Solutions should not be more complicated than the problems they are trying to solve!

Transportation and Distribution Management - Automating the Process

This paper will discuss the necessity of improving the shipment information management process in order to facilitate a more seamless supply chain.

The objectives of this paper are threefold:

1. Help executive management realize the importance of this corporate information repository

2. To assist Logistics, Transportation, Treasury, Accounting, Purchasing, Operations and Manufacturing professionals leverage the transportation database for profit improvement and corporate performance

3. Use a freight bill management, shipment information and transportation collaborative portal to achieve collaboration amongst the business partners

As we begin to consider automation, more often than not, we tend to focus on goals and objectives rather than identifying, understanding and respecting all of the activities associated with the operation and jobs that we are attempting to automate.  Failing to recognize and appreciate the history of each of the study tasks will result in false assumptions and missed opportunities.

In order to maximize benefit, facilitate the process and create a platform for long term improvement, one of the successful methods of approach is to first describe the situation in detail.  It is from this perspective that we can truly establish realistic and achievable goals and objectives that identify meaningful benefit. 

One successful method of approach is based on two key principles, case based reasoning and artificial intelligence.  Case based reasoning allows you to study detail and therefore understand every task in the manual processes, while the artificial intelligence perspective compels you to structure logical paths, simultaneously developing an understanding of the probable interdepartmental relationships. The combination of these principles brings together the specialized intelligence of the specific professional disciplines and the generalization of such begins the basis of a collaboration platform.

Understanding the Shipping Process (high level overview)

Why begin here?  Transportation expenditures are greater than those of warehousing, customer service and order entry – combined!  In most companies, transportation expenses can be as much as 18% of every sales dollar.

From the perspective of data collection, this process could begin with the acceptance of a qualified order; in essence, this means, at the very least, that credit and inventory have been validated.  A Pick Pack List is created and the information (electronic or paper) moves to the product location where the goods are picked, packed and readied for shipment.  A Bill of Lading is prepared and the carrier arrives for the pickup; the freight is signed for and the Bill of Lading parts are distributed. (For additional information about Bills of Lading and liability you can refer to our white papers titled, “Freight Terms and Loss and Damage Claims” )

The Corporate Data/Information Repository

The data collected in the shipping and ensuing processes is the platform upon which most mission critical business decisions can and should be made! 

An example of the data elements contained in the Bill of Lading are:  Shipper Name, Consignee Name, Carrier, Creation Date, Reference Number, Origin and Destination detail, Product Description, Pieces, Weight and Total Weight, Pick up Date, Special Terms and Conditions (inside delivery, rush, etc.) Advanced Shipping Notices or ASN’s can also be generated at this time.

This data in and of itself, when converted to information is very important, as an example, when combinations of Bills of Lading are examined, it becomes easy to recognize patterns of performance.  However, when you link qualified order data to the Bill of Lading data, you can begin to understand how a sales person performs against a distribution analysis and sales territories, or product performance by territory or distribution market analysis or buy in or sell through analyses.  Further, when you link your inventory to the Bill of Lading data, you can determine out of stock conditions in relation to salesmen, territory, customer, DC, cost center and though-put by facility or competitive performance by facility and do this down to the sku level. 

Manufacturing, Purchasing, Finance and Treasury as well as Human Resources can easily benefit form this robust corporate repository just as well because the data elements relate to their business segments as directly as they do to transportation, distribution and logistics.   Clearly, Manufacturing can better understand their consumption if they can count on their flow of components, Purchasing can buy better if they know their true landed costs and provide real-time information, Finance and Treasury can manage cash more efficiently and effectively if they can forecast and accrue more accurately and timely, Human Resources can acquire the right labor at the right time and for the correct amount of time if the requiring departments can forecast more efficiently.

Although the above are just a few examples of the power of the beginnings of the database, and a simple representation of some combination of data and subsequent conversion to information that can be used for timely and accurate decision criteria; you will see as this white paper continues that the continuous collection of data in the transaction stream and its corresponding availability to the appropriate designees, at the right time will eliminate corporate silos and facilitate collaboration.

Collecting Data in the Transaction Stream (motor carrier description)

The shipping process identified above concluded with the carrier pickup.  It continues here with the carrier retuning to its terminal for cross docking, outbound, interline and ultimate delivery processing.  The minimum data collected in this process are:  carrier assigned references (transaction numbers, trailer, tractor, rig, job, location, dock), route, load position, manifest, sequence, manifesting, billing, interline revenue divisions and freight movement.  This process can occur more than once and over one or more carrier lines. 

The data collected in this continuing process, at a minimum, consists of:  the above data, and tracing, tracking, shipment location, placement, interchange and delivery information. 

The Corporate Data/Information Repository

When you consider the volume, type and quality of data collected from the beginning and through the ensuing processes identified and add to that the knowledge, skill sets and experience that the various management disciplines and their respective professionals bring, it should become evident to all that the decision criteria for accurate and timely decisions for planning and reaction lie within the Logistics Information Repository (LIR).  The LIR contains vital information about costs, purchasing, markets, inventory turns, customers, claims, sales, sales personnel, carrier performance, DC competitive assessment, through-put, inventory put-away, warehousing, labor and many other areas of cost, cost avoidance, profit and profit improvement.

The System Description 

Freight bill management, cost control, transportation information and logistics collaborative portal amongst the business partners!

The Objective

The ability to convert the data to highly coherent information and share the information with authorized business partners, at the right time, at the right location, globally, 24/7 without encumbering the internal or partners proprietary computer systems is what the neutral ASP model was designed to do.

An ASP as the Delivery Mechanism

An application service provider or ASP is one that provides their services over the Internet.  In most instances, the operating software resides on the provider’s equipment and the data files reside there as well.  Authorized users have access to the system/service dependent upon security level.  As an example, some users identified as administrators can view data and change files, other users can only view files and only certain files at certain times. Other users can be designated as security officers; they can authorize new users and designate clearance levels.

Why an ASP?

ASP or Application Service Provider is one that provides computer applications on the web. A highly secure ASP allows appropriate information access and necessary dialogue to all authorized business partners at the right time and at the right place without encumbering proprietary operating systems and does so in neutral territory, 24/7. 

What ASP Model Meets the Three Objectives?

Predicated upon the three objectives stated above, the most suitable ASP model would be a freight bill management, cost control, transportation information and logistics collaborative portal. This model would be responsible for, in order of events:

Accepting/preparing Bill of Lading data, generating the Bill of Lading- in this task, data would flow to the ASP and populate the appropriate B/L fields and the B/L would then be generated or the B/L would be initially generated on the Web.  All appropriate data would be validated and retained for subsequent use, inquiry or reporting.

Assigning freight costs and the corresponding general codes or cost center information- once the B/L was prepared, actual freight cost would be assigned based upon the actual route of movement.  General ledger codes are then assigned, cost center are applied and total freight costs are calculated.  At this point, optimization can occur (provided the appropriate wave frequency in the process has occurred); the B/L’s can be transmitted directly to the respective carriers and the shipments staged for pickup.

Pre-payment and add charges- for those companies that pre-pay and add freight charges to their merchandise invoices, they can easily access this file for all necessary information or obtain a report (electronic or paper) to facilitate their invoicing process and expedite their receivables.

The files- the above processes have created the necessary routines to achieve: tracing and tracking; auditing/matching; duplicate payment prevention; payment control; payment; performance monitoring and management reporting, including but not limited to all of the examples identified above. 

Another very important advantage of this selected model is that it operates 24/7 across all time zones and therefore properly addresses global commerce.

While not addressed specifically in this white paper, it should be clear that all of the preceding is absolutely applicable to the entire inbound process and all of the advantages apply equally as well.

If a key goal of collaboration is to effectuate a smooth, continuous, cost efficient flow of goods and information along the supply chain, a seamless supply chain can not be achieved until the data supporting the various decision points is accurate and timely available to authorized business partners.

Collaborative performance is realized by virtue of the necessary preliminary data having been captured in the shipping process and being combined with the data continuously collected in the ensuing transaction stream.  Consequently, authorized consignees can determine in-stream shipment status, consignors can precisely establish the time of delivery for invoicing and passage of title and other mission critical relevant information can be viewed in this neutral ASP environment.   Messaging is another critically important part of this ASP model as it satisfies this “final mile” in the collaborative process and does so with full and complete documentation. 

The impressive nature of the data combined with its capture in the transaction stream, coupled with the ASP’s fundamental ability to provide equal access to authorized business partners at the right time, across the globe, 24/7, coupled with the ability to communicate special situations, those outside of the business operating rules, presents itself as the ideal candidate for collaborative performance. 

Continuation

Please consider this white paper as a beginning in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com .

Disclaimer

The information presented above represents the opinion of the author and not necessarily the opinion of TransportGistics, Inc. nor is it presented as a legal position

All content copyright by TransportGistics, Inc. All rights are reserved. The authors of the articles retain the copyright to their articles. No material may be reproduced electronically or in print without the express written permission from TransportGistics, Inc. or the individual authors (papers@transportgistics.com)

Additional Resources

Micrologistics and Macrologistics - The Dichotomy of Logistics

Logistics, The Beginning of the New Potential

The Freight Audit Function and Utility.  Driving Corporate Performance.