Thanks to the Internet and EC-based collaboration techniques, it is easy to see how orders will be fulfilled in the next century.
As we head into the new millenium, the gravitational pull of globalization — new trading partners, cheaper supply sources, and emerging markets — is compelling enterprises of all sizes to build alliances and online commerce systems that efficiently deliver products to customers while providing a worldwide view of operations. Virtual along with leading-edge and traditional organizations are developing new strategies to track orders and react to changes, real time, in the handling and transportation of materials as they move across the supply chain from supplier to customer.
The goal is to electronically link the entire sales, production, and delivery process into one seamless flow of information across national borders and time zones. Having a global view of logistic movements enables better decision making, reduces costs while providing the means for sharing information among trading partners. This type of visibility and collaboration provides bottom line benefits along with an improved ability to react to customer requirements.
Lean manufacturing and associated supply chain strategies are well understood and have improved the production process and movement of materials between adjacent suppliers and manufacturers or retailers. KanBan and just-in-time techniques are now being applied to the science of logistics.
Extranets provide relatively inexpensive ways to exploit the global nature of the Internet while e-commerce-based collaboration techniques are showing how orders will be fulfilled in the next century. The Internet is also making it easier to find and do business with small and midsize suppliers, particularly in remote areas of the world. Because this technology is open to all, the advantage large, multi-national enterprises have traditionally held regarding the movement of goods is being challenged.
There's a growing recognition that an improved flow of information and the ability to react, real-time, to a changing demand and supply situation is necessary to be a leading supplier or retailer. This naturally entails close coordination with transportation and other partners in the fulfillment of orders.
Companies traditionally monitor major trading lanes across the country or around the world but this is no longer enough to insure a high level of customer service. To keep up, logistic systems must encompass a solution that automates the process of dealing with customers, such as order revisions and document management (i.e. import/export, hazardous materials). In addition, tracking shipments, handling payments and monitoring inventory positions (by item and location) across the supply chain is necessary.
Transportation and fulfillment providers, including Federal Express, UPS, SeaLand, DHL and SkyWay, are opening up their systems, via programmable API's, allowing e-commerce vendors to access, track and communicate logistics information in a variety of innovative ways. Webcasting and publish/subscribe techniques allow all interested parties to be alerted to situations requiring attention. This includes changes in customer demand, order revisions/cancellations and, often most difficult to resolve, adjustments in quantity and/or location to deliveries in progress.
Transportation networks and the software used to track shipments must optimally minimize the movement of goods via Internet-based collaborative relationships. Improving visibility into individual logistic events reduces delivery time while lowering transportation costs. The ability to alter the movement of goods, in real time, is a significant customer service advantage. Inbound/outbound freight planning must be coordinated with the order management processes. Close operational collaboration with customers and suppliers provides for dynamic decision opportunities.
Dynamic decision opportunities, or DDO's, are the logistics holy grail. Order fulfillment via the transfer of freight across the supply chain involves thousands of joint and individual inventory movements. A percentage of these movements are unnecessary, potentially counter-productive and don't take into account the latest logistics picture. A collaborative e-commerce system with visibility into the supply chain can recommend revised inventory movements along with associated operational changes. This includes notifications to affected suppliers, transportation partners and, of course, customers. In addition associated costs and documentation can also be taken into account.
The ability to proactively manage the logistics landscape is made possible via Internet-based technology solutions. For example, linking carriers to a central logistics-planning center via the Web improves time-definite deliveries. Collaboration improves the flow of product within and across companies from raw materials or parts through manufacturing to delivery of product to the end customer. Shortening the order-to-fulfillment to cash cycle while offering customers improved order management services furthers any enterprises ability to compete.
Most businesses focus on the supply side of the logistics equation because that's where they typically exert more influence. It's easier to control the purchasing of supplies than it is to evaluate and react to the customer side of the value chain. However, forward looking companies recognize the advantages of improving the demand side of the equation. Internet-based, e-commerce solutions are adept at addressing these issues as they tend to be customer faced, and order management oriented. A Web-based front-end automates customer interactions during the order and fulfillment process; often in a self-service capacity where the customer decides when and how to interface to their supplier(s).
Integrating incoming supplies from vendors with outgoing shipments to customers require globally accessible applications that coordinate both front office and back office activities, including information from transportation and fulfillment partners. Whether there is a central data repository or data is distributed across the Internet, is a question of architecture and collaborative trading relationships. While there are a few examples today (e.g., Dell, Cisco), eventually these globally integrated virtual solutions will be common place.
Strategic decisions of the future will be based on up-to-date, real-time logistic events that are shared across the value chain and accessed via the Web. As more industries become commoditized, commercial success becomes a matter of branding and efficient, economical response to a customer's changing requirements.
Enterprise-wide visibility of inbound, outbound, and interfacility moves requires the manipulation of order data to create optimized shipping plans including freight consolidation, pooling, continuous moves, round trips and mode/carrier selection. Load tendering, shipment documentation, confirmation, freight audit/payment and shipment tracking are also required features as a minimum barrier to entry. As customers have increased the demands placed on suppliers, the onus falls on suppliers to provide more sophisticated solutions within the same cost constraints.
When order volumes increase, suppliers must work faster and more efficiently. When customers ask for special labels, bar codes, packaging and other value-added services, as well as complex distribution and logistics conditions, manufacturers must pay extra attention to detail to maintain accuracy and streamline the entire order cycle. Achieving these customer-focused objectives requires the integration of operational, tactical, and strategic functions across the trading horizon.
Incremental optimization becomes possible via continuously sharing information among order fulfillment partners. Since even the best laid plans easily go awry, enterprises must be able to react quickly and effectively while communicating changes to customers. This is another case where having the visibility to identify and react to change leads to a dynamic decision opportunity.
Compare the information and coordination required for logistics excellence, within the framework of a DDO, with that of operating a cross-country train. Train schedules cannot be developed without receiving accurate data from the field about weather conditions, other train traffic, how much fuel is required for a specific trip or the number/types of cars required to fulfill the objectives of the trip. Trains rely on receiving accurate feedback, in real time, before, during and at the close of their trip.
Everyone knows how easy it is for trains to get off schedule, so quick decisions must be made to accommodate adjustments. There is not sufficient time to synchronize data back and forth between systems and still react in a cost effective and efficient manner. Information must be shared among those using the train's services to insure costs are minimized and the train reaches its destination(s) on time.
An integrated, virtual logistics solution can tell when the warehouse is short of product and also locates the source of a problem, whether it's due to an en-route delivery, warehouse situation or change to the scope (quantity, ship-to) of an order. As the movement towards pull-driven manufacturing, make-to-order, and mass customization increases, suppliers must focus on improving customer service through better execution not simply through improved planning.
Companies strive to increase responsiveness to customer's needs by meeting their requirements for getting the right product to the right place at the right time. A manufacturer, retailer or distributor must react quickly to problems, remain flexible, and provide value-added services in order to maintain and increase its customer base.
The virtual logistics system not only considers order consolidation, traffic patterns, and routes, but has visibility across multiple sites. The system looks at actual inventory in real time at distribution sites, warehouses and in transit across a supply chain to better meet demands placed on each facility. It also allows users to reroute and replan based on a trading partners ability to deliver on-time. When a problem arises alternative suppliers or transportation options must be determined even if that means splitting an order.
Making proper deployment decisions without knowing order levels and inventory numbers is difficult at best and unlikely to provide an optimal solution. Order management is not enough if it is not integrated into the delivery and transportation backbone. The grand vision of most every enterprise that initiates an Internet-based, collaborative e-commerce solution is to be constantly synchronized with their logistics environment in order to satisfy customer demand without wasting resources; time, labor, dollars or material. Such operational efficiency leads to consistent delivery of high-quality, low-cost goods backed by superior customer service, all of which give a company a competitive edge within its marketplace while enhancing trading partner relationships.
Orders are being fulfilled every minute of every day. Having the visibility of transportation moves and being able to react to changes is key to meeting tight customer delivery windows. As global competition intensifies, especially from virtual organizations, enterprises must avoid increased order cycle time and cost, as well as heightened sensitivity to customer service levels and in-transit visibility. Because customer service requirements drive every decision, customer satisfaction can be increased through on-time deliveries of the right products to the right locations. The intelligent use of 24/7-available, e-commerce systems allows an enterprise to proactively respond to exceptions. Costs are minimized and customer responsiveness increases in proportion to resolving the exception as close to its real time occurrence as possible. This is not a trivial issue and one that will require investment and coordination if true benefits are to be achieved.
Increased global visibility, optimized resource management and improved asset usage are a few of the benefits that are provided by this integrated virtual approach to logistics planning and execution. Maximizing shipment size, pinpointing consolidation opportunities and reacting to customer order fulfillment changes are additional benefits.
Once a tactical matter of moving goods from point "A" to point "B," logistics has become an IT challenge that cuts across business relationships, application infrastructures and corporate cultures. The Internet provides the messaging infrastructure and Web-based commerce solutions to not only enable customer based efficiencies but offer the potential of creating new bottom line opportunities for all trading partners.
Many critical elements make up any successful trading relationship. Companies must learn to trust their business partners. There is a very real-and sometimes justified-fear that information sharing can turn into a competitive disadvantage. But trading partners that exchange information on a regular basis are better able to work as a single entity. Together, they have a greater understanding of the end customer and are, therefore, better able to respond to changes in the marketplace. These companies also realize they must harness the power of technology to collaborate with their business partners as never before. Using a new breed of logistics awareness, e-commerce applications provide the most intuitive, open and cost-effective methods for communicating information amongst organizations involved in a trade.
In addition to order and fulfillment information defect rates, engineering changes, and product enhancements can also be shared. Buyers, suppliers and transportation partners that remain in constant communication reduce their margin for error and best manage expectations. Partners can also collaborate, in real time, on product designs and enhancements. Trust increases because all trading partners reap the benefits of faster cycle times, reduced inventory, and the improved movement of goods. Ultimately, the customer gets a higher-quality product at a lower price. e-commerce Web sites can also create a trading community where partners from around the world can exchange information to further optimize this virtual value chain. The Internet is the core to all of this as it provides the capacity to improve the flow of information, eliminate paper-based functions, and link organizations; locally or globally.
From the retail perspective logistics complexity often involves the movement of goods from the supplier to the warehouse and then on to the store. Removing intermediate inventory movements moves items directly from the manufacturer to the storefront. Products no longer languish in warehouses, saving both suppliers and buyers money. Treating stores as distribution centers works especially well in high volume environments as products can frequently ship in full truckloads. Once again collaboration is provided via a logistics-aware e-commerce-based solution.
This process of disintermediation, the elimination of intermediaries between buyers and sellers, continues to gain momentum based on a variety of factors and is at the heart of the growing number of virtual e-commerce companies. Since resellers still play a key role in many logistics models this type of product movement must also be taken into account. New logistics models must be employed to support both existing and new distribution channels. What are a few of the logistic tactics that can be implemented in these environments?
Logistics functionality and the integration with logistics partners must be done in phases. Initially customers must be provided with real-time, seamless integration to shipping/tracking systems and shippers must be provided with notification at the time the order is approved.
This functionality includes get ship rate, get track number, get order status and track line item. As the trading relationship grows shipment estimation, shipping method selection, advanced shipping notice (ASN) and cancel shipment functionality is added. Online dispatch requests to ship product from supplier to customer or in reverse must also be implemented in a cost effective manner.
Traditional return processes are inefficient, costly to maintain, involve long cycle times and are difficult to track. The integration of e-commerce systems with shipment vendors providing logistics API's give businesses better control over the return of merchandise, while increasing service levels to customers. This includes complex tasks like recalls, upgrades or repairs, trade-ins and refunds. Eventually all logistics and service related functions will be provided online and coordinated throughout the trading community.
As we head into the 21st Century, business as usual is anything but that as businesses move to capture the competitive advantages offered by the Internet and the collaborative communication amongst trading partners. One of the keys to success is an efficient and flexible logistics model that ties buyers to sellers throughout the order process and fulfillment cycles. This means coordinating information from acquisition of raw materials to after-sales service.
Internet-based, extra enterprise-wide e-commerce applications are part of a fundamental shift in how computing is being applied to the business of managing logistics across the trading landscape. New strategies and software to support those strategies are being developed, tested and implemented in order to help companies find the best balance between demand opportunities and supply constraints while enabling effective, controlled logistics execution.
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