Supply Chain Technology –
What is Working, What is Not,
and Where We are Going
Executive Seminar
September, 2005
Value Based
Benchmarkingsm
2005 Supply
Chain Best
Practices
Executive
Seminar
A S S O
C
I
A T E S
1
Supply Chain Technology
Foundation questions for the supply chain technology
discussion …
 Do you have the technology infrastructure in place to
efficiently manage your supply chain?
 Are you fully utilizing the technology you have now?
Largest gap?
 What do you see as your top technology priority?
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
2
Enterprise Level Systems Usage
Use of Supply Chain Applications
% Using this Application
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Transportation Mgt
Supply Chain Event
Mgt
Supply Chain
Performance
Measurement
Warehouse
Management
Systems
Operations applications are more pervasive than
management or measurement tools.
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
3
How Are SCEM Systems Being Used?
SCEM Applied Features
Functionality Used Today
Yes
No
6
0
5
1
3
3
2
1
4
2
3
1
Do your vendors/suppliers have online access to this system?
2
4
Do your logistics service providers have access to this system?
1
5
Do your customers or stores (retailers) have access to this system?
1
5
Indicate which of the following shipment types are monitored by the SCEM system
Monitored Now
5
5
Planned for
Next 12 Months
0
0
Outbound domestic
2
3
Outbound international
1
2
Inbound domestic
Inbound international
Was it developed internally or purchased?
Internally
Purchased
2
4
Does the system support planned milestones and alerts for late shipments?
… If yes, are you using this feature?
Does the system identify variances between purchase orders and shipments,
and provide appropriate alerts?
… If yes, are you using this feature?
Does it support flexible route plans that accommodate multiple modes,
vendor shipping locations, and day-of-the-week sensitivity?
… If yes, are you using this feature?
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
4
Status Gathering Technology
Summary of Technology Usage
Internally
3rd Party
Hosted Web Hosted Web
Portal
Portal
Weighted
Usage
Fax
Telephone
Call
EDI
Vendor
352
54%
6%
10%
20%
9%
Truckload
290
37%
26%
13%
12%
12%
Less Than Truckload
169
34%
19%
15%
11%
20%
Ocean
366
24%
6%
48%
14%
9%
Air
124
43%
5%
30%
22%
0%
Rail
122
34%
17%
36%
4%
9%
Local Cartage
75
21%
21%
11%
21%
26%
Consolidation Centers
73
36%
7%
21%
14%
21%
Customs
100
34%
0%
57%
3%
6%
37%
13%
24%
14%
12%
Message Groups
Overall Technology Preferences

26% of status updates are based on fax and phone calls.

Web portals have caught up to EDI as a collection tool.
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
5
Status Accuracy and Timeliness
While EDI is an established technology, there are issues with
accuracy and timeliness.
Retailers with Trading Partner Issues
100%
90%
80%
70%
60%
Accuracy
Timeliness
50%
40%
30%
20%
10%
0%
Vendors
3PL
providers
Truckload
carriers
LTL
carriers
Ocean
carriers
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
Freight
forwarders
Customs
brokers
6
Status Accuracy and Timeliness - Compliance
Most compliance programs have not been effective in improving
performance.
Status Reporting Penalties and Rewards
Penalties and Rewards
Retailers
Using
------ Vendors ------
Logistics Providers
Used in Last 12 Months
Used in Last 12 Months
Yes
No
Yes
No
Poor performance
Financial penalties
19
15
4
4
15
Reduced order volumes
15
9
6
12
3
Performance that meets or exceeds goals
Financial bonuses
1
0
1
0
1
Vendor recognition awards
11
8
3
5
6
Effectiveness of Status Compliance Programs
Overall Rating
Companies
Selecting
No clear improvement in vendor performance
2
Minor improvement in vendor performance
17
Major improvement in vendor performance
9
Meets all of our expectations
4
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
7
12
10
8
Current
6
Next 2 Years
Next 3 to 5 Years
4
Where will tags
be applied?
2
en
ts
al
le
ts
/C
on
ta
in
er
s
P
O
ut
bo
un
d
ut
bo
un
d
S
hi
pm
ro
du
ct
s
P
O
O
ut
bo
un
d
on
ta
in
er
s
Pa
l le
ts
/C
Sh
ip
m
en
ts
In
bo
un
d
In
bo
un
d
Pr
od
uc
ts
0
4.5
4
Justification
for RF ID Tags
Relative Importance
In
bo
un
d
Number of Positive Responses
RFID Is Still Getting The “Buzz”
3.5
3
2.5
2
1.5
1
0.5
0
Track Product
Movement
Inventory Control
Theft Reduction
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
Reduction in Product
Counterfeiting
Point of Sale
Productivity
8
RFID – Where will tags be read?
Inbound consolidation center arrivals
Inbound consolidation center departures
Inbound manufacturing plant receipts
Manufacturing plant issues or consumption
Manufacturing plant outbound shipments
Inbound distribution center receipts
Distribution center inventory counts
Distribution center picking or shipment
Pool distribution arrival
Current
Next 2 Years
Pool distribution departure
3 to 5 Years
Customer or store delivery (carrier)
Store receipt (by store personnel, retail only)
Store inventory counts (retail only)
Point of sale, POS (retail only)
0
1
2
3
4
5
6
7
8
Number of Responses
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
9
How Are TMS’ Being Used?
The focus of TMS applications is on domestic operations.
TMS Applied Features
Features Used Today
Domestic International % of Total
Shipments Shipments Shipments
Inbound Functionality
Why are TMS’ not being
used in international
operations?
 Limited capabilities?
 Limited benefits?
Automatically captures PO's from order
management system
8
2
67%
Selects optimal routings
7
0
69%
Creates consolidations where appropriate
7
0
61%
Selects optimal carriers
7
0
59%
Books shipments with carriers
6
0
46%
Self invoicing of carrier charges
4
0
37%
Audits freight bills
4
0
53%
Automatically capture customer orders from
order management system
5
0
100%
Selects optimal routings
6
1
87%
Creates consolidations where appropriate
5
1
82%
Selects optimal carriers
5
1
84%
Books shipments with carriers
4
0
99%
Self invoicing of carrier charges
3
1
68%
Audits freight bills
3
0
70%
Outbound Functionality
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
10
Tools to Measure Performance
SCPM Applied Features
Functionality Used Today
Yes
No
Does this system cover Domestic shipments?
… If yes, what percentage of total Domestic shipments are
covered? >>> 96%
9
0
Does this system cover International shipments?
… If yes, what percentage of total International shipments
are covered? >>> 92%
7
2
Vendors/Suppliers
7
2
Customers
2
7
Stores
1
8
Manufacturing plants
2
5
Distribution centers
8
1
Consolidation/pool distribution centers
3
5
Truckload carriers (TL)
5
4
Less-than-truckload carriers (LTL)
4
4
Private fleets
5
4
Dedicated fleets
2
6
Ocean carriers
5
4
Rail carriers
2
7
Global 3PL's
1
7
Was it developed internally or purchased?
Is the infrastructure
in place to measure
performance?
Internally
7
Purchased
2
Does the system cover all key performance metrics for the
following?
How current is the information shown?
Near real time
1
Updated daily
7
Updated weekly
Updated monthly
1
0
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
11
What Is the Savings Potential?
Many enterprises have limited supply chain technology
infrastructure, but the savings potential seems significant.
Potential Annual Savings by Company Size
Company Size
Approx Transp. Potential Transp. Approx Invent. Potential Inv.
Spend (2%)
Savings (2%)
Savings (2%)
Carry Cost1
Combined
Savings
Very Large (over $15B)
$400M
$8.0M
$270M
$5.4M
$13.4M
Large ($3B to $15B)
$180M
$3.6M
$121M
$2.4M
$6.0M
Medium ($1B to $3B)
$40M
$0.8M
$21M
$0.5M
$1.3M
Small (under $1B)
$10M
$0.2M
$7M
$0.1M
$0.3M
1
Note: Assumes inventory investment is equal to 13.5% of revenue and carrying costs are 10% of inventory investment.
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
12
Technology Investment Priorities
Supply chain performance monitoring
Transportation management system
Supply chain event management
Warehouse management system
Internet based status reporting portal
Freight audit system
Security related capabilities
XML upgrades to EDI capabilities
EDI software
Asset tracking capabilities
Auto ID capabilities - bar coding
Auto ID capabilities - RFID tags
Vehicle location and messaging
Private fleet operations software
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Relative Importance
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
13
Technology Investment Trends
Technology Investment Priorities – Trend
Capability
The wish list is
changing. Why?
-------- 2005 -------Weighted
Average
Rank
-------- 2004 -------Weighted
Average
Rank
Supply chain performance monitoring
3.8
1
4.0
2
Transportation management system
3.6
2
3.5
4
Supply chain event management
3.5
3
4.2
1
Warehouse management system
3.5
4
3.5
5
Internet based status reporting portal
3.4
5
3.8
3
Freight audit system
3.2
6
3.2
6
Security related capabilities
3.1
7
2.8
10
XML upgrades to EDI capabilities
2.7
8
2.8
9
EDI software
2.7
9
2.8
8
Asset tracking capabilities
2.5
10
2.7
11
Auto ID capabilities - bar coding
2.3
11
3.1
7
Auto ID capabilities - RFID tags
2.3
12
2.5
12
Vehicle location and messaging
2.2
13
2.3
14
Private fleet operations software
2.1
14
2.4
13
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
14
Technology Investment Criteria
Technology Investment Criteria
Importance
Ranking*
Investment Evaluation Criteria
Required to support company growth
4.6
Required to improve customer service
4.4
Return on investment (ROI)
4.0
Provides us with a competitive advantage
4.0
Internal rate of return (IRR)
3.2
Perceived risk of not meeting project objectives
3.1
Required to respond to competitors
3.1
Payback period
3.0
Subject to capital availability
3.0
Past performance of similar investments
2.7
*(1 to 5, 5 = High)
Return on investment does not
lead the list for evaluating
technology investments.
Investment Hurdle Rates
Measures of Investment Return
Average
Hurdle Rates
Return on investment (ROI)
29.6%
Internal rate of return (IRR)
12.7%
Payback period (months)
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
28
15
Technology Investment Returns
While financial returns are not the most important investment criteria,
what returns are being estimated or achieved?
Technology Investment Returns
Negative
Up to
10%
10% to
30%
30% to
50%
Over 50%
Transportation management system
1
3
0
1
2
Warehouse management system
0
3
2
2
0
EDI software
0
4
0
0
0
XML upgrades to EDI capabilities
0
0
0
0
0
Internet based status reporting portal
0
2
1
0
0
Supply chain performance monitoring
0
0
2
0
0
Supply chain event management
1
0
1
0
0
Auto ID capabilities - bar coding
0
0
0
1
0
Auto ID capabilities - RFID tags
1
0
1
0
0
Security related capabilities
1
0
0
1
0
Asset tracking capabilities
0
0
1
0
0
Private fleet operations software
0
0
1
0
0
Vehicle location and messaging
0
0
2
1
0
Freight audit system
0
1
0
0
0
Capability
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
16
Technology Investment Audits
Are post implementation audits typical for technology investments?
Technology Investment Follow Up
Follow Up Action
Post Implementation Audits?
… If Yes:
Yes
No
10
7
Better
9
Worse
1
Who completes the post implementation audits?
Supply chain management
8
Financial management
8
Information technology (IT) management
4
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
17
Supply Chain Technology – Learning’s
•
Applications to manage the supply chain have not yet been implemented
by many companies. The priorities for filling the gaps are changing with
process measurement tools moving up the list.
•
Even where new applications have been installed, full implementation and
business process change are still challenges.
•
Integration is often an issue -- between applications and between supply
chain segments (e.g. international supply chain and distribution centers to
stores)
•
EDI is still the foundation for visibility, but timeliness and accuracy are
issues. The Internet and web portals (most hosted by 3rd parties) are
playing a greater role in data collection, while faxes and phones are still
used.
•
RFID “feels” like the right thing to do, but most implementations are still in
the future. Bar coding is the entrenched solution.
Copyright © 2005 Tompkins Associates, Inc. All rights reserved.
18
Value Based
Benchmarkingsm
2005 Supply
Chain Best
Practices
Executive
Seminar
A S S O
C
I
A T E S
Questions?
19