Improving supply chain performance.

TM

Roadmap to the Flexible Supply Chain

ESYNC | TranSystems White Paper

ESYNC | TranSystems
3232 Central Park West Drive
Suite A
Toledo, OH 43617
419.842.2210
www.esync.com
www.transystems.com

Roadmap to the Flexible Supply Chain

EXECUTIVE SUMMARY

The supply chain encompasses the infrastructure of facilities,

transportation networks, systems and people that enable and
facilitate (or impede) material flow from source to consumption.
The goal of the supply chain is to provide shippers and
consignees alike with timely, secure, error-free order fulfillment,
delivery and visibility at the lowest possible cost. Put another way,
customers expect to receive their orders in the right condition,
at the right place and at the right time. That said, smaller, more
frequent orders are placing enormous pressure on supplier
warehouses and transportation networks and, most customers
are unwilling to pay a premium for service they believe can
be obtained elsewhere. Today, American industry is spending
well over $1 trillion annually or almost $.09 of each sales dollar
on the supply chain, with half of that amount attributable to
transportation costs (Establish, Inc./Herbert W. Davis & Company
2006). The opportunity to contain (indeed, reduce) these costs
though significant, pales when compared to the opportunity for
growing market share and revenues and maintaining competitive
advantage by leveraging supply chain execution systems
(SCES). This paper examines these systems and provides a
measured approach for assessing their potential and crafting a
roadmap for deployment. It has been prepared for newcomers
and old hands alike. For the former, it is a call to action; and, for
the latter, a suggestion that the time is ripe for revisiting legacy
approaches to supply chain management and execution and
examining new opportunities for improved performance to deal
with landscape changes including acquisitions, new or more agile
competition, expanded customer requirements and extended
networks (e.g. offshore manufacturing, etc.).

2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

BACKGROUND

Supply Chain
Industry Spending
Today, American industry
is spending well over
$1 trillion annually or
almost $.09 of each
sales dollar on the supply
chain, with half of that
amount attributable to
transportation costs.
Herbert W. Davis & Company/
Establish, Inc., 2006

Have you ever jumped on a plane, arrived at a hotel, unpacked

and found yourself missing an important file, laptop power cord,
belt, appropriate shoes, toothpaste or reading glasses? Wouldnt
it be nice if we had access to:
A system that monitored trip inventory status and, when
queried, alerted you to shortages in time for you to do
something about them?
A utility that could be voice-triggered to automatically
retrieve and deliver to your packing area the right clothing,
accessories and suitcase or garment bag for a given type
and length of trip?
A module that automatically verified luggage content and
printed a packing list for double-checking before departure
(that could also be archived for insurance purposes in the
event of loss or damage while traveling)?
A voice-triggered system in your automobile that on
command quickly runs through a checklist to assure that
you have your laptop, tickets, glasses and luggage, while
simultaneously checking your fuel gauge, flight status and
the traffic on the way to the airport?
Far-fetched? Not really. In warehouses and distribution centers
across the globe, similar questions and more like them are being
answered by advanced supply chain management and execution
systems (SCM and SCES). Why? Because the implications of
analogous omissions are far more serious for those charged with
processing orders for customers who expect them to be delivered
complete, undamaged and on time.
Admittedly, taking an SCES into your home is beyond the financial
reach of most travelers. And, even if you showed up at a meeting
without the right shoes, the impact, though discomfiting, might
add an entertainment component to the session. On the other
hand, theres no entertainment value to missing inventory, short
shipments, overloaded or half empty trailers, damaged materials,
excessive costs or orders lost because of erratic supply chain
performance and even less when your system cannot identify
the recipients of suspect products in the event of a recall.

SUPPLY CHAIN EXECUTION SYSTEMS

Clearly, all companies can benefit from systems that facilitate

improved planning and scheduling based upon an accurate,
timelier view of operations status and market behavior. The best
decision-making is executed on the basis of events as or before,
not after, they occur. Responsive systems provide discipline
and control, based not only upon plans and performance goals,
but also upon the dynamics of actual operations. A better view
2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

of inventory status at each point in the supply chain permits

better response to demand through adjustment of production
schedules, inventory redeployment and replenishment. The key to
the equation is real-time material and data flow synchronization.
Every time an order or item moves, data on its identity and location
should be captured, validated, archived and disseminated to your
supply chain stakeholders.
To achieve these objectives, flexible and responsive supply chain
execution systems feature:
A network architecture that enables effective trading partner
collaboration
Provision for real-time visibility of inventory, order and
shipment status that assures timely response to exceptions
for improved customer service
Integration and data sharing across applications to
maximize the efficient use of all resources
Optimization tools that drive cost out of the supply chain
through improved workflow scheduling and the elimination
or reduction of non-value adding tasks
The following systems, which fall under the supply chain execution
umbrella, link material and data flow and provide the functionality
that separates the supply chain winners from the also-rans.
OMS -- Order management systems (OMS) permit real-time product sourcing on the basis of inventory availability and warehouse
or distribution center proximity to the customer. More robust OMS
monitor sales by customer on a regular basis to provide input to
planning systems for adjustment of manufacturing schedules to
build the products actually being purchased.
SCES Supply Chain Execution Systems (SCES) manage inventory, space, material handling equipment, labor and transportation
resources in real time to assure timely, error-free fulfillment, delivery and visibility of order status throughout the supply chain. SCES
include:
WMS -- Warehouse management systems (WMS) provide a
bridge between enterprise-level purchasing, manufacturing planning, manufacturing execution and customer service systems
and the warehouse or distribution center. With an accurate view
of available inventory, equipment and staff, the WMS directs the
operations that feed components and raw materials to production in the manufacturing environment and fill customer orders in
wholesale and retail distribution. With bar code, voice data entry,
RFID and radio frequency data communications technology,
WMS transform conventional warehouses by improving efficiency and productivity. WMS add levels of control that permit users
2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

to better plan and manage resource and inventory allocation in

both conventional and automated operations, while providing
management and corporate systems with real-time visibility of
actual performance.
With up-to-the-event inventory status by discrete location as
well as an accurate profile of available labor and equipment
resources, the WMS issues and manages tasks and monitors
performance across the primary functional areas of receiving,
storage/put-away, inventory management, order processing
and shipping.
LMS A robust WMS time and date stamps every task issued
to and completed by warehouse operating personnel. A labor
management system (LMS) uses this data to establish standards
and monitor individual and team performance. Further, historical
performance data is also used to match available labor and
equipment to the anticipated warehouse workload to prioritize
and schedule those resources and to:
Monitor warehouse operator activity to establish realistic
performance standards.
Match standards to planned activity for optimal scheduling
and staff deployment.
Monitor team and individual performance for pay and
incentive purposes.
TMS While WMS and LMS optimize the use of available
space, handling equipment and staff for order fulfillment, the
supply chain job is not done until customer deliveries have
been completed. Transportation management systems (TMS)
optimize the use of transportation resources to manage
inbound, outbound and internal shipments at the lowest cost
consistent with customer service standards and trading partner
requirements.
SCV Supply chain visibility (SCV) systems link SCES to other
corporate systems to provide enterprise-wide (and, in some
cases, trading-community-wide) visibility of demand, inventory
availability by location and order status. These systems provide
access to the data companies need to manage logistics operations and respond to hiccups as, not after they occur. This visibility is critical to fine-tuning production schedules, inventory
deployment, performance monitoring, event-driven exception
handling and, more fundamentally, to customer service and
protection of the companys investments in the supply chain
infrastructure. And, finally, the same visibility tool can be used
to provide a window for customers to obtain updates on order
status up to final delivery.
2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

Now, lets take a look at how SCES are being deployed to achieve
higher levels of supply chain performance and service.
As illustrated above, the tightly integrated advanced supply chain
management system monitors sales by customer and feeds that
data to the planning system (1) that adjusts manufacturing and
warehouse replenishment schedules to assure availability of the
products customers are actually buying. New orders then flow
through an OMS (2) that sorts and sources fulfillment based upon
customer delivery requirements, inventory availability and warehouse or distribution center proximity to that customer.
Once prioritized, the orders are passed with required delivery
dates to a TMS (3) for load planning, freight rating, carrier selection and scheduling at the lowest cost consistent with customer
promise dates. From the TMS, the orders move to a WMS (4)
that allocates resources and prioritizes order picking tasks based
upon actual workload while directing value-added processing as
required to meet scheduled carrier pick-up times. Once shipped,
the TMS monitors carrier performance and provides periodic
updates until delivery sign-off by the customer.
Data on all of these transactions as well as inventory status
throughout the supply chain is accessible to the companys management team through an SCV and event management system.
The SCV provides real-time order and inventory status throughout
the enterprise.

2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

SCES BENEFITS

Successful Supply Chain Execution Systems:

Support corporate goals and operating strategy
Reflect the culture of the operation and user readiness for
ownership
Link material and information flow
Meet throughput, accuracy and reliability goals
Support timely communications with customers/suppliers
Accommodate expansion and change
Meet schedule and financial objectives
Although the benefits of successful SCES deployment will vary
from user to user, those most frequently cited include:

REDUCED

IMPROVED

Damage/Shrinkage

Inventory Accuracy

Misplaced/Lost Stock

Space Utilization

Search Times

Throughput

Inventory & Safety Stocks

Order/Lot Tracking

Outside Warehousing

Stock Rotation/Inventory Turns

Paperwork/Forms

Customer Service

Human Error

Workload Planning/Scheduling

Direct/Indirect Labor & Overtime Costs

Resource Allocation

Deadheading/Equipment Costs

Labor Utilization & Productivity

Utility Costs

Equipment Productivity

Transportation Costs

Performance Measurement

Expedited Service Costs

Backorder Handling/Crossdocking

Cash-to-Cash Cycle Time

Return on Assets

MOVING AHEAD

Is it time for you to take a closer look at the readiness of your

supply chain to handle increasingly complex market demands?
Most companies supply chain networks and trading partner
requirements have changed over the last five years. Further,
2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

technology and systems have evolved to permit far more adaptive

and flexible response to future changes and demands. What is the
competition doing? Is there an opportunity for you to gain (recover
or sustain) your competitive advantage? The question, of course,
is How?
Many supply chain management initiatives emphasize the
information systems component of the solution with too little
attention paid to fine-tuning the physical infrastructure. Clearly,
advanced supply chain management cannot exist without
information technology and systems. However, information
systems cannot be designed in a vacuum. Where do you start?
It begins with fine-tuning the business model, network and
infrastructure!
Network and Inventory Optimization
To address supply chain demands cost-effectively, management
must consider both the channel that supports the physical flow of
products and the information systems hierarchy that facilitates (or
impedes) communications with trading partners.
Excellent tools are available to address these issues. Questions
to be answered include:
Are plants, warehouses and distribution centers optimally
located to support rapid, low cost deliveries?
Does inventory deployment mirror geographic and
demographic demand?
What are the financial trade-offs between network
configuration, inventory location and quantities, delivery
costs and service levels?
Are warehouses configured, equipped and staffed to
minimize rehandling, facilitate value-added processing
and speed throughput?
Are facilities sized properly and in the right locations? Will
they be in five years? Seven?
When and where should additional plant and/or storage
capacity be added?
What transport modes and lanes should be used to move
products through the network?
Which sites should be served from each facility?
What about construction/lease costs, the local labor
market, wage rates, utilities, access to carriers, etc.?
Warehouse and DC Optimization
The best supply chain technology installed in operations with
ill-conceived material flows and processes will only enable
users to do things badly - - - faster! Launching a supply chain
initiative without a hard look at facility layout, handling systems
and methods will almost certainly produce a sub-optimal
2007 ESYNC | TranSystems. All Rights Reserved.

Information Week
on Technology
Random infusions of
technology will merely
leave the enterprise in
great disarray.
James Borck
Information Week
2001

10

Weigh Your
Options Carefully...
We are reminded of
the Fortune 200 food
company that delayed
rollout of a bar code lot
tracking system because
of its $2 million price tag.
A $5 million recall two
months later changed
management's position in
a hurry...

Roadmap to the Flexible Supply Chain

implementation. LOOK at process flow as well as the efficiencies

that might be realized in terms of space, layout, equipment and
people. Indeed, minor changes to facility configuration, material
flow, storage and picking procedures will often produce benefits
before a system is introduced and, indeed, enhance the
contribution of the system, once it is installed.
Other Considerations
All too frequently, the most severe effects of technology have
come from applying it too late rather than too soon. There have
been dramatic SCES advances during the last several years with
improved data capture technology and the emergence of open
systems, integration and object-oriented design tools as well as
Service Oriented Architecture (SOA). Undoubtedly, there will be
further refinements as SCES continue to evolve. Now as then,
however, the challenge for users will be avoidance of the trap
implicit in romancing current problems with tomorrows solutions
-- and drawing from the existing arsenal those tools that will
address todays problems today.
When looking for a WMS solution, a high level feature list should
include:
Accurate, timely data collection, neither symbol nor device
dependent
High-speed, high-availability Open Systems platforms
Data base independence
User-configurable, easily modified software
Graphical user interfaces for day-to-day operation as
well as accommodation of modifications to product files,
location files, storage/picking strategies, etc.
User-friendly report writers
Clean, reliable external communications interfaces
Luck has nothing to do with supply chain excellence and,
yet, the number of companies that leave performance to
chance continues to amaze. Successful deployments are not
fortuitous accidents. They are the result of solid preparation,
clear articulation of project goals and operating performance
improvement targets, painstaking attention to detail and
an organizational commitment from the time of opportunity
identification to and through installation and acceptance.
Assess the risks associated with introducing or deferring the
introduction of new technology or systems into your operations
before you implement them. Investigate what could go wrong,
the probabilities, options for eliminating risk and the related costs.
Match those costs against the costs you would likely invite in the
event of problem occurrence. We are reminded of the Fortune
200 food company that delayed rollout of a bar code lot tracking
2007 ESYNC | TranSystems. All Rights Reserved.

Roadmap to the Flexible Supply Chain

11

system because of its $2 million price tag. A $5 million recall two

months later changed managements position in a hurry.
Make sure that you prepare your team for proactive handling
of unexpected glitches. The concept of developing plans for
addressing anomalies is not new, but the number of companies
that do not have the requisite procedures is shocking. Primary
areas to regularly investigate include infrastructure, processes,
technology, systems and people. Conveyor, lift trucks and
tractors break. Bar codes and RFID tags dont always read.
Key workers come down with the flu. Carriers miss pick-up
appointments. Storms interrupt power, shut down computers and
close trucking lanes. How will you react? Involve your workforce
in the assessment. Document procedures and make sure that
your team knows how to execute them.
For some companies, realization of the benefits of continuous
replenishment, channel and supply chain integration and trading
partner collaboration are not so much technology constrained as
they are stymied by the inability of the organization to logically
and cost-effectively implement them. Clearly, success with SCES
is no longer technology constrained. Isnt it time to get started?

2007 ESYNC | TranSystems. All Rights Reserved.

About The Author - John M. Hill, Principal

ESYNC | TranSystems
During the past thirty-five years, John has spearheaded the
deployment of over 100 AIDC (bar code, RFDC & RFID),
warehouse (WMS) and transportation management (TMS)
systems for DoD and firms in aerospace, appliance, automotive,
basic metals, consumer goods, electronics, food, lumber, medical
services, pharmaceutical, steel and miscellaneous manufacturing
industries. His accomplishments include: Co-founder of the
Automatic Identification Manufacturers (AIM) Trade Association
and a charter member of AIDC 100, former president of the
Material Handling Education Foundation, Inc. and the Material
Handling Institute, Inc. , member of the Board of Governors of
the Material Handling Industry of America (MHIA), co-founder of
MHIAs Supply Chain Execution Systems & Technology Group,
recipient of the 1997 Norman L. Cahners and 2004 Reed-Apple
awards for contributions to the material handling industry and
material handling education, inductee into Modern Material
Handling magazine's 20th Century material handling Hall of Fame
and named to DC Velocity magazines 2003 roster of Logistics
Rainmakers. Widely published, he has given over 300 seminars
and presentations for corporate clients, trade and professional
societies in North and Latin America, Europe, Asia and Australia.
John is also a faculty member of The Logistics Institute at Georgia
Institute of Technology.
About ESYNC | TranSystems
ESYNC | TranSystems is a strategic supply chain consulting,
integration and implementation services firm that helps
clients achieve bottom-line results by bringing the real world
experience, methodologies and seasoned resources necessary
to meet their supply chain challenges. The service offerings
facilitate development of supply chain strategies, optimize
logistics networks and operations and, when appropriate,
deploy technology and software systems. ESYNC merged with
TranSystems in April of 2007 and is now part of the management
and supply chain consulting services group of TranSystems.
Contact ESYNC | TranSystems today for more information.

ESYNC | TranSystems
3232 Central Park West Drive
Suite A
Toledo, OH 43617
419.842.2210
www.esync.com
www.transystems.com