8 key benefits of effective supply chain management
Operational Responsiveness In Logistics
1. us ™
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WHITE PAPER
> OPERATIONAL
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rvices ®
RESPONSIVENESS
IN TRANSPORT AND
LOGISTICS
Business Transformation through
Real-time Response
David E. Olson
January, 2011
www.progress.com
2. TABLE OF CONTENTS
Summary 2
The State of The Market 2
Consolidation 3
Cost Savings 3
Greening 4
Performance-based Logistics 5
The Technology Approach 6
The Foundation: Events, Transactions and Processes 6
Events 6
Transactions and Processes 7
The Event/Process Relationship 7
Technology for Managing Response 8
Real-time Visibility 9
Immediate Sense and Respond 9
Continuous Improvement 9
The Progress Control Tower 10
Summary 10
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3. 2
SUMMARY
There will be continuing challenges ahead for the transport and
logistics market With rough times predicted, there is increased pressure to
find new efficiencies in operations, as well as shore up revenue by adding
new products and services All modes of transportation (air, land and sea)
must arrive on time; and the customer still expects the right product at the
right time and in the right condition A heightened awareness for reducing
cycle time, improving asset utilization and servicing new markets is the key to
providing the immediate response necessary for today’s market demands
There’s no slowing down the supply chain; the speed of business
needs to be maintained now more than ever Logistics service providers (LSPs)
need to find ways to deliver new levels of service as well as collaborate with
other service partners while ensuring an efficient operation
The transformation of the industry from “deliver and bill” to one that
is more service-oriented will require new levels of awareness, orchestration
and response to real-time operations That’s possible today with Responsive
Process Management (RPM) RPM provides a heightened awareness of
business processes, events and transactions across the enterprise and
enables you to deliver “in the moment” response
THE STATE OF THE MARKET
Air, road, rail and sea are the lifeline of any economy The connection
between buyers and sellers is complex with many critical points in the
supply chain Borders, rules and regulations, and technology all contribute
to the complexity, which makes it difficult for LSPs to get the right level of
intelligence Yet success will be heavily influenced on the ability to sense and
respond to operational events and act on threats or opportunities before it’s
too late
There are four trends that deserve attention because they are where
managing business events can have an impact: consolidation, cost savings,
greening, and performance-based logistics
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4. 3
CONSOLIDATION
While there’s probably more consolidation due to the current
economic conditions, it was happening before the current crisis started There
are actually two trends that fall under consolidation: LSPs joining forces and
LSPs acquiring software vendors
LSPs are either buying themselves into larger, more global markets
or adding to their portfolio to provide a broader spectrum of solutions The
goal of LSPs is to have more control and visibility over the supply chain and to
provide full lifecycle solutions In this case, the move is to become a leading
logistics provider that can deliver a greater level of service since inbound,
outbound and reverse logistics processes can be fully managed This strategy
gives customers “one stop shopping” for services
Software acquisitions allow more domain control Certainly, there
are major vendors that will continue to provide value-added services—and
they’ll surely thrive The general feeling widely documented by industry
analysts is that some of the major LSPs may take the leap into the software
space, venture beyond managing logistics, and offer complementary software
services such as supply chain visibility and warehouse management
For either case, as in any acquisition or consolidation, there will
be complexity The supply chain is a living, virtual entity and managing it is
complicated due to boundaries, application silos, data formats and varying
rules and regulations The challenge for transport and logistics companies is
to be able to effectively (and efficiently) act on opportunities or threats in and
out of the supply chain—whether they own, manage or simply contribute
to it They need to take corrective action before it’s too late and to ensure
they’re living up to performance expectations
COST SAVINGS
Cost savings is certainly not a new trend, but by today’s standards it
is critical There’s more focus on better managing inefficiencies in the supply
chain Responsiveness is becoming a competitive advantage for companies
that can manage logistics flow in a cost- and time-critical manner Time is
probably the most significant factor in logistics costs savings, and it can be
managed on two fronts: visibility and action
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First, you need to efficiently manage the time it takes to move
inventory You’ve got to ensure that the ships, cars or trucks are full, as well
as leaving and arriving on time Ultimate efficiency can be achieved only by
full operational visibility in real-time By monitoring the movement of ships,
cars or trucks in real-time, you can more precisely manage dock space and
the resources to manage the inventory flow There are visibility solutions
out there, but they tend to focus only on specific links in the supply chain In
addition, standard business intelligence tactics rely on yesterday’s data and
provide yesterday’s results Managing yesterday’s efficiency is too late You
have to act “in the moment ”
Second, you need to act on conditions as they change Visibility
solves only part of the problem Acting on business conditions, whether
positive or negative, needs to happen before it’s too late to seize the
opportunity or mitigate the risk You need to put rules in place that allow you
to actively monitor conditions and take appropriate action These real-time
rules can be modeled based on key performance indicators (KPIs) or other
performance metrics In this case, actions can be taken based on the metrics
that define your business
The two, monitoring and acting, when combined, help drive cost
savings by making decision making proactive and real-time With visibility you
can see through and across the process points in your operations Acting on
conditions in real-time can catch problems before it’s too late When real-time
actions affect business processes, responsiveness improves and costs go down
GREENING
Green is “in ” It’s not just a trend, and it makes good business sense
There are a lot of sound green principles being initiated, and many are related
to cost-cutting measures One significant example is implementing energy
savings through fuel efficiency There are at least two ways to optimize fuel
efficiency: better route planning and optimization and maintenance
Route planning and optimization are where the biggest gains can
be found The best possible route is the one with greatest probability of an
on-time arrival In order to accomplish this, you’ll need to know the “condition”
of your network Whether it’s trucks, trains, ships or planes, knowing where
they are and their proximity to critical delivery points helps define what the
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next steps should be Choosing routes based on traffic patterns is a known
science, but can you dynamically re-route deliveries based on traffic, weather,
and vehicle condition? Event processing gives you the ability to manage all those
business events at one time and optimize routing based on real-time input
Managing maintenance can be a complicated process Anticipating
what might go wrong based on history and estimated wear-and-tear is a
science that leads to preventative maintenance routines that may not be
necessary With advances in telematics, a piece of equipment (truck, forklift,
ship, or conveyor) can send events about their current condition to a central
location While most of these events are logged for later review, it is possible
to monitor these events as they happen and look for patterns of use that
could lead to a maintenance issue If a driver consistently speeds, take action
If the brakes on a forklift are used while under acceleration by the same
driver, alert maintenance
There are many conditions in a logistics operation where efficiently
using equipment can support green initiatives and cut costs
PERFORMANCE-BASED LOGISTICS
Performance-based logistics will lead to dramatic changes in the
industry Until now, contracts were largely based on volume, distance,
time and weight Performance, while important, is usually associated with
customer satisfaction As more industries transition from a “service and bill”
mode of operation to a greater service orientation, companies are increasingly
using service-level agreements (SLAs) to define working relationships
Performance-based logistics will require more situational awareness of
your operations to live up the requirements in your SLAs The situational
awareness you need will come from real-time input from the business events
that your agreements are based on
The success of managing performance-based logistics will come
from better operational response and proactively managing exceptions before
contractual issues arise Traditional means of determining business conditions
and situational awareness may not be enough because the analysis is based
on historical information Improved response and real-time exception handling
come from managing events as they happen If you can automatically trigger
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exception-handling processes from real-time business events, you can reduce
the number of steps and latency and take corrective action before it’s too late
The right way to transition to performance-based logistics is by
implementing systems that proactively enforce agreements and provide much
more predictable planning through real-time inputs
THE TECHNOLOGY APPROACH
Existing technology, while critical from a “run the business”
perspective, may not be sufficient for a move towards real-time response
Most existing technology and application architectures are not designed
for managing real-time response They’re designed for optimizing business
processes Their mode of operating—capture data, store data, analyze data
and respond—has too much latency for real-time actions In the transport
and logistics market where timing is critical, a matter of minutes can make or
break a performance-based contract
THE FOUNDATION: EVENTS, TRANSACTIONS AND PROCESSES
In any enterprise, there are events, transactions and processes
Events freely flowing through the enterprise can come from anything that
emits data Processes define and execute how the business is run Each is
individually important, but they become much more powerful when combined
Responsive Process Management manages events, transactions and
processes as one, recognizing the importance of each, but also the power of
the relationship between them
Events
Business is event-driven, and the logistics industry is filled with
events emitted from trigger points in business applications or from sensors
and devices such as RFID and vehicle telematics An event is data that
suddenly exists or indicates a change in state: a door opening, a piece of
inventory being scanned, the location of a vehicle changing or the rate of
orders increasing Event data is normally used to start some form of business
process An inventory item that is scanned will most likely result in an
inventory management process “handling” that item
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The transition to real-time response takes events as inputs that are
monitored as they happen Instead of just being a component of transactional
data, events are analyzed as they flow and then correlated against other
event streams where patterns of activity across event sources might indicate
an opportunity for action
Transactions and Processes
Processes run the business They define how you take an order,
process inventory, perform route planning and manage customer interactions
Processes, modeled as a series of steps, work across software and human
systems to manage the workflow you’ve established for the various tasks you
need to perform to run the business
Improving response from a process perspective requires the ability
to model and manage business processes, but also the power to change and
improve processes as the business changes
The Event/Process Relationship
In logistics, there is an implicit relationship between many event
sources that, if managed in real-time, can lead to a significant improvement
in response These events have a direct impact on business processes In
essence, events trigger processes and processes trigger events Managing
both as related components delivers the heightened awareness that is
necessary for improved response
Consider the concept of “delivery in-full, on-time,” or DIFOT As a
performance metric, it can be a leading indicator of the overall responsiveness
of the organization There are many inputs that contribute to the metric as
well as several business processes that are influenced by events along the
delivery timeline
If “package delivered” is the ultimate objective, managing DIFOT in
real-time across the lifetime of that package requires many processes and
s
Event Stream
Package Scanned Time
Package Loaded
Route Configured Truck Departs Package Tracked Package Delivered
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events to come together In order to ensure that the package is delivered,
each contributing step is dependent on the other, but is often managed
by separate processes and systems RPM can manage this entire timeline
holistically, realizing the business objective of delivery in the right time to the
right place in the right condition
The state “package scanned and loaded” is influenced by the physical
events that are performed when scanning the package In this case, systems
such as RFID are emitting events that contribute to the process of creating an
invoice or work order The overall rate in which packages are being scanned
may have an influence on your ability to manage loading and configuring By
monitoring the scanning process in real-time, you know if you are able to
prepare for delivery
Configuring routes are processes that need to adapt based on the
scanning and loading functions, as well as the available resources for delivery
In this case, route planning needs to know the current conditions of order
processing and delivery status in order to effectively manage routing
Tracking the package requires event input from vehicle telematics
or other en-route systems These events, when managed in real-time, can
contribute to dynamic delivery processes to re-route in the case of traffic
or other delays and even trigger customer experience processes to contact
customers in the event of delays
By recognizing the relationships between the events and processes
required to manage DIFOT, it is possible to create a solution to manage DIFOT
in real-time
TECHNOLOGY FOR MANAGING RESPONSE
In effect, traditional business systems operate in a past-tense
mode This leads to decisions being made from yesterday’s data Immediate
response requires input from data occurring in the present By combining
historical information and active business processes with real-time events,
more precise decisions can be made for future actions Responsive Process
Management leverages technology from Business Process Management (BPM),
Business Transaction Management (BTM) and Business Event Processing (BEP)
systems Instead of managing processes and events as separate solutions,
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RPM combines them to provide real-time visibility, the capability to immediately
sense and respond and continuous process improvement in one suite
Real-time Visibility
Visibility comes from interactive
interfaces that are connected to the !
real-time flow of events and transaction !
across the enterprise and supply chain
Real-time visibility gives decision makers
the information they need to make in-the-
moment decisions
Unlike traditional reporting solutions that rely on past-tense
information, real-time visibility delivers the insight to understand current
conditions and the ability to make decisions before it’s too late
Immediate Sense and Respond
The result of heightened
awareness is the ability to
sense and respond to changing
conditions Being able to
immediately sense and respond
starts with the ability to monitor
events, transactions and processes
in real-time across the enterprise
Automated actions, providing immediate response, can then be initiated from
your business rules, which are looking for patterns that indicate a potential
threat or opportunity
Continuous Improvement
Insight and awareness are
valuable, but become much more
powerful when used to improve + + +
business processes Responsive
Process Management provides the
ability to improve processes “in-
flight”—for continuous improvement
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Processes can be changed while in operation, giving you a faster
response to changing conditions Processes are directly influenced by events
and transactions
The Progress Control Tower
™
A control tower is used to manage the entire
system Instead of using multiple, and often poorly
integrated, solutions the control tower serves as a single,
unified interface for interaction and control
Here, events, transactions and processes are
visualized and controlled from a common interface
Business and technical users interact with business rules,
event processing scenarios and full-featured, real-time
visual controls
SUMMARY
How you manage and respond to your business as it runs will define
your competitive advantage Improved operational response comes from
recognizing the relationship between critical events and the processes that
run the business as they happen—but then having the power to adapt as
conditions change
The market challenge is to move from a passive mode of decision
making to one that is proactive and influenced by real-time business events
The infrastructure is mature The technology is ready Are you?
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