An Analyst’s View of Process Industry SMB Challenges

The process industry provides many of the products we use in our daily lives for food, shelter, and health. Such products are created when materials are transformed through the use of energy resources and chemical products. In addition, the process industry manufactures products that are essential to advanced industries such as computing, biotechnology, telecommunications, automotive, scientific, and space exploration.

These industries are facing major pressures not only to meet the present needs of our global economy, but also to do so without compromising future generations by ensuring that processes

* meet environmental guidelines
* optimize energy resources efficiently
* result in products that are safer, more reliable, and more functional
* provide features that meet both industry and consumers needs

This article focuses on how enterprise resource planning (ERP) vendors are helping the process industry meet both the needs of today and deliver on anticipated functional requirements that will help meet the needs of tomorrow.

Process Industry Manufacturing Challenges

Manufacturers in the process industry are at a difficult crossroads. Although the industry is not facing any imminent substantial decrease in its overall profit margins, there is concern in the industry according to a recent study by the Canadian Manufacturers and Exporters Association, which cites the following issues:

* increased global competition
* foreign currency fluctuation
* changing patterns of customer demand
* escalating business costs
* problems in implementing new technologies
* competitive business pressures
* shortage of skilled workers

To address these issues, process industry manufacturers and distributors must manage the following key activities, and ensure they use an enterprise system that supports these activities:

* Planning production for both materials and capacity—to develop a production plan, manufacturers must ensure that there are sufficient available resources and materials, production capacity, and labor.
* Inventory tracking and controlling work-in-process (WIP)—monitoring material consumption and tracking work order progress is the basis of manufacturers’ being able to meet sales order, demand, and delivery dates.
* Replenishment and demand planning—the ability to review variances between forecasted and actual sales is the basis of managing vendor lead times and raw material replenishment.
* Managing the supply chain for order fulfillment—reviewing the global supply chain provides manufacturers with the ability to coordinate logistics and operational activity to meet customer order fulfillment expectations.

Specific Requirements of an ERP System for the Process Industry

Here’s an overview of how some of the functionalities of an ERP system for process industries help manufacturers better perform the activities listed above.

1. Conversion process capability
In the process industry, the bill of materials (BOM) used in discrete manufacturing is replaced by the master product formula, or simply the formula. The formula requires a conversion table for measures, such as weights from grams to pounds, and must have the ability to record liquid units of measure, in both metric and US-standard. The formula must also record specific information related to product characteristics that can affect manufacturing processes. For example, in the blending process, the system can record product information such as percentage calculations of raw materials, and the effective specific gravity, potency, density, and number of reactives of those raw materials.

2. Interface to other modules
The master formula can also be linked to submodules like quality assurance (QA), procurement, inventory, and accounts payable (A/P) for government compliance and safety issues. Also, the manufacturer must be able to trace products in order to manage dating of inventory lot control and the amount of inventory available at the distribution level. Furthermore, there are government and regulatory concerns that deal with the nature of the materials, as there may be a controlled substance with specific shipping, handling, and storage regulations. Or, the manufacturing process may emit hazardous by-products. Or, there may be logistical concerns within the manufacturing process itself.

3. QA module and flexible formula adjustments
A process industry ERP system must also have a formulation-balancing operation based on the premise that the QA group tests random samplings of production batches. The system needs the ability to adjust, through a program logic control (PLC) interface, any variations in materials used and external factors such as humidity, temperature, cool-down speeds, etc. Also, the material flow and consumption is recorded back into the ERP system. The system’s routing functionalities reflect those capabilities as a requirement or not, depending on the user’s specifications.

4. Reworking all co-products and scrap materials
As a result of manufacturing processes, residual materials (by-products) may be created. These by-products can be collected as waste and reused. This is the case within the plastics industry, for which the collection and re-entry of materials into process creates very specific criteria. In the process industry, due to a continuous production flow operation, the production process generates a theoretical production yield, which may be calculated by the downstream packaging operation as units for case-pack quantities. The residual amount generated from the production process may vary within a percentage point, but in the downstream conversion process, the residual quantities may be aligned to complete full, case-size box quantities. By using flexible formulas, process ERP systems can demonstrate how the residual materials can be reworked from waste back into materials used in production.

5. Supply chain management (SCM)
Collaborative forecasting and planning are essential features of the process industry ERP system, especially for the automotive and consumer products industries. Some the most important functionalities include

* visibility over inventory across the global supply chain
* enterprise-wide planning in the areas of sales and marketing, procurement, and production
* the ability to integrate planning for what-if scenarios
* the ability to benchmark quality and vendor performance issues
* detailed reporting that highlights areas where parameters may be out of scope
* real-time available-to-promise (ATP) information for customer service

6. Process industry costing
The financial system for the process industry must also be able to provide for multiple-level formulas on the same production work order, and for outside processing at subcontract facilities. Given the nature of process industry products, most plants must operate on a continuous basis, which drives maintenance costs up. As a result, maintenance costs usually comprise 30 percent of a process industry plant’s operating budget. Thus, an ERP system must integrate with some type of best-of-breed system to meet the requirements of the operation, and with some form of asset management system, which takes into account predictive and preventative maintenance.

ERP System Constraints in the Process Industry

For lack of an available solution designed for their needs, some process manufacturers have attempted to implement an ERP system for discrete manufacturing. As there are several fundamental differences between the operations and practices of process and discrete manufacturing, opting for such a stop-gap measure is not always effective. Process manufacturers have no doubt noted the constraints that are placed on their operations as a result of using a system that was not designed for their needs. The nature of the process manufacturing business is such that it is difficult to manage inventories and profits. Process manufacturers experience large quantities of finished product in transit and of raw inventory. The products often have low yields with substantial scrap (fine chemicals, pharmaceuticals, or plastics).

Business dynamics is putting demands on ERP systems to help with

* maintaining a lead over competition
* simplifying the product lines
* responding to shorter product life cycles
* providing mass customizations (car options, computer system accessories, etc.)
* complying with regulations compliances

In an attempt to meet these demands, many manufacturers have looked at ways to improve supply chain optimization by re-examining manufacturing processes, relocating closer to markets, and looking at cheaper energy, transportation, and labor. The businesses’ needs are such that an ERP system must be powerful enough and diverse enough in functionality to do more than simple process manufacturing.

With ingenuity, many of the raw material manufacturers have turned to vertical market integration, moving from pure process manufacturing to mixed mode. Their factories now produce raw product for industry and sell finished goods by the item (counting). An example is toothpaste, where the finished good is sold by the pallet, case, or individual package. The ERP system must allow manufacturing processes to batch products in order to achieve product consistency (two examples are textiles, with “dye lots and finishing,” and bakeries, with oven scheduling, and aerospace, with electroplating, etc.).

That some factors are out of the control of process manufacturing vendors is exemplified by the retail industry. In this industry, the vendor has a many-stop supply chain, and plays a role almost like that of the caboose at the end of a long train.

For example, chain stores track sales at the cash register, and use that information to replenish inventory from branch warehouses. The warehouses get their product from distributors. In the case of multilevel distribution networks, this explosion process percolates upward through the various levels from the retail store to regional warehouses (master warehouse, factory warehouse, etc.). The demand is input to the master production schedule at the level of the manufacturer. The process is not always real-time, meaning that a lot of product is out in the supply chain. This process of upward percolation is most common in the pharmaceutical and retail grocery industries. Since everyone in the supply chain strives to minimize and frequently turn inventory, any ERP system has to manage with these constraints.

As a side note, some manufacturers are trying to use real-time reporting to determine product consumption and demand. The information is more accurate and allows total reduction in the field, increased inventory turns, tailoring production to market preferences and better cash management.

Mixed-mode ERP systems are used by the processing industries for several reasons. First, there is no need to duplicate the data. For example, mature discrete ERP systems have well-optimized modules addressing finance, production planning, inventory management, sales, shipping, etc. The benefits of moving to a mixed-mode ERP product such as Syspro stem from the use of a common module to support production, sales, inventory, supply chain, finance, and analytics. These sophisticated discrete modules, adapted to accept process data, can go a long way toward helping the manufacturer reduce inventory, improve cash flow, and improve manufacturing yields.

The optimization of manufacturing and distribution processes for larger enterprises often involves business intelligence (BI) and business performance management (BPM) functions. These new ERP functions are typical of large manufacturers’ systems, and are generally not affordable to SMBs.

Therefore, the SMB-oriented ERP system for process manufacturing needs to have extra capabilities that provide data for BI functionalities. The dynamics are such that this data is often industry-oriented (food versus chemical). ERP systems need to provide dashboards providing what-if scenarios to allow the manufacturer to improve competitiveness, while avoiding the cost of a full BI/BPM operational group.

Finally, a pure process ERP product has quantitative variables with large variations in values, leading to statistically large standard deviations. Statistical analysis for process optimization requires small standard deviations in order to make useful manufacturing recommendations. (Large standard deviations are indicative of large inventories in the pipeline, or variations in raw material quality.) Constraints on the quality of input data are essential to achieve any business improvements.

Today’s Discrete ERP Landscape: Trends, Challenges, and Solutions

The face of today's manufacturing industry is no longer what it was five or 10 years ago. Consumer demand has driven change in the industry as well as to the technology used when producing goods. Enterprise resource planning (ERP) systems have matched these trends, and as a result, compliance, lean manufacturing methods, and supply chain concepts have been incorporated into the manufacturing environment.

Discrete ERP manages all aspects of production, procurement, inventory, and so on within a manufacturing environment. This includes manufacturing products via repetitive processes. Theoretically, products, once assembled, can be disassembled into separate (discrete) parts, unlike products derived from process manufacturing. Discrete ERP applications, like all ERP software, aim at full integration of management, staff, and equipment.

The three main trends affecting discrete manufacturers today are 1) technology, 2) changing business models, and 3) compliance.

Technology Trends

ERP software has changed dramatically since its earlier days of material requirements planning (MRP) and MRP II. Among other changes, it has integrated with the complex networks of supply chain management (SCM) software. Because the manufacturing environment has become so complex, and because many new types of software have been developed to meet the growing needs of manufacturers, Internet technology has been incorporated into these stand-alone software solutions in an attempt to integrate all of them together.

What Is Service-oriented Architecture?

Service-oriented architecture (SOA) is a way to seamlessly integrate multiple enterprise software applications together on top of one integration platform, merging different IT infrastructures with the enterprise applications. It enables all systems to seamlessly interact and integrate with each other in a way that allows the user to have a singular view of what is happening in the organization. SOA allows users to extract data from multiple enterprise systems, which can often be a very challenging and complex procedure.

The service aspect of SOA reflects the fact that ERP vendors are now able to "speak" to a manufacturers niche needs. This is what is known as manufacturing analytics. Manufacturing analytics represents a business intelligence (BI) solution layer on top of traditional manufacturing technologies, enabling users to extract data.

ERP vendors have developed expertise in particular areas of discrete manufacturing. With this expertise, they have developed ERP systems with advanced BI functionality. The BI component to such ERP systems can perform several functions:

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allow the user to mine data in terms of sourcing, assembling, and delivering goods or components
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increase tracking visibility for goods via the bill of materials (BOM), automation of purchasing, sourcing, and order entry
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synchronize quote processing and reporting
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reduce assembly line downtime, inventory carrying costs, production costs, and record-keeping errors
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optimize resources used for production.

Manufacturing analytics can also help users to

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distinguish between suppliers that deliver components on time and those that do not, thus helping with the selection of a supplier
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decide if any manufacturing processes can be performed before components arrive so as not to waste time

Data mining through an ERP system can help to lower overall manufacturing costs, as well as enable human resources (HR) managers to extract important information about employees in the organization. For example, if a particular skill is needed for a particular manufacturing task, the HR manager can quickly pull up this information and make an informed decision on which employees skills would be best suited for that particular task.

Collaboration among Manufacturers, Distributors, and Suppliers

Layered on top of the SOA platform that ERP vendors are offering discrete manufacturers is Web-based BI, which is now integrating with ERP systems and Web portal technology to allow collaboration among manufacturers, distributors, and suppliers.

Web portals help to integrate multiple parties together. If a manufacturer is dealing with international suppliers, collaboration can be achieved through such portals, facilitating communication between international parties. Furthermore, the Web-based BI component helps manufacturers to identify suppliers that could affect lead times by not delivering components on time. In addition, if a problem occurs within the manufacturing environment, the BI component will notify the managers responsible, and appropriate action can be taken.

Manufacturing Business Environment

Because manufacturing has become global, SCM has made it possible for discrete manufacturers to source parts with the lowest cost and to incorporate lean manufacturing methods into their production environments. (For more information on SCM, please see Supply Chain 101: The Basics You Need to Know).

In the past, manufacturers were responsible for managing their inventory and for shipping goods to their final destination. Today however, parts, manufacturing processes, and distribution of components or final goods can flow through multiple "links" within the supply chain. This means that many firms are involved in producing the goods as opposed to a single manufacturer and supplier.

In such an environment, manufacturers integrate their ERP systems with SCM software. A discrete ERP application aims at full integration of management, staff, and equipment. It also offers broad functional coverage; vertical industry extensions; a robust technical architecture; training, documentation, implementation, and process design tools; and so on.

A typical discrete ERP system today is suited for manufacturers of products that can be disassembled into constituent components, such as tractors, computers, tables, and so on.

Compliance

Because of the increase in global competition in the discrete manufacturing sector, a major concern for manufacturers (especially for manufacturers dealing with multiple countries) and consumers alike is that quality standards can be compromised if proper measures aren't put in place. Regulatory compliance—financial, technological, and health and safety—are of prime importance.

Discrete manufacturers are accountable for three main types of compliance:

1. International standards, such as those established by the International Standards Organization (ISO), or local standards, such as those established by the Canadian Standards Association (CSA). Such regulatory bodies conduct quality control procedures and prepare benchmarks to ensure manufacturers adhere to these standards.

2. Industry compliance—standards that are industry-specific. For example, in the aerospace industry, components need to be specific dimensions, and materials need to fall within particular tolerance levels. Such specifications are safety standards, which make it possible for the components manufacturers need to order to be standardized, thus ensuring adherence to industry-specific standards.

3. Company-wide or internal compliance—standards that dictate workflow, systematic production, etc., which lead to increases at the bottom line.

How a Discrete ERP System Can Help

Because software is heading toward an SOA platform, a well-defined software architecture will determine how these standards and policies are integrated into the overall ERP structure. This will allow the manufacturer to withstand scaling to a larger number of users, and determine whether it will be able to incorporate emerging technologies—all to accommodate increasing user and regulatory requirements.

Vendor Snapshot of the Discrete ERP Landscape

Throughout the discrete ERP landscape, merger and acquisition activities have intensified in the last two years. Five vendors now sit at the top of the market: Oracle, SAP, Infor, QAD, and Sage.

Each of these vendors offers broad functionality, but each has made so many significant acquisitions, that all five have vertical expertise in many areas as well. Since ERP software historically has focused on manufacturing, these five vendors have extremely well-developed manufacturing modules.

Other vendors known for their strong presence in the ERP market include CDC Software, IFS, Lawson, and Microsoft. Some older software vendors (those that have been in the industry for 10 to 20 years) have chosen to focus on specific verticals; they do well, but they cannot compete with such "giants" as Oracle or SAP

ERP: When Transparency Becomes Tunnel Vision

The idea behind an enterprise resource planning (ERP) system is to give organizations the transparency and visibility they need to have into their business activities. But what if the ERP system in fact creates a "blind spot" for the business? How could this happen, you might ask? Well, before we answer this question, a little history is needed.

In developed nations, many manufacturing activities have moved offshore. Manufacturers have done this because the cost of labor is cheaper in developing nations. But offshore manufacturing has led to some key concerns:

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How do you measure quality assurance?
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Is it really cheaper to outsource production, given rising energy prices?

From an economic and an IT perspective, several negative factors about moving manufacturing offshore have become apparent:

Negative economic factors:

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The manufacturer is subject to the stability of the local economy where their facilities are located, meaning that labor may be tougher to acquire.
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The speed at which components and parts are acquired is subject to global—and potentially faulty—supply chains.
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Offshore currency instability may make components more expensive to acquire or sell.
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Tracking the cost of resources and reverse logistics can prove to be difficult.

Negative IT factors:

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Access to critical, real-time data may be impeded by disparate enterprise applications in different regions.
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Tracking components may be more difficult due to a low-quality IT infrastructure or minimal IT resources. Or perhaps the ERP software is too inflexible to service the entire organization.
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Financial tracking can be difficult to maintain, due to the factors listed above.

Traditionally, ERP systems come with financials and human resources modules to track all costs throughout the organization. The system controls these processes through a manufacturing management module. The manufacturing management module of a typical ERP solution includes multi-level bills of materials (BOMs), advanced plant scheduling, shop floor control, field service and repair, production planning, project management, product data management, inventory management, purchasing management, quality management, and sales management.

This range of traditional functionality can be sufficient for most manufacturers, giving them the ability to manage their operations very well within the four walls of the manufacturing plant. However, if a manufacturer's business is carried out in multiple locations across continents, and if its supply chain involves complex activities, then a more robust ERP system is needed. This is because such a manufacturer is faced with changing economic, quality, and logistical problems, and its traditional ERP system can actually impede its growth and flexibility by not delivering what this manufacturer needs most: transparency and visibility into all manufacturing and supply chain activities. The manufacturer can develop a sort of "tunnel vision" with respect to their operations if nothing is done.

So what can a manufacturer do if the ERP system provides faulty vision? Can an ERP system really adapt to a fluctuating manufacturing environment?

The Economics of a Shifting Manufacturing Industry

To fully understand how an ERP system can create this tunnel vision for a manufacturer, shifts in the manufacturing sector in developed nations needs to be explained.

The trend of offshoring manufacturing processes has brought different economies together from countries that would not otherwise conduct business with one another. This has caused the manufacturing world in developed nations to shift its focus to distribution, which has led to supply chain management (SCM)—please refer to the article From Manufacturing to Distribution: The Evolution of ERP in Our New Global Economy.

However, there is a new trend to consider: manufacturing has started to revert back to developed nations due to the rise in the price of fuel and issues of quality control. Thus, even though the shift in developed nations is heading toward more distribution-type activities within the manufacturing sector, and even though discrete manufacturing is still a heavy economic sector, changes in the amount of products being produced can be difficult for manufacturers to deal with, as they need to accommodate both logistics and manufacturing activities.

The truth of the matter is that most industrialized nations have a large manufacturing base. And even though many manufacturers have outsourced their manufacturing to developing nations, these firms need to stay flexible if changes in either the local or international economies occur.

How can manufacturers deal with this ever-changing climate? How can ERP vendors help take the blinders off for manufacturers and allow them to become flexible enough to deal with these global challenges?

How to Free Yourself from Tunnel Vision!

Manufacturers must examine their business operations in the context of the global manufacturing environment and properly evaluate their software tools. Manufacturers faced with the complexities of manufacturing activities that are teetering back and forth from location to location must be able to track and manage the global business operations. This means that the enterprise software in place must be flexible enough to efficiently handle shifts in operations between heavier manufacturing to distribution, or vice versa.

To achieve this flexibility, something more than the traditional discrete ERP system is needed: a combination of SCM and business intelligence (BI) software, together with an ERP system.

SCM Software
SCM software is not only of benefit to global enterprises. It is also important for manufacturers that need to forecast demand for products; manage warehouse inventory, supplier relationships, and transportation vehicles; and track goods.

Integrating SCM software with an ERP system enables the manufacturer to have an "ERP for distribution" system. The main advantage of SCM software is that it gives discrete manufacturers the flexibility and visibility they need to know what is happening in terms of logistics. SCM software also helps manufacturing operations set up in multiple locations, through integrated warehouses and high-level demand planning. In addition, SCM software can pinpoint the nearest location to procure components for a lower cost, which can also help in terms of quality issues due to the proximity of the manufacturing plant.

BI software
Two other major issues need to be addressed for a manufacturer to become truly flexible: compliance and real-time information.

Compliance issues introduced by such regulations as the US Sarbanes-Oxley Act (SOX), import and export duties, international trading tariffs, etc., become even more complex when it comes to the business of offshoring. To handle these issues and standards properly and effectively, BI software can help a company get a grip on the amount of information passing through it, allowing improved visibility and transparency.

Many types of BI software are now Web-based. What this means for companies with in-house ERP applications is that they do not need to add much more IT infrastructure to their operations. Software as a service (SaaS) and service-oriented architecture (SOA) have been developed so that the BI enterprise application can "sit" on top of the ERP system, collect the necessary data, and make information available to managers so they are better able to make the right business decisions.

Transportation Management Systems: The Glue of the Supply Chain

Supply chains are becoming increasingly complex, and as manufacturers create a “value chain” that spans many countries, transportation of final goods or raw materials is a critical component to their business. If goods do not arrive at their destination on time, the manufacturing process will come to a halt and links within the supply chain will break, causing problems for other entities down the chain.

Along with this, the import and export of products is increasing, leading to greater movement of goods through distribution centers (DCs) and to a higher volume of products that need to be moved.

And then there is the issue of how companies deal with ever-increasing fuel costs.

It’s hard to imagine how companies can deal with the difficulties described above, but transportation management systems (TMSs) can do plenty to help manage the complexities of manufacturing today.

A Solution for the Complexities of Manufacturing

Given the growing need to move products inland and the increase in fuel prices, TMS software is a vital tool for today’s logistics industry, and the need for this enterprise application will only increase in the next five years.

As manufacturers’ supply chains continue to expand, developing networks and using different modes of transportation (truck, rail, air, and boat) can be quite a challenge. Networks and the use of these transportation modes need to be optimized. Otherwise, the following basic questions will be exceedingly difficult to answer, leading to serious visibility problems for the manufacturer:

* Where are the goods now?
* When and where are the goods to be shipped?
* What mode(s) of transport should be used to ship the goods?

So, what exactly is a TMS?

A TMS is designed to manage the different modes of transportation used to move products, whether finished or semi-finished. Transportation modes consist of ground, air, rail, and sea transport. A TMS determines the optimal path to transport products based on distance, location, and route.

The Anatomy of a TMS

A TMS’s basic functionality is comprised of the following:

Lane set-up: This has to do with multimode types of transportation. If moving a certain product requires three types of transportation methods (for example, rail, truck, then rail again), the system will be able to schedule all three of these means of transport.

Geographic set-up: This will link geographic locations together, as well as set up the service levels between different parties along the logistics chain.

Carrier and contract details: Whether the company using a TMS solution is outsourcing some of its transportation needs or managing transportation methods itself, the system will research the best rate of each carrier (transportation or logistics company), and select the carrier with the best price. Sometimes however, if a carrier has received three strikes against it (for example) for not delivering product on time, the system will not consider it an option, even if it offers the best price; the TMS solution will select another carrier that will fit the needs of the client, even if it’s more pricey to deliver. As well, sometimes the carrier with the best price is not in the appropriate range of location; thus, the TMS will not select it.

Transportation network optimization: This is one of the most critical components of a TMS. The TMS will define the following three aspects, each of which helps to manage the manufacturer’s “private fleet” (its fleet of transportation vehicles):

1. Strategic and master route design: This gives managers in charge of delivery the ability to decide the optimal route the driver of each vehicle can take, allowing expedient delivery of the product.
2. Territory design: This allows manufacturers to establish a standard route for regular, recurrent deliveries.
3. Routing and scheduling: This gives manufacturers the ability to optimize the schedules of all the modes of transportation it needs to use, as well as define the best routes possible. If a route is unavailable, the system, using global positioning system (GPS) technology, can determine another route.

A TMS can also offer advanced functionality, which does even more than the above. For example, a logistics company or a third party logistics (3PL) provider may have some stock to move out; the company loads the stock onto a truck and sends it off. This simple process may be good enough, but optimization has not been achieved at this point.

A TMS with advanced functionality is able to perform the following:

Cubing: This enables logistics managers to 1) maximize the amount of pallets or boxes that can be put into an enclosed space, be it a truck or an airplane, and 2) take into consideration heavy and light items. The data that is pulled from the warehouse management system (WMS) or enterprise resource planning (ERP) system gives managers the information on which pallets to load at the bottom so as not to damage any inventory.

These two capabilities allow logistics managers to assess how to save on fuel costs. The manager can compare if a load is better sent as one full truckload (i.e., at the maximum weight) with a discount, or sent as two less-than-truckload (LTL) shipments, which would save on fuel costs because the loads are lighter and require less fuel.

Advanced scheduling: Cubing ties into advanced scheduling and routing optimization. Advanced scheduling will take into account the above variables, and set out a path for the driver to take to deliver shipments 1) on time, and 2) in sequence, allowing the strategic placement of goods onto the vehicle.

Consolidation: This enables logistics providers to combine multiple loads, whether they come from one location or from multiple locations. It works with what is known as cross-docking and multi-stop pickups. If a logistics company wants to either cross-dock (the process where a shipment is unloaded at one DC and redistributed to other locations, whether retail locations, manufacturers, or other DCs), the system will figure out which items to consolidate with what load, and optimize the routing and cubing at the same time.

With the above functionality, each module within the TMS can be combined with any permutation so that different pickup and delivery models can be designed by the logistics company, and can be incorporated into the TMS. From this, the organization is able to optimize logistics processes, which are often very complex.

How a TMS Can Help Manufacturers: An Example

Let’s look at a concrete example to see how a TMS can help organizations optimize their entire value chain. Because the manufacturing environment is now global, this example will involve China, Canada, and Spain as parts of a manufacturer’s complete value chain. Consider the following scenario:

A manufacturer of cellular telephones has one DC in China, another DC in Vancouver, two manufacturing plants in China, one retail location in Vancouver, and another retail outlet in Spain. Thus, this manufacturer’s supply chain is highly complex for many of its suppliers and distributors to navigate. Figure 1 depicts the process, or flow, for moving product throughout this supply chain.