29
Collaborative Transportation Management : Collaborative Transportation Management : Enhancing Supply Chain Adaptability Enhancing Supply Chain Adaptability & Resiliency & Resiliency Presented to: Joel Sutherland May 9, 2006 Symposium on Value Chain Adaptability

Collaborative Transportation Management : Enhancing Supply

Embed Size (px)

DESCRIPTION

 

Citation preview

Page 1: Collaborative Transportation Management : Enhancing Supply

Collaborative Transportation Management :Enhancing Supply Chain Adaptability

& Resiliency

Collaborative Transportation Management :Collaborative Transportation Management :Enhancing Supply Chain Adaptability Enhancing Supply Chain Adaptability

& Resiliency& Resiliency

Presented to:

Joel SutherlandMay 9, 2006

Symposium on Value Chain Adaptability

Page 2: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Presentation Objective

Objective: Demonstrate how supply chain partners collaborate on transportation processes to become more adaptable to day-to-day demand changes as well as resilient in the event of major supply chain disruptions.

Resilience: A notion borrowed from the materials sciences representing the ability of a material to recover

its original shape following a deformation.

Page 3: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Agenda

2004 State of LogisticsCollaborative Transportation ManagementCase Study-AutoZoneQuestions

Page 4: Collaborative Transportation Management : Enhancing Supply

2004 State of Logistics

Page 5: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Logistics Cost as a % of GDP

$10.60

$10.80

$11.00

$11.20

$11.40

$11.60

$11.80

$12.00

2003 2004

GDP $

U.S. GDP Up

$11.0 T to $11.8 T

0.00%1.00%2.00%

3.00%4.00%5.00%6.00%7.00%

8.00%9.00%

10.00%

2003 2004

GDP %

Logistics % Stable

8.6% to 8.6%

$900.00

$920.00

$940.00

$960.00

$980.00

$1,000.00

$1,020.00

$1,040.00

2003 2004

Logistics $

Logistics $ Up

$0.944 T to $1.015 T

Source: CSCMP, 16th Annual State of Logistics Report

Page 6: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

U.S. Spent $1.015 T on Logistics in 2004

Transportation = $636 B (63%)Transportation = $636 B (Transportation = $636 B (63%)

$47 B

$82 B $636 B

$250 B Transportation

Warehousing

Other Inv CC

Shipper & Log Adm

Source: CSCMP, 16th Annual State of Logistics Report

Page 7: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

80%

7%

4%

1%5% 3%

TruckRailWaterPipelineAirForwarders

$636 B Transportation by Mode

Truck Transportation = $509 B (80%)Truck Transportation = $509 B (Truck Transportation = $509 B (80%)

Source: CSCMP, 16th Annual State of Logistics Report; various other

Approximately 50% of

truck is full truckloadApproximately 50% of

truck is full truckload

Page 8: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Cost of Logistics Relative to GDP

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4

Logistics % of GDP Inventory CC % of GDP Transportation % of GDP

Source: CSCMP, 16th Annual State of Logistics Report

Page 9: Collaborative Transportation Management : Enhancing Supply

Collaborative Transportation Management

Developed by the CTM Sub-Committee of the VICS Logistics Committee

www.vics.org/commit.htm#Logistics_Committee

Page 10: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

• Collaboration is more than cooperation. Collaboration requires that companies work actively together as one toward common objectives.

• Collaboration includes the sharing of information, knowledge, risk, and profits/benefits in an agreed-to consistent fashion for all participants. Everyone involved must benefit or it is not true collaboration.

• Collaboration entails understanding how other companies operate, how they make decisions, and what is important to them.

Collaboration Defined

Page 11: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Eliminate inefficiencies in the transportation component of the extended supply chain though collaboration to bring

benefit to all trading partners

What is the Objective of CTM?

Source: CTM Sub-committee of the VICS Logistics Committee

Page 12: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

CTM Improves Profits & Leverages Assets

CTM Opportunity

Improved Profitability

Improved Balance Sheet Performance

Increased Sales

Reduced Costs

Improved Transportation

Asset Utilization

Inventory Reduction

Improved DSO

Comments

• CTM enables improved service levels and on-shelf availability across the board

• Shippers and carriers with CTM capabilities become "go-to" parties for major retailer events

• Opportunities exist to minimize/eliminate costs associated with miscommunications across the extended supply chain, e.g.:

– Expediting/last minute shipping – Poor truck utilization – Freight bill and shipment administration

• Collaboration facilitates better use of transportation and warehousing assets for all participants, e.g.:

– Continuous moves– Shared warehousing – Fewer fixed assets

• The ability for participants to take a system-wide view of supply and demand minimizes unnecessary inventory

• Better communication between partners creates the opportunity to reduce DSO

Page 13: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Description

Periodic process between a shipper and a carrier to arrange for transportation capacity -- may include the use of a transportation marketplace

Proactive control of inbound goods flow and management of transportation by the receiver

Aggregating truckload freight across multiple locations or divisions of a company or across multiple shippers

Ability to solicit capacity from other select/core carriers

Collaborators Transaction Area

Capacity Procurement

Inbound Management

Integrated Movements

Transportation Marketplace

Shipper Carrier

Shipper

Carrier

Receiver

Shipper

Carrier

Receiver

Shipper

Carrier

CTM Opportunities Exist Across Four Key Transaction Areas

Page 14: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

CTM Eliminates Inefficiencies (Waste)

ECRECR

JITJIT

VMIVMI

“Lean”“Lean”

CPFRCPFR

“Pull”“Pull”

SixSigmaSix

Sigma

TQCTQC

What is CTM?

Time

Motion

Inventory Errors

Space

WasteWasteContinuous

ImprovementContinuous

Improvement

Page 15: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

CTM is a Holistic Process

Private Marketplace

Private Marketplace

RateNegotiation

RateNegotiation

Inbound Management

Inbound Management

RoutingGuide

RoutingGuide

StandardBOL

StandardBOL

DockScheduling

DockScheduling

Continuous Move

Continuous Move

AppointmentScheduling

AppointmentScheduling

YardManagement

YardManagement

CollaborativeLTL

CollaborativeLTL

ModeshiftingMode

shiftingTerms

ConversionTerms

Conversion

What is CTM?

BackhaulBackhaul

ReengineeredBusiness Process

ReengineeredBusiness Process

Page 16: Collaborative Transportation Management : Enhancing Supply

Information Technology Essential to CTM

Advanced technology is essential to successful CTM playing three important roles:

• Enables CTM by providing the necessary tools to make collaboration feasible e.g.:

– Real-time data transfer; automated communication

• Supports collaborative inter-organizational relationships e.g.,

– Reduction of transaction costs/risks with automated process

• Provides the opportunity for outsourcing of core logistics processes between CTM logistics partners

Advanced technology is essential to successful CTM playing three important roles:

• Enables CTM by providing the necessary tools to make collaboration feasible e.g.:

– Real-time data transfer; automated communication

• Supports collaborative inter-organizational relationships e.g.,

– Reduction of transaction costs/risks with automated process

• Provides the opportunity for outsourcing of core logistics processes between CTM logistics partners

Information technology (IT) by itself is not enough to lead to successful collaboration. Firms must know how to use IT to reap the benefits of CTM. Human contribution, through data analysis and information utilization, is where the true benefits of IT lie. Therefore, the enabling and supporting role of IT to CTM processes can only be realized if the technology is employed effectively

Information technology (IT) by itself is not enough to lead to successful collaboration. Firms must know how to use IT to reap the benefits of CTM. Human contribution, through data analysis and information utilization, is where the true benefits of IT lie. Therefore, the enabling and supporting role of IT to CTM processes can only be realized if the technology is employed effectively

Role of Information Technology Comments

Human contribution…is where the true benefits of IT lie.Human contribution…is where the true benefits of IT lie.

Human contribution, through data analysis and information utilization, is where the true benefits of IT lie.

How to do it?

Page 17: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

How to Achieve CTM Benefits

SupplierSupplier BuyerBuyer

CarrierCarrier

3PL3PL

Source: Transportation journal, The Value of CTM, Summer 2003; John Karolefsky, Collaborating Across the Supply Chain, 2001

The value of CTM can be obtained through two primary avenues:

1. Direct communication between Shipper(s), Receiver(s) and Carrier(s)

2. 3PL facilitation of the communication and execution process

The value of CTM can be obtained through two primary avenues:

1. Direct communication between Shipper(s), Receiver(s) and Carrier(s)

2. 3PL facilitation of the communication and execution process

How to do it?

Page 18: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Level of Collaboration

Traditional VendorTransactionalNo visibility

Trading PartnerCollaboration

Shared forecast by lane of trafficAutomated transactions

Partnership CollaborationShipper, Consignee, and CarrierShared forecastCommitted capacityVisibility

Consortium Collaboration

Multiple Shippers, CarriersThird party facilitationInformation HubRelationship management

Value

CTM Continuum

Opportunity to add value through CTM increases as multiple shipper networks are integrated, carriers

are connected, and communication and execution capabilities

are enhanced

Opportunity to add value through CTM increases as multiple shipper networks are integrated, carriers

are connected, and communication and execution capabilities

are enhanced

How to do it?

Page 19: Collaborative Transportation Management : Enhancing Supply

CTMCase Study

Page 20: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Fortune 300 company - $5.7 billion in revenue annually

Largest auto parts retailer in North America

Founded in 1979

Listed on the NYSE in 1991

Key developments in Logistics began in 1996

AutoZone’s Background

Page 21: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

0.8

1.8

5.35.7

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

1991 1995 2002 2005

Net Sales ($Billions)

5981143

3107

3673

0500

1000150020002500300035004000

1991 1995 2002 2005

Stores

AutoZone’s Growth

3,592 stores in 48 states and Puerto Rico

+ 81 in Mexico = 3673 total

Page 22: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Objectives

Support rapid growth of companyUse existing assets more efficientlyEmploy best available technologyProvide visibilityProvide visibility for all inbound flows ReduceReduce transportation lead timesExecute scheduled, time definite time definite shipmentsAchieve competitive advantageCapture and retain market share

Copyright 2002 TransplaceConfidential, All Rights Reserved

Page 23: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Scope of Services

Single point of contact Select, negotiate, contract, manage carriersProvide shipment status visibilityPerformance measurement and reportingAudit freight bills, pay carriers, bill Company

©Copyright 2002 TransplaceConfidential, All Rights Reserved

Page 24: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Product Flow Before CTM

Page 25: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Implementation Process

• Establish cross-dock methodologies

©Copyright 2002 TransplaceConfidential, All Rights Reserved

• Benchmark inbound freight costs–Convert freight terms from prepaid to collect

• Establish product profiles–Products, cube, weight, stacking characteristics

• Conduct detailed site location analysis –Operational business rules

• Determine reliable transit times –Flows between vendors, DCs, and stores –Mode, route

Page 26: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Product Flow After CTM

Page 27: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Results

Before CTMBefore CTM

• Vendors Controlled Freight • 77% of Vendors Converted to Collect• 85% LTL Inbound Shipments • <2% LTL Inbound Shipments

• 1 Week Average Transit Time • 1.5 days Average Transit Time

• No Pipeline Visibility • Complete Pipeline Visibility• Excessive Freight Damage • Freight Damage Nearly Eliminated• High Transportation Cost • >20% Transportation Cost Reduction• Growth Constrained • Significant Inventory Reduction• Poor On-Time Performance • 99%+ On-Time Performance• Poor Utilization of Private Fleet • 25% Increase in Private Fleet Utilization

After CTMAfter CTM

Page 28: Collaborative Transportation Management : Enhancing Supply

Joel Sutherland, Lehigh University

Enhanced Supply Chain Adaptability & Resiliency

Enhanced Supply Chain Adaptability Enhanced Supply Chain Adaptability & Resiliency& Resiliency

Impact

Total lead-time and lead-time variability reducedVisibility allows adaptive processes to be deployedTechnology enables optimal day-to-day executionInbound flows now in retailers’ controlAbility to adapt and grow business enhanced by use of 3PL

Page 29: Collaborative Transportation Management : Enhancing Supply

???

?

?