After the traditional Christmas morning frenzy, I checked out my son’s newest Xbox games. I couldn’t help but think that his existing games are now considered “outdated.” Although these games are perfectly usable and my son plays them with great proficiency, they are destined to gather dust.
Managers have the same tendency to adopt new methods and technologies, even when current capabilities work well. Such is the case with cross-chain visibility. When new freight tracking tools, dashboards, and other visibility solutions emerge, it is easy to ignore existing tools.
One visibility tool that gets lost in the haze of new solutions is the advanced shipping notice (ASN). The Council of Supply Chain Management Professionals defines an ASN as, “detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment.” This important tool has been available for more than 20 years.
In terms of creating supply chain visibility, ASNs must be:
- Timely—As the definition states, suppliers must provide the information prior to delivery. This lead time allows the retailer an opportunity to prepare for arrival of the shipment.
- Accessible—Shipment information must be provided in a readable format. Suppliers typically transmit ASNs to retailers as EDI 856 transactions to ensure fast, seamless data transfer.
- Accurate—The structure of the ASN must conform to the specific information requirements of individual retailers, and the data must correctly depict the actual contents of the shipment.
When these three conditions are fulfilled, the retailer can operate more effectively. ASN information can be verified against purchase orders, data can be received directly into the warehouse management system (WMS), and receiving processes will be streamlined. This helps to reduce receiving costs by up to 40 percent. Also, discrepancies between orders and shipments are known prior to arrival. This allows retailers to reallocate inventory to stores and quickly reorder needed SKUs.
To get better insights into the roles and impact of ASNs, the Auburn University supply chain research team recently conducted a survey of retailers. Over 40 supply chain professionals provided insights into their ASN requirements and auditing practices. Details regarding our study are presented in a Supply Chain Digest videocast.
We learned that 78 percent of the participating retailers require ASNs. However, supplier compliance is an issue. Only 42 percent of the participants receive ASNs from all suppliers. The other retailers receive ASNs from 75 percent of their suppliers, on average.
Also, ASNs are not always correct. The respondents’ median estimate of ASN accuracy was 97 percent. That sounds acceptable until you put it in the context of Six Sigma performance. At 97 percent, suppliers are performing at a 3.375 Sigma level. For every million units scheduled for receipt, 30,000 will be missing, the wrong size or color, damaged, etc. This creates negative consequences of billing discrepancies, phantom expenses, customer service failures, and planning errors.
Improving ASN compliance and accuracy requires that retailers devote attention and resources to the proper use of this visibility tool. We found that industry leaders pursue a four-step process for improving supplier ASN performance:
- Develop a formal audit process. Top retailers develop a specific set of guidelines for their ASN accuracy audits and closely follow the plan. Suppliers are apprised of the process and their performance. In the top programs, every supplier is periodically audited, but greater emphasis is placed on new suppliers and known problem products. It’s a logical strategy, noted a retail executive who estimated that 20 percent of the SKUs generate 80 percent of his company’s costs and losses.
- Quantify the financial impact. Despite the known level of delivery discrepancies and their impact on the supply chain, very few retailers attempt to quantify the costs of inaccurate ASNs. In contrast, leading-edge retailers analyze errors to understand the impact on inventory, operations, and customer service. One retailer focuses on quantifying the cost of shortages, as the problem leads to lost sales during the wait time for a reorder.
- Assess deductions. The ability to quantify the financial impact provides the data needed to recoup the differences between supplier invoices and actual receipts. Taking corrective action is necessary to protect the financial interests of the retailer and quickly grab a supplier’s attention.
- Collaborate with suppliers. The idea behind ASN accuracy audits is not catching and penalizing poor performers. Rather, the goal is to facilitate smooth flows and the elimination of problems. To achieve these goals, it is necessary to build a two-way dialogue with suppliers. “We track vendor performance and work with them to improve their delivery accuracy,” said one supply chain executive.
Leading retailers use this four-step process to reduce the delays and rework caused by inaccurate ASNs. They realize that timely, accessible, and accurate ASNs continue to improve the flow of information and goods across the retail supply chain.
Therein lies the moral of this story: don’t cast aside this venerable visibility tool just because something new comes along. ASNs may be old, but they shouldn’t be forgotten!
ASNs can be a very robust source of information for supply chain planning and execution. Historically, they have been viewed as a great tool for warehouse receiving productivity, but our research revealed ASNs can do much more. When they are accurate, on time, and received in proper format, ASNs are the cornerstone of supply chain visibility. Savvy retailers use this visibility to identify exceptions and take corrective action in order to maintain in-stock availability.
The key to success is development of a robust ASN audit program that provides an accurate depiction of ASN accuracy and highlights needed improvements. Best-in-class retailers understand the financial impact of ASN errors and collaborate with suppliers to reach accuracy targets. Doing so helps the supply chain operate more efficiently and provide the desired level of customer service.