Collaborative Transportation Management :Enhancing Supply Chain Adaptability
& Resiliency
Collaborative Transportation Management :Collaborative Transportation Management :Enhancing Supply Chain Adaptability Enhancing Supply Chain Adaptability
& Resiliency& Resiliency
Presented to:
Joel SutherlandMay 9, 2006
Symposium on Value Chain Adaptability
Joel Sutherland, Lehigh University
Presentation Objective
Objective: Demonstrate how supply chain partners collaborate on transportation processes to become more adaptable to day-to-day demand changes as well as resilient in the event of major supply chain disruptions.
Resilience: A notion borrowed from the materials sciences representing the ability of a material to recover
its original shape following a deformation.
Joel Sutherland, Lehigh University
Agenda
2004 State of LogisticsCollaborative Transportation ManagementCase Study-AutoZoneQuestions
2004 State of Logistics
Joel Sutherland, Lehigh University
Logistics Cost as a % of GDP
$10.60
$10.80
$11.00
$11.20
$11.40
$11.60
$11.80
$12.00
2003 2004
GDP $
U.S. GDP Up
$11.0 T to $11.8 T
0.00%1.00%2.00%
3.00%4.00%5.00%6.00%7.00%
8.00%9.00%
10.00%
2003 2004
GDP %
Logistics % Stable
8.6% to 8.6%
$900.00
$920.00
$940.00
$960.00
$980.00
$1,000.00
$1,020.00
$1,040.00
2003 2004
Logistics $
Logistics $ Up
$0.944 T to $1.015 T
Source: CSCMP, 16th Annual State of Logistics Report
Joel Sutherland, Lehigh University
U.S. Spent $1.015 T on Logistics in 2004
Transportation = $636 B (63%)Transportation = $636 B (Transportation = $636 B (63%)
$47 B
$82 B $636 B
$250 B Transportation
Warehousing
Other Inv CC
Shipper & Log Adm
Source: CSCMP, 16th Annual State of Logistics Report
Joel Sutherland, Lehigh University
80%
7%
4%
1%5% 3%
TruckRailWaterPipelineAirForwarders
$636 B Transportation by Mode
Truck Transportation = $509 B (80%)Truck Transportation = $509 B (Truck Transportation = $509 B (80%)
Source: CSCMP, 16th Annual State of Logistics Report; various other
Approximately 50% of
truck is full truckloadApproximately 50% of
truck is full truckload
Joel Sutherland, Lehigh University
Cost of Logistics Relative to GDP
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4
Logistics % of GDP Inventory CC % of GDP Transportation % of GDP
Source: CSCMP, 16th Annual State of Logistics Report
Collaborative Transportation Management
Developed by the CTM Sub-Committee of the VICS Logistics Committee
www.vics.org/commit.htm#Logistics_Committee
Joel Sutherland, Lehigh University
• Collaboration is more than cooperation. Collaboration requires that companies work actively together as one toward common objectives.
• Collaboration includes the sharing of information, knowledge, risk, and profits/benefits in an agreed-to consistent fashion for all participants. Everyone involved must benefit or it is not true collaboration.
• Collaboration entails understanding how other companies operate, how they make decisions, and what is important to them.
Collaboration Defined
Joel Sutherland, Lehigh University
Eliminate inefficiencies in the transportation component of the extended supply chain though collaboration to bring
benefit to all trading partners
What is the Objective of CTM?
Source: CTM Sub-committee of the VICS Logistics Committee
Joel Sutherland, Lehigh University
CTM Improves Profits & Leverages Assets
CTM Opportunity
Improved Profitability
Improved Balance Sheet Performance
Increased Sales
Reduced Costs
Improved Transportation
Asset Utilization
Inventory Reduction
Improved DSO
Comments
• CTM enables improved service levels and on-shelf availability across the board
• Shippers and carriers with CTM capabilities become "go-to" parties for major retailer events
• Opportunities exist to minimize/eliminate costs associated with miscommunications across the extended supply chain, e.g.:
– Expediting/last minute shipping – Poor truck utilization – Freight bill and shipment administration
• Collaboration facilitates better use of transportation and warehousing assets for all participants, e.g.:
– Continuous moves– Shared warehousing – Fewer fixed assets
• The ability for participants to take a system-wide view of supply and demand minimizes unnecessary inventory
• Better communication between partners creates the opportunity to reduce DSO
Joel Sutherland, Lehigh University
Description
Periodic process between a shipper and a carrier to arrange for transportation capacity -- may include the use of a transportation marketplace
Proactive control of inbound goods flow and management of transportation by the receiver
Aggregating truckload freight across multiple locations or divisions of a company or across multiple shippers
Ability to solicit capacity from other select/core carriers
Collaborators Transaction Area
Capacity Procurement
Inbound Management
Integrated Movements
Transportation Marketplace
Shipper Carrier
Shipper
Carrier
Receiver
Shipper
Carrier
Receiver
Shipper
Carrier
CTM Opportunities Exist Across Four Key Transaction Areas
Joel Sutherland, Lehigh University
CTM Eliminates Inefficiencies (Waste)
ECRECR
JITJIT
VMIVMI
“Lean”“Lean”
CPFRCPFR
“Pull”“Pull”
SixSigmaSix
Sigma
TQCTQC
What is CTM?
Time
Motion
Inventory Errors
Space
WasteWasteContinuous
ImprovementContinuous
Improvement
Joel Sutherland, Lehigh University
CTM is a Holistic Process
Private Marketplace
Private Marketplace
RateNegotiation
RateNegotiation
Inbound Management
Inbound Management
RoutingGuide
RoutingGuide
StandardBOL
StandardBOL
DockScheduling
DockScheduling
Continuous Move
Continuous Move
AppointmentScheduling
AppointmentScheduling
YardManagement
YardManagement
CollaborativeLTL
CollaborativeLTL
ModeshiftingMode
shiftingTerms
ConversionTerms
Conversion
What is CTM?
BackhaulBackhaul
ReengineeredBusiness Process
ReengineeredBusiness Process
Information Technology Essential to CTM
Advanced technology is essential to successful CTM playing three important roles:
• Enables CTM by providing the necessary tools to make collaboration feasible e.g.:
– Real-time data transfer; automated communication
• Supports collaborative inter-organizational relationships e.g.,
– Reduction of transaction costs/risks with automated process
• Provides the opportunity for outsourcing of core logistics processes between CTM logistics partners
Advanced technology is essential to successful CTM playing three important roles:
• Enables CTM by providing the necessary tools to make collaboration feasible e.g.:
– Real-time data transfer; automated communication
• Supports collaborative inter-organizational relationships e.g.,
– Reduction of transaction costs/risks with automated process
• Provides the opportunity for outsourcing of core logistics processes between CTM logistics partners
Information technology (IT) by itself is not enough to lead to successful collaboration. Firms must know how to use IT to reap the benefits of CTM. Human contribution, through data analysis and information utilization, is where the true benefits of IT lie. Therefore, the enabling and supporting role of IT to CTM processes can only be realized if the technology is employed effectively
Information technology (IT) by itself is not enough to lead to successful collaboration. Firms must know how to use IT to reap the benefits of CTM. Human contribution, through data analysis and information utilization, is where the true benefits of IT lie. Therefore, the enabling and supporting role of IT to CTM processes can only be realized if the technology is employed effectively
Role of Information Technology Comments
Human contribution…is where the true benefits of IT lie.Human contribution…is where the true benefits of IT lie.
Human contribution, through data analysis and information utilization, is where the true benefits of IT lie.
How to do it?
Joel Sutherland, Lehigh University
How to Achieve CTM Benefits
SupplierSupplier BuyerBuyer
CarrierCarrier
3PL3PL
Source: Transportation journal, The Value of CTM, Summer 2003; John Karolefsky, Collaborating Across the Supply Chain, 2001
The value of CTM can be obtained through two primary avenues:
1. Direct communication between Shipper(s), Receiver(s) and Carrier(s)
2. 3PL facilitation of the communication and execution process
The value of CTM can be obtained through two primary avenues:
1. Direct communication between Shipper(s), Receiver(s) and Carrier(s)
2. 3PL facilitation of the communication and execution process
How to do it?
Joel Sutherland, Lehigh University
Level of Collaboration
Traditional VendorTransactionalNo visibility
Trading PartnerCollaboration
Shared forecast by lane of trafficAutomated transactions
Partnership CollaborationShipper, Consignee, and CarrierShared forecastCommitted capacityVisibility
Consortium Collaboration
Multiple Shippers, CarriersThird party facilitationInformation HubRelationship management
Value
CTM Continuum
Opportunity to add value through CTM increases as multiple shipper networks are integrated, carriers
are connected, and communication and execution capabilities
are enhanced
Opportunity to add value through CTM increases as multiple shipper networks are integrated, carriers
are connected, and communication and execution capabilities
are enhanced
How to do it?
CTMCase Study
Joel Sutherland, Lehigh University
Fortune 300 company - $5.7 billion in revenue annually
Largest auto parts retailer in North America
Founded in 1979
Listed on the NYSE in 1991
Key developments in Logistics began in 1996
AutoZone’s Background
Joel Sutherland, Lehigh University
0.8
1.8
5.35.7
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
1991 1995 2002 2005
Net Sales ($Billions)
5981143
3107
3673
0500
1000150020002500300035004000
1991 1995 2002 2005
Stores
AutoZone’s Growth
3,592 stores in 48 states and Puerto Rico
+ 81 in Mexico = 3673 total
Joel Sutherland, Lehigh University
Objectives
Support rapid growth of companyUse existing assets more efficientlyEmploy best available technologyProvide visibilityProvide visibility for all inbound flows ReduceReduce transportation lead timesExecute scheduled, time definite time definite shipmentsAchieve competitive advantageCapture and retain market share
Copyright 2002 TransplaceConfidential, All Rights Reserved
Joel Sutherland, Lehigh University
Scope of Services
Single point of contact Select, negotiate, contract, manage carriersProvide shipment status visibilityPerformance measurement and reportingAudit freight bills, pay carriers, bill Company
©Copyright 2002 TransplaceConfidential, All Rights Reserved
Joel Sutherland, Lehigh University
Product Flow Before CTM
Joel Sutherland, Lehigh University
Implementation Process
• Establish cross-dock methodologies
©Copyright 2002 TransplaceConfidential, All Rights Reserved
• Benchmark inbound freight costs–Convert freight terms from prepaid to collect
• Establish product profiles–Products, cube, weight, stacking characteristics
• Conduct detailed site location analysis –Operational business rules
• Determine reliable transit times –Flows between vendors, DCs, and stores –Mode, route
Joel Sutherland, Lehigh University
Product Flow After CTM
Joel Sutherland, Lehigh University
Results
Before CTMBefore CTM
• Vendors Controlled Freight • 77% of Vendors Converted to Collect• 85% LTL Inbound Shipments • <2% LTL Inbound Shipments
• 1 Week Average Transit Time • 1.5 days Average Transit Time
• No Pipeline Visibility • Complete Pipeline Visibility• Excessive Freight Damage • Freight Damage Nearly Eliminated• High Transportation Cost • >20% Transportation Cost Reduction• Growth Constrained • Significant Inventory Reduction• Poor On-Time Performance • 99%+ On-Time Performance• Poor Utilization of Private Fleet • 25% Increase in Private Fleet Utilization
After CTMAfter CTM
Joel Sutherland, Lehigh University
Enhanced Supply Chain Adaptability & Resiliency
Enhanced Supply Chain Adaptability Enhanced Supply Chain Adaptability & Resiliency& Resiliency
Impact
Total lead-time and lead-time variability reducedVisibility allows adaptive processes to be deployedTechnology enables optimal day-to-day executionInbound flows now in retailers’ controlAbility to adapt and grow business enhanced by use of 3PL
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