Transportation Tender for Last Mile Delivery
  • cost & risk reduction by adjusting the pricing model
  • elimination of non-value-added substructures

Contact

LinkedinXing
Florian Dederichs

Florian Dederichs

Founder & Partner

M.+49 160 93882573​

E.florian.dederichs@ocmconsulting.de

W.www.ocmconsulting.de​

eSCM & Supply Chain Analytics

 

eSCM, also referred to as digital supply chain management, combines material, product, person, and information flows across different logistics channels through integration of existing or newly installed IT systems. Especially transport management systems and warehouse management systems are well-known in digital supply chains. Leveraging also further concepts such as supply chain analytics, data-fueled process automation, artificial intelligence, and robotics, the digital supply chain is one pillar of the much-discussed Industry 4.0 and will be key to the success of the future supply chain. In this section, we discuss questions such as:

  • What is eSCM and what are the benefits?
  • When does eSCM make sense?
  • What is the right approach to eSCM?
  • How do you know you’re on the right track?

After answering these questions, we discuss potential challenges and their solutions and provide an outlook on how you can contribute to the future success of your company through eSCM and supply chain analytics.

 


 

What is eSCM and what are the benefits?

 

The traditional supply chain acts in a linear manner, with one function communicating demands and output to the adjacent function. At a simplified level, sales forecasts are made and communicated down the chain, raw materials are ordered, the forecast quantities are manufactured, and the finished products are prepared for delivery to the customer. Ideally, the forecasts match the demand and there are no disruptive events so waste is small. Often, however, a lack of transparency between process steps, slow reaction to unforeseen circumstances, and inefficient communication creates bottlenecks or under-supply, resulting in wastage and disappointed customers.

eSCM acts as an ‘integrated ecosystem’. The linear view of the supply chain is exchanged for one which is fully integrated and has central and immediate transparency. A proven means of this integration is the use of supply chain analytics, such as a “Supply Chain Cockpit” or “digital control tower”. This is a platform that connects the systems operating across the supply chain (e.g. warehouse management system, transport management system, ERP, ..), analysing the generated data and illustrating the findings to provide a better overview and basis for data-driven decisions. The supply chain becomes agile and responsive.

For example, operatives in production can collaborate with their colleagues in logistics, ensuring that appropriate raw material order quantities are placed, while adverse shipping conditions are communicated efficiently, enabling timely and effective mitigating actions. Waste is reduced and the customer’s demands are met.

There is a veritable sea of supply chain digitalisation initiatives a company can undertake, from sensor technologies and robotics in warehouses to AI forecasting algorithms. To ensure your eSCM initiatives are impactful and appropriate, understanding your needs and tailoring your efforts to your specific situation is essential.

 

 

When does eSCM make sense?

 

Before undertaking any eSCM initiative, a company should first be aware of exactly what it wants to achieve through the digitalisation of its supply chain management and which areas will be affected. Many companies claim to use supply chain analytics in entire corporate divisions – but what does that actually mean?

eSCM can be narrowed down to 3 essential objectives:

 

Main goals of eSCM
Goals of eSCM

 

The use of integrated IT systems (e.g. warehouse management system, transport management system, ERP, ..) is a fundamental prerequisite for acting faster, more flexibly, and more cost-effectively in the supply chain and in logistics. Creating data, linking data, and making data transparent through digitalisation can give a decisive competitive advantage, but only if companies have the right resources, methods, and tools to process this data. These must be in place prior to any digitalisation initiatives or put in place as part of the digitalisation effort.

 

 

What is the right approach to eSCM?

 

After the objectives have been evaluated and the most relevant identified, the actual initiatives that seek to achieve these objectives must be derived. Based on these initiatives, we jointly draw up a project plan for the medium to long-term implementation of digitilisation.

Typically, the business requirements of an eSCM initiative and functional eligibility of IT solutions will be defined by the SCM department and the management team. However, usually, the IT department is in charge of the realization and integration of the eSCM initiative, with the functional department responsible for carrying out the operational implementation.

There are three key steps to eSCM implementation.

 

Step 1: Analyse Status Quo

First, collect and identify pain points that exist in the area under consideration. Evaluate the extent of the pain points and the effectiveness of a digital solution. Check prerequisites, dependencies, and other risk factors of a possible implementation. Is there an already available software solution or is in-house development possible and reasonable? What resources are necessary: programming, specialist resources, IT resources? Develop a realisation strategy for testing and implementing the digitalisation opportunities and present it for a go/no-go decision.

 

Step 2: Develop Solution

Regardless of whether there are existing software solutions or whether you want to program your own – first define the objective and the path to a solution. Consider the business requirements and the optimal process, data availability, and other user requirements. Use-cases are a good way to do this, describing in concrete terms how the business benefits will be achieved. In the case of in-house development, work with the required resources on a blueprint of the solution, then evaluate and plan the realisation phase in milestones with concrete dates and the functional statuses to be achieved. In the case of external software, find out what is on offer and compare it with your requirements and objectives. Demos and supplier presentations are a great way to drive the selection process. In both cases we recommend a pragmatic implementation via one or more Proofs of Concept (PoC). Here, both in-house programming and external solutions can demonstrate their degree of suitability for achieving objectives. This check should be as fast, cost-effective, and risk-free as possible, and enable you to make the decision on whether to roll out fully.

 

Step 3: Implementation of IT systems and new processes

Once the decision has been made to roll out the solution, the first step is to draw up an implementation plan. Risks, such as the impact on day-to-day business or rejection of the change by the employees involved, must be identified early on and counteracted. Targeted information, the motivation and involvement of the affected users, as well as a step-by-step approach, will help with the roll-out. An effective project management process should regularly report on difficulties and successes and, if necessary, provide steps for mitigation. Training based on user-related exercises that demonstrate the benefits for the user help with integration into everyday processes.

 

 

Are we on the right track?

 

Use the following check-up questions to determine whether your strategy for eSCM or your current initiative is on the right track:

  • A clear strategy with concrete plans has been formulated by examining all prerequisites and is anchored in the objectives of the initiatives
  • There is a clear roadmap with firm test dates at which certain aspects of functionality are presented in terms of their practical added value
  • Resources with appropriate experience and overall vision were involved in the design of the implementation plan
  • The selected project method and control are suitable for the digitalisation project

We would be happy to support you through dialogue or discussion to evaluate your eSCM strategy or specific supply chain analytics project.

 

 

What are common practical pitfalls and what are the solutions?

 

To provide insight into some avoidable mistakes or to identify adverse situations at an early stage, we describe below some typical examples in which an eSCM initiative can face failure. The approach in each of these cases can be used to prevent such problems reoccurring, and, where necessary, find solutions.

Within supply chain, the goal of most companies is to map analogue supply chain processes faster, more securely, and more cost-effectively through digitalisation. But in some companies, Microsoft Excel is still used for warehouse management and orders are placed by e-mail or even telephone and fax. Even in today's digital age of widely available GPS systems, one of the main challenges for transport companies is the seamless tracking of the routes driven by their own vehicles. Improved tracking through a transport management system also ensures an enhanced customer experience as the status and location of incoming deliveries can be accessed at any time.

At present, in most organisations, technical possibilities are rarely exhausted whilst technology is advancing at a rapid pace. A recurring challenge is objectively evaluating whether the digitalisation of an analogue supply chain process has a positive ROI.

The benefits of digitalising analogue processes are obvious: resources can be used optimally; processes can be mapped faster, more securely, and more cost-effectively; and substantial cost can often be saved. Digitalising all analogue supply chain processes under all circumstances as quickly as possible is certainly not the most efficient approach.

Together with its clients, OCM develops an eSCM strategy. Each sub-process is recorded, analysed, and evaluated with regard to the feasibility of digital mapping, and an ROI is calculated. Essential elements in this evaluation are: the connection with adjacent systems, the creation of transparent and usable data, the savings potential, and the influence on the customers. Finally, the risks presented by the transformation itself must be examined and evaluated in detail in order to ensure smooth deployment of the new systems.

We see in practice time and again how far most companies are from integrating their supply chain systems. We often encounter a fragmented IT landscape in our clients. Each process has its own system: an ERP system for order processing; special software for transport planning; a warehouse management solution for controlling the internal warehouse processes; and another solution for operational transport planning, procurement activities, and invoicing. However, for most companies, an integrated system of databases and work processes is a distant reality, or the integration that does exist is the result of costly and inefficient interface modifications.

The resulting lack of data or insufficiently networked data means that it is near impossible to draw meaningful conclusions at a strategic level. It is also extremely difficult to promptly intervene in ongoing processes and to react flexibly to unforeseen events without a major loss of efficiency. Strategic and operational decisions are not made on a foundation of reliable data sets. The potential of digital SCM is not only missed, additional costs are incurred and time is wasted – the very opposite of the objective of digitalisation.

Linking the supply chain systems and databases is required in order to be able to use data in a meaningful way and to draw the right conclusions. However, only the integrating connections which add significant value should be made. We examine the feasibility and benefits of combining the IT systems in a supply chain cockpit or platform in order to make supply chain analytics available centrally and transparently. With such solutions, problems that still cause considerable headaches today can be elegantly avoided.

Supply chain management can therefore play a key role in the management of data and the provision of corresponding infrastructure.

A key danger is selecting software that does not meet your specific needs. Many companies do not succeed in combining technical supply chain competence with the necessary IT understanding in order to find a digital solution that meets the requirements of both. The consequences are: over-specified and therefore prohibitively expensive solutions; unconnected and isolated solutions, which fail to realise their potential; or digitalisation projects which take too long or the results of which do not fulfil the desired objectives.

We combine technical expertise, IT understanding, and the necessary project management skills to support our clients in the selection, negotiation, and implementation of suitable solutions. We record the requirements of our clients with regards to the target operating models and the desired size of the change, and then have best-in-class providers demonstrate how they will satisfy these requirements. It is crucial to involve the relevant departments in the selection process and to carry out the selection process in a methodical and efficient manner. To that end, in the implementation phase, it is essential to assign responsibility and a deadline to each process step, and to empower project management with a sufficient mandate so they can complete the project efficiently and within budget.

Rapid technological progress has produced some outstanding solutions for the collection and evaluation of information and the deduction of value-adding initiatives. In addition to selecting the right software to match the strategy and IT landscape, the right application should also fulfill the requirements of personnel and be integrated into the team in an appropriate manner. Experience shows that a combination of skepticism towards innovation as well as insufficient skills and knowledge in the use of novel solutions inhibits or even prevents the success of eSCM.

New software and digital tools always require promoters and supporters. Additionally, regular training and the monitoring of actual use is essential to ensure that employees acquire the necessary knowledge and practice. An effective supplement to this is the introduction of so-called super-users, who are available for questions and queries at any time and promote mutual learning in the team. For all of the above we create a training and education plan for our clients in order to implement digitalisation in a sustainable manner, which, if necessary, we can support.

In a world of increasing digitalisation, frequent cyber-attacks, and changing legal regulations there is a need for action in IT security. Work and business processes in the supply chain are increasingly carried out through IT solutions. The security and reliability of these systems is therefore becoming more and more important, as is the trustworthy handling of information. If a company has neglected this topic up until now and no precautions have been taken, it is absolutely necessary to take action immediately. Inadequately protected information and systems represent an often-underestimated risk that can manifest as an existential issue.

IT security focuses primarily on the processing and protection of electronically stored information in the respective systems. Senior management is responsible for ensuring that legal regulations are observed and that all business processes run smoothly. OCM supports its customers to ensure that supply chain IT security is at an appropriate level. An IT security blueprint must be drawn up, including: a risk analysis and risk plan, the definition of fixed work processes, the allocation of responsibilities, and the development of a continuity plan.

In order to achieve this, it is necessary to perform a detailed examination of the current data security processes; both the company's own and those of service providers, suppliers, and business partners. In addition to the technologies and software used, particular focus here must be on responsibilities and competencies; those responsible must have the necessary expertise. Training and further education can help. The new processes and responsibilities must be defined and implemented.


 

Outlook and conclusion on eSCM

 

eSCM enables improved information availability, evaluation, and dissemination; cost, quality, and time-optimised processes; and the optimisaiton of management activities. eSCM as a disruptive use of technology is becoming increasingly important and will potentially lead to a competitive revolution in supply chains over the next few years.

Following a suitable digital strategy and the use of software and hardware with a structured and functioning information flow can make the supply chain faster, more flexible, and more cost-efficient. 

The ability of a company to create competitive advantages through eSCM at an early stage without losing its interconnectedness will become essential for survival.

OCM offers comprehensive support on your path to eSCM. We support you in the design of your customised eSCM strategy as well as its implementation, e.g. supply chain analytics – also in combination with our comprehensive service offering in SCM & logistics. We would be happy to present our approach and modules in this regard or discuss specific issues and possible solutions based on your challenges.

Contact

LinkedinXing
Florian Dederichs

Florian Dederichs

Founder & Partner

M.+49 160 93882573​

E.florian.dederichs@ocmconsulting.de

W.www.ocmconsulting.de​

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