The New Era of Perfect Logistics
Several months ago, I did a two part series summarizing my new set of Supply Chain Megatrends. You can find the links to those columns here: Supply Chain Megatrends Part 1 and Part 2.
I said at the time I would be providing more detail on my thinking on each Megatrend over the following months, and finally got that going a few weeks ago with a piece on the first Megatrend, "Turbo Supply Chain Visibility."
"The issue will become not can a company deliver Perfect Logistics, but how much it costs them to get there."
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I am coming right back with Megatrend number 2, because it is tied at the hip with turbo visibility.
A perhaps obviously but nevertheless important corollary to the substantial improvement in supply chain visibility that is occurring right now is this: with rising visibility comes rising control. And with rising control comes the ability to wring errors and delays out of the process.
This is especially true at the execution layers of the supply chain. While volatility in everything from demand to commodity prices will always play some on havoc planning and forecasting processes, when it comes to supply chain execution, visibility will enable companies to get very close to zero errors: in fact, Perfect Logistics.
As I noted in the Turbo Visibility trend, with GPS and mobile systems, we may be the last generation that was really capable of being lost. And here is the really important point: if we can't get lost, than neither can our inventory or our assets. And that doesn't just mean lost along the way, it means lost because it wasn't put in the box or on the pallet or most other ways.
As I wrote last time, the technology is largely in place today - auto ID, wireless, mobile, GPS, video, advanced ship notices (ASNs), the "Cloud", and software that takes advantage of this – to give us this near complete visibility and control.
To fully get there will probably require more widespread implementation of RFID, which will indeed someday soon dominate the auto ID playing field. Bar codes can help get us close to Perfect Logistics, but it usually requires a manual scan effort that can be missed, and doesn't work so well in more unstructured processes and environments, whether it is the backroom of a retail store or field operations in the orchard or the battlefield.
The ability of RFID to support automatic reads, in combination with the other technologies and systems, will push the potential from near perfection to actual perfection - with big implications for our supply chain.
Examples of Perfect Logistics are Starting to Emerge
The industry is in fact seeing a growing number of examples of partial logistics perfection:
Perdue Pharma, maker of the drug OxyContin, uses a Las Vegas style camera system to video record every step of the packing process as the drug (which is literally worth more than its weight in gold) is placed into shipping containers, pack by pack. If there is any receiving quantity discrepancy on the other end, Perdue simply goes back to the tape.
With the coming of "video analytics," Perdue could actually use the same system to catch any packing errors as they occur.
A division of South Africa's Imperial Logistics manages direct store delivery for a major food company in the country. The delivery operation is controlled by a sophisticated routing and scheduling system connected to GPS units on the vehicles. Large screen displays throughout the master control room show precise, second by second movement of dozens of trucks as they execute their routes.
Dispatchers know instantly if a delivery is going to be off from the scheduled appointment time even by a few minutes, such as from a traffic delay or extra time required at a stop. When this occurs, the customer is often contacted and updated with the new expected arrival time. More seriously delays can cause a dynamic re-optimization that changes routes or dispatches new deliveries.
This is getting very close to perfection indeed, all based on visibility and software that takes advantage of it.
A retail customer of Descartes Systems uses its Logistics Flow Control software to precisely manage inbound vendor shipments to its DCs and remove much of the variance it had previously experienced. The tool is a cloud-based, collaborative system that ties together vendor, carrier, and retailer.
In addition to full visibility of the purchase order through receipt, the software provides visibility and control to the retailer of the carriers as well. This is especially true for the LTL service providers, which analysis showed were the source of much of the delivery variance the retailer had been experiencing.
Now, rather than being somewhat subject to the delivery whims of the LTL carriers, the retailer can see what is happening in the network and terminals relative to inbound goods, and then pull or delay those orders into its own DCs depending on its inventory needs and the DC schedule.
"Logistics Flow Control" - just the same sounds cool, and actually well captures an aspect of what Perfect Logistics will mean.
Monarch Beverage, a major beer distributor located near Indianapolis, recently installed an automated case picking system, using a series of technologies and robotics to select cases and pallets (from Hartness International). In addition to being an impressive display of automation on its own, every case running through the system is also captured on video.
First, the system guarantees just about perfect case selection and pallet building - a challenge in most manual beer operations.
Second, If there are any order discrepancies at the customer, Monarch can go back and show every case that was picked, placed on the pallet, and shrink wrapped for delivery for that customer. It has reduced both incidents and claims dramatically - due to video visibility.
A major department store retailer which I can't reveal at this time is building towards a vision in which cases and items within the case are RFID tagged and read automatically as part of the truck loading process at the vendor's DC, which will be used to create the ASN. It then wants to see the inbound load also read somewhere along the transportation process by the carrier, and then again read automatically as it receives the goods into its own distribution centers, closing the loop.
Not only will this provide truly perfect visibility into the inbound flow of goods, that visibility will highlight where any errors tend to be occurring, leading to their eventual elimination. Perfect.
There are other examples. Perfect Logistics will be about both accuracy and continuous product flow. Another retail executive recently commented, for example, that ""It's all about speed to market, so there's a great focus on how we eliminate dwell time."
Today's visibility tools will provide supply chain participants the ability to find and root out those dwell times with increasing precision not just for retailers but every supply chain sector.
It's hard to talk about Perfect Logistics without mentioning the "perfect order" metric. Clearly, such elements of the perfect order as on-time and undamaged will be by impacted by these new capabilities. But what about "in full?"
Even here, technology such as "demand sensing" software that is greatly improving short term forecasting for companies such as P&G and Unilever, greatly reducing issues with inventory needed for orders not being available.
I believe firmly this new era of Perfect Logistics is coming. And what will happen is that as supply chain leaders begin to deliver different aspects of it, Perfect Logistics will increasingly become a customer expectation that vendors and 3PLs/carriers can provide it.
This in turn will lead to something of a "visibility arms race," as companies and service providers find the need to rapidly deploy such capabilities. And the issue will become not can a company deliver Perfect Logistics, but how much it costs them to get there.
And when we eliminate nearly all logistics execution errors, just how does this change our supply chain world? That is a really intriguing question.