Optimization Squared

Oct 12, 2015
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The Future of Supply Chain Leadership Lies in Tightly Merging and Optimizing the Warehouse and Transportation Functions

Written by: Fabrizio Brasca

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For the past few years, the supply chain leadership mantra has been “agility.” The economic downturn taught virtually every business, in every industry, the importance of building speed and responsiveness into its end-to-end supply chain, enabling a faster reaction to demand shifts.

As a result, we've seen impressive improvements in supply chain capabilities across the board, but particularly in warehouse management and transportation management — two functions that have historically been viewed as time- and cost-intensive. It's easy to be nimble if you're willing to expedite shipments or work overtime in the warehouse, but those activities are expensive. The real challenge is how to be agile, while keeping costs low.

More and more leading companies are using advanced supply chain solutions across their warehouses and transportation networks to achieve this goal in their daily operations. For example, in the area of warehouse management, Advance Auto Parts recently leveraged a suite of JDA solutions to cut replenishment cycle time by at least 50 percent, while simultaneously increasing product breadth in its stores by 20 percent. Improvements in warehouse efficiency have directly led to significant sales gains because products are readily available when consumers are shopping.

In the transportation management arena, Kimberly-Clark Corporation replaced its legacy planning system with JDA solutions that apply logic and business rules to automate approximately 80 percent of its load-planning activities. In addition to reducing manual labor, the company is saving an incremental $12 million to $14 million a year in freight charges, including $8 million in the first year of implementation. As these and other supply chain leaders leverage new technologies and higher-impact processes to optimize their warehouses and transportation networks, the obvious question is: What's next?

Once performance has been optimized within these two functions, the next supply chain revolution will involve bringing them together — and optimizing their shared results. By tightly integrating all activities from the time an order reaches the warehouse through customer delivery, companies in every industry can take agility and cost control to an entirely new level.

Two Functions, One Perspective

The first step in achieving this ambitious vision is ensuring that warehouse managers and transportation managers have concurrent visibility to demand. The moment a customer order is generated, planners in both the warehouse and the transportation function should begin aligning cross-functional resources to fill and deliver that order in the most timely, cost-effective way. Neither discipline should be impeded or delayed because of an absence of order data. Since most companies currently base their warehouse and transportation operations on a set of serial processes, this requires a huge change in mindset.

Ultimately, transportation planning should still drive warehouse execution — for the simple reason that warehousing is a location-specific function, while transportation is a network-level function. An intelligent transportation plan comes up with dynamic strategies for maximizing efficiencies across the entire network — for example, by scheduling a soft transfer to a distribution center (DC), picking up an order at the DC and delivering it to the customer as a seamless process.

It only makes sense for the DC to base its processes on the capabilities of the transportation network, so valuable time won't be invested picking and packing orders that will be sitting on the loading dock, while trucks wait for other orders that aren't filled yet.

Intelligent transportation planning will always be the driver, but providing warehouse planners with concurrent order visibility allows much more effective coordination across these two functions. Transportation planning can be enabled and enhanced with defined warehouse-level constraints that result in flawless, cost- and time-efficient execution. In addition, demand visibility ensures that the warehouse staff is always working on the most critical orders, enabling high service and high profitability.

The Perfect Load: It Begins in the Warehouse


Providing warehouse and transportation planners with simultaneous visibility into orders, as well as network constraints, allows them to focus collaboratively on a concept called “the perfect load.” Though traditionally associated with transportation management, perfect load planning actually relies heavily on warehouse visibility and cross-functional optimization.

What is the perfect load? It's the load that maximizes routing by aggregating many different kinds of transportation demand — including inbound, outbound and inter-facility movements of inventory. By stitching together these moves in an optimal way, perfect loads maximize transportation and warehouse efficiency, as well as financial results.

The perfect load also maximizes the containerization, or load building, of products — all the activities from building cartons and pallets to loading onto the container. Perfect load building maximizes the available three-dimensional space across all these stages, matching customer orders to physical capacity in the most precise and profitable manner.

Perfect loads also take advantage of sophisticated order splitting and scheduling strategies to further reduce costs whenever possible. Traditionally, individual customer orders were considered inviolate and nonbreakable, but today transportation planners are recognizing that orders can often be strategically split to maximize utilization of assets such as trucks or ocean containers. While customer delivery commitments are still paramount, perfect loads increasingly represent partial orders that are spread out over multiple assets in order to create new transportation and warehouse efficiencies.

Because perfect load building depends on managing constraints across the dynamic warehouse and transportation functions, it's essential that these two areas work together if companies are going to achieve the perfect load on a consistent, day-to-day basis.

While perfect route planning has to consider such nuances as cross-docking opportunities and the three-dimensional space available inside various containers, the entire customer delivery process also depends on products being ready at the loading dock when trucks arrive. Unless real-time warehouse constraints are considered simultaneously with real-time transportation constraints, this process will not be fully optimized.

Iterative Planning: Creating Real-Time Agility

Bringing the warehouse and transportation functions together under one umbrella allows the introduction of a new concept that maximizes moment-by-moment agility: iterative planning.

Every day, planners build the best possible routes, pallets, and containers from a transportation perspective. But they may not consider that these plans could result in warehouse inefficiencies — for example, by sending employees across the facility three times to pick different products. While multiple trips across the warehouse aren't necessarily a recognized “constraint,” they can represent an enormous loss of productivity over the course of a year.

Cross-functional plans need to recognize these operational inefficiencies and work around them. That means transportation planners need to have real-time visibility into the warehouse configuration so that workforce productivity is maximized. When orders are packed, transportation planners also need to ensure they have drivers, trailers, and dock personnel ready to meet the loading schedule.

But, because conditions constantly change, these plans cannot be fixed. To truly optimize warehouse and transportation management, plans need to be reiterated and updated throughout the day. A dynamic, real-time view into warehouse load states, order changes, and disruptions enables real-time responsiveness across both functions.

By operating with flexibility and honoring real-time constraints and inefficiencies as they become apparent, companies have the power to truly optimize asset productivity, workforce efficiency and financial results across both their warehouse and transportation networks. This is the ultimate combination of agility and cost control that companies are seeking today.


Technology: The Great Enabler

Clearly, companies can achieve enormous benefits from tightly integrating their warehouse plans and transportation plans. But how can they achieve this ideal state?

The answer is improved supply chain planning solutions that enable real-time information sharing and strategic process coordination, across both functions. Technology tools can provide the critical linkages among warehouse and transportation capabilities, enabling cross-functional managers to view the same real-time information about demand, constraints, resource availability, service targets and performance metrics. Instead of acting as mutually exclusive functions, the warehouse and transportation network can be knit together via advanced software to create a new level of interactivity, interoperability, integration and collaboration.

Technology also supports the repetitive, iterative planning capabilities that are needed to integrate these functions in real time. Whether there is an emerging opportunity like a new customer order or a challenge such as an inventory shortage, software solutions can alert both functions — and automatically suggest a revised course of action that optimizes assets in light of this change.

Advanced technology solutions are already being developed to support this new level of visibility, collaboration, and agility. Instead of managing transportation and warehouse operations separately, tomorrow's supply chain software will transform both functions into a single engine and shared a dashboard, focused on continuous planning and execution that spans both capabilities and provides a net-new view of logistics. As conditions change, next-generation software tools, along with the process and organizational realignment, will position this new logistics network to adapt in real time, creating an incredibly powerful environment of continuous improvement and ongoing agility. Whatever your industry or business model, that's bound to create a significant competitive advantage.