Fundamentals logistics

FUNDAMENTALS OF LOGISTICSBILL DUCAT| FEBRUARY 12, 2013

PITCH

Dynamics AX is Beyond ERP…the Next Evolution

•Business process platform•End to end capabilities•A platform to defeat competitors•Consortium of domain experts•Next evolution of solutions…

FUNDAMENTALS OF LOGISTICS

Dynamics as the Process Platform

FUNDAMENTALS OF LOGISTICS

Powerful embedded

analytics and BI

Applications that are an

asset

Simplicity and agility

Works the way you need it to Simple to use

Get the right data to decision

makers

Complete industry-specific

solutionsManufacturing

Distribution

Retail

Services

Public Sector

Tailored to meet your needs

Broader View of Supply Chain/Logistics

FUNDAMENTALS OF LOGISTICS

Company

RF, DATA COLLECTION AND BARCODING ≠WMS/TMS

Radio Frequency Can Actually Hurt Productivity

•Order picker with paper can be faster than Radio Frequency Picker

– Some gains on searches, errors, etc.

•Key: Strategies that leverage technology like RF, but reduce labor and travel time

– Multi-order picking

– Work flow (Walk paths)

– Material handling integration

– Zone picking

– Pick/sort

– Integrated transportation

– Value added services

– Etc.

FUNDAMENTALS OF LOGISTICS

AWAKE ISSUESDIFFERENTIATION, TRUST, VALUE

Stakeholder Value Proposition

Increase Revenue

Increase AssetUtilization

Increase Profit Margins

FinancialObjective

Increasing Shareholder

Value

CorporateObjective Opportunity

10-20% Fill Rate Improvement 1-3% Increase in Service Level 10-15% Increase in Revenue

2-4% Margin Improvement 30-40% Increase in ROA 10-15% Inventory Reduction

5-10% Lower Fulfillment Cost 15-25% Lower Labor Cost 10-20% Transportation Savings Improved Operating Efficiencies

Supply Chain Benefits (Broader)

FUNDAMENTALS OF LOGISTICS

Logistics Cost Breakdown - Typical

FUNDAMENTALS OF LOGISTICS

% of Total Logistics

% of Sales

Transportation

43% 3.44%

Warehouse 25% 2.09%

Inventory Carrying Cost

29% 2.32%

Administration

3% 0.24%

TOTAL 100% 8.09%

Fuel Costs Rising

FUNDAMENTALS OF LOGISTICS

Supply Chain Solutions Benefits Examples

•Reduction of Inventory Carrying Costs

– 8 to 15% Increased Inventory Turns

– Source: Gartner Group

•Eliminate Some Safety Stock

– For a $100 Million dollar company, a 3% reduction in inventory achieves $500,000 in savings.

– Source: APICS

•Reduction in Customer Returns

– 11 to 25%

– Less Picking Errors

– Source: Gartner Group

FUNDAMENTALS OF LOGISTICS

Warehouse Cost Breakdown - Typical

FUNDAMENTALS OF LOGISTICS

Shipping20%

Storage15%

Receiving10%

Picking55%

Key Questions Example (Value Mapping)

FUNDAMENTALS OF LOGISTICS

COGS What % of COGS is logistics costs?CFO, CLO, COO, VP Dist.

COGSIs COGS in line with expectations? How does your compare with competitors? CFO, CLO, COO

Logistics

What metrics do you use to measure logistics performance? How does your current performance compare with company goals?

CFO, CLO, COO, VP Dist.

LogisticsWhat metrics do you wish you could track but cannot? Why?

CFO, CLO, COO, VP Dist.

Fill RateWhat is your order fill rate, and how does it compare with company goals?

CFO, CLO, COO, VP Cust. Serv., VP Dist., VP Sales

Fill RateHow do you measure the impact of unfilled orders on revenue?

CFO, CLO, COO, VP Cust. Serv., VP Dist., VP Sales

GrowthCan your logistics capabilities handle all existing and planned channels? If not, why?

CFO, CLO, COO, VP Dist.

On-TimeWhat is your on-time delivery %, and how does it compare with company goals?

VP Cust. Serv., VP Dist., VP of Trans., Director of Dist., Director of Transp.

Inventory

How do your inventory turns and inventory accuracy compare to company goals? What are the reasons for the differences?

CLO, CPP, VP of Distr., Director of Dist.

Inventory

Could safety stocks be lowered with better inventory accuracy (knowing what you have, where it is, especially when needed)?

Chief Logistics Officer, VP of Distribution, Director of Distribution

LaborHow do you track labor productivity? Are your tracking capabilities sufficient?

VP of Distribution, Director of Distribution

Chargebacks

Do you incur chargebacks from customers? What are the primary violations?

VP of Distribution, Director of Distribution

Inv. Accuracy

What is your current inventory accuracy (perpetual and location level)? How does this compare with company goals?

VP of Distribution, Director of Distribution

Inv. Accuracy

How does inaccurate inventory affect your business (warehouse productivity, order fill rate, inventory turns)?

VP Distr., Director of Dist.

Physical Cost

Do you perform an physical inventory? How long does it take and what are the total costs associate with a PI?

Director of Distribution

Trading Partner

Do you have a compliance program with suppliers? How effective is it? CLO, VP of Dist.

Order Accuracy

What is the cost to correct an order filled incorrectly? What makes up those costs?

VP Cust. Serv., VP Dist., VP of Trans., Director of Dist., Director of Transp.

KEY ITEMS OF LOGISTICS SYSTEMS

Key Items

GENERAL

Embedded RFConfigurable WorkflowWork CreationLocation

ZonesStocking LimitsLicense Plate Controlled

Labor Tracking

Warehouse Location Profile

FUNDAMENTALS OF LOGISTICS

•Location Profiles

– Dimensions & Capacity

– Mixed SKU

– Mixed Lots

– License Plate Controlled

– Check Digit Controlled

– Permanent vs. Dynamic

– Stocking Limits

– Zones

Integrated RF

License Plate Tracking

Receiving / Putaway License Plate tracked through entire operation System generated label , blind label, or ASN label may be

utilized

Inventory Management Location Controlled License Plate Tracking (optional) Transfer / Adjust by License Plate Support for License Plates in multiple statuses in a single

location

Shipping Pick by License Plate Ability to allocate license plates and track to initial receipt Ability to RF confirm pick license plates

Key Concept

•Ability to deal with concepts separately:–Where – Selecting the optimal putaway/picking location

–How – Best way to perform the work

PRESENTATION TITLE

Order Picker’s Time (non-WMS) - Typical

Travel50%

Search20%

Setup10%

Extract15%

Other5%

Different Zones for Different Purposes

FUNDAMENTALS OF LOGISTICS

Pick Zone

Locate Zone

PRESENTATION TITLE

Units of Measure Matter

•Each unit of measure means different equipment, labor, etc.

•Unit picking should not be done out of the same location as pallet picking

•Items may need to live in multiple bin locations

•Reservations, putaway logic, replenishment, etc. need to be smart about UOM

•Different channels drive different behaviors (direct to consumer vs. B2B)

Pick / Pack Catch Weight FlowLTL Batch Case Pick

Workflow

Pick Catch Weight

Print LabelStage

Load

Pick Stage

Pallet Build

Dock Check

Load

Group Pick

VAS Labelin

g

Pack by Order

Example Configurable Workflow based on Criteria…

Labor and Task Tracking

FUNDAMENTALS OF LOGISTICS

Key Items

INBOUND

Supplier Management

Inbound Container

Management

ASN Receiving

Disposition

RF Receiving / Putaway

Rules Driven Locating

Cross-Docking

Appointment Scheduling

Supplier Management

THIRD PARTY LOGISTICS / FREIGHT FORWARDERS

TRANSPORTATION PROVIDERS

Small Domestic

InternationalContractIn-House

Large Domestic

FACTORIES SUPPLIERS DISTRIBUTION

Branded

Warehouse

InternationalRetail

Cross-Dock/Flow Through

Business

Manufacturing

INBOUND SUPPLY CHAIN VISIBILITY

End-to-End Event Management

DIRECT DELIVERY

Purchase Order

Shipment ASN

PO Confirm (Qty, Price, Dates)

Customs Documents

Shipment Status

Shipment Packing Wizard– Automated Shipment Creation

– Carton / Pallet Packing Wizard

– Container Nesting

– Compliant Pallet / Case Label Printing

– ASN Generation

Key Items

INVENTORY

In Location Quarantine

Real-time Cycle Count

Hierarchical Item

Classifications

Lot / Serial Number

Control

Automated

Replenishment

RF Production Moves

RF Report as Finished

Inventory StatusConfigurable

Inventory Status. In Location

Quarantine!

Cycle Count Processing

•Cycle count creation

– Item, Location characteristics

– Manual or system generated

•Exception driven cycle counts

– Short Pick

– Damaged Product

– Putaway Exceptions

•Real-time Cycle count

– RF cycle count execution

– Immediate inventory updates, or hold for approval

– Does NOT freeze location for pending count

Replenishment

Automatic Replenishment

•Identify Replenishment needs

– Automatic Schedule

– Manual

– Min – Max Capacity

– Allocation Rules

•Replenishment Work

– RF Work Execution

– Priority Driven

Pick LocationsReserve Locations

Key Items

OUTBOUND

Wave / Load PlanningDeferred Reservation

Whs/Site at Order EntryLocation at WaveLP at Picking

Rules based AllocationWork Creation RF Picking / Staging / LoadingPick & PackConfigurable Workflow

Wave Output

Wave Processing

Wave Planning

Order Selection

Load Planning Allocation Work

CreationDocument

sWork

Release

Prioritized WorkLocation Allocation

Load Planning

•Load Planning Workbench

– Automated / Manual Load Building

– Order / Line / Partial Line Selection

– Order Splitting

– Pack Quantity Override

PO-1 PO-3PO-2

Key Items

TRANSPORTATION

Embedded Rating

Engines

Routing / Route Guides

Delivery Schedules

Freight Apportionment

TL, Rail, Ocean, LTL,

Parcel

Load Planning

Compliance Labeling

Integrated WMS / TMS NO INTERFACES… Print shipping labels with

carrier info/tracking # upon order release (eliminate back end process)

Integrated weight check and manifesting

Labor Planning and Load Planning constraint modeling

Shared customer and order information

Improved sortation and space utilization at shipping dock

Closed loop Freight Charge / Invoice

• Rate shopping• Order consolidation• Load planning

Cartons, weights

Selected orders

Planned loads, tracking #’s

Freight charges, manifest

Weigh

‘Wave’ Process

Pick/Pack

Manifesting

Close LoadClose

Shipment

Shipping Documentatio

n

OutboundOptimization

Routing

Least Cost Carrier

Best Way

Pre-assigned

Route

Manual Routing

Routing Guide

Intermodal Routing

Constraints

Transit Times

Delivery Dates

Item / Carrier

Item / Mode

Carrier / Customer

Mode / Customer

Carrier / Hub

Zone / Hub

Routing Guide

Rate Shop

Multi-Carrier and Mode

Dock Management

Shipping Dock Workflow Controlled…•Shipment Staging•Quality Checks•Pallet Building•Dock Door Assignment•RF Loading•Ship Confirm

Post Freight – Landed Cost – Cost of Goods

•Post freight costs to invoice•Configurable posting to G/L•Freight accrual/expense•Freight revenue (bill to customer)

Freight Reconciliation

•Automate the Freight Bill Match and Pay process

•Electronic Freight Bill Invoice (210) from carriers

•Match Rules with Tolerance

– Match down to Accessorial Charges

– Proof of Delivery prior to Pay

•Payment Rules

– GL Coding

– Freight Accrual and Apportionment

Valid Shipment?

Duplicate?

Cost within Tolerance?

Accessorial Fees Valid?

Delivered on Time?

Key Items

MHE

Pick to Light

Conveyor/Sortation

ASRS

Voice

Carousel

Etc.

MHE – Made to Reduce Travel, Space or User Input

FUNDAMENTALS OF LOGISTICS

SUMMARY

C-Level Executive Value Proposition/Questions

•What if we could reduce your warehouse labor cost (usually one of, if not the single highest cost to do business) by 20%? Would that enable you to do more business with the same staff, or reduce staff to save costs?”

•“How many Physical Inventories do you complete per year and at what cost?” “2 per year, and they cost $20K each

•Equipment that is needed can be utilized longer due to better cube utilization and flow of goods design (less run time = longer life).

•What would it mean to your company to reduce your inventory cost by 1%?”

FUNDAMENTALS OF LOGISTICS

Key Questions Example (Value Mapping)

FUNDAMENTALS OF LOGISTICS

COGS What % of COGS is logistics costs?CFO, CLO, COO, VP Dist.

COGSIs COGS in line with expectations? How does your compare with competitors? CFO, CLO, COO

Logistics

What metrics do you use to measure logistics performance? How does your current performance compare with company goals?

CFO, CLO, COO, VP Dist.

LogisticsWhat metrics do you wish you could track but cannot? Why?

CFO, CLO, COO, VP Dist.

Fill RateWhat is your order fill rate, and how does it compare with company goals?

CFO, CLO, COO, VP Cust. Serv., VP Dist., VP Sales

Fill RateHow do you measure the impact of unfilled orders on revenue?

CFO, CLO, COO, VP Cust. Serv., VP Dist., VP Sales

GrowthCan your logistics capabilities handle all existing and planned channels? If not, why?

CFO, CLO, COO, VP Dist.

On-TimeWhat is your on-time delivery %, and how does it compare with company goals?

VP Cust. Serv., VP Dist., VP of Trans., Director of Dist., Director of Transp.

Inventory

How do your inventory turns and inventory accuracy compare to company goals? What are the reasons for the differences?

CLO, CPP, VP of Distr., Director of Dist.

Inventory

Could safety stocks be lowered with better inventory accuracy (knowing what you have, where it is, especially when needed)?

Chief Logistics Officer, VP of Distribution, Director of Distribution

LaborHow do you track labor productivity? Are your tracking capabilities sufficient?

VP of Distribution, Director of Distribution

Chargebacks

Do you incur chargebacks from customers? What are the primary violations?

VP of Distribution, Director of Distribution

Inv. Accuracy

What is your current inventory accuracy (perpetual and location level)? How does this compare with company goals?

VP of Distribution, Director of Distribution

Inv. Accuracy

How does inaccurate inventory affect your business (warehouse productivity, order fill rate, inventory turns)?

VP Distr., Director of Dist.

Physical Cost

Do you perform an physical inventory? How long does it take and what are the total costs associate with a PI?

Director of Distribution

Trading Partner

Do you have a compliance program with suppliers? How effective is it? CLO, VP of Dist.

Order Accuracy

What is the cost to correct an order filled incorrectly? What makes up those costs?

VP Cust. Serv., VP Dist., VP of Trans., Director of Dist., Director of Transp.

Dynamics as The New Evolution of Systems

•The Power of One

•The Power of Experience Domain Experts

•Beyond ERP

•Beyond Four Walls

FUNDAMENTALS OF LOGISTICS

THANK YOU – QUESTIONS?