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Another level

Another level

02/01/2012 | Channel: Technology, E-Business / IT

The next stage of continuous improvement in the supply chain. By Phil Lavin

Excellence in logistics execution creates the conditions for business intelligence to feed back into improved checking and planning, leading to a higher level of continuous supply chain performance improvement.

As every company that is involved in international trade would readily admit, the supply chain represents a key area of cost cutting opportunities – so much so that it has become a focus of board level decisions and a crucial factor in business plans and vision statements. On average, 6.8 per cent of a company’s turnover is spent on freight costs for procurement and distribution. Up to ten per cent of this could be saved through transport consolidation and optimisation, and by the automated selection of the cheapest transport service provider. Another eight per cent could be saved through a state-of-the art freight management system.

Considering the complexity and the cost of modern supply chain networks, having the right systems and IT infrastructure in place is vital. IT systems help to achieve cost effectiveness and improve reliability and accuracy by automating manual, ineffective and error-prone processes. Used in conjunction with a business intelligence solution, the cost reductions achieved by IT systems can be even greater. It is no surprise that Gartner’s Executive Programs CIO Survey in 2009 ranked business intelligence as the topic most important to CIOs for the fourth consecutive year. Board-level executives have moved to the next stage of continuous improvement of the supply chain.

Going beyond the tracking and tracing of processes, business intelligence offers a bird’s eye view of process parameters, costs and performance indicators, allowing for informed decisions that can structurally improve business. In order to gather all this data, excellence in logistics execution is required. The more advanced the logistics execution and in-depth processing of data, the more detailed and accurate the business intelligence.

Business intelligence helps to identify opportunities for logistics optimisation. But how can we improve something that cannot be seen clearly?

Improving logistics execution
In the generic improvement cycle, processes are planned and then executed, the outcome of the execution is checked and - depending on the results - the planning is adjusted so that execution is further improved. In this context it is necessary to add another improvement cycle at a higher level. Excellence in execution provides both the increased detail and broader scope required for the business intelligence to feed back into improved checking and planning, improving the outcome of these steps. Optimised execution will in turn enhance the business intelligence.

As a result, the inner continuous cycle of improvement can be lifted to the next level: from resolving single failures in the supply chain (fixes in the system) to more reliability, accuracy and cost effectiveness in the supply chain (fixes to the system).
Any IT solution should offer features that help to realise cost-saving opportunities and increase accuracy and reliability, such as order management, warehouse management, transport management, and collaboration & visibility. This is the basis for gathering business intelligence, such as order processing times, number of erroneous or incomplete deliveries from suppliers, turnaround or shelf life of items in the warehouse, freight spending for each transport, and number of delayed deliveries for each forwarder.

Business intelligence for better visibility
The first step to introducing business intelligence is to define the key performance indicators (KPIs) – i.e., what information is important to the business and what information can help improve performance and/or reduce costs. The top five categories for KPIs in the supply chain are:
  • Reliability of the supply chain
  • Flexibility of the supply chain
  • Ability of the supply chain to respond
  • Costs of the supply chain
  • Efficiency of asset management in the supply chain
These categories are fed from various source systems, each representing important characteristics of how the supply chain is performing. With increasingly long supply chains, lower buffer stocks, shorter product cycles, and the accompanying importance of reaching the points-of-sale at the right time, the reliability of the supply chain is becoming a key challenge.

The goal of business intelligence in the supply chain is to process data for the calculation of KPIs to determine the performance of, e.g., processes, departments and/or partners; to detect weak points in the supply chain, and to serve as a foundation for business decision-making. Based on the continuous collection of data, IT solutions for excellence in execution help to achieve ‘real visibility’, or rather ‘business intelligence’, on the current state of the supply chain, providing (and comparing) historical, current and predictive views of business operations. Business intelligence provides an overview of the business, consisting of:
  • Scorecarding and dashboarding
  • Reporting, analysis and advanced predictive analytics
  • Planning, budgeting and forecasting
All this information is aggregated in different ways, matching the specific needs of different departments, such as sales, marketing, procurement, finance, manufacturing, operations and IT, as well as external supply chain partners. To serve all of these groups, it is necessary to integrate data from the enterprise resource planning (ERP) assuming sales and customer relationship management are integrated into the ERP. Ultimately, it’s all about providing the right information to the right party at the right time. This defines the value of the information.

Challenges
Business intelligence is about pooling data from various systems and partners. To get this organised, some challenges must be addressed before and during the introduction of a business intelligence solution. They can be divided into three main areas:
  • Data procurement
  • Data transformation
  • Data quality
Resolving these challenges requires a high level of management attention, a trained project team and most likely support from the solution vendor.

Benefits
After introducing a business intelligence solution that is based on excellence in logistics execution, and after resolving the above-mentioned challenges, full visibility of supply chain operations can be expected. This means a better level of control over KPIs for the different areas of execution, for example:
  • Warehouse management
  • Transport and freight management
  • Collaboration
  • Order management
The risks involved in today’s supply chain, and the potential cost they represent, mean that excellence in logistics execution and business intelligence are now highly interconnected. Business intelligence solutions only provide full visibility with accurate and complete input from execution systems. Conversely, only excellent logistics execution systems are able to fully implement the profound and sustainable decisions made with the help of business intelligence. Together, these two areas give access to a new level of continuous improvement to the supply chain and thus help companies to achieve sustainable growth and a competitive edge.

Phil Lavin

Phil Lavin is a sales manager at AEB and comes from a logistics and supply chain finance background. Phil has worked in the logistics and 3PL environment for over 30 years. His primary focus in the past eight years centred on selling solutions and supply chain finance. Phil is an experienced sales professional and very well versed in consultancy and negotiations at the top level, particularly working with board level decision makers.

AEB

AEB is a leading provider of supply chain logistics software with a global client base of over 6000 customers and offices in the UK, Germany, Switzerland, Singapore and the US. AEB’s core product ASSIST4 offers comprehensive functionality via a wide range of modules including warehouse management, freight management, transport management, customs management, monitoring & alerting and compliance. It provides a complete set of business services for end-to-end logistics, including international goods movements, enabling standardisation and automation of business processes in supply chain execution.

For further information, visit: www.aeb-international.co.uk