Electronic Cash News

For global companies, transportation costs are souring to the extent that shipping costs are fundamentally changing the value-added proposition of off-shore outsourcing. For companies with high freight costs (steel, cars, and so on), these companies can now be extremely more competitive manufacturing locally than overseas.

E-Sourcing Forum’s posting, Reverse Globalization, provides a good overview on how transportation costs are creating a fundamental change in how global companies do business. Cost examples include:

“…the cost of shipping a 40ft Container from the Far East to the Eastern Seaboard of the US, has almost tripled since 2000 ($3,000 to $8,000). This will double again once the price of a barrel of Oil reaches $200.

Furthermore, at Today’s oil prices, every 10% increase in a trip distance, translates into a 4.5% increase in transport costs.”

Construction and project-centric businesses have to manage their supply chains more to minimize overall project failure than just to reduce costs. Project-centric businesses use their supply chains to manage risks. Supply chain costs are secondary than the risk of inadequate resources or meeting critical project deadlines and deliverables. Project-centric businesses must look at the total project cost instead of supply chain costs in isolation. To that end, project-centric businesses are using supply chain systems to provide better visibility, less risk, lower total costs, and strengthen supplier relationships.

SupplyChainBrain has a great article, Lifting the Burden of Project-Centric Supply Chains. This article talks about the five drivers of project-centric businesses: risk, cost, cash flow, time, resources. Additionally, enterprise systems are now increasingly being used by project-centric businesses for visibility and control, strengthening supplier communications, managing risk, and even managing return on investment (ROI).

Not sure if it is the downturn in the economy or just a Perfect Storm, but companies are in great need of supply chain talent. Our current economic climate is increasing the need for companies to drive significant costs out of a company’s supply network, continue to cut-order ship time, optimize supplier / outsouring relationships, assure business continuity of changing supply sources, and manage / gain visibility of globally dispersed operations. This is what supply chain professionals do best.

See SupplyChainer posting, Lucas Group Reports Substantial Hiring Growth in Supply Chain Logistics.

There is a rapid evolution occurring in the management of supply and demand. It started with Logistics with the use of the stubby pencil and lookup tables. Then it evolved to Supply Chain Management with logistics automation and data communications. Now there is an emerging trend toward Supply Network Management. This is a synchronous, agent approach with the use of heuristics, simulations, and analytics to synchronize tactical and strategic real-time decision-making across all stakeholders in the supply network.

Logistics Systems. I started off in the military and I remember that logisticians relied on thick manuals with numerous lookup tables to calculate things like days of supply, consumption rates, and so on. The first Mainframe logistics software applications focused on order management (management-by-exception and order status) and managing warehouse stocking levels.

Supply Chain Systems. With the advent of data communications / Electronic Data Interchange (EDI), servers, and desktop computers, supply chain applications focused on automating all aspects of logistics (warehouse, order management, transportation, and so on), and linking these applications across the supply chain. Additionally, planning tools such as network planning / optimization and inventory optimization became a must-have tool to use on a periodic basis.

Supply Network Systems. Now there is an emerging realization that the supply chain is not just an asynchronous linear system, but also a synchronous system with many stakeholders and factors that are affecting it to varying degrees at different times. To best support a real-time supply network, software applications need to move beyond linear algorithms. A heuristics approach is needed to assist managers at all levels with discovering issues, offering solutions, managing risk, and simulating “what if” scenarios. Example tools include network simulation, expert systems, analytics / business intelligence (BI), data mining, and real-time optimization.

Related posts:

Do you practice business the speed of thought? Does your enterprise have a digital nervous system? If not why? - Jon Hansen - Procurement Insights

Supply Chain Optimization versus Simulation - Dan Gilmore - SCDigest

AI in Supply Chains - @ Supply Chain Management

Electronic Data Interchange (EDI) or any type of data exchange for a supplier is usually a burden. On the other hand, their customer, the retailer or manufacturer, sees system-to-system data exchange (EDI) as a strategic necessity. If a supplier desires to do business with large customers, then EDI or some type of standard data interchange becomes a strategic necessity. The challenge is how best for a supplier to meet customers’ EDI/data exchange requirements without going broke or being out of compliance.

Changing the data format from EDI to XML or to any other format does not make data exchange any easier for any supplier that has to exchange data with more than one customer. For any electronic document, most customer need the exact same 80-90% of data, but there always seems to be that 10-20% of data that needs to be formatted different or is mandated for a specific customer. I am an advocate for XML for web presentation and near-real-time data exchange, but it is no “silver bullet” for solving supply chain data exchange challenges. Every large customer wants at least some of their data different.

EDI is a definitely a burden to suppliers. I have come across dozens of frustrated suppliers because each of their large customers wants a different data exchange format (EDI format) and different data content in electronic documents such as an Advance Ship Notice (ASN) or Purchase Order, or Invoice. And to make matters worse for a supplier, each customer requires the supplier to use a specific transportation carrier with its own EDI / data exchange format and content.

Large manufacturers and retailers, use EDI/information exchange with their suppliers to schedule receiving, just-in-time inventory, supply chain visibility, business intelligence / metrics, catalog, matching ASN / PO, and invoices, and overall to save on labor and minimize data entry mistakes.

Direct data communications between suppliers and large customers is becoming easier and easier as most companies have Internet access and are familiar with data communications. The challenge is have a standard electronic data format that a supplier can use with all customers. Data formatting becomes the real issue for suppliers with multiple customers. Standard EDI documents like 850s, 856s, and 810s or any other data format standard can meet 80-90% of customers’ data requirements. It is the other 10% of the data requirements (specific reference information, special codes, unique product information, special electronic document) that causes suppliers headaches.

Prior to 2001 it seem like every year there was a new, emerging technology that was revolutionizing the supply chain industry. Technologies included RFID, PDAs / scanners, voice, GPS, wireless, data communications, internet, and so on. Now the challenge is synchronizing all this data from all these different technologies.

The last couple of years I have worked in the area of B2B communications and just recently came back to implementing supply chain solutions. My biggest surprise is that I see no new enabling technologies, just better use of the technologies that were already out there.

On the other hand, there are some interesting, new areas and trends. One area of growth is what I would call data synchronization. Here IT companies are enabling businesses and supply chains to synchronize their data to get better information.

This is why Enterprise Resource Planning (ERP) system providers (SAP, Oracle, and so on) have gobbled up Warehouse Management System (WMS) and Transportation Management System (TMS) software providers the last couple of years. ERP providers are intent on having their software retain and synchronize their customer’s supply chain data.

Value Added Networks (VAN) and manage file transfer providers (nuBridges, SterlingCommerce, AXWAY, and so on) have definitely jumped on the data synchronization bandwagon. They are now moving from being Electronic Data Interchange (EDI) and communications service providers to providing supply chain software and data synchronization services. VANs and Manage File Transfer providers are intent on having their software and services retain and synchronize their customer’s supply chain data. Data synchronization services are emerging to include matching Purchase Order (PO)-Advance Shipping Notice (ASN)-Invoice data, electronic catalog, and even trade network services.

Having product-level RFID tags from manufacturing through Point-of-Sale (POS) offers the opportunity to automate the entire supply chain. Consumer’s can go through a RFID-checkout line without handling goods except to possibly bag them to carry home (stores could even automate home delivery). Stores with the right automation can receive goods and stock them. The only handling needed would be where materiel handling automation is not available to store and stock shelves. No more looking for stuff or even making decisions on where to slot pallets or products in backrooms. The RFID tags automatically inform store computer systems what stuff is coming in and out of the stores. No more ordering or wall-to-wall physical inventories.

At distribution centers and warehouses with the right materiel-handling automation, everything is automated. All humans would do is to do management-by-exception type activities and maintenance. Even manufacturers could further automate finished product material handling.

Wal-Mart is setting the standard for a fully RFID-enabled supply chain by moving from various RFID pilots to specific plans to implement RFID at the product-level at Sam’s Club by 2010. Their schedule is as follows:

- Jan. 30, 2008. All solid SKU pallets sent to Sam’s DeSoto, Tex. distribution center must be tagged

- Oct. 31, 2008. All pallets sent to four additional DCs must be tagged; tagging of cases and mixed case pallets for product sent to the DeSoto DC

- Jan. 30, 2009. Pallet-level tagging at the remaining 17 Sam’s DCs; tagging of cases and mixed case pallets for product sent to the four DCs in the October 31, 2008 pallet program

- Oct. 31, 2009. Tagging of cases and mixed case pallets for product sent to the other 17 Sam’s DCs; selling unit tagging for DeSoto

- Jan. 30, 2010. Selling unit tagging at the next four DCs

- Oct. 31, 2010. Selling unit tagging at the remaining DCs

See SupplyChainDigest’s article, RFID News: As Wal-Mart Gets Tough with Sam’s Club Compliance, Some Clarity, While a Few Questions Remain, for more details. RFID tags are “finally” going to revolutionize the world (I think).

The term supply chain visibility is a broad term and changes a little bit every year as we get new technology to get more visibility. I have heard DoD “war stories” from 20-30 years ago where they would assign a Lt. Colonel to daily track a high-value electronics component such as a satellite dish from the U.S. to Japan.

The last couple of years, a lot of supply chain vendors are focused on providing inbound supply chain visibility with services and software to match purchase orders, advance ship notices (ASN), and vendor invoices. SterlingCommerce just announced an On-Demand Supply Chain Visibility tool that provides this visibility if all your vendors use SterlingCommerce’s Value Added Network (VAN) or an interconnecting VAN. This sound expensive as everyone in the supply chain has to pay the VAN transaction fees for the inbound supplier (usually a large retailer) to get the visibility. At the same time this could be a good and quick solution compared to setting up your own EDI network and buying / developing your own supply chain visibility software.

Information technology professionals have wrestled with B2B information exchange standards for decades. First there was electronic data interchange (EDI), then EDIFACT, Rosetta Net, XML, and so on. Can there ever be a universal standard for B2B and supply chain information exchange between business systems?

To me there is no “silver bullet” for a universal standard for the way businesses exchange data system-to-system today. It is not because the communications, technology, or data standards cannot be developed or acquired. It is more about competitive advantage. Businesses that use information in unique ways will keep ahead of the competition. It is the old “80/20″ rule. You can get 80% of the data interfaces standardized, but the other 20% are going to be non-standard because it is supporting some unique, value add information service.

If active Radio Frequency ID (RFID) tags ever come down in price, there may be an opportunity to standardize data and data interfaces within supply chains using RFID tags and common-use RFID interrogation networks. In an active RFID scenario, the attached RFID tag would hold and update standard data elements about the shipment or product. The data about the product or shipment would actually travel along the supply chain with the product or shipment. Then business systems throughout the supply chain could interrogate the RFID tag to get as little or as much data as they want at any point in time. There are closed, proprietary RFID interrogation networks that do this today, but these networks are not available for general commerce.

Axway, Inc. announced that AstraZeneca has selected its Synchrony(TM) Supply Chain Integrity Suite to enable track and trace as part of the Product Safety Data Management (PSDM) initiative, which is part of the company’s previously announced program to protect patients from counterfeit medicines.

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