Dynamic logistics strategy shifts planning from local to global; advanced to adaptive
By Staff -- Manufacturing Business Technology, 6/1/2006 12:00:00 AM
Real-time information sharing is essential for visibility into activities across the supply chain, but what remains largely missing is a more adaptive structure for logistics and transportation management.
According to Arun Rai, Georgia State University professor and coauthor of the white paper, Adaptive Logistics and Transportation, the adaptive concept involves integrated planning and global optimization of transportation, warehousing, production, and fulfillment.
"If you don't recognize how they relate to each other as market dynamics change, you mismanage the interdependencies between the plans," Rai says. "It requires a shift from local to global optimization, and from advanced planning to adaptive planning."
Transportation planning, in particular, has remained an independent silo outside the purview of strategic functions, permitting local optimization of transportation plans based on low costs, but with the possibility of dire consequences for overall performance.
"Many of the objectives of these interdependent functions are in conflict with one another," says Adrian Gonzalez, director at Dedham, Mass.-based ARC Advisory Group. "If you're running lean production in manufacturing and have only an hour or two of inventory on the line, if the truck bringing more inventory doesn't get there on time, the plant shuts down."
Rai and Gonzalez agree that the technology infrastructure necessary to facilitate adaptive logistics and transportation is largely available, though Gonzalez says no single vendor has yet put all the pieces together in one comprehensive solution. According to Rai's schema, adaptive logistics and transportation is comprised of two fundamental pieces: planning and execution, with planning focusing on global optimization of transportation, warehouse, production, and fulfillment planning; and execution, comprised of integrated event management and dynamic exception handling.
Says Gonzalez, "The thing that will facilitate this is service-oriented architecture [SOA], which will enable interoperability and integration of the applications necessary to power this transition."
Both Rai and Gonzalez say the main barrier to adaptive transportation and logistics is not, in fact, technology-based, but organizational.
"The bigger hurdle is in setting the right metrics and rules that can drive the business from a more holistic perspective," Gonzalez says. "To get the lowest total cost and total performance, manufacturing costs may need to go up—that is, running smaller batches with more frequent changeovers. But rising manufacturing costs go against the way people have traditionally thought about managing production."
Increased competition and the need to improve overall performance are the likely tipping points.
"As companies look for continued improvement in costs and financial performance, they will have to move toward a holistic perspective," says Gonzalez. "Early adopters are doing it today, and we'll see it start to emerge publicly in the next couple of years."
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