Tracking Suppliers

February 15th, 2013 - How order management can drive a reliable and cost-effective supply chain

​Companies including supermarket chains and clothes manufacturers are opting to hand over management of their supply orders from creation to final delivery.

​“The idea is for companies to change their relationship with suppliers,” says Frédéric Serra, head of business technology at Bolloré Logistics in France. « Order management shifts responsibility for transport from suppliers to a single logistics provider.” In this way, the logistics provider can consolidate orders and get the best price for transport, he adds.

Order management involves the logistics provider handling tasks related to suppliers such as expediting orders through local teams, sending delivery reminders and ensuring that the right documents are completed in order to comply with local regulations and limit disruptions to the supply chain.

The logistics provider also manages shipping and can consolidate deliveries from different suppliers through the use of local consolidation platforms. The service is supported by information systems that provide tracking and reporting including performance measurement of suppliers.

The order management concept has gained traction as companies increasingly look to reduce risks and costs in the supply chain while sourcing far from their home markets. “It’s extremely difficult for companies to keep control and maximize logistics when they have different incoterms with multiple suppliers,” Serra says, referring to the international trade definitions.

Today, SDV has around 180 clients using the order management service. That represents roughly 400,000 open orders in SDV’s active database.

One client, a leather goods group, opted to consolidate supplier deliveries in Hong Kong and Quingdao, China. The goods are then dispatched to destinations in Asia and Europe. As soon as the orders are confirmed, they are sent to SDV electronically and routed to the closest consolidation platform. SDV will send reminders to the suppliers seven days before the goods are due to ensure they arrive on time, in the right quantities and with the correct documents. SDV also checks the quality of the goods when they arrive at the consolidation platform and reports back to the client. SDV then ships the orders, tracking each shipment to its final destination.

« We plan ahead and reduce the risks by calling suppliers well in advance and ensuring that everything goes as planned, » explains Serra. SDV can react rapidly to potential delays by switching from sea to air transport, for example, because it has offices in the same time zone as the suppliers, he adds.

Having a presence close to the supplier has other advantages. Sharing a common language and culture facilitates communication with suppliers while being able to prepare documents ahead of time helps avoid last-minute delays.

Performance measurement is another important order management tool. The logistics provider gives companies information such as the percentage of deliveries that are on time for each vendor, for example. In some cases, order management allows the value of the goods in transit to enter the company’s balance sheet as inventory as soon as the logistics provider takes control of the cargo, Serra adds.

In order to outsource order management, companies must invest in new technology systems to transfer the right data to the logistics provider. Companies must also be prepared to share sufficient data with the provider.

Finally, in any order management agreement, the responsibilities of the logistics provider must be clearly defined, says Serra, including whether the provider will ship and track the goods beyond the warehouse. “This is a partnership between the company and its logistics provider,” Serra adds. “We can work together to create a more secure link to suppliers.

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