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RedPrare > Lostcs > Whte Paper
Achevn Measurable Resultsn Lostcs
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2RedPrare > Lostcs > Whte Paper
TABLE OF CONTENTS
2
Eecutve Summar 3
Achevn Measureable Results 5n Lostcs
Unlockn Hdden Lostcs Value 7
Kes to Unlockn Value and Achevn 8Measurable Results n Lostcs
Prncple No. 1: Clearl Lnk Suppl 8Chan Stratees toCorporate Objectves
Prncple No. 2: Quant 9Lostcs Value
Prncple No. 3: Clearl Dene 14
and Measure Epected ResultsPrncple No. 4: Mantan Results- 15Focused Technolo Deploment
Prncple No. 5: Contnuousl 15Audt Results
RedPrare - A Better Wa o Delvern 16Lostcs Results
Summar 17
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ExECUTiVE SUMMARy
in todas envronment, achevn lostcsecellence has become a boardroom level concern
The ap between lostcs cost leaders and
laards s rown. Lostcs perormance leaders
are buldn a sncant advantae over the
competton that leads to substantall better bottom
lne perormance and ncreased shareholder value.
How are lostcs leaders achevn these results?
B unlockn the hdden lostcs value wthn ther
enterprses and across ther broader suppl chans.
Three mportant trends are elevatn the role
o lostcs wthn corporatons, creatn an
envronment where lostcs leaders who are able to
unlock ths hdden value can ecel.
Trend No. 1: Corporate recognition o thehigh cost o logistics.For most companes, the total costs o lostcs
rane rom 7% to 15% o sales, and ths percentae
contnues to rse as a result o rown lostcs
complet, chann order proles, and customer
servce pressures. Ths ncreased cost has arnered
corporate attenton, wth the correspondn
opportuntes to drve out lostcs costs and
contrbute sncant dollars to the bottom lne.
Trend No. 2: Supply chain velocity isincreasing, placing a growing premiumon execution excellence.When Mchael Dell o Dell Computers s asked what
suppl chan manaement s all about, he ves a
smple answer: Speed. Constantl shrnkn order
ccle tmes, the need or aster response to chanes
and eceptons, and real-tme fow o suppl chan
normaton are creatn a reater ocus on suppl
chan eecuton as a prmar source o corporate
success.
Trend No. 3: The growing role o logisticsas a source o customer satisaction andcompany dierentiation.As lobal competton heats up, there s ncreased
ocus on customer-acn ntatves. As the ultmate
touch-pont wth customers, lostcs has become
the prmar source o derentaton and customer
satsacton, drectl mpactn revenue rowth and
market share.
To take advantae o these trends and unlock
the hdden value wthn ther operatons, lostcs
leaders must emplo a methodolo that ocuses
on achevn measurable results. There are ve ke
prncples underln ths results-ocused approach.
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Principle No. 4: Maintain results-ocusedtechnology deployment.Despte best eorts to quant value and dene
epected results, companes oten al to acheve
measurable results because those chared wth
technolo deploment, ncludn vendors,
consultants and compan personnel, are not
aware o or ncented to mantan ths results ocus.
Manaement must ensure that ths results ocus
s mantaned even when project schedules and
operatonal pressures ntervene.
Principle No. 5: Continuously Audit Results.Manaement must contnuousl audt results
throuhout technolo deploment and onon
use, takn correctve acton whenever the process
stras outsde o acceptable bounds. Scorecardn
and analss technolo are essental to tmel,
eectve eecuton o ths contnuous process.
B appln these ve prncples and the requste
technolo, companes can unlock the hdden value
o lostcs wthn ther enterprses and across ther
etended suppl chans to acheve measurable
results and become ndustr leaders.
Principle No. 1: Clearly link supply chainstrategies to corporate objectives.Too man companes have not lnked ther suppl
chan stratees to overall corporate objectves
throuh quantable metrcs, thereb lmtn ther
ablt to contrbute to corporate oal attanment or
arner reconton or the mportant role o lostcs
n compan success.
Principle No. 2: Quantiy logistics valueMan companes have not quanted the end-to-
end value o lostcs across ther oranzatonsdue to lack o epertse n value analss, tme
consderatons and the barrers o oranzatonal
slos. However wthout ths step, achevn
measurable results to support corporate objectves
s nearl mpossble. The ood news s that the
sources o hdden lostcs value are abundant.
Principle No. 3: Clearly defne andmeasure expected results.Lostcs scorecardn and perormance
measurement are emern as real kes to
contnuous mprovement and suppl chan
leadershp. Once lostcs value s quanted,
specc operatonal results must be dened and
approprate measurement processes / technolo
must be put n place to ensure oal attanment.
ExECUTiVE SUMMARy
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ACHiEViNg MEASUREABLE RESULTS iN LOgiSTiCS
These are ectn tmes or lostcs proessonals.A varet o market and envronmental actors are
elevatn the role o lostcs to one o boardroom
level ocus n most oranzatons.
Whats chann? There are three mportant trends
that are elevatn the role o lostcs n companes
around the lobe.
Trend No. 1: Corporate recognition o the highcost o logistics, and corresponding opportunitiesto drive out logistics costs and contribute signifcant
dollars to the bottom line.
For most manuacturn, dstrbuton and retaln
companes, lostcs represents a sncant porton
o total overhead costs. A 1998 Councl o Lostcs
Manaement stud ound that lostcs-related
epenses rane rom 7-15 percent o compan
revenue, and up to 45 percent o total Sales,
general and Admnstratve epense.
As noted n a presentaton at the 1998 Councl o
Lostcs Manaement conerence, The cost o
lostcs s usuall much larer than ether uppermanaement or operatons people epect. When
results are presented, the rst reacton s skeptcsm,
the second reacton s wonder and revew, the thrd
reacton s concern and nterest.
Metric Typical Ranges
Logistics Cost as % o Sales 7-16%
Logistics Cost as % o Total 10-35%Corporate Value Added
Logistics Cost as % 20-45%o SG&A Costs
Recent research also ndcates that a varet oenvronmental actors are causn lostcs costs to
rse substantall n recent ears, ater a decade o
stablt. in ts annual benchmark stud o lostcs
costs across hundreds o U.S. companes, consultn
rm Establsh / Herbert W. Davs reported that
lostcs costs rose n 2001 or the thrd straht
ear as a percent o sales, now averan nearl 8.5
percent o compan sales. These ures actuall
underestmate total lostcs costs, snce the
ocus on outbound / ulllment lostcs and do
not nclude man costs related to nbound andmanuacturn lostcs.
RedPrare > Lostcs > Whte Paper
Impact o Logistics on the Bottom Line
Source: CLM 1998
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ACHiEViNg MEASUREABLE RESULTS iN LOgiSTiCS
Trend No. 2: Increasing supply chain velocity, whichplaces a growing premium on execution excellence.
As Mchael Dell has commented, suppl chan
ecellence s all about speed. Constantl shrnkn
order ccle tmes. Faster response to chanes
and eceptons. Real-tme fow o suppl chan
normaton.
The result? A reater ocus on suppl chan
eecuton and lostcs ecellence, where companes
operate ther suppl chans n real tme.
Market statstcs bear out ths trend. AMR Research
recentl calculated the corporate nvestment n
suppl chan eecuton / lostcs technolo ar
eceeded nvestments n suppl chan plannn
applcatons, and eecuton / lostcs nvestments
were rown at nearl twce the rate o plannn.1
Trend No. 3: The growing role o logistics as a sourceo customer satisaction and company dierentiation.
Competton, both natonal and lobal, s erce,
puttn pressure on corporate revenues andmarns. in ths challenn envronment, lostcs
has ncreasnl become one o the prmar sources
o derentaton and value-add n the ace o
ncreasnl commodtzed core products.
As AMR Research has recentl noted n ts report
Lostcs Surve Results: Customer-Focused intatves
Receve Top Prort, increased customer ocus s
seen as the most mportant ssue n mprovn suppl
chan perormance, whch ponts to more demandn
and comple customer requrements and the need tomeet them or sales sake.
Competn n ths envronment requres use o
the latest nterated lostcs tools, the ablt to
personalze lostcs servces, mplementaton o
ndustr-specc best practces, and understandn
the hdden sources o value locked n most lostcs
oranzatons toda.
> Dstrbuton Complet
> Chann Order Proles
> Customer Servce
> Requrements
Logistics Costs Continue To Rise
Source: Establish/Herbert W. Davis
Cost as Percent o Sales
9.0
8.5
8.0
7.5
7.0
6.5
1997 1998 1999 2000 2001
1 AMR Research: The Supply Chain Management Applications Report 2001-2006; June 2002
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UNLOCKiNg HiDDEN LOgiSTiCS VALUE
The realt s that most md-szed or larercompanes have mllons o dollars n hdden value
n ther lostcs operatons, whch, unlocked, wll
drve mproved protablt, ncreased shareholder
value and rowth n revenue and market share.
Smaller oranzatons ma have smlar or even
reater opportuntes n percentae terms.
Are there opportunities or unlocking this typeo hidden value in your companys logisticsorganization? Consider the ollowing possiblescenarios in your organization:
Logistics and fulllment costs continue to rise on aper unt or percent o sales bass.
Your company is stuck on older generationlostcs or WMS sotware that lmts feblt andproductvt, but ou are unsure how to cost justthe mplementaton o new sstems.
You feel certain logistics productivity andthrouhput can be enhanced, but dontknow eactl where the ke opportuntes ormprovement are, what levels o mprovedoperatn perormance are possble, and how oucompare wth our ndustr peers n terms o bestpractce.
You would like to better understand the impactlostcs servces and qualt have on customerretenton and market share rowth, but lack amechansm or perormn ths analss.
You know that solutions exist that can signicantlyreduce our transportaton budet, but areuncertan as to the rane o mprovement thats lkel, the cost and complet nvolved nmplementn a soluton, or the nternal processchanes that wll be requred.
You would like to move labor productivity beyondts current plateau, but do not see a clear path ordon so and how best to nsttute the requredoranzatonal chane.
You feel condent better visibility of inventory anddemand across our network can reduce nventorlevels whle mprovn customer servce.
Rapid growth is outstripping the ability of yourlostcs operaton to mantan cost, qualt andthrouhput, and ou need help to determnewhat solutons are most approprate, how to
phase mprovement plans, and how to makethese mprovements smoothl n the ace o rapdoperatonal chane.
Your logistics operations are well managed butoperate n a somewhat sloed ashon, and oubeleve there could be operatonal and cost savnmprovements rom reater process nteratonacross dstrbuton, transportaton, labormanaement and other lostcs domans.
All o these scenaros and man more are eamples
o hdden sources o lostcs value. Uncovern
the sources o ths value and developn a plan ormamzn lostcs perormance at the aclt,
enterprse and suppl chan levels wll not onl
mprove lostcs operatons, t wll help uel overall
corporate ecellence as never beore.
As gene Tndall notes n hs book Supercharn
Suppl Chans, More and more the smart mone
wll fow to the stocks o companes that are
eceptonall well operated. Ths s wh operatonal
ecellencewll become more and more respected
as serous drvers o shareholder value.
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KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS
Vrtuall ever compan has sncant untapped
value wthn ts lostcs operatons. However, ar too
man companes have aled to acheve measurable
results rom suppl chan technolo nvestments.
The ood news s that unlockn ths value and
ensurn the results companes epect rom ther
suppl chan nvestments s easl achevable. How?
B takn a better approach to lostcs mprovement
and technolo deploment.
There is a Better WayB Understandn Lostcs Value Drvers and
incorporatn a Results-Focused Approach
to Technolo Deploment, Companes Can
Consstentl Unlock Lostcs Value
There are ve ke prncples underln the results-
ocused approach.
Principle No. 1: Clearly Link Supply ChainStrategies to Corporate Objectives
Too man companes do not clearl lnk thecorporatons overall oals and objectves to the
specc suppl chan stratees needed to support
them. John Lanle, a lostcs proessor at geora
Tech and one o the countrs most well known suppl
chan researchers, recentl commented that ths was
the number one ssue acn the lostcs proesson.2
The loc s ver smple: te lostcs stratees and
ntatves to specc corporate objectves, then
dene the operatonal metrcs that need to be
mproved to acheve both suppl chan oals and
support these hh-level objectves.
As smple as ths loc ma seem, t s surprsn
how ew companes toda reall do a ood job o
t. Bud LeLonde, proessor emertus at The Oho
State Unverst and one o the ndustrs most
well-respected authortes, recentl commented
on how surprsed he was at the number o lostcs
proessonals that do not even know ther compans
hh level stratees and oals.3
At the start o ever ear the lostcs oranzaton
should produce a document, wdel dstrbuted,
that ormalzes ths lnkae between corporate and
lostcs stratees. An eample structure mht look
lke the ollown:
2 John Langley, presentation at Food and Beverage Logistics Conerence, Chicago, March 26, 20023 Bernard LeLond, RedPrairie Web Seminar High Perormance Logistics: Trends, Issues, Opportunities,
June 27, 2002
Ths plan would obvousl be amended as needed throuhout the ear corporate prortes chane, and to
track and report proress aanst the mprovement tarets.
Corporate Strategy Logistics Strategies Operation Metric(s)
Business Strategy 1 Supporting Logistics Strategy 1 Quantifable Metric(s)
Supporting Logistics Strategy 2 Quantifable Metric(s)
Business Strategy 2 Supporting Logistics Strategy 3 Quantifable Metric(s)
Supporting Logistics Strategy 4 Quantifable Metric(s)
Business Strategy 3 Supporting Logistics Strategy 5 Quantifable Metric(s)
Supporting Logistics Strategy 6 Quantifable Metric(s)
More as required
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mportant to the CFO. Even those companes thatdo possess ths epertse requentl lack the tmeresources necessar to conduct ths analss andmove t orward.
High cost and time of external consultingstudes: Man tradtonal consultn companesoer servces that can help a compan betterunderstand the opportuntes or lostcsmprovement and value creaton. However, theseprojects tend to be lon and epensve. Whleths ma be an approprate route to take n man
crcumstances, companes are oten lookn or aaster, less epensve analss that quckl zeroes non the ke opportuntes or process mprovementand value creaton, n combnaton wth the costjustcaton or sstems requred to support thesechanes.
A need ests or a process and methodolo that
provdes the epertse and eperence o tradtonal
consultn, but delvern ths detaled nsht nto
the opportuntes or unlockn lostcs value
wthn much thter cost and tme constrants. Ths
process must be capable o artculatn the process
chane and correspondn value to the lostcs
oranzaton, and provde the analss n a manner
consstent wth the wa CFOs and other corporate
eecutves make nvestment decsons.
Consder one eample. Man companes realze
appromatel one dollar n prot or ever ten
dollars n sales. in terms o bottom lne mpact,
thereore, realzn $1 mllon n value throuh
lostcs cost savns s equvalent to ncreasn sales
b $10 mllon.
Lostcs s a hhl leveraed uncton or value
creaton. Even small mprovements n lostcs
processes can drve major ncreases n revenue and
prots.
Recentl, a RedPrare customer n the
consumer oods ndustr ormall lnked ts
lostcsperormance to corporate objectves.
it turned out that three o the corporatons top
ve stratees had sncant lostcs mplcatons.
One eample was:
Corporate Strate: Become the preerred
vendor to retal n the cateor
Lostcs Strate: Reduce order ccle tmes
Metrc: Cut order ccle tme n hal, rom
48 to 24 hours, or 75% o shpments.
Lostcs oranzatons that are able to lnk ther
stratees and perormance to corporate objectves
wll clearl acheve more nternal nfuence and obtan
better undn and senor manaement support
or ther ntatves, whle helpn the corporaton
acheve ts oals.
Principle No. 2: Quantiy Logistics ValueCompanes must do a better job quantn the
value o proposed lostcs process chanes and
technolo nvestments. Man companes do a poor
or medocre job o quantn ths value, and a
worse job o results measurement to determne
the epected value was actuall attaned.
There are two prmar obstacles to eectvel
quantn lostcs value rom technolo
nvestments:
Lack of experience / expertise in value analysis:A compans nternal sta ma have lmtedeposure to ndustr-wde best practces. itma also lack eperence translatn potentaloperatonal process chane nto a comprehensvevalue analss and cost justcaton. Lostcsproessonals are oten uncomortable dscussnthe value o lostcs or usn nancal concepts
KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS
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Sources o Logistics ValueLostcs value can be ound n both tradtonal sources,
such as operatn cost reducton, reductons n workn
captal requrements, and mproved return on assets,
as well as n new emern sources such as ncreased
opportuntes or top lne rowth, more feblt and
ncreased suppl chan veloct. These sources can
be created across several operatonal areas, ncludn
data center operatons, transportaton manaement,
productvt manaement, lobal suppl chan vsblt
and lostcs nteraton. The ollow sectons descrbe
how these sources o lostcs value can be acheved.
Traditional Sources o Logistics ValueOperatn Cost Reducton: Ths has been the most
common area o lostcs value analss and resultn
chanes to lostcs processes and sstems. Operatn
cost reducton has been the prmar drver o
transportaton and warehouse manaement sstem
mplementatons and other lostcs technolo
deploments.
The most common sources o value relative to costreduction are as ollows:
Transportaton ependtures: The quantable value
opportunt vares sncantl dependn on the prole
o a compans transportaton requrements, but man
companes have the potental to reduce total reht blls
between 10-25 percent, oten havn an mpact o mllons
o dollars on the bottom lne.
Dstrbuton / ulllment labor costs: Most companes
have a sncant untapped opportunt or decreasn
drect lostcs labor costs n multple areas o ulllment
even those that have alread mplemented warehouse
manaement (WMS) technolo. Newer technoloes andbest practce are enabln reater ecenc ans than
were possble n the past.
Admnstratve costs: Ths apples not onl to
admnstratve costs drectl wthn dstrbuton centers,
but also costs assocated wth customer servce,
epedtn, and other more centralzed tasks that are
mpacted b lostcs sstems.
inventor carrn costs: Epenses assocated wth ecess
or uncontrolled nventores (nsurance, shrnkae, damae,
etc.) can be sncantl reduced and have a drect mpact
on DC costs and corporate protablt.
Total network epense: improved ulllment operatons
and ncreased throuhput can oten reduce the number
o dstrbuton centers and assocated ed and varable
operatn costs. improved space utlzaton and lower
nventor levels can also reduce need or outsde storae.
Workn Captal Reducton: Reducn a compans
workn captal requrements can have a sncant
mpact on nancal perormance and shareholder value.
Dell Computer has aned ame (and stock market returns)
b vrtue o havn neatve workn captal requrements,
as ts rapd nventor turns and ablt to et pad b
customers aster than t pas supplers upends tradtonal
notons o workn captal manaement.
Workn captal reducton should be o prme nterest to
corporatons, as t has a drect lnk to shareholder value.
Lostcs can aect workn captal n multple was:
increased nventor turns
Reducn saet stocks and network nventorlevels
Reducn recevables throuh mproved orderaccurac and normaton completeness (e..,the perect order), whch wll reduce customerdscrepances and accelerate nvoce paments
improved ccle tmes, whch ncrease nventorturns and accelerate the cash-to-cash ccle. NotesRchard Thompson o Cap gemn Ernst & youns
suppl chan practce: i ou can cut the cashccle down, there are mllons o dollars there.
KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS
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Emerging Sources o ValueRevenue and Market Share growth: Whle there has
alwas been tact reconton that lostcs mpacts
customer satsacton and, thereore, top lne
rowth, t has been dcult to quant and oten s
dsmssed as a sot benet b upper manaement.
The ood news or lostcs proessonals s that the
role o lostcs n drvn rowth and market share
s ncreasnl understood and accepted, and that
technques or quantn ths mpact are bendeveloped.
Consder a leadn consumer oods compan, whch
n the past had ocused ts lostcs measurement on
cost and such metrcs as number o tmes a pallet
s touched. The compan s currentl underon
a sncant ntatve to drve the ecenc,
responsveness and satsacton o ts dstrbuton
network, wth the oal o drvn revenue rowth
throuh reater penetraton o local markets.
To accomplsh these oals, new metrcs, such asperect order percentae and total ccle tmes,
are becomn the ke perormance ndcators, as
manaement drves process re-enneern to
support revenue oals not cost reducton.
The ncreasnl short leccle o man products also
contrbutes to the ablt o lostcs to drve revenue
rowth. Shorter leccles ncrease the mperatve or
successul product launch.
The tme to volume o man products s ben
aressvel accelerated. Lostcs capabltes are
crtcal or supportn new product ntroductons that
can meet market demand, whch are ncreasnl n
hue volumes ver earl n the release ccle.
improved Return on Assets: Return on Assets (ROA),
or prot dvded b ed asset value, s one o the
prmar corporate metrcs tareted or mprovement
as a result o suppl chan manaement ntatves.
Companes oten have tens or even hundreds o
mllons o dollars ted up n ther lostcs sstems,
ncludn dstrbuton centers, materal handln
equpment, and transportaton feets. The captal
requred to acqure these assets comes rom
hareholders, who epect a avorable return rom thecompans nvestments.
Lostcs can drectl mprove the compans ROA.
increased dstrbuton ecenc and throuhput
can reduce requrements or captal or phscal
acltes and equpment, lowern the asset
base, whle ncreasn the prot rom dstrbuton
center operatons. Thus, both the numerator and
denomnator o the ROA rato are postvel mpacted.
in man cases, mproved lostcs sstems can
reduce or elmnate the need or captal ntensve
materal handln equpment whle achevn smlar
ecenc benets. Prvate feets can be reduced va
mproved scheduln and manaement.
Man ndustres, such as consumer oods and
ood and beverae, are underon sncant
consoldaton va merers and acqustons. Ths has
oten resulted n sub-optmal dstrbuton networks
that reduce ROA. Lostcs can capture value
b ratonalzn these networks and mamzn
throuhput across busness unts wth ewer phscal
dstrbuton centers.
KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS
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ke customers as an mportant element o overall
corporate strate.
Functional Keys to Creating Logistics ValueThe underln sources o lostcs value must be
mapped aanst the unctonal or sstem vehcles
that can delver ths value. These ke unctonal areas
are as ollows:
Dstrbuton Center Operatons: Man companes,
even those that have alread mplemented
warehouse manaement sstems, have sncant
hdden value wthn ther dstrbuton center
operatons. Common sources nclude opportuntes
to adopt ndustr best practces, mprove labor
productvt throuh enhanced task manaement,
an addtonal ecences throuh newer
technoloes such pck ace slottn and ard
manaement, and man others.
Emern areas such as reverse lostcs are also
creatn new sources o value creaton rom dstrbuton
operatons. Stratees such as postponement and the
rowth n value-added servces
n the dstrbuton supports revenue and market
share rowth b enabln specalzed lostcs
servce bundles or specc customers or markets.
Transportaton Manaement: Man companes have
lostcs value hdden amon some or all o these
transportaton-related sources:
Lack o enterprse-wde vew o transportaton requrements
Lack o optmzaton n mode and carrer selecton
inecent, labor-ntensve eecuton processes
improved transportaton manaement oten provdes
some o the lowest hann rut or lostcs value
creaton. Transportaton, servn as the lue that lnks
man suppl chan actvtes, s recevn ncreased
corporate attenton and mportance.
Fleblt: The need or feblt and alt n
lostcs oranzatons has never been reater. As
Dr. James A. Tompkns, presdent o the consultn
rm Tompkns Assocates, notes n hs recent book
No Boundares: Toleratn chane s not enouh
and manan chane s not possble. The power o
chane must be harnessed.
Oranzatons that can quckl respond to chann
lostcs requrements, whether the are drven
b eternal events (e.., a merer or acquston),nternal process mprovements, or new customer
requrements, provde real value. The speed at
whch the lostcs oranzaton and ts supportn
busness applcatons can mplement new stratees
and process mprovements delvers benets
sooner, havn a measurable mpact on the bottom
lne. Oranzatons that can proactvel work
wth customers to meet new requrements and
snchronze lostcs operatons wll drve down
total suppl chan costs, ncrease revenue, and an
market share.
Veloct: Suppl chan and lostcs ecellence s
ncreasnl dened b process veloct. Ths s
related to feblt (speed o process chane) but
also eecuton ccle tmes.
As Dr. Stephen Tmme, presdent o FnLstcs , has
wrtten, increased speed creates a compettve
advantae, provdes the ablt to oer products/
servces at lower prot marns, [and] ncreases
returns to shareholders.
CEOs understand the value o mproved veloct. A
recent surve descrbed n The Journal o Busness
Lostcs ound that delver speed, or the
ablt to reduce the tme between order takn and
customer delver to as close to zero as possble,
was one o the ke values CEOs envsoned rom
ther lostcs oranzatons. in the consumer oods
ndustr, or eample, man companes are launchn
ntatves to reach one-da ulllment ccle tmes or
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Achevn real-tme lobal vsblt s a powerul value
creator that can reduce nventor (workn captal),
decrease eecuton costs (operatn epense), and
ncreasn the level o responsveness to customerorder ulllment needs (revenue rowth). it also
supports network feblt and suppl chan veloct.
interated Lostcs: Even man well-manaed
lostcs oranzatons operate n unctonal sloes,
wth such areas as dstrbuton, transportaton and
nventor manaement havn lttle drect process
or sstem lnkaes. Sncant value can be created
throuh horzontal process nteraton across
lostcs eecuton operatons, startn wth the
enterprse and ultmatel nteratn lostcs fows
across the suppl chan.
For eample, transportaton plannn and eecuton
must be more thtl nterated wth dstrbuton to
mamze ecenc and mnmze cost. Load plans
should be snchronzed wth pck wave plannn to
ensure optmal sequencn and mnmal product
handln. Transportaton and warehouse sstems
should enae n electronc dalos to neotate
costs, resources and constrants to develop optmal
plans that span both unctons.
Transportaton manaement prmarl drves epense
reducton, but ncreasnl mpacts top lne rowth
as well, or eample, throuh enabln snchronzed
lostcs operatons between tradn partners and
provdn delver normaton to customers.
Productvt Manaement: Most companes
have sncant opportuntes to ncrease the
productvt o labor and other resources (such as
materal handln equpment) above and beond
the mprovements that can be acheved throuh
warehouse manaement sstem technolo.
Companes enerall operate at 60-75 percent o
ther true lostcs labor productvt potental.
Advanced productvt manaement provdes
preerred methods and dscrete standards or
perormn lostcs operatons combned wth
robust, real-tme labor reportn sstems wth labor
plannn and montorn capabltes to substantall
reduce labor costs and ncrease throuhput.
Suppl Chan Vsblt and Real-tme Control: intodas hh veloct lostcs envronment, end-
to-end vsblt to nventor, orders and shpments
across the suppl chan s emern as an essental
capablt to reduce network-wde nventor levels,
mamze customer satsacton, and respond
dnamcall to events that occur durn the
eecuton process.
However, the tradtonal ocus o warehouse
manaement sstems has been lmted to nventor
wthn the our walls o a snle dstrbuton center.
Hher level, areate nventor normatonhas oten been let to ERP or other nventor
manaement sstems. But, the level o suppl chan
vsblt acheved throuh ERP has oten proved
nadequate to meet a compans suppl chan needs,
due to the wa ERP has been deploed, the level o
normaton detal, and the nablt o ERP to easl
nterate wth other sstems. Thereore, lostcs
sstems must provde ther own suppl chan vsblt
n order to enable real-tme control over lostcs
processes and eecuton.
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30% to 60%
Shipment Optimization
1% to 5%
Continuous Moves
5% to 15%
Carrier Management
Process Improvement / Administrative Cost Reduction
5% to 30%
Improved Transportation Management Can ProvideSignifcant Cost Savings
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interated metrc sstems also create value throuhthe ablt to provde near-real tme vsblt toke lostcs perormance ndcators across theenterprse. Ths access to metrcs and perormanceresults serves to ocus lostcs proessonalsn multple unctonal areas and domans on aconsstent set o oals and objectves. it also enablesmore tmel response to problems.
The ollown table summarzes the mpact thatderent unctonal domans and processes have onthe sources o lostcs value.
Value s created when ntellent workfowdnamcall trers process nteraton betweenlostcs domans based on actual eecuton events.For eample, late arrval o an nbound truck maresult n a new transportaton plan, whch thenalerts DC operatons to adjust to the new outboundschedule, and ma trer proactve web-basedalerts to carrers and customers that there has beena chane n the ulllment plan.
KEyS TO UNLOCKiNg VALUE AND ACHiEViNg MEASURABLERESULTS iN LOgiSTiCS
RedPrare > Lostcs > Whte Paper
Principle No. 3: Clearly Defne and MeasureExpected ResultsLostcs scorecardn and perormancemeasurement s emern as one o the real kes
to hh perormance suppl chans. Ths s true onan on-on bass, but s essental when companesembark on new lostcs technolo ntatves.
Ater lostcs value has been quanted relatve tothe proposed technolo nvestment, t s crtcalthat ths potental then be translated nto the speccoperatonal metrcs that must be acheved to drveepected results. Ths step s oten nored ater thental value assessment, busness case presentaton,and corporate approval / undn or the project,makn t mpossble to evaluate the success oralure o the ntatve.
A smple model o what ths result denton - ted tovalue quantcaton - should look lke s as ollows:
Ths normaton would be determned prorto launchn the project, and would nclude allnecessar mprovement areas and metrcs to supportthe oals and cost justcaton o the project.
it s mportant to note that oten the oals ormprovements ma need to be sequenced, asspecc process chanes or sotware capabltesare phased n. in eneral, as man hh proletechnolo alures can attest, t s better tosequence major unctonal or process elements,rather than deplon technolo n a b ban.
Functional Keys to Sources o Logistics Value
OperatingExpense Reduction
Working CapitalReduction
Improved Returnon Assets
Top LineGrowth
Flexibility Velocity
DC Operations
Transportation Management
Productivity Management
Global Visibility Management
Integrated Logistics
Functional Keys Traditional Value Sources Emerging Value Sources
Highest value impact Low value impactMedium value impact
Functonal Current Epected Tmerame Value romArea Perm/Metrc Perm/Metrc improvement
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Or s t pavn over a cow path, wth lttle mpact on
epected results rom the project?
B mantann a laser ocus b all partes on
epected operatonal results throuhout the
mplementaton ccle, companes wll reatl
mprove ther chances o delvern the value ntall
promsed.
Principle No. 5: Continuously Audit Resultsit s essental that companes measure the results
ben acheved rom the lostcs mprovementproject at reular ntervals and perorm root cause
analss epected results are not ben acheved.
Whle the need or ths tpe o approach to a major
technolo mplementaton seems obvous, ew
companes actuall do a rorous job o measurn
the actual results o projects and takn the
approprate correctve acton results are not
meetn epectatons.
Falure to meet operatonal objectves or a project
can usuall be traced to one or more o the ollownactors:
Falure to actuall ollow the process as desneddurn earler phases o the project
A poorl desned process
Sotware that has not been conured appropratelto meet the process and project oals
The project methodolo should nclude pre-
scheduled audts o actual results and revew o the
process and sotware conuraton. Ths reatlncreases the lkelhood that an problems wll be
cauht earl n the o-lve ccle and that approprate
response can be taken to et the results back on track.
B appln these ve prncples and the requste
technolo, companes can unlock the hdden value
o lostcs wthn ther enterprses and across ther
etended suppl chans to acheve measurable
results and become ndustr leaders.
To allow mmedate analss and reacton,
operatonal metrcs should be captured n one
o todas robust, on-lne lostcs scorecardn
sstems. Ths creates an end-to-end process n
whch operatonal metrcs can be vsuall measured
aanst the epected results dened or the project,
provdn eas access or eecutves and ke
unctonal team members.
Principle No. 4: Maintain Results-Focused
Technology DeploymentDespte ther best eorts to quant value anddene operatonal metrcs, companes oten al to
acheve measurable results because those chared
wth technolo deploment, ncludn vendors,
consultants and compan personnel, are not aware
o or ncented to mantan ths results ocus. Ths
happens or several reasons:
Lack o contnut rom the vendors sales andconsultn teams to ts mplementaton personnel
Project pressure, whch oten results n a swtchrom operatonal results to project schedule andcost as the prmar objectves
Turnover o the project to unctonal manaersless normed or ocused on hh level resultsepectatons
These are understandable actors, but ones that
companes can not allow to detract ocus rom the
dened results epected rom the projects undertakn.
implementaton teams - both nternal to the
compan and rom the vendor and consultants -must ben ther work wth a clear roundn on the
epected results dened as the bass or the project.
These results epectatons must be kept ront and
center durn the course o the mplementaton,
and should be the lter throuh whch all mportant
decsons are made.
For eample, potental modcatons to the base
sotware must be vewed wthn the contet o
epected results. Does the proposed modcaton
clearl mpact one o the mportant project metrcs?
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The RedPrairie Logistics OperationsAnalysisKe to the RedPrare Approach s our Lostcs
Operatons Analss (LOA), a thtl ocused
assessment o specc aspects o a compans
current lostcs process, perormance, technolo
and objectves. Ths assessment s then mapped
aanst current ndustr best practces, opportuntes
or process mprovement, value drvers, sstem
mplementaton costs, and economc justcaton.
The result s an objectve benchmark o current
lostcs perormance aanst obtanable levels oecellence, and a clear roadmap o how a compan
can mrate rom current processes and operatn
results to the desred uture state. The LOA provdes
companes wth the normaton the need to make
normed, nancall sound decsons on lostcs
process mprovement and automaton.
RedPrare emplos the ve ke prncples o theresults-ocused methodolo (the RedPrare
Approach) and the ndustrs most comprehensve
sute o end-to-end lostcs solutons to ensure
customers acheve measurable results n lostcs.
RedPrare customers acheve lowest cost lostcs,
thrve n the hh veloct suppl chan, and
derentate themselves rom ther competton,
leadn to ncreased revenue, market share and
customer satsacton.
How do we do this?
The Logistics Industrys MostComprehensive Product LineRedPrare delvers the ndustrs most
comprehensve sute o nterated lostcs solutons,
enabln our customers to drve out costs across the
entre suppl chan. RedPrare radcall ncreases
lostcs perormance end-to-end, across the ke
lostcs fows that run throuh the suppl chan
processes o Source, Make and Delver, wth a
powerul set o capabltes that can be deploed
stand alone to solve specc problems, or toetherto solve comple challenes and acheve the benets
o nterated lostcs operatons.
The RedPrairie ApproachToo man solutons provders ocus on selln
sotware, wth lttle real attenton to customer results
achevement once the purchase decson has been
made. RedPrare s a derent knd o compan
because we have totall alned our compans
culture, processes and products to ensure ou
acheve the results ou epect rom our solutons.
The RedPrare Approach provdes laser ocus on
ensurn our customers realze epected value rom
our solutons. Throuhout the process, we work wth
our customers to quant value, dene results to be
acheved (we call them RPMs - Red Prare Metrcs),
desn, conure and mplement solutons that wll
acheve those results, and measure our success. it
s a undamentall derent approach than that o
almost ever other sotware provder.
REDPRAiRiE - A BETTER WAy OF DELiVERiNg LOgiSTiCS RESULTS
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SUMMARy
RedPrare can help delver ths value wth a breadtho solutons and a results-ocused approach
undamentall derent than an other sotware
vendor n the market. We help ou solve our
lostcs problems toda, and ensure ou receve
the results ou epect rom our solutons.
For most companes, lostcs costs are hh,rsn and reater than manaement currentl
understands. Ths provdes a rch opportunt to
drve out suppl chan costs and contrbute to the
bottom lne.
However, too man companes have aled to acheve
the results the epect rom technolo nvestments.
B clearl lnkn suppl chan stratees and
operatonal metrcs to overall corporate stratees,
and mantann a laser ocus on clearl dened
results throuhout the selecton, desn and
mplementaton o sotware solutons, results-
ocused companes acheve the value the epect
rom new technolo.
About RedPrareRedPrare delvers productvt solutons to help companes around the world n three cateoresnventor, transportaton and
workorce. RedPrare provdes these solutons to manuacturers, dstrbutors and retalers lookn to reduce cost, ncrease sales and
create compettve advantae.
Wth over 20 lobal oces provdn servces to over 40,000 stes n 50 countres, companes trust RedPrare nventor, workorce and
transportaton solutons to delver an mmedate ncrease n productvtwth the feblt to adapt as busness needs chane.
At RedPrare, we understand todas operatonal demands and were commtted to delvern solutons that work. Were commtted
to delvern solutons or the real world.
1.877.733.7724 [email protected] RedPrairie.com
RedPrare Corporaton has made ever eort to ensure the accurac o the normaton ncluded n ths document. Ths document s subject to chane wthout notce. The normaton contaned n ths document
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