TMS Brings the Power
Electronics company Celestica plugs into a TMS solution to cut costs, increase visibility, and power continuous improvements.
Electronics manufacturing services (EMS) companies run on lean margins. They face constant pressure to reduce costs, and their reputations are hinged to high-quality production, efficient supply chain and logistics operations, deep supplier visibility, on-time delivery schedules, and customer satisfaction levels.
It's a race against the clock to get bill of material components and products into global facilities, keep manufacturing lines going, and move finished goods worldwide to their original equipment manufacturer (OEM) partners or customers' customers.
Celestica Inc., a multinational electronics manufacturing services company based in Toronto, knows how this demanding, high-velocity supply chain works. To ease the burden and deliver continuous value, it added software from MercuryGate International Inc. to its toolkit.
Like many other EMS companies, Celestica takes on many of its customers' order fulfillment requirements. It's often charged with purchasing materials and electronic components, ensuring that enough product is on hand for high-volume manufacturing runs and shipping finished goods worldwide.
The 30,000-employee company, with US$6.1 billion in revenue in 2017, operates 30 sites across the globe. It manages thousands of SKUs and suppliers at any given time.
Not all suppliers are qualified at the same time; Celestica's supplier and customer relationships evolve as manufacturing programs start and end, new suppliers are approved and certified, and acquisitions and industry consolidation shift the landscape. Some supplier components have short lead times and are easy to replenish; other inbound materials have lead times of several weeks or months, depending on the ebb and flow of supply and demand throughout the high-tech supply chain.
Moving goods in and out of Celestica's facilities—which are heavily dependent on air and small parcel—requires accuracy, flexibility, velocity, and real-time visibility, says Ryan Bloor, Celestica's director of logistics services.
Visibility, Flexibility, Automation
To help meet those demands, Celestica uses cloud-based software tools from Cary, North Carolina-based transportation management solutions provider MercuryGate. Its transportation management system (TMS) provides the visibility, flexibility, and automation Celestica needs to meet global transportation requirements, and MercuryGate's Mojo solution allows the company to model scenarios and determine optimal freight options.
With time of the essence, a valuable piece of the TMS solution is real-time, in-transit freight visibility down to the purchase order and part number level. It creates a cycle of improvement that eventually reaches Celestica's customer.
"Having visibility down to the part number and purchase order (PO) level is critical," says Bloor. "We work on a 24-hour clock managing sites in Asia, Europe, and North America. With this visibility, we now know what is coming in on every shipment. The TMS provides real-time information about where the shipment is in transit, which PO is being fulfilled, and the quantity of parts coming in.
"If we know where and how the parts are moving in real time, we can better plan and get the production lines ready quicker," he adds. "Improved production scheduling means sharing better data with our customers. Better information to the OEM leads to improved customer satisfaction."
The real-time data feed, which gives Celestica a view into any PO or shipping changes within minutes, stems from the TMS integration with Celestica's ERP system.
"Because we integrated the MercuryGate TMS directly with Celestica's Enterprise Resource Planning (ERP) system, the company has gained visibility down to the PO number," says Karen Sage, MercuryGate's chief marketing officer.
"This connectivity allows various functional groups—warehouse, transportation, distribution—to plan strategically, and to react quickly to changing dynamics at any point in the supply chain," she adds.
The ERP-TMS integration has given Celestica greater flexibility as well, particularly on the execution side. The company uses MercuryGate's TMS for near-real-time tendering of shipments to parcel providers and to optimize shipments across different modes, such as parcel or less-than-truckload. This capability ensures that the company and its shipping partners are using the right mode at the right price point for each shipment.
"The TMS allows us to select the right transportaion services," says Bloor. "We can optimize our shipping costs as well as identify problems and solve for those issues. We have real-time mode and price comparisons accessible from a single platform at our fingertips."
Connecting the Past and Future
Controlling costs was one main reason behind Celestica's 2009 decision to examine transportation management systems and consider automating its practices.
"The initial reason we looked at transportation management systems was to get a better handle on costs, and to do a better job of procuring logistics services," says Bloor. "In addition to cost, increased visibility was another key piece, and, to a lesser degree, we hoped that we would see productivity benefits from working with a single platform. We didn't want to pick up the phone to tender and book shipments. We wanted to have those comparisons easily available in one place."
In 2009, Celestica identified the problems it wanted to solve and what value it expected to see from the chosen solution. It conducted a thorough analysis of the software players and products available at the time, and rated various options against a few dozen qualitative and quantitative criteria. MercuryGate scored high on a total cost of ownership basis and when the criteria marks were tallied, Bloor says.
Within a few months of implementation, Celestica saw noticeable gains, including double-digit improvement in how its supply base was managing shipments. The domino effect meant suppliers had access and visibility into Celestica's electronic routing guide; could make real-time, intelligent decisions about how to ship products; and could better comply with Celestica's shipping requirements.
Additionally, because the company and its suppliers were able to reduce the number of expedited orders and related premium costs, they could switch from dealing with put-out-the-fire issues to better planning.
Finding New Capabilities
Fast-forward to 2018, and Celestica continues to use MercuryGate's solutions in ways beyond the visibility and cost control aspects it initially sought.
For instance, the company uses MercuryGate's Mojo tool to evaluate logistics scenarios and optimize transportation options. This is especially important when customers want to start new manufacturing projects or see how the logistics implementation will roll out.
The tool uses data in the system to model different logistics scenarios; calculate rates and transit times with approved carriers; gauge shipping velocity; identify consolidation options and produce realistic and executable load plans. This type of deeper, analytic scenario planning moves the needle away from day-to-day tactical fulfillment toward longer-term, data-based planning and strategic relationship building with customers and suppliers.
MercuryGate Mojo also gives Celestica the ability to: optimize shipments across business units, locations, and customers; quantify cost savings with data; determine the best carrier and mode (LTL, truckload, parcel, air, rail, intermodal); model dedicated/private fleets using domiciles, vehicles, and drivers; and utilize transportation equipment based on provider schedules (for ocean moves).
These kinds of features and technology have helped Celestica and MercuryGate form a long-standing and well-grounded relationship.
"MercuryGate has been fortunate to have partnered with Celestica since 2009. You could say we grew up together as the transportation technology, business, and processes have matured and evolved over time," says Sage. "One thing learned from the experience is our customers' businesses inevitably change. Fortunately, our architecture was built to offer the customization and flexibility needed to support these changes."
Bloor agrees. He says the technology embedded in MercuryGate's solutions has him considering other areas that can be tapped for additional value.
One area he is keen on addressing in the coming year is fine-tuning Celestica's regional load planning practices, which could be a sweet spot to derive more value, he says.
By utilizing MercuryGate's TMS, Celestica may be able to refine regional transportation options and find additional ways to consolidate routes, bundle shipments from multiple suppliers, and lower shipping costs while improving order fulfillment.
"We are looking at different ways to drive incremental value," says Bloor. "Regional load planning may be a road we go down. We may have a number of suppliers who will be shipping direct to one of our sites. With MercuryGate's solution, we may be able to analyze regional loads so we can optimize cost and consolidate those shipments regionally."
The company is also looking at ways to use the TMS to incrementally improve back-end financial settlement and transportation cost auditing processes, Bloor says, adding that Celestica has more automation work to do in this space, and it could build on the cost control efforts it has already established.
By extending MercuryGate's detailed side-by-side analysis, the company will have greater insight into transportation-related transactions, integrate even more with the ERP system, and improve communications about shipping costs and possible cost savings.
"The system already has these capabilities," Bloor says. "We're are just looking for more ways to implement them."