So the trend to use 3PL is certainly growing in the UK and is allowing companies to stick to their core competencies and competitive differentiation, while leaving the logistics specialists to focus on what they do best. But no matter how effective a 3PL’s infrastructure is – it and the client company can be hampered immeasurably by factors such as inaccurate or outdated information, lack of visibility of data across the supply chain, responding to events and exceptions and procedural issues around responsibilities. These are areas that Geac is having to address with its customers, and each is discussed in more detail below.
One Geac customer, a household name supplying the DIY multiples, paints a very typical picture. The enormity of its daily logistical requirements has meant it has outsourced the delivery of its products to a 3PL company, whose trucks arrive daily to take products back for delivery scheduling.
At present the company has a lease line connection with the 3PL which transmits stock information over night. This batch update means that the company is not alerted if stock levels change until the next day. This is not sustainable when supplying the demanding multiples in a JIT environment. So although its logistics arrangements have worked quite well, the client now wants to improve the process by linking this operation in real-time to its own operations.
Another typical situation, arising due to the growing pressure towards the real time enterprise, is that large customers often want to track their orders and shipments and need up-to-date information. They will expect the supplier to be able to respond to enquiries, but of course the data lies within the 3PL system, so that 3PLs are unintentionally creating information barriers. Providing visibility across the systems is vital.
But the technical challenge comes firstly in the form of data and systems integration – which over the years has presented a number of difficulties when disparate systems are involved – and secondly in providing pro-active workflow systems.
Systems integration needn’t be a bridge too far. A growing number of Geac customers are readily adopting the use of modern integration solutions. These are typically based on a common data language which can communicate with different systems. This is known as eXtensible Mark-Up language (XML) and by using such ‘neutral’ data bridges, which can include some intelligence to help with routing messages to different systems and people, organisations are really starting to benefit from real time data. XML-based messaging has huge advantages over using custom programs or fixed files, as it is more flexible and can be interpreted efficiently, rather than having to reprogram applications at either end of the interface.
Not only is it speeding things up by cutting manual re-entry of data out of the loop (and hence reducing human errors) but this new intelligence can be used to promote data quality by ensuring new data passes a ‘rules test’. In this way poor quality data cannot be entered into the system.
The quality of data is imperative to an effective supply chain. Hence it is necessary to have rules-based software, with in-built workflow capabilities to help spot errors immediately. For example, invalid product data or abnormal demand would automatically be brought to the attention of the appropriate person in the business – ensuring corrective action is taken without any unnecessary delay.
Where EDI typically depends on batches of data, XML messages can be triggered by events or exceptions and can be transmitted in real-time, so they can be used for all data integration, or to supplement the EDI messaging.
Workflow can again route exceptions based messages to the appropriate person. One example of a UK organisation to use this technology is Exel Tradeteam, one of the UK’s largest independent drinks logistics specialists. It commissioned Geac for a XML-based systems integration project to provide a real-time link between its existing Sales Order Processing and Distribution software to a third-party warehouse management system (WMS) which is being rolled out to 19 depots throughout the UK.
This project has been undertaken to meet the changing logistical demands of its national beverage distribution contracts, for customers such as Coors Brewers and Interbrew. Once the integration is complete it will provide Tradeteam with access to real-time information to help support the changing needs of existing customers as well as its ambitious business growth plans.
Tradeteam turned to Geac’s XML solution to help provide access to current stock levels and order status information at all times, so it can more efficiently fulfil customer orders and provide better supply chain visibility to aid improved forecasting and product supply. It chose the XML-based route to avoid being hampered by traditional customised interfaces that are often costly, risky and time consuming to change or maintain. These solutions are proving to be robust and reliable, and flexibility ensures that there will be no barrier to company growth.
Indeed the technical solutions are already in place, and well proven. But, in reality the biggest hurdle towards embracing a real-time approach is cultural, as there are several ways in which current working practices need to adjust. In order to make it a success, a 3PL and its customer need to agree to work together towards a mutual benefit.
One of the first steps should be to look at the primary transaction flows of data and handling of other transactions triggered by exceptions. It will also be necessary to look at the different uses of product codes, and other basic data elements, and agree on those. There will also be security issues to be addressed – how does a sender know the message gets received by the intended recipient? How does one trust the message will be acted upon, and not just sit in an in box?
There are data ownership issues to be
addressed – how much information/reporting
will the client organisation require from the
3PL? Or will management by exception suffice?
If that is the case this will require complete
faith in the robustness of an automated
workflow based system so that the only human
intervention required will be on the exceptions.
This will require a leap of faith.
So to begin with both parties need to agree a ‘day one’ stock figure as the base. Then they need to agree on the level of authority that a 3PL will need to be effective – as they might need to adjust stock figures for instance – ‘net change figures’. In these cases, how much authority can they have to check and then accept them (or maybe park decisions for later discussion)? How many changes does a client agree to let the 3PL accept before it needs to be debated? There needs to be an agreement on the level of paranoia: laissez faire – which has implications for risk: overheads
One final area for discussion is how to use workflow and messaging to communicate directly with customers.
Today customers ask questions of customer service staff and expect immediate answers on order status. But is this really the best way for everyone to behave in the near future?
Surely the following scenario would be more efficient all round:
A customer sends an order by email, only to receive an order acknowledgment email within seconds. Within this it may present a few options: Thank you for your order. However we’re sorry to inform you that we are not able to fully meet your requirements but we can offer the following choices:
l Shall we delay shipment for six days until we can make full delivery?
l Shall we part-ship now and send you the remainder in six days?
l Shall we cancel your order?
The customer then merely clicks the appropriate option and an e-mail is returned directly into the supplier’s planning system – typically an enterprise resource planning (ERP) system.