On a rapidly evolving manufacturing and distribution landscape, there is an immense pressure to consistently outperform your current benchmark, so you deliver more, with less cost, in less time, more accurately and with better quality. If you think it’s not possible to achieve more with your current organization, you need to check if you have in did built an extreme demand management operation. Because if you didn’t, then you’ll be surprised with what you can actually achieve and, better yet, how you can scale for a fraction of the cost it takes you today. Read on and check out the 5 cornerstones of an extreme Delivery Management operation.
In spite of the sluggish economy, industry concentration, market segmentation and consumer trends have actually increased the strain on the distribution activity. More brands, SKU proliferation, consumer market fragmentation and distribution channel increase, all play an important role in reshaping the requirements imposed in modern demand driven organizations, may them be B2B or B2C oriented.
In fact, over the past years, we have experienced a reduction in the order size and an increase in multi-level orders. This has caused a far more complex preparation activity, an increase in preparation errors and a far from optimal volume usage, both in trucks as in transportation units. We have also been constantly faced in the need to reduce the lead times for order processing and delivery, which makes it very hard to plan your operation and execute it with quality. This is worsened by traceability and quality requirements, that are now vital in order to assure a viable operation.
A lot of organizations have invested in some areas in order to cope with the increase in volume, the erratic order structure and shorter lead times. They have put in place route planning tools that have improved load setup, but more often than not they come up short in actually providing an optimal truck usage and drop point handling time. They have implemented automated picking and storage facilities, but very often either these advanced facilities are not fully integrated with the complete material flow and handle poorly exceptions or the underlying IT platform is not able to cope with the real time nature of such advanced facilities, causing bottlenecks and flow disruptions. They have invested in voice picking, auto id and mobile devices, which certainly has a tremendous positive impact in operator productivity, but they forget to provide dynamic multi-tier replenishment capabilities which causes operation downtime, they have a hard time adjusting to process variations and very often they lack the flexibility and planning to optimize both operator effort as transportation unit volume.
Bottom line, a lot is done and all of it good. But very often these activities lack the necessary, end to end, full process integration that truly delivers the optimal, extreme demand management organization. This means, for instance, that’s not enough to plan routes and see the truck on an electronic map. You need to build optimal routes, using optimal transportation units, designed to be efficiently build by either humans or automated systems or both. Otherwise, over 50% of the times you either have loads you can’t fit into a truck or the truck has more than 30% empty space. And this means you’re losing money. But there are more things to consider if you really want to go extreme on demand management. Let’s check them out.
You must engage in predictive, dynamic, rule-based forecasting. This allows you to know in advance, based on evolving instantaneous demand, how your operation will be shaped. The dynamic part is absolutely relevant, because the forecast needs to adjust not only to seasonal and business trends (therefore rule-based) but also to on the spot disruptions that are identified by demand behavior as time goes by. What does this provide you? Highly reliable capacity requirement prediction, segmented according to the way your business operates. This means you will be able to know in advance how many trucks to schedule, from whom and when. And how many resources, human or mechanical, you must make available to comply with the preparation load based on your throughput and capacity. In the end this means optimal resource usage and leverage when discussing commercial terms with your transportation suppliers.
You must use scenario-driven, preparation-oriented, rule-based, dynamic route planning. It not enough to plan your routes using geo information to get the best route considering a set of drop points. You must consider up front how the transportation units are built, so that they are both optimal for the preparation process, making it as efficient as possible, as for the transportation process, maximizing the occupied volume and maintaining its physical stability. This means that multi-level picking needs to considered in advance, so multiple types of packaging are foreseen in the transportation units. This means that specific customer and material requirements, which can change daily, are taken into consideration automatically using rules the operation manages itself. Then, you must consider that different ways of lining up the drops produce different results and you need to choose the best one, since every day the mix of orders and drops will be different. Enter scenario-driven dynamic route planning that, using optimal preparation transport units and rules to define the viable scenarios, generate a set of possible dynamic routes with different costs. This means that, by evaluating different possibilities, which we can change overtime, we will achieve optimal routes. And don’t forget that rules also allow you to take into consideration delivery time windows and traffic regulations, actually choosing the appropriate truck type to meet the drop requirements. Finally, this means that you’ll never end up with semi-empty trucks or loads you can’t fit into the truck and you’ll have the optimal way of preparing your transportation units. Result: 30% less truck cost, 20% less drop time and 40% better transportation units.
You must operate under real time, dynamic, fully coordinated operational processes. This means that all the processes required to prepare a previously planned load must be automatically coordinated and respond dynamically to exceptions that are detected in real time. Prioritization is based on scheduling and on the dynamically assessed risk to fail a deadline, forcing all processes to converge in order to satisfy a set of rule-defined requirements. As an example, if an outbound truck is delayed, your operation must automatically reschedule not only your loading bay assignment but also your picking and full pallet extraction priorities. Another example is multi-tier picking replenishment. As picking load and material demand oscillates based on outbound automatic prioritization, replenishment must adapt automatically for the actual requirements, namely the materials that are risking stock out based on the real time conditions of the pickers on one given area. Another example is dynamic response to material exceptions, so if for instance a material brakeage is detected, the operation must adapt automatically by changing priorities in multi-tier replenishment and force cascade material extractions to assure continued operation.
You must have real time, process-oriented, trend-aware visibility. And I’m not talking about knowing how much picking is missing on a delivery. I’m talking about knowing in advance if we’re going to miss a truck load deadline, why and what needs to be done where to correct that deviation. I’m talking about knowing in real time the productivity of my operation and trigger alerts if that productivity is putting my schedule at risk. This is predictive visibility, aimed at giving you information about trends and risks that allow you to take the decisive action to prevent failure from happening. And this visibility is focused on each of your relevant process and must be setup based on the relevant roles your organization has implemented to effectively manage your operations.
You must assure transparent, automated, real time, transactional integration. This one is a critical piece. For far too long organizations have relied on old-style, batch oriented ERPs to do real time jobs. ERPs are not designed to handle real time information but they are a part of the game. So, you need to engage with a real time operations management platform that assures proper, transactional integration with the ERP. The ERP takes care of the business, the operations management platform responds dynamically to process events and keeps the efficiency at high levels, while providing the required visibility. Additionally, you must assure that all relevant partners are electronically integrated in the process, so that information and events are propagated across the landscape and dynamic, optimal responses can be triggered on the right time. This involves transporters, customers, suppliers and third party operations, all of them must be linked together to assure the adequate response to the right event.
There are a few common denominators to these cornerstones: real time event handling, dynamic behavior, coordination, visibility and integration. They are in fact the key issues that allow you to respond with greater flexibility to exceptions, keep a tight, responsive control over your operations and provide you with the capacity to anticipate problems. These are, in turn, what allows you to scale far better as the requirements imposed on your organization increase every day.
At Processware, we have invested years of research in building up a real time, dynamic cloud platform designed to provide the foundations for this gigantic operations management challenge. And in fact we have successfully deployed several world class implementations with benchmark results, proving that extreme demand management is not only possible as it is a proven reality. You can learn more about this solution and its success cases here.