The value of end-to-end intercontinental transportation planning

Posted on 28 Jul 2014 by The Manufacturer

Fab Brasca, vice-president of global logistics at JDA Software, discusses how companies can get value from utilising end-to-end logistics planning.

Fab Brasca
Fab Brasca, vice-president of global logistics at JDA Software.

When it comes to world-class transportation and logistics management, companies must strive to deliver on two critical mandates: containing costs and sustaining service. With the unprecedented power of the omni-channel consumer driving behavior in the global marketplace, companies — regardless of where they sit in the supply chain — must not only find new ways to achieve efficiencies and operational control, but also to accomplish these objectives with the agility necessary to competitively serve today’s end consumer.

A significant transformational global logistics opportunity for change can be found in the common practice of taking a siloed approach to managing transportation lanes for intercontinental moves. Under this current process from both an organisational and execution standpoint, a North American retailer sourcing product from Asia might divide the multiple modes and legs associated with transporting goods from origin to final destination into separate components and responsibilities.

Typically, one group — either the company’s inbound team or an outside consolidator — manages origin routing of the freight traveling into the origin port, while different groups may manage the ocean legs and domestic transportation from port to final destination.

Especially for large-scale companies, this segmented practice leaves substantial money on the table and results in significant inefficiencies — particularly stemming from lack of consolidation into the port. It also hinders agility due to limited visibility and lack of cohesion, making it difficult to enact any changes while goods are in transit.

A Better Approach: End-to-End Planning From Initial Point of Origin to Final Destination

Today’s retailers and manufacturers can infuse value into their transportation and logistics networks by adopting an end-to-end intercontinental planning process. Enhancing both upstream and overall visibility, this process delivers end-to-end transportation lane control extending from true initial global point of origin to ultimate final destination. While outsourcing certain execution segments such as trade compliance or freight forwarding might still make business sense, end-to-end planning ownership provides companies with the critical ability to adjust execution across their networks based on changes in their supply chains.

Consolidation and port routing decisions can be made on a network-wide basis instead of a single transaction at a time. And with visibility into ultimate freight destinations, companies can dynamically take into account factors such as the bookings process, port congestion and capacity balancing — and then enact routing changes as needed. Rather than the common practice of setting a predefined itinerary or fixed path each and every time between origin and destination, companies can now re-plan as dynamics change in the network.

Taking Control at the Point of Origin

Companies today tend to conduct more optimisation analysis on the domestic side than on the international origin side, and consequently many of the operational inefficiencies that exist reside on the freight origin front. Both sides currently are independently planning and re-planning, which consumes valuable time and resources. As such, taking control at the point of origin can represent a huge opportunity. In order to drive synergies at the point of origin, however, companies must first be armed with transportation management capabilities that are equipped to handle the challenges of routing in the origin point’s global region.

For example, a company might be accustomed to applying sophisticated routing techniques domestically in North America, such as creating multi-stops, doing top-offs on the way to a port and looking for consolidation points. But applying these techniques to an origin location in China requires the company’s transportation management system to be capable of navigating the challenges of different truck sizes, a very diverse carrier base and limited geographic information inherent to the location.

Today, suppliers often define the terms regarding which party assumes ownership of the various process stages, including whether or not a retailer assumes responsibility for transporting goods to port or whether it takes over after that step. From an inbound retail workflow perspective, one of the first steps in implementing an end-to-end intercontinental planning approach is to conduct analysis across all suppliers and associated purchase orders to determine the best stage for the retailer to assume responsibility in order to truly manage end to end from a cost perspective.

The company can then conduct optimisation analysis on the purchase orders to be processed as well as the best way in which to combine them based on volume, timing and other constraints. Optimised decisions from an end-to-end, informed perspective can subsequently be made regarding factors such as the volume that can be consolidated, actual consolidation into the port, destination port identification, and the individual routings on the domestic side.

Maximising consolidation opportunities represents one of the most significant optimisation value drivers. By assuming control of origin-to-destination planning, companies gain the potential to create and leverage scale while moving away from predefined assumptions.

Increasing Visibility and Creating Supply Chain Resiliency

The connectivity between origin and destination routing created by global end-to-end planning delivers significant visibility to help drive decisions. Ocean carriers are now offering more extended services, such as providing port-to-port rates as well as door-to-door rates in which they handle the trucking on both ends of the spectrum. Looking at the planning perspective from true initial origin point to final destination enables a company to evaluate all of the alternatives between routing freight individually or utilising combinations in which the ocean carrier might assume the trucking legs as well.

This overall need for increased visibility and effective examination of all options and how they relate to one another has never been more important. The past several years have served as a reminder that extraordinary circumstances, like Japan’s devastating earthquake and tsunami of 2011, can occur that may challenge existing transportation lanes and disrupt the supply chain. Routine realities such as ever-increasing capacity funneling into specific ports represent more everyday challenges and potential disruptions.

The ability to conduct advanced modeling on the network allows companies to examine the available alternatives and then leverage them as part of the procurement process. The ability to identify and analyse what-ifs during procurement and understand the potential cost impacts or trade-offs in spreading capacity across multiple entry points all infuse a nimble flexibility into the process. This closed-loop approach builds resiliency into the supply chain, resulting in an enhanced ability to execute.

Gaining end-to-end intercontinental planning control also provides companies with the ability to make in-route modifications based on changes in demand and the network. Consider for instance a container of flat screen televisions traveling across the ocean, slated for a final distribution center destination in the northeastern U.S.

While the merchandise is still in ocean transit, the company discovers through its supply chain processes that there is a surge in demand in the southeastern U.S. The port arrival location may be fixed, but with visibility into the change in demand, the company can dynamically re-plan where that last truck goes and arrange for transport to the high-demand location.

The Bottom Line

Given the need to drive incremental global transportation and logistics value and continuous improvement through every opportunity, retailers and manufacturers have significant reason to adopt end-to-end planning from true origin to final destination:

  • Increased efficiency at the origin point. This is the single largest opportunity to drive monetary value, particularly for companies such as large-scale retailers and manufacturers, since traditionally optimisation has focused on domestic activities.
  • Connectivity between origin and destination routing. The connectivity between origin routing and destination routing and the associated interconnected visibility drives improved efficiencies.
  • Enhanced supply chain resiliency. Breaking away from planning by preset repetition with the ability to instead consider and react to potential dynamic disruptions mitigates risk. The ability to identify alternatives — such as balancing capacity across ports to circumvent port congestion — builds resiliency into the supply chain.
  • Dynamic re-planning agility. End-to-end planning control enables dynamic diversions if demand changes for in-transit goods. Companies gain flexibility and can re-plan an in-transit container distribution center destination from one region to another in response to a demand surge, countering long ocean leg lead times.

Retaining greater control of the end-to-end transportation chain delivers an enhanced level of agility and economies of scale that save resources and also speed time to market. By doing so, companies can achieve true efficiencies while nimbly minimising overall supply chain risk in an increasingly complex environment.