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
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
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.
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
« 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
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