Making the global CONNECTION

Mobile-phone manufacturer Ericsson installed software to gain much-needed visibility over its outbound shipments.

By James Aaron Cooke -- Logistics Management, 6/1/1999

Ericsson certainly can appreciate the importance of up-to-date information; after all, the Stockholm, Sweden-based company makes equipment to facilitate communication. No surprise, then, that the company decided it needed the latest info on its worldwide shipments if it was going to manage its global supply chain effectively.

Two years ago, the Swedish company began installing software that gave it visibility over freight movements worldwide. Ericsson uses the application for order tracking, proactive management of delivery exceptions, and the monitoring of delivery leadtimes, delivery precision, and performance.

The software has given Ericsson a worldwide view of its outbound shipments, certainly a requirement today for global supply chain administration. "The logistics department now can view shipment status worldwide," says Ake Oden, a project manager for the initiative in Ericsson's GSM (Global System for Mobile Communications) supply group. That group assembles base transceiver stations that serve as the basic nodes in the GSM network.

Global Network

Ericsson is probably best known in the United States for its digital mobile phones. In fact, it claims to have 25 percent of the world market for those phones today. The company got its start back in 1876 when its founder, Lars Magnus Ericsson, opened a telephone repair shop in Stockholm, Sweden. Today, the company makes a variety of communications and terminal equipment. Earlier this year, it reorganized its business around three product segments: Consumer Products (which includes mobile phones), Network Operators (wireless and wired solutions for data and telecommunications), and Enterprise Solutions (business communications). Worldwide sales last year totaled $20 billion in U.S. dollars.

Ericsson's far-flung operations span the globe. The Swedish communications equipment giant employs more than 100,000 workers in 140 countries. It maintains 140 production facilities in 30 countries. Those plants churn out products that are sold by sales representatives in more than 130 nations.

Although half of its sales come from European countries, the United States represents one of its largest national markets. Ericsson's top-selling products in the U.S. market are mobile phone systems and mobile telephones.

As a general rule, Ericsson ships directly to its customers from its manufacturing sites. To manage those extensive operations, Ericsson recently established a number of supply units for different product segments. Oden's supply unit, which handles orders for the Global System for Mobile Communications group, makes some 50,000 shipments per year alone.

A few years ago, an initiative by some corporate supply managers resulted in Ericsson's forming a distribution council to improve every aspect of its worldwide logistics operations. The council addresses such issues as materials handling, packaging, and information technology.

An important issue facing the Ericsson Distribution Council was the lack of visibility over outbound freight. To rectify that problem, it undertook a project called ELIN, which stands for Ericsson Logistics Information Network. That project's mission was to improve the corporate visibility for logistics shipments worldwide. The council felt that a new system would give the staff continuous visibility of worldwide deliveries on a real-time basis, enabling it to monitor delivery activities, identify bottlenecks, and resolve customer-service issues quickly. "What we found was that we had no visibility for physical distribution,'' says Oden. "It was not possible for anyone in Ericsson to trace material after the dispatch from the supply unit.''

Share Ware

While carrying out a review of software vendors that could help it remedy this visibility problem, the council learned about a software product called "Energy DeliveryNet.com" from Descartes Systems Group, a Canadian company headquartered in Waterloo, Ontario. Impressed by the package's capabilities, the Swedish communication giant began implementing the DeliveryNet.com program in September 1996, and the system became operational in January 1997. Worldwide deployment took place in late 1997, and today more than 500 employees across the world have access to the system. The software provides Ericsson's logistics managers around the globe with information on the status of outbound shipments, whether they are shipped direct from the factory or from a warehouse. "Currently, we have coverage of almost 50 percent of our shipments,'' says Oden.

Descartes' manager for the Ericsson project, Ernst Stegwee, reports that the software provides shipment-status information to managers worldwide. It handles 2.5 million order lines--either components or entire product units--on an annual basis, he adds.

The software uses a Sun Solaris operating system designed for Unix-based workstations. It runs on a Sun Sparc computer that's housed in the Netherlands. Descartes itself actually runs the server, which holds the database on freight movements for Ericsson, says Stegwee.

A majority of Ericsson's carriers provide shipment-status information that enables the company to track freight movements. Although Ericsson primarily uses motor carriers to deliver products within Europe, it moves its international freight by air. As of this writing, 11 of its transportation and logistics providers are connected to the system as well as 82 airlines. The providers include motor carriers, freight forwarders, and third-party logistics companies.

One key advantage to the Descartes system is that it's "vendor neutral." In other words, it can accommodate a wide range of data-transfer formats. Prior to the system's installation, Ericsson would have had to connect directly to an individual trading partner's system, resulting in the need for many vendor-specific computer interfaces.

High Visibility

Typically, the forwarders and air carriers transmit status information via an electronic data interchange (EDI) message that's stored in the DeliveryNet database. If a forwarder lacks EDI capability, it has the backup option of sending a "status update form" via Internet e-mail to the database.

Ericsson's logistics managers can gain access to shipment-status information stored in the database in two ways. The first involves using a standard Web browser. "It has a home page, which you enter through the default browser,'' says Oden. "You can query by a known entity, an order number, or a consignment reference."

The other method uses the software itself, which can be installed on a manager's desktop computer. The program has its own graphical user interface, which makes it easy to operate. Oden notes that this method provides a "query tool" to check on shipments. For instance, he notes, a manager could use the query function to create a list of all consignments that had left a particular supply unit but not yet arrived at the consignee's door.

The software also can be set up to send e-mail alerts to flag managers whenever exceptions occur in distribution. "The browser allows for exception reporting when someone is notified that something is not being executed according to plan,'' says Stegwee.

Although shipment information at present is limited to Ericsson's logistics managers, the company has plans to expand access to customers. In addition, the communications company would like to include information on inbound shipments in the database.

Ericsson is using the software to support other initiatives to improve logistics as well. For instance, it's using the software to control a merge-in-transit pilot now under way in the German market for the sale of radio-based station equipment. A third-party logistics company is actually coordinating the merging of components from various manufacturing points into a final product delivered to the customer. "We are introducing direct shipments to customers through the merge-in-transit concept,'' says Oden. "We are focusing on improving distribution flow in order to reduce warehousing. Eventually we want to make to order and ship to the customer.''

The company also is experimenting with receiving shipment-status messages direct from scanners. When a radio base station is installed, for example, workers could use a handheld unit to scan an item's bar code. That item information then would be sent to the database via a wireless connection.

A Clear View

To date, the company has benefited greatly from the electronic dissemination of shipment-status information. Logistics managers now are in a position to respond before a crisis occurs. "We have a tool that [allows us to] take action before we risk a delay to the customer,'' says Oden. "We can identify bottlenecks and measure performance of the process at different checkpoints.''

In addition, the repository of shipment data gives Ericsson the means to gauge its vendors' performance. "Because we have the data in one database," says Oden, "it's easier to measure the contractors' performance.''

In short, visibility over its outbound shipments has enabled the Swedish company to manage its supply chain and meet customer expectations across the globe better. Says Oden, "We now have visibility from the docks to the arrival at the international destination."