There was a time when companies that outsourced activities to a third-party logistics provider (3PL) just wanted the basics: inbound and outbound transportation and warehousing. But as a recent survey indicates, that is no longer enough. In a study of outsourcing patterns conducted by Georgia Tech, Cap Gemini Ernst & Young, and Ryder, more than one-third of the North American respondents and more than 40 percent of the Western European respondents identified supply chain planning systems, electronic markets and supplier management systems as requirements for the future. The common denominator? The need to increase visibility into the supply chain.
We believe the mandate is clear. To be a supply chain leader, regardless of your role, you must focus on two key areas. First, you must look at ways to increase end-to-end visibility. And second, in a global economy with global customers, you must find ways to standardize the way you implement solutions for customers.
Visibility 2.0
As the 3PL industry took off,many 3PLs found they had to expand their service offerings. Faced with a choice of expanding internally or taking the acquisition route, most opted for the latter. From a customer's perspective this "one-stop-shop" approach should have increased supply chain visibility. But it quickly became clear that the 3PLs faced the same integration problems their customers did, hampering our ability to provide true visibility across the various parts of the supply chain we were providing to our customers.
That's a problem. A global business that draws components from a variety of sources, uses multiple modes of transport, holds inventory and delivers a finished product to an international customer base requires predictability and visibility across the order cycle. Tracking at the shipment level alone is no longer sufficient. Recognizing this, we set out to invest in tools to provide real-time inventory visibility throughout the supply chain.
As Exel began sizing up this end-to-end visibility challenge, we also realized that we needed a way to hook into systems used by other players in the supply chain, including our clien ts' and our suppliers' ERP systems and even systems operated by competitors, some of whom were also involved in our clients' supply chains. Yet nothing on the market addressed this need: We would have to create our own system.
Exel developed its first-generation visibility tool in-house. But when it began work on the second version, Exel called in G-Log, a leading logistics software provider. The result of that collaboration, our Supply Chain Integrator system, is an end-to-end supply chain visibility tool that not only aggregates inventory quantities by location but extends to all the links in the supp ly chain, whether they're still a work in progress, in the final assembly stages or in transit. With this tool, we can track all the way to the product serial number level.
In effect, we have replaced inventory with information. We have found that in complex global supply chains, effective management of information is as important as management of the physical flow of materials and goods. For one customer, data-storage device manufacturer Maxtor, improvements in visibility provided the following benefits:
- A 30-percent reduction in regional transportation costs.
- An increase in inventory turns to 23.3 percent.
- A reduction of inventory levels by over 16 percent.
- Tighter control over in-transit product flows.
- A reduction in total end-customer cycle time to 48 hours from 72.
- A significant reduction of product loss and damage levels by ongoing product flow checks.
A sustainable advantage?
Impressive as these results may be, there will always be skeptics who ask: Is it repeatable? Anyone can achieve great one-time results; it's the ability to continually achieve excellent results that will lead to a sustainable competitive advantage.
We knew we had to create a global, repeatable approach to developing customer solutions and implementing them. This would require us to come up with both designs and project management/implementation methodologies that would ensure that we could deliver what we were selling. But we also realized that our solutions would not achieve the same level of results in all industries.Given that limitation, we chose to target specific vertical markets.
This point bears further discussion. Sometimes suppliers are so focused on the size of the contract or the name of the potential customer that they forget to consider the fit with their processes and capabilities. Though suppliers must certainly be responsive to their customers' changing needs, adding unique capabilities for a new market segment has both real and hidden costs. Though no one wants to turn down business, leadership requires a long-term view of where each company's headed.
With the methodologies in place, our employees developed a four-step process for designing and implementing solutions for our customers. Referred to as the "Exel Way," that process is based on the four Ds: Define, Design, Detail and Deliver, which can be summarized as follows:
Define. The design team identifies opportunities for improving the supply chain, including the identification of new routes to market.
Design. Managers work to create the optimum solution to meet customer needs and exploit market opportunities. We then test solutions using simulation and modeling techniques to optimize cost and test for risk from external factors.
Detail. Detailed operational plans are produced and validated, and a start -up plan created.
Deliver. Successful implementation is ensured through careful resource planning and extensive operations experience.
To assure successful implementation, we apply the core project management methodologies - planning, monitoring, controlling and reporting - to each job. This process culminates in an engineered solution that extends all the way down to the shop floor with standard operating procedures and work instructions. From there, an ongoing continuous improvement effort enables us to keep the cost reductions and efficiency improvements coming.
