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Just as COVID was beginning to emerge as a global threat, a high-tech multinational was able to identify freight trends, switch the way they sourced transportation, and save money. This company saved over $100 million in their last fiscal year! If you have been following news surrounding supply chain disruptions, you know this is not the norm. Most shippers have experienced steeply rising transportation costs because of capacity issues. What this company achieved was remarkable.
This company’s main manufacturing operations are in Asia. The company has four plants across China and Southeast Asia. The company is a big shipper, they have more than half a million shipments of year. The modes of transportation include rail, ocean, truckload, less-than-truckload, and parcel.
There are complex flows of components and raw materials from suppliers to their factories, and from their factories to their main finished goods factory in Southeast Asia. There are also complex flows on the outbound side. Outbound finished good shipments can go direct to customers, flow through more than 10 global warehouses, or even flow through multiple warehouses before reaching the customer.
The Journey to Logistics Excellence
The senior director of transportation at this company explained the journey that the company has been on to improve their transportation capabilities.
The high-tech giant had grown through two significant acquisitions. The acquired companies had used different enterprise and transportation applications. The resulting IT jumble meant that the company could not even run consolidated reports across these three entities. In logistics, they could not get accurate data, data that everyone agreed was true, on their transportation spend. In terms of the staff, there were varying level of logistics maturity across the three companies.
“We needed to start from the ground up,” the executive explained. A common transportation management system (TMS) would allow them to generate reports based on common data. Meanwhile, the supply chain organization created a transportation center of excellence to help with the transition.
IT issues were also experienced by other functions in the company. The company had decided the different entities also needed to be on a common enterprise resource planning solution. The company settled on a cloud solution from Oracle
ORCL
Perhaps not surprisingly, in logistics they ended up selecting the cloud version of Oracle Transportation Management (OTM). The logistics team had begun looking at TMS solutions in 2017. They settled on OTM and then implemented the solution in 2018. OTM was viewed as a functionally rich solution and it was believed that a Cloud version of the solution, a solution they would not customize, would allow them to implement very quickly. Speed to value was a key selling point for OTM.
The transportation division was the first division in the company to implement an Oracle application. Their assumption that the Cloud solution would implement quickly was born out. They brought the first instance up – at their most important manufacturing site – in just six months! Historically, on premise TMS implementations for a big shipper would last 12 months or longer. A rapid succession of sites was then implemented over the next 10 months.
The center of excellence (COE) was a key participant in the implementation and the training of personnel. Once the TMS was in, the COE shifted its focus to identifying best practices and making sure those processes were followed.
OTM is a broad solution. They are using all the modules except for procurement and yard management. OTM is part of the same solution – same database and common master data – as Oracle’s Global Trade Management (GTM) solution. The company is in the process of also implementing GTM.
Get the Foundation in, then Drive Savings
“Before the pandemic,” this director told me, “we saved a few million dollars here and there.” Then the pandemic arrived, and shipping costs began to spike. But like other multinational companies with operations in China, the company was able to sense, before much of the rest of the world, how bad this pandemic could be.
As COVID was beginning to spread out of China, the transportation team began to sense changing patterns surrounding air shipments. By this point, the TMS was in. The foundation was solid.
OTM provides visibility to shipments based on integration with carrier tracking systems. The high-tech manufacturer also had near real-time data on a subset of shipments based on sensors added to about 10% of palletized shipments. These sensors could determine whether shipments were likely to arrive on-time and identify pinch points that served as the basis of continuous improvement projects. There sensors could also detect humidity, moisture, vibration, and other attributes as well. When the company identified that a shipment was very likely damaged, they could ship the customer undamaged goods even before the damaged goods arrived at the customer’s site.
The manufacturer’s data science now had good data to work with. The data science team took data from OTM, tracking data, and combined it with external market data. The external data included flight frequencies in and out of major markets. This data was fed into a data lake. They used Tableau to visualize patterns. Once the data was visualized, it became apparent that flight patterns were changing based on dramatic changes in demand. Transportation costs were rising precipitously. The company sensed an opportunity.
“We went to bid right away,” the director explained. “We went from bid to award in just two weeks. We saved 40% on transportation costs, over $100 million in savings, based on this.” A particular focus of this procurement round was shipments in and out of their main manufacturing plant in Southeast Asia. This plant was a major logistics cost center for the multinational.
Without Oracle Transportation Management as a foundation, this could not have been accomplished. Further, the two-week procurement cycle was also significantly faster because of the automation in the OTM solution.
What’s Next?
The company now wants to integrate the tracking sensor data into the Oracle application backbone by using in IoT solution from Oracle.
This high-tech company also wants to begin to drive savings from global trade management. They began GTM with a focus on restricted party screening, making sure they were not trading with customers and suppliers that governments have on restricted trading lists.
This multinational has also recently completed a pilot with Oracle’s Digital Assistant technology to make compliance information more widely available among the participants in their supply chain operations, while also freeing up the customs and compliance teams to focus on higher value work. The Oracle Digital Assistant can automatically answer questions such as: export compliance status of a sales order; or the export compliances codes associated with a given item; or even the shipment status for a given order (e.g., location, projected ETA, confirmed delivery time). The use of Digital Assistant technology greatly reduces the cost of answering these questions.
The manufacturer also recently started to implement the Customs Management module of Oracle GTM to save both time and money on preparing and filing customs declarations. Time to prepare filings is expected to drop from 3-4 hours per day to minutes via process automation. In addition, by preparing consolidated filings (e.g., one filing per month), they are expecting to pay significantly less in customs brokerage fees.
In the longer term, OTM and GTM will be key pillars in a robust supply chain control tower the company intends to build.
