“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”
— Albert Einstein
When I was a novice runner, training for five and ten kilometer events was simple. I ran – sometimes short, sometimes long, sometimes on hills, sometimes flat. The bottom line, I just ran. As I progressed into the world of triathlons, and eventually into long distance triathlons, my life changed. It became more complex and, consequently, my response evolved beyond the familiar. I entered new events that required cross training, I had to create a balanced schedule, and I needed to consider diet and timing. Simplicity was just not going to work.
Our lives as supply chain professionals evolve similarly. In today’s environment of consumer driven supply chain and omni-channel fulfillment, we are faced with an unprecedented degree of execution variability that creates growing pressure on margins, customer satisfaction, and execution complexity. It stands to reason that our response to this change has to reach beyond traditional thinking into the innovative.
“Necessity is the mother of invention.”
What makes today’s challenges fit this mold more so than past disruptions? It is the clear impact on profitability. From a recent CEO survey, only 16% of respondents that had a clear omni-channel strategy believed it to be profitable. As this strategy adoption grows, it will force organizations to take a hard look at how to adapt to the increased customer variability, all while focusing on mitigating costs and driving improved profitability.
A key component to the fulfillment problem is the domain of transportation. Traditionally focused as a pure “I just need to get it there” execution level function, it has been proven that when looked at through a more strategic lens, transportation can enable step-wise positive value for an organization. As we look at an era of necessary innovation, I outline three ways in which differentiated transportation innovation can drive the elusive combination of network resiliency and cost mitigation.
Dynamic Order Splitting
As e-commerce transforms into omni-channel fulfillment, retailers are realizing that their existing networks, from distribution center to store, are assets that can be leveraged to service individual customer demand. To maximize transportation utilization and performance, the notion of “one store/one delivery” is making way for dynamic order splitting and multiple deliveries as a concurrent part of the store routing problem. This flexible approach creates the ability to be more adaptive to constantly shifting demand while maximizing the usage of transportation assets. While there is complexity in controlling the necessary constraints, there is significant value in addressing the dynamic multi-channel fulfillment challenges.
Item Constraint Awareness
An additional area of opportunity to increase asset utilization is physical “load building.” Load building is the inclusion or three dimensional planning (the ability to build pallets) into the network routing problem. This becomes even more critical when viewed alongside the ability to opportunistically split orders. The challenge with this type of capability has been the synchronization and understanding of item awareness across both transportation and the warehouse. The inclusion of item and location level constraints creates the opportunity to capitalize on utilization improvements without creating downstream execution disruptions. Like a clogged artery, bottlenecks created through a lack of proper constraint visibility can be fatal to the most efficient of supply chains.
Fixed Fleet Routing with Dynamic Insertion
There are some older, traditional strategies that exist purely on merit, but they require innovation to exist in the current environment of increased variability and shrinking margins. One such strategy is the employment of fixed delivery routes. This strategy drives value due to its predictability which enables smooth operations and efficient execution. The challenge arises when demand varies from the profile that was in place when the routes were initially created. One option is to plan the routes more frequently, but this is time consuming and unsustainable due to the increase in consumer demand volatility. A better approach is to model and respect the routes but allow for opportunistic insertion of demand to create resiliency while improving utilization.
What I have just highlighted above aligns with the new functionality in the JDA Transportation portfolio. This portfolio is specifically aimed at giving shippers the visibility to make intelligent service/cost trade-offs, as well as the flexibility to fully utilize their available capacity and other resources. Just as I evolved as an athlete, taking into consideration the changing dynamics of training, we, as supply chain experts, continue to innovate and bring forth new capabilities that address customer satisfaction, execution variability, and complexity.
For even more information, read the breaking news on our JDA Transportation Management System!