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A Conversation with Lucas Kuehner
Managing Director, Panalpina US
and Michael Davies
Head of Logistics and Supply Chain Solutions, Panalpina USA

LQ: How are 3PLs using IT to coordinate the supply chain requirements for companies across several modes of transport? (David Closs, Ph.D.)
Lucas Kuehner: The trend in supply chain management is to make use of collaboration platforms that allow modeling of all stakeholders within the supply chain. These stakeholders include suppliers, customers, warehouse and DC facilities, and so on.
They also include 4PLs and LLPs in conjunction with executing 3PLs, freight forwarding and domestic transportation companies.
Michael Davies: In order to maximize the value of those collaboration platforms that Lucas mentions, it is vital that data access rights and Web visibility are configured to provide end-to-end visibility—and in some instances, where required, with limited visibility and reporting for specific parts of the supply chain.
Lucas Kuehner: The data and transaction histories provided by these platforms can be used to improve forecasting and develop optimized models for intermodal transportation chains, based on required lead times, cost and economies of scale such as development of consolidation/ deconsolidation synergies. Everyone in the supply chain must team up to help implement these integrated platforms so we can deliver optimized solutions.
LQ: What are you doing to create better visibility using IT in regard to costs and product in the supply chain? (Russ Doak)
Lucas Kuehner: Panalpina’s state-of-the-art supply chain collaboration platform allows us to model all stakeholders in the supply chain,which,as mentioned earlier, is an essential element in implementing successful supply chain management solutions.The application provides real-time visibility on the purchase-order, transport-order and delivery-order levels, and,when required, the application can manage at a line-item level as well.
Michael Davies: Regarding cost management, it is vital that data warehouse databases are set up and configured.These configurations are database driven. In a best-case scenario, a 4PL executes all supply chain activities on behalf of a customer, allowing the 4PL to manage end-to-end cost data.
However, most companies do not pursue single-sourcing strategies and/or they outsource only parts of their supply chain. Therefore the challenge for cost-data management is usually twofold: initially, each LSP needs to provide the cost data to the customer, and second, the customer needs to consolidate the data from each LSP in order to obtain a global cost picture.
Lucas Kuehner: One of the advantages we have is that Panalpina operates business data warehouse systems that provide cost data on various parameters and in various layers of detail.This allows us to provide our customers with visibility at the level they require.We can provide them with the full spectrum of visibility or modular output, as dictated by their needs.
LQ: As more companies look at order fulfillment and getting closer to their customers, how are you preparing for this trend? (Russ Doak)
Michael Davies: Panalpina has acted as a fulfillment agent for warehousing and distribution services for many years. This means that we have gained an in-depth knowledge of high-velocity supply chain setups in which buffer inventories and order sizes are decreased but order frequency is increased. Components of such SCM setups are just-in-time, just-in-sequence and VMI, as well as postponement and kitting strategies.The latter components allow our customers to push their products further downstream in the supply chain—closer to their customers—thus reducing cycle times,accessing synergies in component manufacturing,and reducing their total logistics spending. In addition, such concepts allow our customers to better synchronize their marketing activities with their logistics setup. Reverse logistics and spare-parts logistics are becoming integral parts of such service requests as well. After-market service is gaining importance.
Lucas Kuehner: As part of a global company,we can provide our customers with the entire portfolio of Panalpina’s products and solutions.This means that Panalpina can act as a fulfillment service provider not only on a local but also on a global basis, aligning various facilities across the globe and implementing programs such as buyer’s consolidation on the origin side and DC-bypass programs on the destination side.
LQ: Do customers look to you for technology solutions or enhanced process performance—performance that may be enabled through technology? (Thomas Goldsby, Ph.D.)
Lucas Kuehner: Yes,many of our customers seek a combination of both. Information as a vital part of a complex supply chain is improved by intelligent IT solutions, which help improve visibility, reporting and forecasting, based on better availability of historical data as well as broader availability of integrating, forecasting and simulation models.
Michael Davies: Indeed, supply chain models often require a vast amount of basic data in order to be executed with a certain validity.
LQ: Trading partners are placing greater emphasis on inventory visibility up- and downstream in the supply chain.Given the important connection that 3PLs provide in supplier– customer relations in the supply chain,how much emphasis is placed on 3PLs’ providing immediate and clear visibility of inventories they hold and transport? What methods or tools are used to provide this visibility? (Thomas Goldsby)
Michael Davies: Inventory visibility on different levels, such as order level or inventory level, is a standard requirement for large and medium-sized clients. Clients acknowledge that inventory visibility and reporting is one key element in streamlining supply chain management solutions by reducing buffer stocks, based on better information management and reducing unnecessary warehouse and DC facility layers while simultaneously ensuring that service levels are not negatively affected. Modern collaboration platforms commonly provide inventory visibility on the order level, and some are able to realize them on the line-item level.Where such platforms are not able to provide inventory visibility on a line-item level, backbone warehouse management execution systems are normally interfaced to provide both layers of visibility.Web-based reporting and customizing functions are commonly requested by customers as well.The customer wants to have a set of predefined reporting templates available, but he also wants the possibility of creating ad hoc and customized reports.
LQ: How and when will 3PL providers work off a centralized system/software that will link all their global operations? (Sue Gadsby)
Lucas Kuehner: One has to distinguish between 3PL and logistics execution, freight forwarding and domestic transportation. The nature of these industries is different and they are themselves highly specialized. A seamless information exchange will be realized by a service-oriented systems architecture.
Michael Davies: Most global 3PLs, LLPs and other integrators are currently in the process of integrating such a serviceoriented architecture.The complexity of integration,multiple legacy systems and adding modern supply chain collaboration platforms requires detailed planning, interface design, testing and execution. Such a process can take a few years until full synchronization within a service-oriented architecture is in place.
LQ: Currently does each country or office work off its own preferred software? And are most not set up to interface with shippers or receivers? (Sue Gadsby)
Lucas Kuehner: That may be true for some of the smaller players.Panalpina has a global software application suite in place for our core freight and logistics operating systems. The systems are tailored regionally to meet local needs, such as when integrated value-added tax setups are required or when local regulations require special transmissions. Such locally configured systems and modules are integrated within the global application landscape.
Michael Davies: The future trend will be to further roll out Panalpina’s supply chain collaboration platform seamlessly, integrating shippers and receivers by various means. These can be as rudimentary as standard phone or email communication or through more sophisticated methods such as Web-based order entry, exchange of flat files or integrated and automated EDI solutions.
Such a bandwidth of different alternatives for onboarding suppliers and customers is key for global supply chain tools. Several main global sourcing areas are lagging behind in IT connectivity and high bandwidth connections—a good example of the latter is often found in parts of inland China.
LQ: What software or equipment is being adopted to monitor temperature-controlled cargo? And can real-time tracking be available for shippers? (Sue Gadsby)
Michael Davies: Panalpina enables temperature- controlled transport in close conjunction with our network of dedicated and selected carriers. The tracking of temperature- controlled cargo can be facilitated by GPS positioning devices. Because of the high cost of these devices, real-time monitoring of temperature will not be broadly realized within the 3PL,LLP and 4PL industry within the short to medium term.
LQ: To what extent might we see technology providers collaborating with 3PLs to improve software that can be used by 3PLs to better manage themselves and their customer relationships? (John Langley Jr., Ph.D.)
Michael Davies: Technology providers are already collaborating with major 3PL companies—or they have in-house logistics and SCM experts who act as consultants—when designing solutions for the logistics, transportation and supply chain industry. It is not surprising that large players in the technology market with sophisticated expertise in modern database applications have acquired smaller companies to in-source the process. This allows them to execute knowledge required to design a state-of-the-art supply chain application.
One good example was the acquisition of Peoplesoft by Oracle to improve their transport managing system (TMS) application suite.
Lucas Kuehner: Panalpina has recently decided to replace its forwarding systems with SAP’s transport managing system solution in order to support all our modes of transport.We have enjoyed a close working relationship with SAP, and in the next three years we will be making investments in the new system. It will be integrated as a standard feature in other SAP modules such as our customer relationship management (CRM).
LQ: Discuss the pros and cons of using a legacy internal ERP system versus a purchased system like SAP or Oracle in terms of integrating with current and prospective customers. (Chris Norek, Ph.D.)
Lucas Kuehner: In general, system connectivity is a key driver of modern supply chain management. In light of this, the discussion of legacy enterprise resource planning systems versus off the- shelf solutions such as SAP or Oracle is not the most important. IT departments must be able to deliver EDI connectivity using various standard protocols such as EDIFACT, X12 and RosettaNet in a short time with competitive development costs.
Michael Davies: An intelligent mapping of fields between customer and provider systems is a must—this includes stripping technologies and cross-referencing. The usual disadvantage of legacy ERP systems is that they were developed as stand-alone solutions over the decades, with initial limited functionality. As supply chain management emerged and global data visibility became more important, many companies struggled with integrating the internal application landscape. If a service-oriented IT architecture cannot be achieved with internal legacy ERP systems because of rigid code limitations, an advantage of external ERP systems can be the flexibility of data base driven setups. However, if internal ERP systems provide such flexibility,the mapping is again of high importance.
Lucas Kuehner: An additional trend in the industry is that 3PL customers are more familiar with the integration of standard ERP systems such as SAP and Oracle. This is also an indication that experience with EDI mapping and systems integration is limited in customers seeking 3PL services.Some customers have never developed EDI interfaces, and thus such integration is always a consulting service offered by 3PL IT departments.

Questions for this Executive Interview were prepared by LQ’s board members:
David Closs, Ph.D., Michigan State University; Russ Doak, Director, Supply Chain Logistics, Heli-One; Sue Gadsby, Director of Procurement, Apotex; Tom Goldsby, Ph.D., University of Kentucky; John C.Langley Jr.,Ph.D., Georgia Institute of Technology; and Chris Norek, Ph.D., Senior Partner, Chain Connectors, Inc.

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