Working toward integrated digital supply chain transformation
Today, nearly every 4flow client around the world is working on digitalization topics. To gain insights about these digital initiatives, supply chain professionals gathered in Shanghai for 4flow Logistics Day recently. At the event, engaging speakers from AGCO, Continental and 4flow shared expertise gained from large-scale digital transformation projects in China and around the world.
There is now a new quality of software and process integration that is leading to much higher responsiveness and flexibility within supply chains. Companies that have started their journey and reached major milestones in a digital transformation already know that changing how people do their job is one of the biggest challenges. However, digital implementation is worth the effort, as it brings new benefits and opens up new opportunities thanks to new disruptive technologies.
The big picture of digitalization
There are six disruptive factors that drive disruption in the digitalization context: the shared economy, autonomous driving, mobile payments, big data and cloud solutions, drone deliveries, and blockchain. The shared economy is made possible by digital platforms that act as agents between vendors and buyers. Uber and Airbnb are examples of the impact on how people find and pay for transportation and accommodation.
Autonomous driving is not fully widespread yet, but the digital integration of sensors, GPS and information is enabling multiple pilot projects on public roads to pave the way for widespread application in the future. Mobile payments such as PayPal and Apple Pay are making seamless digital payment processing a reality today. As mobile payment services become more widespread, more and more business transactions will shift to such platforms.
Cloud-based solutions that provide ubiquitous access to data are already shaping how people communicate, share information, shop and conduct business. A more futuristic sounding technology that is already undergoing pilot testing are drones used for last mile delivery. One pilot project has already been implemented in China, with 8,000+ orders processed in three months via drone delivery – especially useful in remote areas. As data and information security is also an important issue in a digital world, blockchain promises to ensure more secure and decentralized processing of digital transactions. As new technologies emerge, major manufacturers are demonstrating how digital solutions can be implemented for success.
AGCO takes a global approach to digital transformation
In Europe, AGCO works with 4flow as a fourth-party logistics provider to successfully streamline inbound flows for the agricultural manufacturer’s entire network and uses 4flow’s cloud-based integrated Transportation Management System (iTMS) to reduce costs by more than 25 percent. The initiative was honored with the German Award for Supply Chain Management 2016 by BVL International and with the ELA Project of the Year in 2017 from the European Logistics Association.
For AGCO’s inbound supply chain in Europe, the cooperation partners managed to reduce days of supply by 24 percent and cut carbon emissions by 14 percent, while increasing process compliance by 15 percent and on-time delivery performance by 10 percent. AGCO now benefits from the AGCO Smart Logistics initiative in China as well, by way of a centrally managed, transparent, sustainable, and efficient inbound supply chain. “We decided to work with 4flow, a neutral 4PL, because of its strong IT capability and collaborative approach,” said Jim Zhou, senior manager operations at AGCO about the company’s decision to partner with 4flow. “The biggest challenge was to apply a concept that worked in Europe and to transfer that to China,” he explained. The implementation of AGCO Smart Logistics in China in collaboration with 4flow is already underway with key achievements. More than 100 suppliers in China have already been integrated into the AGCO Smart Logistics initiative. On a monthly basis, more than 1,000 transport orders are executed via digital supply chain, enabling transportation cost reductions of more than 20 percent.
Thanks to the application of big data analysis, AGCO is able to track and trace its cargo. AGCO’s proven and transferable concept has already led to some of its suppliers applying the concept to their own inbound supply chains. To achieve this success, however, some regional challenges in China had to be overcome. Many suppliers in China are hesitant about being on board due to concerns that working with AGCO via a digital transportation management system would increase workload. But just like it was important in Europe, change management was also key in China.
Continental Automotive optimizes networks and transportation
Continental has grown its presence in China continuously since the 1990s. First, the automotive supplier followed its own customers to the market and then rapidly began to supply local Chinese OEMs. Collaboration is also essential to meet the challenging task of ensuring that Continental’s large network of plants and warehouse locations and its own suppliers and OEM customers runs smoothly. Currently, Continental is growing by one plant and about 1,000 people per year in China.
To optimize its supply chain and handle the growth, Continental opted to add a network design function to its team in 2015. Continental began modeling its supply chain network to first of all determine the optimal location of facilities including warehouses, plants and suppliers. Secondly, modeling its supply chain enables Continental to identify the best flow of products through its network of facilities. To support supply chain optimization, Continental deploys 4flow vista®, the integrated standard software for supply chain design and transportation planning. “We rely on 4flow vista for supply chain network optimization and it has taken us a big step forward,” Andreas Subbe explained.
As its next development step, Continental decided to implement an integrated transportation management system (iTMS) with 4flow. The scope of the iTMS project included defining, implementing and operating a China Supply Chain Tower (CSCT) for the organization in China. Nine plants across China are involved with a focus on domestic road, rail and air transportation. The total volume of transportation and shipments includes more than 600 transportation relations and approximately 40,000 shipments per year that need to be managed. “Continental’s growth stemming from various acquisitions led to a decentral suboptimized footprint, where now the CSCT enables us to gain the undisclosed potentials,” Andreas Subbe said.
The CSCT implemented by Continental integrates all of its relevant processes from planning to execution. This includes network and strategic planning, tactical planning, transportation requests, dynamic planning, transportation execution, billing and invoicing and final reporting. Delivery performance, response time, damage ratio and cost savings are among the performance indicators that Continental is monitoring.
Up until now, the CSCT has realized a significant net cost reduction for Continental Automotive in China. Further achievements include the onboarding, integration and qualification of a team of more than 10 professionals. This team relies on the 4flow iTMS to support daily operations including the management of a hub network with four locations across China.
Manufacturers in China are already implementing future-ready digital solutions combined with people-empowering managed transportation models to reduce costs and improve efficiency. In the end, each player in the supply chain – whether it be a supplier, vehicle manufacturer or logistics service provider – must work together to find the best solution.
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German Award for Supply Chain Management 2016
Global leader in the design, manufacture, and distribution of agricultural solutions AGCO and 4flow are the winners of the German Award for Supply Chain Management 2016 presented by BVL International.