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When it comes to measuring the performance of a supply chain, logistics teams have many performance indicators to consider: inventory accuracy, cash-to-cash cycle time, total cost of goods sold. According to McKinsey, however, the top supply chain driver for consumer products companies is the speed of moving inventory. When it comes to global supply chains, there is no place where predictability and precision of on-time-performance comes into play more than when the order is placed to when it’s delivered to its final destination.
How Freight Forwarding Plays into On-Time Performance
For companies importing and exporting products, unlocking speed is dependent on the swift execution of their freight forwarders. As a key partner in the supply chain, forwarders operate almost as travel agents for freight, booking space on carriers’ networks for their customers. And in the process, they depend on ocean, air, and ground carriers to deliver goods on-time and in-full.
Enter, the logistics team—part of whose responsibility of managing in-transit inventory centers on a key metric: transit time. When forwarders share a shipment quote, they include a transit time estimate based on the port-to-port shipment schedule provided by the carrier. But that information isn’t dynamic. “The problem with this model is that carrier schedule estimates are static data points and don’t incorporate the multitude of things that can cause actual shipment transit time to deviate from the estimate,” explains Nerijus Poskus, VP and Global Head of Ocean Freight at Flexport.
Estimated port-to-port transit times don’t always tell the full story. “Actual port-to-port transit time can be affected by things such as weather delays, port congestion, vessel employment, and the number of port calls, among other things,” says Poskus.
Beyond the journey from port to port, there are several other parts from the factory to the final destination warehouse where your freight could be delayed. “There are other factors to consider, such as the fact that feeder vessels at origin often run late; 5-7% of containers get rolled at origin; and destination rail services are often prone to delays,” notes Poskus. “Forwarders can’t control for all of these things, but we can measure them and use this data to choose routings and anticipate transit time estimates more intelligently.”
Creating a Data Model for Reliable and Predictive Transit Times
By creating a data model that pulls in historical Flexport shipment data in combination with carrier schedule estimates, Flexport is upending the way the industry typically computes transit time predictions. “Looking at our own historical data, we’ve seen a lot of variance at different nodes, such as the time spent at ports, and the impact that it has on transit time predictions,” says Nahom Workie, Product Manager for Flexport’s Marketplace.
To help temper some of this variance and bring Flexport’s predictions closer to reality, the new model incorporates node data, such as time spent at transit ports, which ocean carriers and trucking carriers were used, and the distance between the port goods are shipped to and the final destination. The predictive transit time model model also pulls in data such as transit and dwell time across key legs on the journey: from supplier location to origin port, to destination port, to where the goods are finally delivered. “In addition to more data points, we’re also looking at seasonality and whether or not a premium service offering was used,” explains Workie.
“At the end of the day, logistics teams care about two things: speed and accuracy. Using historical data allows us to give our clients exactly that—to have more control over their supply chains,” says Workie. Now available for ocean FCL, Workie says Predictive Transit Times will eventually expand to include air and LCL shipments in the future. “We’re integrating this technology into our core product to give logistics teams more certainty. Ultimately, we see this as a first step in the journey, to help them more precisely manage their supply chains,” says Workie.
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