2017 GREEN SUPPLY CHAIN AWARDS Global Supply Chain Solutions Covering Procurement, Risk, the IoT and More
DECEMBER 2017
TECH TRENDS FOR 3PLS
Annual study shows IT critical to 3PL partnerships
OCEAN CARRIER ALLIANCES EXPAND
Consolidation continues as shippers face new challenges
Fresh new content daily at SDCEXEC.COM
THE RISE OF
DEMAND-DRIVEN SUPPLY CHAINS Supply chains adapt to meet growing customer needs
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2017 SUPPLY CHAIN
10 th Annual
Supply & Demand Chain Executive
GREEN SUPPLY CHAIN AWARDS The following are some of the companies selected for this year’s award, honoring leading organizations that envision and implement strategies to support green or sustainable supply chain goals. Turn to Page 14 to read about the practical steps that companies are taking—and other companies can take —to green their supply chains.
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Digitalize insights. Realize better products. In the age of big data, your products can tell you how they’re performing. You just need a way to understand them. Product Intelligence can help. It’s a cloud-based MindSphere MindApp that automates insights from product performance data. Unify all your big data sources, including the IoT, in a worldwide value chain. And quickly discover the source of issues so you can improve your products—and your customers’ experience.
siemens.com/plm/product-intelligence
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December 2017 | Volume 18 | Issue 5
CONTENTS FEATURES
06
06 The Growth
of DemandDriven Supply Chains
Customers want it now, and supply chains are adapting to their needs.
14 Green Supply
Chain Awards
This year’s recipients are making a positive impact not only on the environment but their own bottom line.
14 36
SPECIAL REPORTS
22 THE INTERNET OF THINGS 4 Questions Every Manufacturer Should Ask How can manufacturers intelligently implement IoTenabled devices into their automation process?
38
26 3PL TRENDS
22
IT Critical to 3PL-Shipper Relationships
The availability and analysis of useful information is essential for customers and 3PLs to effectively manage supply chains.
SDCEXEC.COM
30 T RANSPORTATION
Ocean Carrier Alliances Expand As ocean carrier consolidation continues, shippers face new service challenges and solutions.
34 WAREHOUSE
ROBOTICS What’s Emerging and Where’s It Headed
The human workforce still holds the upper-hand in running an efficient warehouse.
36 SOFTWARE
& TECH 3D Printing: The Next Great Supply Chain Tool
On-demand additive manufacturing promises lower inventories and costs, plus less waste.
38 PROFESSIONAL
DEVELOPMENT Combating the Labor Shortage
Three ways to improve working conditions and morale to close the employment gap.
COLUMNS
04 EXECUTIVE MEMO 12 MADE IN AMERICA 40 EXECUTIVE Q&A 44 WORK HARD, PLAY HARD
Exclusive online features and solutions for successful supply chain operations
Self-driving Trucks: Potential for Logistics Transformation
4 Steps to Developing a Supply Chain Collaboration Program
sdcexec.com/12380020
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EXECUTIVE FOCUS
How Deep Learning Exposes Weak Links in the Workforce sdcexec.com/12376741
SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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EXECUTIVE MEMO By John R. Yuva, Editor jyuva@ACBusinessMedia.com
FEW CAN FORECAST THE FUTURE
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Transition into the new year with the feeling of a clean slate and the optimism of what opportunities await.
f you’re like me, it’s hard to believe the supply chain, involving suppliers that 2017 is already coming to a and customers. Not only is this having a close. Were your forecasts correct positive effect on the environment, but with how you expected the year also on their bottom lines. to unfold? While I’m sure some things Consolidation among ocean carriers came to fruition, not everything occurred is nothing new. However, on page 30, as expected. find out the challenges and strategies That’s the thing about forecasts, they’re for shippers that now operate in an seldom spot-on. Such is the case in the environment where three large alliances supply chain world, where myriad factors cover 95 percent of global container can affect supply and demand parameters. trade. Navigating this new landscape In the words of futurist Paul Saffo, “The requires due diligence on the part of goal of forecasting is not to predict the shippers to assure quality service. future but to tell you what you need to Where do you see additive know to take meaningful manufacturing in “The goal of forecasting is your supply chain? In action in the present.” With e-commerce and not to predict the future but a world of demandthe evolution of consumer driven supply to tell you what you need chains, 3D-printing demands, organizations are adapting by focusing to know to take meaningful technology may be on supply chain data the answer to those action in the present.” for greater efficiency under- and over— PAUL SAFFO and improved decisionsupply conundrums. making—shifting toward a demandSee page 36 for an in-depth view of driven operating model. In our cover story how 3D printing is evolving and how on page 6, “The Growth of Demandorganizations can best use the technology Driven Supply Chains,” we examine the as a tool in their supply chain toolbox. role of forecasts and use of data, as well as This is just a sampling of the content how automation can streamline operations in our December issue. We’re excited in a demand-driven system. about the editorial offerings we have in Also in this issue, on page 14, we honor store for 2018. As always, let us know the winners of our 2017 Green Supply how we’re doing and what topics, trends Chain Awards. This year’s honorees are and issues you want to see in the future making corporate social responsibility pages of SDCE. a business imperative that transcends Happy reading! their companies and extends throughout 4
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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Published by AC Business Media Inc. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com
www.SDCExec.com PRINT AND DIGITAL STAFF GROUP PUBLISHER Jolene Gulley ASSOCIATE PUBLISHER Judy Welp EDITORIAL DIRECTOR Lara L. Sowinski EDITOR John R. Yuva ASSISTANT EDITOR Amy Wunderlin CONTRIBUTING EDITOR Barry Hochfelder SENIOR PRODUCTION MANAGER Cindy Rusch ART DIRECTOR Kayla Brown AUDIENCE DEVELOPMENT DIRECTOR Wendy Chady AUDIENCE DEVELOPMENT MANAGER Angela Kelty ADVERTISING SALES (800) 538-5544 JOLENE GULLEY, jgulley@ACBusinessMedia.com STEPHANIE PAPP, spapp@ACBusinessMedia.com EDITORIAL ADVISORY BOARD
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100% of supply chain execs think insurance is a good risk mitigation tool. Yet most think it’s not their job to buy it. Risk from weather, theft and other unexpected disruptions is a fact of life in your supply chain. Not planning for it is an even bigger risk. That’s why it’s surprising that in a survey of supply chain executives, 100% said insurance was a very effective risk mitigation tool. But most thought purchasing it wasn’t their job. At UPS Capital, mitigating supply chain risk is our job. We offer insurance solutions for freight and small parcels, regardless of mode or carrier. If you’re not sure whose job it is, call us. We’ll help you figure it out. upscapital.com | 877-263-8772
Source: The Global Supply Chain Institute, University of Tennessee; Managing Risk in the Global Supply Chain, 2014. 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. UPS Capital Insurance Agency, Inc. and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. Insurance coverage is not available in all jurisdictions. ©2017 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.
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FEATURE
By Barry Hochfelder
THE GROWTH OF DEMANDDRIVEN SUPPLY CHAINS Customers want it now, and supply chains are adapting to meet their needs.
I
A survey of 360 senior manufacturing executives reveals that one of the biggest threats to growth is a supply chain that fails to deliver. Source: KPMG
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t would be so easy—wouldn’t it—if the forecast was right on the money, and demand changed only slightly—or not at all. But as the old saying goes, there are only two sure things in life—and neither of them is a perfect forecast. Supply chains can be disrupted by weather, geopolitical upheaval, labor stoppages, poor quality from a sub-tier supplier, consumer whim and more. In response to the added pressures, supply chains have increasingly shifted to a demand-driven supply chain model. According to the Boston Consulting Group, a demand-driven supply chain “offers real-time information on demand and inventory levels to all supply chain participants, so that they can react quickly and effectively when unexpected changes arise.” Demand-driven supply chains have been gaining popularity over the past couple of decades, says Jeff Bodenstab, vice president of marketing at ToolsGroup, calling it an evolution—not a revolution—that started in small ways and picked up steam. “If I had to pick one industry early on that was most aggressive, it would be consumer goods, like CPG and food and beverage,” he says. “They had the will and the way. They had a need because [they were] dealing with highly demand-driven supply chains and lots of different channels and sources of demand that tended to fluctuate quite a bit.” Since then, he says, use has been broadening to retailers, wholesalers and industrial companies that find a need and are seeking ways to make it happen. “There was a lot of earlier work around making the transition from inside out to outside in—translating to downstream demand. In its
simplest form, most companies, 10 to 15 years ago, were looking at a very gross aggregate: How much product did we sell last month versus this month? When you deal with aggregate, there are a lot of variations that balance each other, or wipe each other out. You lose various demand signals.” Keith Baranowski, global vice president and general manager of direct materials sourcing at SAP Ariba, says the term was broadly coined by AMR Research, which was acquired by Gartner in December 2009. From a profit perspective, he says, it was under the category of lean manufacturing, and worked well for certain industries to reach zero inventory. That doesn’t More than a third necessarily work today. “I think if you look at extreme of CEOs say their supply chains lack practitioners—hard line, never the speed and use a forecast, only go off of agility to effectively customer expectations—larger compete with companies have the discipline new entrants. to make it work. For some, it Source: KPMG wasn’t practical,” he adds. In the semiconductor industry, for example, the production process might take 12 to 16 weeks. That’s difficult with a fully lean approach. “Customers want it in less time,” Baranowski says. “So, you have to forecast and pre-build. One
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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THE FUTURE OF SUPPLY CHAIN MANAGEMENT: How Businesses Should Take Advantage of Automation By Mario Vollbracht, global director, consumer markets, Industry Solutions Group at Oracle way is to build up a wafer bank by forecast, but do the packaging by customer demand. We’re seeing a lot of that kind of thing.” In what he describes as “mixed model” demand driven, some companies will use forecasts as a signal, but not a legal commitment like a purchase order (PO). Then, after demand materializes, the PO can be written. Eric Pfeiffer, senior director of supply chain integration at HAVI, says his supply chain management company began the journey to demand driven in 1997-98, triggered by limited time offerings (LTOs) in foodservices, menus, toys and gifts. “Demand and supply were not in balance,” he explains. “Retailers were not getting value in inventory, and marketing was not where it should be. We improved the system by using consumer demand at the retailer to establish a forecast to better enable the marketing plans. Have the items in the store in the quantity that are needed.”
USE THE DATA Once upon a time, companies used spreadsheets to look at past results and make their forecasts. How long have we been doing this? How much did we do last month? Then, says Bodenstab, they smooth it out and allocate an extra 2 percent. “That’s 1990s thinking. They’re still thinking top down.” With demand-driven supply chains, a more granular approach is required, and the data are there. “What’s happening in the big box channels? At the convenience store?” Bodenstab asks. “Look at orange juice. Does Vitamin D enhanced sell more? Are people buying in smaller units and with more pulp? When do you sell, and
The Theory of Constraints (ToC) in operamodel. While digitization is key to capture tions management states that in a given and harness all this data, it is automating environment, there is always one scarce the reading and interpreting of this data resource that will dictate the maximum that will allow an organization to senseoutput of that entire operation. This ToC respond-and-shape appropriately and is fundamental to the digital revolution effectively to support business growth we are experiencing in the supply and versus just traditional cost savings. demand chain world. Many organizations Leverage Automation Across have tried a piece-meal approach to the Entire End-to-End Chain digitizing their supply chain, but end up Many of the emerging technologies “functioning” in silos (versus end-to-end entering the supply chain have first been from the buyer back to implemented in the backsupply), and have learned The power from end of the supply chain. that these efforts fall short However, automation digitization lies in fully in delivering measurable is now moving closer connecting all aspects business value. to connecting with the
of the supply chain to consumer and enabling Why? Because the power deliver a demand-driven integrated business planfrom digitization lies in fully connecting all aspects and end-to-end business ning among the supply, business and demand of the supply chain to operating model. processes. deliver a demand-driven and end-to-end business operating Foster a Fail-Fast Culture model. Otherwise, the nondigitized or The ability for an organization to acceldisconnected functional area or process erate the identification, experimentation will quickly become the scarce resource, and adoption of automation technoloand constrain the holistic capabilities of gies within the supply chain has bethe complete business operating model. come a distinct competitive advantage. This leads to separate business silos that Innovation management processes that need to be aligned and integrated. continuously enable and evaluate fail-fast A fully digitized, end-to-end supply chain, focused on transforming the business operating model, is required to take advantage of applied and increasingly intelligent automation. For automation to really deliver the intended and expected benefits to a consumer markets organization, let’s look at a handful of strategic recommendations.
trials and experiments have to be the new norm.
Focus on Demand-Driven Sense and Respond Capabilities
Keep Up and Lead the Market
With the power of information, insight analytics, social media and shopping at a consumer’s fingertips, the traditional inside-out supply chain has been turned on its head. Where organizations used to “stack it high, watch it fly,” consumers are now driving the supply chain based on their needs. This explosion of data sources has created new capabilities in the business operating
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Break Down Silos
True transparency and visibility across the entire supply chain is paramount to unleash the power from automations and analytics, such as artificial intelligence (AI), the Internet of Things (IOT), machine learning and blockchain. The supply chain today is driven by consumer and market demand. Personalization with a high degree of service and engagement, segmented to deal with different supply chain characteristics at scale are the new capabilities required to reduce complexity and meet business growth requirements. Digitization, analytics and automation, combined with people and processes, allow a consumer markets organization to deliver to demand and grow.
SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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FEATURE A DEMAND-DRIVEN SUPPLY CHAIN CAN ENHANCE PERFORMANCE
WHAT THE CONSUMER WANTS
Gaming is big business, and Microsoft, of course, is a major player. The tech giant Reduction in Operating recently announced that it’s shifting from Expenses a forecast and allocation-driven model 20%–30% to a demand-driven model to “provide Transportation Reduction guaranteed availability of the right product in Inventory to the right place before the customer’s Buffer** Transportation tolerance time.” Planning In a webinar with SAP Ariba and Intrigo, Microsoft’s Ali Khaki, principal product Planning Buffer** manager: supply chain engineering (order Promotional management, fulfillment and logistics), Demand explained why the move was being made. Promotional Sales* Sales Demand He cited inventory reduction, the ability to capture upside potential to make more of the CoGS products that are selling well, better balance CoGS of Microsoft’s demand and supply, as well as Forecasted more reliable order confirmation dates and Actual Demand Demand an improved overall customer experience. As part of the shift, Microsoft is using the Ariba Network as the supply chain backbone of its Traditional DemandTraditional DemandTraditional DemandXbox and Surface tablet line of products. Model Driven Model Driven Model Driven Under the legacy In a survey of 539 Sales Levels Expense Levels Inventory Levels system, a forecast senior retail and *Lift from out-of-stock forecast accuracy improvements resulting in recoverable sales. consumer executives, spreadsheet was **Safety stock adjustment for uncertainty/information latency. sent via email, then prioritization was in what form? Leverage that extra data, and create conducted primarily by say they’re a more demand-driven supply chain. telephone, and supportability concerned that “That doesn’t require big data,” he adds. “Just was conducted by meetings changes in take advantage of [the data you have]. Maximize and emails. That resulted in consumer behavior the data you can acquire. Then look at what’s limited traceability, a highly will threaten their happening on social media.” manual process, errororganization’s growth prospects. Consumers are willing to share their opinions, prone communications and In a poll of more Source: KPMG so if you have a new product line, new flavoring limited visibility for contract than 1,250 chief or new packaging, social media can add to the manufacturers to changes in demand/priority. executives from information you have. Response to your Tweets With a demand-driven supply chain, traceability around the world, and “likes” on your Facebook page can be early is improved, the discussion revolves around the second bigindicators of demand. exceptions, and the process is highly automated gest priority over Pfeiffer agrees, pointing out that knowledge and scalable to multi-tiers. Additionally, there is the next three of the “general ecosystem” is important, leading better visibility of consignment parts to the contract years is gaining to better predictions. That means visibility from manufacturer as the process is being leveraged. a stronger client production schedules, inventory, distribution How has it worked out? Here’s what Microsoft focus. Source: KPMG centers, suppliers and outlets. “Use your plan to reports: know where and when it needs to be there and ❯❯ The supplier supportability process improved make adjustments along the way,” he says. “You by more than 90 percent (1 to 2 hours reduced can quickly jump in to best support the network to approximately 5 minutes). if there are interruptions. Monitor and know ❯❯ Planner efficiency improved 95 percent (order what’s going on with your suppliers, retailers, follow-ups/expediting was reduced from 1 to 2 transportation, DCs or manufacturer.” days to 1 to 2 hours).
1%–4%
Improvement in Sales
5%–10%
60%
8
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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HOW DSC LOGISTICS
IS COMBINING SUSTAINABILITY AND COST EFFECTIVENESS TO ACHIEVE CUSTOMERS’ GOALS When DSC considers how to implement green measures throughout our nationwide network of over 50 Logistics Centers, we look at it from two perspectives: reducing waste to preserve resources AND keeping costs under control. Through network modeling, analysis and optimization of shipments and processes, we help our customers find the most efficient and cost effective supply chain solutions. As a SmartWay partner, we’re lowering transportation emissions as well as costs. Our Green Team develops sustainability solutions for preserving natural resources across our network and assesses them for both effectiveness and cost. We measure consumption across our network and have reduced our use of water, electricity and gas. We’re now recycling 67% of products that can be recycled. We’re reducing our impact on the environment and helping our customers reduce theirs.
DYNAMIC SUPPLY CHAIN LEADERSHIP
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FEATURE ❯❯ Supplier on-boarding time improved 75 percent (time reduced from 3 to 4 months to 3 to 4 weeks). “There are now new tools and mechanisms to digitize the process between buyer and supplier,” says Baranowski. “Where is your inventory? What state is it in: finished goods or raw products? One benefit is that a digitized process changes the way you collaborate. It’s more exception based. You’re looking at the same numbers, but it’s more valueadded, rather than chasing spreadsheets. There’s more response time. The buyer and supplier are equal now.”
NOW HEAR THIS Amplifon Group has a 9 percent global market share in the hearing solutions space, operating in 22 countries on five continents. The company operates in a highly competitive, diverse and fragmented market. It’s diverse because it has 2,100 of its own retail outlets; 3,200 “shop-inshops” and “corners” within a widespread network of third parties (pharmacies, opticians and medical practices); and a network of more than 3,100 indirect points of sale, franchises and affiliates.
“Our top priority is to automate and streamline procurement and logistics at the point of sale in order to reduce in-store stock levels and significantly improve the rotation of peripheral and central warehouse inventory.” — ALESSANDRO NOBILE It’s fragmented because it operates differently in each region. In the United States, where it is known for its Miracle Ear brand, Amplifon’s suppliers manage all purchasing and logistics in a B2B model. In Europe, the Middle East and Africa (EMEA), suppliers and central warehouses in the Netherlands and Italy distribute products directly to retailers in a B2C model. Over time, Amplifon lost full oversight over its inventory, particularly which products needed replenishing and the assortment of products to be distributed to the stores. Alessandro Nobile, EMEA supply chain director, says, “Amplifon’s supply chain doesn’t 10
end at the point of sale (POS). It’s a forensic process that involves monitoring the whole product life cycle, and includes reverse logistics of trial products. Our top priority is to automate and streamline procurement and logistics at the POS in order to reduce in-store stock levels and significantly improve the rotation of peripheral and central warehouse inventory.” In 2014, Amplifon reviewed its logistics and business processes and implemented a demanddriven supply chain with ToolsGroup to manage planning and replenishment. Amplifon today has end-to-end control of the supply chain and complete visibility of all operations because data is sensed at every stage of distribution, including POS and by channel. Planners are able to identify demand trends, trigger alarm signals, and improve responsiveness between planned and actual supply chain events, while providing detailed forecasts and determining optimal inventory levels. Amplifon is able to determine the right mix of products in stock as well as those in high rotation, such as hearing solutions, connectivity tools, batteries, cleaning accessories and headsets, for each POS. Replenishment is done automatically according to each retailer’s requirements, pace and sales strategy. All this also increases service levels across the supply chain while achieving balance between inventory safety stock and holding costs. The results? By allowing Amplifon’s sales forecast data to be integrated with short-term demand data, forecast error has been reduced by 30 to 50 percent, while still allocating stock across its distribution chain. Amplifon reports that it has slashed inventory by 18 percent and obsolescence by 40 percent, while improving quality. “Today, branch logistics is much more streamlined,” Nobile says. “And the work carried out by our most experienced logistics teams is completely integrated into the other business functions. This amplifies our ability to deliver real added value throughout the supply chain.”
ABOUT THE AUTHOR BARRY HOCHFELDER is a freelance journalist who has covered a variety of industries in his career, including supply chain. He also served as the former editor of Supply & Demand Chain Executive. Hochfelder is based in Arlington Heights, Illinois.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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Isn’t that what you want to say to your customers and management? That you are not only in full control but, you can significantly reduce costs, delivery pressures and essentially make miracles happen. Now you can with the most advanced yet easy to use Transportation Management System (TMS) for Shippers. MercuryGate TMS delivers a multimodal, multi-leg solution for planning, optimizing, executing and financially managing shipments anywhere in the world. Start making miracles happen with us — call now for an immediate free consultation.
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MADE IN AMERICA By Amy Wunderlin
Paper with a Field Notes’ vintage-inspired notebooks evoke nostalgia for an America before keyboards.
T
ypewriters, laptop of the lucky computers, smartphones. recipients, They all have one thing in Jim Coudal, common: a keyboard. But owner of the before the written word was simplified design firm in type, there was good old pen and Coudal Partners, was so paper. fond of the holiday gift that he reached The days of elegant hand-written out with a business opportunity. letters and dear diary entries may seem “Jim called Aaron and said, ‘We love long gone, but a nostalgia for script still these. We think we can sell these,’” lingers. The Chicago-based Field Notes recalls brand manager Michele Seiler. Brand is proving that with their line of “So we did a small run, built a website American-made notebooks. Inspired by and threw them up. Three weeks later vintage agriculture memo books, pen on we sold 14 packs in our first day, and paper is making a comeback. we haven’t looked back.” ‘I’M NOT Since the turn of the 20th Field Notes is now in 1,500 WRITING IT stores worldwide, with 99.9 century, promotional memo books have been a staple in the DOWN TO percent of retail locations back pocket of the American independent Mom and REMEMBER being farmer. Often distributed by seed, Pop stores. “They are our local IT LATER. marketing folks. They care tractor and other agricultural companies, the pocket-sized I’M WRITING about how our notebooks are notebooks offered a convenient and they know the IT DOWN TO displayed, space for notes or records, with history of Field Notes and REMEMBER are able to tell the story. In some even including reference sections offering details on IT NOW.’ that way, they’re our brand planting or harvesting. ambassadors,” Seiler adds. In 2006, Field Notes’ business partner and avid memo book collector AMERICAN TRADITIONS Aaron Draplin created a small batch Though the notebooks are sold run of the original Field Notes Craft worldwide, Field Notes has that local Graph Edition, and sent them out to feel only a truly American-made friends as Christmas presents. One product can. Inspired by a tradition 12
FIELD NOTES BY THE NUMBERS
1,500
number of stores Field Notes is now in worldwide.
99.9%
of notebooks are sold at independent Mom and Pop stores.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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MADE IN AMERICA dripping in red, white and blue, Field whose main job is to gild Bibles. We Notes sources everything from the had them gild the edges for us,” Seiler staples to the shrink wrap in the explains. “It’s been kind of fun to meet United States and manufactures different U.S. manufacturers or people the product at four or five different that offer different processes who can printers in the Chicagoland area. help us put our notebooks together.” “From the beginning, “FROM THE we said that we were going QUALITY AT A COST BEGINNING WE It’s a familiar tune: you to manufacture in the United States, using only SAID THAT WE get what you pay for, and U.S. materials, and we that holds true for Field WERE GOING TO Notes. Because they have have continued to do so,” MANUFACTURE chosen to adhere to a strict says Seiler. “The vintage agricultural notebooks that IN THE UNITED American-made policy, inspired Field Notes are costs are higher STATES, USING production an American product, very than if the notebooks were ONLY U.S. much part of the American produced elsewhere. As printing history, and we felt MATERIALS.” a result, costs are slightly strongly that it would be higher, though Seiler firmly important to print our notebooks in believes it is worth it. the USA and continue that tradition of “We are very careful about quality American printing.” control…and making sure we are Field Notes are printed with soyproducing a quality, well-designed based inks, and a lot of papers they use product that looks great. Having that are recycled. French Paper, which is a (product) made in the USA is a big family-owned boutique paper company part of it,” she explains. out of Niles, Michigan, is a company Another factor at play is the favorite, as well as U.S.-based suppliers personality the Field Notes Brand Mohawk and Neenah. has created not only through In addition to their classic designs, its commitment to American Field Notes offers limited editions manufacturing, but a tagline that has four times a year. Here, Seiler says struck a chord with their customers. designers are given “a creative “We hit (the market) right at a time playground,” with freedom to choose when everything was going so digital, different themes, printing styles, so quickly,” Seiler explains. “Field papers, etc. They also are able to work Notes is so deliciously analog. It’s kind with a wide-variety of businesses of back to the old school way of doing and manufacturers, including screen things and not typing into your phone printers, foil stampers, letter but writing something down into a pressers and embossers. little notebook. For example, one of the “There’s science behind it, too. You’re editions, called the Ambition more likely to remember it when you Edition, was a small calendar and write it down as opposed to typing it a planner with gilded edges like a into a phone. That’s kind of where our Bible. Their typical printers were tagline came from, which is, ‘I’m not not equipped to handle the unique writing it down to remember it later. request, so Field Notes went in search I’m writing it down to remember it of a U.S.-based company that was. now.’ I think that really caught people’s “We found a company in Indiana attention.”
Field Notes sources everything from the staples to the shrink wrap in the United States and manufactures the product at several Chicagoland-area printers.
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2017 GREEN SUPPLY CHAIN AWARDS By Editorial Staff, Supply & Demand Chain Executive
2017 SUPPLY CHAIN
10 th Annual
The
GREEN SCENE
Many of the recipients of Supply & Demand Chain Executive’s Green Supply Chain Award have been on the scene for some time, though a few new faces stand out on the annual list. No matter their track record, however, each of the companies recognized this year are making a positive impact not only on our environment, but their own bottom line. Those who made notable contributions in 2017 are listed below.
3GTMS
www.3gtms.com 3GTMS’ transportation management solution (TMS) uses proprietary routing algorithms to help customers significantly increase the efficiency of their routes in terms of miles driven and emissions expelled. The technology’s ability to respond in real-time to dynamic routing factors ensures that customers are maximizing the efficiencies of their routes no matter what last-minute changes may occur. In addition, the technology simplifies pool distribution by allowing logistics planners (rather than engineers) to plan using real costs and service times. Pool distribution is typically a faster and “greener” way to deliver versus basic LTL because it moves freight the longest distance on a truck and avoids LTL carriers’ networks. The concept of pool distribution isn’t new, but 3GTMS’ technology is helping companies fully leverage their speed and fuel efficiencies, which in turn have led to cost savings and lower price points for their customers. 14
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
ALOM
www.alom.com ALOM has partnered with a publicly-traded California gas and electric utility company to be the prime supplier of energy efficiency materials for low-income residents across 38 counties. The objective of the program is to reduce qualified low-income resident energy costs and improve their health and comfort by replacing inefficient, energy-wasting residential lighting, insulation and appliances with highefficiency, energy-saving products at no cost to the resident. The fiscal goal of the program is to reduce energy costs/consumption amongst program participants by between 10 and 25 percent. It is estimated the program will upgrade 90,000 residences this year with energy-efficient products. At the time of publication, ALOM had sold approximately 350,000 LED bulbs into the program. By year end, they estimate sales of more than 700,000.
SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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2017 GREEN SUPPLY CHAIN AWARDS ARKIEVA
www.arkieva.com Arkieva recently teamed up with a leading organic cosmetics company, Lush Cosmetics, to improve demand, invenotry and finacial planning. The 21-year old vegetarian and organic hand-made cosmetics company differentiates itself in the marketplace by focusing on sustainable business practices and products that are manufactured using natural ingredients. The beauty products retailer has been experiencing yearover-year growth in various regions throughout North America, and as such, noticed the need for a robust planning tool that would give the planning team more flexibility, collaboration, and the ability to quickly and easily analyze data. The global cosmetic industry is highly competitve and volatile, making it critical for Arkieva to create a planning processes for Lush that was agile and nimble within the fast-moving industry.
ARVIEM AG
www.arviem.com
The carbon emissions monitoring solution developed by Arviem enables exporters, importers, distributors and manufacturers of goods to understand what’s going on in their supply chains with regards to environmental impact, with granularity down to each individual shipment. This not only provides business intelligence, but also saves money while lowering the impact of transport on the environment. By implementing Arviem’s pay-as-you-use monitoring service, companies can monitor the carbon footprint of their logistics supply chain from day one without the burden of introducing new processes or investing in equipment or software.
BLUJAY SOLUTIONS
www.blujaysolutions.com
BluJay’s Global Trade Network enables connected companies to collaborate and optimize efficiently, helping participants to reduce their carbon footprint and achieve their sustainability goals. Features such as gas emissions reporting are available within BluJay’s Advanced Reporting Suite, allowing clients to report on greenhouse gas emissions based on activity that has occurred within the TMS. Teams can report on the three main greenhouse gases: carbon dioxide, nitrous oxide and methane, as well as carbon dioxide equivalency, with the ability to fine-tune the emissions calculations for their supply chain and industry by configuring GHG emission factors.
B-STOCK SOLUTIONS
www.bstock.com
Though not an obvious first thought, the reverse supply chain is definitely a place where retailers can support sustainability initiatives. This is particularly true when it comes to heavy use, damaged, salvage or other hard-to-sell items. Historically, these products went straight to a landfill, but these days, regardless of the condition of the returned products, there is a buyer base interested in facilitating either reuse or recycling—you just have to know how to tap into it. B-Stock provides clients access to a global base of vetted buyers interested in product across all condition codes, with many solely interested in recycling or repurposing salvage products for their own business needs. What’s more, because of B-Stock’s transparent B2B marketplace platform that connects sellers directly to buyers, their clients know exactly who is purchasing their product and for what purpose. Since inception, 3 million previously deemed excess items have been sold through B-Stock for reuse, resale or recycling. 16
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
FUTUREPROOF
YOUR SUPPLY CHAIN AT MODEX 2018
Whatever manufacturing and supply chain solutions or insights you need to FUTUREPROOF your business, you’ll find them at MODEX 2018. With over 850 of the industry’s solution providers on site and more than 100 hands-on education sessions, MODEX 2018 allows you to make new contacts, discover cutting-edge solutions and learn the latest trends that are sure to give you a leg up on the competition.
MODEX Keynotes:
Georgia World Congress Center Atlanta, Georgia April 9-12, 2018
THE GREATEST SUPPLY CHAIN SHOW ON EARTH.®
Monday, April 9 8:45 AM – 9:45 AM
Tuesday, April 10 8:45 AM – 9:45 AM
Wednesday, April 11 8:45 AM – 9:45 AM
Wednesday, April 11 1:00 PM – 2:00 PM
Anticipating Tomorrow’s Supply Chain Challenges – Today
What will the Future Supply Chain Jobs Look Like? How the Digital Revolution is Accelerating Innovation, Driving Productivity and Irreversibly Transforming Employment and the Economy
2018 MHI Annual Industry Report Keynote Panel
Why Dirty Jobs Matter
JUAN PEREZ Chief Information and Engineering Officer, UPS
Monday, April 9 9:45 AM Welcome to MODEX 2018 GOVERNOR NATHAN DEAL Governor of Georgia
GEORGE W. PREST CEO, MHI SCOTT SOPHER Principal, Deloitte Consulting LLP
ANDREW MCAFEE Co-Founder & Co-Director, Initiative on the Digital Economy
MODEX is FREE to attend.
LEARN MORE AND REGISTER AT MODEXSHOW.COM.
MIKE ROWE Founder, mikeroweWORKS Foundation
2017 GREEN SUPPLY CHAIN AWARDS CASS INFORMATION SYSTEMS
www.cassinfo.com
Cass Information Systems utilization of technology and accelerated electronic interchange to obtain cost and processing efficiencies for their customers has resulted in a significant reduction of paper transactions in the areas of shipping documents, billing (freight invoices), payment transactions and information delivery. In addition, use of their centralized business intelligence to help manage the supply chain provides further positive environmental impact for customers. Cass’ annual EDI freight invoice percentage averages over 75 percent, with some Cass clients achieving an EDI invoicing percentage as high as 98 percent. In addition, more than 99 percent of Cass’ payments and remittance advices to carriers are electronic.
CBS CORPORATION
www.cbscorporation.com
CBS is driving greener dollars into its supply chain by influencing spend at the business-unit level with the CBS Eye on the Environment program. The main driver this year is their “1, 2, 3, GREEN” campaign in partnership with three preferred vendors in the office category. In the inaugural year, the three-step campaign includes: 1) switching to double-sided printing, 2) choosing paper with recycled content, and 3) opting for ground shipping instead of air. For 2017, CBS is on-track to reduce more than 400 tons of carbon compared to 2016 and save $500,000 across the specific categories in the 1, 2, 3 GREEN program.
DSC LOGISTICS
www.dsclogistics.com
Sustainability is a core component of DSC Logistics’ supply chain strategy and part of their promise to customers. At DSC, a Sustainability Steering Committee oversees initiatives in a three-pronged approach, focused on opportunities in warehousing, transportation and network redesign. Working with representatives from each logistics center, the Steering Committee provides support for pilot projects and network-wide rollouts, sustainability education throughout the organization, and metrics and benchmarking efforts. Each year, DSC’s goals include: reduction of their waste stream, implementation of LEAN initiatives focused on reducing process steps and waste in the supply chain, and utilization of strategic supply chain modeling to reduce their logistics footprint.
ELEMICA
www.elemica.com Elemica’s integrated cloud-based logistics and transportation products help customers lower their carbon footprint and energy usage by optimizing shipments and loads. Shippers and carriers can collaborate on shipments to find capacity, avoid disruptions and penalties, and optimize loading/unloading times—which saves on fuel and lowers emissions. Additionally, Elemica helps food and beverage ingredient customers improve and achieve their measurable sustainability goals through the automation of manual processes that reduce their usage of paper, saving trees and other resources. Manual approaches are costly, time-consuming and fraught with errors. Automating business processes for sourcing, procurement, order management, inventory and logistics streamlines operations and boosts efficiencies. Electronic purchasing and sourcing, transportation optimization, and shipment visibility are many of the green solutions that Elemica provides to help customers lower costs while driving sustainability. Since 2004, Elemica has delivered approximately 210 million messages, equating to savings of 2,100 cubic meters of landfill space, 23 million liters of water used in paper production, 23,000 trees, and 257,000 kilograms of CO2 emissions. 18
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
JOHN GALT SOLUTIONS
www.johngalt.com
John Galt’s Atlas Planning Suite was designed to streamline the S&OP process, taking full advantage of a comprehensive supply chain planning solution. An end-to-end value network provides visibility into the supply chain and allows customers to identify areas of opportunity and set ambitious goals for their environmental strategy by reducing waste in production and improving distribution efficiency. The benefits of the John Galt planning process further extend to the supplier and customer side, where the visibility to the entire supply chain gives all stakeholders the optimal conditions to minimize the impact of their own operations.
TRANSPORTATION INSIGHT
www.transportationinsight.com
WE GO
Transportation Insight’s solutions combine analysis, intellectual capital and a hallmark Co-managed Logistics® approach to help clients achieve green supply chain results. Through optimal mode and carrier selection, comprehensive data management and logistics reporting, and predictive supply chain analytics, Transportation Insight helps to streamline supply chain networks through “what-if ” scenario simulation based on historical data and future-casting to reduce energy costs, vehicle miles, fuel consumption and air pollution emissions.
REAL ESTATE CenterPoint Properties is focused on the
TYCO RETAIL SOLUTIONS
development, acquisition and management
www.tycoretailsolutions.com
Tyco Retail Solutions believes that environmental
of industrial property and transportation
responsibility is not only good business, but also a social obligation. As part of that mission, Tyco Retail Solutions has incorporated sustainable practices in their supply chain processes to drive a competitive edge in today’s evolving retail landscape, including genuine Sensormatic® Electronic Article Surveillance (EAS) solutions. Their Sensormatic apparel tagging recirculation program recycled more than 1 billion tags in 2015, and has recycled nearly 7 billion since the program began in 2010, saving a total of 35 million pounds of plastic and reducing waste and costs for customers.
infrastructure for supply chain efficiency.
SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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2017 GREEN SUPPLY CHAIN AWARDS YALE MATERIALS HANDLING
www.yale.com/north-america/en-us/ With the first commercially available ULrecognized lithium-ion battery pack in the lift truck industry, Yale is leading the way in power solutions designed to help customers reduce their carbon footprint and increase efficiency. The maintenancefree lithium-ion option, which requires no watering and contains no acid, lasts up to five times longer than traditional lead-acid batteries—drastically reducing battery replacements and landfill waste. Additionally, the lithium-ion option is suitable for opportunity charging on-site and in-transit because there is no off-gassing, negative memory effects or cooling time needed. Another green option from Yale is lift trucks powered by hydrogen fuel cells, which can help customers reduce greenhouse gas emissions and increase efficiency. With only water and heat as byproducts, hydrogen fuel cells produce zero harmful emissions, and require approximately three minutes to refuel, compared to between 15-30 minutes to replace a lead-acid battery.
YUSEN LOGISTICS
www.yusen-logistics.com
Since 2005, Yusen Logistics (Americas) Inc. has been a member of the U.S. EPA SmartWay Transport Partnership and has consistently held the highest score possible: 1.25 “Excellent.” Beginning in 2008, Yusen began offering complete domestic carbon footprint analysis reporting to their customers, and in 2011, they expanded their capabilities to include global carbon footprint analysis reporting. In 2009, Yusen introduced Green Express, an expedited intermodal service that offers over-the-road speed and an environmentally-sound alternative to other service modes. In addition, Yusen Logistics offers a reverse logistics program that enables retailers and manufacturers to sustainably manage product returns, including a zero-landfill solution. The program enables customers to capture the maximum recovery value for reused goods and ensure that any recycling is done in an environmentally-friendly and responsible way. Services include consolidation and return to vendor, auction/secondary market sales, and recycling and recovery of used assets. 20
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
OTHER GREEN AWARD WINNERS 4flow www.4flow.com
A. Duie Pyle www.aduiepyle.com ADEC Innovations www.esg.adec-innovations.com Agistix Inc. www.agistix.com Amazing Print Tech www.amazingprint.com Atlantix Global Systems www.atlantixglobal.com Axis Communications www.axis.com BAM www.bamwire.com Blue Ridge Global www.blueridgeglobal.com BNSF Logistics LLC www.bnsflogistics.com CBX Software www.cbxsoftware.com Chainalytics www.chainalytics.com CHEP Containers www.cheppallecon.com Crown Equipment www.crown.com CT Logistics www.ctlogistics.com Diageo North America www.diageo.com DHL Supply Chain www.dhl.com DMW&H www.dmwandh.com Easiway Systems www.easiway.com East Coast Warehouse & Distribution www.eastcoastwarehouse.com Echo Global Logistics www.echo.com enVista www.envistacorp.com FreightCenter www.freightcenter.com G&D Integrated www.gdintegrated.com
HH Global www.hhglobal.com
VAI www.vai.net
HighJump www.highjump.com
Westfalia Technologies Inc. www.westfaliausa.com
Holman Parts Distribution www.holmanparts.com Inmar www.inmar.com Knichel Logistics www.knichellogistics.com Liquidity Services www.liquidityservices.com
LOADEXPRESS ®
LLamasoft www.llamasoft.com Logistic Matchmaker www.tankcontainerfinder.com LOG-NET Inc. www.LOG-NET.com
aggregated CAPACITY
Murphy Warehouse Company www.murphywarehouse.com
aggregated LOADS
MyRouteOnline www.myrouteonline.com Paragon Software Systems www.paragontruckrouting.com Penske Logistics LLC www.PenskeLogistics.com PeopleNet www.peoplenetonline.com PITT OHIO www.pittohio.com
The marketplace for 3PLs, shippers and carriers to move and manage freight in one seamless workflow.
Powered Aire Inc. www.poweredaire.com Ryder www.ryder.com Saddle Creek Logistics Services www.sclogistics.com
› 3PLs scale and make more money with aggregated loads and capacity › Shippers cut freight spend at higher coverage › Carriers make more money with larger customer pool › Everyone cuts cost and aggravations while increasing productivity and
Sarasota County Government www.scgov.net Schenker Inc. www.dbschenker.com ShipHawk www.shiphawk.com
customer satisfaction
› Free to join. One simple transaction fee
Source One Management Services www.sourceoneinc.com
Request FREE Demo
Spinnaker www.SpinnakerMGMT.com The Sustainability Consortium www.sustainabilityconsortium.org
Sign up for FREE at www.LoadExpress.com
UL EHS Sustainability www.ulehssustainability.com
sales@loadexpress.com
UNEX Manufacturing www.unex.com
(619)916-3123, ext. 1711/12
SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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SPECIAL REPORT THE INTERNET OF THINGS
By Matt Scherer, Peter Scherer
4 QUESTIONS
Every Manufacturer Should Ask Before Upgrading to Industrial IoT Platforms
A
s 2017 comes to a close, organizations should—if they haven’t already—begin discussions on how the Internet of Things (IoT) can improve their operational capacity. In turn, many may decide to pursue further “smart manufacturing” options as they make changes or retool to take advantage of the lower costs and improved production IoT functionality can add to their operations. “We have seen a lot of firms make presentations at our trade shows or through other marketing channels showcasing their ability to transform traditional manufacturing and logistical processes with IIoT (Industrial Internet of Things) tech,” 22
says Carl Ford, chief executive officer of Crossfire Media. “Add in other sectors, such as automotive, energy and health care, and it’s logical that most forward-looking businesses will want to increase their IIoT footprint.” Analysts estimate IoT adoption will reach anywhere from 8.3 billion devices this year to more than 20 billion in three years. And yet, despite the rapid adoption of IoT devices across a diverse set of industries, Ford says the intelligent use of them in a factory requires executives to first understand the history of industrial controls within their organization. Many companies have replaced their relay logic systems, ones without intelligence or cascade systems, with software that has provided them with limited functionality. However, their
design, Ford notes, allows them to work well in extreme temperatures. More modern systems give executives a higher availability of solutions with an ease of programming. These also give plant managers process fault diagnostics capability with superior processing speeds for both humanbased and robotic-armed processes. Most manufacturing processes today deploy Supervisory Control and Data Acquisition (SCADA), Programmable Logic Controllers (PLC) or a Distributed Control System (DCS). “Many older factories have a SCADA system, which has fail/safe distributed intelligence and an alarming strategy when something in a plant fails,” Ford says. DCS and PLC are better with a centralized control system, managing various levels of controllers, networked with share control at local on-plant monitoring, he adds. IIoT processes now join these older systems as part of the automation process. And that begs the question that many factory decision-makers face: When is it time to make changes for this new technology, or should a company continue with its current tech capability? To best answer that question, there are a few additional questions decision-makers should ponder when considering the addition of IoT-based technology to their smart manufacturing mix.
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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Link to products: Link to products:
www.bosch-connectivity.com/industry-logistics www.bosch-connectivity.com/industry-logistics
Transport Data Logger The Transport Data Logger (TDL) makes the supply chain transparent. Once attached to the shipment, the Transport Data The Transport Data Logger (TDL) makes the supply chain transparent. Once attached to the shipment, the Transport Data Logger measures and records temperature, humidity, tilt, and shock, with the data visualized through a mobile application. Logger measures and records temperature, humidity, tilt, and shock, with the data visualized through a mobile application. The limits of each parameter can be individually configured, and any violation is traceable and clearly assignable throughout The limits of each parameter can be individually configured, and any violation is traceable and clearly assignable throughout the entire supply chain. the entire supply chain. i4.0 Approach i4.0 Approach
Benefits Benefits
▶ The TDL is the cost-effective, simple, all-purpose and reliable ▶ The TDL is the cost-effective, simple, all-purpose and reliable way to bring transparency to the entire supply chain, with the way to bring transparency to the entire supply chain, with the usual exceptional Bosch quality. usual exceptional Bosch quality. ▶ The TDL is individually configurable, intuitive and easy to ▶ The TDL is individually configurable, intuitive and easy to use, and can be integrated with little effort and without prior use, and can be integrated with little effort and without prior knowledge of the processes of a logistics chain. knowledge of the processes of a logistics chain. ▶ The TDL gives the initiator of a delivery peace of mind and supply ▶ The TDL gives the initiator of a delivery peace of mind and supply chain transparency. In the event that a parameter threshold chain transparency. In the event that a parameter threshold is exceeded, the TDL provides verifiable proof and a reliable is exceeded, the TDL provides verifiable proof and a reliable indication for possible primary and secondary damage. indication for possible primary and secondary damage. If there is no parameter violation, the TDL is the evidence If there is no parameter violation, the TDL is the evidence of a carefully conducted and failure-free transport chain. of a carefully conducted and failure-free transport chain. ▶ The TDL provides an added value for every logistical effort. ▶ The TDL provides an added value for every logistical effort. It creates trust between partners and provides important It creates trust between partners and provides important data for the optimization of logistics processes. data for the optimization of logistics processes.
▶ ▶ ▶ ▶ ▶ ▶ ▶ ▶
Contact us Contact us
For further information visit our website For further information visit our website
Bosch Connected Devices and Solutions GmbH Bosch Connected Devices and Solutions GmbH E-Mail: info@bosch-connectivity.com E-Mail: info@bosch-connectivity.com
SDC1217_22-25_IoT_JY AW.indd 23
Creation of transparency within the entire supply chain Creation of transparency within the entire supply chain Simplified visualization via mobile application Simplified visualization via mobile application Easy installation with a well-designed mounting concept Easy installation with a well-designed mounting concept Battery with an outstanding long lifetime resulting in less Battery with an outstanding long lifetime resulting in less handling effort handling effort
Features Features
▶ ▶ ▶ ▶ ▶ ▶ ▶ ▶
Reliable and precise MEMS technology by Bosch Reliable and precise MEMS technology by Bosch Simultaneous monitoring of multiple crucial parameter, Simultaneous monitoring of multiple crucial parameter, such as temperature, humidity, tilt and shock such as temperature, humidity, tilt and shock Up to two years battery lifetime Up to two years battery lifetime Industry proven design with IP54 enclosure protection class Industry proven design with IP54 enclosure protection class
www.bosch-connectivity.com www.bosch-connectivity.com
11/29/17 12:12 PM
SPECIAL REPORT THE INTERNET OF THINGS measure the connectivity requirements for their devices when adding newer IIoT platforms. Many need a low Many manufacturing software bandwidth, but bundling them with systems, often referred to as legacy other communications requirements systems, were developed with a closed may cause technical issues when process, one that allows further everyone uses them at the same time. modifications only by having one Bill Brehm, the chief operations specific software system engineer to officer of James Brehm and Associates, make those changes. says each situation in any smart “For the foreseeable future, there manufacturing operation differs will always be a legacy and closed because of the physical setting for a system crucial to an operation factory or operation. with replacement costs that are too For example, one company’s steel prohibitive,” says Daniel Price, chief roof might cause issues with a wireless executive officer at Breadware Inc., a technology needed to add smart Reno, Nevada, company that designs manufacturing capability, while a and builds custom electronics for factory that is located near an airport, businesses launching IoT initiatives. college or interstate will also see an “The advantages of utilizing impact on some wireless open software is being able “The advantages of utilizing open signals. to receive greater amounts of “Imagine that your operation software is being able to receive quantitative data in sections is next to a major interstate that previously were closed and greater amounts of quantitative data where there are hundreds of could only be monitored through commuters, each driving a in sections that previously were inputs to outputs,” he adds. smart car that competes for John Kowal, director of bandwidth during rush hour. closed and could only be monitored business development for B&R If you have a manufacturing industrial systems, adds he and operation that also depends on through inputs to outputs.” others are working with the that bandwidth, it can create Industrial Internet Consortium (ICC) have a data plan that factors in the serious issues,” Brehm explains. to develop a future open standard that costs for required hardware, as well as Communications providers have allows businesses to communicate with collecting, securing and transmitting created other options that help a smart each other, regardless of their system’s data,” he says. manufacturing operation to connect software and hardware systems. Kuntz adds that the return on machines to each other despite their “We are becoming operating system investment (ROI) for updating a environment (see sidebar on page 25). agnostic,” says Kowal, who co-chairs system to the IIoT standard typically Kuntz says manufacturing executives the ICC’s smart factory group. He hovers between 18 months to a year. could select four or five communications recommends that business integration However, the investment will help standards in one setting that would teams embrace the OPC Foundation’s businesses better communicate with allow transmitted data to work Uniformed Architecture (OPC-UA) as their key vendors and get diagnostical together to inform decision-makers a resource for industrial automation. data that will help them make of key changes, as well as alert their decisions. “Smart manufacturing maintenance teams. Do we know where all Machine will see crucial machine motions to Machine (M2M)-based occurring at a hundredth of a How secure is the IoT system technology is located within our microsecond,” says Kowal. “It will when faced with outside threats? manufacturing facility? also eliminate operator error.” Compared to other forms of Since the first PLC controllers Corky Roth, principal at the San reported security attacks, such as were created, manufacturing managers Antonio, Texas-based Blackwater Equifax or Target, U.S. industrial have added them, often without Group, says automation managers and IoT platforms have not been exposed much thought. Now, the fees for the their integration teams should also to major attacks. The Stuxnet virus,
1
Is the operating system open-ended or closed?
connectivity act as a major cost factor in introducing them. These financial factors could be lowered if a smart manufacturing organization planned for it by looking for competitive bids to augment the needed communications bandwidth. Chris Kuntz, vice president of marketing and strategy for Integron, a managed IoT services provider, recommends an IoT integration team complete an audit of known connectivity points. Such audits can take time, but having a complete connectivity strategy and blueprint will help a smart manufacturing team avoid making the wrong decision on connectivity, required hardware and their costs. “Each connectivity point needs to
2
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3
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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SPECIAL REPORT THE INTERNET OF THINGS which started in 2008, was the first truly significant computer malware designed to attack PLC systems, most notably ones controlling the Iranian nuclear program. According to several published sources, the worm destroyed more than 55 percent of those devices within the Iranian nuclear infrastructure. Jim Jaeger, a cyber strategist at Arete Advisors, advises those involved in smart manufacturing to have their operational and security team focus on the need to update security patches, which would eliminate exposure to attacks. “Many of the attacks have been made against known vulnerabilities,” says Jaeger, a retired Air Force general. “Patches are available but not applied.” Factory decision-makers should also understand the biggest threat to their IoT-based resources comes from wiping attacks. A cyberattack could focus on a key industrial point where it would lock out the operational team from continuing without paying a ransom or hiring an IT/security team to correct it, Jaeger explains.
4
CONNECTIVITY Connectivity is key in a smart factory. A steel roof that blocks the wireless signal, or a highly-populated location where many people are trying to connect at once, are just two of the many reasons a manufacturer’s IoT-enabled devices may fail. Below are other options communications providers have created that help a smart manufacturing operation connect machines to each other despite their environment: Zigbee: Zigbee is a wireless network used for home, building and industrial control. It is intended to be simpler and less expensive than other Wireless Personal Area Networks (WPANs) such as Bluetooth. Z-wave: A protocol for communication used by home automation devices (e.g., home security, home theater, lighting, air condition). It uses radio frequency for signaling and control. Z-wave devices use the unlicensed 902-928 MHz band, so they won’t interfere with Wi-Fi, which uses the 24 GHz band. LoRa: A Low Power Wide Area Network (LPWAN) protocol specification designed for wireless, battery-operated devices in a regional, national or global network. Sig Fox: A French company that builds wireless networks to connect low-energy devices that need to continuously emit small amounts of data. These devices include electricity meters, smartwatches and washing machines. NB-IoT: NarrowBand IoT (NB-IoT) is a LPWAN radio technology standard developed to enable a wide range of devices and services to be connected using cellular telecommunications bands. Long-Term Evolution (LTE): LTE is a standard for high-speed wireless communication used by mobile devices and data terminals.
What key change management issues will new IoT tech capabilities bring?
Wi-Fi: The standard wireless LPWAN technology used by computers and other electronic devices to connect to the Internet. It is the wireless version of a wired Ethernet network.
With IoT, fewer humans in the communication loop will participate in manufacturing and logistical applications, Breadware’s Price says. He foresees more automated M2M transactions, where one machine subscribes to a service from another machine (not necessarily in the same factory) without a human in the loop. He also believes smart manufacturing devices will see more automated maintenance with fewer service trips, as the technician will get more detailed information in a machine diagnosis report. IoT processes will bring higher productivity as well. Kuntz cites a forklift manufacturer that places a tracking device on each piece of
BlueTooth: A standard wireless personal area network (WPAN) for short-range transmission of digital audio and data. Bluetooth can transmit through walls and other non-metal barriers.
equipment. In the retail industry, where a typical distribution warehouse may contain dozens of these types of equipment, operators can know the location and health of each vehicle, allowing them to locate one within an area the size of a football field. Making changes to integrate a communications platform to an existing one will take time and effort. However, if senior executives understand the technology changes
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available and the capability it brings, it will make them more competitive in the ever-expanding smart manufacturing sector. ABOUT THE AUTHOR MATT SCHERER, a San Antionio-based communications and marketing analyst, works with IoT and security firms on their communications efforts. His son, Peter, a recent graduate of the University of Texas at San Antonio with a degree in information systems and security, helps his father with content and research.
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SPECIAL REPORT LOGISTICS
By C. John Langley Jr., Ph.D.
INFORMATION TECHNOLOGY C
to 3PL-Shipper Relationships The availability and analysis of useful information has become front and center among the capabilities that are essential for customers and 3PLs to effectively manage supply chains.
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he just-released 2018 22nd Annual Third-Party Logistics Study shows the continuation of positive relationships between shippers and third-party logistics (3PL) providers. Greater availability of data and the ability to make real-time decisions are driving both parties toward better results from more meaningful collaboration and information sharing. The ability to provide and manage IT capabilities is clearly recognized as a key competency of capable providers of 3PL services. In addition to the annual global survey of 3PL users and providers, this year’s study included an industry workshop that was held at Google’s PartnerPlex conference facility in Mountain View, California. This venue helped to facilitate a very effective dialogue with industry executives that related to preliminary study findings and relevant topics relating to shipper-3PL relationships. Study team sponsor organizations included Penn State University, Infosys Consulting, Penske and Korn Ferry.
TECHNOLOGY REPORT CARD—SHIPPERS WEIGH IN
Complimentary copies of the just-released 2018 22nd Annual Third-Party Logistics Study are available for download at www.3plstudy.com.
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Again this year, the most frequentlycited technologies are those that are more execution- and transactionbased capabilities. Examples include warehouse/distribution center management, transportation management, visibility and electronic data interchange. Other commonly-
cited technologies include web portals, bar coding, network modeling and optimization, supply chain planning, transportation sourcing and global trade management tools. Among the types of IT-based capabilities that generated discussion at the Google workshop as candidates for future growth are yard management, advanced analytics and data mining tools, cloud-based systems and distributed order management. For the past 16 years, this study has tracked two relevant analytics that provide insight into the role of IT in shipper-3PL relationships. The first of these, the percentage of shippers indicating that IT capabilities are a necessary element of 3PL expertise, has remained at a very high level over the 16 years we have been asking this question (91 percent in the current study). The second, the percentage of shippers indicating satisfaction with 3PL IT capabilities, has increased very significantly to 56 percent in the current study from 27 percent in 2002. The difference between these two analytics has been referred to as the “IT Gap.” An interesting observation from this year’s study is that the reported 56 percent of shippers indicating satisfaction with 3PL IT capabilities represents a decline from the 65 percent reported last year. This could be because shipper expectations have increased as technology has improved or because shippers are seeking enhanced analytical capabilities to help drive more effective supply chain decisions.
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SPECIAL REPORT LOGISTICS
Y CRITICAL
that there is an increased need for 3PLs to respond to customers more quickly and with complete, accurate and consistent information. However, both parties agree there is a need for improvement, with just over half of shippers—51 percent—and half of 3PLs reporting that 3PLs communicate well in responding to risks and executing operating objectives. Discussions at the workshop session held at Google highlighted the need for accurate and capable systems and technologies and for objective decisions based on data. The capabilities of KPI tracking systems represent a useful resource for shippers to document specific requirements that may result
PLANNING VERSUS EXECUTION Increased visibility within the supply chain is creating more opportunities for 3PLs to provide greater value, and providers are becoming better prepared to deal with uncertainties that may arise before they occur. Both parties increasingly need the resources that will enhance their abilities to take action in real time to anticipate and mitigate the consequences of supply chain disruptions. In short, real-time problems require real-time solutions. In this year’s study, 98 percent of shippers and 99 percent of 3PLs agreed
in their requirements being met by 3PLs. Examples of these requirements include shipment tracking/delivery dates, order processing updates and real-time fulfillment information prior to shipping, and assistance with customer inquiries and insightful responses to help mitigate issues. While there are numerous types of important interfaces that connect shippers and 3PLs, those of greatest immediate consequence occur in the execution phase of the relationship. One of these interfaces is that of direct communications between shippers and 3PLs, which participants at the Google workshop said can sometimes be lacking. This year’s research identified a number
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SPECIAL REPORT LOGISTICS of root causes of communications issues with 3PLs and their customers: ❯❯ Over-use of email for communications, instead of more contemporary technology that can enable more complete, accurate and consistent communications. ❯❯ Lack of context in emails or phone calls that does not satisfactorily communicate urgency and details that may surround a real-time problem. ❯❯ Lack of a collaboration hub or digital workspace. ❯❯ Unclear or changing internal organizational structure. ❯❯ Geographically-dispersed teams.
BLOCKCHAIN The increased desire for visibility within the supply chain is driving increased interest in blockchain technology, which breaks each movement down into a block and documents transactions every time a shipment changes hands. Linking the blocks together creates a record for parties involved and provides specific details associated with each movement, which all parties can access. This creates a permanent, digital history as products move throughout the supply chain from the original source through the final leg of the journey. The goal is to create one version of the truth, link information, create transparency surrounding all
parties involved in the supply chain, and identify how they participated in the flow of a good or service. As a bonus, the digital history is not owned or controlled by any one trading partner, so it can be available for all verified partners to use. The technology improves security because each transaction is validated and recorded by an independent third party. No one party can modify, delete or append any record without the consensus from others on the network. Data generated through blockchain technology could provide more opportunity to analyze information, which is becoming more important in today’s data-driven supply chain. Blockchain also has the potential to create demand chains because it closely tracks and transmits data in real time related to consumption. Blockchain isn’t a panacea solution that is a fit for all supply chains. And how companies can
DO THE NUMBERS ADD UP?
and will apply blockchain should be directly dependent on the return on investment. Certain industries, such as fair-trade minerals, food, prescription drugs, fine arts and diamonds, may find greater value in blockchain capabilities. The technology can help remove the risk of counterfeit goods because shippers can easily track every person that has touched the products. In the future, consumers may make choices based on what information is available about a product. Overall, the study found that both 3PLs and shippers are in the beginning states of examining or implementing blockchain technology. However, interest is increasing, particularly for logistics providers, and its use could create a competitive advantage. To be successful, shippers will need greater clarity relating to the functioning, benefits, and likely costs that may be related to the use of blockchain.
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SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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SPECIAL REPORT LOGISTICS AUTOMATION AND DIGITALIZATION
recognize greater potential and take care of certain tasks, but it is human talent that is the key factor linking Although it may innovation. seem like increased Technology is upping the table stakes for participants to be successful, automation will particularly in the logistics and supply chain industries. Supply chain and decrease the need for logistics executives are increasingly companies to invest shifting from physical efficiency to data efficiency. Data collection, in employees, the analytics, increased visibility and the opposite appears to ability to react quickly all rely on increased technology within the supply be more likely. chain. Thus, logistics leaders will have to handle highly complex operations. Understanding the current and ABOUT THE AUTHOR future state of the supply chain C. JOHN LANGLEY JR., PH.D., is clinical industry can help shippers and 3PLs professor of supply chain management at deploy strategic workforce planning Penn State University. He specializes in supply that aligns a company’s business and chain strategy; collaboration; and outsourcing talent strategy and then map the of logistics services. workforce’s needs to that strategy. As documented in the 2018 22nd Annual 3PL Study, the availability and analysis of useful information has become front and center among the capabilities that are essential for customers and 3PLs to effectively manage supply chains. The examples above are intended to Take Control with provide some Automated Inventory Optimization perspectives on technologies and approaches that With EazyStock you’ll have the right product are high-profile at the right time and in the right place when and can contribute the order comes through. to and improve our supply chains. As to what may www.eazystock.com info@eazystock.com lie ahead … stay tuned.
Technology is developing at a rapid pace, and shippers and logistics providers are leveraging advanced technologies to enable faster and more efficient services, provide visibility and improve safety. Automation is changing everything from the vehicles that move products to warehouse operations, while also assisting human workers throughout the supply chain. Shippers participating in the workshop agreed they are interested in the concept of using data to predict and reduce vehicle-related service failures. The more information that can be available about vehicle performance and how drivers are behaving can be instrumental in driving down costs. This year’s study addressed some aspects of the development and use of autonomous vehicles. Currently, 2.5 percent of shippers and less than 2 percent of 3PLs report use of autonomous vehicles, but 27 percent of shippers and 3PLs report they plan to make a future investment in the technology. And while technology could ultimately replace some of the capabilities related to the use of drivers, it is likely that drivers will remain a critical link in the supply chain for quite some time.
TALENT Technology is reframing the demands on the workforce, particularly within the supply chain where automation, digitization and data collection capabilities are growing rapidly. Supply chain leaders and logistics executives are taking on even greater importance as companies work to build more efficient and technologically advanced supply chains. Although it may seem like increased automation will decrease the need for companies to invest in employees, the opposite appears to be more likely. Technology will help employees
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EXECUTIVE FOCUS
{ TRANSPORTATION}
By Mollie Bailey
Ocean Carrier
ALLIANCES EXPAND As ocean carrier consolidation continues, shippers face new service challenges and solutions.
as a shipper looking for alternatives, it can be worrisome that five or six international carriers control all major global trade routes.
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WHY WERE THESE ALLIANCES NECESSARY?
hile the changing atmosphere of ocean carrier alliances for containerized cargo isn’t something new, it has been a tumultuous few years in the industry. What used to be four primary alliances has now transformed into three new large ocean carrier alliances. Effective April 1, 2017, these three large alliances were considered formal carrier alliances, offering a dramatic display of the vast changes being made in the industry, as they now cover 95 percent of global container trade. The alliances are: the 2M Alliance (MSC, Maersk, Hamburg Sud, Hyundai), the Ocean Alliance (CMA CGM, APL, COSCO, China Shipping, OOCL, 30
Evergreen) and THE Alliance (NYK Group, “K” Line, MOL, Yang Ming, Hapag-Lloyd, UASC). With the changes in carrier ownership over the past year, some of the “carriers” listed as alliance members are now actually a brand of the carrier owner. For example, Maersk is buying Hamburg Sud, while Hapag Lloyd bought UASC, and CMA CGM owns APL, and COSCO is purchasing OOCL. Japanese carriers will also form a single entity in April 2018. And consequently, the overall pool of competitors keeps decreasing. This lack of competition has also allowed the carriers to begin to regain profitability and control rate fluctuations and space availability. But
Why has there been a need for these alliances at all? Over the past 10 years, the industry has seen the persistent challenge of an imbalance of global supply and demand throughout the market, affecting carriers and shippers alike. At times, there is overcapacity in the market, causing the rates to plunge, but there are also instances in which demand picks up quickly. Carriers have benefitted from these periods of increased demand, causing rates to shoot up and become more volatile and challenging for shippers to allocate and purchase space. One of the driving factors of this global supply and demand imbalance was Maersk’s fleet investment initiative.
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Maersk wanted to control the global container market and drive existing industry rates, and began making more vessel orders and placing shipping orders from more vessels to achieve this. However, this effort was stymied by the Great Recession of 2007-2009, when supply decreased rapidly for container shipping. The recession caused a chain reaction for carriers, making it necessary to ensure that freight rates didn’t tumble too far. Some of the methods used to accomplish this were: ❯❯ Slow steaming. Carriers tried to conserve fuel and extend the time on export routes (for example, from the United States back to Asia). ❯❯ Vessel idling. Carriers chose to take vessels out of operating streams during strategic times when demand may have slowed, such as after peak season or late winter.
Since April, there have been notable changes to carrier schedules, loops and direct ports of call versus transshipments—and that has impacted transit time and port options. Some carriers have chosen to stop calling low-volume, unprofitable ports and regions. Those carriers with contracted rates in place notified shippers that they would no longer accept cargo for those destinations. Shippers then had to scramble to find alternate carriers many times the cost of contracted rates. There is a concerted effort on the part of the carriers to collectively examine how different trade lines should be serviced, how they can provide these services in the most competitive way and how their overall costs can be managed most effectively. In light of the rocky path of continued supply and demand imbalance and challenges with overcapacity, the goal is for ocean carriers to truly get in better
IN LIGHT OF THE ROCKY PATH OF CONTINUED SUPPLY AND DEMAND IMBALANCE AND CHALLENGES WITH OVERCAPACITY, THE GOAL IS FOR OCEAN CARRIERS TO TRULY GET IN BETTER FINANCIAL SHAPE FOR THE FUTURE. ❯❯ Organizational cost cutting. As they had limited ability to control overall rate market pricing, carriers cut back within their organization and spent significant time and energy trying to trim costs. ❯❯ IT modernization. Carriers made large investments in information technology infrastructure, creating e-shipment sites where bookings could be made online, documentation could be reviewed and the like.
financial shape for the future.
THE IMPACT OF CARRIER ALLIANCES Overall, the potential strengths that have resulted from the carrier partnerships include: ❯❯ Fewer competitors controlling more vessels. ❯❯ More effective management of existing capacity. ❯❯ Greater alignment of future vessel orders with demand forecasts.
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❯❯ Reduction in operating costs and cleaner negotiations with service providers, such as tugboat operators, container lessors, terminal operators and stevedores. ❯❯ Expanded scope, allowing alliance members to call on new ports or take advantage of new route opportunities. However, there are also weaknesses in these alliances. For example, there are concerns that one or more members of these alliances may be in debt. The impact of any one member’s financial challenges could be passed off to the rest of the alliance—similar to what the industry saw during the recent Hanjin bankruptcy. Other concerns within the industry include: ❯❯ Terminal congestion. In Asia and Europe especially, ship bunching has become a larger problem due to redrawn vessel rotations—leading multiple vessels to call on a terminal too quickly and causing increased challenges loading and unloading those vessels within the terminals. ❯❯ Chassis dislocations. Container ships are calling different terminals and ports, changing where many chassis need to be. This raises concerns that the shipper or importer may be bearing the brunt of that impact and paying any associated dislocation fees. ❯❯ Delays in spotting and releasing intermodal trains. Some scheduled intermodal trains have been delayed or had other challenges due to increased congestion and ship bunching in a number of key ports.
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TRANSPORTATION
TACKLING CARRIER ALLIANCE TROUBLES It’s critical for shippers to understand which carriers are in which alliances and ensure that they have balanced carrier coverage among the three alliances. For any contracted carrier, shippers should be aware of how much of their freight will actually move via the contract-holding carrier versus an alliance member. If shippers are booking through third-party logistics providers (3PL) rather than direct carriers, they need to know which carriers and alliances do those 3PLs work with. For example, can the shipper choose the carrier they want to work with under NVOCC contracts? Knowledge is power, and too many shippers were taken by surprise when Hanjin declared bankruptcy a year ago—despite the warning signs building for months. As for any product purchased, it’s important for shippers to be a smart consumer for their ocean services. It’s also important to remember that, for the most part, carriers are still not consumer oriented. They can be bureaucratic, inefficient and challenging to partner with when problems arise. And responsiveness may also be difficult with many carriers. However, there are a number of things that shippers can do to mitigate problems as more ocean carriers partner together: ❯❯ Contract across alliances—not just carriers—to manage risk. Make sure that you partner with diverse service providers that are represented in all three alliances. This will ensure that containers are being carried on different vessels, and it will help to manage your risk if one alliance member runs into financial issues.
IT’S ALSO IMPORTANT TO REMEMBER THAT, FOR THE MOST PART, CARRIERS ARE STILL NOT CONSUMER ORIENTED.
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❯❯ When carriers are offering the same alliance services, sailings, transit times or ports of call, ensure that your carrier is providing a level of service that distinguishes it from its alliance partners. ❯❯ Hold your carrier accountable during business reviews and use a global Transportation Management System (TMS) or a 3PL that can provide meaningful metrics on quoted turnaround times, on-time departure/arrival, equipment availability and other KPIs. ❯❯ Contractually require ocean carriers to carry a certain percentage of your cargo on their own vessels, and ensure that a certain percentage is on specific vessels within an alliance. ❯❯ Reserve the right to reduce your quantity commitment (MQC) based on specific declining carrier metrics, such as on-time performance, services scope, transit requirements and direct ports of call. ❯❯ Review your carrier’s financial results frequently. A carrier’s “Z-Score” can tell you a great deal about its current financial health. ❯❯ Be carrier-friendly by using electronic portals, load-legal weights and meeting required regulatory or documentation cut-offs. While much is changing, shippers must do their due diligence to ensure they’re receiving the service and cost required for their cargo. ABOUT THE AUTHOR MOLLIE BAILEY is director, international, LCB for Transplace. Transplace is a North American non-asset based logistics services provider offering manufacturers, retailers, chemical and consumer packaged goods companies the optimal blend of logistics technology and transportation management services.
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EXECUTIVE FOCUS
{ WAREHOUSING}
By Don White
WAREHOUSE ROBOTICS: What’s Emerging and Where’s It Headed?
While great strides have been accomplished in robotics, the human workforce still holds the upper-hand in running an efficient warehouse.
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hey won’t ask for sick time. They won’t complain about overtime hours. And you’ll never hear about their weekend exploits. But when you really do the analysis, is it worth considering the deployment of robot “workers” as your next labor strategy to improve your warehouse efficiency? Predictions of long-term labor shortages across the United States and Europe, as well as continued pressure on supply chains to deliver orders faster and more accurately, have caused operations executives to seriously evaluate that question as they look for answers to staffing challenges. The good news is that cost reductions in automated material handling equipment, and advances in machine learning and robotics, have made such technology tools considerations fair game for warehouses of all sizes. Supply chain operators are taking 34
full advantage of shifting market forces. Research firm Tractica estimates warehouses will invest a staggering $22.4 billion globally in robots by the end of 2021, up from $1.9 billion in 2016. More organizations now see automation and robotics as a top solution to address a wide range of warehouse challenges, from increasing capacity utilization and picking efficiency to labor reduction and improving order accuracy and cycle time. New internal and external demands can also drive warehouse operators to investigate new technology. With the rapid growth in the e-commerce sector, many need to fill orders faster to meet customer service expectations. Others want to develop new offerings, such as subscription commerce boxes that require peak efficiency. Still, others are motivated to keep up with competitors, many of whom have turned to automation to gain the upper hand.
EMERGING TECHNOLOGY Automation and robot technology in the warehouse has come a long way since the first automated guided vehicles (AGVs) began making warehouse rounds in the early 1950s, diligently following their wired pathways through aisles, aiding pick and putaway operations. The latest generation of warehouse robotics, autonomous mobile robots (AMRs), still perform the same functions as AGVs, moving material from location to location within distribution centers—but do it faster, smarter and more efficiently. Instead of relying on buried wires or magnetic tape for guidance, AMRs can navigate dynamically to complete material handling tasks, using an on-board map that can easily be updated should the warehouse configuration change. These robots are smart enough to find their way around obstacles and can safely navigate around people or other equipment. In addition to basic stock movement and replenishment tasks, modern robotic automation is also changing the traditional “man to goods” model
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WAREHOUSING
where employees walk warehouse aisles following pick lists from shelf to shelf to fill orders. AMRs reverse the process with robotic vehicles bringing items to employees who staff pick locations and fill orders—reducing employee travel time and increasing pick accuracy. Reports of employees being forced to walk 10 to 15 miles per shift may be exaggerated, but it’s not hard to imagine the efficiency savings in employee travel (as well as the satisfaction improvement) by allowing robots to “do the walking.” And while robots with advanced pick and pack capabilities have yet to produce a foolproof automated picking and packing operation, this technology isn’t far off. Amazon, which pioneered the use of mobile robots in its U.S. facilities after acquiring Kiva, sponsors a global competition every year to identify and promote robotic technology to perform advanced pick processes.
Within the next 3-5 years, it’s likely that applications will appear where information is consumed around items, people, processes and order profiles, as well as the physical organization of the warehouse to recommend workflows that best handle the work. These applications are also likely to be costly and be appropriate for only the largest operations when first rolled out. One thing is clear—embarking on a strategy to enhance or replace portions of your labor pool with automated devices isn’t a quick decision. It requires significant thought and long-term strategic and operational planning. And, before you consider adding a new robotic component to your warehouse operations strategy, it’s best to consider the systems already in place to ensure successful integration. For example, even in the most automated warehouse, a warehouse management system (WMS) is the core to the entire operation. It maintains critical data on inventory, orders, workforce management and the like. Properly configured, it will provide the baseline for managing automated equipment. Without it, attempting to manage a robotic workforce can be as— or more—difficult as dealing with the human equivalent. Innovative companies do feel the use of robotic technology has reached the point where it’s accessible to all operations and are working on applications to integrate advanced automation with their WMS offerings.
WHERE IS IT ALL LEADING? So, are we headed toward a complete warehouse labor pool comprised of robots sporting artificial intelligence (AI) and machine learning? Probably not—at least in the near term. Even the newest bots require configuration and set up to perform their automated functions. AI and advanced machine learning, where the rules and algorithms controlling the devices can be self-modified based on experience, are still emerging technologies.
Within the next 3-5 years, it’s likely that applications will appear where information is consumed around items, people, processes and order profiles, as well as the physical organization of the warehouse to recommend workflows that best handle the work.
ABOUT THE AUTHOR DON WHITE is vice president of enterprise solutions at Snapfulfil, a software house specializing in warehouse management technologies and solutions. For more than 40 years, its systems have been powering the warehousing operations of some of the world’s most successful companies.
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EXECUTIVE FOCUS By Alan Amling
{ SOFTWARE & TECH}
3D Printing:
THE NEXT GREAT SUPPLY C
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On-demand additive manufacturing promises lower inventories and costs, plus less waste.
he inability to perfectly correlate demand with supply has been a key riddle for supply chains and logistics throughout history. Too much product is a glut. Too little is a scarcity. Striking a balance is hard, so suppliers use sophisticated algorithms to take their best shot at how much of their products will be needed at a certain time and place to meet an uncertain demand. Couple that with the need to produce products in large quantities to achieve economies of scale, and the issue is exacerbated. To deal with this, suppliers produce products in large quantities in lowlabor-cost countries, and ship and store those products near their customers, hoping that their demand projections turn out to be accurate. This projection is always imperfect, especially considering that the value of inventory in the United States alone was $1.8 trillion in 2015, according to the U.S. Department of Commerce. Assuming an inventory carrying cost of 25 percent, that’s $450 million U.S. companies pay each year to hold that inventory. What if you could flip the supplydemand equation on its head? Instead
of producing in anticipation of demand, what if you could produce on demand, after the customer has committed to buy the product? How much inventory could you reduce? How much could you improve your cash flow and reduce overhead? How much unnecessary material, production, storage and transportation could be eliminated? How much better could you serve your customer by producing exactly what they want, when they want it and where they want it? This is the promise of additive manufacturing, more commonly known as 3D printing.
MAKING STRIDES Unfortunately, we’re not that close to reaching this nirvana, but we are making strides. A good example is what Adidas and technology-provider Carbon are doing with the new Futurecraft athletic shoes. Next year, they will introduce a shoe that is custom
The fuel nozzle for GE’s new Leap aircraft engine used to be made up of 20 parts that needed to be assembled. Thanks to additive manufacturing, it is now one print. 36
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SOFTWARE & TECH
very slowly—or not at all. That doesn’t always make good business sense, but the tide is turning as additive manufacturing’s cost and speed have been improving at an exponential rate. It may only make business sense to store 5 to 10 percent of your fit to each foot, as well as the customer’s THE GOLDEN AGE product in “virtual inventory” to print weight, gait and sport. The consumer’s At this point you may be thinking, on-demand today, but as material foot will be scanned, and then custom “Is this the end of the supply chain and printer technology continues to shoes will be made and delivered industry?” Absolutely not. This actually improve exponentially, UPS expects that directly to their door. may be the beginning of a golden age percentage to go up rapidly. It’s a move that thrills everyone for supply chain. Think of additive Another bonus? Less waste will from industry watchers to sneaker manufacturing as another tool in be created, which in turn helps the enthusiasts. It is likely that 10 years the toolbox to improve supply chain environment. from now, kids will look back in efficiency. Much thought is being given Consider an electronics company amazement that we ever settled to how this will bring production— that wants to create custom earbuds for “best fit” shoes that weren’t that fit each of their customer’s Think of additive manufacturing ears perfectly. Once the digital personal. This will extend beyond shoes to everything from eyeglasses file of each ear is created from as another tool in the toolbox to to artificial knees. a smartphone picture and the With additive manufacturing, improve supply chain efficiency. custom 3D printing earbuds are there is no cost for complexity. manufactured, it still has to be Printing a 5-inch by 5-inch solid and likely jobs—closer to demand assembled to the standard devices that block of material will actually be more centers. Dusty old warehouses will make the sound come to life. If that expensive than a 5-inch by 5-inch be reinvigorated and reimagined as manufacturing, assembling, packing highly complex design because it uses thriving hubs for smaller batches of and shipping all occurs in one location, more material. By the way, that design needed products. is it a manufacturing solution or a may not have even been possible to The possibilities are exciting. When logistics solution? make any other way. Consider the a piece of equipment, like an MRI The key point is that this is not machine or server goes down, there is an either/or situation between the Adidas partnered with technology-protypically a service agreement in place traditional manufacturing supply vider Carbon to design Futurecraft, an athletic shoe custom fit for each foot. for a technician to get that important chain and additive manufacturing. An machinery back up and running in analogy might be the microwave oven short order. To do this, sellers have to that was supposed to revolutionize store parts near their installed base. the kitchen. While most homes do A tiny fix may be needed, but if that have a microwave, they also still have part isn’t nearby, waiting a few days stoves and ovens. It’s about using the for shipping can lead to big problems. right tool in the right situation. This is Airlines, for example, count delays in where logistics professionals thrive. seconds. The quicker a plane is fixed, ABOUT THE AUTHOR the quicker it gets in the air. As a result, UPS has a network of ALAN AMLING leads the global more than 1,000 locations around the on-demand manufacturing initiative at UPS. He moved into this role world where parts are stored close after serving as vice president of to the point of need for quick access. marketing for UPS Logistics & Distribution. Amling They know, because the inventory is has held numerous leadership roles in industrial engineering, technology and product development. in their facility, that much of it turns
Y CHAIN TOOL
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additively manufactured GE fuel nozzle for its new Leap aircraft engine. It used to be made out of 20 separate parts that needed to be assembled, now it’s one print that is lower weight, more efficient and more durable.
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EXECUTIVE FOCUS
{ PROFESSIONAL DEVELOPMENT}
By John O’Kelly
Three ways to improve working conditions and morale to close the employment gap.
COMBATING THE LABOR SHORTAGE
I
’ve been a business owner in the retirement and millennials lack interest warehousing industry for more in blue collar jobs. than a decade now, and the But who’s going to do the work if labor shortage issue has never your business is not ready to heavily been more prevalent. invest in automation and robotics? At the beginning of the year, there To turn the tide, businesses must was more than 12.5 billion square feet improve working conditions in the of industrial space across the United warehouse environment, provide a States, and this will only grow as an more competitive wage, give warehouse excess of 200 million employees a voice and square feet is currently make them part of the The turnover rate under construction. Add improvement process, for warehouse labor is to that the growth in and incentivize the work. e-commerce, which is These simple changes expected to grow to $4 will make it easier to find trillion by 2020. and keep workers. As warehouses grow and expand, the need for workers becomes EMPHASIZE SAFETY increasingly critical. Even more so Warehouse work is manual labor. when you consider the turnover rate Most employees are walking up to 10 is 36 percent, according to the Bureau miles a day, operating heavy machinery of Labor Statistics. In addition, and lifting packages of varying sizes. the older generation of the supply Safety should not be overlooked. chain workforce is moving closer to When a prospective employee
36%
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SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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PROFESSIONAL DEVELOPMENT
comes to a job interview, they need to know that above all else safety is a top priority. Strict guidelines need to be put in place to ensure safety and prevent injury, and warehouses always need to be well-lit and clean. Prospective employees also need to know that proper training is available for all new employees. In addition, safety includes tools; employees need to know warehouse managers are investing in the latest products and solutions to keep them safe—and to keep the wear and tear on their bodies as limited as possible. With so many job options, most of which center around a desk and the internet, employees considering manual labor need to understand that safety is paramount.
in the process. People want to make valuable contributions to the world— warehouse employees included. If employees truly understand the value, they will gladly provide it.
weekly incentives for employees who consistently deliver strong performance and get things done quickly, and recognize them throughout the organization. ❯❯ Good wages—Wages in the INCENTIVIZE industry need to improve. There Over the last year, unemployment needs to be a livable wage for has fallen from above to below the hard work, and make no mistake natural rate, signaling a shortage of about it, this is hard work. The labor throughout the warehousing national average for a warehouse market. This is a concern because worker’s salary is less than $30,000 at the same time, the national a year, according to Glassdoor. unemployment rate This just won’t keep has gone down in the people around, and The national average for a last year. Providing warehouse worker’s salary is it’s one of the main financial and career reasons the industry growth incentives is facing a labor will go a long way to shortage. Losing good attracting staff—and workers to Amazon keeping them for the for a few extra bucks long term. an hour is painful. ❯❯ Professional development— Find the money in your budget by Providing a clear track to looking for efficiencies throughout management is vital. If a the warehouse—changing prospective employee sees no layout, reducing steps or going room for growth within an paperless. Raising wages will industry, why would he or make employees feel like there is she stick around? Employees a future for them in this industry need to know they’re working rather than looking for the next toward something, and that the opportunity. Investment in your warehouse floor is not a dead-end people is crucial for sustained job. Provide constant training growth. and professional development There is no denying that combating opportunities for employees to the labor shortage is a tough task. reach the next level. However, there is plenty of opportunity ❯❯ Performance incentives— for improvement. It’s a team effort, and Day-to-day performance also can making sure all parties are heard and be incentivized. It is important respected will go a long way. warehouse associates don’t feel as ABOUT THE AUTHOR if they’re just punching a clock and putting in a mindless eight JOHN O’KELLY is the founder and hours. Reward efficiency, hard CEO for Newcastle Systems, an innovator of workplace mobility work and results; this will allow solutions partnering with many employees to set professional of the world’s leading companies to enhance goals and become eager to worker productivity, operational efficiency and improve. Implement daily/ organizational profitability.
$30,000 A YEAR.
GIVE WAREHOUSE ASSOCIATES A VOICE The best information comes from direct observation and involvement with the workforce; top managers don’t expose themselves enough to the work on the floor. The staff on the floor has the best understanding of what’s happening day in and day out, and know what can be improved. Create an environment where they can share their knowledge and feel invested
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EXECUTIVE OUTLOOK
By Lara L. Sowinski
Q& A: NEOVIA CEO PAT OLNEY
Q:
As global supply chain executives look ahead to 2018, there are several key topics that are getting a lot of attention— Industry 4.0, the digitized supply chain, blockchain, the IoT, AI and AR. How important are these from your perspective and from the perspective of Neovia’s customers? How are they shaping the future supply chain?
OLNEY: The future global supply chain will be defined by four key pillars: Connect, Collect, Analyze and Orchestrate—and the future is now. Just as technology has become a material part of our daily lives, it is integral in all parts of the supply chain. Real-time social media connectivity, along with the overlapping of our physical and digital worlds, is a key feature of today’s business environment. Whether as an employee or customer, people expect their interactions to occur in realtime with visibility and transparency. Technology is not only a critical enabler for organizations— whether 3PLs like Neovia, or the customers we serve—to achieve their goals, but it’s a requirement for them to be competitive, agile and profitable. Our business is not immune to these demands. We are digitizing processes and increasing data transparency so we can provide our leaders, decisionmakers and customers with the information they need, in real-time. Our OEM mindset helps us think as our customers think, meaning we can better manage flows, anticipate challenges and uncover efficiency opportunities, boost productivity, and enhance customer satisfaction. In addition, we have a cross-functional innovation team that consists of subject matter experts and thought leaders who focus on anticipating future trends, being proactive and disrupting the status quo. Our team has been evaluating several technologies, including IoT, machine learning, augmented/virtual reality, collaborative robots (CoBots), supply chain orchestration applications, 40
software-driven WAN, drones and many others. Our goal is to look not only 3-5 years from now, but 10-20 years from now. Meanwhile, as we approach Industry 4.0, where there can be hundreds of “nodes” or “partners” working together to get goods manufactured and transported, the net value of the cost of goods sold can only be optimized when all “nodes” have endto-end transparency and visibility. While blockchain has quite a way to go in terms of marketplace adoption, the constant demand from consumers for “cradle to grave” visibility around the products they are consuming is a reality that supply chain companies must embrace. In the future, everything in the supply chain will be connected, from having smart warehouses, to AI algorithms making procurement decisions and from digitized and trustless public ledger technologies, to additive manufacturing via 3D printing. This is where the industry is going.
Q:
Broadly speaking, the 3PL sector has in many ways become commoditized in recent years. How can 3PLs continue to bring value to the proposition, differentiate themselves in the marketplace, and command a fair price for their products and services?
OLNEY: In the supply chain world, competition is intense, some services are commoditized, and “lowest bid” has become a catch-phrase of procurement departments. Because of this, organizations are forced to look at ways to become more cost-efficient and cost-competitive, while also finding areas for differentiation. We have seen interest in the marketplace and from our customers for 3PLs to bring value-added services to the table, to exceed the standard set of activities, and provide insights and business enhancements—in other words, to be a partner instead of a service provider. The best way to add value is to be internally aligned with the customer’s strategy, goals and way
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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of operating. As a partner, our success relies heavily on our ability to think as they do, help them achieve their most critical KPIs, and design and execute solutions with those objectives in mind. We need to be proactive in introducing new solutions rather than waiting for a customer to make a request. Our customers are relying on their partners to bring them real-time insights and help identify opportunities to improve their supply chain, not just presently but with the future in mind.
Q:
From customers’ point of view, what are some of the top concerns heading into 2018?
OLNEY: For many of our customers, supply chain
transformation is the new normal, and executing on transformational initiatives will be the focus of 2018. For starters, companies are keeping a close eye on the disruption of globalization. Many have expressed concern that global economic growth will continue to be unpredictable, due to factors like Brexit, changing U.S. priorities, and potential shifts in major trade agreements (e.g., NAFTA, TTP and TTIP). Many companies have built their operations based on these agreements, and any disruption could force them to relocate or pay the potentially hefty tariffs. With the news surrounding data breaches and hacking, companies are concerned with security and compliance as they look to transform and digitize their supply chain. Managing these risks has become a top priority for companies, as an attack could jeopardize sensitive information or bring a global operation to a standstill. The awareness of these risks is slowing down the adoption of technology improvements despite the cost and efficiency benefits.
Q:
Nearly every aspect of global supply chains are under continual optimization. Yet, there are still areas that are ripe for transformation. What would you identify as those areas?
OLNEY: One of the significant areas that continue to be ripe for transformation is a company’s distribution network. Many companies today are looking to digitize their supply chains, but they are
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still operating a distribution network that is 20-plus years old. More than likely, their consumer demand has shifted globally over that same period. These companies should look first at reorganizing their operations to meet their current and future needs through the center of gravity and consumer/supplier network studies. The cost savings and productivities gained through this transformation will help better prepare them for the addition of digital supply chain technologies, which in turn helps reduce costs for customers.
Q:
What might be the biggest disruptors (positive or negative) and/or risks on the horizon for global supply chains?
OLNEY: The IoT provides a massive opportunity for logistics as the world becomes more and more connected. This means that selfsteering and even self-driven objects will become smarter. Visibility into the supply chain will also improve greatly and help us identify additional opportunities to improve our customers’ supply chain efficiency. Autonomous logistics is percolating as well, thanks to the fascination with everything from selfdriving trucks and unmanned forklifts to drones in the sky. The use of these technologies, in controlled areas, will eventually shift the need for human capital from the shop floor to behind the scenes, controlling the supply chain through technology. We may potentially see an acceleration of this effort, due to rising labor costs and the continued war for talent. Meanwhile, 3D printing or additive manufacturing, once it becomes financially practical for wider use, will change the 3PL landscape vastly. The force of its impact will depend largely on where one is in the supply chain. For example, it will jeopardize the success of providers that are heavily dependent on transportation as their revenue stream, since the products will be created closer to the points of use. On the other hand, manufacturers will be that they no longer need to hold large inventories, which in turn will shift their allocation of resources to other strategic investments. For more information:
neovialogistics.com SDCExec.com | December 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE
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WORK HARD, By Amy Wunderlin
Life in the FAST LANE
T
hroughout his long (and successful) supply chain career, Geoffrey Finlay has worn many hats— each of which gave him the experience, drive and know-how to turn a passion into a profitable business. As non-executive director of Logistyx Technologies and strategic advisor to Volvo Group, Finlay also founded Evo 2 Motorsport in 1985, a business focused on creating performance and styling enhancements for race cars. “It’s a real business. It’s more than just a hobby that I’m very passionate about,” Finlay explains. “I’ve used my tenure at companies like General Electric, Kewill and JDA Software that incorporated all areas of the supply chain to really help develop, not only the cars we drive, but also my career.” Initially self-funded, Evo 2 has quickly grown profitable with success on both the motorsport side of the business and in the customization of unique cars for high-profile customers. The company is committed to three key brands: BMW, Porsche and Ferrari.
44
A FAMILY TRADITION Finlay has been a car fanatic his entire life. There is not a picture of his childhood where he’s not sitting atop of somebody’s car or where a toy car is not tucked under his arm. This affinity for motorsports stems from his grandfather who raced regularly between the two World Wars. It was also a time
Geoffrey Finlay combines two unlikely passions: supply chain & cars. when racing was highly dangerous with few safety measures. “(Racing) was really nothing like it is today. They took huge risks and raced at high speed on tracks that would be unrecognizable as raceways today. It was hard to believe that these cars were doing 130 to 140 miles per hour,” he explains. “We think that sounds fast today, but they were racing at those speeds in the 1930s. “I remember listening to some of my grandfather’s tales. The stories he would tell were just extraordinary. Despite being only five or six years’ old at the time, it was then that I became a car fanatic. There’s no questioning that,” he adds. At age 17, Finlay took his love for cars to the next level,
entering the sport of racing himself. And when the chance to enter the world of motorsports opened itself professionally, he jumped at the opportunity. “I really got into developing Evo 2 after the success of other businesses I was involved in. I had some equity to spend on nice cars, and I really wanted to be competitive in the market [not only behind the wheel, but in] running a business,” Finlay says. “I felt that I could do something different by turning a hobby into a business.”
THE THRILL OF COMPETITION In the motorsport world, many participants are entrepreneurs like Finlay. While the coincidence is partly due to the expensive nature of the sport, it’s also attributed to the overall spirit of motorsports. “What I’ve found in the motorsport world, is that we’re (made up of ) a very large number of entrepreneurs. There are a lot of corporate guys who run big businesses and make a lot of money, but the guys that I come across who are exceptionally quick and committed to the business are all entrepreneurs. “It’s a theme that repeats itself in the motorsport world,” Finlay adds. “Those who compete in a less professional arena—the talented amateurs if you’d like—the overwhelming majority of them are entrepreneurial in spirit. And maybe it’s that kind of spirit we need to go out and race.”
SUPPLY & DEMAND CHAIN EXECUTIVE | December 2017 | SDCExec.com
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