by Clayton Bornman
A business’ success hinges on efficient logistics and supply chain management. Transportation once started as the cart behind the retail horse, but it has since become the driver. An escalating thirst for immediate gratification has led consumers to increasingly demand visibility to goods and services in transit. A digitalized supply chain network, equipped with tracking and tracing analytics, provides the supply chain transparency that those consumers require.
Simply put, accurately and effectively tracking and tracing product movements creates four tangible benefits for businesses: (1) increases flexibility and agility, (2) mitigates operational risk, (3) improves informed decision-making, and (4) establishes a standard that can be used to create performance metrics and identify critical bottlenecks. This article will discuss the importance of how companies can harness logistics to achieve these benefits.
Benefit #1: Increase Flexibility Based On Insight
With proper analytics, companies can respond rather than react to disruptions.
Heightened visibility of the supply chain allows organizations to swiftly identify and appropriately address operational issues. Tracking and tracing facilitate awareness of the opportunities available to them which, in turn, impact management’s consideration of alternatives and their consequences. Then, rather than hastily react, organizations can respond to such disruptions in a deliberate and calculated manner with data-driven insights.
For example, if a terminal’s sales suddenly drop due to a spike in truck liftings, that might be cause for major concern. Runouts are serious and can damage the reputation of terminals. However, proper insight into the logistics and recognition that the inventory restock takes hours, rather than days, can alleviate the terminal’s concerns.
Consider the same scenario of a spike in truck liftings but incorporate an additional factor of weather complications. The resupply is expected to arrive by train within the next five hours; however, due to heavy storms, the railcars are delayed by one day. Insight into these delays from your tracking and tracing analytics enables the company to appropriately adapt by either adjusting its price and conserving inventory or purchasing on the spot market to compensate for the inventory drawn down. Regardless of the tactics determined, it’s only through insight into the logistics that the company can be proactive.
With real-time data representing what inventory is on-hand, awaiting offload, in transit, or stuck at the origin location, management can plan and make critical decisions. Visibility into product departures, transits, and arrivals also enables improved inventory management. If the information is known, then the management team can make critical decisions on how to manage inventory across terminals. Otherwise, they are doomed to be reactive.
Benefit #2: Mitigate Risk
Traceability facilitates the identification of risks. A company can leverage real-time tracking data to identify regular sources of disruptions and other vulnerabilities throughout the product movement. By utilizing that information, managers can decide whether to adjust the overarching operations strategy and plan or implement initiatives that would function as a buffer for the product being moved to help thwart threats.
A common example here focuses on weather and understanding its impact on supply. In August 2021, Hurricane Ida made landfall. In response, producers shut in 95 percent of volumes from the Gulf Coast. Traceability in this circumstance means being aware of scheduled loads—whether they’re still on course for delivery to the terminals—and discerning if it’s necessary to secure supply elsewhere.
In another example, advanced tracking and tracing technology is used to thwart maritime piracy. Even if pirates board a vessel and disable the AIS tracking system, additional forms of tracing will help locate the targeted vessel.
Companies can proactively adjust the production schedule in anticipation of extemporaneous events, or, with the support of real-time data, managers can re-route the product movement because of the interruption. When emergencies arise, decision-makers must have the most accurate information available so they can plan that’ll help the organization best adapt.
Benefit #3: Improve Informed Decision-Making
Effective decision-making hinges on access to more accurate and representative information and data. A decision supported with data from the prior hour is likely to be more profitable than a decision supported with data from the prior day. Tracking and tracing technologies facilitate this.
For example, GPS systems provide optimal routing for drivers making fuel deliveries from a terminal. The GPS relies on historical knowledge of the rush hour and busy thoroughfares to route tanker trucks appropriately. If unexpected incidents arise, the trucks can then be re-routed in real-time.
Real-time decisions can also help determine how to route trains. While the journey of a train is more predictable, the unknown aspect of train movements is the bottleneck and congestion faced on the tracks, especially in junction locations where the Class 1 carriers exchange railcars for long hauls. Therefore, if a company identifies congestion and storms threaten its inbound crude load from Canada through Chicago, the business can make a better decision for sourcing crude for an East Coast refinery in the more immediate term.
Before real-time insights can improve decision-making, however, companies must work through a complicated set of interfaces to retrieve the data, mixing the data with other transactions from the ERP or ETRM system. The result is a digital transformation whereby the organization leverages technology and automation to create more efficient processes. Resources monitor for exceptions, rather than toil away at clerical data entry. Additionally, companies can layer in business analytics to visually navigate through the enormous mountain of data and create a meaningful dashboard.
Put simply, companies must sift through the “noise” within their data to avoid dilution of vital information. Tracking and tracing analytics can then be condensed and displayed in an advanced dashboard that is both informative and consumable. Transportation data provides insights critical to management’s decision-making capability and agility in responding to unforeseen disruptions. In leveraging logistics data, businesses can improve decision-making and, in turn, improve operations.
Benefit #4: Establish Standard Performance Metrics
More accurate operational measurements can create more accurate performance metrics.
A primary concern related to operational measurements and performance metrics relates to the estimated time of arrival (ETA). Companies want to know whether the ETA values provided by a logistics company are accurate—and if so, how accurate? Historical ETAs may not provide the most accurate estimates throughout the entire year. This inaccuracy may be due to seasonal changes or other transient factors. Therefore, rather than strictly relying on historical transit data and assuming that the transit time will be a fixed number of hours, it’s better to actively track and trace the movement to know that the railcar, truck, or ship is on schedule.
Visibility into operations through tracking and tracing helps identify critical bottlenecks, as well as highly efficient processes along the supply chain. The inefficient processes will become abundantly clear with the use of tracking data provided on the average speeds, transit times, and locations of the fleet. A company can then manage around the bottlenecks and consider alternative processes to break the bottleneck.
Real-time and accurate data helps the business better understand its true operational capabilities which, in turn, impact the organization’s goals. Using this information, an organization can create key performance indicators (KPIs) and metrics. Real-time information that tracks operations such as offload times can then be leveraged to create organizational goals and KPIs. Further, these measures can be used to create performance metrics for individuals. Hence, actionable insights into the supply chain benefit not only an organization at the operational level but can also have trickle-down benefits down to the individual, and behavioral level too.
Visibility and Transparency: Knowledge Is Power
Accurately and effectively tracking and tracing movements creates value across the entire supply chain. This digital transformation approach drives tangible results because it increases operational flexibility, mitigates risk, improves decision-making, and establishes a standard that can be leveraged to create performance metrics and identify bottlenecks. Because digitalized logistics technologies create enhanced visibility and transparency, companies can effectively manage the complexities of an intricate supply chain.
About the Expert
Clayton Bornman
Clayton Bornman is a Consultant in Opportune LLP’s Process & Technology practice based in Houston. She specializes in providing business management and technology expertise across the energy industry and supply chains. Such work includes business process design and improvement, software selection and implementation, business and IT strategy, and other technology services. Most of Clayton’s work has been in the downstream sector, working with clients to enhance operational efficiencies by streamlining their business processes and developing initiatives to improve the business’s organizational, process, and/or technological capabilities. Clayton graduated from Texas A&M with a BBA in Business Honors and Management.