The Real Logistics Challenges (Why Logistics is So Hard)
If every shipment were outbound, logistics would be simpler. In the real world, though, shippers deal with returned merchandise, receipt of goods in process and inbound raw materials. Multimodal transportation adds to the complexity — plus the fact that a single shipment can come by rail, truck, ship and air. Add to the mix that all carriers likely have their own systems. Whether they offer real-time information, access to a portal or other benefits, shippers must interact effectively with every one of them.
Professionals must also be attentive to constant shifts in the regulatory and logistics industry environments. For example: Now that customs is part of Homeland Security — and renamed Customs and Border Protection (CBP) — it's evolving from tariff collection and inspection to a focus on supply chain security. This transition is reflected in Congress' recent consideration of a proposal for 100 percent screening of cargo on passenger aircraft. On the commercial side of things, cube-based pricing is poised to transform less-than-truckload (LTL) shipping through per-pallet rates that can conceivably reduce shipping prices eight to 10 percent. And producers of perishable products must maintain consumer confidence after recent food supply safety crises by ensuring freshness from packing to delivery, a concern familiar in Rick's industry.
Finally, there are internal enterprise issues. A supply chain is not a monolithic entity. Companies usually run several, depending on customer requirements, product line and so on. Each has its unique complexities, and operational subtleties are often invisible to other departments.
Forward-looking companies like Rick's have attempted to address this disconnect and increase efficiency by adopting transportation management systems (TMS). A TMS typically produces highly detailed routing guides and brilliantly optimized operating plans, but these documents are largely paper-based and almost impossible to enforce — a situation not unlike leading the proverbial horse to water.
TMS integrates nicely with customer order processing but not with shipments — such as customer returns, inter-company transfers and inbound supplier shipments — that don't fulfill customer orders. In practice, this means that an astounding 50 percent of a company's shipping spend is neither monitored nor managed.
In addition, companies that don't automate implementation and management of optimized plans distance rank-and-file shipping department employees from strategy and leave them unable to enforce policy. On a more mundane level, scheduling and managing shipments is manually intensive, requiring specific knowledge of and access to carrier forms and rate information. This can add as much as 10-15 percent to total transportation costs and negatively impact profitability.
In this environment, getting an accurate picture of costs, identifying excesses and determining how to solve problems is difficult. With globalization now a fact of life, most organizations attempt to reduce the complexity of their shipping scenario by reducing the number of carriers they use, but that approach has become less effective. Indeed, as the world continues to flatten, they need to expand their carrier relationships in order to create plans that are effective at the local, regional and international levels.
As Rick understands all too well, complete, accurate data is critical to improving logistics operations. Better information leads to better analytics, and that leads to the ability to make real improvements. The Aberdeen report puts it nicely: "When asked about whether they actually had the ability to find and access the needed global supply chain data to support the decision making process, study participants gave an alarming response: only 13 percent were fully satisfied with how efficient they were in finding the needed supply chain data… it became apparent that very few companies actually had the needed timely visibility into the critical processes involved in global supply chain management, which prevented them from accessing information in a timely manner." (1)