admi trends in yard management systems march 2010

C o p y r i g h t © A u t o D i v e r s i t y M a n a g e m e n t I n c . ( A D M i )

2010 Trends in Yard Management Systems

AutoDiversity Management inc. (ADMi) Supply Chain Consulting

Research White Paper Series

March 2010

2010 Yard Management Survey

C o p y r i g h t © A u t o D i v e r s i t y M a n a g e m e n t I n c . ( A D M i ) P a g e | 2

TABLE OF CONTENTS

Editor’s Note .................................................................................................................................................................. 3

2010 Trends in Yard Management Systems: Introduction ............................................................................................ 4

Methodology & Purpose | ......................................................................................................................................... 4

Respondent Profile | ................................................................................................................................................. 5

2010 Yard Management Survey: Results ....................................................................................................................... 6

Business Profile, Organizational Roles & Supply Chain Service Involvement | ......................................................... 6

Question 1: What is your primary business category? .......................................................................................... 6

Question 2: What is your Organizational Role? ..................................................................................................... 7

Question 3: Does your organization purchase/utilize OR provide/coordinate supply chain services? ................. 8

Question 4: If you chose "Purchase/Utilize", what is your organization's annual supply chain budget?.............. 9

Question 5: If you chose "Provide/Coordinate", what is your organization's annual supply chain budget? ...... 10

Question 6: If you chose “Provide/Coordinate”, what is your organization’s primary service role? .................. 11

Scope and Detail of Current Yard Management System Operations ...................................................................... 12

Question 7: Types of Equipment Managed through your Yards and Facilities ................................................... 12

Question 8: What Types of Yards and Facilities do you manage? ...................................................................... 13

Question 9: How many Shipping Yards and Facilities do you operate? .............................................................. 14

Question 10: What Percentage of your Yards and Facilities use an electronic Yard Management System? ..... 15

Question 11: How would you rate your experience with your existing Yard Management System? ................. 16

Question 12: Which technology platforms currently touch your yard and facility operations? ......................... 17

Question 13: Satisfaction ratings for each tech. category applicable to your yard and facilities management . 18

Question 14: What type of Functionality do you look for in a Yard Management System? ............................... 19

Question 15: When do you plan on investing in a Yard Management System? .................................................. 20

Concluding Analysis ..................................................................................................................................................... 21

About Us & Contact Information ................................................................................................................................. 22

About AutoDiversity Management inc. (ADMI) ................................................................................................... 22

Contact Information ............................................................................................................................................ 22

Confidentiality ..................................................................................................................................................... 22



EDITOR’S NOTE

March, 2010

Towards the end of 2009, we were approached by several clients wanting to discuss Yard Management Systems (YMS) and the potential savings that effective use of these systems can offer the supply chain industry participants. The level of interest was so much higher than expected and the questions being asked much more detailed than in the past few years that we decided to undertake this study to better understand how organizations viewed and leveraged YMS in the current economic climate.

The research was brief, precisely focused and designed in the form of a 15 question survey distributed online to a targeted list of supply chain professionals. Although the brevity of the survey indicated that the results would merely be a temperature check of current opinions on the subject, we found that the responses yielded much richer results and correlations than initially anticipated.

Although YMS is recognized as a significant percentage of an overall annual budget, over 50% of respondents do not currently employ any electronic system. With the growth in volume and complexity within this arena, the interest in increasingly flexible, responsive and integrated systems appears to be growing and on the cusp of a corporate demand upswing.

Thank you to all the respondents that made this study possible and I hope that you find the results as interesting and useful as we did.

Marc A. Brazeau Principal AutoDiversity Management inc. (ADMi)



2010 TRENDS IN YARD MANAGEMENT SYSTEMS: INTRODUCTION

As the supply chain industry continues on its path to recovery in 2010, there are a tremendous number of companies that have used the recent downturn to examine every facet of their operations and cost drivers not only to survive but to also be prepared for the rebound.

As part of that exercise, many companies have begun looking at those areas that traditionally have low operating margins and therefore have lower returns than other larger scale supply chain initiatives. One of those areas where ADMi is seeing a lot of activity and investment in is yard management systems. Yard management refers to the ‘first’ and ‘last’ mile activities that happen with any number of change of custody locations; ports, containers, trucking activity, cross-docks, manufacturing points, distribution centers and motor vehicle storage yards, which seem fairly straightforward on the surface (thus the low operating margins), however, represent a critical piece in the supply chain and in just-in-time inventory management.

The underlying complexity present in yard management operations is compounded by the growing requirement for yard flexibility in handling multiple commodities and modalities across a common geographic footprint. This growing complexity has created an opportunity for more and more sophisticated yard management systems. Traditionally, yard management systems were developed, maintained and utilized by the specific yard operators and role-specific service providers but, as we’ve seen with other supply chain related systems (ERP, WMS, TMS), developers of commercially available off-the-shelf systems have been focusing on providing solutions for the remaining modules in the supply chain, including yard management.

Methodology & Purpose |

ADMi worked with several Global supply chain publications to develop the distribution list for our 2010 Trends in Yard Management Systems survey during the months of December 2009 and January 2010, distributing the questionnaire to subscribers across nine industries. Participants were asked to assess the interest in, need for and effectiveness of yard management systems in their organization. Survey responses were collected through the first week in February then analyzed and summarized at an aggregate level.

The 2010 Trends in Yard Management Systems survey provides a comprehensive look at the satisfaction with customers’ existing yard management systems and the willingness to invest in yard management systems in the near future, as well as general trends in the use and functionality of these systems.

With this in mind, a series of questions were developed to determine whether respondents:

• Currently utilize a yard management system and its effectiveness

• Demonstrated a willingness to invest in yard management systems as well as other types of supply chain operations technologies



• Were satisfied with the functionality required and available in yard management systems

• Operated the types of shipping facilities that require yard management technology

Respondent Profile |

Survey participants were drawn from nine global industries, all of which rely heavily on supply chain networks. Respondents were targeted through the Global subscription lists of 2 major supply chain magazines and identified as recognized decision makers that would be interested in participating in this survey.

Respondent profiles include:

• Responses from the United Kingdom, the European Union, North America, Asia, and Africa

• Fairly even distribution among Executive level management, Mid-level management, IT management, and Operations management

• 59% considered providers or coordinators of supply chain services while the remaining 41% represented purchasers or consumers of logistics services

• Representation of nine different global industries

• Diverse response rate among large and small companies:

50%-55% of purchasers and providers of supply chain services have an annual budget of less than $10 million

10%-15% of purchasers and providers of supply chain services have an annual budget of greater than $100 million



2010 YARD MANAGEMENT SURVEY: RESULTS

Business Profile, Organizational Roles & Supply Chain Service Involvement |

Question 1: What is your primary business category?

The opening question profiled the primary business interest of respondents. The 2010 Trends in Yard Management Systems Survey (YMS) captures data from a wide array of industries though, not surprisingly, High Tech and Supply Chain Services represent over 50% of respondents. What is unexpected is that these numbers and those for Manufacturing & Processing (15%) and Transportation Providers (13%) were not higher given the narrow focus of the survey on a very tactical piece of the supply chain.

Further, the participation of service purchasers and beneficiaries of effective YMS (i.e., Food & Beverage, Warehousing & PDC, Aerospace, Automotive, & Retail (24%)), indicates a strong interest in the emerging YMS trends and practices of their service providers. This highlights the crucial importance of effective ‘first’ and ‘last mile’ management to those who, though they themselves don’t control truck and trailer yard operations, rely on the efficient scheduling, management and communication of those that do.

Figure 1 - Primary Business Category



The study highlights the increasing focus on the

“weak link” in SCM and a willingness to support

YMS

The interest shown by the High Tech sector (20%) which comprises mostly software and application development organizations is a strong indicator of commercial interest in the development of YMS applications, management hardware, and support technologies for this market.

With 44% of the respondents either beneficiaries or support developers, the study highlights the increasing importance and focus on what many consider the “weak link’ in supply chain management function and implies a burgeoning willingness to support YMS initiatives that result in greater investment in R&D and the emergence of tools to allow service providers to improve efficiency and derive further savings in this traditionally low-margin segment of the supply chain.

Question 2: What is your Organizational Role?

This question identifies the roles of the respondents and provides insight into who may have input into Yard Management decisions.

As per Fig. 2, although fairly equal distribution was found among the top three respondent roles the survey illustrates that decision makers at the C-Level/Executive and IT levels far outweigh the participation rate from actual Supply Chain Strategy and Operations personnel (36%). This finding runs counter-intuitive to the research expectations of a high number of respondents that would have hands-on experience or responsibility with the operations management of a truck or trailer yard taking the lead in responding. These results, demonstrating the involvement of these respondents to this survey, indicate a high interest, or timeliness, in considering re-investment in the Yard Management sector.

Figure 2 – Respondent’s Organizational Role



Finally the participation of IT Management hints at the current landscape for yard management systems; historically, YMS were developed in-house as an extension of existing warehouse management or freight payment systems, however, the increased pace of development over the past 10 years coupled with the emergence of off-the-shelf alternatives provides organizations with additional development and support options for their existing legacy systems.

Question 3: Does your organization purchase/utilize OR provide/coordinate supply chain services?

This response provides insight in to the respondent organization’s involvement with the Supply Chain and creating a basis for deeper analysis of the survey responses.

Although response rates indicate a slight slant towards service providers, the important finding is the fairly equitable distribution of responses from both companies providing supply chain services (59%) and those purchasing supply chain services (41%), providing a fairly balanced opinion base for the remaining survey questions.

Figure 3 – Role within Supply Chain Services



Based on feedback, smaller companies are

leading the charge

Question 4: If you chose "Purchase/Utilize", what is your organization's annual supply chain budget?

This question establishes the significance of the annual spend on supply chain operations. The YMS survey illustrates that regardless of an organization’s annual budget for most the supply chain costs represents a significant overhead.

Based on feedback, smaller companies are leading the charge towards exploiting the opportunities provided by effective yard management advancements. Fifty percent of all respondents have a supply chain budget of under $10 million per year.

Figure 4 – Organizations Annual Supply Chain Budget (for “Purchases/Utilizes)”

Larger companies, those with budgets greater than $100 million, represented the smallest group of respondents while mid-sized companies, grouped by three different spend categories, equally split the remaining responses. This breakdown makes sense given the focus on improving a relatively small, though critical, piece of the supply chain and the following considerations:

o YMS operate under razor thin margins, making operational ‘cost reductions’ difficult and, thus, any returns on invested improvements challenging to justify.

o Larger companies, with larger budgets, have higher priority areas of improvement in their supply chain that provide a greater ROI.

o Yard operations tend to be critical in nature, with constantly changing priorities and expedite exceptions that make standardized cost reduction programs difficult to implement.



Service providers are demanding greater

flexibility and complexity from their Yard

Management Systems

o Smaller companies are forced to be on the forefront of improvement to create and retain a competitive advantage, by the nature of their position they must leave no stone unturned.

Question 5: If you chose "Provide/Coordinate", what is your organization's annual supply chain budget?

As depicted earlier in Fig. 3, 59% of the respondents are providers and coordinators of supply chain services

To this question feedback demonstrated that service provider participation is slightly higher for operations with a smaller supply chain budget category, 56% vs. 50%. This response is consistent given the analysis to the previous question whereby smaller service provider companies are under greater pressure to reduce overall cost and leverage every opportunity to ensure a competitive ranking alongside larger integrated supply chain providers. These organizations also include companies that specialize in yard management and truck and trailer operations, making their interest in yard management systems critical to overall success

Figure 5 - Organizations Annual Supply Chain Budget (for “Provide/Coordinate)”

The survey revealed that 26% of the respondents both purchased, and provided supply chain services. These companies need to fully understand the importance of developing tools to improve efficiencies and capitalize on re-engineering efforts. They stand to benefit the most by improving profit margins and becoming more competitive in the marketplace.



Question 6: If you chose “Provide/Coordinate”, what is your organization’s primary service role?

The response to this question highlights the organizational roles that are demonstrating a greater interest in Yard Management systems. The top three functions, which make up over 80% of the respondents, will be evaluating the latest available yard management technology and its capabilities.

Chief respondents are companies that provide 3PL Services (33%), indicating either an interest in improving current horizontally integrated abilities, investing in operational capability or investigating emerging technologies as a matter of strategy.

Here again, we see a tremendous interest from the IT Systems and Services sector in the service provider category. This sector indicates a strong interest in emerging technology for this area and where IT Systems and Services can integrate further down the supply chain from CRM to ERP to WMS to TMS and finally YMS.

Figure 6 - Organizations Primary Role (for “Provides/Coordinates)”

Consulting Services demonstrates the third highest interest and plays a significant role in identifying, promoting and supporting emerging supply chain technologies. Their interest in YMS is not surprising given the potential revenue streams created by software integration and support engagements.

Trucking and Vessel Services, as well as Others (Express Couriers and LTL providers) make up the remaining respondents. These categories interface with YMS to either receive instructions from, or provide input to, specific yard management systems streamlining delivery and receipt of goods, and ensuring effective scheduling of truck/trailer resources.



Scope and Detail of Current Yard Management System Operations

Question 7: Types of Equipment Managed through your Yards and Facilities

The response to this question demonstrates that supply chains are currently running the full spectrum of different types of equipment all of which require some sort of interface to Yard Management Systems.

Figure 7 – Types of Equipment Managed through your Yard and Facilities

Standard containers proved to be the most common type of equipment in use with an exposure rate of 65% while standard Truck-Trailer combinations came second with a showing of between 40-44%.

Beyond container and truckload traffic, which require the least amount of complexity in terms of yard management system, equipment types used are a wide variety of truck configurations, rail and finished motor vehicles. This complex variety of equipment is an important consideration for yard management systems as it requires shipment details, handling instructions, yard configuration and asset scheduling



information that surpasses any effortless tracking of single pieces of equipment within a yard. Therefore, service providers require greater and greater complexity and flexibility in terms of yard management system upgrades, changes or replacements.

Question 8: What Types of Yards and Facilities do you manage?

Responses proved fairly consistent regarding the types of yards either utilized or managed, with no category accounting for more than 47% of total responses.

There is a clear split however between certain categories, with finished vehicles, ports and vehicle homologation centers accounting for fewer than 15% of activity whilst the 5 leading categories comprise between 34% and 47% of yard activity.

Figure 8 – Types of Yards and Facilities Managed

The top five categories have specific challenges as detailed below:

• Cross docks (46.9%) generally represent the greatest level of scheduling complexity,



• Consolidation Centers, coming in second at 40.6%, represent a challenge due to extensive WMS integration requirements,

• Container yards (37.5%) generate volume and throughput complexity,

• Manufacturing Plants (37.5%) represent the most time-critical complexity of all, and;

• Bulk terminals (34.4%) require consideration for a variety of transportation modes and limited loading and unloading options.

With no category accounting for greater than 50% of responses, it’s clear that most providers of yard services have developed the capacity to handle multiple operations and modality within their yard locations and that their yard management system considerations must be flexible and robust enough to handle the increased complexity present in contemporary supply chain management yards.

Question 9: How many Shipping Yards and Facilities do you operate?

Though the majority of respondents, 81%, operate between 1 and 10 facilities (81%), 56% of those respondents operate under 5 facilities throughout their network.

These results support earlier analysis that interest in YMS is led by relatively smaller companies (revenues of $10 million/year) and single facility companies (that may have geographic leverage over the business they represent) that would see more benefit from adopting standardized YMS. This finding could equally imply that perhaps these same smaller companies simply have yet to make the investment in YMS that larger organizations may have already committed.

Figure 9 – Number of Shipping Yards and Facilities Managed



Question 10: What Percentage of your Yards and Facilities use an electronic Yard Management System?

This question clarifies and supports the previous analysis regarding potential demand and future adoption rates for YMS. Results show that 56% of respondents (comparable to the population of respondents that operate under 5 facilities) currently have no electronic yard management capability.

Figure 10 – Percentage of Yards and Facilities Managed using an electronic Yard Management System

Results underscore the potential for efficiency and cost improvements for respondents currently without a system. For operations with thin margins, replacing legacy or existing applications is frequently a low priority regardless of the potential of emerging technologies, however, for those without any systems, operating off of paper, clipboards and dispatch whiteboards, productivity improvements provide a compelling business case for investment.



Question 11: How would you rate your experience with your existing Yard Management System?

The results to this question are interesting for the overall level of satisfaction they indicate for existing solutions (still representing only 44% of all responses), and the cluster of mediocrity that all dimensions represent (between 2.6 and 2.8).

Figure 11 – Evaluation of current Yard Management System

Excluding the ‘Implemented on Time/Budget’ dimension, respondents were least satisfied by their experience with the following:

• Perceived improvement to work processes;

• Value of real-time visibility; and,

• The identification of any considerable savings.

Taking into consideration that this applies only to those with systems (44%) and, it is assumed both legacy and newer systems, these results form an effective benchmark for the 56% of respondents that don’t currently use any systems.

The key to maximizing the effectiveness of future investments in YMS is to address any satisfaction short comings and/or understand that current satisfaction levels for YMS, or the opinions of users, is fairly neutral. These findings provide an appealing goal for emerging technologies to target and address in the release off-the-shelf solutions, particularly when considering the market potential of over half the respondents not utilizing any solutions.



Question 12: Which technology platforms currently touch your yard and facility operations?

This question explores system integration within organization in relation to their YMS choices. It outlines the types of applications that require some measure of integration with YMS to maintain a seamless supply chain and the nature of their development.

Figure 12 – Technology Platforms which touch the yard and facility operations

YMS modules will most likely have to interface with the following enterprise applications, whether commercially packaged or an in-house, or legacy, application:

• 90% of respondents utilize some sort of warehouse management system, with slightly over 50% of them relying on commercially available solutions,

• 70% rely on a transportation management system, again with roughly 50% of those solutions coming from established vendors,

• 66% have some sort of enterprise resource system that integrates operational administration across functional departments, and

• Roughly 50% of respondents have some sort of CRM or Manufacturing system to take into account when considering additional systems integration

The responses do, however, highlight the use of commercially available off-the-shelf applications when it comes to management or enterprise software within the sample population. Commercial applications account for roughly 50% within each category, with further adoption reasonably expected to grow. With the majority of respondents experienced in selecting and implementing commercially available systems for other aspects of their supply chain, we would expect the market for YMS systems, with such a low current penetration rate, to increase as more flexible applications with proven ROI track records become widely available.



Question 13: Satisfaction ratings for each technical category applicable to your yard and facilities management

This response highlights a potential integration issue with existing YMS, particularly as it relates to current YMS and TMS solutions.

These responses are further eroded when compared to the results for YMS satisfaction (Q.11) highlighting the importance of the integration experience as a crucial component to overal all satisfaction. In fact, the most compelling aspect of these responses is the perceived satisfaction that those who currently utilize no software have a slightly higher satisfaction ranking that those who utilize the different types of systems available. Although this doesn’t address the functional benefits of YMS systems, merely the satisfaction of those systems once implemented, this does underline the difficulties in adopting, integrating and utilizing automated systems where there were none in the past.

This appears to further highlight the need for system providers to improve the implementation and delivery aspects of their applications or, in other words, somehow overcome the perceptive hurdle between satisfaction and functionality.

Figure 13 – Satisfaction Levels with Technology used as part of your Yard and Facilities Management



Question 14: What type of Functionality do you look for in a Yard Management System?

The response to this question demonstrates an overwhelming requirement for improved activity tracking and management and scheduling capabilities when considering a YMS. This requirement is closely followed by by the futher need for some form of load building capabilities. These findings are unsurprising as they represent the complex tasks associated with horizontally integrated yards. Other functionality categories scored lower as they tend to be out of the operators control (Yard Design Capability), or are adminstrative processes established in any yard regardless of technology.

Figure 14 – What type of functionality do you look for in a Yard and Facilities Management System?

The importance of Activities Tracking & Management corroborates the findings collected regarding yard and equipment types (Q.7), all of which require a great deal of integration and visibility to ensure proper handling and scheduling.



Question 15: When do you plan on investing in a Yard Management System?

Although few respondents were sure of when they would/could invest in a yard management system, 22% felt that they were in a position to invest in the next 12 months.

Only 4% gave any indication that they would invest in the next 2 years, implying a shorter sales cycle than traditional supply chain solutions and requiring providers to focus on leads that generate potential within the first 12 months of contact.

Figure 15 – Planned Investment Horizon?

The uncertainty indicated by 60% of respondents suggests that this percentage could be targeted by a proactive marketing and sales effort to quantify leads into the 12 or 24 month categories.



CONCLUDING ANALYSIS

The 2010 Trends in Yard Management Systems white paper reflects that although a majority of companies are not currently invested in YMS at this time, there is a significant interest in the subject at a high level in both service consumers and providers, specifically within the C-level and IT management roles. The market opportunity seems to support a significant growth in investment in YMS over the next 12 months with a tremendous market capacity of non-users that could benefit from further automation.

Smaller companies appear to be leading the trend to improve this critical piece of the supply chain. This may be because they’ve already addressed the higher priority issues within their supply chain networks and are now positioned to address yard throughput issues. Larger companies may still be concentrating their efforts on the more complex issues of their network that result in more significant savings. This means that the smaller companies may be better positioned to take advantage of a near term economic recovery, as well as the lead in yard management best practices. This also underlines the need for small companies to remain innovative and progressive in order to compete in a market that will only see more and more consolidation.

The trend is definitely shifting away from in-house developed systems that may or may not be inflexible in operating multiple locations based on their specific requirements, or do not have the scalability to support strategic growth. In any event, it appears that there are finally enough off-the-shelf options in the market that most organizations expect to, at the very least; perform detailed build versus buy analysis when considering implementing or upgrading a system. In fact the results indicate that commercially available systems are already outstripping all other categories as the preferred option.

The challenge in this market will be how providers overcome the perceived dissatisfaction, or at least ambivalence, with the integration and functionality experience of those companies that have invested in YMS (or other enterprise solutions) and are currently using some sort of automation for managing their yards. This ‘ambivalence’ puts a premium on those service providers and or applications that demonstrate superior ease of integration and implementation, flexibility in function, maintenance and distribution, as well as flexible cost options that reflect the users’ specific needs.

Finally, YMS investment appears to be a short cycle decision, with organizations expecting the definition, planning, implementation and ‘go-live’ milestones to happen within 12-18 months. Interest in YMS investment seems to peak at the 12 month period and then wanes into a longer term (over 24 months) strategic consideration.

Jennifer Cavanagh David C. Vandenbossche Senior Research Associate Principal Consultant London, UK Detroit, MI



ABOUT US & CONTACT INFORMATION

About AutoDiversity Management inc. (ADMI)

ADMi is an impartial supply chain consultancy and research organization that offers clients strategy, research and collaboration support by providing supply chain benchmarking and analysis. ADMi provides strategy consulting, transportation research, decision and purchasing support to the Global supply chain industry. ADMi is uniquely designed to provide unbiased, non-conflict of interest supply chain research and decision support services to all the supply chain industry by creating mutually productive collaborative network opportunities, promote supply chain innovation and standards, as well as provide qualifying tools to emerging carriers and service providers to improve overall competition.

Visit the ADMi website at www.autodiversity.com

Contact Information

For more information on this report or to participate in further studies please contact:

David C. Vandenbossche, Principal Consultant [email protected]

Confidentiality

All information in this document is provided in confidence for the sole purpose of adjudication of the document and shall not be used for any other purpose, be published or disclosed wholly or in part to any other party without ADMI’s prior permission in writing nor be held in safe custody. These obligations shall not apply to information which is published or becomes known legitimately from some source other than ADMI.

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admi trends in yard management systems march 2010

Documents

facilities management

question survey

yard management systems

electronic system

types of yards

shipping yards

overall annual budget

leveraged yms