives. n g lf a critical competitive resource, creating value by responding to

has become in itse ever-higher levels of customer expectation, engineering operations that integrate -trading partners up and down the channel network while reducing costs and expand .ing the spectrum of value-added services necessary for electronic corrmierce The sheer size of the logistics function bears witness to its central position in business. According to Delaney) the cost of logistics just in the U.S. for the year exceeded $1 trillion. This expenditure was equivalent of 10% of the U.S. gross 2000 domestic product measured in nominal dollars. The total included $377 billion of d $585 billion of transportation cost. Of total logistics

inventory carrying cost an

l U.S. frei ht transportation costs, trucking accounted for nearly 82% of annua g .4 _ expenditures. g While numerous definitions of logistics have been proposed, perhaps the most .en formulated by the Council of Logistics Management I. DEFINING LUGISTICS RESOU

often quoted has be

th rocess of planning implementing, and controlling the efficient How ' ' , Logistics is e p and storage of raw materials, in-process inventory, finished goods, services, and related ~f ation from point of origin to point of consumption (including inbound, out ' in orm

transportation -finished goods management. inventory reduction. and finance.requirements This and other deiinitions imply that LRM creates competitive value by ensuring the optimization of logistics operations costs and productivity. customer order management services. these processes include . and external movements) for the purpose of conforming to customer . resource allocation human capital. receipt. product packag . sets of functions as illustrated if Figure 8.bound. Beyond cost management. The first set of functions has classically been grouped under the term materials management and is identified with the management of the incoming flow of materials and services into the enterprise from the supply channel. This function is normally associated with the outbound -flow of finished goods through the distribution channel to meet customer require . Detail activities can be described as including warehousing. operations.ments. yet closely integrated. achieving conformance to quality _ _ ?standards. The second set of functions can be termed physical distribution. In addition to traditional operations functions. better capacity and resource utilization. and closer integration with customers and k t lace ` ° ` suppliers. Materials management can be further broken down into a subset of activities supporting the cycle of materials How from the purchase. LRM creates competitive advantage by flawlessly executing customer service objectives. and control of inventory to manufacturing and delivery of finished goods to the supply channel system.strategic decisions relating to channel design and structure. the overall success of these objectives depends upon the close collabora tion and integration of all logistics partners that populate each node in the supply channel system and who are responsible for the efficient performance of logistics processes. Fur -thermore. LRM also assists rn the creation of mar e p -leadership through customer service and timely product and service delivery. and increasing marketplace value Perhaps the best way to examine the contents of LRM is to divide it into two separate.1. internal.

While it can be argued that separating LRM into the above two regions is somewhat artificial and that processes. and higher ROI. overlap. and returns goods management. In addition these capabilities are the foundation upon which the remaining LRM capabilities can be improved. the LRM capability model does provide a structured approach to understanding the possible components involved in logistics and transportation. the model provides strategists with a frameworkfor identifying strengths and weaknesses and . In addi tion.HGURE 8. to drive the logistics rr1odel.these capabilities can be singled out as absolutely critical. both (. LRM can be broken down into strategic and tactical objectives distributed within a framework spanning three 19 -critical processes: planning and collaboration. regardless of industry Masteringthese five capabilities provides companies with the most important drivers . tive of . and execution.define the objectives and processes of each capability and to architect enabling organizations and technologies.delineate organizational identities as to facilitate understanding -While the above definition attempts to view LRM from an organizational per spective.ing.2.“While it is critical to ~acknowl edge that not all of the 19 processes will apply to all industries and companies. the goal is not so much to . Developing and the other capabilities will require strategists to closely . These capabilities can be described as . Accenture has developed a framework that seeks to describe LRM from a capability point of view? As illustrated in Figure 8.2 The logistics footprint.of logistics cost reduction.for developing effective measurements to initiate continuous improvement While each of the 19 process capabilities are critical'~to effective LRM. shipping. transaction. higher customer service. (Reprinted with permission of Accenture internally and externally. and an infomediary component which will detail the depth of knowledge and information required to support the capabilities. the model contains a technical infrastructure component which will determine how information is exchanged. such as transportation and inventory management. In addition.

share of overall enterprise costs..customer. the integration of quality management processes.complexity of LRM operations activities (inventory transactions. Finally. the ability to track and manage logistics costs.entire supply chain LRM functions should conform to the level of performance expected by the .follows 4 A. Furthermore. shipments and so on) touch so manyfacets. identify possible avenues for profit by uncovf efing new value-added services or by differentiating product/service delivery. In addition. The second component. is . Such a judgment arises in part from the fact that the sheer size and . orders. validating the capabilities of logistics has become a critical source of competitive advantage. Essentially. since LRM operations drive a significant . and the broadening of logistics service levels. but also for the ' . and 4 architect new channel strategies with suppliers that result in channel inventory reduction and overall improved efficiencies. is demonstrate_d by the creation of measurements that can provide meaningful productivity standards. they must be carefully collected and monitored Accurate measurements assist managers to identify operating inefticienci la V S reduce costs. Locisncs PEnronMANc£ MANAGEMENT Perhaps no other business area in the enterprise needs to be measured more closely than logistics. effective LRM metrics enable strategists to detail how well T the company is serving its customers. not only for individual companies. not only of individual businesses. as LRM evolves from a tactical to a strategic function. logistics service performance. logistics performance is composed of three key components The first. logistics productivity. but also of trading partners on a global scale.

and planning. Fuu=|itMsNr PLANMNG AND Execuriou Whether traditional or e-commerce channel. even the best marketing campaign or the cleverest Web site is destined for failure.data warehouses B. Finally. A critical issue in this component is ensuring . cost. such as product availability. ln the past. one lesson has been made abundantly clear: without effective and timely product fulfillment. and breadth of postsales service support. ERP systems. quality. fulfill ment process time. LRM information systems should be -employed to gather. companies must be careful to select those that paint an accurate -portrait of overall performance. buyer/seller exchangeconsisted of one-to-one paper-based systems. In addition. utilization of technologies. The fundamental problems revolving around data inaccuracies. Often this means working closely with trading partners to ensure the proper data is being gathered from channel SCM systems.ment costs to a minimum The final LRM performance component.concerned with tracking metrics associated with the ability of logistics functions to meet customer service goals. order cycle time. and . process. and scheduling process -accuracies. depth of service information. and analyze the tremendous volume of LRM perfor mance activities. thereby distorting reality. Such a task is a -difficult one and conceals several traps.logistics measures are in synch with company fulfillment strategies. logistics performance measurement systems. focuses on what and how performance is to be tracked. forecasting. companies need to ensure that measurements are not sub ff' jective. lack of connectivity. For example if a company’s strategy is to be a low-cost provider of products. such as the sourcing/procurement process. and lack of information . logistics system flexibility. the logistics systems -must be efficient and flexible enough to meet company goals while keeping fulfill . Since there are literally hundreds of mea surements possible.

Accordingly. to view marketing materials and promotions and place orders and access shipment -nf tion almost instantaneously.” the goal of the LRM process isdthe optimization of supply chain network fulfillment functions.ning enables companies to convert customer demand into actual shipment schedules .onmpanies need LRM functions that place a premium on fulfillment speed. inflexible fulfillment processes of the past and require. in their place. accuracy l` ' -. customers have become increag’ ingizrilriimuent with the poorly synchronized.mortar vt-rirehouses Architecting an effective LRM fulfillment plan require ~o rational functionality and strategic capabilities. integrated supply chains capable of compressing all aspects of fulfillment from order entry to delivery.attributes that require companies to deploy` ` ' ’ ° (visibility. In contrast. and ag: ll the right technologies in support of superbly engineered fulfillment processes that -range from tightly synchronized trading partners to strategically located ht'ick-and . today’s customers have the capability . fulfillment plan ¢P .visibility that constrained the fulfillment process were masked by inflated cycle times and channel inventory buffers. ln such an environment .optimize transportation management :rctivities such as carrier selection and routing ent life cvcle information. According to Poirier and s close attention to both and collect and provide fulfillm Bauer. Opemtionally. personaltrxition. These functions can he separated into the following live opcr :ations ztrens .

‘t'n.service levels -l.l4`rm`g/it mi! and .ts to be considered are optimi ~zation of shipping capacity utilization. and postponement strategies that position actual product at the various nodes in the supply channel.‘t2a1’_I‘f!tII'!!!!'fZ§. Critical functions in this area rcxolve around selection of the appropriate transportation mode.»\re.tIt>{>ott.i~_t of tnxitinping inbound outbound freight.1gcmcnt.tron. The main functions in this :treo ° cons.t tltirctl-pgrty supplier. An often-overlooked area is shipment . \\‘Zil{"ll(`)ll§lll§}. equipment maintcnance.t_l ttrtxis for fulhllmcfll planning rc\ol\‘c :trottnti cqniprncstt t.cost. Ltilizing transportation assets to achieve maximum ful ° fillment optimization requires clctnilcd load planning. . 'lihts .vxet-.‘cnient. and execution of adminis trative 5'=L‘l`\'lCL‘I~».. :ind ntlniinistrzitive Scr -vices that utilize the tr:<">\t co~.totnl -co~»tt control.t~cll`ctfti\'c yet efficient trnnsporttltton part llt‘l'$ tllltl t`.rrrtzcc »”I.iHlt1£Qt`I7Zt`l'lf. less-than-tnickload (LTL) ship ments. operations outsourcing decisions. These functions are normally considered as the ° -heart of Lransportzttion mztnrtgcment.ttliJ.inzuin use of transportation assets tthethcr internal or through . itll (llc: effective lJllllZZlll0Il r*<‘! f!2tli"1t}. and possible third-party transfer .lf£`_!'?fc'!Zf. and total .point or cross-docking functions Roztnfig and _rc/:rdzl!t`ntg.»t. The goal is to tfetcrnunc the op:.‘tl xt.t!‘l`lt'!ix ls ctt>tttFt. lzffcctitc fulfillment planning in this area requires the zircliitcctiiiiz of fultiilmcnt functions that can optimize inbound materials ~and outlwount_i protliitrt mt»». carrier m:1n. (i`ttttc.. load building and consolidation. without compromising .tit`f§i ..trtut["{ ’ of pllyslcgtl U.

putaway .marketplace needs. transportation.ingly replacing inventory in the supply pipeline with information -While effective LRM operations will assist in generating incremental improve ments to supply chain fulfillment.management . EDI. The effective management of inventory in the « . ERP. and . order-of-magnitude acceleration of channel value will be achieved when whole channel networks leverage LRM to achieve strategic -fulfillment objectives. product classification. and letters of credit Warehouse management.documentation and compliance.can be found order allocation and picking. Key points are concemed with ensuring accurate documentation regarding country quotas. packaging. and electronically enabled to provide real-time connectivity -Effective LRM operations planning should provide fresh opportunities for the devel -opment of new fulfillment networks and relationships with logistics partners. import/cxp0f'l . The goal is to engineer highly integrated supply chain net works that are seamless to the customer. or the Internet. and warehouse performance measurements -Effectively managing each one of these logistics operations areas requires plan ners to constantly search for methods to automate functions through the use Of computerized technologies. receiving.delivery capabilities C. warehousing. optimization requires planners to assemble technology toolsets that enable them to leverage channel information flows to make better decisions.returns management. thereby -increas . agile in their ability to change to meet . reengi neering of new organizational LRM roles and responsibilities. Looisncs PAnTNrnsH|P MANAGEMENT . flexible sourcing.supply chain requires efficient and well-managed warehousing techniques Among the components of this area of traditional logistics . tariffs. and the development and implementation of robust. Whether through transaction devices.f¢8Ul31i0f1S.

l.1p}Lstem'and create newforrns of unctrons can be divided into three technology~driven enablers.1.Today’s fast-paced.q e used to assist both individual companies and the supply chains to which they belong -ogielglgd gitlllilséilggitgqiome mpre valuable as they utilize new technol fulfillment Support Services. In one region can be found LRM providers who use the Intemet to form logistics marketplaces that match buyers and_ sellers.. tactical. Often p achieving the level of operation optimization detailed above will require the use of a third-party logistics (3PL) firm or a lead logistics provider to support fulfillment objectives.. and strategic functions for a supply network.the movement of fulfillment transactions through the supply network .P1é>l316¢§1I. These <. In the final region can be found flow management service providers that assist network partners to manage . According to Hintlian and Churchmanf today’s LRM environment requires logistics service relationships characterized by: f Increased collaboration between logistics services providers and their ° customers The establishment of contractual and operations arrangements that foster ° an environment of win-win between all parties -detailed and accurate catalog of core competencies possessed by logis ° p tics providers that can be outsourced I ° 'she capability of logistics providers to design support systems that can p . of _ lggigties operational services.models governing logistics relationships with third-party service providers. Internet-driven marketplace requires businesses to develop new . In another region can be found infomediaries who -harness information technologies to support the synchronization of logistics opera tional.

challenge Inability to see shipments in the supply chain simply causes time delays. and the establishment of often separate Intemet sales functions increasingly renders just tlCll\’CI`lIlg the product to the customer a .tems is to provide a real-time window into the life cycle of a product transaction -beginning with order placement. amplifying inventory reserves.intelligently -When coupled with event management functionality. ranging from SKU number to shipment origin. progressing through picking. raw material providers extending several levels upstream.D.has been made more difficult as the complexity of the supply chain has deepened caused by the increase in contract manufacturing. and creating a bullwhip effect especially in complex supply channels with many depots where inventory tends to build. shipment visibility constitutes the very first layer in LRM. As cycle times and inventories shrink in the supply pipeline. anytime in the supply network. and ship . and global sourcing efforts requiring overcoming geographic boarders and language barriers.” While it is critical that current fulfillment functions provide the capability for customers to access real-time data regarding their shipments utilizing any one of a number of variables. Of increasing importance to logistics managers is visibility to information about inventories and fulhllment capabilities found not just between immediate buyer and supplier. substituting information for inventory has placed a premium on total supply network resource visibility. but also among trading partners constituting the entire supply chain. packing. Supply chain visibility is about being able to access accurate information about inventory and shipments anywhere. the goal of visibility sys . Assembling effective LRM capabilities . so planners can respond quickly and . SHWMENT Vrsiaturv Shipment visibility today has become much greater than simply order “track and trace.

and carriers. and assist in architecting fulfillment processes that lead to a spiral of continuous improvement and superior . from pick-and-pack all the way to delivery. and better plan the receiving process -As the value of information regarding delivering capability and shipment visi bility grows. Today. Target.receives thousands of inbound shipments each week into its 20 distribution centers In the past.000 phone call inquiries about shipment status.visibility is also critical for inbound shipment management. Shipment . fulfillment event management (or its better known name -. 'I`arget’s supply channel visibility soft ware enables the giant retailer to optimize shipments.ment. consolidate LTL into full _ ?tnrckloads. . enabling them to execute more effective 'strategic logistics solutions. ensure valid avail able-to-promise information.supply chain event management (SCEM)) has become one of today’s most . track fill rates. companies can leverage ERP suites. dependence on various levels of technology can be expected to q wi-fespondingly grow and will become a “must-have” for effective LRM. Extemally. and transportation management systems (TMS) to view shipment-order) -linkages and in-transit shipment information. and performance statistics Lanier. used a third-party shipment solution to eliminate nearly 100. quality reporting. and concluding with delivery. FULFILLMENT EVENT MANAGEMENT Alongside logistics visibility. suppliers. information was handled largely through faxes and phone calls between ~the company..service to the customer E. and control transportation costs. for example . and execution applications that provide CPFR and supply chain event management (SCEM) solutions that provide LRM planners with visibility to the entire supply channel. management. for example. warehouse management systems WMS). companies can now leverage supply chain planning. Inside the Organization. when it provided dealers Web access to the status of their orders.

such as missed orders. and transportation management. can assist to proactively reduce and eliminate common fulfillment -errors. and improve supply chain efficiencies. such as when shipments are packed and shipped and which carriers are the most efficient and cost effective. create workflows. order. which tightens ‘up lead times and lets companies spit out better optiniizationsf Companies such as KBKids.start to understand the root cause of why a truck didn’t arrive when it should have What we lacked before is visibility into the reasons why truck shipments have been delayed or why orders have been short. AMR Research feels that such capabilities take fulfillment beyond mere track and trace: true SCEM :applications should support business processes for . and other shipment and service prob lems. a Denver-based division of Consolidated Stores Corp.. According to one analyst. so LRM planners can .8 Such a view is shared by Steve Banker. the operator of 1.duction.com. With more granular. extended supply-chain visibility we have the data to start to correct causes of these problems. Fulfillment data. late deliveries.Monitoring: Providing real-time information about supply network events ' .-important buzzwords in supply chain management. when applied to warehouse. director of supply chain solutions at ARC Advisory Group. are provided on their Web sites and e-mailed directly to the customer.300 KB Toys stores nationwide. who feels that event management systems can now feed data into performance management systems. and fulfillment -N0{1fying: Providing real-time exception management through alert mes ’ . ful fillment event management is one of the most significant and far-reaching of today’s software technologies that. open orders. cut logistics costs. and set up escalation processes to enhance customer service. pro .-such as the current status of channel inventory levels. are using fulfillment event management applications to monitor and send alerts.

to todzryfs emerging forms of trading exchange. to alen planners through rt generic workflow process that :rn occurrence inthe fulfillment pipeline leurs xirilazed predctcrrnined tf\`Clll boundaries. and performance/complizince management. For .action in response to an event or trend analysis Controlling: Provides channel planners with capabilities to quickly and ° easily change a previous decision or condition. Depending ~on the impact of the excnt. such as cxpediting an order .ition. either planned or unplanned. SCEM appli cations currently provide logistics planners with the following functions: order and shipment tracking. alert messaging st= ’notit'ic.ruring. often using Boole:in type logic.Sagrng that will assist supply channel planners to make effective decisions .transports fulfillment infomation as it tions between channel trading partners SCEM is normally integrated with ERP and supply chain execution systems and has ~the potential to link. the system will trigger .° Provides essential metrics and performance objectives or KPls to assist supply chain strategists to assess the performance of existing channel relationships and to set realistic expectations for future .agement SCEM can be described as an application integration layer that standardizes and . occurs requiring planner intervention. escalation processes. Basically. ttforlttlovt.i signal.example . the system is engaged when an event.performance ARC believes that fulfillment event management and performance management -will eventually be integrated to provide what they temt supply-c/rnr'n process man .or selecting less costly delivery opportunities i ~ Mea.as conditions change in the supply pipeline |¢Simulating: Providing tools that permit easy and fast supply chann ° modeling and “what-it" scenarios that recommend appropriate remedial .

variances Altogether. channel. and in~transit" «inven l°§» imPf0\’ed accuracy of order processing and tracking. After years of JIT and demand-driven fullillment. and decreases in labor requirements. increased velocity of'°’ gm” m5”\3S.i°’l»’ WMS. released. so less expensive h5PP51\8 ii required. This permits them to be aware of logistics events such as whether a product is produced. performance scorecards. and dashboards can detail long term spending and fultillrnent performance on shipments and compare the data over at variety of carriers. reduction of returns. on hold. the real value in event management is to be found on the strategic level -where predetined KPIS. delays in transportation and at border crossings created too much stress on already lean inventory stocks and forced temporary shutdowns in automotive and electronics assembly plants.¢f¥'¥!Hl. It also has renio\ ed sew eral days in the speed of cycle time fulfillment due to improved information tion through the supply channel. time periods.” However. but also for entire Supply chains. the benefits of applying the latest computerized techniques that seek to automate logistics functions and increase the accuracy of LRM decisions can produce enormous benetits not only for individual companies. ~r\ddi fmnll bmi benefits can be found in decreased inventory holding costs. or available for pickup. decreased manufacturing WIP.Unilever Home & Personirl Care uses their SCEM systern to create close Internet links to their third-party ntitnutlicturers. some analysts were declaring the end of JIT and fast-cycle procurement modes and the . find reductions in channel safety stocks”'¢‘”" The recession of 2001--2002 and the events of 9/11 demonstrated the fragility of the -concepts of JIT and SCM that had been guiding the conceptual and practical man agement of fulfillment functions for almost two decades. Among the benefits 'ire faster response times. During the last few months of 2001. increased . while SCEM provides visibility to current events and permits planners to execute operational corrections. and transportation modes to pinpoint critical .

has historically marked the entrance of other technologies into the logistics held. According to Lewis Dibert. participating in e-LRM solutions requires little or no investment from trading partners. and suppliers were being forced to reassess inventory management. What is really happening is. Unfortunately. retailers. only 8% of shippers and 4% of carriers are prepared for Web-based integration with their partners. director of logistics at Red Gold Inc.establishment of higher levels of safety stock. while they’re cutting inventory ”“. “People are trying to cut inventories. This disappointing result. Manufacturers. must be debuggea' by a large in-house . In reality. and the reluctance of most companies to automate supply chains have made many logistics managers hesitant about embarking on Intemet technology initiatives.costs because sales are dropping. companies must be careful to avoid the following common misconceptions conceming the application . 72% of shippers and 38% of carriers have EDI capabilities. sourcing. they’re trying to expand them. Apparent contra dictions have only confused matters. most providers do not even charge a membership fee for participating in their trading communities. according to one industry expert.1 IS stalf and will take years before a satisfactory ROI can be achieved. increased skepticism regarding B2B e-marketplaces. cutbacks in technology spending. In the new world of Internet ~ commerce (September 2001). and transportation -processes to guard against possible new supply chain disruptions. Part of this reluctance can be traced to the learning curve for new integration technologies..reluctance can be attributed to unfounded fears about technology While it is true that undertaking a supply chain integration project is difficult in itself without threats of trade disruptions and a soft economy.of today’s suite of LRM technologies e-LRM is prohibitively expensive. but at the same time. Twenty years after the rise of EDI. they’re finding resupply is taking a lot longer In addition to the economic and political challenges. much of this “. While customized private trading communities will require upfront expenses. e-Logistics providers .

» t Using e-logistics trading communities will severely damage long-standing . Logistics exchanges should be I used to enhance. Most e-logistics suppliers provide complementary training and 24-hour help desks to support users. Leading~edge companies simply cannot wait. uncertainty. and the agility and sophistication to manage even . existing logistics relationships.the most complex of supply chains -e-LRM will require massive changes to existing technology infrastruc . such as the Internet.that provide safe transmission of sensitive data e-Commerce requires a great deal of internal knowledge and it is hard to .charge transaction fees when freight is tendered -e-LRM will require massive changes in the way the company has histor . ‘Logistics managers 'might want to test the cost of services first on an exchange . XML.skills to participate.3 tures. and wireless communications with legacy ERP and TMS solutions: Normally itis the responsibility of the logistics solution provider to provide the necessary connectivity for . Most e-logistics providers possess" technology infrastructures scalable enough to handle enormous transaction volumes.today’s seamless supply chain The use of nonproprietary information technologies risks a loss of control . thereby threatening operations during a period of _.2 ically done business. Any company with a computer will benefit from e-commerce. operating redundancies to respond to any emergency condition. not replace..4 -and security over sensitive company data.5 learn. Virtually all e-logistics mar ketplaces today are encrypted with sophisticated security technologies .in an Internet-driven trading community.6 relationships with core logistics providers.technologies._ and even the most technology-challenged users can acquire sufficient . In reality today’s e-logistics providers can easily combine advanced .

Finally. where customer needs are identified. Components must be on hand to meet build requirements. but excess risks oversupply on pans that lose value daily. and determines optimal supply plans that reduce risk and bring the greatest profits. Internet-based logistics providers can -also provide service to supply chain areas that have functioned indepen dently of core carriers. On-line marketplaces are also devel oping multiple response engines that are more sensitive to their customers’ comfort -with technology. logistics process and readiness for e-commerce are mapped. Sun’s solution was to invest in a standardized. managing logistics network risk is fundamental to survival. and product availability. and execution are discussed at the outset.The system pinpoints critical I ihortages and possible surplus inventories. and appropriate Web and EDI connections that accentuate logistics optimization.cies of existing logistics partners Removing these fears is going to be critical as more and more companies become more comfortable with technology.before tuming to core providers. Many Web-based second-generation 3PLs are ' beginning to assemble a full range of Intemet-enabled services that are flexible -enough to meet a variety of customer systems. provides p ans at see pro `” ’ "`toptrm1zat1on . a 14 3 . Web-based Plallfliilg and procurement application that provides the ability to reduce risk and optimize the financial impact of a given demand. The result has been an 11% reduction in buffer costs. e-logistics providers can add value to existing relationships by supplementing handling and automating financial -settlements or special reporting functions that are beyond the competen . . Today’s logistics marketplace is more and more focused on col laborative partnerships. Such an approach will go far in establishing the necessary trust and comfort . For Sun Micro systems.and increase understanding of technology benents In times of risk and uncertainty in the logistics channel. choice. today ’s world-class -companies tum to technology to maintain competitive momentum.

lower levels of channel inventories. and an overall increase in the “. transportation routing. DEFINING LRM IN THE AGE OF e-BUSINESS There can be little doubt that the advent of e-business has dramatically changed forever the nature and objectives of logistics.i§o that logistics . increased transportation asset utilization. Although there was and continues to be much discussion over what is the proper function of e-logistics (should it provide an all-encompassing range of sewices. better on-time delivery.nies with logistics systems that can utilize positioning satellites to pinpoint truck rail car.The first applications of e-business to logistics were introduced in the mid-1990s Despite the complexity of the array of possible logistics functions. ‘4 A. competitive logistics depends on effective partnership management.to 18% reduction in exposure to excess supply costs. In the past. the fact that logistics services were basically a commodity and could be easily adapted to the Internet made them an easy candidate for Web-based trading technologies. and accurately track transportation assets and the cargo they carry from origin to destination across the globe. Today’s LRM application toolsets are providing better till rates. fulfillment has become a hot topic and the path to survival in the growing -e-business marketplace. As technology tools continue to mature. Today. and real-time visibility to link all trading partners anywhere in the supply chain. and inventory chasing. and shipments in transit. e-LRM FOUNDATICNS . rate calculations. As delivery times shrink from weeks to days dr hours. and lower costs while improving customer demand for ever faster and cheaper order fulfillment. providing compa . logistics has become a strategic advantage. logistics was primarily a -back-office function concerned with the day-to-day packing and shipment of prod ucts.ability to cover demand and increase revenues ’ ll.

logistics providers used the Web to detail information about the organization and company location. market . Initially.(on a cafeteria approach. contracting logistics services requires more than attaining . these early efforts can be said to consist of two types of logistics exchange: auctions and spot markets. 16 A logistics auction features a single party who is soliciting logistics services from or selling logistics services to multiple parties through the Internet. These early Internet driven e-logistics offerings tended to be horizontal. The goal of the exchange 'is to match requirements and provider capabilities and possibly even to provide tools for managing the transaction or deepening the buyer-seller .their services and products. While the characteristics of commodities can be accurately determined. where shippers would be able to post requirements on the Web and then . phase-two logistics providers focused on the -buying and selling of logistics services. Further. such as transportation. or should it be focused . shipper. and respond to prospects regarding logistics capabilities When the concept of exchanges arose. logistics services are not the same as commodity products. public exchanges that provided buyers with the opportunity to post loads on a Web bulletin board. would provide fresh opportunity for eos reductions and increased services and dramatically change the nature of the logistics industry. it was assumed that reverse auctions. in turn log1st1CS “.companies could then bid on those loads When viewed in greater detail.entertain bids from logistics providers. The spot market concept seeks to broaden the number of players by increasing the auction to accommodate multiple buyers and sellers. these first-generation public exchanges were gripped by the same centripetal forces that plagued the dot-com revolution.relationships cover end-to-end management of fulfillment. and logistics services providers. many logistics providers avoided the exchanges in fear that spot market prices would be construed by buyers as constituting the base services price.relationship Unfortunately. To begin with. Originally. where customers engage the discrete service they need the application of the Internet to LRM has been eagerly adopted by all forms of carrier.

e-LRM PTX and CTX exchanges suffer from the same problems affecting T other e-marketplaces. For companies that had already implemented EDI applications . e-logistics marketplaces have closely followed the experience of other areas of e~business as they migrate from independent to private exchanges and move _their focus from cost economies and spot buys to developing collaborative commu ° nities. the once frantic explosion in the e-logistics marketplace had . Also. most first-generation exchanges simply failed to generate critical mass and soon died. . since so much business was already covered by logistics contracts (up to 85% of freight moved by truck and more than 90% of ocean shipments). some e-logis .the exchange. customers wanted to be assured that their providers were reputable and that their shipments would arrive on time without damage or pilferage. reliability.dissipated. the anonymity of the Web was quickly perceived as a detriment to historical relationships that existedbetween trading partners.negating the use of independent and PTX/CTXs altogether By the early 2000s. thereby forcing smaller trading partners in the channel to participate But again. and survivors entered a period of shakeout and massive consolidation Today. the lines separating companies competing in the e-logistics space have -become blurred. These private logistics exchanges are normally developed by a dominant or group of dominant players who have _already established a clear e-LRM strategy and set of logistics partners. Numerous technical and standards issues must be worked .out while packages software exists.of a certain vendor. such as transit. Providers wanted to be assured that their customers would promptly pay for services and that there would be no frivolous claims. many companies are using 3PLs which have their own solutions .lowest price and must Hconsider additional factors.there was little incentive to migrate to the Web Today. and availability of equipment. Finally. Some providers offer on-line load/matching services. On their part. This existing relationship provides instant critical mass to . companies fear being trapped within the boundafigs .

For example." e-LRM solutions can be divided :into the following live distinct categories -Transportation exchanges. which may be ° .(management (Figure 8. This type of e-LRM provider offers ° -logistics Web-based software applications and communications infrastruc -tures for shippers.reviewed and acted upon in a cross-enterprise. This type of e-LRM provider ° -offers server-based or Web-based software applications that enable com panies to optimize bidding and load and route management. and other logistics value-added services. suite of applications that address e-LRM requirements for data i capture. G -Log. SKU. and assists in -the management of contracts within the boundaries of the business. and 3PLs capable of automating global logis -tics transactions. According to Langley. which offers a variety of technology-based solutions. and Web based. provides a fully Web-native logistics management solu tion that provides for global collaboration among trading partners by -synchronizing physical shipment with total supply chain delivery capabil ity.tics software. An example is NTE. This type of e-LRM provider acts as an e-mar ° ketplace where logistics providers can publicly post and match capacities with customer demands-on a spot market basis. for example. T Transportation network infrastructure. carriers. transportation management solutions. detail. real-time data capture about a shipment down to such records ` as line. Celarix offers an EDI. business process visibility. collaborative fashion Third-party logistics providen This type of e-LRM provider acts as a third ° -party offering transportation.3 Transportation management software (TMS). including IT X and PT X marketplaces. and event . warehousing services. and others have expanded to include extensive logistics management and consulting services. and serial number. XML. and real-time SCEM. shipment consolida . data quality management.

so logistics services can be managed by exception. and miscellaneous services such as on~site managermm . hosted solutions aimed at ~on line transportation management.procurement .ment that provides visibility to any event occurring in the network including off-contract purchasing. and other functions to clients . which enables logistics service interoperability -with any member regardless of data exchange standards. track and trace. or eitamp c..and consulting Cgllaborative logistics networks._ . tendering. Logisticscom has been increasing its footprint from its origins in Web~native.iii* t. to connect -to any other member in the selection and utilization of logistics func tions. For example.While this brealtdown can assist in scgmenting the types of e-logistics markets many of today’s e-logistics companies have significantly expanded their services to the point that they bridge several of the above categories. and event management capabilities to encompass an integrated offering embracing complete transportation .tion freight payables. air services. including shippers and carriers. and in-transit delays. warehousing and distribution.KPls across the entire supply chain A . reverse logistics. Nistevo provides a modular network available to any member to respond to logistics needs. and analysis providing critical executive and management information containing . ocean transport. The Web site offers four modules: connectivity. This final type of e-LRM provider . event manage . visibility to logistics operations accessible by all supply chain participants.i'i if ii i Maersk 1/ogistics. customs house brokerage. enables any network mcinber. ers a u array o r ocument man ggment.

. and collaborative capabilities. i _r ¢rl. and l ser\iccs to their tistomers by utilizing the internet. fr. ip V.1 .`bc.com`s TMS solution.4.. and then to . L0gis tics. Amrosiii OF e-LRM Foiscrtoxs 2 Simliib' \3f~‘5D¢‘d.<'" 7 .. the company can offer critical transportation search. called Opnfifanage. and tracking orders. so that proactive remedies can be taken when l performance is below standard. manages the shipments from origin to delivery.\{ is the process whereby manufacturers. .Rf\l providers utilized the Internet to provide basic i _. These . 'Q . SCEM. mln. c*LR. ie'_ _.u1. and contract ~management. called Lane enables customers to adjust existing contracts without compiletexenegotiation if their original logistics network.simulate possible scenarios for shippers and carriers. Once bids have been posted in its core module called Network. needs change. booking shipments. bid evaluation and optimization. ". for 'the 5 . tinds carriers based on an optimization guide. such i as carrier compliance and events.com uses its optimization engine to package and organize lanes.. Another function. distributors. . The TMS consolidates orders into shipmens. Law il MS in so mlm’ anus JW ogistits Pfovtders 3PL tntertttedtanes sed technologies in logistics have shifted from:_ .e so that have. When these functions are coupled with Logistics.) bommt fm..'ffi1"8 Cimfrs.including the entire RFQ process. 5S5¢. and dynamically monitors critical metrics.” 1 B.

_ _ _ . f0¢us on basic services to collaborative and supplier logistics management The 3 visibility and control of inventory but also to develop clOS€ W0fk1flg Pafmefshlps with trading partners For example. . ° . . _’ . «Y .-i f *U ` :. Ab€fd€€H sa s .. . . . 3 ‘ sc ."" ~ B3 f1 Bli.. the Aberdeen Group sees e LRM fl1HCf10US HS agung rn the role of a central clearinghouse of logistics data to meet a variety of other decision making needs of the enterprise An LRM environment. ' gg’ £12 f".`7` ‘LII _M_ F. _ gi-Strategy is to utilize logistics functions not only to reduce costs and gain real’ 5 time ..‘ .t 'Q-1 ' _ _.f.

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”‘9 In summary. and full multimodal transport. provides route and lane ' optimization. trim costs and increase logistics efficiencies. total-landed costs” that include duties.Wg .1:. tariffs.4535 < _":_ ul: s agggr ’ -_` ::. tracks goods movement and provides alert notification and management.. . e-LRM enables whole supply chains to make better decisions. supports carrier selection and negotiations. fr-' v ’ Va . and architect effective collaborative relations .F . and taxes..between all supply channel trading partners Despite the recent and dramatic downturn regarding all forms of e-business ' Intemet applications for procurement and logistics are expected to see a stead .gs ’_r `Vj ff" I4" . _ provides information on: crosslborder regulatory compliance. «} .

.gr' gh . ._ _ . . _: ./(. _ . For example. _ mark t t h e o ave been $42 billion rn 2000. N# :lr ’ ~fa -0 ""*°S xg:_ _..Y increase through at least mid-decade.. The answer for the interest in Web-based tools rn these areas is simple: when the Internet is applied to purchasing and logistics -functions. investment researcher Bear Stearns forecasts the e-LRM . and ROI.~. .225 _._ f _ _` !f f _ '_"€rm-. using to $274 billion in 2004 Third art 1 ’~ ~ « E ._.." f: ‘5'~'3 ~ _§°.__ .g yi _ :T "f c 1 ' ~ :7Jf‘ _..E `_=P f .__'E»fr'1’ ! _ _`_ Y ` . companies can see positive. short-term gains in productivity. cost reduc tion. . .«.

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4 and detailed as follows Enterprise Performance Measurement .1 Effective logistics mana -viding planners with the capability to evaluate precisely the efficiencies and profit `ab`l rrty of supply chain logistics processes. e-logistics ' ` functions are moving beyond a concern with the spot-buy market and are focusin 8 on long-term logistics relations.2004____. where early technology focused on short-term gains in MRO and indirect materials procurement. measurement. Critical performance metrics should ' ° ' enabl e analysis. purc asing sphere.Y-¢« « P Y' ` ` ' ` ` outsourcing alone was $11 bill' ` 2000 ron rn and rs expected to rise to $100 billion rn __ Similar to what has occurred in the h . The goal is be able to penetrate the contract logistics marketplace by offering automation and decision support tools to logistics planners ` ` ` ° e-LRM b can e described as consisting of three major areas of Internet-assisted :functions as depictedin Figure 8. Operationally. and communication of the status of key business indicators at an operational and a strategic level. Web-based support ° tool .

Strate ° ' ° ` fgicall ~ -. 1-._. _ _ .t -Vi .-. _ _ _ _ A° :Among the Web-based toolsets in this area can be found Analytical and modeling tools providing mathematical algorithms and ° . `\ l_ including an executive dashboard that tracks costs and revenues across the suPP Y h 1“_ ¢ 0rk.. . all network trading partners should be provided with the ability to access rn t'eal~t1me the data they need to monitor the productivity of logiSIiCS f\1"°ti°"S' A. &__ y.. . *T 1# . ..Y __.s in this area should provide instant availability to information regarding the _ ‘ fQ¢. at any time in the supply channel network.4»»o S 0 _individual orders and shipments as well as the visibility to track individual products in real time -gement requires robust analytical solutions capable of pro -anywhere.t x .

ocean. claims status. invoice generation. focused on customer service as well as sharpening the accu .inventory costs or other configurable business rules Track and trace tools providing timely information regarding shipments ° :at anytime. review and printing of bill of lading. and. air. Among the key functions found are -Complete and real-time status and history on all shipments from book ° ing to proof of delivery .dynamic business modeling functions that can assist planners manage . load matching. Included are windows into in-transit -inventories. and pickup requests i ° Administration management tools providing for the effective reporting and management of logistics financial functions. SKU.Wsibility tools detailing inbound and outbound shipments to a company ° its customers. and other shipper reference numbers Availability of other shipment data such as on-line reports. shipping labels ° waybills. total landed cost calculations.if retrieval.asset optimization and fleet management. Among the events to view upon logistics transaction completion are proof of delivery. anywhere on the globe. or rail cartage ° Costs and time requirements for international business ° Web-access to shipments by pro number. RMA. PO ° number. carrier selection.racy of replenishment cycles and reductions in channel-wide safety stocks Visibility to channel resources can also assist companies in selecting the optimum location from which to fill an order based on delivery and . routing . bill of lading number.transit times. freight bill review. and its trading partners. load optimization. By providing for Web-based . and any necessary filing/status of loss and damage claims. importfexport documentation. document ° . and contract management . other order details Multimodal tracking for truck.Electronic transmission and access to bills of lading.

. and wireless technologies have permitted companies to push logistics inventory functions. routing. cross-docking. and . trading partners anywhere in the supply chain possess -feedback regarding live freight movement. Among today’s WMS toolsets can be found radio frequency (RF -and bar coding. multicompany -freight consolidation and deconsolidation. cost analysis . stock locator systems. e-LRM provides shippers and carriers with the tools to manage fast closure of the order . the Intemet. manifesting.tivity and item velocity reporting. and value-added services such as packaging .wide array of shipping solutions that automate and optimize provider selection .applications that can assist in automating the execution of bill of lading p A and delivery receipt (POD). accurate.multicarrier compliance.kitting.timely transportation systems that span the entire order cycle from bid to delivery Today’s Intemet-integrated transportation management systems (TMS) provide a . comrningling of complimentary commod -ities. The merger of WMSs. tracking. warehouse status. labor produc . With real-time visibility available through the Intemet.cycle and accelerate time to cash Warehouse Management . integration with transportation. and final payment. and relabeling .2 Warehouse management systems (WMS) provide today’s logistics functions with exciting new tools to manage and optimize inventory in motion or at rest.3 The execution of world-class e-LRM functions requires flawless. such as merge in-transit. audit. rate quotation. and other techniques. to the furthest limits of optimization to increase order to-deliver cycles while decreasing overall logistics costs. and brokerage clear (ance information. Transportation Management .

allocating the true cost of transportation q based on actual charges.S and post-shipment analysis processes. . They can also obtain electronic notice of consignment and ._ _ . _F . and compliance issues such as Certificate of Origin. the inherent collaborative nature of e-LRM can serve as the foun 5 on or the application of other shipment management applications that can be Shared “NSS 10Eistics e-marketplaces. As trading partners and logistics service providers become linked real-time into the logistics network web. global settlement of freight payment and billing. customs invoice. freely retrieve shipping. . service. transit p tunes. companies can . statement of revised charges for change of destination of an in-transit shipment «datiln qddition. Among the new opportunities available for . and contact information to identify carriers.

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