Green Matters / eSupply Chain

Technology and Sustainability: When Lean and Green Converge

It seems that when supply chain decision makers thought to discuss what the technology and sustainability goals of their firm were, the conversations took place in two different meetings.

Technology, after all, was primarily about supply chain visibility. With the advent of lean, customer needs drove the discussion – they  absolutely, positively needed to know where their shipment was “right now.”

Sustainability, meanwhile, was primarily about “green” credibility; the adoption of best practices that reduced the company’s environmental footprint while also, admittedly, giving it a slight marketing edge.

Every supply chain seeks to develop the capability to track shipments from creation through sale. And on the sustainability side, those that were able have invested in shiny new fleets of fuel-efficient vehicles (or contracted carriers who had made that commitment).  At the very least, companies initiated new processes to reduce the amount of resources that went into each delivery.

But in the wake of the keenly felt supply chain lane disruptions caused by the tsunami in Japan, floods in Thailand and volcanic eruptions in Iceland over the past two years, a noticeable change has taken place.

Now, when talk turns to sustainability, the theme on everybody’s mind is business continuity and über-efficient, technologically enhanced transportation practices.

It’s not that “green” has gone out the window; it’s just that in the current economic climate, the tone has shifted  from being a distinct driver of goals and policies to sustainability being seen more as a byproduct of other decisions.

“I think the thing that everybody has begun to realize is that, in many ways, technology has the ability to blend corporate sustainability goals with what’s good for a company’s economic viability,” says Les A. Hamashima, chief operating officer for Transite Technology Inc., a transportation management systems software company based in North Carolina. “Essentially, we’ve reached the point where both of those things go hand in hand.”

All good transportation management software fulfills a basic function – enabling the company using it to bring in raw materials and ship out finished goods in the most effective way possible. And for many customers of Hamashima and others who commented for this article, “effective” means low cost.

“If you can reduce the cost of your goods sold, you’re just a more competitive company,” Hamashima explains.

But it turns out that’s also the sweet spot for what we used to think of as green sustainability. With a solid 70 percent of all goods moved in the United States still being moved by truck, every decision that leads to a more precisely balanced load and a shorter distance between points A and B reduces fossil fuel consumption, carbon emissions in the air, and wear and tear on other resources.

 

First, Visibility

Historically, the development of transportation management systems was a direct outgrowth of companies becoming more diligent about their supply chain administration.

Yet up until the onset of the global financial crisis, industry surveys show that less than half of US companies had a strategic transportation management process in place.

“Within that corporate initiative, they looked at technology as a means to do a couple of things – to boost the efficiency of processes, and to provide them with a better overall view of corporate data,” Hamashima says.

Ironically, supply chains, the physical manifestation of a shipper’s global footprint, were left largely untouched when many of these firms considered where they could innovate and how they would cut costs.

But knocked for a loop by the crisis and successive natural and man-made disasters, shippers decided it was high time to sharpen their transportation processes.

“Now, there’s a huge uptick in interest in this area – it’s a pretty hot space right now. The reason is they’ve already done as much as they can conceivably do in every other area. They’ve squeezed the manufacturing process hard... they’ve squeezed other areas hard... and now they are looking for areas that have been left untapped,” according to Hamashima.

What shippers are looking for specifically from technology is a way to lower the overall cost of goods sold while growing, or at least preserving, their bottom line. That means reducing the cost of raw material and inbound product, and then, in partnership with their transportation service provider, designing a delivery strategy that will get their goods before the buying public at a rate that’s cheaper than that being paid by their competitors.

The result is that RFPs are growing increasingly complicated; a natural outgrowth of shippers realizing that transportation management is not just a functional part of their business, but a strategic part as well.

“The term you hear more than any other these days is ‘resiliency,’” says Scott Byrnes, vice president of marketing for Amber Road, provider of global trade management solutions for McDonalds, Honeywell, Abercrombie & Fitch, Kraft Foods, Cisco Systems and others.

“What we’re seeing as a result of what were some fairly major supply chain disruptions are more senior executives asking, ‘Is my supply chain resilient?’ And, ‘Can I survive a catastrophe that’s half a world away?’ Followed with, ‘How badly will it affect me?’ and ‘How will I respond?’” Byrnes says. “That didn’t used to be as big an issue as it is now.”

While the modern global economy has been with us for decades, supply chains have become so ubiquitous, so interdependent and so lean, that one shattered link can create chaos for the unprepared.

For those tasked with crafting a solution to the possible and the unprecedented, “it all comes down to giving your client control of their global supply chain,” Byrnes says.

“That’s what people are looking for... they want to understand where their orders are with respect to their raw materials and manufactured goods coming in, with respect to fulfillment, and they want to be able to match these things up, supply versus demand, so that if the lightning bolt hits anywhere along their supply chain, they can quickly assess how bad the impact is going to be in the intermediate term and what their options are,” he continues.

“It’s all about, ‘How quickly can I re-route production to different facilities?’ ‘How quickly can I secure alternative transportation routes?’ ‘Alternative air routes?’ ‘Alternative ocean routes?’ ‘Rail?’ And you can’t do any of that if you don’t have full visibility and control of your global supply chain,” he says.

Byrnes says cloud-based software solutions are a powerful tool, gathering data from clients’ global trading partners, suppliers, carriers and the like, and feeding it into a portal through which they can see a clear, real-time picture of their supply chain.

“You can even check the status of work-in-progress at your manufacturer,” he says.

But Byrnes says data collection, no matter how thorough, is only part of the equation. In a world where the unexpected and unpredictable can wreak havoc, clients need to be able to interpret that data as quickly as it fills their computer screens.

“That’s where our trade professionals come in,” Byrnes says. “You need to have a partner you can turn to and say, ‘I need to source from a different location. What are the risks of sourcing from this country or that country?’ ‘What are their regulatory regimes like?’ And most importantly: ‘How quickly can I move once a decision is made?’”

 Byrnes says in addition to its large multinational clients, Amber Road is increasingly working with small to medium-sized firms who are trying to grow their top-line revenues by penetrating foreign markets and trying to reduce their cost of goods sold by sourcing from low-cost countries.

“The difference, from the solution perspective, is one of scale and capabilities,” he says. “ A $20 billion multinational will use the broadest range of capabilities and functions possible. A smaller companydoesn’t need that.

 

Sustainability: The Driving Force?

If something of the overt emphasis on green that was so prevalent just a few years ago has diminished,  That side of sustainability is not entirely on the back burner when it comes to integrating tech into the transportation setting, says John Tucker, vice president of marketing for Datatrac Corp.

“Yes, people are concerned about being as lean and efficient as they can be, but I think there’s still a big emphasis on the environmental side,” Tucker says. “We work with expedited delivery companies, and they’re acutely aware of their green profile because the final mile tends to be very visible – people seeing them on the road, stopped at traffic lights – and in that setting, if you’re not green, people notice.”

“I think a lot of that also plays into business side [of their operations],” he says. “I mean, if you follow the logic, if they don’t clean up their own act, somebody else will step in for them and make it harder to do business, [namely] government regulators.”

When Datatrac started – in the days before the proliferation of accounting software – it primarily offered soup-to-nuts back-office services.

“Initially, and remember, I’m talking about a time before the widespread use of computers and cell phones and tablets, a lot of guys didn’t necessarily see the value of technology, but those that ultimately went on and grew and prospered were the ones who saw that it created a lot of efficiencies, made their internal operations saner and quieter, and even opened up a host of new opportunities,” Tucker says.

As an example of the latter, Tucker pointed to a client who stores an extremely expensive wound care package for a pharmaceutical distribution company.

“This is a kit that costs in the vicinity of $50,000 and hospitals simply don’t want to have something like this on their shelf or on their books,” he says. “It’s technology that makes this a workable situation. What you have is a situation where when a patient is discharged the hospital will send the order to a distribution company, which alerts the courier warehousing it to bring it to you at the hospital door. It’s a situation where promptness and responsiveness is key.”

If the example suggests Datatrac has moved a long way from its own beginnings, Tucker confirms it has, moving from being the purveyor of a comprehensive operating system to one that is deeply involved in web technology.

“The mobile aspect has really become the focus. It’s the tip of the spear; it’s where the work is really done,” he says.

“In any kind of delivery businesses, it has to be done by trucks and drivers and people moving things around. That’s where the work is happening and we need to be where the work is happening.”

At its heart, Datatrac’s platform relies on drivers to collect data on their deliveries, which are then passed up to their dispatcher and on up to the carrier’s chain of command and all the way through to the shipper.

“The cumulative effect of all this being that the shipper has a much broader view of the entire supply chain or distribution channel,” Tucker explains.

“In today’s lean supply chain world, shippers need to know that things got off the ship, that somebody picked their box up at the port, took it to the warehouse, broke it down, cross-docked it, put it on the delivery trucks and that it got to the store when it needed to be there,” he continues.

“In essence, they need to know substantially everything, in real time, so that they can identify shortages in a timely fashion and successfully make corrections,” he says.

Tucker describes the business environment as being one in which clients want “exception-based management.”

“To do that, you need to collect good data in the field, because that’s the only way to achieve a broad range of efficiencies, he adds.

So what of “sustainability” the way we used to think of it?

There is little to no distinction between employing technology for business continuity purposes and employing it as part of an overall “green” strategy.

“It goes right to the heart of environmental sustainability,” Tucker says. “If you’re not tracking each movement and have people running around out there and making three or four extra stops because things didn’t get delivered or delivered correctly, that’s wildly inefficient – you’re consuming business resources, and you’re becoming a hazard to the environment because you’ve logged, perhaps, three times more miles than you needed to in order for one shipment to be delivered.”

“I’d like to say “green” initiatives are driven by and large by a kind of eco-consciousness, but that’s not really it in the current business environment,” he continues. “Drivers today are often paid by the stop, and companies on their effectiveness at distribution, so they want to design the most efficient route, encompassing the fewest miles with the least idle time – all good things for the environment – but really just a natural byproduct of the transportation service provider becoming a better business operation. And again, technology enables all these things.”

 

Avoiding Disaster

But, of course, visibility is only one aspect of how technology is aiding supply chain continuity.

It wasn’t all that long ago, that critical pieces of people’s business operations resided in a box – the computer tower – sitting under the desks of their workers. In a really tech savvy business, a server holding critical business data might be in an off-site server.

Today, increasingly, that critical supply chain information is being centralized in the cloud.

“I think the event that really drove home the lesson of not keeping everything in house was Hurricane Katrina,” Tucker says.

He goes on to tell the story of a client whose facility was destroyed by the 2005 hurricane, but that company had the good fortune – or foresight – to store its mission-critical data on servers in Datatrac’s top tier hosting center in Atlanta.

“Because their data was here, all they had to do was get to a location with power, open up a box, set up a PC and get back to work,” he says. “We’ve had similar situations with customers whose buildings were destroyed by fire. In those cases, as in the aftermath of the hurricane, all they needed to do was get on a web browser and they were back in business.

“The evolution of technology has helped us safeguard the sustainability of our client’s businesses, and cloud-based computing is only making our abilities more flexible,” Tucker continues. “Our movement to the cloud – and our taking the majority of our customers to it as well – has enabled them to feel that as soon as they can get in front of a screen, they can get back to work. With the advent of mobility, they don’t even need to find their way to a desktop. They can resume business via their phone or tablet.”

“What makes designing transportation management systems unique in the tech world is that the work of a dozen skilled engineers can be immediately shot down by a guy paid by the mile,” Tucker says. “You might design what you think is the most elegant solution in the world, but if the design interfaces and user experience isn’t right, it’s not going to work... and that is a very sobering aspect of this business.

“The other thing you have to be mindful of is not crushing your client with the weight of technology... it’s not enough to build a technological platform that can work for everybody... you need it to be able to work for anybody. More often than not what that means is, identify the common threads that everyone can benefit from and then build scalability into the rest of the system so large and small enterprises can use it from day one. And then any business will be able to continue to use it as they grow and their needs change.” wt

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