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Utilizing Technology In the logistics industry results in more efficient sales activities and physical distribution

Tenaka Budiman, Executive Board of ALI

Those who work in logistics industry and supply chain management (SCM) should know everything about all physical distribution processes, specially in sales division. When an order is receive from the salesman, the order must then be processed at the sales office, sent to the warehouse and finally delivered. So, in the sales division, most processed are govern by logistics and the supply chain.

On this occasion, I want to discuss the use of technology in logistics, especially in relation of sales and the physical distribution if fast moving consumer goods (FMCG). From what I observed, the process begin when the salesman leaves the office with a stack of invoices and some products for sales in a small box. In this case, I went along with the salesman to take orders. The interesting things is that he brought a personal data assistant (PDA) to record the orders from the outlet, and when leaving the office, he recorded the time of departure and the mileage on his motorcycle using his PDA. At the first outlet, the salesman held up the PDA to scan the barcodes attached at the outlet. As he arrived at the first outlet, I notice there were a few barcodes from other companies that were also attached to the outlet. This indicates that the store sells some products for other companies that also use PDA technology. The salesman then went strait to the store owner and submitted the invoices to be prepared and then looked at the displays to check the composition of other products on display. After the payment was completed, the store owner made a recording of all the new ordered items on his PDA. The salesman then unveiled the newest products that he had brought from the office and the store owner took the products he was interested in, paid with cash and put all the information in his PDA.

After the salesman finished at the first store, he then visited the next store and repeated the same process. By noon, all the information from his entire day was stored in his PDA which he would later connect to the office computer so that the delivery orders that have been obtained can be fulfilled by the afternoon.  If the connection is interrupted, the salesman can also use his cell phone to deliver the orders manually. In the late afternoon, after the completion of the salesman's route, we returned to the office to synchronize the PDA with the computer in the office. The new orders obtained in the afternoon will be fulfilled the next day, but preparation will begin in the warehouse division in the same day. Another interesting thing I notice while visiting the stores with the salesman was that some stores can return some products because the products had been bitten by rats, were approaching their expiration dates or there were defects in the product packaging. All of this was recorded in the PDA again and although the products were not immediately taken by the salesman, they were later picked up by the distribution/delivery division. When the salesman arrived at the office, he recorded the time of arrival and the kilometers spent on his vehicle. Then he reported the result of the day by paying a brief visit to his supervisor. Finally, the PDA was given to the logistics division, where all the PDAs will be synchronized with computers in order to build a summary of the day's orders.

The activities that a salesman does are basically the same whether he works in general trade or modern trade. Both kinds of salesman use a PDA for various purposes, such as ordering and for many other activities, but ordering is a bit different modern traders dealing with large national accounts such as Carrefour, Hyper Mart and others. For these large accounts, they are more likely to use technology such in B2B.

Next, let's discuss the duties of the logistics division. The division is responsible for planning deliveries for the next day. This is known as a route planning as delivery routes need to be constantly redesigned so that deliveries are efficient and timely. They must determine in what order to visit each destination. Oddly, I did not see the use of technology when performing the following activities:

1.       Delivery route planning

2.       Sales visit planning

3.       The picking process, when the warehouse management picks the orders for the warehouse staff does the picking and the delivery process is done manually.

4.       The payment system, when cash is received directly by the salesman or driver from the distribution division.

So, technology is in widespread use in the sales and distribution divisions but is not used for all logistics activities, especially in warehouse management, transportation management and the financial area, in relation to payment transactions from store to the company. At this point, I want to emphasizes that the use of technology is not often used in the warehouse and transportation divisions.

Since I have been working in the FMCG sector in both manufacturing and distribution, I have noticed that the use of technology in the warehouse management system (WMS)is still not seen as particularly valuable. This is also true for the transportation management system (TMS).

The order fulfillment process works like this: the salesman receives the order which is the executed by the warehouse division and transported by the delivery division. There are many things that I thought could be improved, for example, the staff in the warehouse processes the orders one by one for every store that will be loaded into one truck. The normal process of picking often causes orders to be delivered late because the arrangement of goods in the warehouse is not efficient. With clear regulation in place and by exercising the first in first out (FIFO) and or First Expired First Out (FEFO) strategy, the picking process in the warehouse would work much faster. Some warehouses use racking systems but do not employ a reliable labeling system resulting in uneven density. Sometimes products in rack level one and two are empty but at the top level there are too many goods being stored. The staging area may also be flawed with just a very minimal management system, such as simple horizontal lines on the floor in the storage area, staging or dispatch. In this case, each worker does the picking of goods based on instinct, always having to try to remember where they usually keep each different type of product. This activity can easily bottleneck if a worker usually does the picking is sick and their replacement has to ask where each product is located. All these activities in the warehouse have an impact in the overall level of inventory accuracy, as well. Before, applying technology to warehouse activities, 5S and the visual management of storage needs to be assessed to find out exactly what technology is needed to replace these activities because if the wrong technology is chosen, then more problems will be generated. With the wrong technology, stock variances and wrong delivery will remain a constant problem for the warehouse workers.

On the other hand, delivery rote planning, which is based on every customer order that goes through the PDA system, is done manually. I observed that if a particular worker is sick, no one else has the ability to set up the orders by store location. This is major problem. Several store orders should be loaded into a single truck and deliveries should always be on time, but the planning must be done properly for this to happen. This capability to plan routes is based on human intuition and memory and requires extensive training. I think this is area in particular can be improved by using the right technology. Route planning and setting up orders for multiple stores in a single multi drop truck could be aided by the right technology.

In the sales area, the use of technology is obvious, but its existence in the warehouse and in the transportation division is not so evident. The result is less than optimal performance as the time needed for every process, from order capturing, order processing, routing and delivery to the preparation in the warehouse and especially in picking, takes longer than is necessary.

For some people, the use of technology in the warehouse and in the delivery fulfillment is not considered advantageous, but it is viewed as just an expensive and non value added investment. Consequently, improvements in logistics generally do not occur. The use of technology in the sales and distribution divisions is where added value will mostly likely be felt, especially since a lot of the work that was previously done manually will now be done using technology, so the process become efficiency and we can shorter cycle times. But one must not forgot, sales and distribution can not be separated from warehouse and delivery fulfillment. All divisions are integrated in the supply chain and the flow of goods, information, cash and products return must be smooth. So, the three strategies in SCM, which are product leadership, customer focus and operational excellence, should complement each other, although one will likely dominate depending on what the company's priorities are.


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