Digitalization in the Real-World, Part 2
At our recent customer conference Blue Yonder ICON, we heard first-hand the chronic and new challenges supply chain, logistics, and commerce executives are facing and their strategies and implementations to realize the next visions. This is part 2 of a multiple part series to explore their stories (read Part 1).
Digitalization Through the Eyes of Our Customers
Consumer products manufacturers are learning the practical benefits of forming tighter connections via digitalization. PepsiCo is a consumer packaged goods (CPG) giant, with more than $70 billon in revenue, 23 billion-dollar brands and operations in more than 200 countries. At ICON, Rogelio Antillon, Associate Manager of Global Procurement – Transportation, detailed its massive transportation network, which includes over 60 lane owners, 9,000 lanes and 1.2 million loads annually. While PepsiCo owns its own fleet assets, it also partners with more than 350 active, contracted carriers, for a total transportation spend that’s over $1.5 billion a year.
Supply chain digitalization is helping PepsiCo succeed in an increasingly adverse transportation environment that includes soaring on-highway diesel fuel prices, supply chain disruptions, labor shortages, and the highest spot-rate freight charges in years. Carriers have rejected load tenders on contracted rates, leaving PepsiCo scrambling to replace them.
Rogelio discussed how in response, PepsiCo is using an advanced TMS and digitalization to support a more nimble procurement strategy [watch the video here]. The company has shortened its overall bid times, rapidly implemented new rate structures and even introduced monthly “mini bid” events to address new lanes, changing volumes, capacity shortages, and other disruptions.
Advanced technology drives this strategy by enabling closer connections with the carrier network, as well as supporting faster responses to changing conditions. A shared technology platform supports centralized bid management and the fast execution of large, enterprise-level bids. Spot-bidding and e-auction functionality enable PepsiCo’s new “mini bid” format and drive prices down by creating competition.
Digitalization is absolutely critical to PepsiCo’s ability to communicate rapidly and efficiently with its sprawling carrier network, custom-tailoring data and messages as needed. New rates and awards can be rapidly loaded into vendor systems for quick bidding and execution. PepsiCo’s state-of-the-art logistics solutions position the company to stay close to market conditions and optimally match available capacity to its freight requirements as disruptions emerge. The company is hoping that it can reduce its transportation costs by up to 5% in stable conditions, and by 10% or more in volatile conditions, via its new digitally enabled procurement strategy.
Digitalization of Warehousing Operations
Real-time connectivity and rapid-response times are also mission critical for fresh-foods CPG manufacturers. A fresh-foods CPG customer relies on digitalization to manage its cold-chain warehousing operations. As food items are moved between 500+ independent food suppliers and consumers in 15+ countries, real-time warehouse visibility, accuracy and efficiency are essential. This customer leverages digitalization for quality assurance, order filling and cold-chain distribution across its network of warehouses.
Advanced technology connects this customer with suppliers and inbound shipments. Advanced shipping notifications ensure that resources are in place to check products and unload trucks quickly. On the customer side, digitalization allows inventory to be managed, and trucks to be loaded, in compliance with customer needs. Throughout the warehouse, paperless processes, task interleaving and real-time reports maximize speed and productivity. Because Blue Yonder’s Warehouse Management System (WMS) integrates with other systems and apps, connectivity is optimized. This ensures an early identification, and fast communication and resolution, for any exceptions.
Easy Access to Capacity and Pricing
A North American retail customer operates over 1,000 stores, as well as multiple distribution centers (DCs) in the U.S. The retail customer completes close to 100,000 store deliveries per year, working with both an import and domestic vendor base. According to its Director of Logistics, the company digitized its freight order management system, creating two-way integration with its existing digital Transportation Management System (TMS). The company moved from a clunky domestic routing portal, with no routing restrictions and no SKU-level vendor routing, to an intelligent, connected digital system that features a user-friendly interface, as well as SKU-level routing and reporting. Vendor routing restrictions based on weight and volume, as well as vendor-driven bill-of-lading creation, support greater efficiency, compliance, cost control and responsiveness to exceptions.
Blue Yonder’s dynamic price discovery solution is helping this retail customer optimize its transportation spend and return on investment by maximizing agility. The retailer can easily access multiple carriers via a single platform and get responses in near real time. As external conditions continue to change unexpectedly, this level of flexibility, accompanied by cost visibility and control, has become an imperative.
Digitalization also enables this retailer to optimize its entire logistics network across stores, vendors and DCs. Manual, slow and inaccurate processes have been replaced with automated, optimized practices in such areas as loading, sequencing, inbound order management and cross-docking. Instead of basing key logistics decisions on assumptions, it optimizes its logistics operations based on real-time data about costs, service levels, capacity, and other constraints.
Greater Resilience: The Real Value of Connectivity
In their attempts to master volatility, it’s important for companies to recognize that no disruption takes place in a vacuum. Just as disruptions affect every part of the extended value chain, that entire chain must participate in executing a response that maximizes outcomes for every participant. Gone are the days when an event is merely a “logistics problem” that must be solved by only the logistics function.
Executing a collaborative, orchestrated response depends on creating real-time connectivity across the value chain via advanced technology. While AI, ML, control towers, data science, predictive analytics, and other capabilities are readily available today to help identify and strategically manage disruption, it’s up to each organization to attain these advanced solutions and make the commitment to fully leverage them.