RISK MANAGEMENT PACKAGE
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DECEMBER 2015
GLOBAL SOLUTIONS FOR SUPPLY CHAIN ROI
2 15
COMERICA TEAM SHREDDING EVENT
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HONORING STEWARDS OF THE ENVIRONMENT The Comerica team, led by CFO Karen Parkhill, looks to the future as they look at the bottom line P. 16
IOT AND THE
FACTORY OF THE FUTURE
P. 22
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SDC1215_02-05_TOC.indd 3
Global Solutions for Supply Chain ROI
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CONTENTS December 2015 | Volume 16 | Issue 5
08
28} B EST PRACTICES: THE HOLIDAY SUPPLY CHAIN Optimizing the Holiday Supply Chain
Do it right and be rewarded with increased profits and satisfied customers By Padman Ramankutty
06} E XECUTIVE MEMO Yes, Slavery Still Exists
Business—and supply chain—can play a huge role in the global fight By Barry Hochfelder
Think about installing a chief profit officer to help maintain focus on continued, sustainable growth By Mike Hoffman
32} O N THE FLOOR The Green Warehouse
14} RISK MANAGEMENT: VENDOR CONTRACTS Cybersecurity & Contracts: Have you looked at them lately?
34} B EST PRACTICES: MANAGING SILOS Got Silos?
You may not think you’re vulnerable, but anything connected to your organization’s network is a potential threat By William L. Michels
26} BEST PRACTICES: REVERSE SUPPLY CHAIN Your Business-toBusiness EBay Solution
There are options to recoup value from holiday returns and overstock inventory, including resale to the secondary market via online auctions By Carrie Mantey
...brought to you by the Internet of Things revolution By Andy Binsley and Terri Hiskey
30} P ROFESSIONAL DEVELOPMENT: MAXIMIZING PROFIT Identity Crisis in the C-Suite: Who Owns Profit?
08} RISK MANAGEMENT: CARGO THEFT Combating Cargo Theft Technology + a proactive security strategy = a match made in supply chain heaven By Richard Kolbusz
THE FACTORY OF THE FUTURE...
There are myriad incentives and opportunities for warehouses and distribution centers to become more sustainable By Carrie Mantey
22 36} F INAL THOUGHTS Keeping up With Change
What do 3PLs and 4PLs need to know to properly implement cold chain logistics? By Ron Atapattu
There are three common misconceptions in the fight to end silos By Rick Chavie
pg 16 COVER
ENVIRONMENTAL STEWARDSHIP IS GOOD BUSINESS
2015 Green Award winners look to the future as they look at the bottom line.
4
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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Saia team members have one goal: timely, claims-free shipping. For our dockworkers, it’s a responsibility they take personally. Their training begins with several weeks of extensive one-on-one mentoring, where they learn the critical knowledge they need to succeed. Accountability is Saia’s number one priority. That’s why every dockworker’s forklift carries a tablet that tracks all the freight they handle, while protective packing materials are used to prevent damage during transit. With the right people, the right technology and the right attitude, we’re exceeding our customers’ expectations — one shipment at a time.
1-800-765-7242 / www.saia.com
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DECEMBER 2015 / VOLUME 16 / ISSUE 5 ®
EXECUTIVE MEMO Global Solutions for Supply Chain ROI
By Barry Hochfelder, Editor bhochfelder@ACBusinessMedia.com
www.SDCExec.com Published by AC Business Media Inc.
YES, SLAVERY STILL EXISTS BUSINESS—AND SUPPLY CHAIN— CAN PLAY A HUGE ROLE IN THE GLOBAL FIGHT
I
t’s no secret that we live in a troubled and troubling world. Bigotry and violence are seemingly camped out on every corner in every part of the globe. Even an evil that many people think ended a century and a half ago is causing pain and suffering—slavery. In Jharkhand, India, children as young as three are being forced to work in underground mines. For what? Beauty products. Mica, the mineral they’re scraping from the earth, is used in makeup, sunscreen, facial lotions and other products. And 60 percent of the world’s mica comes from Jharkhand. Uzbekistan, one of the world’s largest cotton producers, forces its citizens to pick cotton during harvest season. Each citizen is given a quota. Fall short, and you can lose your job or be jailed. For decades, children as young as 10 were forced to the fields. The government “softened” so now those of 15 or 16 are the youngest. And let’s not get too high and mighty here in the U.S. Workers at some Florida tomato farms were found in cramped, dirty trailers, monitored and chained to keep them from escaping between harvesting seasons. Whatever you call it—slave labor, forced labor—these, and so many other similar situations around the world, are supply chain issues that must be faced and eradicated. “Slave and child labor is rampant in supply chains around the world,” says Justin Dillon, founder and CEO of Made in a Free World, a network of individuals, 6
groups and businesses working together to disrupt slavery. “We live in a digitally connected and data-driven economy, and we have the tools and information to uncover it.” Sure, the conflict minerals arm of Dodd-Frank is making a difference, as will the UK’s new Modern Slavery Act. But, says Dillon, they’re not enough. “The way to fight slavery, which is a business, is to use business to fight it. But it’s not a fair fight. Each year, roughly $120 million of funding is provided to address slavery, but estimated profit from slavery is $150 billion a year.” To help in the fight, Made in a Free World created its Forced Labor Risk Determination and Mitigation (FRDM) database, which maps the bill of materials of 54,000 goods, products and services, allowing companies to get a better handle on their supply chain, including subtiers. The not-for-profit recently teamed up with the Ariba Network and its database of 1.8 million companies in 190 countries. That’s a lot of visibility. “They can make more informed decisions about their supply chains that not only help their business, but make the world a better place,” says Chris Haydon, senior vice president of product management at Ariba, an SAP Company. “You can outsource processes and manufacturing, but you can’t outsource accountability.” SDCE
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PRINT AND DIGITAL STAFF PUBLISHER Jolene Gulley EDITOR Barry Hochfelder ASSOCIATE EDITOR Carrie Mantey ASSISTANT EDITOR Eric Sacharski ART DIRECTOR Kayla Brown AD PRODUCTION MANAGER Cindy Rusch SR. AUDIENCE DEVELOPMENT MANAGER Wendy Chady AUDIENCE DEVELOPMENT MANAGER Tammy Steller ADVERTISING SALES (800) 538-5544 JOLENE GULLEY, jgulley@ACBusinessMedia.com STEPHANIE PAPP, spapp@ACBusinessMedia.com EDITORIAL ADVISORY BOARD LORA CECERE, Founder and CEO, Supply Chain Insights TIM FEEMSTER, President, Foremost Quality Logistics JOHN M. HILL, Director, St. Onge Company, and Board of Governors, Material Handling Industry of America RORY KING, Analytic and Big Data Advisor, SAS Institute KAREN MASTER, Vice President, Communications, Ariba, an SAP Company WILLIAM L. MICHELS, CEO, Aripart Consulting JULIE MURPHREE, Founding Editor, Supply & Demand Chain Executive ANDREW K. REESE, Senior Portfolio Marketing Manager, IHS, and Former Editor, Supply & Demand Chain Executive BOB RUDZKI, President, Greybeard Advisors CHRIS SAWCHUK, Global Managing Director and Procurement Advisory Practice Leader, The Hackett Group RAJ SHARMA, CEO, Censeo Consulting Group KATE VITASEK, Founder, Supply Chain Visions CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (800) 543-5055 Email: circ.sdcexec@omeda.com LIST RENTAL Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18, Fax: (847) 492-0085 Email: ejackson@meritdirect.com REPRINT SERVICES JOLENE GULLEY, jgulley@ACBusinessMedia.com AC BUSINESS MEDIA INC. CHAIRMAN Anil Narang PRESIDENT AND CEO Carl Wistreich EXECUTIVE VICE PRESIDENT Kris Flitcroft CFO JoAnn Breuchel VP CONTENT Greg Udelhofen VP MARKETING Debbie George DIGITAL OPERATIONS MANAGER Nick Raether DIGITAL SALES MANAGER Monique Terrazas Published and copyrighted 2015 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Supply & Demand Chain Executive [USPS #024-012 and ISSN 1548-3142 (print) and ISSN 1948-5654 (online)] is published five times a year: March, May, June, September and December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, Wisconsin and additional entry offices. POSTMASTER: Please send all changes of address to Supply & Demand Chain Executive, P.O. Box 3605, Northbrook, IL 60065-3605. Printed in the USA. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the United States, Canada and Mexico to qualified individuals. Publisher reserves right to reject nonqualified subscribers. One-year subscription to nonqualified individuals: U.S., $30; Canada and Mexico, $50; and $75 for all other countries (payable in U.S. funds, drawn from U.S. bank). Single copies available (prepaid only) for $10 each. Return undeliverable Canadian addresses to: Supply & Demand Chain Executive, P.O. Box 25542, London, ON N6C 6B2. The information presented in this edition of Supply & Demand Chain Executive is believed to be accurate. The publisher cannot assume responsibility for the validity of claims or performances of items appearing in editorial presentations or advertisements in the publication.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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The average U.S. cargo theft is $233,000*. What’s more surprising? You’re probably not protected. Most companies assume it won’t happen to them. But in the U.S., more than 800 of them are proved wrong every year. And they’ll need a lot of new sales to cover just one bottom-line loss. Bad guys are plotting, but so are we. UPS Capital Insurance Agency, Inc. will customize a policy for your business and even cover losses to the full retail value. Better yet, with more than 100 years of supply chain expertise, we can help prevent them in the first place. Protect yourself. upscapital.com
UPS Capital insurance Agency, Inc., and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. Insurance coverage may not be available in all jurisdictions. Insurance is underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. ©2015 United Parcel Service of America, Inc. UPS, UPS Capital, the UPS brandmark and the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved. *FreightWatch International, Supply Chain Intelligence Center: Annual Cargo Theft Report 2014.
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RISK MANAGEMENT
{ CARGO THEFT}
By Richard Kolbusz
COMBATING
CARGO
THEFT
Technology + a proactive security strategy = a match made in supply chain heaven
A
gang of thieves watches a truck carrying high-value cargo—in this instance, electronics. The thieves wait for the opportune moment to carry out their plan and, when the truck is parked in a dimly lit area with no one around, they strike, breaking into the truck and making off with the goods. The cargo is never recovered. This scenario is all too common both in the United States and around the world. According to FreightWatch International, cargo thieves continue to adopt increasingly “professional and sophisticated” tactics. In fact, the FreightWatch 2014 cargo theft report notes that 90 percent of verified thefts in 2014 occurred when a truck was stationary and unattended. The vast majority of all thefts were theft of truckloads and 87 percent of thefts with a known location were stolen from unsecured parking areas, such as truck stops, public parking and roadsides. For trucks, and air and ocean containers, there are many security technology options available on the 8
market. Among the most common are security seals, which affix to truck doors, trailers, totes or containers, with unique serial numbers or barcodes. There are electronic, indicative and barrier seals, but it is important to choose one that fits customer needs based on the transport mode and/or type of products being shipped. Many companies are not familiar with the security measures and behind-thescenes technology being used to track their valuable goods. Understanding freight security is the freight company’s job and a strong freight forwarding partner should be able to assure its customers that their cargo is being tracked with the latest, most effective technology. But these security options are only available to forwarders with the necessary know-how and relationships with security software companies to be able to effectively deploy these systems to support the safe transport of customers’ goods. Without the proper experts in place to set and inspect the security seals,
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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Control the chaos. Today’s manufacturing companies are challenged to optimize the logistical complexity throughout the supply chain. iManage™, a new Numerex Solution, helps companies use the power of the industrial Internet of Things (iIoT) to monitor the flow of parts, assemblies, and racks across their supply chains and among geographically dispersed suppliers and plants. Receive instant alerts when the tracked assets deviate from preestablished routes, or when stoppages, slowdowns, or problems occur. Numerex’s scalable IoT solutions including devices, network, and applications deliver actionable data to help customers make informed decisions. We simplify the complexity of machine interconnectivity—enabling the Internet of Things—so you can solve business challenges, produce new revenue streams, create operating efficiencies, and improve your bottom line. To learn more about iManage call 1-877-980-6208 today or visit numerex.com © 2015 Numerex Corp. All rights reserved. Numerex is a registered mark of Numerex Corp.
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CARGO THEFT
HOLIDAY SEASON = CARGO THEFT SEASON “Statistics show that cargo at rest is at an increased risk for pilferage and full container theft,” says Tom Mann, president of TrakLok International, a firm specializing in trailer and container access control. “This is especially true during the holidays, when cargo theft increases 50-plus percent.”
WWReport
Mann recommends transportation companies take the following steps to decrease risk:
WWDrivers
LOADS AT REST WWUtilize secure lots
that provide sufficient barriers to prevent theft or unauthorized access. (For example, the compound should have a chain link fence of 9-gauge material at least 8 feet high, topped with barbed wire and it should be properly anchored.)
WWClose
truck doors before pulling into the lot so that surveillance efforts cannot see what was loaded on to trailers.
WWEmploy
the use of security patrols in lots where high-value cargo is staged for transport.
WWUse
security equipment to secure trailers while they are being staged. King pin locks, landing gear locks, and most important, electronic security locks with active alarm systems should be installed on cargo doors.
ON THE ROAD WWEnsure that a Red
Zone of at least 250 miles is implemented. (The Red Zone is the distance wherein the driver does not stop after a pickup.) Drivers should be rested, trucks fueled and all personal needs taken care of prior to a pickup so the Red Zone can be effectively implemented.
any out-ofthe-norm occurrences while loading the trailer or a shipment is in transit. Drivers should notify dispatch during extended stops at areas such as truck stops and rest areas. and warehouse workers should not discuss any details regarding loads with anyone, specifically drop locations, routes and contents.
WWConsider
a no-drop policy, keeping the trailer married to the tractor so that the tractor and trailer can be secured.
WWUse
effective access control equipment to maintain integrity while the shipment is in transit. This includes electronically monitored locks equipped with a tamper detection alarm system and GPS tracking affixed to the trailer doors.
ADDITIONAL SECURITY WWFor high-target shipments,
employ multiple layers of security to dissuade or delay cargo thieves.
WWImplement
regular security briefings to train drivers on surveillance techniques and protocols to follow if drivers detect suspicious activities.
WWEmploy
a tracking system that includes active and passive alarm systems.
WWUse
a rugged locking system that notifies the driver and security personnel if there are any attempts to breach the trailer door.
and without a full understanding of the supply chain, in addition to a strong monitoring system, any seal can be rendered ineffective. Although common cargo security technology, such as seals, can be very sophisticated and work very effectively, there’s a new wave of technology that is becoming increasingly popular—intransit total asset visibility (I-TAV). Frequently used in defense logistics, I-TAV tracks, reports, controls and delivers information for optimal management of a company’s entire supply chain. 10
This I-TAV technology is able to provide full supply chain visibility based on three pillars: hardware, software and a control tower/network operations center (NOC). First, the hardware created now is self-powered, while it collects and transmits information in real time regardless of extreme conditions. It is also bullet- and tamper-proof. Second, the software collects and organizes information, then delivers it and prompts supply chain users to take action if necessary. The web-based software contains unlimited data analytics, key performance
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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THE LINE FOR SUPPLY CHAIN SOLUTIONS STARTS HERE. At MODEX, you’ll find the solutions you need to solve tough manufacturing and supply chain challenges, identify best practices, exceed customer demands and gain competitive edge. There’s a reason we call MODEX “the Greatest Supply Chain Show on Earth.” It’s where 850 of the leading manufacturing and supply chain providers gather to showcase their latest and greatest solutions to an audience of more than 25,000. If your business needs to maximize operational efficiency and cut costs, your solutions will be waiting at MODEX. The industry’s brightest minds will gather to network and share their perspectives on the ever-evolving state of the supply chain – where it’s headed, new ideas, innovation and more. With powerful keynotes and more than 100 hands-on education sessions, you’re sure to find your edge.
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CARGO THEFT
COMPANIES DO NOT HAVE TO BE VICTIMS OF CARGO THEFT. THERE ARE ADVANCEMENTS IN TECHNOLOGY HELPING TO LESSEN THE RISKS INVOLVED IN SHIPPING AND IT IS OF THE UTMOST IMPORTANCE TO ASK THE RIGHT QUESTIONS WHEN SELECTING A FREIGHT FORWARDER.
ABOUT THE AUTHOR RICHARD KOLBUSZ is the head of security and operational resilience for DHL Global Forwarding, Americas region. He has an extensive federal law enforcement management background, including the Secret Service and U.S. Customs Service/Immigration and Customs Enforcement. Overseeing a security team of 27, he is responsible for the daily management and direction of security operations, budget, personnel and policy guidance, including the direction of sensitive, potentially criminal and/ or administrative investigations. 12
indicators and protocol compliance information. Additionally, the software can provide real-time information regarding temperature, position, speed and the estimated time of arrival, and includes options for alerts, alarms and geo-fencing as well. Third, the control tower is comprised of professionals whose job it is to watch over protected assets. The NOC provides and coordinates cloud-based services, making them available to interested parties anywhere in the world. This new type of technology is different from some of the technology that was available up to now in that it detects and manages multiple events that could threaten the supply chain, and does not act as an extension of a GPS tracking system, but acts more on cargo traceability. This I-TAV technology is also available on multiple platforms (including both laptops and smartphones). The technology is fully customizable, allowing forwarders to interact with and personalize the platform. It is also ideal for long journeys, offering information for more than 50 straight days. Alerts are also customized, allowing forwarders to define who receives notifications based on security level or incident type. Many freight forwarders say security is at the top of their priority list, but often partner with third-party vendors that do not have security as their top concern, rendering them unable to accurately monitor their customers’ cargo over its entire journey. For companies that need to ship close to home, on high-risk routes, or in emerging markets where corruption
and political and legal instability are high, it is necessary to partner with logistics companies that have many vendor security protocols and measures in place. When selecting a freight forwarder, it is important to inquire about how many vendors and hand-off points that particular forwarder uses, what type of security and tracking services are in place, as well as any tracking options that are available. Additionally, it is also important to know what thirdparty vendors they use, and how those companies monitor compliance and screening protocols. One such measurement to use is the Customs-Trade Partnership Against Terrorism (C-TPAT) program. The C-TPAT program is a voluntary initiative designed by U.S. Customs and Border Protection to strengthen the security of our borders and the overall supply chain while facilitating the flow of legitimate trade. By earning this certification, companies can illustrate their commitment to a more secure supply chain for their employees, suppliers and customers. Companies do not have to be victims of cargo theft. There are advancements in technology helping to lessen the risks involved in shipping and it is of the utmost importance to ask the right questions when selecting a freight forwarder. Lastly, a company should have a proactive security strategy in place, anticipating any scenario that could possibly occur, from loss of goods or disruption in the supply chain to smuggling or tampering. With theft or any of the above scenarios, you not only risk loss of cargo—you risk loss of reputation and potentially business as well, so security should be everyone’s priority. SDCE
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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RISK MANAGEMENT
{ VENDOR CONTRACTS}
By William L. Michels
CYBERSECURITY & CONTRACTS:
Have you looked at them lately?
You may not think you’re vulnerable, but anything connected to your organization’s network is a potential threat
14
I
n October, I had the pleasure of attending and speaking at the Zycus Horizon 2015 conference. The thing about conferences is that you always learn something and this one was no exception, especially when I listened to a presentation by Deborah Wilson from Gartner on “Cybersecurity: What the CPO Needs to Know.” The thing that I found most interesting was that all supplier contracts need specific language about risks, obligations and notifications concerning cybersecurity breaches. Yet, thinking of my contracts and those of my clients, most do not address this area of the law where businesses are subject to extreme risk. While reading news headlines waiting for my flight after the conference, this one caught my eye: Average Cost of Cybercrime in the U.S. Rises to $15 Million. On the fourhour flight from Atlanta to Phoenix, I saw several articles in business magazines and looked through a few contracts on my computer; no, clauses specifically addressing cybersecurity were not there. As soon as I got back to my office, I called a few law firms I worked with over the years and all of them confirmed that data security is the fastest growing practice in their respective firms. All were now building new contracts with cybersecurity language. The Security and Exchange
Commission issued guidelines that get a lot of attention as companies build the contract language to protect them. This was a wakeup call to me; many businesses are highly exposed as they did not add new language and contract clauses, not just because they’re not aware, but because they don’t know what to include. To close the gap in this area, Jeffrey Mayer, partner at Akerman LLP, helped outline the areas that should be considered. Mayer regularly advises purchasing departments and speaks on many cutting-edge issues relating to purchasing law, including international contracting, warranties, and responding to sudden and unexpected catastrophic events. Here’s what Mayer and his team suggest: Data security breaches are very real and costly. In addition to legal risk, there is public relations risk, stock price risk and, of course, people can lose their jobs for not taking the proper precautions to mitigate potential breaches. Use your contracts to help. Akerman has an entire team devoted to data security issues and two of those team members, Melissa Koch and Elizabeth Hodge, outline some of the most critical legal provisions for purchasing departments concerned about data security issues. Koch and Hodge’s tips are: ❯❯ Be clear on what data is at issue (especially if it includes
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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liability. Also verify if the service provider has appropriate cyber liability insurance and the limits on such coverage. ❯❯ Make sure the service provider is required to assist in transferring data back to you in the event the services agreement terminates. Make sure that the contract does not permit the services provider to lock you out of access to your data, especially if the data at issue is critical to your business operations. ❯❯ Not only demand that the vendor indemnify you, but also that they cooperate with any pending litigation or investigation. None of these issues stand apart from other issues that you face in a purchasing department. Just as legal systems vary, making international contracting challenging, so do local laws on data security and privacy. And, unlike other commercial laws, you may not be able to contract out of those obligations. Similarly, your warranties in a contract bear directly on legal obligations related to data security. And any force majeure (chance occurrence or unavoidable accident) clause needs to be examined closely to determine whether it provides an out or escape to the vendor in the event of a major data breach. While data security issues go well beyond the contract, making sure your contracts fit with your overall data security strategy is just as essential as any other contract strategy. With this information, I am enhancing risk management plans and reviewing contracts. You may not think you’re vulnerable, but anything connected to your organization’s network is a potential threat. How prepared are you? SDCE
personal, confidential or sensitive information). ❯❯ Make sure the ownership rights are spelled out and well understood to help control who has access to the data and how it can be used. ❯❯ Understand all of the touch points on how the data flows, who has access to it and where it is stored. This is particularly important if a vendor is going to have access into your company systems. Make sure there are at least industry-standard procedures and processes in place to keep the touch points and data safe and secure. Also make sure the transfer of data complies with all applicable laws. Regulators across all industries increasingly expect data owners to know where the data lives and who is handling it. You want to know if the data is stored beyond U.S. borders, or if vendor employees and subcontractors outside the U.S. have access to the data. ❯❯ Perform pre-qualification reviews, and assess audits and certifications. Thoroughly evaluate the vendors with whom you are sharing data, and make sure they are properly audited and certified using current standards. Make sure their Internet service providers are also audited and certified. ❯❯ Have proper recourse in the event of a security incident through carefully drafted indemnity rights and carve-outs from limitation of
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ABOUT THE AUTHOR Jeffrey Mayer, a partner in the litigation practice group at Akerman LLP, contributed to this article. As founder and CEO of Aripart Consulting, WILLIAM L. MICHELS helps companies transform business strategies into maximum profits. He is an expert in purchasing and supply chain management, and has worked with some of the world’s greatest companies across a wide spectrum of industries and countries transforming procurement and the supply chain. He is co-author of the book, Transform Your Supply Chain. Michels also is a member of the Supply & Demand Chain Executive Editorial Advisory Board.
SDCExec.com | December 2015 | SUPPLY & DEMAND CHAIN EXECUTIVE
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2015 GREEN SUPPLY CHAIN AWARDS By Editorial Staff, Supply & Demand Chain Executive
ENVIRONMENTAL STEWARDSHIP
is Good Business
2015 Green Award winners look to the future as they look at the bottom line
W
e’ve long taken the stance that being green and profitability are not mutually exclusive. What better way to illustrate that point than with a forward-thinking bank that practices sustainability? Of the almost 200 entries in this year’s Supply & Demand Chain Executive Green Awards, we’ve selected Dallas-based Comerica Bank as the outstanding entrant. In its submission, Comerica wrote that it “understands sustainability as an approach to conducting business that seeks to meet the needs of the present in ways that do not compromise the ability of future generations to meet their needs. We recognize that protecting and preserving the environment is important to the health, well-being, and prosperity of the people, businesses, and communities we serve. We are therefore committed to incorporating environmental stewardship considerations into the ways we do business, including our processes for procuring goods and services.” Over the last two years, Comerica compiled feedback from its suppliers and key stakeholders to develop its Sustainability Impact Analysis to help shape its sustainability program and reporting. The company initially focused its attention on better understanding 16
the current environmental practices and performance of its most significant suppliers to establish a baseline to measure future progress and set targets for improvement. Other supply programs, such as its Supplier Diversity Program, address aspects of sustainability apart from environmental issues. Based on the use of a companydeveloped environmental questionnaire and scoring tool, Comerica assesses and rates its most significant suppliers and sets goals for improving the performance of the group as a whole. During their regularly scheduled reviews, key suppliers are told how Comerica views their environmental sustainability performance and where it sees opportunities for improvement. Previously rated suppliers are rescored on a three-year cycle to evaluate whether progress is being made or maintained. New potential suppliers of significant goods and services are evaluated and scored as part of the RFP process. Placement of the company’s business considers environmental performance in addition to quality, pricing, and delivery needs, consistent with good procurement practices. “As we continue on our long-term sustainability journey,” the submission explained, “we have identified some environmental sustainability issues that are important to our stakeholders
and relevant to our industry and company. We have therefore adopted an Environmental Policy Statement which contains a series of specific commitments.” They include: ❯❯ Helping suppliers increase their awareness of both the risks and opportunities that may arise from climate change developments and the growing global imperative to conserve energy and natural resources, use them efficiently, and minimize waste. ❯❯ Implementing initiatives within the company to reduce, reuse, recycle, and re-think processes in ways that decrease overall use of natural resources and generation of wastes. ❯❯ Reduce paper consumption. ❯❯ Where practical, preference in the procurement processes will be given to products and suppliers that demonstrate superior environmental performance. ❯❯ Track and publicly report progress. Led by the Comerica’s corporate executives—spearheaded by CFO Karen Parkhill—other programs include the Environmentally Preferred Procurement (EPP) Program and the Green Procurement Work Group. EPP is designed to promote and support the growth of a sustainable supply chain. The intent is to influence suppliers
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2015 GREEN SUPPLY CHAIN AWARDS to adopt more environmentally responsible practices over time. The Green Procurement Work Group oversees the work of the EPP. Chaired by senior procurement management, it meets monthly and consists of individuals from Corporate Procurement, Corporate Sustainability Office, Corporate Marketing, and two key supplier partners. The Green Procurement Work Group’s annual action plan to advance Comerica’s progress in this area is reviewed and approved by both the Sustainability Council and the company’s Management Executive Committee (MEC). The Council receives quarterly reports on the progress of the work group, and the MEC reviews performance in this area against expectations in the annual action plan once a year.
AND NOW, HERE’S A LOOK AT OUR OTHER GREEN SUPPLY CHAIN AWARD WINNERS: ALOM put place key sustainability
metrics in place in 2014-15 that include development of a two-part
strategic sustainability plan. Part 1 focuses on ALOM operations across its global facilities (electricity efficiency, recycling, enviro-friendly cleaning solvents, employee transportation, etc.). Part 2 focuses on specific ALOM client service offerings. Basware’s solutions, allow companies to improve efficiency, visibility and control, and achieve significant environmental benefits. A large U.K.-based pharmaceutical chain, for example, processed many of its 1.2 million annual invoices. Moving to a completely electronic system, it’s on target to save more than 419 trees and 3.5 million pieces of A4 paper yearly. B-Stock helped clients ditch traditional methods, including landfills, and replace them with a sustainable solution in the form of a B2B liquidation marketplace. This enabled the recycling, repurposing, reuse or resale of more than 24 million items. In the past 18 months, 21 million excess items have been sold for reuse, resale or recycling. CaseStack, by combining separate LTL deliveries heading to the same
Results Through Applied Intelligence® JVKellyGroup, Inc. provides cost reduction and risk mitigation solutions for some of the world’s largest organizations. By offering an integrated set of analytics, sourcing services and technology, JVKellyGroup helps ensure that a company’s spend is effectively analyzed, sourced, managed, and monitored. Why JVKellyGroup, Inc.? Clients benefit from the expertise of years of experience our consultants have in actual sourcing roles including former CPOs, VPs of Procurement and Sourcing, Buyers, Analysts and Sourcing Technology Developers. Our services will help decrease sourcing cycle time, increase potential savings capture due to expertise in commodity areas as well as improve supplier relationships and mitigate supplier risk. Experience With a team of professionals, averaging more than 15 years of hands-on, industry experience, our projects provide practical solutions and quantifiable benefits. JVKellyGroup has led engagements across a diverse range of industry verticals and worked with virtually every category of indirect spend.
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Industries
JVKellyGroup has worked with some of the world’s largest organizations across multiple industries including: » Financial Services » Pharmaceuticals » Manufacturing » Automotive » Business Information » Government/Public Sector » Retail
Retail DCs, stores, or regions into one full truckload, helps minimize dock congestion and reduces the number of trucks on the road. This, in turn, reduces greenhouse gas emissions. It helps streamline packaging, builds partnerships with efficient carriers and eliminates waste from the process.
Cass Information Systems
solutions help its customers meet green supply chain goals. The result is a significant reduction of paper transactions in shipping documents, billing (freight invoices), payment transactions, and information delivery. These are accomplished without sacrificing controls and accuracy. Celestica reduced the need for 53 ocean containers, avoiding approximately 28.5 metric tons of CO2e for a single product for one customer. In another case, Celestica’s solution reduced the need for 44 ocean containers, avoiding 20 metric tons of CO2e. Not only did this represent significant carbon savings for customers, it also generated concrete financial savings. DiCentral’s solutions inherently help create and sustain green supply chains. This is achieved via streamlined processes, a massive reduction in paper and other durable goods use that results in millions, if not billions, of pounds of waste not being introduced into our already full landfills. Global consciousness is not only preached, but practiced. DSC Logistics has been tracking sustainability on electricity, natural gas, water, propane, and recycling across 40-plus locations for four years. Its goals include further waste stream reductions, implementation of LEAN initiatives focused on reducing process steps and waste in the supply chain, and use of strategic supply chain modeling to reduce logistics center footprints.
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Sometimes the best way to use resources...
is to conserve them.
Five of the many ways we’re reducing our environmental impact At DSC Logistics, we are: • Reducing fuel usage and carbon emissions with network modeling, shipment consolidation and transportation collaboration • Saving water with green-scrubbers that use 70% less water to clean our Logistics Centers • Recycling paper, plastics, electronics, batteries, and other materials
• Decreasing paper and packaging waste with an innovative machine that designs each container to fit its contents precisely • Measuring consumption of water, electricity, propane and natural gas to monitor and drive improvement DSC launched our network-wide sustainability program in 2009 and since then, we’ve won 19 awards for initiatives that conserve resources and reduce costs.
We think greener!
Lead Logistics Partner • Third-Party Logistics • Supply Chain Analysis & Design Network Management • Logistics Center Management • Transportation Management Value-Added Services • Business Process Integration • Supply Chain Visibility Dynamic Supply Chain Management
www.dsclogistics.com 1.847.635.4952
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2015 GREEN SUPPLY CHAIN AWARDS East Coast Warehouse & Distribution’s sustainability initiative
is growing. It calls home the largest solar powered warehouse in the Northeast, which allows it to produce more than 810,000 kilowatts per hour of clean, renewable energy each year. Motion sensing technology reduces the time fixtures are drawing electricity. enVista works to promote green business practices with clients, but also has taken steps to ensure green practices within the workplace with its Going Green initiative. All enVista associates are reimbursed for purchasing LED light bulbs, receive a partial reimbursement for purchasing a new hybrid car, and are reimbursed if they purchase and plant a tree at home. eZCom Software’s EDI (Electronic Data Interchange)
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solution, Lingo, has made supply chain management streamlined and more efficient, but also much more eco-friendly. It enables companies to move to electronic transactions, which reduces paper usage by thousands of tons yearly, and reduces carbon emissions. It also requires less energy. Geodis Supply Chain’s EcoTransIT tool measures emissions of greenhouse gases and atmospheric pollutants for all means of transport. It is aligned with the European standard which defines a methodology for calculating greenhouse gas emissions in the transport sector. Geodis’ performance has improved continuously over the past five years. Inmar saves clients millions of road miles per year, a significant carbonfootprint and cost reduction. One large
Midwest grocer will save more than 10 million miles by implementing better transportation sourcing and networking for distribution; another client can save 3.7 million miles per year through returns optimization. Kenco’s suppliers are required to incorporate minimum sustainability policy compliance. The company has invested in training and certification of its Leader of Sustainability and the program in as an Association of Energy Engineers Certified Energy Manager, Certified Energy Auditor and as a Six Sigma Black Belt to enable a synergistic execution of sustainability initiatives. NeoGrid provides solutions which, by their very nature, contribute to the sustainability of the supply chain by virtually eliminating paper waste with its EDI solution. Recently, NeoGrid contributed to the savings of 350 tons of paper, which is the equivalent of about 4,000 trees. This is significant because it contributes to countless amounts of CO2 emission credit and landfill pollution. Omnify Software’s database enables one customer to incorporate all supplier certifications. The customer can update all specific vendor items with one update per supplier and not have to update 31,000 records independently. It has realized an approximately 17 percent increase in efficiency for its environmental practices. Satellite Logistics Group helps beverage companies dispose of out-ofdate, damaged or recalled product in an environmentally friendly manner that complies with EPA requirements. The company’s EcoBev material recovery service is the only turnkey nationwide green solution for beverage disposal. SLG removes expired, mislabeled, excess, and damaged beverage goods from distributor and producer warehouses.
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Source One seeks not only sustainable alternatives for its customers, but also to identify affordable options helping to make the decision-making process easier and more enticing toward sustainable sourcing. Its analysts seek opportunities to implement green or sustainable sourcing options as a component of every sourcing engagement it takes on. Transportation Insight performs LEAN supply chain assessments to determine where to cut waste such as eliminating expedited shipments, lowering energy usage, reducing packaging, optimizing transportation loads and modes, gaining control over inbound and outbound shipments and improving communication and collaboration with transportation partners, vendors and customers. SDCE
WWAmerican
Logistics
Global
WWBizSlate WWBona WWChainalytics WWCisco Systems WWColumbia Manufacturing
WWC.R. England WWCrown Equipment WWElemica WWELynxx WWGreenPrint WWHighJump Software
WWIHS WWIngram
Micro Mobility
WWInsight WWInternational Asset Systems
WWKane is WWLineage
Able
Logistics
WWLi Tong Group WWLocusTraxx WWLog-Net WWMurphy Warehouse Systems
WWPINC Solutions WWRM2 WWSchenker WWSpinnaker WWSupply Chain Optimizers
WWThomson
Terminals
WWTPS Logistics WWUNEX Manufacturing
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Technologies
WWParagon Software WWPenske Logistics
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TECHNOLOGY
{ THE INTERNET OF THINGS}
By Andy Binsley and Terri Hiskey
THE FACTORY OF THE FUTURE … … brought to you by the Internet of Things revolution
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e live in a time when things once only dreamed about are becoming reality: driverless cars, appliances that text when they need servicing and home healthcare wearable technology that alerts you if your elderly loved one falls. These are just a few of the hundreds of ways consumers are taking advantage of the new technology landscape brought on by the Internet of Things (IoT), which enables the automated transmission of data over a network without need for human intervention. Just as the consumer world is changing at light speed with the adoption of IoT technology, the manufacturing world also is in the midst of an IoT revolution. IoT is enabling manufacturers to gain competitive advantage, and lay a foundation for the factory of the future with smart connected operations,
smart connected assets and the smart connected enterprise. These initiatives to modernize manufacturing plants and facilities is going to have a huge impact on workers and organizations. Leading global manufacturers across various industries are putting together strategies that leverage IoT technology to modernize their processes and organizations. Analyst firm LNS Research sees four main areas for manufacturers to consider when developing an IoT strategy: connectivity, cloud, big data analytics and application development. Let’s look at each of these areas individually and how they all work together to create a factory of the future.
CONNECTIVITY: TO ACT ON THE DATA, YOU NEED TO COLLECT THE DATA On the factory floor, it is already impressive how sensors, instruments,
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cameras and other data collection devices are being deployed en masse to record and track a wide range of operational processes—from tracking temperatures to inspecting parts with greater speed and accuracy to equipment productivity. The installed base for Internet-connected devices already exceeded 14 billion in early 2015 and is forecast to balloon to nearly 50 billion by 2020 according to one estimate from Cisco. Adoption of connected devices on the manufacturing floor is expected to continue to accelerate for a number of reasons, including lower costs for smart devices, reduced connectivity costs as providers are charging less for data connections, more efficient wireless communications, better security and expanded cellular networks, leading to higher bandwidth. In addition, now there is easy-to-use software available that can take all that collected data, and provide insightful and actionable analytics on a regular basis. How is this connectivity being applied to a factory of the future? Imagine installing sensors and controllers to your manufacturing equipment and throughout your facility. They can inform you of equipment’s needs for maintenance before something malfunctions, preventing production delays and shutdowns. Questionable parts can be viewed remotely with cameras or optical sensors, then followed digitally through their production run and the supply chain. All the while, sensors continue to collect data on the performance of those parts and equipment during production runs. Building out the infrastructure to create this smart connected enterprise may be critical for manufacturers if they hope to keep up with competition. By 2025, the number of connected devices
used in manufacturing facilities or for manufacturing processes is expected to represent 75 percent of all connected devices, according to IHS, a data and analytics firm.
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To gain any true value out of all this data being generated with connected devices on the manufacturing floor, you need a scalable infrastructure that lets you store, organize, integrate and
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THE INTERNET OF THINGS
secure that data. There is no better time to get into the game than now. Cloud computing greatly reduced computer processing and storage costs, so economic barriers to entry are becoming almost non-existent. Organizations that don’t fully think through how to leverage the large amount of data being collected are not going to be positioned to fully take advantage of what the IoT can do, as all components of an IoT solution must work together and be secure at every point throughout the system. Streamlining and connecting this new device data to back-end cloud applications and services is critical to driving production and infrastructure costs down and profits up. Companies that wisely adopt a cloud strategy are getting greater bandwidth and scalability, and are able to save time and streamline operations. Being confident that your data is protected and secure from device to data center to the cloud is important to the factory of the future. As manufacturers rely more on cloud technology, they must also consider how to protect themselves against cyber threats to intellectual property. Factories of the future must have reliable security measures to protect against hacking and ensure that confidential data cannot be breached.
BIG DATA & ANALYTICS: ANALYZING DATA & GAINING ACTIONABLE INSIGHTS To get the most out of the generated data, manufacturers must analyze and act on it quickly—often not such an easy task given the sheer amount of data. Many manufacturers are unable to manage and analyze such large volumes of data spread across multiple systems due to the lack of a robust and scalable infrastructure, technologies 24
and analytical tools. These issues are magnified if companies experience slow access to the data that is critical to their businesses, resulting in delays of days to weeks to analyze the root cause of defects, and often preventing timely corrective actions.
Many manufacturers are now taking a harder look at their current enterprise applications, business processes and data, and realizing the inefficiencies in using systems that are functionally isolated and fragmented. Bringing all these processes and data
The implementation of an effective Big Data strategy can yield a 10 to 25 percent reduction in operating costs and 10 to 50 percent reduction in assembly costs, and can generate an increase of up to 7 percent in revenue. Factories of the future adopt endto-end solutions that help consolidate, contextualize and analyze massive amounts of product, process and quality data generated by manufacturing facilities. These solutions enable enterprises to detect problems earlier in the process to help maximize yield, improve quality, and minimize defects and cycle times. The implementation of an effective big data strategy can yield a 10 to 25 percent reduction in operating costs and 10 to 50 percent reduction in assembly costs, and can generate an increase of up to 7 percent in revenue. The factory of the future can deliver this Big Data analysis on a smartphone, tablet or desktop on the shop floor; act on the data; then push information back to the field, the production line or out to a supplier. Easy access to the level of analysis that these tools enable can facilitate decision-making; improve products, solutions and customer service; and uncover new opportunities for improvement.
APPLICATIONS DEVELOPMENT: STREAMLINE THE DATA INTO INTUITIVE BUSINESS FLOWS WITH MODERN CLOUD APPLICATIONS
together in smart business flows is the next component to a strong IoT manufacturing strategy. The right cloud applications can help revitalize and optimize older business flows and processes on the factory floor. Some manufacturers may be interested in an integrated cloud planning and manufacturing solution that enables them to plan and balance supply and demand on one screen, while efficiently managing the shop floor. Some manufacturers may benefit from a complete order-to-cash solution that allows them visibility to orders as they are fulfilled. The bottom line for factories of the future is less risk and lower costs for cloud applications as part of an overall IoT strategy. For manufacturers to have a comprehensive IoT strategy, they must consider the aforementioned four main areas. Leading manufacturers are building their IoT strategy to include these four areas because they understand the impact of IoT and are well on their way to building their factory of the future. SDCE ABOUT THE AUTHOR ANDY BINSLEY is the senior director of manufacturing and ALM product strategy at Oracle, and Terri Hiskey is the director of product marketing at Oracle.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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BEST PRACTICES
{ REVERSE SUPPLY CHAIN}
By Carrie Mantey
YOUR BUSINESS-TO-BUSINESS
EBAY SOLUTION
There are options to recoup value from holiday returns and overstock inventory, including resale to the secondary market via online auctions
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epending on what retailers do with holiday returns and overstock inventory—to the degree they touch it, sort it, triage it, refurbish it, recycle it, resell it—the associated costs of the reverse supply chain can add up quickly, especially around the holidays. “It’s expected that roughly 10 percent of purchases will end up being returned and the estimates I’ve read is that will translate into $70 billion worth of retail sales, which just get reversed. The impact is enormous. With 10 percent of sales coming back, it’s not just running the register backwards, but the cost associated with handling all that product coming back,” according to Howard Rosenberg, CEO and cofounder of B-Stock Solutions. There are several ways a retailer can try to recoup value from the gift returns and overstock inventory that tend to accumulate during and after the holidays: resale to another consumer (in some cases including reconditioning and/or refurbishment), resale in bulk on the secondary market, donation and recycling. Destruction is another option for retailers, although no value is recouped, but further reduced. One issue with dealing with this excess inventory and returns is that many 26
retailers not only don’t have the space to house it or time to invest in it, but also the expertise to determine what inventory liquidation approach best suits their bottom line. That’s why B-Stock Solutions and comparable organizations focus on helping retailers resell their returns into the secondary market in bulk to business buyers. “The secondary market for retailers’ products … is anything that leaves a company’s facilities, but not through the front door of their retail stores. It’s going out from distribution and return centers. What we found is that retailers want this product gone relatively quickly after it hits their warehouses and return centers,” says Rosenberg. The bulk secondary market “satisfies the velocity requirement that they have to move this product out so they can return to business as usual and have their normal inventory on the shelves, not all these return products.”
ELIMINATING OVERSTOCK WHILE RECOUPING VALUE WITH AN ONLINE AUCTION Rosenberg continues, “Returns have been happening forever. With the percentage of sales that are getting returned, I think that’ll continue to rise as the balance of sales shifts from offline
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to online. We are definitely seeing that already, so it becomes more and more important.” With the volume of returns ever-increasing, it often makes sense for retailers to collaborate with a third party specializing in inventory liquidation and the reverse supply chain to get rid of excess product, especially considering the core competency of retailers generally doesn’t include the reverse supply chain. “99.9 percent of the people that work at any given retailer are focused on optimizing margins on the forward side of the business. You have a tiny number of people at the company who are even thinking about the liquidation and the reverse part of the business.” The online auction platform provides tools and services that open up the secondary-market sales of retailers’ and manufacturers’ excess inventory to a much broader audience
(much like a business-to-business eBay), thereby eliminating the timeconsuming negotiation step of selling inventory, which causes them to limit their secondary-market sales to a small group of buyers. Online, you can negotiate with 5,000 people, but when you negotiate on the phone, you have to limit the number of people that have access to the negotiation process due to time constraints. “The retailer gets the benefit of lots of buyers competing for their inventory, with the increased likelihood that someone in that group of 5,000 is willing to pay more than the someone in that group of five may have,” Rosenberg concludes, adding that the solution tends to deliver higher recovery rates, typically anywhere from 30 to 80 percent, than if retailers just negotiate directly with a buyer. And buyers win as well because they have
With the volume of returns ever-increasing, it often makes sense for retailers to collaborate with a third party specializing in inventory liquidation and the reverse supply chain. direct access to inventory that they
never had before. “It’s really a winwin for both buyer and seller.” A dedicated database of suppliers and product differentiation helps, too. “When we build these private marketplaces for a particular retailer, we build a buyer base in that marketplace for that product. It’s there, ready, waiting and acceptable to the retailer to put its product in front of, any time it needs 24/7/365. It fundamentally changes that dynamic in the market in which the retailer feels dependent on some buyer because it doesn’t know where to sell its product itself. Rather, the retailer has the tool right there
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at its disposal, ready to go, with the appropriate buyer base just waiting for it to list something. I think the bottom line is that it’s not necessarily in the retailer’s core competency to know the secondary market and know where to go find demand for particular products, which is caused by the fact that so few people focus on liquidation. They don’t have the bandwidth to go make this their job to go scouring global markets looking for the right buyers for the right product.” Retail is intensely competitive: Every dollar that a retailer generates matters. Rosenberg elaborates, “There’s pressure on margins everywhere retailers turn, whether it’s free shipping and faster delivery, or liberal return policies. Retailers work hard to squeeze every dollar they can out of the main business and got quite good at that: The retail business—selling single items to consumers either in their stores or on their sites—streamlined processes, put in massive systems, and invested huge amounts of money in software and analytics, so the question I always asked (in the 10 years I’ve been doing this) is why would you neglect the last mile of liquidation, in particular, all of your supply chain, more generally. A lot of companies use very old, inefficient systems and processes in the reverse. “I used to say that the opportunity for our business is that retailers just never got around to making the investment in the reverse part of the supply chain and the last mile of liquidation. I thought eventually they were going to get there as they realized that this was the last frontier of where they have significant financial margin opportunity that has yet to be taken advantage of and I think we’re finally starting to see that.” SDCE
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BEST PRACTICES
{ THE HOLIDAY SUPPLY CHAIN}
By Padman Ramankutty
Optimizing
THE HOLIDAY SUPPLY CHAIN Do it right and be rewarded with increased profits and satisfied customers
M
onths before the onslaught of the holiday season, retailers begin preparing their stores with seasonal merchandise and holiday decorations. Supply chain and logistics processes thus need to be efficient enough to handle the shopping increase. Industry reports suggest that a dedicated holiday supply chain strategy needs to be put in place at least six months ahead of time; nine months would be ideal. The more severe challenge, however, is the ability to offer online as well as in-store inventory presence. Much of this is now done through third-party channels or shipped directly to the customer. Perhaps this is one of the primary reasons for inventory and delivery snafus as most consumers demand delivery within a day and the flexibility to return the product. Without real-time visibility, a company can carry too much inventory, leading to decreased cash flow and increased warehousing costs. Worse yet, products could go out of stock at the peak of the holiday season, leading to 28
sales loss and unhappy consumers. The ability to see inside the supply chain, including work-in-progress inventories, increases lead time and allows companies to respond to unexpected demand shifts. This brings us to the ways in which we can circulate current inventory: Omnichannel shopping. Successful supply chain planning doesn’t only mean supplying goods. It serves a higher purpose of being able to promise—at the right moment and with confidence—to fill an order from store stock, the retail network or even a brand vendor’s warehouse. So the real challenge is to invest in the right inventories to provide the optimal service level. This requires channel integration—the ability to sense, collect and analyze demand signals from both physical and virtual channels. The holiday season must be maximized at all costs—it is estimated that retailers derive between 10 to 20
percent of their annual profit in this season. To effectively and efficiently deploy an omnichannel strategy, retailers must focus on three things: the customer, inventory and orders. They must understand customer behavior. They must develop a strategy that delivers a consistent, homogenous experience for the customer, while understanding individual preferences and what motivates them to buy. With a great brand or product, omnichannel necessitates that the inventory is available for sale at the right price and time. The inventory and order allocation methods need to support both physical and logical inventory deployment strategies. Finally, omnichannel is about order fulfillment. Retailers must be able to ship from a distribution center, store, vendor, and yes, even a competitor, to meet or exceed customer expectations. And the ability to complete a reverse
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ACCORDING TO THE NATIONAL RETAIL FEDERATION, ONLINE AND E-COMMERCE SALES GREW 6.8 PERCENT TO $101.9 BILLION IN 2014.
logistics order is just as important. Consumers today prefer to buy online, and at the same time, seek flexibility in shipping and return options. According to the National Retail Federation, online and e-commerce sales grew 6.8 percent to $101.9 billion in 2014. This is perhaps why so many omnichannel retailers are revisiting inventory management strategies. Some are building dedicated online customer fulfillment centers to directly support online orders. Others are allocating a separate inventory for supporting brick-and-mortar needs. Much was made in the last couple years of the estimated millions of
delayed packages containing e-commerce-based orders that were holiday gifts. Even manufacturers and logistics providers realize that, to succeed, they need to see and respond more quickly to consumer demand. The whole chain—from the retailer to the raw material supplier—must work together to give the end consumer what he or she wants on demand. The concepts of lessons learned and planning accordingly resonate for Jeff Brady, director of transportation for Harry & David, a multi-channel
specialty retailer: “We were impacted, as were all retailers, going into holiday 2014. We challenged our partners to develop creative solutions to help alleviate that. Our business is hyperseasonal and levered to this holiday season, so we need to do things to help mitigate these risks and we challenged FedEx to assist in this effort. We tried this year to be even more diligent in our peak forecasting to help our partners to be successful.” SDCE ABOUT THE AUTHOR PADMAN RAMANKUTTY is the founder and CEO of Intrigo Systems.
How to Reduce Invoice Processing Costs by 80%
How to Reduce Invoice Processing Costs by 80%
Do you receive hundreds or thousands of emailed and faxed invoices from suppliers each month that have to be manually keyed into your financial system? Pretty inefficient, costly, and error-prone isn’t it?
Why AP Invoice Automation?
Invoice Automation will eliminate the need for AP staff to physically enter, review, code, and validate supplier invoices. With automation, you’ll quickly process emailed and faxed supplier invoices with total precision, avoiding clerical errors, delays, and lost invoices.
• Maximize early payment incentives and prevent duplicate payments
• Speed up invoice processing • Eliminate costly manual entry errors • Reduce invoice processing costs by 80%
• Enable better visibility and cash flow control • Achieve 100% invoice entry accuracy
Visit conexiom.com/sdce-ebook/ to download your free eBook on how to reduce invoice processing costs by 80% and discover the top 5 reasons your bottom line needs AP Invoice Automation. ecmarket inc. #203 – 535 Thurlow Street, Vancouver, BC V6E 3L2 Tel: (604) 638-2300 | conexiom.com | info@conexiom.com
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PROFESSIONAL DEVELOPMENT
{ MAXIMIZING PROFIT}
By Mike Hoffman
IDENTITY CRISIS IN THE C-SUITE:
Who Owns Profit?
Think about installing a chief profit officer to help maintain focus on continued, sustainable growth
B
ack in 1998, at the Washington Hilton Hotel, Dun & Bradstreet CEO Terry Taylor delivered a message to National Association of Purchasing Management (NAPM) members: “A different P would suit you better. Forget about purchasing management. Given what you do to optimize margins, your real business is profit maximization.” He walked off to a standing ovation. Much changed since then. NAPM changed its name in 2002 to the Institute for Supply Management (ISM)—a nod to the growing criticality of procurement in the context of managing the supply chain. And the profession burgeoned. But the greatest change is evident in the new skillset and mindset of today’s procurement professionals: They were never smarter, more demanding or better equipped to impose their terms than today. The reason: They have tools—spend data, competitive pricing data, all manner of Big Data and analytics—and they’re not afraid to use them to press sellers into slashing price. How are sellers to respond, especially in categories in which companies sell thousands of stock-keeping units (SKUs), each of which must be priced to compete effectively and still yield profit? I talk a lot about the need for pricing that is nimble and about sellers 30
who must command data—target price, walkaway price and more—to maneuver successfully while holding the line on the right price. I talk about margin growth as a game of inches, one that requires the same disciplined, data-driven approach typical of supply chain management, production control, manufacturing and logistics. And I talk about the contradiction of approaching margin management crudely, with little more than a gut feel for pricing that may satisfy customers and deliver profit. Just as you wouldn’t allow a CFO to replace accurate cash reporting with a ballpark estimate, no revenue and profit forecasts are worth a dime unless they reflect the accuracy and reliability enabled by data science. And yet, while every other function makes major strides in this regard, pricing, by and large, remains a game of instincts. We’re left with this irony: As buyers move relentlessly to negotiate with their heads, too many sellers remain content to follow their gut. And this at a time when mature industries— having leveraged outsourcing and Six Sigma—are seeking new sources of earnings per share (EPS) growth. So here’s the question: How does one establish and sustain a culture of profit inside today’s enterprises, where pressures often run high to deliver revenue at any cost?
Perhaps the best way to answer is by asking another question: Who inside the company is responsible for profit? Google this query and you’d expect to find a simple answer: the CFO. But this isn’t the case; in fact, profit appears nowhere in any definition of the CFO’s role, which is to manage financial risk, oversee financial planning and manage cash flow. Managing cash flow is a far cry from creating and enforcing a culture of profit. In fact, Google yields no answer to the aforementioned question: That’s because the responsibility for delivering profit is typically spread across the organization—laterally across divisions and bottom-up from regional to corporate management. This must change, because the only way to institutionalize a culture of profit and make margin top of mind across the enterprise is to turn it from a diffuse
Managing cash flow is a far cry from creating and enforcing a culture of profit. responsibility into a focused one. And what better way to do this than by appointing a chief profit officer, a move that not only would elevate pricing and profitability, but also help protect the enterprise from internal and external threats to margin growth.
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MAXIMIZING PROFIT
What functions should be within the purview of the chief profit officer (CPO)? Pricing, for one. It should be the CPO’s job to ensure that the enterprise is: determining and delivering the optimal price and guidance for all deals; setting prices in a single rules-based system driven by relevant internal and external data; evaluating and enforcing pricing strategy on every deal; and identifying price, margin and profit opportunities for all units of the business. But there’s more to optimizing profit than the right pricing. Equally important is the ability to detect customer defections and prevent them proactively, while institutionalizing a sensibility that emphasizes the importance of upselling and cross-selling. Also within the CPO’s purview is boosting win rates across multiple sales teams, increasing average deal sizes and shortening average sales cycles, all of which require arming sales reps with data and analytics that shed light on competitive offerings, competitive pricing and market trends. And because selling boils down to creating a perception of value, the CPO should propagate a way of selling that focuses not simply on what the products do, but also on what they enable. Finally, if the CPO is to oversee pricing and other facets of selling critical to profit, it stands to reason that he or she should do the same for buying. There are institutional imperatives attached to turning procurement into a profit-maker— among them, visibility into all spending. This would fall within the CPO’s purview as well. Given what we’d expect from this e-team member, his or her credentials should be multidisciplinary. The CPO should know how to manage
sales teams, craft pricing to deliver working with finance or sales teams, profitability (and know if price the CPO should facilitate the increases or decreases best serve transfer of information to stimulate the company’s interest) and how to productivity and actionable insights manage procurement to create an that foster growth. Instituting the enterprise adept at wringing costs from CPO role guarantees your company the system. maintains its focus on continued, Measuring the CPO’s success sustainable growth for present and becomes the final challenge. The future initiatives. SDCE most obvious metric is profit growth. ABOUT THE AUTHOR While necessary, this is too broad. At the granular level, the key profit MIKE HOFFMAN is chief commercial officer at Vendavo. indicators on the CPO dashboard He brings more than 20 years include revenue, deal-closing prices of experience developing and and margins, to name a few. With the deploying sales and marketing best practices responsibilities outlined above, the across a variety of technology companies. Prior to joining Vendavo, Hoffman was senior vice CPO should track profit opportunities president of worldwide sales for Mxi Technologies pertaining to revenue, whether sales and president and founder of inSelligent. reps are getting the best price from their negotiations, and how internal and external data can increase margins. The final, and perhaps most your supply chain important, success Only Logility Voyager benchmark is Solutions™ can help more difficult to you leave the measure: crosscompetition behind departmental by getting the right communication. products at the right Since the CPO is cost to the right place multidisciplinary, at the right time. he or she should • Grow your Business work directly with counterparts • Improve Margins in different • Outperform the Competition divisions— CFO, CCO, COO, etc.—to ensure company WWW. LOGILITY.COM profitability objectives are NA: 800-762-5207 • EMEA: +44 (0) 121 629 7866 being prioritized and met. When
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ON THE FLOOR
{ SUSTAINABLE WAREHOUSES}
By Carrie Mantey
THE GREEN WAREHOUSE Warehouse and DC Operation Tips WWEvaluate energy demands for all equipment purchases (compressors, forklifts, etc.) and replace with energyefficient equipment when practical. WWInstitute
recycling and waste reduction programs.
WWInstall
energy-efficient lighting systems with motion sensors.
WWConsider
projects.
roof-top solar
WWEmulate
Energy Star or Leadership in Energy and Environmental Design (LEED)-certified buildings with an eye on attaining that status at some point in the future.
Transportation Tips WWOptimize
routing to reduce miles traveled and increase per/ton miles.
WWTransport
freight in modes other than air, if possible, in order to move to more efficient surface transportation.
WWExplore
the use of alternative-powered vehicles ( natural gas, biodiesel, electric, etc.) to transport product.
WWUse
environmentally friendly transport partners and fleets if outsourcing transportation.
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G
oing green has been a part of the national conversation for quite some time. It was first popularized by concerned citizens, and since trickled up to corporate initiatives and back down to warehouses and distribution centers (DCs). There are myriad reasons and incentives for warehouses and DCs to become more sustainable. According to Nanci Tellam, the group director of environmental services and sustainability at Ryder, “First and most important is the role or importance that green issues play in a company’s overall business strategy or business objectives.” For example, sustainability can be meaningful for warehouses and DCs if the company: ❯❯ Acknowledges that environmental initiatives can provide operational cost savings. ❯❯ Can offset capital expenditures as incentives are increasingly available to promote energyefficient upgrades to warehouse lighting and buildings. ❯❯ Is committed to efficiency or energy reduction as a core value. ❯❯ Considers it part of their overall corporate sustainability or social responsibility agenda. ❯❯ Recognizes that improving efficiency and reducing waste is important to their business model and/or services. ❯❯ Realizes that it can help improve investor or customer relations.
OPPORTUNITIES While many individuals and organizations concede that sustainability is essential for preserving
the environment, it may be more difficult to make a business case for green initiatives. In Tellam’s view, however, “Reducing energy use and improving efficiencies always translates to financial savings.” She suggests the following procedures: ❯❯ Incorporate energy-use selection criteria in pre-acquisition due diligence reviews for equipment. ❯❯ Establish routine repair and maintenance programs for high energy-use equipment, such as heating, ventilation and air conditioning (HVAC) systems, to ensure optimum performance. ❯❯ Upgrade the building roof, windows and envelope to improve energy efficiency, and routinely audit building envelope energy losses, making improvements when feasible. ❯❯ Implement a formal process to identify and acquire/occupy greener facilities and buildings, or work with landlords to improve building efficiencies. ❯❯ Track, measure and report energy use and greenhouse gas emissions. ❯❯ Sub-meter key systems, such as HVAC, lighting, plug loads, subleased spaces, etc. Tellam says that it is critical to set environmental goals and benchmarking. “First understand where you are today and in recent history—benchmark all buildings for water, electricity, gas, waste—both consumption and cost,” advises Tellam. “Then develop a simple, easy-to-do action plan for what’s reasonable based on low-hanging fruit. You can’t manage what you don’t see; once you start tracking, opportunities will present
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and supportive.” When this is achieved, employees at all levels of the organization should feel empowered to recommend practices—practices that
a CFO or CPO may not be familiar with as a result of not being involved with day-to-day warehouse or DC operations. SDCE
themselves. As you gain momentum, have some successes, and increase employee engagement and executive sponsorship, report routine performance. Then establish reasonable short-term reduction goals, and provide tools, checklists and employee training to achieve them.” Tellam suggests that businesses “identify the best savings opportunities based on what will resonate most with a company’s business model, customers and overall strategic goals. Find out what your competitors are doing and rethink the value proposition for incorporating sustainable solutions into marketing and collateral materials.” While you asses sustainability programs and claims, beware of what is called greenwashing, both from your competitors and within your organization. According to the Greenwashing Index, greenwashing is “when a company or organization spends more time and money claiming to be green through advertising and marketing than actually implementing business practices that minimize environmental impact.” Another obstacle that may block your organization from full environmental program fruition is a lack of employee engagement. “Topdown programs alone do not work,” admits Tellam. “It is best to engage diverse teams and stakeholders at all levels of the organization—from executive leadership to front-line employees—all need to be engaged
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BEST PRACTICES
{ MANAGING SILOS}
By Rick Chavie
GOT SILOS? A
s channels proliferate in this digital age, companies struggle to deal with brand fragmentation and execution of omnichannel orders through traditional competencies, especially in marketing, logistics and category management. As companies breach the omnichannel threshold, it often seems favorable to remove departmentalized silos in exchange for a holistic team approach to systems and organization. Marketers become responsible for sales activities; logistics personnel become responsible for customer order interactions—the thought being that, when employees wear multiple hats, they can deal with all the different channels and personalized customer expectations. The problem is, such a model doesn’t scale. So how should companies orchestrate world-class processes across physical (catalogs, stores, field sales reps) and digital (mobile, website, social commerce) touchpoints? Are silos really an obstacle to dealing with disparate channels? Or an advantage?
34
There are three common misconceptions in the fight to end silos
The answer is clear: If you enable a single view of content across your organization, your teams can collaborate while remaining in their areas of functional competency. Marketers can remain marketers if they have the collaborative content tools that provide real-time interchange with colleagues in related silos of category management, sales and supply chain. No matter how globally distributed capabilities become, businesses can update their siloed structures to achieve collaboration in real time, and preserve accurate data and content. Despite the three common misconceptions listed below, silos can remain an integral part of any company.
SILOS LIMIT CROSSTEAM COLLABORATION Misconception: One objection to a siloed internal business structure is that individually focused competencies limit teamwork. This can mean communication, collaboration, dissemination of company knowledge, etc. A lack of flexibility can occur when business units are stacked with restricted synergy. While silos do create more competencies to manage, this can be solved with the implementation of an enterprise content network. Businesses have access to a powerful network of virtual data and they can use a well-crafted digital network to promote sharing. Key elements, such as master data management (MDM) and product information management (PIM), can create a single view of company content within an enterprise and across partners. They can also
overcome isolated areas of information to stimulate consistent messaging across an entire company. A company-tailored enterprise content network brings silos together under a unified and effectively governed umbrella of information. While tools and technologies can unify communication across silos, their implementation allows every individual business unit to retain specificity over its unique responsibilities. Each distinct business department can do its best work while simultaneously contributing to singular company content.
SILOS STYMIE GROWTH Misconception: Despite already existing as a component of business, naysayers treat silos as a limitation to large-scale business growth. Simply put, there is no need to eliminate silos when they are working well. A common repository for master data that effectively houses information on customer, product, brand, etc. allows silos to function at optimal productivity levels. Finding a solution that addresses internal content issues is a simpler and more economical choice than overhauling company structures. Silos give a business the ability to direct logical ownership over tasks to departments. Because competencies are tasked with managing their own responsibilities, each can get better work done faster. It makes more sense for marketing and sales to claim responsibility for customer-facing endeavors, and logistics teams to have access to more specific customer information to properly address
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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Statement of Ownership, Management, and Circulation
(Requester Publications Only)
individual queries. All departments know what they are responsible for, fostering cross-company accountability. Siloed businesses can ramp up growth by starting from a single source of truth for company content and data. Then, each silo can contribute to growth in a uniform way. Rather than deterring expansion, silos prepare businesses with proper infrastructures and systems to methodically handle quick or escalated periods of growth.
SILOS SPUR A DISJOINTED OMNI- CHANNEL CUSTOMER EXPERIENCE Misconception: Some believe that silos produce an inconsistent or unsatisfactory customer experience due to their disparate nature. When information is not shared across departments, brand messaging and customer data can differ, and compete from one channel to the next. As the world becomes more interconnected, it is believed that silos cannot keep up with the always-on business environment. More than ever, consumers expect a personalized user experience, which silos can give them. Today’s technology makes it possible to develop a single language crosscompany. When a single source of truth is shared across an enterprise content network, all departments can bend the same information to their particular customer needs. Even when asking area-specific questions, a customer can get the same answers from marketing, sales, logistics and other departments. Starting from a common point, all departments can create a singular customer experience. Channel-specific operations become simpler as employees deploy data that is guaranteed to be correct. Rather than searching for answers or doublechecking work, departments can expend resources and time providing the best customer experience that is customized to each channel. All silos can become experts in their particular fields of work and approach customer interactions with greater confidence. SDCE ABOUT THE AUTHOR
1. Publication Title
2. Publication Number
3. Filing Date
Supply & Demand Chain Executive
024-012
September 1, 2015
4. Issue Frequency
5. Number of Issues Published Annually
6. Annual Subscription Price
March, May, June, September, December
5
Free to Qualified Subscribers
7. Complete Mailing Address of Known Office of Publication (Street, City, County, State, and Zip+4)
Contact Person
AC Business Media, Inc 201 N. Main Street Fort Atkinson, WI 53538
Telephone
Tammy Steller
(920) 542-1246
8. Complete Mailing Address of Headquarters or General Business Office of Publisher
AC Business Media, Inc., 201 N. Main Street, Fort Atkinson, WI 53538 9. Full Names and Complete Mailing Addresses of Publisher, Editor, and Managing Editor Publisher (Name and Complete Mailing Address)
Jolene Gulley, Publisher 201 N. Main Street Fort Atkinson, WI 53538 Editor (Name and Complete Mailing Address)
Barry Hochfelder, Editor 201 N. Main Street Fort Atkinson, WI 53538 Managing Editor (Name and Complete Mailing Address)
Carrie Mantey, Associate Editor 1233 Janesville Avenue Fort Atkinson, WI 53538 10. Owner (Do not leave blank. If the publication is owned by a corporation, give the name and address of the corporation immediately followed by the names and addresses of all stockholders owning or holding 1 percent or more of the total amount of stock . If not owned by a corporation, give the names and addresses of the individual owners. If owned by a partnership or other unincorporated firm, give its name and address as well as those of each individual owner. If the publication is published by a nonprofit organization, give its name and address.) Full Name
Complete Mailing Address
AC Business Media, Carl Wistreich, President & CEO 201 N. Main Street, Fort Atkinson WI 53538 AC Business Media, Anil Narang, Chairman 201 N. Main Street, Fort Atkinson WI 53538 11. Known Bondholders, Mortgagees, and Other Security Holders Owning or Holding 1 Percent or more of Total Amount of Bonds, Mortgages or Other Securities. If none, check here. None Full Name
Complete Mailing Address
12. Tax Status (For completion by nonprofit organizations authorized to mail at nonprofit rates) . (Check One) The purpose, function, and nonprofit status of this organization and the exempt status for federal income tax purposes:
Has Not Changed During Preceding 12 Months Has Changed During Preceding 12 Months
PS 3526-RTitle Facsimile, July 2014 13. Form Publication
14. Issue Date for Circulation Data Below
Supply & Demand Chain Executive
September 2015
15. Extent and Nature of Circulation
Average No. Copies
a. Total Number of Copies (net press run) Outside County Paid/Requested Mail Subscriptions stated on
Issue Published Nearest to Filing Date
51333 33076
51911 31208
0
0
4
1
(1) PS Form 3541. (Include direct written request from recipient, telemarketing and b. Legitimate
Internet requests from recipient, paid subscriptions including nominal rate subscriptions,
Paid and/or Requested
employer requests, advertiser's proof copies, and exchange copies.)
(2) In-County Paid/Requested Mail Subscriptions stated on PS
Distribution
Form 3451. (Include direct written request from recipient, telemarketing and internet
(By Mail
requests from recipient, paid subscriptions including nominal rate subscriptions,
and Outside the Mail)
employer requests, advertiser's proof copies, and exchange copies.)
(3) Sales Through Dealers & Carriers, Street Vendors, Counter Sales, and Other Paid or Requested distribution Outside USPS. (4) Requested Copies Distributed by Other Mail Classes
0
0
33080
31209
16484
18353
0
0
Through the USPS. (e.g. first-Class Mail) c. Total Paid and/or Requested Circulation [Sum of 15b(1), (2), (3), (4)] (1) Outside County Nonrequested Copies stated on PS form 3541. (include sample copies, requests over 3 years old, requests induced by a premium,
d. Nonrequested
bulk sales and requests including association requests, names obtained from
Distribution
business directories, lists, and other sources)
(By Mail
(2) In-County Nonrequested Copies stated on PS form 3541.
and Outside
(include sample copies, requests over 3 years old, requests induced by a premium,
the Mail)
bulk sales and requests including association requests, names obtained from business directories, lists, and other sources)
(3) Nonrequested Copies Distributed Through the USPS by
0
0
1194
1831
e. Total Nonrequested Distribution (Sum of 15d (1), (2), and (3))
17678
20184
f. Total Distribution (Sum of 15c and e)
50758
51393
Other Classes of Mail.(e.g. First-Class Mail, nonrequestor copies mailed in excess of 10% Limit mailed at Standard Mail or Package Services Rates)
(4) Nonrequested Copies Distributed Outside the Mail (include pickup stands, trade shows, showrooms, and other sources)
g. Copies Not Distributed
575
518
h. Total (Sum of 15f and g)
51333
51911
i. Percent Paid and/or Requested Circulation
65.2%
60.7%
(15c / 15f x 100)
RICK CHAVIE is the CEO of Enterworks. He brings industry experience from his leadership roles at major retailers, such as Home Depot, technology experience from his role as the global marketing leader for NCR’s retail and hospitality business, and management consulting expertise from his partner roles at Deloitte and Accenture.
*if you are claiming electronic copies, go to line 16 on page 3. If you are not claiming electronic copies, skip to line 17 on page 3. Average No. Copies
PS Form 3526 -R Facsimile, July 2014
16. Electronic Copy Circulation
a. Requested and Paid Electronic Copies b. Total Requested and Paid Print Copies (Line 15C) + Requested/Paid Electronic Copies (Line 16a) c. Total Copy Distribution (Line 15F) + Requested/Paid Electronic Copies (Line 16a) d. Percent Paid and/or Requested Circulation (Both Print & Electronic Copies) (16b divided by 16c X 100)
Advertiser Index
Issue Published Nearest to Filing Date
4,704 37,784 55,462 68.7%
SDC1215_34-38_Silos.indd 35
4,585 35,794 55,978 63.9%
I certify that 50% of all my distributed copies (electronic & print) are legitimate requests or paid copies 17. Publication of Statement of Ownership for a Requester Publication is required and will be printed in the October/November issue of this publication. Date
Carl Wistreich, President & CEO
DSC Logistics................................... 19 LeanLogistics, Inc............................ 33 www.dsclogistics.com PS Formwww.leanlogistics.com 3526 -R Facsimile, July 2014 ecmarket inc................................... 29 Logility........................................... 31 www.ecmarket.com www.logility.com GPS Insight....................................... 2 mythic/MODEX 2016........................ 11 www.gpsinsight.com www.modexshow.com JVKellyGroup, Inc............................ 18 Numerex Corp................................... 9 www.jvkg.com numerex.com
No. Copies of Single
Each Issue During Preceding 12 Months
18. Signature and Title of Editor, Publisher, Business Manager, or Owner
Advertiser............... Page Number Amber Road.................................... 13 www.amberroad.com Basware.......................................... 21 www.basware.com CaseStack Inc.................................. 17 www.casestack.com Cass Information Systems, Inc......... 20 www.cassinfo.com
No. Copies of Single
Each Issue During Preceding 12 Months
September 1, 2015
Resilinc........................................... 23 www.resilinc.com Saia.................................................. 5 www.saia.com TMC/IoT Evolution World................. 25 www.iotevolutionworld.com UPS Capital....................................... 7 upscapital.com
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FINAL THOUGHTS By Ron Atapattu
KEEPING UP WITH CHANGE What do 3PLs and 4PLs need to know to properly implement cold chain logistics?
W
ith the logistics sector constantly changing due to the introduction of new products, safety concerns, higher quality standards or technology, 3PLs and 4PLs are constantly changing their business models to incorporate these new opportunities. Each year, goods and products increase in sophistication, from food and beverages to pharmaceuticals. In order for a 3PL or 4PL to properly implement cold chain logistics, it needs to give careful thought and consideration to both its capabilities and limitations in the transporting of temperature sensitive goods. Risk assessment is a huge factor that comes into play when a company is looking to implement cold chain logistics. If the company can identify points of weakness and put in place SOP, it can significantly reduce the risks associated with managing temperature sensitive products. The greater the number of touch points, the greater the risk of cold chain failure. As many companies have seen, innovations in technology have played an increasing role in the cold chain. For many 3PLs and 4PLs, technology takes the guesswork out of the equation. According to a survey by Penn State’s C. John Langley Jr.,
36
and Capgemini, 75 percent of shippers said the logistics industry could benefit from better technology. Front-end technology provides un-biased, transparent tracking that streamlines, forecasts and simplifies the supply chain process for faster, uninterrupted service.
IF THE COMPANY CAN IDENTIFY POINTS OF WEAKNESS AND PUT IN PLACE SOP, IT CAN SIGNIFICANTLY REDUCE THE RISKS ASSOCIATED WITH MANAGING TEMPERATURE SENSITIVE PRODUCTS. Another factor to consider is the staff ’s ability to fully understand and properly use these new programs and software. Businesses must have in-house skills to manage the variety of items that are being transported each day in the cold supply chain. It is important to know that refrigerated products and produce not only require a specific temperature, but also high levels of humidity to stay fresh. Many of these cold supply chain systems have
advanced monitoring and temperature control settings that, when not used to their full potential by staff, lower the quality of the items being handled. It also is important to realize the extreme circumstance an employee endures while working in the cold supply chain. Employees must be given the proper clothing and gloves, as well as a reasonable schedule that controls the amount of time exposed to the elements. In the cold supply chain, customers are looking for quality and consistency, rather than speed of delivery. Human interaction is necessary to monitor and document that proper benchmarks are hit and that scheduling is maintained. Something to note is that in different countries standards vary and expectations differ and the demand for cold supply chain perfection has transformed over time. Increases in the sophistication of products—quick-serve, ready-to-eat and pharmaceuticals—have led to more informed customers and higher standards. SDCE ABOUT THE AUTHOR RON ATAPATTU, President & Founder of Overseas Cargo, Inc., has more than 30 years of experience handling supply chain management, distribution, transportation, inventory management and warehousing for some of the world’s most recognizable brands.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2015 | SDCExec.com
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Get the RECOGNITION YOU DESERVE!
Each year, Supply & Demand Chain Executive recognizes individual and corporate leaders in the global supply chain. Plan now to enter your company, executive or a cutting-edge client or vendor in one of these industry-leading recognition programs:
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Global Solutions for Supply Chain ROI
12/3/15 2:49 PM
SUPPLY CHAIN LEARNING CENTER
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LEARNING HUB
TRAINING TODAY
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SUPPLY & DEMAND CHAIN EXECUTIVE
GREEN SUPPLY CHAIN AWARDS Following are some of the companies selected for this year’s award, honoring leaders who envision and implement strategies that support green supply chain or sustainable supply chain goals. Turn to Page 16 to read about the practical steps that companies are taking—and that other companies can take—to green their supply chain.