Technology in supply chain responds to the demand of regulations
Compliance is a major catalyst for better supply chain visibility-having a clear and traceable indication of events along the chain is becoming not only a competitive advantage but a necessary requirement. It can also drive down costs.
The demand for technology that meets regulatory compliance requirements is surging, leading companies like Waterloo, Ontario based Descartes, to show a fiscal third quarter net profit rise of 91% year on year on revenue growth of 11% to US$43.1 million.
How are compliance requirements driving the technology that is used, and also procedures and processes?
Descartes CEO Edward Ryan has said that customs regulation “is a principle driver for our customs and compliance solutions,” and an influence on the company’s content solutions and mobile resource management solutions.
Customs regulations such as tariffs and taxes are driving growth, as is demand for security and for electronic filing systems.
Descartes has made a number of acquisitions in 2014, including that of e-customs Inc., a provider of electronic security and fiscal customs filing solutions in the UK, whose cloud-based solution, Webdecs, provides both shippers and logistics service providers with a wide range of customs capabilities to comply with UK fiscal filing and security filing requirements.
On December 8, 2014, Descartes also announced its acquisition of Pentant Limited, a UK-based certified Community System Provider (CSP) offering customs connectivity and import/export inventory control solutions for ocean, truck and air cargo. Prior to this Descartes acquired Airclic Inc., a provider of mobile solutions that help companies reduce the cost of delivering goods by automating traditional paper-based processes.
In order to reduce truck driver wait time at Customs, between Canada and the US, Livingston International just launched a tracker app, which is designed to give drivers information on the clearance status of their shipments as quickly as possible. Both the US Pre-Arrival Processing System (PAPS) and the Canadian Pre-Arrival Review System (PARS) have been optimized for mobile on Livingston’s Tracker app, so that drivers can be kept informed of their shipment’s status no matter where they are.
Livingston’s Speed Scanner functionality also enables truck drivers to use a simple barcode scan to check shipment status, with no need to type in barcodes, said the company.
For shipments without a barcode, the driver simply keys in the shipment information to find the shipment status. There is no longer a need to phone a dispatcher and wait for them to check the status, Livingston said.
The app also features “set and forget” functionality for shipments entering Canada, so truckers can get PARS shipment alerts with the click of a button. Carriers can also opt for SMS and/or e-mail shipment updates.
Solutions providers are increasingly anticipating governments’ next regulatory moves in order to expand their service offerings.
“With governments dictating rules of engagement for shippers, there are certain requirements we now have to ensure are in our systems,” said Mike Chapman, Vice President Sales at Transplace Canada.
“I guess it all depends on what stage each organization is in. Transplace already has its own Customs Portal up and running on the US-Mexico border. In Canada, we are seriously going to look at partnering with a customs company or acquiring one, to fulfil what we call our diamond for North America. Within our own TMS coming into Canada, we put questions in for newer shippers. Many US-based shippers just think they give us their load and they don’t have to do any paperwork. Many of them are coming north for the very first time. We will then put them in touch with a customs company. That’s why our aim is to to acquire a customs company,” he said.
Companies are having to adapt to more and more changes, such as increased self assessment of goods crossing borders to speed up the process.
The company is also getting ready to onboard a new TMS which will provide better visualization for Transplace internal teams about broker info, client info, and declared values.
“We’re having to do a more labour-intensive checklist. We’re in the midst of onboarding our new dispatch system by the end of second quarter 2015,” he said.
At press time, DHL Global Forwarding, the air and ocean freight specialist within Deutsche Post DHL, announced itexpected a ‘substantial’ increase in its portfolio of customers adopting its International Supply Chain (ISC) supply chain management service by the first quarter of 2015.
A cloud-based collaborative global platform, it offers shipment tracking, expedited management of purchase orders, real-time visibility of operational changes, enhanced customs visibility, end-to-end standardized logistics execution, and early intervention of discrepancies in any stage of shipment.
With the retail sector being the earliest adopters of ISC’s service and cloud platform, there has also been a recent influx of interest among customers from the technology, automotive, life science, chemicals, and engineering and manufacturing sectors.
“The marrying of the company’s ISC and customs expertise offers customers an end-to-end solution with greater control over their supply chain and guidance on regulatory compliance,” said Jose Maria de Orduna, head of Operations and Value Added Services, Americas.
DHL Global Forwarding’s ISC team developed its supply chain management service platform to be more flexible in its system configurations, streamlining of processes, improvement of efficiencies, and visibility from the moment a purchase order is issued to delivery of the goods.
A major impetus is the US’ “Single Window” International Trade Data System (ITDS) initiative, for which DHL’s Customs Brokerage teams are working to assist importers and exporters to become aligned, the company said.
On Feb. 19, 2014, the Single Window was announced by executive order to streamline the export/import process for America’s businesses with a deadline of Dec. 31, 2016 for completion. Businesses will now have to file documentation with one government agency instead of filing with up to 47 separate agencies.
With the advent of the Single Window, importers and exporters doing business in the U.S. or with the U.S. are going to need guidance on this new electronic interface that will be carried out in phases by the U.S. government.
DHL Global Forwarding has launched free monthly 60-minute customer webinars in the U.S. earlier this year geared toward various customs and trade topics in order to ease transition.
While technology promises better compliance, the aim to achieve better visibility end to end also promises better cost control. A July 2014 report by Bob Heaney, Research Director Supply Chain, Wholesale and Retail Practices with Aberdeen, looked at best practices and the potential improvements in revenue and profit margins that can be derived from enhanced visibility, improved intelligence and control of logistics costs.
Control towers are getting a lot of attention in terms of their promise to provide this control to organizations and their stakeholders.
In ‘Supply Chain visibility and segmentation: a view of the control tower approach’, the control tower is defined as a set of integrated processes and technologies that support a seamless flow of product from source to end consumer, regardless of global complexity, or sales and logistics channel preferences of customers
“Supply chain visibility under a control tower approach involves tight synchronization of supply and demand, as well as the orchestration of the three flows of commerce-the movement of goods, information, and funds-across end-to-end logistics activities, from raw material to the delivery to the end customer. The increase in the number of suppliers, customers, carriers and transport and logistics modes and channels, changes the importance of collaborative synchronization between all parties in the multi-tiered global supply chain,” said Heaney.
What are the key drivers for focusing on improving visibility in the context of complex global transport and logistics networks?
“The increased complexity and multi-party nature of global supply chains has led to longer lead times, more in-transit and multi-channel inventory, and the need to control downstream and upstream logistics. This, in turn, has contributed to increased supply chain management costs. It is not surprising that, in light of global economic turmoil, many companies have turned to their supply chain organizations in search of ways to cut costs, while enabling faster and more efficient responses to changing customer demands across all logistics channels,” said the report.
Reducing costs by driving down excessive inventory, both staged and in-transit, and proactively responding to inbound and outbound events, has become critical for companies in today’s supply chain environment.
The report ranks top performers as those who use a control tower approach to leverage their internal capabilities, but also leverage their supplier and manufacturing partners and collaborative optimization technologies.
The new logistics formats require understanding new B2C as well as B2B requirements. This involves linking financial and cost to serve components with visibility events.
According to Aberdeen’s study of Chief Supply Chain officers, the top business pressures facing the 161 companies studied are: the impact of increasing supply chain complexity and rising supply chain management costs. Key areas of change highlighted were the more challenging and complex e-commerce and multichannel or cross-channel demands impacting 87% of respondents.
Leaders had 95.4% of orders delivered to customers complete and on time outbound, 94.6% of orders received from suppliers complete and on time, a 0.5% decrease in total landed per unit costs in the past year, and a 7.5% decrease in the frequency of out of stock inventory in the past year.
Automation followers, however had 86.4% of orders delivered to customers complete and on time outbound, 84.8% of orders received from suppliers complete and on time, +8.5% increase in total landed per unit costs in the past year, +0.9% increase in the frequency of out of stock inventory in the past year.
“These gaps in performance are significant, particularly in today’s global market, where 88% of companies are involved in global supply chains and address B2C and B2B channels,” the report noted.
Accruing landed cost updates as an order or shipment progresses is another example of linking financial and cost to serve components with visibility events.
When considering B2B and B2C convergence capability, the best in class are:
48% more likely to collaborate with the customer on a strategic level, 83% more likely to better understand tradeoffs between service level and inventory management, 86% more likely to have closed look integration of supply chain planning and execution, 83% more likely to segment the demand forecasts based on key product-customer characteristics, and 67% more likely to provide accurate views of inventory and ensure that availability to promise is extended across multi-echelon inventory whether at stores, DCs, suppliers or partners.
Top performers use a Control Tower Approach to leverage their internal capabilities but also leverage the strength of their supplier and manufacturing partners and collaborative optimization technologies.
With 85% of survey respondents indicating that they plan to increase their current level of end to end supply chain visibility, companies are now trying to look further upstream into their supply chains to address those visibility “blind spots”.
Having access to cost and event data and collaborating with the customer is essential to managing the B2B volume demands and supporting the customer’s e-commerce business, said the report.
The five key best practices for B2B and B2C “reengineering” include access upstream and downstream demand-fulfilment models, consider the demand side requirements up front, re-engineer and streamline B2B and B2C fulfilment processes, and link demand and fulfilment process with integrated systems.
In a presentation at the recent CITT Canada Logistics Conference in Calgary, Ryan Bloor, Global Logistics Director, and Oliver Heath, Logistics Advisor, both with Celestica, examined the use of control towers in the logistics industry.
Celestica, a six billion dollar manufacturing and supply chain services company, has for the last several years put more focus on TMS, planning, supply chain and freight network optimization.
The end-to-end visibility of the control tower, supplier to customer, on a single platform, enables improved cost and serviceability, and quick analysis of data.
While control towers don’t promise control of everything, what you do with the data you can capture can provide a better handle on things.
“The transportation control tower does equal collaboration,” Bloor noted.
Taking the systemic view, the control tower acts as a platform sitting on top of some of the key platforms you may have in your organization, for example on top of the TMS.
The control tower can provide some key KPIs, Bloor said, including pickup notification, transit time, shipment status, order delivery, etc.
“An ERP is great at saying here is what is happening within the four walls, but what is happening outside? So you have ERP elements, compliance data, and carrier elements, rolled into the control tower platform. The KPIs can be customized by region or site. In the manual world of order lifecycle process, we strive to automate this data via control tower,” Bloor said.
Where many companies will employ a third party on their freight audit process, in the control tower world, the order cycle goes as follows:
The order is created in the ERP, the shipment is created in the TMS, the auto tender goes to the LSP, the tracking is in the TMS, the freight audit is in the TMS and payment in the ERP.
All of this information, including any communication back to the ERP, gets fed up into the control tower. Reporting of this takes place in the control tower.
You can do your audit on an exceptions basis at this point, noted Bloor, and different KPIs can be designed to provide real time data, and to have more control of the elements you potentially can’t control.
The value of combining these data sources goes back to the big picture, where 85% of companies cite global transportation activities, compliance requirements, the need to better understand their freight spend, and the need for optimization.
With globalization and compliance major factors, language capabilities are also now becoming more of a requirement.
Many KPIs can be made available that deal with carrier service. Companies operating without one use manual rate quoting, manual routing guides, phoning for shipment status, and manual bills of lading.
Acting in the realm of transportation optimizer, the control tower can provide proactive notification of premiums and who is responsible (this KPI tends to come up a lot in terms of understanding where the non-compliance is, Bloor noted).
On average, control towers also allow a 7-day shorter cash to cash cycle than companies without.
They improve the time to problem resolution, and the real time exception notification means you’re more responsive. But control tower access can be given to your organization internally and to your customers so they can now see in real time.
With inaccurate information, more companies tend to hedge, creating the risk of more inventory in their supply chain.
The make vs. buy decision
“A control tower is not a big decision but certainly an important one, and one with many elements. There are pros and cons to it. There is complexity involved and if your organization sees value in the benefits I went through you’re going to need to cut through that complexity. You’re either going to have the skill in house or you’re hiring it or buying it from a managed service,” said Bloor.
There are reasons for both outsourcing and insourcing-if you decide to implement a managed service project for a control tower, setting the baseline is important-your partner is going to be on the hook for delivering “X”, he said.
When it comes to the process flow during implementation, Heath noted that the strategy process typically runs 6-8 weeks, the design 6-8 weeks, covering processes and implementation 6-8 wks, then the pilot stage, then live.
LSP to TMS connectivity is required to implement a fully functioning EDI connection to and from the control tower.
There are electronic connection alternatives for each of the EDI messages such as web services thru XML, said Heath.