Profitable Fulfillment - Informktforms.gtnexus.com/.../GTNexus-Profitable-Fulfillment.pdfProfitable fulfillment is one of the biggest challenges and opportunities for today’s businesses

© ChainLink Research 2016 – All Rights Reserved

Profitable Fulfillment:

Orchestrating Multi- Enterprise Networks

to Profitably Serve Diverse Customer Demands

By Bill McBeath

July 2016


Table of Contents

The Profitable Fulfillment Challenge ........................................................................................ 1

Dynamic, Diverse, Personalized Fulfillment Requirements Are the Norm ............................................... 1

Network Orchestration Required ............................................................................................................. 1

Profitable Fulfillment Opportunities ........................................................................................ 2

Automation & Integration of Mass Customization ................................................................................... 3

Fulfillment Segmentation and Orchestration ........................................................................................... 5

Optimized Postponement with Outsourced Partners .............................................................................. 7

Multi-Party Inventory Pooling ................................................................................................................... 8

Enablers of Profitable Fulfillment ............................................................................................ 9

Operationally Precise, Network-Wide Visibility ........................................................................................ 9

Dynamic Network Orchestration Capabilities ......................................................................................... 11

Networked Order Management ............................................................................................................. 12

Conclusion ............................................................................................................................. 13

Profitable Fulfillment

1 © ChainLink Research 2016 – All Rights Reserved

The Profitable Fulfillment Challenge

Profitable fulfillment is one of the biggest challenges and opportunities for today’s businesses.

Dynamic, Diverse, Personalized Fulfillment Requirements Are the Norm

Manufacturers, wholesalers, and retailers alike are being challenged with diverse, continually changing channel

fulfillment demands. Across industries, success (and even survival) depends on the ability to serve customers

profitably in the way they expect to be served. This

means doing everything from massive shipments to

micro-fulfillment, from high velocity to slow movers,

ship from anywhere, fulfillment innovation, tailoring

for channel and potentially per customer, automated

sourcing, dynamic inventory management, creative

postponement strategies at each stage, last mile

optimization, and more … and doing it all profitably.

In other words, successfully serving today’s consumer

and business customers requires a supply chain that is

personalized for each sector, channel, and customer’s

unique needs and demands, but doing it economically, efficiently, and profitably. The variety and specificity of

customer demands expand every day. This is not just about product personalization. It is about delivering

products in the precise manner desired:

at the desired time and place (such as just-in-time delivery to a busy urban construction site);

in the desired packaging, prepared and packed in a specific way (such as floor-ready hanging

merchandise, customer-specific purpose-built kits for use in an operating room or manufacturing plant,

rainbow pallets for store delivery, and so forth);

in the desired sequence of delivery (different components arriving as they are needed, in the sequence

they are used);

at the desired level of component/finished goods assembly (for optimal duty/tariff engineering and/or

logistical optimization);

with the desired documentation and precise customer- and location-specific labeling;

using the right transportation carriers and routes;

offering the desired installation services when and where needed;

The list of dimensions of fulfillment personalization goes on and on, and grows every day.

Network Orchestration Required

We see more and more third parties involved in these increasingly complex fulfillment scenarios. How can

businesses meet these highly diverse, micro-segmented, personalized requirements with increasing numbers of

fulfillment partners, with so many different handoffs and stages in the end-to-end delivery of products?



Success requires a unified networked approach to the problem. This means integrating the end-to-end network

of fulfillment partners—supplier-manufacturers, logistics providers, packaging firms, third party fulfillment,

carriers, inspectors, distributors, retailers, delivery and installation companies—everyone who touches or

manages the end-to-end fulfillment. It means having an operationally precise, network-wide view—a highly

accurate and up-to-date shared single-version-of-the-truth, as a foundation for synchronizing each player

across the network.

In this paper, we provide concrete examples and describe specific capabilities that leading companies are

executing today.

Profitable Fulfillment Opportunities

The challenge of diverse fulfillment requirements is not just the fact that omni-channel presents more and

more fulfillment locations and methods every year. It is also about variety in other dimensions: different

product types (size, logistics handling

requirements such as fragility or

temperature control, installation or

technical support requirements, etc.),

range of category velocity (very fast to

very slow movers), localization, range of

item criticality (T-shirts vs. organ

transplant), configuration complexity,

logistical complexities, and more. Trying

to satisfy customer demands across all

these dimensions often increases costs

and eats into sometimes already thin margins.

It is usually assumed that this is a fixed tradeoff between meeting increasingly varied customer demands vs.

profitability. There is, in fact, enormous opportunity to move the efficient frontier to both satisfy customer-

specific demands and achieve higher profit. The opportunities are substantial and diverse. Here are examples

we cover in this paper:

Automation & Integration of Mass Customization—Providers of mass customized products, from

running shoes to mining trucks, are exploring new approaches to squeezing out more efficiencies, using

the same highly-automated manufacturing line for their customized items that they use for their large-

run build-to-stock items, and leveraging the bulk shipping whenever possible.

Fulfillment Segmentation and Orchestration—Companies are using an increasing number of partners to

fulfill demand, for increasingly varied scenarios. Doing that profitably requires a new level of multi-

party automation, control, and visibility around that shared fulfillment process.

Optimized Postponement with Outsourced Partners—When using a network of outsourced

manufacturing and fulfillment partners, postponement or differed differentiation strategies are hard to

do. These can be enabled by having precise visibility into the actual step-by-step execution across the

network and the means to instantly disseminate precise instructions for each step to each partner.



Multi-party Inventory Pooling—Multiple

tiers of distribution can be integrated to

pool inventory across the supply chain.

Needs in one channel can be fulfilled with

inventory from another channel if the

visibility and relationships are in place. This

goes beyond the single-enterprise scenario

of a retailer fulfilling from all of their own

locations (stores, DCs). It includes multi-

party scenarios, such as in spare parts

distribution.

Below we discuss each of these opportunities in

more detail.

Automation & Integration of Mass

Customization

Manufacturers have been striving to improve the

efficiencies of mass customization in their plants

for many years. In this quest, they have developed

and refined techniques like single minute exchange

of die and in-line sequencing.1 However, mass

customization is increasingly being done by a series

of outsourced partners in stages across a

distributed supply chain. Since most of the cost is

incurred outside of the OEM’s own four walls, it

requires visibility and tight orchestration and

control of these multi-stage, multi-entity

processes: from forecasting and prepositioning of

component inventory, to presenting and taking the

order, the actual manufacturing and/or assembly

of the products, labeling and packaging, various

legs of transport, and final delivery/installation.

Furthermore, to contain costs, brand owners and

OEMs are enabling automation across the

distributed set of partners performing all the

various steps, as well as deploying algorithms that

look for opportunities to optimize and reduce costs (such as lower cost transportation modes).

1 In-line sequencing, also known as Just-in-Sequence, is commonly used in automotive. As each chassis travels down the line, feeder lines deliver the exact set of components and options for that specific vehicle (for a specific order) in the right precise sequence, just-in-time for assembly into the vehicle.

Automation of Mass Customization Example

One of the world’s top manufacturer/major brand owner of athletic shoes and clothing uses outsourced manufacturers to make, in the same factories, both bulk orders destined for retailers and personalized shoes that individual consumers have customized and ordered on their website. Using a networked platform, they send to their Asian contract manufacturers a single flow of orders, containing both bulk and custom shoe orders. The orders for custom shoes contain a ‘mini-BOM’ for each pair. The contract manufacturer is thus able to optimize the interleaving of bulk and custom production runs.

The network platform looks for opportunities to piggyback individual shoe orders on bulk shipments to the deconsolidation point, from where the individual orders are separated and sent to the consumer. The same networked platform sends each factory very detailed, order-specific labeling, packing, and routing instructions and data, so that when the custom shoes arrive at the deconsolidators or at the brand owner’s own DC, they are already packed with the correct parcel shipping label on them and can be sent out the same day. Suppliers also receive the packing instructions for their bulk shipments to the DCs. This could include things like the exact musical size runs by store, enabling rapid cross docking.

Network-wide Visibility Example

Another major sports shoe and apparel manufacturer uses a network platform to monitor forecasted demand and actual incoming orders, and raises an alert when it sees there will be a shortage for fulfilling expected future demand. In that case, the OEM’s planner has the ability to look at in-transit inventory, as well as finished goods inventory across suppliers. It can request specific suppliers to accelerate orders and/or drop ship to the retailer instead of to the OEM’s DC. The OEM can also request the supplier to reprioritize the work-in-progress in order to meet anticipated demand. The same system provides an order-specific packing plan, with the correct labeling, quantities, cartons, packing sequence, destination, and so forth for that specific retailer. The same system can be used by the supplier or 3PL to book transportation, ensuring that the correct retailer-approved carriers and routes are used. The reasons for the expediting/air freight are captured in the process, so that the supplier is not charged the expediting fees when it wasn’t their fault, and anyone viewing the transaction after-the-fact can understand why the decisions were made.

https://en.wikipedia.org/wiki/Just_in_sequence



Those profit-maximizing capabilities are enabled by a network platform providing a single-version-of-the-truth,

creating inherent real-time integration between all of the parties connected on the platform. Beyond that,

some platforms are able to automate the functions within each of the partners in a synchronized way. For

example, a brand owner has different compliance requirements from its different retailer customers, each

retailer dictating many precise details from custom packaging, to labeling, routing requirements, bundling of

shipments, sequence of packing and loading, documentation, and much more. Non-compliance results in costly

chargebacks that can add up to 5% or more of revenue for some brand owners. A shared platform allows

compliance rules to be centrally defined and input, then uses those rules to drive automated operations,

distributed across the supply chain, so that each player in the chain performs their step in a way that creates a

fully compliant end-to-end fulfillment process.

Figure 1 - Automation and Integration of Mass Customization

Present Choices to Customer (Incent to Profitable

Order)

Fulfillment Decisions (Location,

timing, delivery mode)

Execution of Production

Postpone-ment

Decisions (How many to

hold back,

where)

Fulfillment Execution

Supply Network Decisions (Location of Production,

Distribution)

Product/ Sourcing/

Production Decisions

(Models, Styles, Mix, Qty,

Location, Timing)

Allocation Decisions

(How many will each location

get)

Customer Places Order

Returns Policies and Execution

Source: ChainLink Research

Mass customized items assembled on-demand, based on order stream

from OEMs ecommerce site, automatically sent to contract

manufacturers factories in near real-time.

Exact pack-sequences, labeling, transport, and

other requirements travel with the order to the

contract mfg.

Production and prepositioning of component inventory at contract manufacturers, ready for mass

customization, based on shared forecast between OEM and contract manufacturers.

Execution at each stage driven by compliance rules from the network platform, ensuring end-to-end compliance and

efficiency.

Real-time visibility of component inventory available at contract

manufacturers’ locations enables accurate lead times presented to

online consumer, based on the combination they selected.



Fulfillment Segmentation and Orchestration

A common strategy to control complexity and

cost is consolidating spend to fewer suppliers and

service providers (e.g. carriers, 3PLs, installers,

and repair services), thereby gaining economies

of scale and volume discounts with more business

per supplier. However, supplier consolidation can

make it harder to meet the increasingly diverse

fulfillment requirements that companies are

facing across the globe, such as a much broader

mix of order sizes, product diversity, needs for

specialized processing, handling, and installation

skills and equipment, and expanding globalization

with significant differences by regions (even

within a country). The diversity of requirements

drives the need to segment fulfillment, with

capabilities to handle the unique requirements of

each segment differently. It can be hard or

impossible to find a supplier that can do it all.

Often specialized or regional service providers are

much better able to fulfill these diverse unique

requirements… sometimes at a lower cost.

Unfortunately, using many specialized suppliers

introduces complexities. Different products are

handled by different partners, e.g. temperature

sensitive carriers or storage facilities, heavy

equipment haulers and riggers, extremely fragile

instruments, and so forth. Advanced companies

are using technology to provide the coordination

and orchestration that lets them ‘have their cake

and eat it too’—that is to take advantage of the

abilities of a diverse and scattered set of suppliers

and service provider partners, while controlling

costs and performance.

One example of fulfillment segmentation and

orchestration is a major automotive OEM that has

an online ‘Upfit Configurator’ that allows general

contractors, plumbers, caterers, people

Complex Orchestration Challenge

With over 300 vehicle/equipment platforms (compared to 12-15 typically for an automotive manufacturer) Caterpillar’s equipment comes in hundreds of thousands of possible configurations. There can be over 10 legs in the end-to-end delivery from the factory to the dealer. Many of these, such as mining trucks, are very large complex pieces of equipment that may not be shipped as an entire finished vehicle, but rather shipped in various pieces from various locations that arrive at a yard, often colocated with the destination port, where they do the assembly. These can include many different third party accessories and subsystems that CAT doesn’t provide directly.

Dealers have the flexibility to mix and match those add-ons at the dealer location or at the actual job site, which could be a mine, construction site, agricultural, military, or other site. In the past this in-chain, multi-stage assembly process was difficult for CAT, since it tracked shipments but did not have clear visibility into the relationship of those various piece parts. Dealers often had long lead times of 15-25 weeks from the time they placed an order until receiving it. Yet, depending on sector, some equipment can’t be forecasted until 2-3 weeks out because the customer doesn’t know the exact requirements yet. This forces dealers to make their own forecast and hold a lot of parts inventory. And if they can’t put together the right configuration, they may be forced to sell an alternate brand to meet the needs on time, even if the customer preferred CAT equipment.

GT Nexus network platform is being used to increase the transparency, reliability, and coordination of shipments to dealers. Dealers can now see where all the various pieces of the product are and get more accurate estimated arrival times. CAT is also providing mechanisms for the dealers to better pool their inventory (see Inventory Pooling in a Heavy Equipment Dealer Network below). CAT is continually working on better optimizing product movements to reduce costs, reduce lead times and variability (see CAT Tackles Variability below), reduce detention and demurrage charges, and speed up processing at the port. They have used the network data to analyze port efficiencies and thereby changed origin/desti-nation pairs for better speed (reduced wait time for unloading or delays in custom clearance). Detention has been reduced by better documentation and better visibility of the receiving capabilities and locations in the yard.

https://secure.ford.com/transitupfits/welcome



transporters, electricians, and HVAC contractors to configure customized vans and wagons.2 The

customizations are typically not done by the OEM, but rather by its network of upfit or port processing

partners, at an ‘upfit center,’ often located near the origin or destination port. This is just one specialized step

in a multi-step logistics process from the factory to the dealer (see Figure 2 below) that can include the OEM,

their Origin Service Provider, rail carriers, the trading company, upfit centers and port processors, ocean

carriers, car haulers, and more. By using a common networked platform across this network of fulfillment

partners, the OEM is able to give the upfit centers much more precise estimated times of arrival, allowing the

centers to better plan their labor and capacity. The upfit center receives a complete set of instructions for the

operation.

The same system gives the OEM precise visibility into progress at the upfit center, for early alerts when things

are falling behind with the potential to miss the sailing. The system provides a set of KPIs and dashboards to

measure and continually improve the performance of the upfit centers. This is one example of how fulfillment

can be highly segmented, performed by many parties, yet tightly coordinated, with the activities of all of the

parties being monitored and orchestrated by a common end-to-end platform.

Figure 2 - Example Multiple Milestones and Partners in Vehicle Logistics Processes from Factory to Dealer

2 Customizations include adding various interior racks, shelving, workbenches, seating, wire spool holders, partitions to separate and secure the cargo, protective window mesh, exterior ladder racks, strapping systems, and so forth.



Optimized Postponement with Outsourced Partners

While supply chain postponement strategies3 have been implemented by manufacturers for years, they can be

a lot harder to accomplish, due to the loss of visibility and control resulting from the tremendous growth in

outsourced manufacturing and fulfillment partners. The challenges are compounded when multiple tiers and

multiple enterprises are involved. To enable well-managed postponement execution with outsourced

manufacturers, one of the world’s largest sporting footwear brand owners has implemented the ability to

monitor the progress, step-by-step, at each of its suppliers’ factories. This granular, near-real-time visibility into

factory progress against milestones is foundational to the OEM’s postponement strategy. Another large apparel

manufacturer/OEM has taken a similar approach.

Precise factory milestone visibility enables these OEMs to have multiple points of postponement and maintain

an accurate estimate of the time they have before they need to make each of the key postponement decisions.

For example, the apparel OEM sends an order which specifies the number of shirts to make, but not yet the

colors or sizes. The outsourced factory buys the undyed gray fabric. The OEM knows exactly when the material

is ordered, arrives, and is scheduled to be dyed. It knows exactly when it has to make the color decisions, based

on what is actually happening on the ground at the outsourced factory, not some average estimated schedule.

Later in the process, it knows when the size decisions must be made, based on when the cutting and sewing

will start. At the end, it knows by when they must tell the contract manufacturer how many of each size, color,

and style to ship and where. In fact, the decision on final destination can be postponed further until the

shipment arrives at the deconsolidator at the destination port. This allows key decisions to be postponed until

location-specific demand is much better understood.

Postponement is also used for duty and tariff engineering, where an item’s components are assembled at the

point in the supply chain that creates the lowest total cost. One large equipment manufacturer makes

enormous mining trucks, which are assembled at different stages and points in the supply chain, both to

optimize duties and tariffs as well as due to logistical constraints of moving very large machinery across roads,

on or under bridges, and by rail. In many cases, the final assembly is at the mine.

The flexibility to design a global fulfillment and delivery process with postponement done at the optimal stage

by various outsourced partners is made feasible by using a shared network platform that orchestrates the

activities of the various partners. The network platform must provide highly granular, near-real-time visibility

into what is happening on the ground at all of the various manufacturing and fulfillment partners, and provide

a single shared system that drives the execution, with precise instructions for each activity at each partner at

each step. With a single networked platform, there are no delays in these instructions or status information

getting from one system to another or mistakes introduced by manual data re-entry or translation errors

between different systems.

3 Postponement of differentiation is where certain decisions or steps in production (or fulfillment decisions such as where to ship to) are postponed until a clearer picture of demand emerges (such as having received firm orders or measured actual demand). A classic example is designing a platform with interchangeable components, building the components based on the forecast, but postponing assembly until each order arrives and then doing assemble-to-order.

https://en.wikipedia.org/wiki/Delayed_differentiation



Multi-Party Inventory Pooling

The demands of omni-channel fulfillment have given

rise to Distributed Order Management, whereby a

retailer (or wholesaler or manufacturer) has a system

that can see inventory across all locations and make

optimal decisions about where to fulfill each order

from. However, these systems are often constrained

in their visibility to see inventory outside of the

company. It is not uncommon to have inventory

spread across multiple tiers of fulfillment, not only a

company’s own inventory locations (DCs, stores,

plants) but also at out-sourced manufacturers’ plants

and DCs, and at other supply chain participants, such

as wholesalers, distributors, installation and repair

partners, accessory suppliers, and other players in the channel. In addition, there is often a lot of inventory in

transit between these various locations, especially when shipped across an ocean. Network-wide visibility to

available inventory, both at rest and in motion, provides major advantages of wider inventory pooling, often

allowing much quicker and/or lower cost of servicing customer needs as they arise. In some percentage of

cases, pooling consumes inventory that is not in demand in the location it is currently at and therefore might

not be consumed for months or at all.

In addition to finished goods inventory, multi-

party pooling can add a lot of value in spare parts

inventory management, where it can be quite

challenging to achieve desired service levels with

the optimal mix of inventory at each location, in

large part due to the long tail4 of slow movers

that is common in spare parts. A frequently used

approach, particularly where fulfillment response

time is critical (e.g. auto parts, where a car is up

on the lift waiting for a part), is to simply throw a

lot of inventory at the problem, especially at or

near the end nodes. This adds a lot of inventory

and cost to the system. This can be further

complicated when parts distribution centers

(PDC) hold a mix of parts built by the OEM and by

suppliers. In addition, there is inventory at dealers that becomes invisible to other dealers. Providing unified

visibility across dealers’ inventory, suppliers’ inventory, parts retail store inventory, and PDC inventory creates

opportunities for higher service levels at less cost across the network.

4 Complex machinery has a long tail of parts, many of which may see only a couple of turns per year at a given location.

Inventory Pooling in a Heavy Equipment Dealer Network

Heavy equipment dealers can benefit greatly from network-wide visibility of equipment, options, and service parts. One of Caterpillar’s largest dealers has about 20 locations spread throughout the region. CAT started giving that dealer better visibility into their own inventory. Now the same platform is being used to help with inter-dealer transfers. These were already being done, but largely on a manual basis, with dealers calling around when there was a need. Now the platform can quickly identify and orchestrate inter-dealer transfers. This includes full visibility into equipment and compo-nents that are at CAT’s own locations and in transit as well.

https://en.wikipedia.org/wiki/Long_tail



Enablers of Profitable Fulfillment

The scenarios and new approaches described above have only been made possible with the advent of a set of

enabling capabilities. These capabilities can be broadly divided into three areas:

Operationally Precise, Network-Wide Visibility

Dynamic Network Orchestration Capabilities

Networked Order Management

Operationally Precise, Network-

Wide Visibility

Achieving profitable fulfillment in today’s global,

multi-party, omni-channel fulfillment scenarios

requires an operationally precise view—accurate, up-

to-date, granular visibility across the network of

partners, as needed to optimize multi-party

processes and flows. There are several dimensions to

an operationally precise view:

Inventory visibility is precise, granular, multi-

party, near-real-time—Accurate SKU/location

inventory counts that are updated in real

time, not just for inventory that the company

owns, but inventory across the network, on

order, being built, and in transit.

Lead times match current reality on the

ground—Actual transit times for ocean freight

can vary by several days from the estimates

supplied by ocean carriers.5

Planning with precision requires knowing the

actual average lead times and lead time

variability by lane and mode (See sidebar CAT

Tackles Ocean Transit/Port Variability).

Dynamic Precise ETA—Rather than using

standard lead times, a Dynamic Precise ETA

monitors various factors (vessel/vehicle

speed/location, weather, port congestion,

traffic, backlogs, events on the ground) to

provide a much more precise estimated time

of arrival. It also updates over time as

5 Ocean carriers’ estimated transit times are typically days longer than the average transit time, to ensure that considerably more than 50% of shipments will arrive within the estimated time.

CAT Tackles Ocean Transit/Port Variability

By leveraging its network platform, CAT obtained better visibility into sources of variability throughout the full multi-leg routing and the various costs those were adding such as detention demurrage, and inventory costs. This variability occurred in each stage, such as ocean transit, load and unload, drayage steps, customs clearance, consolidation and deconsolidation, and so forth. In one case, the manufacturer observed a specific lane where customs clearance took place on average 2½ days after vessel arrival and with lots of variability, in many cases over 5 days after arrival (see diagram below). With this visibility and ability to measure and share performance, CAT tightened assumptions and worked with the responsible service providers, and as a result improved the average clearance to 2 days before vessel arrival, while significantly reducing variability so that virtually no loads are taking more than 5 days after arrival to clear. This approach was applied more broadly, and as a result the average variability for CAT’s China to US shipments was reduced from 18 days to 8 days thereby reducing in-transit inventory by 10 days, freeing up $250M of working capital.



conditions change. Precise ETA on inbound logistics enables better

execution of advanced practices such as merge-in transit or DC bypass.

Costs are accurate, up-to-date, incident-specific—Traditional standard

costs or average costs often diverge widely from actual costs in each

situation. Without accurate actual cost data, even the best of

optimization algorithms will struggle to find the most profitable

approach. This includes not just knowing a firm’s internal costs, but knowing a supplier’s or partner’s

costs, which are ultimately passed on to the buyer-customer. Getting a handle on the actual cost

drivers and cost interdependencies across the network is the only way to truly understand the total

cost-to-serve. That data in turn serves as the foundation for optimized decisions.

Condition—For certain types of cargo, accurately knowing the conditions it has been exposed to—such

as temperature, humidity, exposure to shock

and vibration, and other types of condition

sensing—can be an important element of

profitable fulfillment. For example, around 20%-

30% of produce is lost to spoilage before it is

consumed. Precise, granular temperature

tracking7 can be used to drive process

improvements from harvesting to precool to

handling in trucks, loading docks, and DCs to

dramatically reduce losses. Having a shock

sensor on expensive, sensitive electronic

equipment can increase handling compliance

when service providers know they are ‘being

watched’ and will be liable for damage based on

that data. The new IMO SOLAS Container Weight Verification Requirement, effective July 1, 2016,

requires all containers to have an actual (not estimated) weight before they can be loaded onto the

vessel. Lack of compliance could cause delays in shipment.

Location—Knowing that an item or shipment is somewhere in transit between origin and destination is

often not enough. There can be considerable value in knowing with some precision, in near real time,

where each shipment is. This can be useful for security (preventing and detecting cargo theft) as well as

anti-counterfeiting (knowing that a specific serial number item is not where it should be). It is a key

element for calculating Dynamic Precise ETA, which is a foundation for all sorts of other benefits. It is

often not cost-justified to attach a satellite- or cellular-connected GPS device to every item or order. In

that case, location can be inferred from other data, such as AIS location data of a ship, truck location

data, ‘sightings’ of the order at different milestones, current traffic conditions, current port congestion,

weather, and other data. Algorithms are getting smarter all the time about using these combinations of

data to calculate more precise shipment location.

6 Source: Improvement in fresh fruit and vegetable logistics quality: berry logistics field studies 7 I.e. tracking temperature at a case or pallet level, from the field/point of harvest to the point of delivery/sale to the end consumer.

Impact of Temperature on Berries’ Shelf Life 6

http://www.worldshipping.org/industry-issues/safety/WSC_Summarizes_the_Basic_Elements_of_the_SOLAS_Container_Weight_Verification_Requirement___January_2015_-3-.pdf

http://rsta.royalsocietypublishing.org/content/372/2017/20130307



Dynamic Network Orchestration Capabilities

In addition to an operationally precise network-wide view, a platform needs to provide dynamic orchestration

across all the various trading partners and service providers involved in the end-to-end fulfillment processes.

These include capabilities such as:

Dynamic Multi-Party Available-to-Promise—This requires an ATP (available-to-promise) engine that can

see and manage inventory that is owned by multiple parties, across many locations, and dynamically

commit that inventory to specific customer orders. This requires synchronization between each player

and the network, creating and maintaining a synchronized, near real-time, shared view of what

inventory is available for sale. When a dealer or partner or store or ecommerce site sells a unit, it is

immediately taken out of the shared pool of inventory available for sale, regardless of which enterprise

or entity has sold it. That pool of available inventory may include units that are still in production, or in

transit, or returned items sitting in a returns processing center.

Dynamic Multi-Echelon Available-to-Promise—Multi-echelon ATP refers to the ability to reliably

promise items that are still in the process of being built or transported or at different tiers of

distribution. This requires accurate visibility into the current status of production at suppliers, as well as

dynamic precise ETA for goods in transit. These estimates of production completion and transport

arrival dates must be dynamic; updated the moment conditions change. With Dynamic Analytics (see

below), predictions are updated well before a milestone is missed, based on a variety of predictive data

(internal and external) and various algorithms, such as taking into account weather, other orders being

built, other ships arriving at a port, and so forth.

Dynamic Multi-Echelon Postponement—An enabler of Dynamic Multi-Echelon ATP, this is the ability to

wait until the last moment to decide where items will be shipped from for different suppliers or tiers in

the chain. This requires the ability to remotely, instantly assign, control, and automate the

‘postponement functions’ at those various suppliers and partners, such as customer- and order-specific

assembly/kitting, customer-specific packaging and labeling, and so forth. Thus shared inventory at

many different locations can be dynamically pooled across all customers, while still meeting the widely

varying requirements of individual customers.

Supplier Shipment Automation and

Orchestration—This is orchestrating

multiple third parties—such as contract

manufacturers, packaging firms, third-party

logistics, carriers, and so forth. The

platform should provide automation and

control of end-to-end fulfillment processes

such as assembling, labeling, packing, and

shipping, regardless of who is doing them.

Streamlining these processes is required to

efficiently scale to high volumes while

improving reliability and reducing lead

times. © Panpote | Dreamstime.com

https://www.dreamstime.com/panpote_info

https://www.dreamstime.com/



Dynamic Analytics—Dynamic analytics provides situational awareness based on conditions on the

ground across the network. When there is a change in weather, congestion at ports, a fire, or other

event that might cause a slowdown or stoppage at or near one of the locations in the fulfillment

network, the appropriate persons are alerted, potential impacts analyzed, and ideally potential

remedies suggested. Dynamic Precise ETA and other types of proactive alerts are enabled by this type

of analytics. This requires accurate network-wide data feeds and geospatially aware complex event

processing capabilities.

Network-wide KPIs and Dashboards—The performance of the various players, manufacturing locations,

lanes, and services involved in fulfillment must be measured, monitored, and made visible to

authorized stakeholders, including the partner providing the service. These should highlight both

average performance and

variability, identify under-

performing and better performing

suppliers and locations, and help

pinpoint factors that may be

affecting performance. This forms

the basis for continuous

improvement across the network;

continually working on reducing the

cost of transport, cost of delivery,

inventory levels, service levels,

cycle times, encouraging

collaboration, and other factors

contributing to success.

Networked Order Management

Distributed Order Management (DOM) has been around for over a decade, but is only now getting more

attention and some adoption as omni-channel capabilities are becoming increasingly critical. A new set of

capabilities called Networked Order Management (NOM) is emerging to support more flexible, multi-party

scenarios. This includes managing orders to OEM/brand owners and directing how those get executed by

contract manufacturers, logistics providers, and other upstream partners. It also includes more flexible

approaches to last-mile delivery. This is an area we plan to explore further in future papers.



Conclusion

Fulfillment has become a key differentiator and determinant of success.

Fulfillment capabilities have become as important as the product itself. Failure to deliver in the desired manner

and time has devastating consequences. At the same time, the challenges are increasing. Fulfillment

requirements continue to get more complex, varied, and personalized. There are an increasing number of third

parties involved in fulfillment scenarios.

To survive and thrive in this new world requires a new way of thinking. It requires ‘network thinking’— a

network-first approach to manufacturing, inventory, shipments, orders, and fulfillment. It requires coordinating

the network of players across end-to-end fulfillment scenarios. A network-first approach is the key to better

execution in today’s world. It is the key to satisfied and loyal customers. It is the key to profitable fulfillment.



About ChainLink Research

ChainLink Research, Inc. is a Supply Chain research organization dedicated to helping executives improve business performance and

competitiveness through an understanding of real-world implications, obstacles and results for supply-chain policies, practices,

processes, and technologies. The ChainLink 3Pe Model is the basis for our research; a unique, multidimensional framework for managing

and improving the links between supply chain partners.

For more information, contact ChainLink Research at:

321 Walnut Street, Suite 442, Newton, MA 02460-1927

Tel: (617) 762-4040. Email: [email protected] Website: www.clresearch.com

mailto:[email protected]

http://www.clresearch.com/

Documents

Profitable Fulfillment - Informktforms.gtnexus.com/.../GTNexus-Profitable-Fulfillment.pdfProfitable fulfillment is one of the biggest challenges and opportunities for today’s businesses