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WEB-ENABLED
LOGISTICS
THE
ROAD
TO
B E S T- I N - C L A S S
SHIPPING
MANAGEMENT
Table of Contents
Introduction
3
Challenges
3
Offshoring and Outsourcing Increase Delivery Costs
Globalization Impacts Shipping Lanes and Costs
No Central Repository of Information or Overall Visibility
Limited Resources
Escalating Fuel Costs
Market Conditions
6
Ubiquity of the Internet
Emergence of ASP-enabling technologies
The Next Step: SaaS
Business Applications
The Agistix Approach
8
Best-in-Class Rules-based Processing
Reverse Auction Process for Logistics
Automated Invoicing
Operational Insight
Data Storage
Secure Processing
Immediate Implementation
Export Regulation Compliance
Case Study: Maxim Integrated Products
11
Conclusion
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Introduction
Today’s frantic pace of globalization, fueled by rampant outsourcing, has tangled
traditional supply chains. The result is unprecedented complexity surrounding the
logistics process and spiraling costs. Best-in-class enterprises report that taking back
control of the logistics process by making well-informed and timely decisions in this
frenetic environment is a top challenge. Tremendous pressure to deliver real-time
global visibility by closing the information gap between manufacturing and the rest
of the enterprise is another major issue. Adopting new technologies that bring logistics
operations in line with the rest of the company’s operations has proved to be the
best hope of untangling the mess, simplifying delivery processes, and creating
efficiencies that assist Best-in-class enterprises to retain their competitive edge
in a global market.
Challenges
Historically, the field of global logistics has not benefited from long-term study or
research due to the constantly evolving nature of supply chains. Lack of formal
training in the profession has exacerbated its inherent challenges. In recognition
of how complex the logistics field has become, the Massachusetts Institute of
Technology recently introduced a new Masters degree dedicated to logistics in the
school of engineering. But those currently on the logistics battlefield have been
fighting on the front lines without the benefit of formal tools they can use to handle
today’s complex delivery challenges.
Offshoring and Outsourcing Increase Delivery Costs
To begin with, the market pressure for rapid development and deployment of goods
has forced companies to look across continents to save costs on materials; many
have moved their manufacturing overseas. For some Best-in-class enterprises,
offshore sourcing has gone from 5 percent to almost 50 percent of their materials’
spend. Crossing borders, however, is an expensive and unpredictable proposition.
Transportation fees are still a large portion of landed costs. However, import duties,
fees, carrying costs, quality costs, supply risk and safety stock are just some of the
additional line items that must also be factored in. Best-in-class enterprises have
discovered that without real-time oversight on their logistics operation and the ability
to optimize international transportation costs, their foreign sourcing costs run the
risk of being grossly underestimated.
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Globalization Impacts Shipping Lanes and Costs
Currently, there is an enormous imbalance between East-West trade. As China’s trade
activity has increased around the globe, the eastbound shipping lanes to the U.S.
have become congested, driving up logistics costs. On the other hand, westbound
delivery routes have been severely discounted so that empty containers can be
returned to the Far East. As the world’s trade activities proliferate, trade lane changes,
which directly drive transportation costs, will continue to impact logistics costs.
To compound the challenge, import regulations, with their extensive use of
compounded exceptions and “provisional” rules, as well as the application of nonlinear tariff formulas, make it difficult to predict logistics costs. This adds a level of
complexity that is impossible to predict over any length of time—with actual costs
often not known until the actual billing has been received.
Fluctuating trade imbalances—not only with China but all around the world—have
prompted Best-in-class enterprises to look for a technology solution that can provide
visibility and control for wildly changeable logistics costs.
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LOGISTICS
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No Central Repository of Information or Overall Visibility
Globalization adds new direct
Much of today’s logistics processes are handled manually; logistics data for freight
shipments does not flow into the other operational networks of the company, and there
and indirect expenses to
is no way to identify trends, forecast costs, or get an overview of delivery activity.
logistics cost calculations,
Invoices, reports and miscellaneous logistics paperwork come in different formats:
including custom duties and
static PDF files, sparsely populated Excel spreadsheets, illegible receipts and more.
Without data that can be easily reformatted into reports, most enterprises lack
taxes, import fees, increased
the visibility needed to make truly informed decisions about how to reduce
inventory carrying costs,
transportation costs.
supply chain disruption risks
Limited Resources
and overhead for additional
Another challenge faced by logistics departments is dwindling staff. Because many
safety stock.
enterprises underestimate the level of logistics sophistication their globalization
efforts demand, they downsize the one department that needs more resources, not
less. Some enterprises have turned to third-party logistics (3PL) companies for help.
Unfortunately, the core competency of 3PLs is to expedite traffic, not necessarily
to reduce a company’s transportation costs.
Escalating Fuel Costs
Rising energy costs result in higher transportation fees for trucks, ships, trains
and planes. Since enterprises cannot alter the limited supply of fuel in the world,
they’re turning to technology to help them mitigate other components of their
logistics cost equation.
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Market Conditions
Three primary forces had
Three primary forces had to converge to provide Best-in-class enterprises a cost-
to converge to provide
effective, practical solution to their logistics’ problems: 1) a secure, ubiquitous
Best-in-class enterprises
World Wide Web with a fast connection, which allowed easy access to real-world
information; 2) the ability to organize that data into a format that helped managers
a cost-effective, practical
make intelligent, well-informed decisions; and 3) technology advances that
solution to their logistics’
supported permission-based access to a global user community
problems:
1) a secure, ubiquitous
World Wide Web with a fast
connection, which allowed
easy access to real-world
information;
Ubiquity of the Internet
Ten years ago, when the Internet was still an unproven entity, it was viewed
skeptically by enterprises. Since then, dramatic improvements in firewalls, IP
protocols, and load-balancing tools have made the Internet more secure, reliable and
scalable. Browsers are now an accepted application user interface. And high-speed
access has accelerated the adoption of the Internet as a practical day-to-day business
tool. Today, enterprise employees use Explorer, Netscape, Safari and other browsers
to quickly search for information, buy goods, and even pay bills.
2) the ability to organize that
Emergence of ASP-enabling technologies
data into a format that helped
The declining costs of bandwidth have made it possible for complex technologies to
managers make intelligent,
be delivered over the Web. These technologies are being developed and deployed by
well-informed decisions; and
3) technology advances that
Application Service Providers (ASPs). Enterprises that used to invest costly resources
to develop their own applications or buy off-the-shelf software solutions now subscribe
to applications developed and “hosted” by ASPs for a fraction of the cost.
supported permission-based
The ASP revolution made it possible to deliver information-rich, price-comparison
access to a global user
engines over standard Internet browsers and—this is the important benefit—start
community.
making sense of the information. One of the more effective products of this revolution
was the real-time reverse auction. Overnight, anyone with an Internet connection could
find product information and compare apples-to-apples costs for travel on Expedia and
Travelocity or hunt for bargains on Ebay. Information that had previously been held
hostage by a select few was now available to everyone online. In a free information
society, competition abounds.
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The Next Step: SaaS
Software as a Service, or SaaS, is the next evolutionary step of the ASP model.
Cutter Consortium, an Arlington, Massachusetts research firm, states that
the transformation of the software business model from packaged products—
like off-the-shelf solutions—to Web-enabled subscription services like SaaS
is one of the most significant present-day trends in the IT industry because
of all the benefits they offer enterprises:
■ Low overhead and involvement
■ Little need for IT manpower
■ Immediate Return on Investment (ROI)
■ Guaranteed cutting-edge technology
SaaS applications provide support for multiple users, multiple applications, and
multiple platforms. Since they run on the Web, enterprise employees can use them
on any computer with Internet access. The SaaS—or ASP—provider takes care
of all updates and maintenance to the system; the enterprise is off the hook for
IT support. In today’s rapidly changing world, updates can be made quickly at no
additional cost to users.
Indeed, Best-in-class enterprises have found that using ASP technologies can shorten
their deployment times drastically and minimize total cost of ownership (TCO) by
eliminating the high upfront costs of hardware, consulting support and network setup.
In fact, the Gartner Group claims that application outsourcing can actually reduce
TCO by 30 to 50 percent, depending on the complexity of the application.
Business Applications
Consumer applications have paved the way, but sophisticated B2B (businessto-business) applications are now becoming commonplace in the global economy.
For example, Salesforce.com is being used for enterprises as large as Cisco Systems.
The pharmaceutical industry has also been using the ASP model to advantage.
Large pharmaceutical distributors like McKesson, Cardinal and Amerisource Bergen
now allow hospital and retail pharmacies to search for and order products with
real-time pricing and availability data. Not only is this process saving time, money and
effort, it helps deliver the proper medication to each patient.
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The Agistix Approach
Within minutes of imple-
Armed with years of practical experience in the logistics space, Agistix developed
menting the Agistix solution,
and deployed a web-based solution to automate the shipment processing tasks that
customers can submit a
are at the core of logistics’ activities. Top global logistics experts told Agistix that they
had an immediate need for processing, organizing, and controlling the costs of their
request for a shipping quote
heavy freight shipments. Reducing costs was the first priority, followed by visibility
and begin receiving bids
and control of their expanding global operations. Logistics personnel said they were
from pre-qualified carriers.
drowning in paperwork that provided relatively little usable information. What logistics
experts wanted was a technology platform that would allow them to take back control
of their exploding global logistics programs and start saving money immediately.
Agistix developed a centralized Web-based shipment processing application that
is simple to use and can be scaled for any company, from small start-up to global
enterprise. The Agistix solution works for small packages as well as heavy freight;
domestic or international; and by land, sea or air. There is no software to install and
no maintenance costs to consider. Agistix has succeeded in delivering Software as a
Service with access to real-time shipping costs that gives enterprises a hefty Return
on Investment (ROI). Initial customers have documented savings of greater than
25% in just six months.
Best-in-Class Rules-based Processing
One of the key features of the Agistix solution is a rules-based processing environment
that allows enterprises to customize user settings that conform to enterprise business
rules, such as the carriers they prefer to use and the service levels authorized within
each carrier. Logistics managers specify user permissions in advance, so routing
guidelines and cost-containment measures are enforced at the most crucial decision
point: each user’s desktop. Each enterprise’s unique logistics rules and exceptions—
enforcement of which can confound today’s global logistics personnel—are built right
in, taking the guesswork out of the process.
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Reverse Auction Process for Logistics
A key component to reducing costs is competition. Unfortunately, due to limited
resources, most firms do not have time to check the shipping market for every lowcost opportunity. To address this need Agistix developed a unique, dynamic bidding
environment to match customer shipment needs with carrier capacity on a global
basis. The Agistix platform allows users to pause during shipment processing, hit a
button, and send out a detailed, standardized bid request to dozens of pre-screened
carriers. Carriers log in, reacting to an e-mail alert, review the bid details and enter
their freight quote. Users select the carrier that offers the best value for that specific
shipment, and complete the shipment processing. All related shipping documentation
is then automatically generated and stored online.
Automated Invoicing
To close the processing loop, Agistix provides a weekly electronic invoice through
an Invoice Consolidation Service that compiles all transportation vendor billing.
Every shipment detail is included in this report—vendor name, cost center, invoice
number and data, service level, weight, and cost—in a clear, easy-to-read format.
Logistics managers finally have visibility to all shipment data in a centralized
repository, which allows them to analyze trends and ensure compliance with the
most complex governmental regulations.
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Operational Insight
Enterprise executives with high-level responsibility for logistics operations can sort
and search historical data by shipment status, customer reference number, tracking
number or shipment date. They can use this information to make decisions about
future carriers or changes in logistics procedures.
Data Storage
Because Agistix is an ASP, the company stores all shipping transaction data
and document images in digital format off-site. The solution provides web site
security certified by TRUSTe, an independent auditor, which mitigates fraud from
unauthorized users.
Secure Processing
Agistix built in multi-level security features, including the most powerful 128-bit SSl
encryption scheme allowable by law, to protect enterprise data and mitigate fraud.
Immediate Implementation
Since Agistix hosts the application on its own servers, companies incur no costs
associated with integration and set-up. The data entry processes are so intuitive that
the average training time for an enterprise user is less than 45 minutes.
Export Regulation Compliance
Through the Agistix solution, Best-in-class enterprises can receive automated
assistance in their U.S. Export Compliance efforts. The system flags the user when
shipment parameters dictate that a Schedule B, sometimes known as Harmonized
System (HS) number, or an Export Control Classification Number (ECCN#) is required.
Export license details can then be entered and stored with each shipment record.
This recordkeeping is invaluable for export compliance, as well as Sarbanes-Oxley
and other government regulations.
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CASE STUDY: Maxim Integrated Products
Maxim Integrated Products is a multinational leader in the design, development
and manufacture of integrated circuits. The company boasts 2005 net revenues of
more than $1.6 billion and over 8,000 employees across facilities in the U.S., the
Philippines and Thailand. Diverse geographic locations made it challenging for
Maxim to control shipping and distribution. Like many Best-in-class enterprises,
Maxim needed help with the following:
■ Centralize decision-making for how goods would be
shipped and which carriers would be used
■ Enforce strict parameters on shipping methods and
vendor selection
■ Reduce overall costs of shipping and distribution
■ Simplify management of volumes of weekly invoices
from multiple vendors
Maxim chose the Agistix solution instead of developing proprietary software. Within
hours of implementation, Maxim was able to enforce a uniform policy for shipping
methods and vendor selection. Gradually, Maxim realized increased pricing visibility
for small-parcel shipments, and began using the spot-quote market for heavy freight.
By the end of one quarter after implementing the Agistix solution, Maxim had reduced
shipping costs by more than 28 percent.
Within six months, instead of processing up to 500 shipping invoices each week,
Maxim began receiving a single electronic invoice for all weekly transactions.
With this change alone, this world-class enterprise has reduced accounts payable
processing time from 70 hours per week to five minutes per week, generating savings
of up to $20,000 each month.
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Conclusion
Our Mission: To achieve
Best-in-class logistics processes are now available to any enterprise.
unparalleled success for our
Global companies know that the operational complexities caused by globalization
customers, partners and
must be managed proactively. They realize that to remain competitive in a global
environment, they must optimize their supply lines to build in more flexibility
ourselves through the
and efficiencies. The road to flexibility and efficiency is technology; in particular,
convergence of passion,
technologies that unite multiple processes and systems into a common information
technology, and logistics
expertise.
and real-time decision support network that supports all internal and external
relationships. Agistix represents a convergence of technology, practical experience,
and logistics capabilities that can deliver for companies the promises of the
21st century.
About Agistix
Agistix is a business Application Service Provider that reduces logistics costs and saves
time by automating the shipping process. We provide an enterprise-class solution designed
to process shipments worldwide, from small package to heavy freight. We have developed a
competitive, Web-based marketplace that leverages technology to bring real-time visibility,
control and savings to our clients.
U . S . H E A D Q U A RT E R S
643 Bair Island Road, suite 209
Redwood City, CA 94063
P H O N E : : 877.724.4784
FA X : : 650.780.9948
E M A I L : : [email protected]
W E B : : www.agistix.com
© 2006 Agistix, Inc. All rights reserved.
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