Where’s my box? The case for improved supply chain visibility. Now!
“… a 1% increase in total factor productivity in the logistics industry would yield a $2 billion increase in national GDP."
Our systems for moving goods into and across Australia are under great stress. Our growing population and the booming popularity of on-line shopping is driving a rapid increase in the national freight task. And yet the systems we use have barely changed in decades, and suffer ongoing problems of uncertain or delayed deliveries and lost goods.
The fragmented nature of our freight system has its origins in state-based jurisdictions and separate modal operations. While our freight enterprises may be internally efficient, poor communications and information flow between operators deliver patchy performance and gross inefficiencies across the system as a whole. This costs Australian consumers and businesses significant amounts of time and money.
To remain competitive Australia needs better performance from its national freight system, and this will necessarily require improved visibility and sharing of some freight data. In a competitive world, with its insistent demands for high levels of service, the need for action has become urgent.
How many times have you been asked to wait around for a delivery that is expected “sometime” today? There’s little more frustrating, for both customers and businesses, than not knowing precisely when a delivery will arrive. This uncertain waiting wastes everyone’s time and creates inefficiencies. The goods become effectively stuck, and have to be stored until the delivery is rescheduled. No-one in the delivery process — consumers, suppliers, or freight companies — is happy.
Supply chain visibility
And yet the frustration is unnecessary. Tracking the physical location of the goods to make information available to downstream recipients in the chain would allow them to accurately anticipate the delivery. Everyone in the chain would know what’s happening, and plan accordingly.
What is needed, is supply chain visibility, which is defined as:
… the awareness of, and control over, specific information related to product orders and physical shipments, including transport and logistics activities, and statuses of events and milestones that occur prior to, and in-transit.1
And though we often use the singular expression there are actually many chains involved in the supply of individual products. For example, supply chains:
- supply factories with raw materials
- forward intermediate components to final assembly or construction
- distribute final products to the point-of sale
- convey goods to their final destination, often in consumers’ homes
All of this takes place every day, 24/7. It occurs across state and country borders. It happens in rain, sleet, snow, turmoil, industrial actions, vehicle breakdowns, fund transfer issues, and more. Chains connected to chains connected to chains. Is it an easy thing to fix? No. Is it an important thing to fix? Absolutely!
The problems associated with limited visibility have long been with us, but their impact grows ever greater. The shift in consumer behaviour to shopping online requires more goods to be moved in shorter timeframes, and with greater reliability. And yet, this is not happening.
Those who order products online for home delivery and then experience delays or additional costs in getting items to their door are experiencing something of the frustration that has beset freight logistics operators for many years.2
So, what are the problems? And how do we fix them?
Behind the scenes
Freight recipients generally know when their item of interest enters a supply chain, but lose sight of it as it passes through the system.
This is true for final recipients, but it also applies to all the intermediate parties on the way. The current carrier knows where the item is, but because there is no systematic sharing of position data, others in the chain remain in the dark.
Ryan Petersen, the founder and CEO of technology and data-driven freight forwarder Flexport, offers a neat analogy of supply chain organisation:
Imagine if whenever you turned on a light switch, a small army of people scattered around the world had to duct tape together a bunch of electrical wiring to get you the power you need, placing phone calls and shuffling paperwork to folks at other nodes of the network to make sure they each did their part in exactly the right sequence to ensure the current reached your switch when you needed it. How long would it take to get light? How much more would it cost? How much less light would we use as a result?
This is what logistics looks like today, each container is run almost like a chartered vessel, with a small army of humans monitoring it each step of the way.
How might we go about eliminating the duct tape and shuffling paperwork?
What’s new — vehicle telemetry
Up-to-date information on the current location of an item is essential. Technologies such as global positioning systems (GPS) and vehicle telemetry can combine to deliver this information automatically, or on demand. This ability to continually and regularly report on the position of a box or a vehicle generates the base information that enable all supply chains to optimise their operations.
Ideally, the tracking would be applied to the item itself, as it is the item (not the vehicle) that matters. However, in the real world it is predominantly the vehicles rather than the containers that have the telemetry capabilities, hence we use the vehicle position as a proxy for the position of the item.
Know what you are tracking
Another requirement for the establishment of visibility along a supply chain is the unambiguous identification of the item. Whether it’s a package or a shipping container, it can only be tracked through the delivery process if it can be distinguished from all other items.
If locations, vehicles, and operators are also uniquely identified then the supply process consists of a series of sequential associations between the item ID, location, and vehicle ID. If the vehicle ID is accompanied by its current GPS position then the item can be determined and reported. Such a system of identifiers already exists and is ready to be deployed into supply chains … more on this below.
Just-in-time methodology — visibility in the manufacturing process
Another important aspect is time. In this respect we could learn from the Japanese automotive industry. In the 1940s, Toyota production engineer Taiichi Ohno developed the Just-in-Time (JIT) concept. He recognised the opportunity to improve efficiency by arranging for supplies to be received only as they are immediately needed.
By understanding the demand for the goods, and the time required for each delivery, JIT minimises inventory and substantially reduces wastage of time and effort. The Japanese auto industry used JIT to catch up to, and overtake, the efficiency of US automotive production.
Pulling it all together — the Australian trial of Electronic Product Code Information Service (EPCIS)
Can Australia pull these elements together to improve its national supply chain performance? Yes, and a start has already been made along this path.
Between 2014 and 2016, the Australian Logistics Council (ALC), in collaboration with GS1 Australia and Austroads, ran three pilot trials of GS1’s ISO-certified Electronic Product Code Information Service (EPCIS) global standard. For 18 months assets, vehicles, and events in selected supply chains were identified, their movements captured, and relevant visibility event data shared with downstream recipients.
The trials involved three Australian businesses, Toll, Arrium OneSteel, and Nestlé Australia. They each used their trial to:
- code up a subset of products with the GS1 unique identifiers
- capture in real time the position of each vehicle carrying each product
- share this information in real time with the downstream recipient of each item
- reduce substantially the time that each item spent in the supply chain on its way to the end customer
Toll reported a 20% increase in the number of customer service enquiries it could process in a day. Efficiencies in the inbound planning department saw a reduction of 30% in planners’ work hours. Toll was also able to undertake supply chain diagnostics, providing advance notice of potential failures, and the ability to avert those outcomes.
OneSteel found that in just one part of its supply process, using GS1 and scanning the label when loading vehicles reduced turnaround by 28%. It also reduced the baseline cost of transport over a 12-month period by 11.5%.
Whereas previously it would take a Nestlé business unit more than 24 hours to chase up and deliver on requests from its replenishment planner, all the information and paperwork needed was available immediately.
The costs, the savings for Australia
What would Australia stand to gain if this system were deployed industry-wide?
ACIL Allen Consulting has estimated that transport and logistics accounts for 8.6% of Australia’s Gross Domestic Product (GDP), and contributes around $130 billion to the Australian economy. Its report, ‘The Economic Significance of the Australian Logistics Industry’, estimates that “… a 1% increase in total factor productivity in the logistics industry would yield a $2 billion increase in national GDP.”
According to the Austroads report the prospective cost savings for SMEs in the transport and logistics sector is estimated to be around $1.63 billion, a figure that dwarfs the projected $407.5 million implementation cost.
There are pain points in the end-to-end freight process and it has many complexities. However as demonstrated by the long success of Just-in-Time, and by the favourable results of the GS1 pilot trials, there is much to be gained from developing and enhancing visibility along supply chains.
And that is just from an Australian perspective. As noted by ALC in its ‘Freight Doesn’t Vote’ submission to the Federal Government’s Inquiry into National Freight and Supply Chain Priorities, “Australia’s supply chains do not stop at state borders.” The visibility needs to be extended upstream and downstream to encompass our many suppliers and customers overseas. Ideally what is needed is a consistent national approach, which can integrate with international systems.
Back to Ryan Petersen, and his electricity power grid analogy:
In the coming years, logistics will start to look much more like the electrical grid, a reliable utility that you can count on to respond in real-time to demands placed on it by the commercial activities of customers. When someone buys a product, whether online or offline, the network will respond in real-time, to get that product into the hand of the customer as quickly and cheaply as possible, while also sending signals back through the network to replenish that product, and make decisions about where to position it to be most ready to serve the next person to order one.
Improving freight and logistics is a core objective of iMOVE, and you can be sure that we will remain ‘switched on’ over supply chain visibility.
- As defined by the Aberdeen Group in its ‘Supply Chain Visibility: A Critical Strategy to Optimize Cost and Service’ report
- From the ALC’s ‘Freight Doesn’t Vote’
- Austroads’ report, ‘Investigating the Potential Benefits of Enhanced End to End Supply Chain Visibility’, is downloadable from the Austroads website. Note: you’ll need to sign up for a (free) Austroads account to be able to download its publications.
- The Centre for Workplace Leadership’s report, ‘Leading Technological Innovation & Productivity Improvement Across the Supply Chain: An Evaluation of the ALC Intermodal Visibility Pilot of the GS1 Electronic Product Code Information Service (EPCIS) Standard‘
- Ryan Petersen’s article on Quora, ‘What does the future look like for commerce and logistics?‘