| In past years "logistics" represented a focus on transporting material. In viewing ourselves a "logistics
information systems" provider; we offered transportation management systems (TMS) software. That started for the
principals of ARCLOGIX almost fifteen years ago. Today "logistics" has become a covering term for all aspects
of manufacturing and distribution, i.e., to all components of the supply-chain management process. |
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| Today to have a TMS software focus its no longer just logistics; the focus now must be on transportation
logistics software. |
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The economic conditions that have recently impacted transportation logistics are:
- Demand - A flat growth economy with no expansion in transportation services demand.
- Cost - Significant increases in the cost of fuel.
- Supply - Over capacity, under capitalized carriers struggling with increased costs while experiencing
reduced demand for services.
- Human Behavior - Within traffic departments, staffing has become less of an issue, while breaking old
habits on how to manage transportation, particularly for traffic departments of large firms, has become a major
issue.
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| Where should the focus be in transportation logistics software? Where does ARCLOGIX see the TMS software industry
headed, and what is our direction? |
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For the most part the corporate financial wizards are now three steps removed from influencing traffic departments
because of more pressing issues impacting corporate finances. This is a trend, but is it a good trend? The
transportation budget was at one time simply viewed as a necessary evil to be tolerated; i.e., until Occum's
Razor was exercised throughout the corporation and the remaining budget to be scrutinized at the end of the 1990's
was the transportation budget. All is quiet now with "customer service" the key focus (naturally to ratchet
up sales). That is the trend; the focus should be addressing the issue of transportation costs before it becomes a
corporate focal point again. For ARCLOGIX software -  , we focus on an overall minimum cost model and the
selection of the best model solvers. is prepared for the future - today. |
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| Traffic departments are drifting on the sea of uncertainty, trying to second-guess what is a next best logistics strategy.
Recently, high volumes of shipments produced cost savings through economies of scale. With the reduction in traffic for most
corporations, cost reduction for transportation proved not to be a linear function. Costs did not drop as the same percentage
drop in traffic. How can this be? Economics 101: First there are fixed and variable operating costs, and second, the opportunities
for achieving savings are less as the volume of traffic falls. The trend - we've identified a new concern that is associated
with a shrinking versus an expanding economy. What does this mean to a traffic department's logistics strategy and to the
design of transportation models for TMS software? One of our customers offered a solution (now in )
to solve a related issue. The model regionalized traffic planning with traffic in different regions planned on different weeks
therefore increasing the volume in any one week versus spreading it out over a month. Simple. And "region" can be defined
in many ways, e.g., geographic area, traffic lane, etc. The downside - forget "just-in-time" shipping. But if
a pick-up / drop-off range exists or inventory turn is not an issue, volumes remain high. A second solution in
is to relax the savings expected on shipping individual orders (some orders may involve a negative savings), to achieve an overall,
entire trip, savings. This is an example of what is possible in a continuous mile type of trip where the carrier charges less
per mile (range) as the length of the trip increases. Simply, the added volume / orders are less costly to move by a carrier on
its own than with the continuous mile carrier; but if added to the continuous mile trip it reduces the cost of the other orders
on the truck to a lower per mile rate. Here we are equating volume of material with volume of miles. |
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| Then there is the volatile energy concern. Two guys from Texas get in the White House and fuel prices skyrocket.
Who would have guessed! The impact -- [all] carriers, already subject to narrow profit margins are seeing that margin squeezed
to a negative and the cost of fuel always an uncertainty. And soon to accelerate for the shipper, a fuel surcharge is being
applied to all forms of transportation. So while corporate sales are declining (actually it is often the margin of profit
on sales), the unit-price-to-distribution cost is on the rise as transportation costs increase. While ARCLOGIX is powerless
in reversing the price of fuel, the software has addressed two related issues: optimal, minimum path routing
of shipments, and fuel surcharge calculations as part of the costing algorithm. |
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| And the question that needs addressing as a major change in the shipping industry, what is happening with third party
logistics providers (3PLS)? Only a few years ago many were predicting that most firms would convert to 3PL management of their
traffic operation. Many firms with 3PLS involved are considering a trend reversal. What happened? We're not likely to be
able to chronicle all reasons, but an interesting question can be raised. Where is the incentive for the same 3PL managing
competing firms to actually initiate a logistics strategy in your firm, versus the other firm that "optimizes
planning / minimizes cost" so that as a result of your superior transportation planning the profit margins of
your firm looks better? The above is an unlikely scenario. What 3PLS have proved to be is great equalizers. Like water,
they are uniform in performance and seek the lowest level. They insured that all customers would experience the same
mediocre traffic management results. It is time, and a new trend, to revisit the use of an in-house staff and software
specific to the goals of the traffic department. It is also time to realize that 3PLS do not have magic silver bullets.
The solution is to go with a dedicated and motivated staff and TMS software that incorporates your specific transportation
logistics goals and strategies. |
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Web-based application service providers (ASPs) proliferated only a few years ago. Some fifteen firms offered their
transportation planning ASPs at one major logistics tradeshow. Today only a few remain and then the profitability is
questionable. That is not to say that virtually every logistics, supply-chain software vendor is without some Web-based
component in their software offering. (For example ARCLOGIX's has a client-like interface to our application
that appears to the user to be entirely Web-based.) Although the Web technology advanced the communication channels, the
access to information and applications and the ease of use, ASPs had some basic marketing flaws. With hindsight it is easy
to discern the issues with ASPs:
- Too many firms offering ASP systems arrived at the market at the same time; they overwhelmed the level of demand. Also remember
that most arrived post-Y2K system purchases.
- The pricing structure favored no one. ASPs absorbed huge investment dollars (usually venture firm money) whose payback horizon
when pricing was on some form of transaction basis, was many years out. Venture firms only tolerate losses for three to four
years out. The real game was to go public. "Financial planning" was dependant on a public stock offering not profit from
sales.
- Not frequently discussed, ASPs lacked functional flexibility. In attempt to minimize implementation and transaction-based costs,
virtually no customization to individual customer needs was offered by the ASPs. If you're not vanilla, forget being in the big
hopper with everyone else. That's claimed efficiency but for whom?
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| So what is the ARCLOGIX focus here? We almost took the plunge and offered an ASP version of whose Web components
satisfy all of the requirements. But we could not satisfactorily address each of the issues above. The current focus and
direction of ARCLOGIX is to incorporate all positive aspects of Websites and information transfers over the Internet with that
technology part of . |
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| The new logistics, which includes transportation logistics, was born with the rapid growth of Web/Internet technologies. It was
a technological advance predicated on an interest in directly sharing information. With the proliferation in the use of cell
phones and the Internet, everyone sought "real time" talking, because not to do so might cause missing some critical,
timely information. To embrace this technology, however, often was at the expense of losing existing or new functionality in
supply-chain software. |
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While seeming to be an outgrowth of EDI technology, which sought to standardize the communication across businesses and business
units, the goals of the new logistics were to:
- Consolidate information across applications, which promotes user access to data and applications and links the business
process shared by many companies aligned in the supply chain (this has often been referred to recently as collaborative
planning).
- Use the communication protocols of the new technology (XML; File Transfer Protocol - FTP; Simple Mail Transfer Protocol - SMTP)
as well as EDI to integrate and interoperate business processes with the purpose of sharing information and applications easily
among business partners in near real time.
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| The results of the new technology are better systems integration across businesses, an ease of implementation and improvements
in the updating of information. |
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| What are described above are changes in technology for supply chain management software. While much of the ARCLOGIX focus has been
in pursuit of technology changes, the real architectural design changes have focused on the reintroduction of the concepts of
artificial intelligence in guiding the new architecture of . |
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| The focus of the software is on dynamic transportation planning (and execution) models. The models are made dynamic
by a change in the rules, parameters and links to the data driving the models, adjusting the structure of the model with the
introduction of new stimuli with each run of the software. The transportation models learn and change the structure. They learn
and adapt to a new set of stimuli. They learn and grow in their understanding of the particular user environment in which they
are asked to solve problems. The software can be set through the asynchronous scheduler to be run continuously or only as
frequently as new primary data driving the model is introduced. This data, as stimuli, triggers adjustments in the models
that define the transportation process by changing the structure of the models. The structure and the rule parameters defining
the structure can be unique with each stimuli set. |
