A common dilemma in organizations working with global logistics operations is: while the benefits of various products focused on digitization of supply chains and provision of an extended track and trace functionality sound so appealing, is it worth the money?
There is no easy way to answer this question. However, the good news is that you can breakdown all aspects under the ROI umbrella to simplify the thought process and analysis. Looking at specific topics, we can identify common themes across several industries. Using results experienced by customers, we can share insights from businesses that have successfully answered this question, from a local supplier of raw materials to a global distributor of goods.
Improvements on resource efficiency and faster conflict resolution
When leading a transport and logistics department, delivering on the company’s strategy with efficiency is essential. One of the aspects to be quantified is the impact that real time track and trace, or the lack of this capability, has on the execution of operational tasks. One of the aspects to be considered is the management of the operations across several vendors. It is industry standard to diversify the portfolio of vendors and have several contractual supply chain partners. That is a natural and strategic choice since vendors can have better service offer or price for specific trade lanes. However, the diversification also makes the task of consolidating information across all of them more time-consuming, cumbersome, and brings the risk of miscommunication internally or externally.
Calculating the average time spent by your team on multiple websites of ocean carriers, 3PL partners or rail operators collecting the data is a beginning. Comparing that figure with the cost of a visibility tool, increased productivity gained by FTE and gains to overall strategy can strongly lead to an indication of return on investment.
Visibility can also impact regular tasks that need to be performed on a weekly or monthly basis. Looking at a routine of an invoicing process, it’s possible to identify additional aspects that influence the return on investment of real time track and trace solutions. Working with several vendors for ocean and inland transportation, each invoice needs to be reviewed individually. In case all numbers look right, the review should be uncomplicated. However, if finding a lumpsum that is above the expected, additional hours or even days will need to be invested to understand the discrepancy. This process involves cross checking details of a particular shipment with your internal sources, putting the invoice on dispute with a carrier, requesting explanation on the calculation, verifying once again with the main source of truth and so on.
Having the information from all the vendors, including carriers, marine terminals, and trucking companies, to a level of details that mentions what happened and when expedites the process. A single source of truth shared with vendors eliminates all these extra steps and helps to maintain a simple verification system, anticipating additional charges and reducing the need of resources and hours allocated to the monthly task.
Reducing costs related to documentation and errors
Customs clearance is certainly one of the most important processes in international commerce. For a customs house broker, or a related department within the company importing the goods, it is an inevitable task to collect the information from various sources, primarily documents, and transition selected parts of it into the customs clearance declaration. Mistakes in this process will not only jeopardize the name of the company in front of the Customs Authorities and its risk management systems, but also add an unexpected extra cost to your supply chain.
On a usual process of customs clearance, a packing list or an original bill of lading will be issued. Subsequently, it will be shipped to the relevant business partner with a regular courier service, or sometimes with captain's mail. In case any step of this process is not correct, the delay is substantial. It’s not uncommon that containers spend several days in the destination waiting for lost documents to be re-issued and sent once again. Apart from obvious costs occurring from demurrage and detention, the cost of generating new document and the time invested is also considerable.
Digitizing trade documentation not only reduces potential errors in customs clearance, along with standardization, it is the start of automating cross organizational workflows. The gain of automating this process partially or fully, such as using data from the bill of lading to automatically fill up customs declaration and feeding partners with digital copies of documents, can lead to savings on the time spent, demurrage and detention fees and service levels. With customs authorities progressively becoming digitized, investing in new tools can minimize the number of mistake caused by manual entries and, over time, leave behind the paper-based document exchange.
Track and trace reducing the risk of cargo losses
Another common global problem in supply chain and logistics is cargo theft. While some countries face it to a lesser extent, statistics show that owners of apparel, electronics, pharma goods, alcohol and tobacco in many countries are still targeted. Considering the long transit time between warehouse and the port, finding where the burglary happened exactly becomes extremely hard. Companies already budget by default "losses to theft"..
Extended visibility, that monitors every step of the transport can help to prevent these incidents. With detailed milestones for container track-and-trace received from terminals, trucking, and rail operators finding deviations becomes easier. The data points empower companies to act on changes in the transportation schedule and make all the necessary proactive steps to prevent cargo theft.
How to create your own ROI analysis
While all the topics above are general aspects that influence the return on investment for track and trace, the analysis should be done considering the scenario of your business. A few simple steps involved in this process are identifying the problem that can be solved by granular visibility together with a review of the costs linked to that situation. The costs should include the hours involved on repetitive, non-value adding manual tasks, charges and fines paid, loss of goods and all other aspects that are directly or indirectly affected. Simulating or trialing the impact of the changes gives a good basis for comparison.