THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN
ARC INSIGHTS
By Steve Banker
Service Logistics providers like TNT and
IMI...
ARC Insights, Page 2
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
ple, TNT’s Cisco cont...
ARC Insights, Page 3
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
notification when the...
ARC Insights, Page 4
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
Bevcore’s Monthly Shi...
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Component Based Solutions Well Aligned with Needs of Service Logistics Providers

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Component Based Solutions Well Aligned with Needs of Service Logistics Providers
Service Logistics supply chains are very dynamic. Achieving customer satisfaction
depends not only delivering the right parts, but also the right
people, the right tools and the right information to the right place at the
right time. Two Service Logistics providers, TNT and IMI Bevcore, concluded
that in order to effectively enable their processes,
they had to implement logistics software
based on component-assembly architectures.

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Transcript of "Component Based Solutions Well Aligned with Needs of Service Logistics Providers"

  1. 1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN ARC INSIGHTS By Steve Banker Service Logistics providers like TNT and IMI Bevcore support many clients, each with different processes and business rules. In order to effectively manage their operations, both companies determined that logistics software based on component-assembly architectures are the best solution. INSIGHT# 2003-38E SEPTEMBER 10, 2003 Component Based Solutions Well Aligned with Needs of Service Logistics Providers Keywords WMS, Third Party Logistics, Service Logistics Summary Service Logistics supply chains are very dynamic. Achieving customer sat- isfaction depends not only delivering the right parts, but also the right people, the right tools and the right information to the right place at the right time. Two Service Logistics providers, TNT and IMI Bevcore, con- cluded that in order to effectively enable their proc- esses, they had to implement logistics software based on component-assembly architectures. Analysis This Insight examines two Service Logistics supply chains: TNT’s in Asia and IMI Bevcore’s in North America. Both companies implemented software solutions based on component-assembly architectures in order to power unique business processes. Component assembly software, in contrast to traditional solutions that utilize a table-driven configuration, allow service providers to manage multiple warehouses and customers, each with differ- ent processes and business rules, via a single instance of the solution. Component architecture also allows companies to develop and provide new services without paying for costly enhancements to the code and with- out endangering the upgrade path. TNT Logistics After-market logistics is a niche market for TNT. It’s a market that requires strategic and long-lasting relationships with clients due to the critical na- ture of the services provided and the leverage provided by a preexisting network of warehouses. Companies like Cisco and Nokia contract with TNT to manage and execute the spare parts service agreements they have with their clients. For exam-
  2. 2. ARC Insights, Page 2 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com ple, TNT’s Cisco contract defines service levels for spare parts, whereby the delivery window for non-critical parts is 24 hours, but for critical parts it’s 4 hours, with penalties charged if parts arrive late. In addition, part swaps are typically involved, whereby replacement parts are sent to the customer while the faulty part is sent back for repair. Consequently, a large network of small depots with forward deployed in- ventory is necessary. TNT has 78 facilities across 10 countries in Asia, as well as single facilities in Germany and Holland. The configuration of the network generally includes a country central warehouse, many small for- ward stocking locations, as well as inventory at the customer site. Repair centers are located in a separate loca- tion from the regional or country distribution center (DC). Logistics in Asia is particularly difficult because the customs rules of different nations are not always transparent and it can be difficult to estimate how long it will take goods to clear customs. Repair parts usually flow from the forward stocking location closest to the customer site. These sites, in turn, have min-max or Just-in-Time replen- ishment rules. The inventory to replenish them may come from the country warehouse, other forward locations, or even in-transit shipments. Visibility into these multiple sources of inventory is critical to effectively manage these facilities and to reduce the layers of inventory across the multi- echelon supply chain. The swapping of parts means that reverse logistics is also important. Swaps are more complex than might be imagined and there are several variations. The process begins when an authorized customer engineer en- ters a password-protected Website and requests a service (swap, advance swap, etc.) The system verifies that (based on the contract agreement) the customer engineer is entitled to the service selected and then generates a Return Materials Authorization (RMA). Customer engineers can use their PDA to query parts availability at the warehouse, place orders, and receive Swap Type Description Regular Swap Replacement part is issued and faulty part is received at the same time Advance Swap Replacement part is issued in advance of the return of the faulty part Repair & Return without Loan Faulty part sent to repair facility, re- paired, and then returned to customer Repair & Return with Loan Faulty part is exchanged for a loan part. The faulty part is sent to the Repair Center, repaired, and returned. Customer then returns the loaned part. Loan Part Loan Part is issued to the customer but there is no return of faulty part. Sub- sequently, the loaned part is returned. Parts Issuance A new part is issued to the customer and the customer is invoiced. Types of Swaps
  3. 3. ARC Insights, Page 3 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com notification when the parts are dispatched from the warehouse. The service logistics system also tracks the faulty parts that engineers “owe” a stocking location under an advance swap transaction. The small forward stocking locations did not warrant an investment in RF technology, so the real time data is provided by a combination of data en- tries into the Internet portal and barcode scans. Event visibility includes inventory availability, repair status, customs clearance status, in-transit status, advance shipment notification, and expected receipt times. Users can access real-time Web reports on inventory, service performance, order status, and parts consumption and the system supports multiple languages and currencies. This service logistics system was developed by V3 Systems to TNT’s speci- fications. The implementation began in March of 2002 and went live in July of that year. Traditional client/server solutions would have required im- plementations at 78 sites. The centrally-hosted V3 solution was implemented much faster because it was installed at just one site in Singa- pore. V3’s component architecture allowed one instance of the software to support multiple TNT customers with different processes and unique busi- ness logic. IMI Bevcore Bevcore is a new company in the IMI group of companies that opened its doors in October of 2001. They are a spin off of the manufacturer IMI Cor- nelius, a leading manufacturer of beverage dispensing and cooling equipment. Bevcore distributes spare parts (from Cornelius and other manufacturers) for the beverage service industry, where fountain equip- ment is rented inexpensively to chains like McDonald’s and they’re serviced by the beverage company. Bevcore came into existence because the previous service model was not fully satisfying customers. Cornelius had seven distribution centers scat- tered across North America. When a customer placed a multi-line order for spare parts, the inventory was often located in different warehouses. The result was that orders were frequently shipped incomplete. In addition, the existing systems did not support special services that could help grow the business.
  4. 4. ARC Insights, Page 4 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com Bevcore’s Monthly Shipments PO Receipts • 2,118 PO Receipts, 5,102 Lines, 762,019 Units Shipments • 6,745 Orders Shipped, 7,406 Cartons Shipped, 18,065 Lines Shipped, 652,657 Units Shipped • 2.7 Lines per Order Cycle Counts • 95 / Day In contrast, Bevcore operates just one 70,000 square foot distribution center that carries all 32,000 active stock keeping units. Many parts are sold as part of a regular replenishment purchase order, but Bevcore also provides critical parts by next day air. Bevcore considers itself competitive on price, but the com- pany believes that its services differentiate it from its competitors. For example, Bevcore won the business of one customer by being able to create a custom la- bel that upon being scanned at the customer’s warehouse tells the worker where to store that inven- tory in their DC. This customer went from doing put away in three hours to 45 minutes. One key service is that a customer can place a rush order first thing in the morning, another rush order at noon, and Bevcore will often ship the two orders on the same overnight air shipment so that the customer only has to pay one air bill instead of two. For large cus- tomers, this can save thousands of dollars per month. HighJump’s WMS was selected primarily because it allows Bevcore to con- tinue to develop new services and operating efficiencies without paying for costly outside enhancements to the code and without endangering the up- grade path. For example, Bevcore’s small IT crew created the ability to scan a barcode and have the system print the correct documentation for interna- tional shipments without any use of any consultants. The HighJump implementation helped enable a profitable new business model. Recommendations • Consider outsourcing service logistics. A 3PL with an existing network of service warehouses will frequently be able to do this cheaper and better. • For unique or dynamic supply chains, consider a solution based on component assembly architecture. Please help us improve our deliverables to you – take our survey linked to this transmittal e-mail or at www.arcweb.com/myarc in the Client Area. For further information, contact your account manager or the author at hleroy@arcweb.com. Recommended circulation: All EAS clients. ARC Insights are published and copyrighted by ARC Advisory Group. The information is proprietary to ARC and no part of it may be reproduced without prior permission from ARC.

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