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RedPrare > Lostcs > Whte Paper

Achevn Measurable Resultsn Lostcs


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2RedPrare > Lostcs > Whte Paper

TABLE OF CONTENTS

2

Eecutve Summar 3

Achevn Measureable Results 5n Lostcs

Unlockn Hdden Lostcs Value 7

Kes to Unlockn Value and Achevn 8Measurable Results n Lostcs

Prncple No. 1: Clearl Lnk Suppl 8Chan Stratees toCorporate Objectves

Prncple No. 2: Quant 9Lostcs Value

Prncple No. 3: Clearl Dene 14

and Measure Epected ResultsPrncple No. 4: Mantan Results- 15Focused Technolo Deploment

Prncple No. 5: Contnuousl 15Audt Results

RedPrare - A Better Wa o Delvern 16Lostcs Results

Summar 17


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ExECUTiVE SUMMARy

in todas envronment, achevn lostcsecellence has become a boardroom level concern

The ap between lostcs cost leaders and

laards s rown. Lostcs perormance leaders

are buldn a sncant advantae over the

competton that leads to substantall better bottom

lne perormance and ncreased shareholder value.

How are lostcs leaders achevn these results?

B unlockn the hdden lostcs value wthn ther

enterprses and across ther broader suppl chans.

Three mportant trends are elevatn the role

o lostcs wthn corporatons, creatn an

envronment where lostcs leaders who are able to

unlock ths hdden value can ecel.

Trend No. 1: Corporate recognition o thehigh cost o logistics.For most companes, the total costs o lostcs

rane rom 7% to 15% o sales, and ths percentae

contnues to rse as a result o rown lostcs

complet, chann order proles, and customer

servce pressures. Ths ncreased cost has arnered

corporate attenton, wth the correspondn

opportuntes to drve out lostcs costs and

contrbute sncant dollars to the bottom lne.

Trend No. 2: Supply chain velocity isincreasing, placing a growing premiumon execution excellence.When Mchael Dell o Dell Computers s asked what

suppl chan manaement s all about, he ves a

smple answer: Speed. Constantl shrnkn order

ccle tmes, the need or aster response to chanes

and eceptons, and real-tme fow o suppl chan

normaton are creatn a reater ocus on suppl

chan eecuton as a prmar source o corporate

success.

Trend No. 3: The growing role o logisticsas a source o customer satisaction andcompany dierentiation.As lobal competton heats up, there s ncreased

ocus on customer-acn ntatves. As the ultmate

touch-pont wth customers, lostcs has become

the prmar source o derentaton and customer

satsacton, drectl mpactn revenue rowth and

market share.

To take advantae o these trends and unlock

the hdden value wthn ther operatons, lostcs

leaders must emplo a methodolo that ocuses

on achevn measurable results. There are ve ke

prncples underln ths results-ocused approach.



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Principle No. 4: Maintain results-ocusedtechnology deployment.Despte best eorts to quant value and dene

epected results, companes oten al to acheve

measurable results because those chared wth

technolo deploment, ncludn vendors,

consultants and compan personnel, are not

aware o or ncented to mantan ths results ocus.

Manaement must ensure that ths results ocus

s mantaned even when project schedules and

operatonal pressures ntervene.

Principle No. 5: Continuously Audit Results.Manaement must contnuousl audt results

throuhout technolo deploment and onon

use, takn correctve acton whenever the process

stras outsde o acceptable bounds. Scorecardn

and analss technolo are essental to tmel,

eectve eecuton o ths contnuous process.

B appln these ve prncples and the requste

technolo, companes can unlock the hdden value

o lostcs wthn ther enterprses and across ther

etended suppl chans to acheve measurable

results and become ndustr leaders.

Principle No. 1: Clearly link supply chainstrategies to corporate objectives.Too man companes have not lnked ther suppl

chan stratees to overall corporate objectves

throuh quantable metrcs, thereb lmtn ther

ablt to contrbute to corporate oal attanment or

arner reconton or the mportant role o lostcs

n compan success.

Principle No. 2: Quantiy logistics valueMan companes have not quanted the end-to-

end value o lostcs across ther oranzatonsdue to lack o epertse n value analss, tme

consderatons and the barrers o oranzatonal

slos. However wthout ths step, achevn

measurable results to support corporate objectves

s nearl mpossble. The ood news s that the

sources o hdden lostcs value are abundant.

Principle No. 3: Clearly defne andmeasure expected results.Lostcs scorecardn and perormance

measurement are emern as real kes to

contnuous mprovement and suppl chan

leadershp. Once lostcs value s quanted,

specc operatonal results must be dened and

approprate measurement processes / technolo

must be put n place to ensure oal attanment.

ExECUTiVE SUMMARy

4RedPrare > Lostcs > Whte Paper


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ACHiEViNg MEASUREABLE RESULTS iN LOgiSTiCS

These are ectn tmes or lostcs proessonals.A varet o market and envronmental actors are

elevatn the role o lostcs to one o boardroom

level ocus n most oranzatons.

Whats chann? There are three mportant trends

that are elevatn the role o lostcs n companes

around the lobe.

Trend No. 1: Corporate recognition o the highcost o logistics, and corresponding opportunitiesto drive out logistics costs and contribute signifcant

dollars to the bottom line.

For most manuacturn, dstrbuton and retaln

companes, lostcs represents a sncant porton

o total overhead costs. A 1998 Councl o Lostcs

Manaement stud ound that lostcs-related

epenses rane rom 7-15 percent o compan

revenue, and up to 45 percent o total Sales,

general and Admnstratve epense.

As noted n a presentaton at the 1998 Councl o

Lostcs Manaement conerence, The cost o

lostcs s usuall much larer than ether uppermanaement or operatons people epect. When

results are presented, the rst reacton s skeptcsm,

the second reacton s wonder and revew, the thrd

reacton s concern and nterest.

Metric Typical Ranges

Logistics Cost as % o Sales 7-16%

Logistics Cost as % o Total 10-35%Corporate Value Added

Logistics Cost as % 20-45%o SG&A Costs

Recent research also ndcates that a varet oenvronmental actors are causn lostcs costs to

rse substantall n recent ears, ater a decade o

stablt. in ts annual benchmark stud o lostcs

costs across hundreds o U.S. companes, consultn

rm Establsh / Herbert W. Davs reported that

lostcs costs rose n 2001 or the thrd straht

ear as a percent o sales, now averan nearl 8.5

percent o compan sales. These ures actuall

underestmate total lostcs costs, snce the

ocus on outbound / ulllment lostcs and do

not nclude man costs related to nbound andmanuacturn lostcs.


Impact o Logistics on the Bottom Line

Source: CLM 1998


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ACHiEViNg MEASUREABLE RESULTS iN LOgiSTiCS

Trend No. 2: Increasing supply chain velocity, whichplaces a growing premium on execution excellence.

As Mchael Dell has commented, suppl chan

ecellence s all about speed. Constantl shrnkn

order ccle tmes. Faster response to chanes

and eceptons. Real-tme fow o suppl chan

normaton.

The result? A reater ocus on suppl chan

eecuton and lostcs ecellence, where companes

operate ther suppl chans n real tme.

Market statstcs bear out ths trend. AMR Research

recentl calculated the corporate nvestment n

suppl chan eecuton / lostcs technolo ar

eceeded nvestments n suppl chan plannn

applcatons, and eecuton / lostcs nvestments

were rown at nearl twce the rate o plannn.1

Trend No. 3: The growing role o logistics as a sourceo customer satisaction and company dierentiation.

Competton, both natonal and lobal, s erce,

puttn pressure on corporate revenues andmarns. in ths challenn envronment, lostcs

has ncreasnl become one o the prmar sources

o derentaton and value-add n the ace o

ncreasnl commodtzed core products.

As AMR Research has recentl noted n ts report

Lostcs Surve Results: Customer-Focused intatves

Receve Top Prort, increased customer ocus s

seen as the most mportant ssue n mprovn suppl

chan perormance, whch ponts to more demandn

and comple customer requrements and the need tomeet them or sales sake.

Competn n ths envronment requres use o

the latest nterated lostcs tools, the ablt to

personalze lostcs servces, mplementaton o

ndustr-specc best practces, and understandn

the hdden sources o value locked n most lostcs

oranzatons toda.

> Dstrbuton Complet

> Chann Order Proles

> Customer Servce

> Requrements

Logistics Costs Continue To Rise

Source: Establish/Herbert W. Davis

Cost as Percent o Sales

9.0

8.5

8.0

7.5

7.0

6.5

1997 1998 1999 2000 2001

1 AMR Research: The Supply Chain Management Applications Report 2001-2006; June 2002



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UNLOCKiNg HiDDEN LOgiSTiCS VALUE

The realt s that most md-szed or larercompanes have mllons o dollars n hdden value

n ther lostcs operatons, whch, unlocked, wll

drve mproved protablt, ncreased shareholder

value and rowth n revenue and market share.

Smaller oranzatons ma have smlar or even

reater opportuntes n percentae terms.

Are there opportunities or unlocking this typeo hidden value in your companys logisticsorganization? Consider the ollowing possiblescenarios in your organization:

Logistics and fulllment costs continue to rise on aper unt or percent o sales bass.

Your company is stuck on older generationlostcs or WMS sotware that lmts feblt andproductvt, but ou are unsure how to cost justthe mplementaton o new sstems.

You feel certain logistics productivity andthrouhput can be enhanced, but dontknow eactl where the ke opportuntes ormprovement are, what levels o mprovedoperatn perormance are possble, and how oucompare wth our ndustr peers n terms o bestpractce.

You would like to better understand the impactlostcs servces and qualt have on customerretenton and market share rowth, but lack amechansm or perormn ths analss.

You know that solutions exist that can signicantlyreduce our transportaton budet, but areuncertan as to the rane o mprovement thats lkel, the cost and complet nvolved nmplementn a soluton, or the nternal processchanes that wll be requred.

You would like to move labor productivity beyondts current plateau, but do not see a clear path ordon so and how best to nsttute the requredoranzatonal chane.

You feel condent better visibility of inventory anddemand across our network can reduce nventorlevels whle mprovn customer servce.

Rapid growth is outstripping the ability of yourlostcs operaton to mantan cost, qualt andthrouhput, and ou need help to determnewhat solutons are most approprate, how to

phase mprovement plans, and how to makethese mprovements smoothl n the ace o rapdoperatonal chane.

Your logistics operations are well managed butoperate n a somewhat sloed ashon, and oubeleve there could be operatonal and cost savnmprovements rom reater process nteratonacross dstrbuton, transportaton, labormanaement and other lostcs domans.

All o these scenaros and man more are eamples

o hdden sources o lostcs value. Uncovern

the sources o ths value and developn a plan ormamzn lostcs perormance at the aclt,

enterprse and suppl chan levels wll not onl

mprove lostcs operatons, t wll help uel overall

corporate ecellence as never beore.

As gene Tndall notes n hs book Supercharn

Suppl Chans, More and more the smart mone

wll fow to the stocks o companes that are

eceptonall well operated. Ths s wh operatonal

ecellencewll become more and more respected

as serous drvers o shareholder value.



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KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS

Vrtuall ever compan has sncant untapped

value wthn ts lostcs operatons. However, ar too

man companes have aled to acheve measurable

results rom suppl chan technolo nvestments.

The ood news s that unlockn ths value and

ensurn the results companes epect rom ther

suppl chan nvestments s easl achevable. How?

B takn a better approach to lostcs mprovement

and technolo deploment.

There is a Better WayB Understandn Lostcs Value Drvers and

incorporatn a Results-Focused Approach

to Technolo Deploment, Companes Can

Consstentl Unlock Lostcs Value

There are ve ke prncples underln the results-

ocused approach.

Principle No. 1: Clearly Link Supply ChainStrategies to Corporate Objectives

Too man companes do not clearl lnk thecorporatons overall oals and objectves to the

specc suppl chan stratees needed to support

them. John Lanle, a lostcs proessor at geora

Tech and one o the countrs most well known suppl

chan researchers, recentl commented that ths was

the number one ssue acn the lostcs proesson.2

The loc s ver smple: te lostcs stratees and

ntatves to specc corporate objectves, then

dene the operatonal metrcs that need to be

mproved to acheve both suppl chan oals and

support these hh-level objectves.

As smple as ths loc ma seem, t s surprsn

how ew companes toda reall do a ood job o

t. Bud LeLonde, proessor emertus at The Oho

State Unverst and one o the ndustrs most

well-respected authortes, recentl commented

on how surprsed he was at the number o lostcs

proessonals that do not even know ther compans

hh level stratees and oals.3

At the start o ever ear the lostcs oranzaton

should produce a document, wdel dstrbuted,

that ormalzes ths lnkae between corporate and

lostcs stratees. An eample structure mht look

lke the ollown:

2 John Langley, presentation at Food and Beverage Logistics Conerence, Chicago, March 26, 20023 Bernard LeLond, RedPrairie Web Seminar High Perormance Logistics: Trends, Issues, Opportunities,

June 27, 2002

Ths plan would obvousl be amended as needed throuhout the ear corporate prortes chane, and to

track and report proress aanst the mprovement tarets.

Corporate Strategy Logistics Strategies Operation Metric(s)

Business Strategy 1 Supporting Logistics Strategy 1 Quantifable Metric(s)

Supporting Logistics Strategy 2 Quantifable Metric(s)





More as required



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mportant to the CFO. Even those companes thatdo possess ths epertse requentl lack the tmeresources necessar to conduct ths analss andmove t orward.

High cost and time of external consultingstudes: Man tradtonal consultn companesoer servces that can help a compan betterunderstand the opportuntes or lostcsmprovement and value creaton. However, theseprojects tend to be lon and epensve. Whleths ma be an approprate route to take n man

crcumstances, companes are oten lookn or aaster, less epensve analss that quckl zeroes non the ke opportuntes or process mprovementand value creaton, n combnaton wth the costjustcaton or sstems requred to support thesechanes.

A need ests or a process and methodolo that

provdes the epertse and eperence o tradtonal

consultn, but delvern ths detaled nsht nto

the opportuntes or unlockn lostcs value

wthn much thter cost and tme constrants. Ths

process must be capable o artculatn the process

chane and correspondn value to the lostcs

oranzaton, and provde the analss n a manner

consstent wth the wa CFOs and other corporate

eecutves make nvestment decsons.

Consder one eample. Man companes realze

appromatel one dollar n prot or ever ten

dollars n sales. in terms o bottom lne mpact,

thereore, realzn $1 mllon n value throuh

lostcs cost savns s equvalent to ncreasn sales

b $10 mllon.

Lostcs s a hhl leveraed uncton or value

creaton. Even small mprovements n lostcs

processes can drve major ncreases n revenue and

prots.

Recentl, a RedPrare customer n the

consumer oods ndustr ormall lnked ts

lostcsperormance to corporate objectves.

it turned out that three o the corporatons top

ve stratees had sncant lostcs mplcatons.

One eample was:

Corporate Strate: Become the preerred

vendor to retal n the cateor

Lostcs Strate: Reduce order ccle tmes

Metrc: Cut order ccle tme n hal, rom

48 to 24 hours, or 75% o shpments.

Lostcs oranzatons that are able to lnk ther

stratees and perormance to corporate objectves

wll clearl acheve more nternal nfuence and obtan

better undn and senor manaement support

or ther ntatves, whle helpn the corporaton

acheve ts oals.

Principle No. 2: Quantiy Logistics ValueCompanes must do a better job quantn the

value o proposed lostcs process chanes and

technolo nvestments. Man companes do a poor

or medocre job o quantn ths value, and a

worse job o results measurement to determne

the epected value was actuall attaned.

There are two prmar obstacles to eectvel

quantn lostcs value rom technolo

nvestments:

Lack of experience / expertise in value analysis:A compans nternal sta ma have lmtedeposure to ndustr-wde best practces. itma also lack eperence translatn potentaloperatonal process chane nto a comprehensvevalue analss and cost justcaton. Lostcsproessonals are oten uncomortable dscussnthe value o lostcs or usn nancal concepts




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Sources o Logistics ValueLostcs value can be ound n both tradtonal sources,

such as operatn cost reducton, reductons n workn

captal requrements, and mproved return on assets,

as well as n new emern sources such as ncreased

opportuntes or top lne rowth, more feblt and

ncreased suppl chan veloct. These sources can

be created across several operatonal areas, ncludn

data center operatons, transportaton manaement,

productvt manaement, lobal suppl chan vsblt

and lostcs nteraton. The ollow sectons descrbe

how these sources o lostcs value can be acheved.

Traditional Sources o Logistics ValueOperatn Cost Reducton: Ths has been the most

common area o lostcs value analss and resultn

chanes to lostcs processes and sstems. Operatn

cost reducton has been the prmar drver o

transportaton and warehouse manaement sstem

mplementatons and other lostcs technolo

deploments.

The most common sources o value relative to costreduction are as ollows:

Transportaton ependtures: The quantable value

opportunt vares sncantl dependn on the prole

o a compans transportaton requrements, but man

companes have the potental to reduce total reht blls

between 10-25 percent, oten havn an mpact o mllons

o dollars on the bottom lne.

Dstrbuton / ulllment labor costs: Most companes

have a sncant untapped opportunt or decreasn

drect lostcs labor costs n multple areas o ulllment

even those that have alread mplemented warehouse

manaement (WMS) technolo. Newer technoloes andbest practce are enabln reater ecenc ans than

were possble n the past.

Admnstratve costs: Ths apples not onl to

admnstratve costs drectl wthn dstrbuton centers,

but also costs assocated wth customer servce,

epedtn, and other more centralzed tasks that are

mpacted b lostcs sstems.

inventor carrn costs: Epenses assocated wth ecess

or uncontrolled nventores (nsurance, shrnkae, damae,

etc.) can be sncantl reduced and have a drect mpact

on DC costs and corporate protablt.

Total network epense: improved ulllment operatons

and ncreased throuhput can oten reduce the number

o dstrbuton centers and assocated ed and varable

operatn costs. improved space utlzaton and lower

nventor levels can also reduce need or outsde storae.

Workn Captal Reducton: Reducn a compans

workn captal requrements can have a sncant

mpact on nancal perormance and shareholder value.

Dell Computer has aned ame (and stock market returns)

b vrtue o havn neatve workn captal requrements,

as ts rapd nventor turns and ablt to et pad b

customers aster than t pas supplers upends tradtonal

notons o workn captal manaement.

Workn captal reducton should be o prme nterest to

corporatons, as t has a drect lnk to shareholder value.

Lostcs can aect workn captal n multple was:

increased nventor turns

Reducn saet stocks and network nventorlevels

Reducn recevables throuh mproved orderaccurac and normaton completeness (e..,the perect order), whch wll reduce customerdscrepances and accelerate nvoce paments

improved ccle tmes, whch ncrease nventorturns and accelerate the cash-to-cash ccle. NotesRchard Thompson o Cap gemn Ernst & youns

suppl chan practce: i ou can cut the cashccle down, there are mllons o dollars there.




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Emerging Sources o ValueRevenue and Market Share growth: Whle there has

alwas been tact reconton that lostcs mpacts

customer satsacton and, thereore, top lne

rowth, t has been dcult to quant and oten s

dsmssed as a sot benet b upper manaement.

The ood news or lostcs proessonals s that the

role o lostcs n drvn rowth and market share

s ncreasnl understood and accepted, and that

technques or quantn ths mpact are bendeveloped.

Consder a leadn consumer oods compan, whch

n the past had ocused ts lostcs measurement on

cost and such metrcs as number o tmes a pallet

s touched. The compan s currentl underon

a sncant ntatve to drve the ecenc,

responsveness and satsacton o ts dstrbuton

network, wth the oal o drvn revenue rowth

throuh reater penetraton o local markets.

To accomplsh these oals, new metrcs, such asperect order percentae and total ccle tmes,

are becomn the ke perormance ndcators, as

manaement drves process re-enneern to

support revenue oals not cost reducton.

The ncreasnl short leccle o man products also

contrbutes to the ablt o lostcs to drve revenue

rowth. Shorter leccles ncrease the mperatve or

successul product launch.

The tme to volume o man products s ben

aressvel accelerated. Lostcs capabltes are

crtcal or supportn new product ntroductons that

can meet market demand, whch are ncreasnl n

hue volumes ver earl n the release ccle.

improved Return on Assets: Return on Assets (ROA),

or prot dvded b ed asset value, s one o the

prmar corporate metrcs tareted or mprovement

as a result o suppl chan manaement ntatves.

Companes oten have tens or even hundreds o

mllons o dollars ted up n ther lostcs sstems,

ncludn dstrbuton centers, materal handln

equpment, and transportaton feets. The captal

requred to acqure these assets comes rom

hareholders, who epect a avorable return rom thecompans nvestments.

Lostcs can drectl mprove the compans ROA.

increased dstrbuton ecenc and throuhput

can reduce requrements or captal or phscal

acltes and equpment, lowern the asset

base, whle ncreasn the prot rom dstrbuton

center operatons. Thus, both the numerator and

denomnator o the ROA rato are postvel mpacted.

in man cases, mproved lostcs sstems can

reduce or elmnate the need or captal ntensve

materal handln equpment whle achevn smlar

ecenc benets. Prvate feets can be reduced va

mproved scheduln and manaement.

Man ndustres, such as consumer oods and

ood and beverae, are underon sncant

consoldaton va merers and acqustons. Ths has

oten resulted n sub-optmal dstrbuton networks

that reduce ROA. Lostcs can capture value

b ratonalzn these networks and mamzn

throuhput across busness unts wth ewer phscal

dstrbuton centers.




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ke customers as an mportant element o overall

corporate strate.

Functional Keys to Creating Logistics ValueThe underln sources o lostcs value must be

mapped aanst the unctonal or sstem vehcles

that can delver ths value. These ke unctonal areas

are as ollows:

Dstrbuton Center Operatons: Man companes,

even those that have alread mplemented

warehouse manaement sstems, have sncant

hdden value wthn ther dstrbuton center

operatons. Common sources nclude opportuntes

to adopt ndustr best practces, mprove labor

productvt throuh enhanced task manaement,

an addtonal ecences throuh newer

technoloes such pck ace slottn and ard

manaement, and man others.

Emern areas such as reverse lostcs are also

creatn new sources o value creaton rom dstrbuton

operatons. Stratees such as postponement and the

rowth n value-added servces

n the dstrbuton supports revenue and market

share rowth b enabln specalzed lostcs

servce bundles or specc customers or markets.

Transportaton Manaement: Man companes have

lostcs value hdden amon some or all o these

transportaton-related sources:

Lack o enterprse-wde vew o transportaton requrements

Lack o optmzaton n mode and carrer selecton

inecent, labor-ntensve eecuton processes

improved transportaton manaement oten provdes

some o the lowest hann rut or lostcs value

creaton. Transportaton, servn as the lue that lnks

man suppl chan actvtes, s recevn ncreased

corporate attenton and mportance.

Fleblt: The need or feblt and alt n

lostcs oranzatons has never been reater. As

Dr. James A. Tompkns, presdent o the consultn

rm Tompkns Assocates, notes n hs recent book

No Boundares: Toleratn chane s not enouh

and manan chane s not possble. The power o

chane must be harnessed.

Oranzatons that can quckl respond to chann

lostcs requrements, whether the are drven

b eternal events (e.., a merer or acquston),nternal process mprovements, or new customer

requrements, provde real value. The speed at

whch the lostcs oranzaton and ts supportn

busness applcatons can mplement new stratees

and process mprovements delvers benets

sooner, havn a measurable mpact on the bottom

lne. Oranzatons that can proactvel work

wth customers to meet new requrements and

snchronze lostcs operatons wll drve down

total suppl chan costs, ncrease revenue, and an

market share.

Veloct: Suppl chan and lostcs ecellence s

ncreasnl dened b process veloct. Ths s

related to feblt (speed o process chane) but

also eecuton ccle tmes.

As Dr. Stephen Tmme, presdent o FnLstcs , has

wrtten, increased speed creates a compettve

advantae, provdes the ablt to oer products/

servces at lower prot marns, [and] ncreases

returns to shareholders.

CEOs understand the value o mproved veloct. A

recent surve descrbed n The Journal o Busness

Lostcs ound that delver speed, or the

ablt to reduce the tme between order takn and

customer delver to as close to zero as possble,

was one o the ke values CEOs envsoned rom

ther lostcs oranzatons. in the consumer oods

ndustr, or eample, man companes are launchn

ntatves to reach one-da ulllment ccle tmes or




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Achevn real-tme lobal vsblt s a powerul value

creator that can reduce nventor (workn captal),

decrease eecuton costs (operatn epense), and

ncreasn the level o responsveness to customerorder ulllment needs (revenue rowth). it also

supports network feblt and suppl chan veloct.

interated Lostcs: Even man well-manaed

lostcs oranzatons operate n unctonal sloes,

wth such areas as dstrbuton, transportaton and

nventor manaement havn lttle drect process

or sstem lnkaes. Sncant value can be created

throuh horzontal process nteraton across

lostcs eecuton operatons, startn wth the

enterprse and ultmatel nteratn lostcs fows

across the suppl chan.

For eample, transportaton plannn and eecuton

must be more thtl nterated wth dstrbuton to

mamze ecenc and mnmze cost. Load plans

should be snchronzed wth pck wave plannn to

ensure optmal sequencn and mnmal product

handln. Transportaton and warehouse sstems

should enae n electronc dalos to neotate

costs, resources and constrants to develop optmal

plans that span both unctons.

Transportaton manaement prmarl drves epense

reducton, but ncreasnl mpacts top lne rowth

as well, or eample, throuh enabln snchronzed

lostcs operatons between tradn partners and

provdn delver normaton to customers.

Productvt Manaement: Most companes

have sncant opportuntes to ncrease the

productvt o labor and other resources (such as

materal handln equpment) above and beond

the mprovements that can be acheved throuh

warehouse manaement sstem technolo.

Companes enerall operate at 60-75 percent o

ther true lostcs labor productvt potental.

Advanced productvt manaement provdes

preerred methods and dscrete standards or

perormn lostcs operatons combned wth

robust, real-tme labor reportn sstems wth labor

plannn and montorn capabltes to substantall

reduce labor costs and ncrease throuhput.

Suppl Chan Vsblt and Real-tme Control: intodas hh veloct lostcs envronment, end-

to-end vsblt to nventor, orders and shpments

across the suppl chan s emern as an essental

capablt to reduce network-wde nventor levels,

mamze customer satsacton, and respond

dnamcall to events that occur durn the

eecuton process.

However, the tradtonal ocus o warehouse

manaement sstems has been lmted to nventor

wthn the our walls o a snle dstrbuton center.

Hher level, areate nventor normatonhas oten been let to ERP or other nventor

manaement sstems. But, the level o suppl chan

vsblt acheved throuh ERP has oten proved

nadequate to meet a compans suppl chan needs,

due to the wa ERP has been deploed, the level o

normaton detal, and the nablt o ERP to easl

nterate wth other sstems. Thereore, lostcs

sstems must provde ther own suppl chan vsblt

n order to enable real-tme control over lostcs

processes and eecuton.


30% to 60%

Shipment Optimization

1% to 5%

Continuous Moves

5% to 15%

Carrier Management

Process Improvement / Administrative Cost Reduction

5% to 30%

Improved Transportation Management Can ProvideSignifcant Cost Savings



14/17

14

interated metrc sstems also create value throuhthe ablt to provde near-real tme vsblt toke lostcs perormance ndcators across theenterprse. Ths access to metrcs and perormanceresults serves to ocus lostcs proessonalsn multple unctonal areas and domans on aconsstent set o oals and objectves. it also enablesmore tmel response to problems.

The ollown table summarzes the mpact thatderent unctonal domans and processes have onthe sources o lostcs value.

Value s created when ntellent workfowdnamcall trers process nteraton betweenlostcs domans based on actual eecuton events.For eample, late arrval o an nbound truck maresult n a new transportaton plan, whch thenalerts DC operatons to adjust to the new outboundschedule, and ma trer proactve web-basedalerts to carrers and customers that there has beena chane n the ulllment plan.



Principle No. 3: Clearly Defne and MeasureExpected ResultsLostcs scorecardn and perormancemeasurement s emern as one o the real kes

to hh perormance suppl chans. Ths s true onan on-on bass, but s essental when companesembark on new lostcs technolo ntatves.

Ater lostcs value has been quanted relatve tothe proposed technolo nvestment, t s crtcalthat ths potental then be translated nto the speccoperatonal metrcs that must be acheved to drveepected results. Ths step s oten nored ater thental value assessment, busness case presentaton,and corporate approval / undn or the project,makn t mpossble to evaluate the success oralure o the ntatve.

A smple model o what ths result denton - ted tovalue quantcaton - should look lke s as ollows:

Ths normaton would be determned prorto launchn the project, and would nclude allnecessar mprovement areas and metrcs to supportthe oals and cost justcaton o the project.

it s mportant to note that oten the oals ormprovements ma need to be sequenced, asspecc process chanes or sotware capabltesare phased n. in eneral, as man hh proletechnolo alures can attest, t s better tosequence major unctonal or process elements,rather than deplon technolo n a b ban.

Functional Keys to Sources o Logistics Value

OperatingExpense Reduction

Working CapitalReduction

Improved Returnon Assets

Top LineGrowth

Flexibility Velocity

DC Operations

Transportation Management

Productivity Management

Global Visibility Management

Integrated Logistics

Functional Keys Traditional Value Sources Emerging Value Sources

Highest value impact Low value impactMedium value impact

Functonal Current Epected Tmerame Value romArea Perm/Metrc Perm/Metrc improvement


15/17

15

Or s t pavn over a cow path, wth lttle mpact on

epected results rom the project?

B mantann a laser ocus b all partes on

epected operatonal results throuhout the

mplementaton ccle, companes wll reatl

mprove ther chances o delvern the value ntall

promsed.

Principle No. 5: Continuously Audit Resultsit s essental that companes measure the results

ben acheved rom the lostcs mprovementproject at reular ntervals and perorm root cause

analss epected results are not ben acheved.

Whle the need or ths tpe o approach to a major

technolo mplementaton seems obvous, ew

companes actuall do a rorous job o measurn

the actual results o projects and takn the

approprate correctve acton results are not

meetn epectatons.

Falure to meet operatonal objectves or a project

can usuall be traced to one or more o the ollownactors:

Falure to actuall ollow the process as desneddurn earler phases o the project

A poorl desned process

Sotware that has not been conured appropratelto meet the process and project oals

The project methodolo should nclude pre-

scheduled audts o actual results and revew o the

process and sotware conuraton. Ths reatlncreases the lkelhood that an problems wll be

cauht earl n the o-lve ccle and that approprate

response can be taken to et the results back on track.

B appln these ve prncples and the requste

technolo, companes can unlock the hdden value

o lostcs wthn ther enterprses and across ther

etended suppl chans to acheve measurable

results and become ndustr leaders.

To allow mmedate analss and reacton,

operatonal metrcs should be captured n one

o todas robust, on-lne lostcs scorecardn

sstems. Ths creates an end-to-end process n

whch operatonal metrcs can be vsuall measured

aanst the epected results dened or the project,

provdn eas access or eecutves and ke

unctonal team members.

Principle No. 4: Maintain Results-Focused

Technology DeploymentDespte ther best eorts to quant value anddene operatonal metrcs, companes oten al to

acheve measurable results because those chared

wth technolo deploment, ncludn vendors,

consultants and compan personnel, are not aware

o or ncented to mantan ths results ocus. Ths

happens or several reasons:

Lack o contnut rom the vendors sales andconsultn teams to ts mplementaton personnel

Project pressure, whch oten results n a swtchrom operatonal results to project schedule andcost as the prmar objectves

Turnover o the project to unctonal manaersless normed or ocused on hh level resultsepectatons

These are understandable actors, but ones that

companes can not allow to detract ocus rom the

dened results epected rom the projects undertakn.

implementaton teams - both nternal to the

compan and rom the vendor and consultants -must ben ther work wth a clear roundn on the

epected results dened as the bass or the project.

These results epectatons must be kept ront and

center durn the course o the mplementaton,

and should be the lter throuh whch all mportant

decsons are made.

For eample, potental modcatons to the base

sotware must be vewed wthn the contet o

epected results. Does the proposed modcaton

clearl mpact one o the mportant project metrcs?




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16

The RedPrairie Logistics OperationsAnalysisKe to the RedPrare Approach s our Lostcs

Operatons Analss (LOA), a thtl ocused

assessment o specc aspects o a compans

current lostcs process, perormance, technolo

and objectves. Ths assessment s then mapped

aanst current ndustr best practces, opportuntes

or process mprovement, value drvers, sstem

mplementaton costs, and economc justcaton.

The result s an objectve benchmark o current

lostcs perormance aanst obtanable levels oecellence, and a clear roadmap o how a compan

can mrate rom current processes and operatn

results to the desred uture state. The LOA provdes

companes wth the normaton the need to make

normed, nancall sound decsons on lostcs

process mprovement and automaton.

RedPrare emplos the ve ke prncples o theresults-ocused methodolo (the RedPrare

Approach) and the ndustrs most comprehensve

sute o end-to-end lostcs solutons to ensure

customers acheve measurable results n lostcs.

RedPrare customers acheve lowest cost lostcs,

thrve n the hh veloct suppl chan, and

derentate themselves rom ther competton,

leadn to ncreased revenue, market share and

customer satsacton.

How do we do this?

The Logistics Industrys MostComprehensive Product LineRedPrare delvers the ndustrs most

comprehensve sute o nterated lostcs solutons,

enabln our customers to drve out costs across the

entre suppl chan. RedPrare radcall ncreases

lostcs perormance end-to-end, across the ke

lostcs fows that run throuh the suppl chan

processes o Source, Make and Delver, wth a

powerul set o capabltes that can be deploed

stand alone to solve specc problems, or toetherto solve comple challenes and acheve the benets

o nterated lostcs operatons.

The RedPrairie ApproachToo man solutons provders ocus on selln

sotware, wth lttle real attenton to customer results

achevement once the purchase decson has been

made. RedPrare s a derent knd o compan

because we have totall alned our compans

culture, processes and products to ensure ou

acheve the results ou epect rom our solutons.

The RedPrare Approach provdes laser ocus on

ensurn our customers realze epected value rom

our solutons. Throuhout the process, we work wth

our customers to quant value, dene results to be

acheved (we call them RPMs - Red Prare Metrcs),

desn, conure and mplement solutons that wll

acheve those results, and measure our success. it

s a undamentall derent approach than that o

almost ever other sotware provder.

REDPRAiRiE - A BETTER WAy OF DELiVERiNg LOgiSTiCS RESULTS



17/17

17

SUMMARy

RedPrare can help delver ths value wth a breadtho solutons and a results-ocused approach

undamentall derent than an other sotware

vendor n the market. We help ou solve our

lostcs problems toda, and ensure ou receve

the results ou epect rom our solutons.

For most companes, lostcs costs are hh,rsn and reater than manaement currentl

understands. Ths provdes a rch opportunt to

drve out suppl chan costs and contrbute to the

bottom lne.

However, too man companes have aled to acheve

the results the epect rom technolo nvestments.

B clearl lnkn suppl chan stratees and

operatonal metrcs to overall corporate stratees,

and mantann a laser ocus on clearl dened

results throuhout the selecton, desn and

mplementaton o sotware solutons, results-

ocused companes acheve the value the epect

rom new technolo.

About RedPrareRedPrare delvers productvt solutons to help companes around the world n three cateoresnventor, transportaton and

workorce. RedPrare provdes these solutons to manuacturers, dstrbutors and retalers lookn to reduce cost, ncrease sales and

create compettve advantae.

Wth over 20 lobal oces provdn servces to over 40,000 stes n 50 countres, companes trust RedPrare nventor, workorce and

transportaton solutons to delver an mmedate ncrease n productvtwth the feblt to adapt as busness needs chane.

At RedPrare, we understand todas operatonal demands and were commtted to delvern solutons that work. Were commtted

to delvern solutons or the real world.

1.877.733.7724 [email protected] RedPrairie.com

RedPrare Corporaton has made ever eort to ensure the accurac o the normaton ncluded n ths document. Ths document s subject to chane wthout notce. The normaton contaned n ths document

ma not refect the nal desn n some nstances.

Coprht 2009 RedPrare Corporaton. All rhts reserved. Ths publcaton contans propretar normaton o RedPrare Corporaton. No part o ths publcaton ma be reproduced, stored n a retreval

sstem, or transmtted n an orm b an means, electronc, mechancal, photocopn, recordn or otherwse wthout the pror wrtten permsson o RedPrare Corporaton.

RedPrare and the RedPrare loo are restered trademarks o RedPrare Corporaton.E2e s a trademark o RedPrare Corporaton.All other trademarks and restered trademarks are the propert o ther

respectve holders.

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