Deploying efficiency all along the chain
The application of technology like an Oracle transportation management solution can cut down a complex process for route and capacity optimisation of trucks, from at least five hours to a mere two minutes.
This could mean potential savings of time, resources, fuel and money for a 3PL or third-party logistics company like Biforst. Malaysian-owned and based in Seri Kembangan, its COO Kathegesan Bala shared that the logistics industry is growing year-on-year, and projects that this year it could yield as much as RM200 billion.
He even viewed Malaysia as having potential to become a logistics hub for this region, especially with big foreign players already eyeing and getting ready to invest here.
Karthegesan said, “The distribution network here is good because of our good infrastructure, and not to mention we have lots of space.”
All this plays well into Biforst’s bigger plans for the future, and it realises that technology would have a huge part to play in enabling them to meet future needs and demands.
Today, most big manufacturers would outsource their logistics to companies like Biforst which would then handle the entire supply chain.
Fourth-party logistics or 4PL means the inclusion of the procurement and fulfilment portion, but it’s really fifth party-logistics that Karthegesan is excited about, calling it a new business model that can potentially augment what they do, with services and service fulfilment.
Imagine if there was an online platform or an e-commerce environment, where retailers can place orders of products from large brand manufacturers. What Biforst has done together with Oracle is deliver a digital marketplace for retailers to buy what they want and when.
Karthegesan points out that one manufacturer could have as many as 70 to 80 distributors. If the geographical area is hard to reach, these distributors may appoint sub-distributors and they in turn hire agents. On top of that, there is also a lot of uncertainty as to when the placed orders would arrive because of the usually manual processes involving fax machines and phone calls.
He said, “A retailer’s challenge is the cash that becomes tied up in inventory. This poses a financial risk and it is common to see shelves empty because some SKUs (stock-keeping units) are out of stock.“
So besides making the whole supply chain become leaner and more efficient, retailers benefit from better cash flow, better inventory planning and consumers benefit from more choice and fresher produce.
With Biforst taking this new model on, they do carry some financial risk as well in the form of warehousing the inventory.
“In the long run, we are looking at unlocking value and reducing cost for the consumer by weeding out the multiple handling,” Karthegesan said.
In essence Biforst has created an integrated system to tackle all these big volume transactions – giving retailers a virtual warehouse and also helping them save cashflow.
This solution targets usage from the convenience retail sector which are large chain stores with typically 500 to 600 stores nationwide, like MyNews or 7-eleven outlets.
The forward-thinking COO also has big data on his mind. “What’s critical also is big data and mining it.”
Currently data sits with the manufacturer and not much is happening with it. The case would be different with Biforst’s digital platform which began operations over six months ago.
Oracle’s VP of Cloud ERP/SCM Applications Jasbir Singh said, “By bringing the e-commerce portal to retailers, we can sense demand in real-time – there is intelligence about location, demographics, time frame… this is big data which can be mined.
This real-time visibility can lead to better planning and also better management of inventory and supply chain.
Karthegesan said, “We want to apply the same convenience consumers get to the B2B space. Retailers focus should be on selling, and not having to worry about logistics.
“We are not in the IT business. Oracle’s solution enables us to be more efficient and regain value. We didn’t want to incur TCO so we wanted a SaaS platform. And this came with supply chain management knowledge and best practices,” the COO explained.
This is just the first phase, and already there is talk of a second phase involving the Internet of Things or IoT technology.
Imagine stores that do not have to place orders because of an auto-replenishment feature that would order a new batch immediately once sensors detect low-levels of SKUs.