Can't see what's going on in your small package supply chain? Open up your eyes with these helpful steps.
Managing a lean, efficient supply chain today involves plenty of challenges, from optimizing manufacturing schedules and reducing inventory costs to expediting customs, speeding cash flow and improving customer service.
I wouldn't suggest trying it with one arm tied behind your back — or with both eyes closed. But that's essentially what you're doing if you try to run a small package supply chain without real visibility into the process.
Greater visibility enables more proactive supply chain management, allowing businesses to improve efficiency, better manage costs and inventory, and enhance customer relationships. In many cases, it allows managers to identify small problems and to correct them before they become big ones.
Information technology investments leading to improved information visibility and adoption of just-in-time (JIT) processes have led to significant supply chain enhancements. Over the past decade, the result has been a 34 percent reduction in the ratio of inventory to sales, a $4.6 trillion reduction in total business inventories and a 10 percent improvement in cash cycle times (Source: U.S. Statistical Abstracts; U.S. Dept. of Commerce; Cass and ProLogics State of Logistics Report — 2002).
Effective small package supply chain management requires precise management of the three flows of commerce — goods, information and funds. As supply chains become more complex, the flow of information about a shipment has become nearly as important as the shipment itself, and is critical to synchronizing the flows of goods and funds.
Supply chain visibility — the ability to capture and leverage that information — has come a very long way in a very short time. Marty Peters, who began work as a UPS driver in Detroit in 1946, remembers the advent of the ballpoint pen as a momentous change in the way he did his job; drivers no longer had to carry pocketknives to sharpen the pencils they used to manually log pickups and deliveries. But drivers still kept hand-written records, and accessing those records required that a clerk search through a file cabinet.
Today, drivers who work at Peters' package center carry sophisticated wireless devices called DIADs (for delivery information acquisition device) that scan computer-generated labels on packages they pick up and wirelessly beam information about the shipment to the world's largest DB2 database. As a package speeds through the delivery network, it's scanned numerous times by high-tech wireless optical scanners mounted above highly automated conveyor belts, or on the wrists of employees. This helps to guide the package's journey from trucks to cargo jets to whirring conveyor belts and back to trucks — until the recipient signs the DIAD carried by another driver in another city, and even more information, including that digitally-captured signature, is beamed to the database.
As a result, there's a virtual tidal wave of digital real-time information available regarding goods moving around the world. That information is powerful, but it isn't helping you manage your supply chain by sitting on a computer server somewhere. The challenge is accessing the particular information that's important to you in a way that it can offer the maximum benefit for you and your customers.
The good news is that a number of Internet-enabled visibility tools are available to help you connect with and leverage specific information about your shipment. The broad range of visibility tools available means there are likely one or more that suit the particular needs of your company very well, whether you manage your supply chain and your own fleet of trucks, or you contract out your entire supply chain to a 3PL. What's more, some are available at no charge as value-added services.
Visibility tools range from simple to complex, from those that require you to access them on a delivery company or third-party logistics (3PL) provider's Web site, to those that proactively sift out the information that's most critical to you. The information is then delivered to your inbox or imported directly into a desktop spreadsheet or database application.
The most basic visibility tool is a tracking function. Based on the purchase order (PO) or stock-keeping unit (SKU) number in the smart labels and optical scanner technology mentioned earlier, tracking — of packages, pallets, or freight containers — is really the basic building block of visibility services, and is offered by most shipping companies.
You can get an idea of how quickly the demand for visibility has grown and of how much the process has shifted to the Internet by looking at the numbers of online package tracking requests UPS receives.
In December of 1995, during the height the holiday Peak Season, UPS first received more than 100,000 online package tracking requests in an entire month. In December 1996 the carrier surpassed 1 million online package tracking requests in a month. In December 1997 the company surpassed 1 million online package requests in a week, and in December 1998 it surpassed 1 million online package requests in a single day.
UPS still hasn't reached a million online package tracking requests in an hour, but the numbers continue to increase. On December 23, 2003, UPS received 12.6 million online tracking requests in a single day — a 23 percent increase from the busiest day in 2002.
Many of these tracking requests are generated by people who go to UPS' Web site to track their packages. But increasingly, these requests are coming directly from the Web sites of online retailers and other companies that offer package tracking on their own sites as a service to their customers — and as a way to generate more visits to the site.
Other visibility solutions are more advanced and more specialized. But like online tracking, they often are available as value-added services. And the goal is the same: enbabling shippers to easily monitor package movements within their supply chains and to use that information to improve customer service.
For example, R-Biopharm, a manufacturer of diagnostic products for the detection of residues in food, ships its testing kits Next Day Air across the United States. The company uses one carrier for its importing and shipping needs. It benefits from a Web-based application by learning of any delays that are due to severe weather or incorrect addresses. This information prompts the company to proactively alert customers such as hospitals, food manufacturers, Food and Drug Administration (FDA), Centers for Disease Control (CDC) and Department of Homeland Defense when the product will arrive.
So what are some of the steps that your company can take to improve supply chain visibility?
1. If you use a major delivery company to move your goods, whether documents, small packages or freight, request a meeting with your account person to ensure you're taking advantage of the visibility services that best fit your company. Many of these solutions are available as value-added services.
2. If you plan to use a software application to help run your business — from enterprise resource planning (ERP) to accounting, customer relationship management (CRM), shopping cart and e-commerce systems, look for one with visibility tools built in. Many prominent software companies work with major shippers and 3PLs to strengthen their applications by integrating tracking functionality and other shipping tools.
3. Don't limit visibility information to the shipping department. For example, the finance department can use a confirmed delivery notice to automatically trigger invoices, cutting days off payment cycle times. And it can use electronically generated information about who initiated a shipment to easily assign billing charges to clients or internal departments at the end of the month. The customer service department can proactively contact customers when it receives information that a shipment is in route, or that it's been delayed due to weather or a customs issue, enhancing customer relationships.
4. Integrate visibility tools into your own Web site or other customer-facing components of your operation. Many companies have integrated online tracking and other shipping tools onto their own Web sites. This not only allows them to improve service to their own customers and cut down on where's my order phone calls, but it also drives additional traffic on your site as customers return to check on the status of their orders. Proactive notification of shipment status enables shippers to improve their customer service by proactively alerting customers of critical package status events.
Most shipping companies offer supply chain visibility solutions, and some go much further; it's worth your while to make sure the company you deal with offers the solution that's right for you. And if not, don't be afraid to shop around.
About the Author: Jordan Colletta is vice president of e-commerce marketing at UPS.