1 Busiess Itelligece ad Logistics WHITE PAPER Authors: Sriivasa Rao P, Techical Maager, BI / DW Practice. Saurabh Swarup, Cosultat, BI / DW Practice. Over the last few decades the role of logistics maagemet has udergoe a paradigm shift. It is widely recogized as a extremely importat aspect of the overall busiess strategy. At the same time, a umber of factors have icreased the complexity of logistics maagemet. This has led may compaies to outsource their logistics activities to Third Party Logistics (3PL) providers. Today, 3PLs play a critical role i the supply chais of their customers. They are icreasigly viewed as strategic parters who ca play a pivotal role i optimizig the supply chai ad thereby providig sustaied competitive advatage. To effectively maage the supply chais of their customers, 3PLs eed to costatly aalyze data collected from various sources ad covert it ito actioable iformatio. Busiess Itelligece (BI) tools like data warehousig ad OLAP ca sigificatly help 3PLs i achievig this objective. By providig a uified view of the etire supply chai, these tools ca help improve the fuctioig of basic 3PL services like trasportatio maagemet, warehousig, ad ivetory maagemet. 3PLs ca leverage BI tools to provide their cliets with iformatio specific to their supply chai, thereby icreasig their market resposiveess. BI tools ca also help 3PLs improve their ow iteral orgaizatioal fuctios like huma resources ad fiacial maagemet.
2 Busiess Itelligece ad Logistics Table of Cotet Evolutio of logistics as a strategic fuctio...01 Rise of Third Party Logistics (3PL) Providers Busiess Itelligece ad the 3PL Idustry...02 Trasportatio Maagemet...03 Warehouse Maagemet...04 Value Added Services Iformatio Techology Services...05 Corporate Maagemet Marketig ad Sales Huma Resources Fiacial Maagemet Coclusio Refereces...08 About the Authors...09 About Wipro Wipro i Busiess Itelligece... 10
3 Page 01 of 10 Busiess Itelligece ad Logistics Applicatio of busiess itelligece tools like data warehousig ad OLAP i the 3PL idustry Evolutio of logistics as a strategic fuctio Logistics came to be recogized as a distict fuctio with the rise of mass productio systems. Productio ad distributio were viewed as a sequetial chai of extremely specialized activities; the role of logistics was to esure availability of all the requisite materials before each step i this chai. Obviously ivetory of raw materials, semi-fiished ad fiished goods was a must across this chai to esure its smooth fuctioig. Busiess eviromet was relatively stable ad the mass productio system esured huge ecoomies of scale for the maufacturers. So far so good. Eter the Japaese. The whole paradigm of mass productio system came crumblig dow! Suddely compaies scrambled to adopt Japaese philosophy i maufacturig ad distributio Lea maufacturig, Just-i-Time, Kaize, ad Quality Circles became the key techiques. Simultaeously the role of logistics uderwet a paradigm shift. It became the corerstoe of busiess strategy a key eabler for the ew techiques. Lea maufacturig called for drastic reductio i ivetory costs across the supply chai. This required o-time delivery of raw materials, semi-fiished ad fiished goods at differet poits i the chai; ofte the widow of o-time delivery was as low as 10 miutes. Hece logistics became a extremely complicated process ad firms hired experts to do this job. Logistics maagemet has, if aythig, grow much more complex ever sice. Product lifecycles have shorteed, customer behavior has become very fickle ad busiess eviromet as a whole is extremely volatile. Maufacturers ca o loger push their products dow the supply chai; it is the cosumer who pulls the products she desires. Ad the products should be there right i frot of her, as ad whe she wats them. Price ad quality are o loger sufficiet to thrive i this market; speed to market ad flexibility of the supply chai are also of paramout importace. To achieve this flexibility, iformatio has to freely flow throughout the supply chai iformatio ot just about where the products are but also how the supply chai as a whole has bee fuctioig. The performace of the supply chai eeds to be costatly aalyzed ad improved to esure its survival. Rise of Third Party Logistics (3PL) Providers Icreased impetus o core competece ad growig complexity of the logistics fuctio has led may compaies to outsource logistics activities like trasportatio ad ivetory maagemet to Third Party Logistics (3PL) providers. I additio to this, by outsourcig to 3PLs, compaies avoid lockig capital i warehouses,trucks, cotaiers, etc. Aother factor ifluecig the adoptio of 3PL services is globalizatio. As firms expad their markets beyod atioal boudaries, the eed for more sophisticated services like multi-modal trasport ad iteratioal trade rules compliace icreases. Smart 3PLs have developed these competecies ad ca effectively ship products to multiple coutries, usig multi-modal trasport, ad meetig
4 Page 02 of 10 Busiess Itelligece ad Logistics all the iteratioal trade requiremets. The emergece of Iteret has give rise to a ew breed of e-logistics compaies, which provide a spectrum of solutios. These web based logistics portals seek to brig together shippers, 3PLs ad other iterested parties to provide more effective collaboratio. Ofte these portals are perceived to be i competitio with covetioal 3PLs. I fact they provide complemetary services ad together they ca cover the worldwide supply chai eeds for their customers. I cojuctio with e-logistics compaies, 3PLs ca provide services like crossborder trasport, customs clearace ad iteratioal trade settlemet by effectively coordiatig with cocered agecies. But there are still may compaies which believe that logistics is too critical a fuctio for them to reliquish cotrol to third parties. To wi over these customers, 3PLs eed to establish themselves as key busiess parters ivolved i the etire supply chai right from logistics strategy formulatio to its implemetatio. Ad they eed to effectively share iformatio ad kowledge with the customers. Busiess Itelligece ad the 3PL Idustry The 3PL idustry is extremely varied i the types of services it provides. At oe ed are covetioal freight movers ivolved i trasportatio of shipmets from oe locatio to aother. Geerally these services are restricted withi a geographical area ad use limited modes of trasportatio. At the other ed are 3PLs who ca execute complex ed to ed supply chai projects ivolvig multiple coutries ad multiple modes of trasport. 3PLs may or may ot owcarriers ad warehouses. Accordigly they are classified as asset based ad o-asset based 3PLs. Curretly the 3PL idustry is i a state of trasitio. Players are addig more ad more services to their portfolio as customers demad more itegrated solutios. 3PLs are viewed as strategic parters who ca optimize the supply chai, reduce the cycle time, ad provide uprecedeted customer resposiveess. The key to effectively provide these services is Iformatio Techology. More sophisticated 3PLs have quickly embraced IT to eable better coordiatio of activities by providig tracig ad trackig facility to its customers. But this is hardly eough to esure sustaied competitive advatage. To squeeze out the last drop of iefficiecy from the supply chai, elimiate bottleecks, ad cotiuously seek process improvemet, the ability to aalyze all the activities i the logistics process is vital. Busiess Itelligece ca help the 3PLs i three ways: 1. Service Improvemet: Traditioally 3PLs have bee providig services like trasportatio maagemet; warehouse ad ivetory maagemet; ad value added services like light assembly, kittig, etc. Busiess Itelligece ca improve the effectiveess of these services by i-depth aalysis ad reports o various fuctios ivolved i these services. 2. Provide Iformatio Techology Based Services: With the help of BI, 3PLs ca provide their cliets with aalysis ad reports specific to their supply chai. These
5 Page 03 of 10 Busiess Itelligece ad Logistics ca sigificatly help the customers icrease their resposiveess ad time to market. 3. Improve Orgaizatioal Support Fuctios: BI ca sigificatly improve orgai zatioal support fuctios like HR ad fiacial maagemet by providig a itegrated view of these fuctios ad supportig their specific decisio makig requiremets. Trasportatio Maagemet Trasportatio plaig ad maagemet is a basic service provided by 3PLs. They ca deploy their ow fleet or egotiate with oe or more third party carrier compaies. Apart from this, 3PLs provide iboud ad outboud traffic cotrol, route optimizatio, delivery usig multiple modes of trasport ad paymet services. Busiess Itelligece tools ca help gai isight ito the complex process of trasportatio maagemet. Some of the possible BI applicatios i this area are: Carrier Performace Evaluatio: The performace of third party carrier compaies ca be aalyzed o various factors like o-time delivery, cost, adherece to supplier s stadards, etc. This aalysis ca be used to assig quality poits to the carriers, which ca sigificatly help i selectig the best carriers for future projects. Mode-Cost Aalysis: The costs associated with various modes of trasport ad the correspodig vehicles employed ca be aalyzed. This ca help i selectig cost effective modes ad third party carrier compaies for projects. Supplier Compliace Aalysis: Ofte the suppliers do ot ship products o time resultig i delays beyod the cotrol of 3PLs. Supplier compliace ca be aalyzed over a period of time, across differet loadig poits, so that the
6 Page 04 of 10 Busiess Itelligece ad Logistics supplier ca be itimated about treds i such delays. Also the supplier compliace with respect to ivoice paymets ca be tracked for a detailed aalysis of the supplier paymet history. Carrier Relatioship Maagemet: Third party carrier compaies ca be itimated about specific delivery problems, ad their improvemet ca be tracked over a period of time. This ca help i desigig Carrier Relatioship Programs/ Carrier Excellece Programs that go a log way i establishig mutually profitable relatioships. Capacity Plaig: Busiess Itelligece ca sigificatly help i aalyzig available capacity, loss of reveue due to shortfall i capacity, ad future capacity icremets. It ca also help i short term capacity plaig like egagig empty carriers returig after delivery, thereby reducig empty miles. Cycle Time Aalysis: The importace of cycle-time time gap betwee placemet of order ad the actual receipt of shipmet caot be overemphasized. BI tools ca help critically aalyze the etire cycle-time for differet combiatios of goods, routes, modes, weather coditios, etc. Routig ad Schedulig: BI tools ca help i routig ad schedulig by presetig a updated view of capacity ad mapower available at ay poit i time. Truck ad Driver Performace Aalysis: Asset based 3PLs ca use BI tools to moitor the performace of drivers, trucks, ad other vehicles over a period of time. This ca help i maitaiig the vehicles ad improvig driver performace. Root Cause ad Claims Aalysis: BI tools ca help aalyze the root causes for accidets ad damage to goods ad the claims agaist these. Warehouse Maagemet This is aother core service provided by may 3PLs. Agai, 3PLs themselves may or may ot have their ow warehousig facilities. The various fuctios i this service iclude ivetory maagemet, cross-dockig, meterig, pickig etc. Ivetory Aalysis: A host of aalyses ca be doe o ivetory i the ware houses. This icludes ivetory by supplier, ivetory by material class, etc. for a time period or at a poit i time. Key ivetory performace idicators like ivetory accuracy ad ivetory turover ca also be tracked over a period of time. Warehouse Performace Aalysis: Compare the performace of various ware houses alog key performace idicators like pickig accuracy, shippig (from warehouse) accuracy, lies per hour (LPH), percetage over-time hours ad percetage o-time shipmets. This aalysis ca be used to compare the performace of warehouse operators/ maagers. Assigig Warehouse Costs: Warehousig costs deped o product dimesios ad hadlig requiremets. Based o past data, warehousig
7 Page 05 of 10 Busiess Itelligece ad Logistics costs ca be assiged to combiatios of dimesios ad hadlig require mets (o appropriate scale) ad this data ca be used for pricig of the warehousig service. Pickig Aalysis: It ivolves aalysis of products o the basis of umber of picks required. It also icludes aalysis of products which ted to be picked together for groupig of products durig pickig. Pickig aalysis ca sigifi catly improve warehouse efficiecy ad help i the layout desig. Warehouse Space Utilizatio Aalysis: Aalyze how effectively the warehouse space has bee utilized ad the cost per uit of space over a period of time. Value Added Services I additio to trasportatio ad warehouse maagemet, may 3PLs provide various value-added services like light assembly, hadlig reverse logistics, packig ad labelig, kittig, customs brokerig, etc. Ofte these services are the key differetiatig factors betwee two 3PLs. BI tools ca improve the effectiveess of these services. Some of the applicatios i this area are: Cost-Beefit Aalysis: Costs ad beefits associated with a particular service ca be aalyzed over a period of time. This ca help i decidig whether to cotiue the service or ot. Reverse Logistics: Reverse logistics the ability to hadle customer returs is oe of the major challeges i this idustry. BI ca help effectively maage reverse logistics by associatig the returs with the right order, aalyzig the reasos for returs, ad by aalyzig returs delivery time to the supplier. It ca also help idetify patters i reverse logistics, which ca serve as a importat feedback to the supplier. Assembly Aalysis: Light assembly is a very commo value added service provided by may 3PLs. Busiess Itelligece ca sigificatly help i aalyzig ad improvig this activity over a period of time. Kittig: Budlig of parts i predefied kits for shipmet is called Kittig. BI ca help i desigig these kits based o part dimesios ad hadlig requiremets. This ca sigificatly brig dow the overall trasportatio cost. Iformatio Techology Services Compaies are icreasigly lookig towards 3PLs to provide Iformatio Techology based services. With the emergece of Iteret, 3PLs ca ow reegieer the customer s supply chaiby providig olie collaboratio ad sychroizatio via the web. Eve before the widespread acceptace of Iteret, sophisticated 3PLs used custom developed software for electroic data iterchage (EDI) with the cliets. Other IT based services that are provided by the 3PLs are trasportatio plaig, olie orderig, automatic ivoicig, forecastig, shipmet tracig ad trackig, etc. Busiess Itelligece tools ca leverage the data created by the existig IT ifrastructure to provide valuable additioal services to the customers.
8 Page 06 of 10 Busiess Itelligece ad Logistics Some of these services are: Supply Chai Visibility: Typically the order data ad shipmet data are available i differet operatioal systems. To provide complete supply chai visibility to the customers order ad shipmet data eeds to be collected i a real time data warehouse or a operatioal data store (ODS), from where seam less olie tracig ad trackig ca be provided. Forecastig: Sophisticated demad ad supply forecastig models ca be created usig the available ivetory movemet data. These forecasts ca sigificatly help customers optimize their distributio ad logistics etwork by sigificatly reducig the ivetory costs. Customized Reports ad Aalyses: To become critical busiess parters, 3PLs should provide customers with kowledge pertaiig to the customers supply chais. The kowledge ca be delivered i the form of reports ad aalysis created from the data captured by 3PLs. Corporate Maagemet This typically ivolves the various activities performed by the top maagemet; ad the role of BI tools is to provide the top maagemet with reports ad aalyses to meet their decisio-makig requiremets. Oe possible applicatio i this area is: Dashboard Reportig o KPIs: Key performace idicators like cotributio margi, shippig accuracy, ivetory accuracy, percet o-time delivery ad order-turaroud widows ca be preseted i dashboard reports to the top maagemet to facilitate decisio-makig process. Also alerts ca be triggered if ay KPI reaches a pre-defied threshold level. These reports ca icorporate 3PL idustry bechmarks as threshold levels for various KPIs. Marketig ad Sales For ay 3PL to be successful i this market, it is ot just importat to get ew customers, but also to maitai relatioships with the existig customers. 3PLs should strive to provide more ad more value-added services that help their customers i meetig the challeges of the moder ecoomy. Some of the applicatios of BI that ca help 3PLs achieve this are: Customer Service Portfolio Aalysis: Marketig maagers ca do a thorough aalysis of the various services offered to differet cliets o the basis of profitabilty of these services. Based o this iformatio, they ca offer more value-added services to the existig cliets. Customer Profitability Aalysis: Not all customers are equally profitable. Marketig maages ca do a detailed aalysis of the profitability of all the customers alogdifferet factors which affect customer-profitability. Customer Service Level Aalysis: Marketig magers eed to aalyze how the
9 Page 07 of 10 Busiess Itelligece ad Logistics compay has bee performig o various couts with respect to the service level agreemet with the customer. Detailed reports ad aalysis ca be made o the reasos ad margi by which the service level was ot met. Huma Resources Busiess Itelligece tools ca sigificatly help i aligig the HR strategy to the overall busiess strategy. It ca preset a itegrated view of the workforce ad help i desigig retetio schemes, improve productivity, ad curtail costs. Some BI applicatios i HR are: Huma Resource Reports/ Aalytics: Reports ad aalysis ca be geerated to support a itegrated view of the workforce. Various aalyses iclude staff movemet ad performace, compesatio ad attritio, ad other customized aalyses ad reports. The HR data ca be itegrated with bechmark figures for the idustry ad various reports ca be geerated to measure performace vis-à-vis idustry bechmarks. Mapower Allocatio: This icludes allocatig mapower based o requiremets. Accordig to the eed, temporary mapower like additioal drivers ca be hired to maitai service levels. HR Portal: Employers eed to maitai accurate employee data, which ca be viewed by theemployees for iformatio relatig to compesatio, beefits, retiremet facilities, etc. Payroll data ca be itegrated with data from other huma resource maagemet applicatios i the HR data warehouse. This data ca the be circulated withi the orgaizatio through the HR portal. Traiig ad Successio Plaig: Accurate data about the skill sets of the workforce ca be maitaied i the data warehouse. This ca be used to desig traiig programs ad for effective successio plaig. Fiacial Maagemet The role of fiacial reportig has udergoe a paradigm shift durig the last decade. It is o loger restricted to just fiacial statemets required by the law; icreasigly it is beig used to help i strategic decisio makig. Also, may orgaizatios have embraced a free iformatio architecture, whereby fiacial formatio is opely available for iteral use. May compaies, across idustries, have itegrated fiacial data i their eterprise wide data warehouse or established separate Fiacial Data Warehouse (FDW). Some of the applicatios of data warehousig i fiace are: Budgetary Aalysis: Data warehousig facilitates aalysis of budgeted versus actual expediture for various cost heads like fuel costs, labor costs, ware house lease costs etc. OLAP tools ca provide drill dow facility whereby the reasos for cost overrus ca be aalyzed i more detail. It ca also be used to allocate budgets for the comig fiacial period.
10 Page 08 of 10 Busiess Itelligece ad Logistics Fixed Asset Retur Aalysis: This is used to aalyze fiacial viability of the fixed assets owed or leased by the compay. It would typically ivolve mea sures like profitability per kilometer of distace covered, total lease cost vs. profitability, etc. Fiacial Ratio Aalysis: Various fiacial ratios like debt-equity, liquidity ratios, etc. ca be aalyzed over a period of time. The ability to drill dow ad joi iterrelated reports ad aalyses provided by all major OLAP tool vedors ca make ratio aalysis much more ituitive. Coclusio The third party logistics idustry is i a state of flux. Iteret, supply chai maagemet ad globalizatio has made sweepig chages i the existig busiess models of the 3PLs. To compete i this market, a 3PL has to cotiuously improve the existig services, add ew services based o techology ad make its iteral orgaizatioal fuctios more effective. BI tools like data warehousig ca sigificatly help a 3PL achieve these objectives. Recogizig the eed for a effective busiess itelligece solutio is just the first step. The real challege is to make it a itegral part of the decisio makig process. It is vitally importat to set clear busiess objectives for the busiess itelligece solutio with total top maagemet support. Refereces 1. Poirier, Charles ad Reiter, Stephe, Supply Chai Optimizatio: Buildig the strogest total busiess etwork, Berrett-Koehler Publishers, Sa Fracisco, Marti, Adre, Distributio Resource Plaig: The gateway to true quick respose ad cotiual repleishmet, Joh Wiley & Sos, Quilli, Timothy ad Duca, Matt, Logistics ad Fulfillmet: Idustry Report, Stephes Ic, August Dyche,Jill, e-data: Turig data ito iformatio with data warehousig, Addiso Wesley, February Greis, Noel ad Kasarda, Joh, Eterprise Logistics i the Iformatio Era, Califoria Maagemet Review, Sprig Busiess Itelligece & Retailig, Busiess Itelligece ad Data Warehousig White Paper, Wipro Techologies, Bagalore, Lagley, Joh; Newto, Bria; ad Alle, Gary, Third Party Logistic Services: Views from the customers results ad fidigs of the 2000 fifth aual survey, Cap Gemii Earst ad Youg, Uiv. of Teessee, ad Excel.
11 Page 09 of 10 Busiess Itelligece ad Logistics About the Authors P. Sriivasa Rao is a Techical Maager with Busiess Itelligece ad Data Warehousig Group i Wipro Techologies. He has 9 years of experiece i IT Idustry, ad is curretly ivolved i deliverig Busiess Itelligece ad Data Warehousig solutios to Retail, Logistics, Utilities, Fiace ad Isurace idustry. He holds a Masters degree i Cotrol Egieerig ad a Bachelors degree i Electrical Egieerig. Saurabh Swarup is a Cosultat with the Busiess Itelligece ad Data Warehousig Group i Wipro Techologies. He holds a Masters degree i Busiess Admiistratio ad a Bachelors degree i Electrical Egieerig.
12 Page 10 of 10 About Wipro Wipro (NYSE: WIT) is the first SEI CMM Level 5 certified IT Services Compay operatig i the global market. Wipro provides software solutios ad services to global corporate eterprises ad Research ad Developmet services to Telecom ad Electroic product compaies. I the Idia market, Wipro is a leader i providig IT solutios ad services for the corporate segmet offerig system itegratio, etwork itegratio ad IT services. Wipro i Busiess Itelligece Wipro provides ed to ed Data Warehousig ad Busiess Itelligece services to Global Corporate Eterprises. Wipro has implemeted Busiess Itelligece ad Data Warehousig solutios for over 30 Fortue 1000 customers across various vertical idustries like Fiace, Isurace, Utilities, Telecom, Retail, Logistics, Maufacturig ad Healthcare. Wipro has evolved its "Ista Itelligece" project maagemet ad delivery methodology built aroud leadig edge techologies i the areas of Data Acquisitio, Data Modelig, Data Maagemet, OLAP, Data Miig, ad Meta-data Maagemet to deliver iovative, surefire solutios to its customers. It has etered ito Busiess ad Techology alliaces with some of the leadig vedors like IBM, Iformatica, Cogos, Microstrategy, Brio, SAS to offer customized solutios to its customers. Copyright Wipro Techologies. All rights reserved. No part of this documet may be reproduced, stored i a retrieval system, or trasmitted i ay form or by ay meas, electroic, mechaical, photocopyig, recordig, or otherwise, without express writte permissio from Wipro Techologies. Specificatios subject to chage without otice. All other trademarks metioed herei are the property of their respective owers. Specificatios subject to chage without otice. Idia- Corporate Headquarters Asia Pacific Wipro Ifotech Wipro Limited (Sigapore Brach) Doddakaelli, Sarjapur Road, 22, Malaca Street #06-01 Bagalore Royal Brothers Buildig Tel: Sigapore Fax: Tel: Fax: Middle East Wipro Ifotech Office No.124, Buildig 1, First Floor, Dubai Iteret City, PO Box , Dubai, Uited Arab Emirates Phoe: Fax: Visit us at:
C o m m i t t e e o f S p o s o r i g O r g a i z a t i o s o f t h e T r e a d w a y C o m m i s s i o T h o u g h t L e a d e r s h i p i E R M R I S K A S S E S S M E N T I N P R A C T I C E By Deloitte
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