Logistics System Solutions are Key — Pain Point 1: Resource Management

Introduction to Logistics

Logistics is an industry that relies on the people-augmented process of planning and running operations. The reliance on people purportedly allows logistics companies to react to uncertainty and quickly follow up with solutions that are effective.

For clarity, a group of items that are shipped in the same ‘container’ (this is a generic term and does not mean the TEU term that we commonly use) will be referred to as a parcel. Parcel represents the simplest unit of shipment in logistics, which cannot be further broken down in the entire parcel journey (or logistics flow).

This article discusses the importance of having system-based solutions to assist on-the-ground staff in logistics businesses to tackle the key pain points that I have identified, given my experience in PSA Singapore, Lazada and Janio Asia. Broadly, the benefits of having system-based solutions are:

• Reduce the turnaround time for implementing solutions in uncertainty
• Reduce the learning curve for on-the-ground staff to implement solutions in uncertainty
• Instil a intentional habit of continuous improvement and lean operations in logistics

Pain Point 1: Resource Management

Objectives for seller are:

• Ensure that 99% of parcels are delivered on time
• Ensure that parcels that are delivered beyond must-deliver time do not exceed must-deliver time by 1% of overall parcel journey

Fixed constraints:

• Must-deliver time of parcels (to customer)
• 3PLs involved in parcel journey

Flexible constraints:

• Time-windows for 3PL pickup at parcel journey level

Cost control levers for 3PL:

• 3PL parcel schedule planning: can be low/high parcel geographical pickup density per vehicle. Note: 1) Schedule = parcels to pick up broken down into shifts/batches/routes — e.g. AM/PM. 2) Highest uncertainty in 3PL parcel schedule for first-mile and last-mile
• 3PL fleet deployed in each shift/batch/route

Parcel-level alert prioritisation challenge:

• If parcel is delayed at first-mile, it’s not reasonable to ask the next-mile service provider to prioritise the parcel handover for that specific parcel over other parcels
• It’s not reasonable but if this delay can be predicted, time savings can be achieved even before the delay practically happens
• This leads to us solving the parcel delay prediction challenge

Parcel delay prediction challenge:

• If parcel delay to customer can be predicted, then what can be done about it?
• I can trace the root cause of the predicted parcel delay to customer as a specific 3PL delay
• I can arrange for earlier first-mile pickup — subject to seller availability; I can ask first-mile to prioritise pickup and enforce stricter service levels for downstream 3PLs before the specific 3PL delay actually happens; I can perform a cost-benefit analysis of the possible pre-emptive solutions, assess the tradeoffs and proceed with mitigating the delay risk or ignoring that
• If preventive action is taken, all downstream 3PLs in the parcel journey have to be involved. They have to adjust accordingly to the results of the preventive action. That leads us to another challenge: how can we forecast the results of the preventive action solutions that we can implement?
• Going ahead with the second approach above requires recalculation of time-windows for 3PL pickups, which has to be supported by system.
• If system can do this, parcel delay to customer can be prevented and the revised parcel delivery date can be obtained and updated to the customer

Preventive Action Results Forecast:

• This helps in cost benefit analysis of the possible preemptive solutions
• This also helps the other downstream 3PLs in the parcel journey to adjust their plans according to the projected results of the preventive action
• Only with their adjusted plans, the mitigation of the parcel delay can be achieved

Hub inventory lead time challenge:

• If parcel is first transported to a inventory hub instead of cross-dock, the parcel lead time might be higher.
• For cross-dock to be effective in reducing lead time, the prediction of parcel drop-off to the takeover 3PL needs to be accurate.

Air Freight flexibility Challenge:

• Air freight are usually arranged in big batches at lower frequency. There is less flexibility to book in parcels for next flight at the last minute.