Profitable Fulfillment:
Orchestrating Multi- Enterprise Networks
to Profitably Serve Diverse Customer Demands
By Bill McBeath
July 2016
© ChainLink Research 2016 – All Rights Reserved
Table of Contents
The Profitable Fulfillment Challenge ........................................................................................ 1
Dynamic, Diverse, Personalized Fulfillment Requirements Are the Norm ............................................... 1
Network Orchestration Required ............................................................................................................. 1
Profitable Fulfillment Opportunities ........................................................................................ 2
Automation & Integration of Mass Customization ................................................................................... 3
Fulfillment Segmentation and Orchestration ........................................................................................... 5
Optimized Postponement with Outsourced Partners .............................................................................. 7
Multi-Party Inventory Pooling................................................................................................................... 8
Enablers of Profitable Fulfillment ............................................................................................ 9
Operationally Precise, Network-Wide Visibility ........................................................................................ 9
Dynamic Network Orchestration Capabilities......................................................................................... 11
Networked Order Management ............................................................................................................. 12
Conclusion ............................................................................................................................. 13
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Profitable Fulfillment
The Profitable Fulfillment Challenge
Profitable fulfillment is one of the biggest challenges and opportunities for today’s businesses.
Dynamic, Diverse, Personalized Fulfillment Requirements Are the Norm
Manufacturers, wholesalers, and retailers alike are being challenged with diverse, continually changing channel
fulfillment demands. Across industries, success (and even survival) depends on the ability to serve customers
profitably in the way they expect to be served. This
means doing everything from massive shipments to
micro-fulfillment, from high velocity to slow movers,
ship from anywhere, fulfillment innovation, tailoring
for channel and potentially per customer, automated
sourcing, dynamic inventory management, creative
postponement strategies at each stage, last mile
optimization, and more … and doing it all profitably.
In other words, successfully serving today’s consumer
and business customers requires a supply chain that is
personalized for each sector, channel, and customer’s
unique needs and demands, but doing it economically, efficiently, and profitably. The variety and specificity of
customer demands expand every day. This is not just about product personalization. It is about delivering
products in the precise manner desired:







at the desired time and place (such as just-in-time delivery to a busy urban construction site);
in the desired packaging, prepared and packed in a specific way (such as floor-ready hanging
merchandise, customer-specific purpose-built kits for use in an operating room or manufacturing plant,
rainbow pallets for store delivery, and so forth);
in the desired sequence of delivery (different components arriving as they are needed, in the sequence
they are used);
at the desired level of component/finished goods assembly (for optimal duty/tariff engineering and/or
logistical optimization);
with the desired documentation and precise customer- and location-specific labeling;
using the right transportation carriers and routes;
offering the desired installation services when and where needed;
The list of dimensions of fulfillment personalization goes on and on, and grows every day.
Network Orchestration Required
We see more and more third parties involved in these increasingly complex fulfillment scenarios. How can
businesses meet these highly diverse, micro-segmented, personalized requirements with increasing numbers of
fulfillment partners, with so many different handoffs and stages in the end-to-end delivery of products?
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Profitable Fulfillment
Success requires a unified networked approach to the problem. This means integrating the end-to-end network
of fulfillment partners—supplier-manufacturers, logistics providers, packaging firms, third party fulfillment,
carriers, inspectors, distributors, retailers, delivery and installation companies—everyone who touches or
manages the end-to-end fulfillment. It means having an operationally precise, network-wide view—a highly
accurate and up-to-date shared single-version-of-the-truth, as a foundation for synchronizing each player
across the network.
In this paper, we provide concrete examples and describe specific capabilities that leading companies are
executing today.
Profitable Fulfillment Opportunities
The challenge of diverse fulfillment requirements is not just the fact that omni-channel presents more and
more fulfillment locations and methods every year. It is also about variety in other dimensions: different
product types (size, logistics handling
requirements such as fragility or
temperature control, installation or
technical support requirements, etc.),
range of category velocity (very fast to
very slow movers), localization, range of
item criticality (T-shirts vs. organ
transplant), configuration complexity,
logistical complexities, and more. Trying
to satisfy customer demands across all
these dimensions often increases costs
and eats into sometimes already thin margins.
It is usually assumed that this is a fixed tradeoff between meeting increasingly varied customer demands vs.
profitability. There is, in fact, enormous opportunity to move the efficient frontier to both satisfy customerspecific demands and achieve higher profit. The opportunities are substantial and diverse. Here are examples
we cover in this paper:
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2
Automation & Integration of Mass Customization—Providers of mass customized products, from
running shoes to mining trucks, are exploring new approaches to squeezing out more efficiencies, using
the same highly-automated manufacturing line for their customized items that they use for their largerun build-to-stock items, and leveraging the bulk shipping whenever possible.
Fulfillment Segmentation and Orchestration—Companies are using an increasing number of partners to
fulfill demand, for increasingly varied scenarios. Doing that profitably requires a new level of multiparty automation, control, and visibility around that shared fulfillment process.
Optimized Postponement with Outsourced Partners—When using a network of outsourced
manufacturing and fulfillment partners, postponement or differed differentiation strategies are hard to
do. These can be enabled by having precise visibility into the actual step-by-step execution across the
network and the means to instantly disseminate precise instructions for each step to each partner.
© ChainLink Research 2016 – All Rights Reserved
Profitable Fulfillment

Multi-party Inventory Pooling—Multiple
tiers of distribution can be integrated to
pool inventory across the supply chain.
Needs in one channel can be fulfilled with
inventory from another channel if the
visibility and relationships are in place. This
goes beyond the single-enterprise scenario
of a retailer fulfilling from all of their own
locations (stores, DCs). It includes multiparty scenarios, such as in spare parts
distribution.
Below we discuss each of these opportunities in
more detail.
Automation & Integration of Mass
Customization
Automation of Mass Customization Example
One of the world’s top manufacturer/major brand owner of
athletic shoes and clothing uses outsourced manufacturers to
make, in the same factories, both bulk orders destined for
retailers and personalized shoes that individual consumers have
customized and ordered on their website. Using a networked
platform, they send to their Asian contract manufacturers a
single flow of orders, containing both bulk and custom shoe
orders. The orders for custom shoes contain a ‘mini-BOM’ for
each pair. The contract manufacturer is thus able to optimize
the interleaving of bulk and custom production runs.
The network platform looks for opportunities to piggyback
individual shoe orders on bulk shipments to the deconsolidation
point, from where the individual orders are separated and sent
to the consumer. The same networked platform sends each
factory very detailed, order-specific labeling, packing, and
routing instructions and data, so that when the custom shoes
arrive at the deconsolidators or at the brand owner’s own DC,
they are already packed with the correct parcel shipping label
on them and can be sent out the same day. Suppliers also
receive the packing instructions for their bulk shipments to the
DCs. This could include things like the exact musical size runs by
store, enabling rapid cross docking.
Manufacturers have been striving to improve the
efficiencies of mass customization in their plants
for many years. In this quest, they have developed
Network-wide Visibility Example
and refined techniques like single minute exchange
Another
major
sports
shoe and apparel manufacturer uses a
1
of die and in-line sequencing. However, mass
network platform to monitor forecasted demand and actual
customization is increasingly being done by a series incoming orders, and raises an alert when it sees there will be a
of outsourced partners in stages across a
shortage for fulfilling expected future demand. In that case, the
OEM’s planner has the ability to look at in-transit inventory, as
distributed supply chain. Since most of the cost is
well as finished goods inventory across suppliers. It can request
incurred outside of the OEM’s own four walls, it
specific suppliers to accelerate orders and/or drop ship to the
requires visibility and tight orchestration and
retailer instead of to the OEM’s DC. The OEM can also request
control of these multi-stage, multi-entity
the supplier to reprioritize the work-in-progress in order to
meet anticipated demand. The same system provides an orderprocesses: from forecasting and prepositioning of
specific packing plan, with the correct labeling, quantities,
component inventory, to presenting and taking the
cartons, packing sequence, destination, and so forth for that
order, the actual manufacturing and/or assembly
specific retailer. The same system can be used by the supplier or
of the products, labeling and packaging, various
3PL to book transportation, ensuring that the correct retailerapproved carriers and routes are used. The reasons for the
legs of transport, and final delivery/installation.
expediting/air freight are captured in the process, so that the
Furthermore, to contain costs, brand owners and
supplier is not charged the expediting fees when it wasn’t their
OEMs are enabling automation across the
fault, and anyone viewing the transaction after-the-fact can
understand why the decisions were made.
distributed set of partners performing all the
various steps, as well as deploying algorithms that
look for opportunities to optimize and reduce costs (such as lower cost transportation modes).
1
In-line sequencing, also known as Just-in-Sequence, is commonly used in automotive. As each chassis travels down the
line, feeder lines deliver the exact set of components and options for that specific vehicle (for a specific order) in the right
precise sequence, just-in-time for assembly into the vehicle.
3
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Profitable Fulfillment
Those profit-maximizing capabilities are enabled by a network platform providing a single-version-of-the-truth,
creating inherent real-time integration between all of the parties connected on the platform. Beyond that,
some platforms are able to automate the functions within each of the partners in a synchronized way. For
example, a brand owner has different compliance requirements from its different retailer customers, each
retailer dictating many precise details from custom packaging, to labeling, routing requirements, bundling of
shipments, sequence of packing and loading, documentation, and much more. Non-compliance results in costly
chargebacks that can add up to 5% or more of revenue for some brand owners. A shared platform allows
compliance rules to be centrally defined and input, then uses those rules to drive automated operations,
distributed across the supply chain, so that each player in the chain performs their step in a way that creates a
fully compliant end-to-end fulfillment process.
Production and prepositioning of
component inventory at contract
manufacturers, ready for mass
customization, based on shared forecast
between OEM and contract manufacturers.
Supply
Network
Decisions
(Location of
Production,
Distribution)
Returns
Policies and
Execution
Product/
Sourcing/
Production
Decisions
(Models, Styles,
Mix, Qty,
Location, Timing)
Fulfillment
Execution
Allocation
Decisions
(How many will
each location
get)
Fulfillment
Decisions
(Location,
timing, delivery
mode)
Real-time visibility of component
inventory available at contract
manufacturers’ locations enables
accurate lead times presented to
online consumer, based on the
combination they selected.
Postponement
Decisions
Present
Choices to
Customer
(How many to
hold back,
where)
(Incent to
Profitable
Order)
Execution of
Production
Customer
Places
Order
Source: ChainLink Research
Execution at each stage driven
by compliance rules from the
network platform, ensuring
end-to-end compliance and
efficiency.
Exact pack-sequences,
labeling, transport, and
other requirements travel
with the order to the
contract mfg.
Mass customized items assembled
on-demand, based on order stream
from OEMs ecommerce site,
automatically sent to contract
manufacturers factories in near
real-time.
Figure 1 - Automation and Integration of Mass Customization
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Profitable Fulfillment
Fulfillment Segmentation and Orchestration
A common strategy to control complexity and
cost is consolidating spend to fewer suppliers and
service providers (e.g. carriers, 3PLs, installers,
and repair services), thereby gaining economies
of scale and volume discounts with more business
per supplier. However, supplier consolidation can
make it harder to meet the increasingly diverse
fulfillment requirements that companies are
facing across the globe, such as a much broader
mix of order sizes, product diversity, needs for
specialized processing, handling, and installation
skills and equipment, and expanding globalization
with significant differences by regions (even
within a country). The diversity of requirements
drives the need to segment fulfillment, with
capabilities to handle the unique requirements of
each segment differently. It can be hard or
impossible to find a supplier that can do it all.
Often specialized or regional service providers are
much better able to fulfill these diverse unique
requirements… sometimes at a lower cost.
Unfortunately, using many specialized suppliers
introduces complexities. Different products are
handled by different partners, e.g. temperature
sensitive carriers or storage facilities, heavy
equipment haulers and riggers, extremely fragile
instruments, and so forth. Advanced companies
are using technology to provide the coordination
and orchestration that lets them ‘have their cake
and eat it too’—that is to take advantage of the
abilities of a diverse and scattered set of suppliers
and service provider partners, while controlling
costs and performance.
One example of fulfillment segmentation and
orchestration is a major automotive OEM that has
an online ‘Upfit Configurator’ that allows general
contractors, plumbers, caterers, people
5
Complex Orchestration Challenge
With over 300 vehicle/equipment platforms (compared to 1215 typically for an automotive manufacturer) Caterpillar’s
equipment comes in hundreds of thousands of possible
configurations. There can be over 10 legs in the end-to-end
delivery from the factory to the dealer. Many of these, such as
mining trucks, are very large complex pieces of equipment
that may not be shipped as an entire finished vehicle, but
rather shipped in various pieces from various locations that
arrive at a yard, often colocated with the destination port,
where they do the assembly. These can include many
different third party accessories and subsystems that CAT
doesn’t provide directly.
Dealers have the flexibility to mix and match those add-ons at
the dealer location or at the actual job site, which could be a
mine, construction site, agricultural, military, or other site. In
the past this in-chain, multi-stage assembly process was
difficult for CAT, since it tracked shipments but did not have
clear visibility into the relationship of those various piece
parts. Dealers often had long lead times of 15-25 weeks from
the time they placed an order until receiving it. Yet,
depending on sector, some equipment can’t be forecasted
until 2-3 weeks out because the customer doesn’t know the
exact requirements yet. This forces dealers to make their own
forecast and hold a lot of parts inventory. And if they can’t put
together the right configuration, they may be forced to sell an
alternate brand to meet the needs on time, even if the
customer preferred CAT equipment.
GT Nexus network platform is being used to increase the
transparency, reliability, and coordination of shipments to
dealers. Dealers can now see where all the various pieces of
the product are and get more accurate estimated arrival
times. CAT is also providing mechanisms for the dealers to
better pool their inventory (see Inventory Pooling in a Heavy
Equipment Dealer Network below). CAT is continually working
on better optimizing product movements to reduce costs,
reduce lead times and variability (see CAT Tackles Variability
below), reduce detention and demurrage charges, and speed
up processing at the port. They have used the network data to
analyze port efficiencies and thereby changed origin/destination pairs for better speed (reduced wait time for unloading
or delays in custom clearance). Detention has been reduced
by better documentation and better visibility of the receiving
capabilities and locations in the yard.
© ChainLink Research 2016 – All Rights Reserved
Profitable Fulfillment
transporters, electricians, and HVAC contractors to configure customized vans and wagons.2 The
customizations are typically not done by the OEM, but rather by its network of upfit or port processing
partners, at an ‘upfit center,’ often located near the origin or destination port. This is just one specialized step
in a multi-step logistics process from the factory to the dealer (see Figure 2 below) that can include the OEM,
their Origin Service Provider, rail carriers, the trading company, upfit centers and port processors, ocean
carriers, car haulers, and more. By using a common networked platform across this network of fulfillment
partners, the OEM is able to give the upfit centers much more precise estimated times of arrival, allowing the
centers to better plan their labor and capacity. The upfit center receives a complete set of instructions for the
operation.
The same system gives the OEM precise visibility into progress at the upfit center, for early alerts when things
are falling behind with the potential to miss the sailing. The system provides a set of KPIs and dashboards to
measure and continually improve the performance of the upfit centers. This is one example of how fulfillment
can be highly segmented, performed by many parties, yet tightly coordinated, with the activities of all of the
parties being monitored and orchestrated by a common end-to-end platform.
Figure 2 - Example Multiple Milestones and Partners in Vehicle Logistics Processes from Factory to Dealer
2
Customizations include adding various interior racks, shelving, workbenches, seating, wire spool holders, partitions to
separate and secure the cargo, protective window mesh, exterior ladder racks, strapping systems, and so forth.
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Optimized Postponement with Outsourced Partners
While supply chain postponement strategies3 have been implemented by manufacturers for years, they can be
a lot harder to accomplish, due to the loss of visibility and control resulting from the tremendous growth in
outsourced manufacturing and fulfillment partners. The challenges are compounded when multiple tiers and
multiple enterprises are involved. To enable well-managed postponement execution with outsourced
manufacturers, one of the world’s largest sporting footwear brand owners has implemented the ability to
monitor the progress, step-by-step, at each of its suppliers’ factories. This granular, near-real-time visibility into
factory progress against milestones is foundational to the OEM’s postponement strategy. Another large apparel
manufacturer/OEM has taken a similar approach.
Precise factory milestone visibility enables these OEMs to have multiple points of postponement and maintain
an accurate estimate of the time they have before they need to make each of the key postponement decisions.
For example, the apparel OEM sends an order which specifies the number of shirts to make, but not yet the
colors or sizes. The outsourced factory buys the undyed gray fabric. The OEM knows exactly when the material
is ordered, arrives, and is scheduled to be dyed. It knows exactly when it has to make the color decisions, based
on what is actually happening on the ground at the outsourced factory, not some average estimated schedule.
Later in the process, it knows when the size decisions must be made, based on when the cutting and sewing
will start. At the end, it knows by when they must tell the contract manufacturer how many of each size, color,
and style to ship and where. In fact, the decision on final destination can be postponed further until the
shipment arrives at the deconsolidator at the destination port. This allows key decisions to be postponed until
location-specific demand is much better understood.
Postponement is also used for duty and tariff engineering, where an item’s components are assembled at the
point in the supply chain that creates the lowest total cost. One large equipment manufacturer makes
enormous mining trucks, which are assembled at different stages and points in the supply chain, both to
optimize duties and tariffs as well as due to logistical constraints of moving very large machinery across roads,
on or under bridges, and by rail. In many cases, the final assembly is at the mine.
The flexibility to design a global fulfillment and delivery process with postponement done at the optimal stage
by various outsourced partners is made feasible by using a shared network platform that orchestrates the
activities of the various partners. The network platform must provide highly granular, near-real-time visibility
into what is happening on the ground at all of the various manufacturing and fulfillment partners, and provide
a single shared system that drives the execution, with precise instructions for each activity at each partner at
each step. With a single networked platform, there are no delays in these instructions or status information
getting from one system to another or mistakes introduced by manual data re-entry or translation errors
between different systems.
3
Postponement of differentiation is where certain decisions or steps in production (or fulfillment decisions such as where
to ship to) are postponed until a clearer picture of demand emerges (such as having received firm orders or measured
actual demand). A classic example is designing a platform with interchangeable components, building the components
based on the forecast, but postponing assembly until each order arrives and then doing assemble-to-order.
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Multi-Party Inventory Pooling
The demands of omni-channel fulfillment have given
Inventory Pooling in a Heavy Equipment Dealer Network
rise to Distributed Order Management, whereby a
Heavy equipment dealers can benefit greatly from
retailer (or wholesaler or manufacturer) has a system
network-wide visibility of equipment, options, and service
parts. One of Caterpillar’s largest dealers has about 20
that can see inventory across all locations and make
locations spread throughout the region. CAT started
optimal decisions about where to fulfill each order
giving that dealer better visibility into their own
from. However, these systems are often constrained
inventory. Now the same platform is being used to help
in their visibility to see inventory outside of the
with inter-dealer transfers. These were already being
done, but largely on a manual basis, with dealers calling
company. It is not uncommon to have inventory
around when there was a need. Now the platform can
spread across multiple tiers of fulfillment, not only a
quickly identify and orchestrate inter-dealer transfers.
company’s own inventory locations (DCs, stores,
This includes full visibility into equipment and components that are at CAT’s own locations and in transit as
plants) but also at out-sourced manufacturers’ plants
well.
and DCs, and at other supply chain participants, such
as wholesalers, distributors, installation and repair
partners, accessory suppliers, and other players in the channel. In addition, there is often a lot of inventory in
transit between these various locations, especially when shipped across an ocean. Network-wide visibility to
available inventory, both at rest and in motion, provides major advantages of wider inventory pooling, often
allowing much quicker and/or lower cost of servicing customer needs as they arise. In some percentage of
cases, pooling consumes inventory that is not in demand in the location it is currently at and therefore might
not be consumed for months or at all.
In addition to finished goods inventory, multiparty pooling can add a lot of value in spare parts
inventory management, where it can be quite
challenging to achieve desired service levels with
the optimal mix of inventory at each location, in
large part due to the long tail4 of slow movers
that is common in spare parts. A frequently used
approach, particularly where fulfillment response
time is critical (e.g. auto parts, where a car is up
on the lift waiting for a part), is to simply throw a
lot of inventory at the problem, especially at or
near the end nodes. This adds a lot of inventory
and cost to the system. This can be further
complicated when parts distribution centers
(PDC) hold a mix of parts built by the OEM and by
suppliers. In addition, there is inventory at dealers that becomes invisible to other dealers. Providing unified
visibility across dealers’ inventory, suppliers’ inventory, parts retail store inventory, and PDC inventory creates
opportunities for higher service levels at less cost across the network.
4
8
Complex machinery has a long tail of parts, many of which may see only a couple of turns per year at a given location.
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Profitable Fulfillment
Enablers of Profitable Fulfillment
The scenarios and new approaches described above have only been made possible with the advent of a set of
enabling capabilities. These capabilities can be broadly divided into three areas:
 Operationally Precise, Network-Wide Visibility
 Dynamic Network Orchestration Capabilities
 Networked Order Management
Operationally Precise, NetworkWide Visibility
Achieving profitable fulfillment in today’s global,
multi-party, omni-channel fulfillment scenarios
requires an operationally precise view—accurate, upto-date, granular visibility across the network of
partners, as needed to optimize multi-party
processes and flows. There are several dimensions to
an operationally precise view:
 Inventory visibility is precise, granular, multiparty, near-real-time—Accurate SKU/location
inventory counts that are updated in real
time, not just for inventory that the company
owns, but inventory across the network, on
order, being built, and in transit.
 Lead times match current reality on the
ground—Actual transit times for ocean freight
can vary by several days from the estimates
supplied by ocean carriers.5
Planning with precision requires knowing the
actual average lead times and lead time
variability by lane and mode (See sidebar CAT
Tackles Ocean Transit/Port Variability).
 Dynamic Precise ETA—Rather than using
standard lead times, a Dynamic Precise ETA
monitors various factors (vessel/vehicle
speed/location, weather, port congestion,
traffic, backlogs, events on the ground) to
provide a much more precise estimated time
of arrival. It also updates over time as
CAT Tackles Ocean Transit/Port Variability
By leveraging its network platform, CAT obtained better visibility into
sources of variability throughout the full multi-leg routing and the
various costs those were adding such as detention demurrage, and
inventory costs. This variability occurred in each stage, such as ocean
transit, load and unload, drayage steps, customs clearance,
consolidation and deconsolidation, and so forth. In one case, the
manufacturer observed a specific lane where customs clearance took
place on average 2½ days after vessel arrival and with lots of variability,
in many cases over 5 days after arrival (see diagram below). With this
visibility and ability to measure and share performance, CAT tightened
assumptions and worked with the responsible service providers, and as
a result improved the average clearance to 2 days before vessel arrival,
while significantly reducing variability so that virtually no loads are
taking more than 5 days after arrival to clear. This approach was
applied more broadly, and as a result the average variability for CAT’s
China to US shipments was reduced from 18 days to 8 days thereby
reducing in-transit inventory by 10 days, freeing up $250M of working
capital.
5
Ocean carriers’ estimated transit times are typically days longer than the average transit time, to ensure that
considerably more than 50% of shipments will arrive within the estimated time.
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Profitable Fulfillment



conditions change. Precise ETA on inbound logistics enables better
execution of advanced practices such as merge-in transit or DC bypass.
Costs are accurate, up-to-date, incident-specific—Traditional standard
costs or average costs often diverge widely from actual costs in each
situation. Without accurate actual cost data, even the best of
optimization algorithms will struggle to find the most profitable
approach. This includes not just knowing a firm’s internal costs, but knowing a supplier’s or partner’s
costs, which are ultimately passed on to the buyer-customer. Getting a handle on the actual cost
drivers and cost interdependencies across the network is the only way to truly understand the total
cost-to-serve. That data in turn serves as the foundation for optimized decisions.
Condition—For certain types of cargo, accurately knowing the conditions it has been exposed to—such
as temperature, humidity, exposure to shock
and vibration, and other types of condition
sensing—can be an important element of
profitable fulfillment. For example, around 20%30% of produce is lost to spoilage before it is
consumed. Precise, granular temperature
tracking7 can be used to drive process
improvements from harvesting to precool to
handling in trucks, loading docks, and DCs to
dramatically reduce losses. Having a shock
sensor on expensive, sensitive electronic
equipment can increase handling compliance
when service providers know they are ‘being
Impact of Temperature on Berries’ Shelf Life 6
watched’ and will be liable for damage based on
that data. The new IMO SOLAS Container Weight Verification Requirement, effective July 1, 2016,
requires all containers to have an actual (not estimated) weight before they can be loaded onto the
vessel. Lack of compliance could cause delays in shipment.
Location—Knowing that an item or shipment is somewhere in transit between origin and destination is
often not enough. There can be considerable value in knowing with some precision, in near real time,
where each shipment is. This can be useful for security (preventing and detecting cargo theft) as well as
anti-counterfeiting (knowing that a specific serial number item is not where it should be). It is a key
element for calculating Dynamic Precise ETA, which is a foundation for all sorts of other benefits. It is
often not cost-justified to attach a satellite- or cellular-connected GPS device to every item or order. In
that case, location can be inferred from other data, such as AIS location data of a ship, truck location
data, ‘sightings’ of the order at different milestones, current traffic conditions, current port congestion,
weather, and other data. Algorithms are getting smarter all the time about using these combinations of
data to calculate more precise shipment location.
6
Source: Improvement in fresh fruit and vegetable logistics quality: berry logistics field studies
I.e. tracking temperature at a case or pallet level, from the field/point of harvest to the point of delivery/sale to the end
consumer.
7
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Profitable Fulfillment
Dynamic Network Orchestration Capabilities
In addition to an operationally precise network-wide view, a platform needs to provide dynamic orchestration
across all the various trading partners and service providers involved in the end-to-end fulfillment processes.
These include capabilities such as:




11
Dynamic Multi-Party Available-to-Promise—This requires an ATP (available-to-promise) engine that can
see and manage inventory that is owned by multiple parties, across many locations, and dynamically
commit that inventory to specific customer orders. This requires synchronization between each player
and the network, creating and maintaining a synchronized, near real-time, shared view of what
inventory is available for sale. When a dealer or partner or store or ecommerce site sells a unit, it is
immediately taken out of the shared pool of inventory available for sale, regardless of which enterprise
or entity has sold it. That pool of available inventory may include units that are still in production, or in
transit, or returned items sitting in a returns processing center.
Dynamic Multi-Echelon Available-to-Promise—Multi-echelon ATP refers to the ability to reliably
promise items that are still in the process of being built or transported or at different tiers of
distribution. This requires accurate visibility into the current status of production at suppliers, as well as
dynamic precise ETA for goods in transit. These estimates of production completion and transport
arrival dates must be dynamic; updated the moment conditions change. With Dynamic Analytics (see
below), predictions are updated well before a milestone is missed, based on a variety of predictive data
(internal and external) and various algorithms, such as taking into account weather, other orders being
built, other ships arriving at a port, and so forth.
Dynamic Multi-Echelon Postponement—An enabler of Dynamic Multi-Echelon ATP, this is the ability to
wait until the last moment to decide where items will be shipped from for different suppliers or tiers in
the chain. This requires the ability to remotely, instantly assign, control, and automate the
‘postponement functions’ at those various suppliers and partners, such as customer- and order-specific
assembly/kitting, customer-specific packaging and labeling, and so forth. Thus shared inventory at
many different locations can be dynamically pooled across all customers, while still meeting the widely
varying requirements of individual customers.
Supplier Shipment Automation and
Orchestration—This is orchestrating
multiple third parties—such as contract
manufacturers, packaging firms, third-party
logistics, carriers, and so forth. The
platform should provide automation and
control of end-to-end fulfillment processes
such as assembling, labeling, packing, and
shipping, regardless of who is doing them.
Streamlining these processes is required to
efficiently scale to high volumes while
improving reliability and reducing lead
© Panpote | Dreamstime.com
times.
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Profitable Fulfillment


Dynamic Analytics—Dynamic analytics provides situational awareness based on conditions on the
ground across the network. When there is a change in weather, congestion at ports, a fire, or other
event that might cause a slowdown or stoppage at or near one of the locations in the fulfillment
network, the appropriate persons are alerted, potential impacts analyzed, and ideally potential
remedies suggested. Dynamic Precise ETA and other types of proactive alerts are enabled by this type
of analytics. This requires accurate network-wide data feeds and geospatially aware complex event
processing capabilities.
Network-wide KPIs and Dashboards—The performance of the various players, manufacturing locations,
lanes, and services involved in fulfillment must be measured, monitored, and made visible to
authorized stakeholders, including the partner providing the service. These should highlight both
average performance and
variability, identify underperforming and better performing
suppliers and locations, and help
pinpoint factors that may be
affecting performance. This forms
the basis for continuous
improvement across the network;
continually working on reducing the
cost of transport, cost of delivery,
inventory levels, service levels,
cycle times, encouraging
collaboration, and other factors
contributing to success.
Networked Order Management
Distributed Order Management (DOM) has been around for over a decade, but is only now getting more
attention and some adoption as omni-channel capabilities are becoming increasingly critical. A new set of
capabilities called Networked Order Management (NOM) is emerging to support more flexible, multi-party
scenarios. This includes managing orders to OEM/brand owners and directing how those get executed by
contract manufacturers, logistics providers, and other upstream partners. It also includes more flexible
approaches to last-mile delivery. This is an area we plan to explore further in future papers.
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Profitable Fulfillment
Conclusion
Fulfillment has become a key differentiator and determinant of success.
Fulfillment capabilities have become as important as the product itself. Failure to deliver in the desired manner
and time has devastating consequences. At the same time, the challenges are increasing. Fulfillment
requirements continue to get more complex, varied, and personalized. There are an increasing number of third
parties involved in fulfillment scenarios.
To survive and thrive in this new world requires a new way of thinking. It requires ‘network thinking’— a
network-first approach to manufacturing, inventory, shipments, orders, and fulfillment. It requires coordinating
the network of players across end-to-end fulfillment scenarios. A network-first approach is the key to better
execution in today’s world. It is the key to satisfied and loyal customers. It is the key to profitable fulfillment.
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Profitable Fulfillment
About ChainLink Research
ChainLink Research, Inc. is a Supply Chain research organization dedicated to helping executives improve business performance and
competitiveness through an understanding of real-world implications, obstacles and results for supply-chain policies, practices,
processes, and technologies. The ChainLink 3Pe Model is the basis for our research; a unique, multidimensional framework for managing
and improving the links between supply chain partners.
For more information, contact ChainLink Research at:
321 Walnut Street, Suite 442, Newton, MA 02460-1927
Tel: (617) 762-4040. Email: [email protected] Website: www.clresearch.com
© ChainLink Research 2016 – All Rights Reserved