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SPECIAL REPORT: IOT SECURITY PRODUCT MARKET RIPE FOR EXPANSION Global Supply Chain Solutions Covering Procurement, Risk, Blockchain, the IoT and More

MAY 2018

WAREHOUSES ADAPT

Rethinking automation to handle bigger and bulkier items

How mobile technology can BOOST SMART MANUFACTURING

Innovation in the age of

INDUSTRY

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September 26

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Executive Outlook for Supply Chain 2019 _________________ SDCE’s annual Executive Outlook educational webinar brings together industry executives for a roundtable discussion of the top-level trends and developments taking shape in the supply chain sector and what that means for the year ahead.

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Dates are subject to change.

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May 2018 | Volume 19 | Issue 2

CONTENTS FEATURES

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10 Innovation in the Age of Industry 4.0

From the internet of things to AI, technology will continue to disrupt the supply chain.

24 E-commerce Warehouses Adapt

Items that consumers purchase online are becoming bigger and bulkier, forcing managers to rethink automation.

SPECIAL REPORTS

 Adoption Is King

Organizations must continue to increase adoption across all spend categories to fully realize their ROI.

36

30 THE INTERNET OF THINGS  IoT Security Products Ripe for Expansion

28 34

New research by Future Market Insights projects growth at a staggering 14.9 percent.

32 BLOCKCHAIN

 Collaboration Key to BiTA

Key players hope to influence the development of a standard industry framework.

SDCEXEC.COM

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 Why Drones Could be the Answer The consumer demand for products is faster than ever with retailers scrambling for new delivery solutions.

36 WAREHOUSING

 The Human Side of the Autonomous Warehouse Stay focused on safety and applying staff to more value-added work.

 Smart Manufacturing Gets a Boost

Advancements in mobile technology help make the entire manufacturing process smart.

44 PROFESSIONAL DEVELOPMENT  Training or Development?

A development approach focused on long-term mentoring and measurable goals provides the best results.

COLUMNS

06 EXECUTIVE MEMO 08 CHAIN REACTIONS 20 MADE IN AMERICA 46 WORK HARD, PLAY HARD

Exclusive online features and solutions for successful supply chain operations

Servitization: Where Service is the New Product www.sdcexec.com/21002057

34 T RANSPORTATION

40 SOFTWARE & TECH

28 PROCUREMENT

24

EXECUTIVE FOCUS

Best Practices for Pitching Sustainable Technology www.sdcexec.com/21001969

Improving Business Intelligence to Capitalize on Consumer Changes www.sdcexec.com/21001973

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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EXECUTIVE MEMO By John R. Yuva, Editor jyuva@ACBusinessMedia.com

WHERE ARE YOU ON THE The digital supply chain is here. Are you embracing these digital innovations or waiting to be changed by it?

W

elcome to the May issue of Supply & Demand Chain Executive. We have a packed issue, including a special section focusing on Industry 4.0. However, before we dive into that content, I’d like to direct your attention to page 8, which features our new column in the magazine—Chain Reactions: News From Across the Digital Supply Chain. This new column brings you the latest news from the world of Internet of Things (IoT), blockchain, automation, machine learning and other evolving digital innovations impacting supply chains. This month’s Chain Reactions column reveals a computer developed by IBM that’s smaller than salt and Amazon’s influence of automation in retail stores, among other briefs. Each month we’ll cover trends in the digital supply chain to inform you on what companies are doing in this arena. Beginning on page 10, we have our special section on Industry 4.0. Referred to as the fourth industrial revolution, most companies regardless of industry sector are impacted by the age of Industry 4.0. Whether it’s doing business in the cloud, implementing automation or deploying IoT within their operations, companies will either embrace these technology innovations are be changed by them. In its 2018 Global Digital Operations Study, PwC surveyed 1,100 executives at global manufacturing companies about their views of Industry 4.0. One 6

of several best practices cited was the “implementation of new technologies to connect and collaborate along the endto-end value chain.” According to PwC’s study, “The key to success for digital champions is a holistic approach in connecting essential technologies across the organization and with strategic partners instead of isolated implementations. Digital champions expect to achieve significant gains in cost savings and efficiency from technology implementations, with 16 percent cost savings in the next five years, versus 10 percent for digital novices.” While PwC’s study is focused on manufacturing, the services sector is using Industry 4.0 technologies for their own supply chain innovations. UPS’ chief information and engineering officer Juan Perez, says, “I would make the argument that each and every one of you, no matter the company, work in a technology company—it is the business we are in, especially as it relates to supply chain management. It has become a truly technology-labeled business.” There is one important aspect not to overlook in the world of Industry 4.0—people. Technology is critical, but it takes people to deploy these systems appropriately and to evaluate the data that’s generated. Happy reading!

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.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 WEB AND COPY EDITOR Mackenna Moralez CONTRIBUTING EDITOR Barry Hochfelder SENIOR PRODUCTION MANAGER Cindy Rusch ART DIRECTOR Kayla Brown AUDIENCE DEVELOPMENT DIRECTOR Wendy Chady AUDIENCE DEVELOPMENT MANAGER Angela Franks ADVERTISING SALES (800) 538-5544 JOLENE GULLEY, jgulley@ACBusinessMedia.com SHEILA SPINCK, sspinck@ACBusinessMedia.com EDITORIAL ADVISORY BOARD LORA CECERE, Founder and CEO, Supply Chain Insights TIM FEEMSTER, President, Foremost Quality Logistics JOHN M. HILL, Director, St. Onge Company, and Board of Governors, Material Handling Industry of America RORY KING, Analytic and Big Data Advisor, SAS Institute KAREN MASTER, Vice President of Communications, SAP Ariba WILLIAM L. MICHELS, CEO, Aripart Consulting JULIE MURPHREE, Founding Editor, Supply & Demand Chain Executive ANDREW K. REESE, Senior Portfolio Marketing Manager, IHS, and Former Editor, Supply & Demand Chain Executive BOB RUDZKI, President, Greybeard Advisors CHRIS SAWCHUK, Global Managing Director and Procurement Advisory Practice Leader, The Hackett Group RAJ SHARMA, CEO, Censeo Consulting Group KATE VITASEK, Founder, Supply Chain Visions CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (847) 291-4816 Email: circ.sdcexec@omeda.com LIST RENTAL Jeff Moriarty, Infogroup (518) 339-4511 Email: jeff.moriarty@infogroup.com REPRINT SERVICES JOLENE GULLEY, jgulley@ACBusinessMedia.com AC BUSINESS MEDIA INC. CHAIRMAN Anil Narang PRESIDENT AND CEO Carl Wistreich CFO JoAnn Breuchel DIGITAL OPERATIONS MANAGER Nick Raether DIGITAL SALES MANAGER Monique Terrazas Published and copyrighted 2018 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Supply & Demand Chain Executive [USPS #024-012 and ISSN 1548-3142 (print) and ISSN 1948-5654 (online)] is published five times a year: March, May, June, September and December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. POSTMASTER: Please send all changes of address to Supply & Demand Chain Executive, P.O. Box 3605, Northbrook, IL 60065-3605. Printed in the USA. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the United States, Canada and Mexico to qualified individuals. Publisher reserves right to reject nonqualified subscribers. One-year subscription to nonqualified individuals: U.S., $30; Canada and Mexico, $50; and $75 for all other countries (payable in U.S. funds, drawn from U.S. bank). Single copies available (prepaid only) for $10 each. Return undeliverable Canadian addresses to: Supply & Demand Chain Executive, P.O. Box 25542, London, ON N6C 6B2. The information presented in this edition of Supply & Demand Chain Executive is believed to be a­ccurate. The ­publisher cannot assume responsibility for the validity of claims or ­performances of items appearing in editorial presentations or advertisements in the publication. May 2018 / Volume 19 / Issue 2

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CHAIN REACTIONS

NEWS FROM ACROSS THE DIGITAL SUPPLY CHAIN

UBER STARTS A REWARDS PROGRAM FOR TRUCKERS Uber is launching a rewards program for its trucking app Uber Freight. Currently, the app allows truckers to easily book loads. The rewards program, Uber Freight Plus, offers truckers discounts and opportunities depending on how much they drive with the service. If drivers haul one load per month with Uber Freight, they’ll be eligible for an Uber Freight “fuel card.” Truckers will be able to use the card to save 20 cents per gallon off the retail price of gas at TA/Petro truck stops. Members will also be able to use the card to save up to 30 percent on Goodyear tires. When an Uber Freight driver hauls 10 loads, they’ll be eligible for up to $16,000 off new truck purchases from Navistar or up to a $4,000 rebate on used trucks from the company’s international brand. Uber Freight Plus is the latest push to tempt existing drivers to try out the service. In the middle of the driver shortage, the app is also encouraging new users to sign up.

IBM CREATES COMPUTER SMALLER THAN SALT On the first day of IBM Think 2018, the company unveiled the “world’s smallest computer.” The computer is comparable to a grain of salt in size and has a similar computing power to IBM’s x86 chip from the 1990s. It will cost less than 10 cents to operate and will pack thousands of transitors to monitor, analyze, communicate and act on data. The small computer will specifically be a data source for blockchain applications. It’ll help track the shipment of goods and detect theft and fraud. IBM researchers are currently testing the computer’s first prototype. It is unknown when it will be released to the public.

ZARA TO UTILIZE ROBOTS TO SPEED UP ONLINE ORDER PICKUP Zara is turning to robots to help improve their “click and collect” service. The fashion retailer will utilize robots to fetch items from the back of the house to help speed up the in-store pickup process. Customers who have placed online orders can enter or scan a code, and robots will search for the order and bring it to a dropbox where the customer can then pick up their order. One-third of Zara’s online orders are already picked up in store. The increasing demand has created long lines while employees manually search for orders. While Zara continues to experiment with robots, it will also be opening up a digitally enhanced store in a U.K. mall. All merchandise in the store will only be available for online orders. Employees will use mobile devices to help customers shop, and customers will use a bluetooth credit card terminal to pay for their items.

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IOT HELPS THE TRANSPORT AND LOGISTICS SECTOR LOWER ITS CARBON FOOTPRINT The Internet of Things (IoT) will play a pivotal role in enabling the transport and logistics sector to reduce its carbon footprint, according to Inmarsat research. The research, conducted by Vanson Bourne for The Future of IoT in Enterprise report, collected responses from 100 large global transportation companies and found that 44 percent of companies are prioritizing environmental monitoring as a key area for IoT deployment.

44%

Companies are prioritizing environmental monitoring as a key area for IoT deployment. Moreover, 15 percent stated they had increased their environmental sustainability as a direct result of their IoT deployments, and a further 65 percent expected to do so in the future, highlighting the effectiveness of the technology in this area.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | SDCExec.com

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GOOGLE LOOKS TOWARD BLOCKCHAIN FOR CLOUD Google is looking toward blockchain technology to work with its various online services. The company is currently working on creating its own digital ledger that could be used internally. The ledger could also potentially be used by third-parties to verify and post transactions. Google is already planning on creating a white label version that other companies can use on their own servers. Google has not released an official statement yet.

Delta to Offer Real-Time Bluetooth Tracking on Container Shipments

ROBOTS TAKE ON TOUGHEST CHALLENGE YET: IKEA FURNITURE

Delta will become the first U.S. passenger airline to provide real-time tracking for unit load devices (ULDs).

Putting together IKEA furniture—a task many don’t look forward to and have given up on—has met its unlikely match, and it just happens to be a robot in Singapore. Scientists at Nanyang Technological University spent three years programming a robot made of arms, grippers, sensors and 3D cameras to assemble the frame of an IKEA dining chair in 20 minutes. The scientists told Reuters it is only a matter of time before robots can fully assemble furniture from a manual, verbal instruction or looking at a photo of the finished item. Singapore has been advising businesses to invest in automation to boost productivity and help monitor labor expenses.

This move marks a new era for Delta Cargo and the more than 500 million kilograms of cargo it flies annually. The technology will replace manual tracking for all shipping containers, called ULDs, which move cargo shipments, baggage and mail globally. When implemented, the new tracking system will also enable Delta to produce electronic unit control receipts, which is required by the International Air Transport Association when ULDs are transferred between parties, making Delta the first airline to offer a fully automated solution for customer transactions.

Arizona Signs Latest Blockchain Bill into Law Following in Delaware’s footsteps, Arizona has passed a law that will allow Arizona corporations to now hold and share data on a blockchain. The bill introduced by Rep. Jeff Weninger amends the Arizona Revised Statutes to recognize data written and stored on systems using technology. The Arizona House passed the bill within eight days of its introduction, with the senate following suit a month later. Last year Arizona began recognizing signatures recorded on blockchain and smart contracts as legal documentation. The law allows signatures to qualify as legal electronic signatures, meaning individuals can sign records or contracts on a blockchain.

AMAZON TRIGGERS RACE TO AUTOMATE RETAIL STORES

A global race to automate stores is underway among several of the world’s top retailers and small tech startups, reports The New York Times. Motivated not only by Amazon’s recent experiment into brick-and-mortar, they are also hoping to shave labor costs and minimize shoppers’ frustrations, like waiting for cashiers. Amazon Go, the e-commerce giant’s experimental convenience store in downtown Seattle, has replaced cashiers

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with sensors and artificial intelligence. Companies are also testing robots that help keep shelves stocked, as well as apps that let shoppers ring up items with a smartphone. High-tech systems like the one used by Amazon Go completely automate the checkout process. China, which has its own ambitious e-commerce companies, is emerging as an especially fertile place for these retail experiments.

SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE

By Amy Wunderlin

Innovation in the Age of Companies must disrupt themselves or be disrupted in today’s ever-evolving supply chain. Supply & Demand Chain Executive explores the companies, technologies and innovation making this possible.

T BUSINESSES MUST STAY ON THEIR TOES TO KEEP PACE WITH WHAT’S AHEAD, ANTICIPATING TOMORROW’S SUPPLY CHAIN CHALLENGES TODAY.

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he speed at which technology evolves throughout the supply chain makes its challenging to remember a time before the fourth industrial revolution—a time when a cloud was in the sky, and the internet was accessed through your phone line. Today, however, everything from the warehouse to the truck to the end consumer is connected. Businesses must stay on their toes to keep pace with what’s ahead, anticipating tomorrow’s supply chain challenges today. During a keynote address at MODEX in Atlanta last month, UPS’ chief information and engineering officer Juan Perez explained how the logistics powerhouse has remained competitive in the age of Industry 4.0. Continuing to innovate in the areas of technology and engineering has allowed UPS to disrupt itself and evolve their business from a small package delivery company to a technology company. “You know UPS by the friendly driver in the brown truck who is making deliveries in neighborhoods around the world. UPS today, now more than ever before, however, has become a technology company,” says Perez. “I would make the argument that each and every one of you, no matter the company, work in a technology company—it is the business we are in, especially

as it relates to supply chain management. It has become a truly technology-labeled business.” For UPS, its self-disruption stems from three innovative initiators: enhanced mobility, consumer demand and evolving technologies.

ENHANCED MOBILITY Over the last 20-plus years, enhanced mobility has had maybe the greatest impact on the logistics provider. Fortunately, Perez says UPS saw how mobility would change the way they do business way back in 1990 when it introduced its first mobile scanner. Perez used that device in his first job out of college as a UPS driver in Beverly Hills, California. When he first started the job, he recorded all of his packages manually on paper. “I became the first driver using that big, old handheld device. Look, it was clunky, it was big, it actually worked really well to keep dogs away; however, it truly transformed the way we did business back in 1990,” Perez recalls. Drivers no longer had to carry paper logs or manage their time cards on paper, and no longer did UPS have to enter all of this information over again so that they could provide it to their customers. The evolution of UPS’ mobile scanner has transformed the way they do business.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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“We saw at this point that mobility was going to change the way we do business, and we started evolving our technology,” Perez adds. UPS is now working on its sixth generation of the device, which will be available in 2028. Perez says it is going to truly transform both the driver as well as the customer experience. “We’ve all heard about the fourth industrial revolution. We know that today consumers are more connected than ever before; in fact, 5 billion of those consumers through mobility have access to information and capabilities we could only dream of 10 years ago,” notes Perez. “UPS has been impacted by that change, and today, all of the work we are doing in IT and all of the work we are doing in engineering is actually driving us to take advantage of those technologies not only to satisfy our customers’ needs but to also enhance the way that we do business within the company.”

customize their delivery options. Members can decide how, where and when home deliveries occur to fit their schedule; get estimated arrival and progress alerts; sign for a package in advance; set vacation holds, change a delivery address or hold at a UPS location; and more. “UPS My Choice allows our consumers to have that convenience, that choice and that control,” says Perez. “You must think about your consumers as the ones who define the experience and continue to innovate and create solutions and ideas that will help you remain relevant.” Today nearly 40 million consumers are connected through UPS My Choice.

EVOLVING TECHNOLOGIES

Partnerships with innovative technology companies is one key to UPS’ growth, aligning themselves with innovators who support things they view will be critical to their success in the future. “As you innovate, as you think about the future, as you continue to disrupt yourself, you can’t do it alone; INDUSTRY 1.0 INDUSTRY 2.0 INDUSTRY 3.0 INDUSTRY 4.0 Mechanization, steam, Mass production, Automation, Cyber Physical you need to work with power, weaving loom assembly line, computers, Systems, internet of others,” adds Perez. electrical energy and electronics things, networks When it comes to THE CONNECTED CONSUMER innovation, Perez also suggests considering: It’s not enough to have the technology on the ❯❯ Information security back-end. Today’s consumers are demanding access ❯❯ Securing the right talent, with the right skills to delivery information in a way we’ve never seen and capabilities to support your needs before. In the same way they check their email, ❯❯ Investing in technologies that support your connect with friends and purchase items, they also customers want convenient access to delivery information. “If a company like UPS needs to continue to “Flexible shoppers, global consumers—they disrupt itself, how are you and your companies all want to be able to go from one channel to the disrupting yourself ?” asks Perez. “How do you bring next. They want that experience, regardless of innovation to the table continuously so that you the channel, to be seamless, to be effective, to be can remain competitive? We have to innovate time productive,” explains Perez. “We have to make sure and time again so that we can remain relevant in a that the technology is easy to use, pleasant to use space that is continuing to change.” and it’s efficient to use. It’s no longer just worrying From the Internet of Things to artificial about the shippers, but it’s also making sure that intelligence, there certainly will be no shortage of the receiver experience as is as great an experience innovation in the years to come. On the following as it can be.” pages, we look at some of the technologies that will To support this, UPS introduced UPS My continue to disrupt the supply chain in the age of Choice, a mobile app that allows customers to Industry 4.0.

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IT’S NOT ENOUGH TO HAVE THE TECHNOLOGY ON THE BACK-END. TODAY’S CONSUMERS ARE DEMANDING ACCESS TO DELIVERY INFORMATION IN A WAY WE’VE NEVER SEEN BEFORE.

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE

By Maciej Kranz

The Internet of Things As pressures rise throughout the supply chain, the IoT has become a critical component in helping logistics companies meet the demands of today’s fast-paced, global economy.

T

he Internet of Things (IoT) is revolutionizing the logistics industry. By connecting nearly everything from parcels to people, the IoT is enabling supply chain and logistics companies to track and trace freight in real time, make data-driven decisions that improve operational efficiency, perform predictive maintenance on assets and infrastructure, and much more. In fact, industry experts estimate the IoT will drive more than $1.9

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trillion in value within supply chain and logistics by 2020. This value comes, in part, from the way the IoT helps converge information technology (IT) with operational technology (OT). By deploying IoT-enabled sensors and advanced analytics, supply chain and logistics companies can gain real-time visibility into operations and insights on how to make improvements. For example, global shipping line Maersk manages its far-flung collection of

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processed 8.9 million TEU in 2016, and expects shipping containers with sensors that monitor the that figure to double by 2025. Yet, because the port location of containers and whether they are full is located near downtown Hamburg, it cannot or empty, enabling the company to route them expand beyond its current footprint. As a result, efficiently to where they will be needed next. The HPA needed to become more efficient within its system also tracks temperature, C02 and oxygen existing boundaries. levels inside refrigerated Using IoT technologies containers to maintain More than 90 percent of and sensors, HPA the integrity of the world trade is carried by the was able to create a contents and make the delivery and check-out international shipping industry, more intelligent and automated harbor process faster. This IoTwith more than 50,000 merchant operation to improve enabled strategy has so traffic flow and move far saved the company ships trading internationally freight in and out more $100 million. quickly. Given Maersk’s in more than 150 nations. success, it is easy to A UNIFIED NETWORK PLATFORM see why the shipping industry and ports stand For HPA, the first step in achieving its goal to gain the most benefit from IoT technologies. was to integrate its separate networks into a More than 90 percent of world trade is carried by the international shipping industry, with more single, unified platform. Previously, the port than 50,000 merchant ships trading internationally in more than 150 nations. And due to the intermodal nature of ports, they pose one of the biggest IoT opportunities in the supply chain with the potential to connect data and operations from interdependent modes of transportation (shipping, rail and truck). Ports, however, especially those located in dense cities, struggle to meet today’s growing logistics demands. Not only is shipping traffic growing, ports also face an increasing number of cybersecurity threats, mandates to reduce carbon emissions and pressure to improve worker safety. Fortunately, IoT technologies are enabling modern solutions to many of the industry’s perennial problems. Take for example the Hamburg Port Authority (HPA) in Germany. HPA is the largest port in Germany and the 14th largest in the world. Tenthousand ships enter it each year, and 83 rail transport companies operate at www.primerevenue.com the port. More than 132 million tons of freight travel through HPA annually and use is growing fast—the port

Learn how supply chain finance helps procurement negotiations.

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FEATURE was using four separate network systems for its logistical operations. A stand-alone radar system communicated with and tracked ships; another network managed train traffic. Meanwhile, a third network supported telephone communications, and a fourth supported the port’s IT platform. These non-consolidated infrastructures created communications problems among HPA’s 1,800 employees and hindered overall efficiency. HPA worked with Cisco to bring all these together onto a single platform, which it dubbed HPAnet. Wired and wireless networks With data-driven were converged into one physical infrastructure. An enterprise insights, the switching platform paired with guesswork has been wireless controllers and security routers formed the hardware removed, and port foundation for the new network, unified communications managers are able while manager software brought voice, to make decisions video and teleconferencing capabilities to HPA personnel that ensure the least through their mobile phones. disruption to traffic. With a port-wide wireless network and the new mobile technologies, HAP personnel no longer have to meet in a central location to collaborate with a colleague. Instead, they can be where they are most needed, and the network, in a sense, comes to them. For enhanced security, the communications manager is also paired with adaptive security appliance firewall software that supports cryptographic algorithms and encryption standards.

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The firewall integrates with a cloud-based web security solution to provide web-based threat protection.

OPERATIONAL EFFICIENCY AND REDUCED TRAFFIC CONGESTION HPA’s unified network platform not only serves as the foundation for more fluid communications across port employees and with outside clients; it also serves as the foundation for an upgraded traffic management system. HPA installed 300 roadway sensors to monitor traffic across major roadways in the port area to help them more efficiently orchestrate the movement of ships, railcars and trucks. For example, as container ships approach, port managers must raise truck or railcar bridges to allow the ship to dock. In the past, knowing how to optimally route the ship for the least disturbance to rail or truck traffic in the port involved some guesswork. Today, it’s a different story. Through integration with ship radar, HPAnet alerts port managers that a container ship is approaching. The roadside sensors monitor traffic flow on the roads and railways, sending real-time data to the Port Road Management Center. Advanced analytics provide port managers visibility into traffic speed, congestion, the number of vehicles crossing over a bridge, the volume of traffic on major roads crossing the port and more.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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With data-driven insights, the guesswork has been removed, and port managers are able to make decisions that ensure the least disruption to traffic. HPA also installed large digital billboards along roads to communicate with drivers about delays and traffic patterns. Additional sensors provide parking information to drivers via mobile applications that take advantage of GPS-enabled location data. This system has reduced the time drivers spend on the roads looking for parking. With trucks making an average of 40,000 trips across the port each day, reducing traffic congestion or the amount of time engines spend idling helps significantly cut carbon emissions. Sensors on other assets such as cranes and pallet loaders allow HPA port managers to see in a simple interface which assets are available and where they are located. This helps them further optimize efficiency by speeding freight turnover and moving cargo in and out faster. Sensor data also give HPA insights into longterm usage patterns on the roads, bridges and other infrastructure. Using this data, HPA can monitor the health of assets and infrastructure and conduct preventative maintenance to avoid costly downtime. In fact, in logistics, real-time analytics on asset health and the ability to schedule

preventative maintenance is one of the fastest ways to achieve ROI on an IoT initiative. The reduction in operational disruption can virtually pay for the IoT investment.

IOT-ENABLED RESULTS

The company was able to reduce the number of network management components it must maintain from 400 to 200, and by using server virtualization, the entire port now runs on 48 servers rather than the 242 it used previously.

By integrating multiple, siloed networks into one unified platform and deploying IoT-enabled sensors and technologies, HPA has not only simplified network management and streamlined operations, but also reduced operational expenses. HPA staff now have real-time visibility into the movement of vehicles and the status of shipments in a single interface, and they can access this information across the entire port. The company was able to reduce the number of network management components it must maintain from 400 to 200, and by using server virtualization, the entire port now runs on 48 servers rather than the 242 it used previously. As a result, operational costs are being reduced even while HPA’s operational capacity is growing. Operational costs are expected to be reduced 70 percent over the next five years, and the port is on track to double the number of shipping containers (TEUs) it handles by 2025. The transformational potential for the IoT in logistics and supply chain is undeniable. HPA serves as just one example for what is possible. The real-time visibility and data-driven insights provided by IoT-connected sensors and systems enable companies to increase efficiency, reduce operational costs, perform predictive maintenance to prevent downtime, and even cut energy consumption or minimize negative environmental impacts. With the increasing pressure within the logistics industry to meet two-day, overnight or even same-day service commitments, the IoT is a critical component in helping companies meet the demands of today’s fast-paced, global economy. ABOUT THE AUTHOR MACIEJ KRANZ is the vice president of strategic innovations at Cisco Systems.

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FEATURE

By Roy Thomas

THE DIGITAL CHESS MATCH:

AI’S EFFECTS ON FACTORY FLOOR DECISIONMAKING Machine learning has already enabled factory managers to think one move ahead, but tomorrow’s developments could help us predict two or even three moves into the future.

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sk any factory manager their thoughts on the most important tech advancement of the last two decades, and you’re likely to get a similar answer: data capture. Moving processes away from error-prone pencil-and-paper recordkeeping immediately increases shop floor visibility and efficiency. Managers no longer need to manually track machine and labor productivity; they can interpret the information and adjust processes based on their findings. While basic data capture had a major impact on factory processes when it was introduced, it still suffered from a significant flaw: it couldn’t keep up with the speed at which managers must interpret, absorb and then make decisions. If an important asset is days away from malfunctioning, 16

that information must be readily available to the manager rather than buried in data. Industry 4.0, driven by machine learning and artificial intelligence (AI), has made strides in minimizing this delay in decision-making. To demonstrate the impact of Industry 4.0 on shop floor processes, think of AI in the factory as a chess match. You’re the player, inefficiencies are your opponent and productivity is checkmate. With traditional data capture software, you’re only empowered to think about your next move. You have information about the factory floor’s current status and nothing more. Today’s machine learning has already enabled factory managers to think one move ahead. Tomorrow’s developments, and ultimately the endgame for AI in the factory, could help us

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think two or even three moves ahead. Let’s take a deeper dive into the current state of factory AI, the developments we’re likely to see in the next 1-2 years, and what AI innovators hope the technology will be able to achieve in the not-too-distant future.

context of your factory’s normal operations and your team determines how to address potential pain points. As long as humans are required to intervene in the solution of these common factory issues, however, we won’t attain a truly automated shop floor. The next step beyond simple data Tomorrow’s TODAY’S MACHINE LEARNING: ONE capture is recognizing patterns technology needs MOVE AHEAD to drive workflow. within that data without human Specifically, it needs The next step beyond simple data capture is determine whether aid—and machine learning has to recognizing patterns countermeasures for within that data without common malfunctions already achieved this step. human aid—and are in place. For machine learning has already achieved this step. example, machine sensors might recognize that a This rapid development is thanks in part to the specific set of vibrations signal a motor is reaching Internet of Things (IoT). Whereas 5-10 years ago end-of-life. The factory manager wouldn’t have to installing equipment to detect process anomalies interpret data to address it. Rather, these vibrations would be expensive and time consuming, it’s now would trigger a search for another motor in stock. relatively simple and affordable to feed 100 sensors into your manufacturing execution system. These sensors “learn” your machinery’s normal state. Working together, sensors can detect patterns— such as those within vibrations—that deviate from this normal state and alert the maintenance crews and managers. Sensor technology empowers us to stay one step ahead of inefficiency. Rather than dealing eJournal Collection with malfunctioning equipment after it’s already affecting productivity, we now have “leading information,” or hints that something will go wrong soon. Managers then interpret this data and make adjustments with minimal effect on regular factory operations. Still, today’s machine learning technology has its limits. Although it can sense coming malfunctions, it doesn’t recognize these signals as problems. Human operators must still add context to the data. In other words, you have an idea of how your A leading publisher in applied business research, our opponent’s next move might play out, but you’ll Operations, Logistics & Quality eJournal Collection is have to know your opponent well to counter it. indispensable to both researchers and practitioners. The next developments in machine learning will Our journals include Supply Chain Management, prepare you to counter your opponent’s next move. International Journal of Physical Distribution & Logistics

Operations, Logistics & Quality

TOMORROW’S MACHINE LEARNING: TWO MOVES AHEAD Current IoT technology drives business and logic—it collects the data, you examine it in the

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Management, and Journal of Global Operations and Strategic Sourcing.

Browse research at emeraldinsight.com www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE Thinking About the Dangers of Industry 4.0 By Lara L. Sowinski We often talk about transformative technologies in a positive light—and with good reason. Blockchain, the IoT, AI and machine learning hold tremendous promise for supply chains. Yet, the ethical concerns about Industry 4.0 need to be part of the conversation, too. Klaus Schwab, founder of the World Economic Forum, notes that because the speed, scale and scope of change underway today is so fast, “entrepreneurs, companies and policymakers are already creating rules, norms, techniques and infrastructure around new technologies.” The result, he says, is that in 10 years it will be too late to “shift mindsets” in order to address the challenges associated with Industry 4.0. For starters, Schwab says that, “our understanding of previous industrial revolutions is that while they create huge wealth and opportunity, they also create significant harm. Many people miss out on the benefits entirely, and it is most often those populations with the least voice or power who bear the negative consequences.” Others warn of criminal misuse of transformative technologies, such as “adversarial AI,” in which researchers with expertise in AI systems try to deceive other AI systems into making incorrect classifications or decisions. Nitin Dahad of EE Times says that image recognition systems are one of the most susceptible to these kinds of attacks. “Examples include making cars crash using false images to trick the car into stopping suddenly, or triggering the firing of autonomous weapons.” Dahad concludes that while technology is “pushing the boundaries of what is possible, society will in the end decide how much of that technology takes its place in real-world applications.” Schwab has a similar take. He says Industry 4.0 will require a new type of leadership, called “systems leadership.” Systems leadership “doesn’t just mean leading on the design of the technologies themselves, but also acting as a leader on how they are governed and the values they exhibit in how they affect people from all backgrounds.” In other words, the advent of transformative technologies will not simply create a wholesale displacement of workers and overtake humans when it comes to decision-making, Industry 4.0 will actually require even more thinking on the part of humans, including those engaged in supply chain. Schwab sums it up this way: “Those of us lucky enough to be alive today have a responsibility to future generations to ensure they can live and find meaning in a sustainable, inclusive, technology-driven future.”

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The manager is alerted to the issue, has a clear understanding of the fix and is advised on what steps they should take to address it. We’re not far from a factory driven by this level of machine learning. In fact, we’re already seeing similar applications in the home, with Amazon’s Alexa and Apple’s Siri virtual assistants. The words that the devices hear trigger a reaction, bringing information back to the user. Of course, detecting machine malfunctions is slightly more complicated than checking movie showtimes. Innovators continue to develop and perfect this level of AI in the factory, and it’s not a stretch to say it could be widespread before the decade closes out. Now we’re thinking two moves ahead. We’ve analyzed our opponents’ possible moves, and we know exactly how to counter them. But what about the bigger picture? What if we could analyze not just the pieces currently in play, but also factor in that rook or knight your opponent has yet to touch? That’s machine learning’s endgame.

MACHINE LEARNING’S ENDGAME: THREE MOVES AHEAD When you’re addressing shop floor inefficiencies, you’ll naturally try to correct internal issues first— aging equipment, for instance. These are the most visible issues, and fixing them is usually within your control. However, external forces can have just as great an impact, if not greater, on your productivity. Perhaps it’s the height of flu season, and cases are skyrocketing in a community where many of your employees live. Maybe a hurricane impacted your supplier on the east coast, and you’re left without the materials necessary for production. Even if a disaster doesn’t directly affect your company, you might still feel the ripples. AI innovators are thinking outside the physical factory and developing solutions that impact the entire factory ecosystem—the materials that move in and out of the factory, the employees who come to work each day and the community in which the factory operates. Much more advanced than sensors on the shop floor, these solutions will be integral for day-to-day operations. They’ll track all factors currently affecting factory performance

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and have protocols to minimize lost productivity. If a hurricane is 48 hours from affecting a major supplier, it could shift orders to another provider outside the storm’s path. It will identify areas of the warehouse that could be impacted by mass illness and prepare for a labor shortage. Data points as granular as the current air temperature will be tracked and operations adjusted accordingly. Instead of thinking only about your opponent’s next move and how you’ll respond, you’ve considered all of your opponent’s pieces—even the ones that aren’t immediate threats—and figured out how they’ll play into your next few moves. Advanced AI is no longer science fiction. Although it may not be ready to solve all of your company’s challenges, innovators get closer every day. That’s why it’s critical to consider how you might prepare your factory for rapidly evolving technology.

STRATEGIES FOR CHECKMATE: AIMING FOR MAXIMUM PRODUCTIVITY If you’re still relying on manual data tracking to manage your factory, the thought of switching to automated processes can be daunting. So, where to begin? Consider these three steps: ❯❯ Determine the key variables that affect your operations. Before you invest in a new solution, ensure you understand which variables most affect factory productivity. Spend a day on the shop floor watching employees move through daily activities, and start an open dialogue concerning which tasks prevent them from working efficiently. Then consider how you might overlay those variables with IoT-enabled technology. Different solutions address different pain points, and you’ll want to make sure you understand what issues need to be addressed before you invest.

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❯❯ Identify areas of potential rapid implementation. The longer you wait to address inefficiency, the more it hurts your bottom line. Determine which issues you can fix quickly, and prioritize new technology within those areas. Because IoT sensors are inexpensive and relatively easy to install, implementing new data Instead of thinking collection software is generally a only about your good first investment. However, make sure it aligns with your opponent’s next specific pain points. move and how you’ll ❯❯ Integrate your technology into algorithms. AI requires an respond, you’ve understanding of your processes considered all of your before it can actively improve your factory. Determine how best opponent’s pieces— your IoT-enabled technology can be programmed into algorithms even the ones that to address common problems as aren’t immediate they arise—and plan for slight variations on your pain points. threats—and figured Your solution must be able to out how they’ll play recognize that two different vibrations could mean the same into your next few issue with your machinery. moves. One final piece of advice concerning implementation: avoid installing a solution on servers in-house. The equipment is costly, and you won’t have the power to quickly analyze sensor data. Instead, consider investing in a cloudbased AI solution. They’re much more powerful, able to turn around data analysis rapidly, and don’t require substantial upfront investments or lengthy implementations.

IT’S YOUR MOVE Addressing problems as they arise is no longer a sustainable business model. There are too many demands on the factory to allow for downtime. If you’d like to stay one step ahead of your pain points, or if you’d like to lay the foundation for an AI overhaul down the road, you’ll need to invest in today’s technology and empower your employees to work at maximum productivity. Only then will you be able to declare checkmate on inefficiency. ABOUT THE AUTHOR ROY THOMAS is the general manager of Aptean MES.

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MADE IN AMERICA By Amy Wunderlin

AGAINST

THE GRAIN

Mennel Milling adapts to a changing industry as it continues a long tradition in flour production.

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lour milling is an American tradition that seems to have stood the test of time. As one of the oldest flour mills in the country, The Mennel Milling Company, headquartered in Fostoria, Ohio, has seen a lot of change. But one thing has remained consistent—family ownership. D. Ford Mennel, CEO of the company, represents the fifth generation of the milling company, which was started in 1886. Today, Mennel operates six flour mills, 10 country grain elevators, two trucking companies, a bakery mix facility, a popcorn facility and several other service-centered businesses. Its mills, located throughout Ohio, Michigan, Illinois and Virginia, produce hard, spring and soft wheat flours. All told, the company produces more than 200 different types of flour per day, with over 2,000 products in the Mennel Milling catalog. Over the years, Mennel has continued to innovate and adapt to the changing industry and consumer preferences as demonstrated by their investment in research and development. One of their largest areas of focus has been on transportation. Internally, Mennel’s systems were very good at tracking costs of milling flour and production, but they didn’t have the same tool on the transportation side. 20

“We’re more than just one piece because you are looking at grain merchandising, you’re looking at production whether it be flour milling or the bakery mix products, there’s lots of different pieces. And one of the things we realized is we didn’t have as good of visibility on the financial breakdowns of running the trucking side (of our business),” explains Jeremy Decker, transportation safety manager at Mennel Milling.

“We identified that need, and said, ‘OK, we’ve got to put something in place that gives us better visibility so we can examine these lanes and do more of these traditional transportation cost models.” Trucking is just one area of service that has led to Mennel Milling’s success. The 132-year-old company also operates six flour mills, 10 country grain elevators, a bakery mix facility and a popcorn facility.

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Since implementing a BOLT paid for—plus, it wasn’t flexible for our their safety equipment. system, Decker says Mennel has a needs. BOLT System has been far less The company was an early adopter better understanding of where its costs complex. It’s tailored for our needs, and of disc brakes and collision mitigation are. “It allows us to look at each lane it saves us time and money.” systems, as well as electronic logs, as an individual entity and determine The company pays its drivers in which Decker says they implemented whether our pricing models are good, segments, with information easily in 2006, “way before anyone told us we bad or just where they need to be,” plugged into the company’s electronic had to.” he adds. There are a lot of moving parts with our structure, and BOLT To handle deliveries, the eliminates extra paperwork and tracking on our end. And, our company has a fleet of more than 70 drivers like it too. They see everything, and pay is transparent. tractors. Mennel Plus, they save time every week too; they no longer typically grosses out at 80,000 pounds have to manually record all of their time.” and deliveries are —JEREMY DECKER, MENNEL MILLING normally single shipments to one customer, like a logging device (ELD). In addition, The bakery or mixing plant. “We primarily geo-fencing at mills and customer transportation cover the eastern half of the U.S., and locations allows for faster input. Pay safety manager some of our trucks will make two to can be broken out per mile, on longer adds: “We’ve three runs per day,” says Decker. “We trips, for example, or it can have a flat always been more do have longer runs though, which load rate. Plus, loading can have a pay on the leading edge of will take the truck 500 or more miles structure, which can include a self-load those safety technologies, not only for outside one of our mills.” fee at the mill. What’s more, the time the protection of our assets but for the Thus, routing at Mennel must be of day can come into play. protection of our employees.” dynamic. “Some of our customers will “If, for example, a delivery is made Whatever the reason, Mennel know exactly what they need two to after midnight on a Friday, a multiplier remains an industry leader thanks to three weeks in advance, so those are can kick in to assign additional value,” this commitment to quality products, easier to schedule,” says Decker. “But says Decker. “There are a lot of service and employees. As the industry many others can change their needs moving parts with our structure, and continues to fight consolidation daily. It makes it a challenge. We BOLT eliminates extra paperwork and at the top, the company’s recent work with BOLT System for our fleet tracking on our end. And, our drivers expansion into bakery mix, popcorn management program, and it helps us like it too. They see everything, and and warehousing further differentiates tremendously in routing and dispatch.” pay is transparent. Plus, they save time them from the pack— In addition, Mennel has long used every week, too; they no longer have to even after 132 years activity-based pay for its drivers—many manually record all of their time.” of business. of whom have been with the company In addition to their investment for 30 or more years. BOLT was able to with BOLT, Mennel Mining also tailor their software to accommodate it. consistently looks to improve “Dispatch and pay were like a jigsaw puzzle without a box top for guidance,” recalls Decker. “We had originally gone with the 800-pound gorilla in a fleet management program, but didn’t have success. It was expensive, offered platforms we didn’t need or use but still

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ADVERTORIAL

AkzoNobel Specialty Chemicals ACHIEVES A ONE-PLAN SYNCHRONIZED S&OP PROCESS WITH ARKIEVA The Synchronized planning system from Arkieva delivers a single-source planning process; providing AkzoNobel Specialty Chemicals visibility across its Business Units.

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ndustries worldwide rely on essential chemistry from AkzoNobel Specialty Chemicals in the manufacture of everyday products such as paper, plastics, building materials, and personal care items. AkzoNobel has five Business Units – Ethylene and Sulfur Derivatives, Industrial Chemicals, Polymer Chemistry, Pulp and Performance Chemicals and Surface Chemistry. Achieving a Synchronized S&OP process involved “The partnership with Arkieva creating a common shows the dedication of AkzoNobel planning system for all Business Units with Specialty Chemicals to delivering Arkieva.

innovative products in the chemical

manufacturing space while having streamlined processes that allow for better service levels. AkzoNobel has

STARTING THE JOURNEY TO SYNCHRONIZED PLANNING

The journey achieved an enviable level of S&OP to achieving a maturity with their supply chain Synchronized planning process for AkzoNobel that many businesses only dream Specialty Chemicals of accomplishing” started in 2000 when the Chicago office of —SHANKARA GURUMURTHY, company’s Surfactants SUPPLY CHAIN OPTIMIZATION Chemistry business PRACTICE DIRECTOR, ARKIEVA approached Arkieva (then Supply Chain Consultants) for consulting help using their pre-existing solution. Arkieva was also awarded support in the company’s Sweden office in 2001.

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Arkieva Surface Chemistry Business Unit Implementation in 2004 In 2004, the Surface Chemistry business moved from its pre-existing planning solution to the Arkieva platform. After evaluating other supply chain planning tools, the company opted to use Arkieva to create a standardized S&OP process for the company’s Business Units across Europe and North America.

Full Suite Arkieva Implementation for Surface Chemistry Business Unit In 2007, the Surface Chemistry business unit implemented the Arkieva Demand, Inventory, Financial and Supply Planning solutions. “The systemized process improved the forecasting process and productivity for monthly S&OP meetings by creating a more collaborative environment. The Arkieva Planning Solution fosters sharing of forecasting data across different areas of the company, leading to a more effective way to address uncertainties in demand. This improvement in S&OP processes has led to better forecast visibility and a dramatic reduction in inventory costs,” adds Smith.

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STORY HIGHLIGHTS AKZONOBEL SPECIALTY CHEMICALS ARKIEVA ONE-PLANNING FOR ALL BUSINESS UNITS UNDER AKZONOBEL SPECIALTY CHEMICALS In 2016, the team at AkzoNobel Specialty Chemicals embarked on a journey to build a Synchronized system across all Business Units, starting with Demand Forecasting, with a primary objective to allow users to collaborate in real-time, plan, and create reports from one single environment. This project eliminated the need for manual Excel spreadsheets.

AkzoNobel Specialty Chemicals One-Plan Process The AkzoNobel Specialty Chemicals division now has a Synchronized planning process using the Arkieva Supply Chain Planning Suite. The one-plan S&OP process begins with an integrated model that carries out demand, inventory, supply, financial planning and S&OP reporting for the entire business. The multi-user collaborative features of Arkieva allow 1500+ global users including on-the-road sales managers access in the Asia Pacific, Europe, and North America at different security levels while providing offline Excel integration and collaboration. The Synchronized S&OP process now includes cross-functional collaboration with teams from different Business Units including Demand Planners, Business Managers, Financial Controllers, Supply Chain Managers, Supply Planners as well as management and executives.

Future Outlook AkzoNobel Specialty Chemicals is looking to use Arkieva’s web-based dashboards to enhance visibility and decision-making soon.

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COMPANY NAME: AkzoNobel Specialty Chemicals LOCATION: Global corporation BUSINESS UNITS: Ethylene and Sulfur Derivatives • Industrial Chemicals • Polymer Chemicals • Pulp & Performance Chemicals • Surface Chemistry INDUSTRY: Chemical REVENUE: €5 billion ~ $6 billion USD AKZONOBEL WEBSITE: akzonobel.com/about-us/specialty-chemicals ARKIEVA WEBSITE: arkieva.com

OBJECTIVES Achieve a harmonized S&OP process with cross-functional team collaboration among Demand Planners, Business Managers, Financial Controllers, Supply Chain Managers, Management and other Stakeholders. Create one Global planning system across all business units and regions. Implement a collaborative planning environment for planners to easily share ideas and strategies.

BENEFITS The AkzoNobel Specialty Chemicals division now has a harmonized planning process using the Arkieva ‘One-Plan’ S&OP Software suite. • Harmonized S&OP process across all AkzoNobel Specialty Chemicals Business units including, Surface Chemistry, Polymer Chemistry, Ethylene and Sulfur Derivatives, Pulp and Performance Chemicals, and Industrial Chemicals. • E asy data aggregation and comparison of supply chain performance metrics across business units. • I ntegrated financial planning system used by Controllers and Financial Analysts to create and manage budgets. • Access to a more robust segmentation model that makes it easier to recognize demand patterns. • Enhanced communication among Sales, Customer Service Representatives, Manufacturing, Accounting and Product Development via the Arkieva Collaboration platform. • M acroeconomic forecasting and a reduction in manual forecasting hours due to the embedded statistical forecasting. • S cenario-driven capacity optimization models to improve overall asset and key raw material utilization. • The availability of sophisticated inventory optimization techniques to help determine the optimal safety stock levels that reduce costs while maintaining increased customer satisfaction. • I nventory visibility and tracking for key inventory metrics including, Days of Coverage, Excess and Slow-moving stock (age) analysis. • Event-based triggers to alert planners and key stakeholders of possible disruptions across the Supply chain. • S treamlined bidirectional data Integration with SAP ERP, SAP Business Warehouse, and COPA. www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE

By Clint Lasher, Herb Scott

E-COMMERCE WAREHOUSES ADAPT FOR

LARGE AND BULKY ITEM HANDLING Items that consumers are purchasing online are becoming bigger and bulkier, forcing managers to rethink their operations and the inclusion of automation.

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ccording to Consumer Reports magazine, the number of people buying appliances online has risen from 11 percent in 2015 to 14 percent in 2017. Another survey published last year by online payment processor Future Pay reported that 37 percent of respondents were planning to purchase appliances online. This confirms what we have been hearing from retailers: the items that people are purchasing online are getting bigger and bulkier, requiring managers to rethink the way they are staffing and structuring operations. In addition to appliances, online purchases now include items as large as fitness equipment, riding lawn mowers and furniture. Buyers are also expecting the same quick turnaround they get from their small purchases of books and toasters.

STAFFING UP For warehouses designed around small parcel handling, manual handling of large items is usually the only immediate option. This is problematic for many reasons. Given the current low unemployment rate, finding qualified people to staff warehouses is not easy, especially during peak seasons. People capable of handling large items with warehouse experience are rare. Compounding the problem is the fact that handling these items manually requires extensive bending, lifting and other motions that present ergonomic, safety and fatigue challenges. These requirements make it even more difficult to staff appropriately. Even with the most capable people on the job, some SKUs are difficult to handle without mechanical assistance. All of this leaves warehouse operators with the choice of either rethinking their operations or losing revenue by not offering bigger ticket items. For most, the business opportunity is too great to pass up, as they look for ways to transition less labor-intensive solutions for handling larger, bulkier more efficiently.

INVERTING THE PICK PROCESS One of the most valuable process modifications that improve handling of large and bulky items has been inverting the traditional operating paradigm:

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FEATURE bringing goods to the pickers instead of sending them out to find the goods. Automating the process eliminates the many miles the picker might otherwise travel around the warehouse transporting a small number of large items. It also frees them to devote more time to the less strenuous task of transferring items to outbound pallets for shipment and planning for the next delivery. Three of the most common means of transporting large items to pickers are automated or rail guided vehicles (AGVs and RGVs), tuggers and large conveyors. ❯❯ AGV/RGV: AGVs are transport vehicles guided by magnetic strips, RF/laser guidance or 3D mapping technology. RGVs are installed on travel and power rails within a facility. The guided vehicles receive direction from the warehouse management system and travel on their own to the storage area. AGV/RGVs are often designed to spec for the loads they are carrying in the warehouse and can be designed to handle loads up to several tons. They may be equipped with forks or robotic arms that pull pallets or

items, they can be especially valuable for large warehouses with many SKUs. Once the person transfers the order from the tugger to an outbound pallet, they push a release button sending it back for the next pick, delivering the same efficiency benefits of parallel operations as AGV/RGVs. ❯❯ CONVEYOR: Powered by rollers or drive chains, conveyors can be an efficient means of transporting large and bulky items. Because they require relatively permanent installation, conveyors are most suitable for established lines that are processed continuously in a relatively compact layout. As the storage area grows in size, it may be more efficient to use AGV/RGVs or tuggers to bring goods to pickers.

AUTOMATING PALLET MANAGEMENT In addition to inverting the process by which pickers receive large goods, pallet-loading or unloading might also be enhanced for handling larger items. Adding vacuum assists or mechanical grippers

TUGGER AGV/RGV cartons from automated storage and retrieval systems (ASRS) and bring them to a picker who will supervise transfer of the goods to the appropriate technology for shipping. While the picker is then processing that order, the AGV/ RGV is simultaneously working on the next. ❯❯ TUGGERS: Tuggers are a specialized subset of AGVs that use a set of carts to haul multiple pallets. Because tuggers can haul large volumes of 26

to robotic arms can help in lifting and moving of larger objects. An arm equipped with a vacuum head, for example, might help lift a carton from the top, while other arms clamp around the sides.

RISING TO THE CHALLENGE The proliferation of large SKUs compromises warehouse space as well. At the same time as they are automating storage and retrieval, some large retailers are launching initiatives to reduce area

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FEATURE dramatically, while others are building up. Instead of the 35- to 40-foot ceilings typical of warehouses, some retailers are deploying ASRSs with ceiling heights of more than 120 feet.

the handling of large and bulky items. A warehouse execution system (WES), for example, can assist in analyzing data from the warehouse control system (WCS) and WMS, to sequence orders based on their weight and dimension, maximizing SELECTING THE RIGHT TECHNOLOGY the number of items that can be handled safely per As the mix of larger objects changes, most pick, pallet and picker. warehouses will transition to various combinations Orders can be grouped by ABC classification, of manual, semisize, delivery method automated or As the mix of larger objects changes, or whichever fully automated parameters drive most warehouses will transition to operations. company KPIs. Determining the These can help various combinations of manual, right mix starts with determine which semi-automated or fully automated items might be a data analysis, such as an ABC analysis. suitable for operations. Determining the right mix more The analysis begins automation, which with identifying are more suitable starts with a data analysis… “A” movers, rated for manual handling by velocity and cubic volume, followed by the “B” and which might require a hybrid approach. and “C” movers and so on. This results in a Pareto Optimization can be refined through integration curve, which typically follows the 80/20 rule, with SCADA systems that track where each with the extremely fast and slow moving SKUs order is at in the system, whether it is in storage, at a pick station or on the shipping platform. WES analysis can then spot trends and bottlenecks for correction and see which areas correlate with larger SKU handling. These systems can also capture data and pass it back to order management systems, which can potentially evaluate cost and benefits of large item handling strategies.

CONVEYOR

at each end of the curve and most in the middle. When mapped to the levels of automation now being deployed, analysis of those curves can help determine where automation improvements could make a difference.

OPTIMIZATION THROUGH SOFTWARE Fully-integrated supervisory control and data acqusition (SCADA), warehouse management, control and execution systems can further optimize

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BIGGER THINGS TO COME

As consumers grow to trust online retailers and warehouses ramp up delivery with the speed they expect, ordering big tickets online will continue unabated for years to come. Innovations that bring automation to the forefront will become the norm, and the results will be a safer, more efficient load handling. ABOUT THE AUTHORS CLINT LASHER is the executive vice president at Daifuku Wynright. HERB SCOTT is the director of application engineering at Daifuku Wynright. www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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SPECIAL REPORT PROCUREMENT

By Loyd Hawkins

ADOPTION IS

King

Adoption is on the horizon. To fully realize your ROI, your organization must continue to increase adoption across all spend categories.

The math is simple: Adoption + spend throughput = savings. Enabling spend can be a daunting task, however. Each category may consist of several supplier types, and o your organization has made one may have features and attributes the transformation from a that require several enablement paper-based, zero-control approaches. Additionally, supplier system to the latest fresh connection types will require specific off-the-shelf procurement platform. You roll out processes, attributes and finished ahead of schedule and managed concerns for both the suppliers and the not to incite a revolt internal stakeholders. The math is simple: among your stakeholders. Prior to moving to a Adoption + You even have a fully value-based assessment, Spend throughput= “live” system. You should the primary measure of be on cloud nine. success for a procure-toHowever, a dark pay (P2P) deployment cloud is looming on was meeting the “live” the horizon—adoption. In order to date while remaining under budget. fully realize your return on investment Transitioning from a licensing business (ROI), your organization must model to a subscription business model continue to increase adoption across all will help the client and the software spend categories. provider realize that measurable ROI

S

Savings

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Metrics need to be attainment is essential to match suppliers established in order to to success. In order to the appropriate to realize savings categories. Be careful and efficiencies from of focusing on a P2P platform, getting all of your all stakeholders suppliers enabled. must be included in the equation. Frankly, that goal is unattainable Without a healthy supplier base, the and unnecessary because it is the procurement and accounts payable lose wrong metric. Instead, focus on any efficiencies necessary to eliminate enabling suppliers that account for costs. Conversely, suppliers with only most of the categories’ spend. Use one connection to their customer base the 80/20 rule here: 80 percent also suffer from the inability to take of your spend is comprised of advantage of exponential decrease in 20 percent of your supplier base. days sales outstanding (DSO). Focus on these key suppliers for The goal of an organization should faster ROI. be to maximize connectivity while ❯❯ Previously Enabled Content— minimizing time to ROI. To do this, Most companies will have used a the client needs to focus on enabling point-to-point vendor system to suppliers that provide the user buy specific items. By ensuring population access to the necessary goods this content is enabled early in the and services. Internal stakeholders see process, you are able to provide a integrators as disruptors and don’t run large footprint of the P2P system to embrace the change. The project throughout your organization. team usually focuses on attacking the An ancillary benefit is the easiest spend first. ability to turn off expensive EDI While this is a good start, it usually connections that will become heralds the end of the process because obsolete. there is no roadmap to ensure that Lastly, once you have your plan additional content is enabled. Without in place, it is critical that you get a roadmap, critical mass is often lost and internal stakeholder buy in. This can ROI is unattainable. Metrics need to be be done by mocking up the category established in order to measure success. processes and demonstrating these A consistent way of ensuring success early and often. You will also uncover is by leveraging a category enablement information that may affect your plan plan (CEP). A CEP should take the and have the ability to uncover critical following into consideration: requirements that need to be passed ❯❯ In Scope Categories—These onto the deployment team. categories should be aligned If you follow these simple guidelines, by level of complexity, business you will be able to transition your process groups and amount of organization from one that has spend. Once categorized, they little control over its spend to an should be ranked by amount of organization that buys in the most spend and complexity. This sets efficient manner. This has the effect of the foundation of the plan. allowing your stakeholders to be more ❯❯ Suppliers—The best rule of effective and increases the satisfaction thumb for supplier enablement is of buyers and suppliers.

MEASURE SUCCESS.

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USE THE 80/20 RULE HERE: 80 percent of your spend is comprised of 20 percent of your supplier base. Focus on these key suppliers for faster ROI.

ABOUT THE AUTHOR LOYD HAWKINS is global vice president, supplier management, at Elemica.

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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SPECIAL REPORT THE INTERNET OF THINGS

By Swapna Supekar

IoT SECURITY PRODUCTS

RIPE FOR EXPANSION New research by Future Market Insights indicates the market will continue to grow as more digital technologies are adopted.

I

ncreasing adoption of digital technologies, including web-based services such as online education and banking, has accelerated the use of smartphones among individuals. In turn, the demand for security of such technologies against cyberattacks has grown. Various governments across the globe have imposed stringent laws in order to ensure secure environments and maintain privacy for connected devices. In addition, several enterprises are focusing on implementation of Internet of Things (IoT)-based solutions, encouraging employees to bring their own devices for flexibility. In its recent research, Future Market Insights (FMI) projects the global IoT security product market to register a staggering expansion of 14.9 percent CAGR through 2027. In 2017, the market accounted for revenues worth approximately $12 million, and it is further estimated to reach nearly $50 million by the end of 2027. This growth is primarily Future Market Insights (FMI) projects the global IoT security product market to register a staggering expansion of

14.9% CAGR through 2027.

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North America will remain dominant in the global IoT security product market, with sales estimated to reach nearly $16 million in revenues by the end of 2027.

In 2017, the market accounted for revenues worth approximately $12 million, and it is further estimated to reach nearly

$50 million by the end of 2027.

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attributed to continuous launches of IoT security offerings by enterprises, the soaring number of service providers and emergence of niche players in the market.

NORTH AMERICAN DOMINANCE North America will remain dominant in the global IoT security product market, with revenuces estimated to reach nearly $16 million by the end of 2027. Government organizations across North America have entered partnerships with major technology companies in order to implement IoT across urban cities. These organizations are also providing funds to technology vendors for development of IoT applications. In addition, increasing smart city projects in North America has led to a significant adoption of sensor applications. A number of government authorities have issued guidelines to be followed by IoT device manufacturers for protection against cyberattacks on IoT devices and networks. However, several device manufacturers and users are not adhering to these guidelines, ignoring precautionary measures. This has resulted in security lapses and incurring challenges for IoT security solutions providers, which is expected to restrain growth of the market in North America.

MANUFACTURING REMAINS LARGEST VERTICAL

The Asian Pacific region, excluding Japan (APEJ), will continue to be the fastest growing market for IoT security products, registering a high double-digit CAGR through 2027. A growing number of connected devices is leading toward expansion of the IoT ecosystem in APEJ. This is further prompting the region’s leading companies to develop services and platforms, helping them in efficient management and analysis of real-time data streams gathered from multiple data sources. These companies are now focusing on IoT data analytics, and setting up strategies for procuring and deploying adequate tools in order to enable successful IoT adoption and real-time analysis of operations. With rapidly changing technologies, enterprises are faced with difficulties in deploying technology-specific networks, which, in turn, is expected to impede market growth in the APEJ region. In addition, rapid adoption of IoT among enterprises has led to a surge in cyberattacks, owing to increasing internet exposure to a number of devices. This has further resulted in a higher likelihood of cyber threats, which, in turn, is estimated to inhibit growth of the IoT security product market in APEJ.

Manufacturing is estimated to remain the largest vertical for IoT security products in the global market. Revenues amassed from sales of IoT security products in manufacturing are expected to reach about $15 million by the end of 2027. In addition, healthcare will be the fastest growing vertical in the global IoT security products market, followed by energy and utility and transportation and logistics. Although smart grid will remain sought-after among applications, home and building automation is expected to witness the fastest market expansion through 2027. Revenues amassed from smart grid and home and building automation applications of IoT security products will collectively account for revenues worth $26.7 million by the end of 2027. Meanwhile, network security will remain the preferred solution for IoT security products, with sales anticipated to account for nearly $15 million by the end of 2027. End-point/device security will continue to be the second-largest solution for IoT security products. In addition, vulnerability management solutions for IoT security products will register the fastest expansion through 2027. In terms of components, software will continue to retain its dominance in the global IoT security product market, with sales expanding at 15.2 percent CAGR through 2027. In addition, sales of hardware in the market is expected to surpass revenues worth $20 million by the end of 2027.

The Asian Pacific region, excluding Japan (APEJ), will continue to be the fastest growing market for IoT security products, registering a high

Manufacturing is estimated to remain the largest vertical for IoT security products in the global market.

double-digit CAGR through 2027.

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FAST EXPANSION IN ASIAN PACIFIC

ABOUT THE AUTHOR SWAPNA SUPEKAR is a senior associate consultant with Future Market Insight. FMI is headquartered in London and has delivery centers in the United States and India.

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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SPECIAL REPORT BLOCKCHAIN

By Amy Wunderlin

COLLABORATION

KEY TO BLOCKCHAIN

IN TRANSPORTATION ALLIANCE Key players in the transportation industry have been quick to join the alliance in hopes of influencing the development of a standard framework for the use of blockchain in the field.

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o a quick search for the Blockchain in Transportation Alliance, grab your attention—UPS, SAP, or its better known Uber Freight, P&G, to name a few. acronym BiTA, and you are sure to find But the smaller players may have the a slew of well-known and respected most to gain. Third-party logistics logistics providers. It seems every day provider Kenco, which announced another big name in the transportation its membership in March, hopes to sector announces it has joined. BiTA influence the use of blockchain on the was founded in 2017 to create a forum same scale as those big names. for the development of blockchain “We wanted to have input into standards and education for the freight the standards of how blockchain industry. According to will be used in our the alliance’s website, its industry,” explains Kristi goal is to bring together Montgomery, vice leading companies in president of innovation, the freight technology research and technology industries that have at Kenco. “As we look a vested interest in back at technologies that the development of have evolved over time, blockchain technology. typically what happens is — MONTGOMERY Thousands of your largest players in the companies from every industry tend to be the facet of the industry—tech ones who everyone is listening vendors, OEMS, suppliers, to and leading the charge in consultants, banks, carriers, developing standards. What shippers and brokers—have joined with BiTA is doing is very different; they’re hopes of leading the charge in what saying that everyone has a voice.” many believe will be a revolutionary Kenco is a mid-tier player in the technology. Members share in a logistics space compared to a FedEx unified mission of developing a or UPS, and yet the decisions that are standard framework, educating the made now to determine how blockchain market on blockchain applications and will work in the transportation industry encouraging the use of said applications will greatly impact companies of all through implementation. sizes. “We didn’t want the players Scrolling through the member list who had all the money to make all of is impressive as many names instantly the decisions, because they might not

“WHAT BITA IS DOING IS VERY DIFFERENT; THEY’RE SAYING THAT EVERYONE HAS A VOICE.”

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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be thinking about it from the same perspective that we are. We felt like we wanted to have impact into that,” adds Montgomery. Kenco’s service offerings span the entire supply chain. They hope their particular voice will broaden the alliance’s horizons, forcing them to look at the supply chain as a whole, including the warehouse component of it and backing even into on-plant services. Montgomery says they would like to see BiTA ask the question: “How do we take blockchain and apply it across the supply chain, not just the transportation component?”

sure that [blockchain does not become] a vendor driven, software provider driven solution, but it’s those of us who have to live, work and breathe this industry every day that are defining how it works best for us,” says Montgomery. She adds: “If every major transportation company has their own set of standards around blockchain, it becomes very difficult for us to collaborate on behalf of customers. From the shippers’ perspective, blockchain will best serve them when it is standardized and they have visibility across every vendor and supplier to their entire network of their supply chain. “It won’t work if everybody has their own way of doing it. It’s not going to ultimately serve the customer, and the BiTA founders recognized that early in the process.” That unique sense of collaboration is one of BiTA’s most attractive characteristics. Collaborating with—to some extent—their competitors is a unique concept that is driving important discussions within the alliance. “Most people look at blockchain and it becomes a really cool thing to talk about, but there is no real value in a single entity joining the blockchain,” Montgomery explains. “The value comes when I am serving my customer and their other five suppliers. When we are all on the blockchain together, now

TEAMWORK MAKES THE DREAM WORK Because blockchain is not yet a fully developed technology, companies big and small must work together to determine what makes the most sense in its standardization. Questions surrounding blockchain in the transportation industry abound, but BiTA members are focused on unanimously answering the seemingly simple ones such as: How are we going to use it? How are we going to set it up? What is the framework and platform going to look like? And who better to answer these questions than the people who work in the industry every day. “We want to make

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our customer has visibility end to end in everything that’s happening along their supply chain, and they have full track and trace at the SKU level. Now it becomes a really valuable offering. “We recognize that running a pilot for blockchain is going to take multiple suppliers collaborating for a single upstream customer,” she adds. Currently, there are a few isolated pilots, such as the one IBM and Maersk announced in January. The duo hopes to use blockchain technology to provide more efficient and secure methods for conducting global trade. But Montgomery emphasizes that “we don’t want IBM setting the standards for how everybody uses blockchain.”

READY FOR TAKEOFF BiTA hopes to publish a set of standards by the end of 2018. Once the standards are established, the organization plans to move forward with a number of pilots based on use cases in transportation they have identified. Such use cases may include: ❯❯ Track and trace, chain of custody ❯❯ Simplification of ELD compliance ❯❯ Fraud prevention, security of product ❯❯ Dynamic optimization of capacity ❯❯ Performance history around assets ❯❯ Smart contracts ❯❯ Reduction of paperwork “The horizon for real strong usage of blockchain is 1-3 years, and by year three, it’s going to be driven by some extent our customers,” adds Montgomery. “We want to make sure that when the Walmarts of the world come to us and say, ‘OK, we want you to be part of our blockchain,’ we are prepared, we have the standards, we understand how the framework is going to work and that we are ready to make them successful.”

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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EXECUTIVE FOCUS

{ TRANSPORTATION}

By Yariv Bash

WHY DRONES MAY BE THE

SUPPLY CHAIN SOLUTION RETAILERS CRAVE The consumer demand for products is faster than ever, with retailers scrambling for new delivery solutions. Could drones be the answer?

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ounting consumer demand for instantaneous service has triggered a raging on-demand delivery war, with major retailers scrambling to meet appetites for ever-faster deliveries. Amazon’s acquisition of Whole Foods and Target’s purchase of Shipt are leading indicators of this trend, which dovetails into a larger movement toward instant services—from money transfers to prescription deliveries. In a culture that prizes speed, retailers must develop the capacity to deliver products within a few hours of order placements to remain competitive in the marketplace. Even next-day

delivery will soon no longer cut it. How are retailers to adapt to this new reality? The answer can be found in drones.

LAST-MILE SOLUTION Drone deliveries will satisfy consumer expectations of rapid service while helping retailers avoid the nettlesome last-mile problem. Drones are fast, cost-effective, safer than traditional methods and produce zero emissions, marrying efficiency and economy with sustainability. Moreover, drone technology is exceptionally advanced. In urban environments, drones can circumnavigate skyscrapers and operate in densely-developed areas without falling victim to the congestion and inefficiencies too often experienced on the roads.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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According to the experts at the Embry-Riddle Aeronautical University (ERAU), drones’ greatest advantage over ground delivery will be in timesensitive deliveries. Ground delivery costs soar for urgent deliveries, whereas drone delivery costs remain largely constant whether the delivery is time sensitive or not. To illustrate drones’ bottom-line benefit to retailers, the ERAU scholars presented the example of an online retailer that paid $2,000 for a delivery platform that could fly 50 hourly flights weekly, at an allocated cost of $1.74 per trip. Compared to other methods costing $2.50 per last-mile trip, the drone delivery option generates cost savings of 76 cents per delivery—savings that quickly add up, particularly for retailers with high delivery volumes. An instructive case study on the promise of drone deliveries can be found in Iceland, where Flytrex’s partnership with the e-commerce company AHA has reduced delivery

costs by 60 percent, while slashing delivery times from 30 to four minutes. The drone delivery system there has provided a game-changing solution to the difficulty of navigating Iceland’s often-forbidding terrain. Given the advantages in speed and cost-effectiveness, retailers who adopt drone delivery solutions will be better positioned for success. The most recent Walker Sands Future of Retail study found that 54 percent of consumers would shop online more frequently if they had regular access to same-day delivery services. In the 2016 survey, nearly 80 percent of consumers said they would be likely to select a drone delivery option if it meant their package could be delivered within an hour. Such figures indicate that consumers will embrace retailers who deploy drone delivery solutions and are excited by the prospect. This stands in contrast to the misperception that customers don’t trust drones to deliver products. Indeed, only

THE DRONE ERA IS HERE Once confined to the realms of science fiction, the drone era is now truly upon us. The parent company of China’s biggest package carrier recently secured permission to begin drone deliveries, and drone deliveries are well underway in Africa, Europe and Australia. Federal regulators in the United States are also moving to hasten the age of drone deliveries. State and local obstacles to drone carriers must still be overcome, but the fundamental logic of expanding drone delivery is undeniable. For retailers and consumers, drone innovation will prove a win-win. ABOUT THE AUTHOR YARIV BASH is the CEO of Flytrex, an Israeli company leading the development of on-demand drone delivery services for last-mile logistics.

Flytrex has tested its drone control system with the Ukrainian Postal Service and a company delivering pharmaceuticals to hard-to-access locations in Africa. Its latest partner is AHA, an on-demand goods service in Reykjavik, Iceland.

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13 percent of consumers said they don’t trust drone deliveries at all.

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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EXECUTIVE FOCUS

{ WAREHOUSING}

By Lara L. Sowinski

The Human Side of the

AUTONOMOUS WAREHOUSE

Stay focused on safety and apply staff to more value-added work.

TOP 10 FEATURES OF AN AUTONOMOUS WAREHOUSE

By Leslie Sullivan, marketing coordinator, Evans Distribution Systems It’s said that an autonomous warehouse functions much like the way autonomous vehicles navigate the road. Robots move on their own throughout a warehouse, maneuvering around obstacles—they stop for human workers, pick up crates and move them from one location to the next, navigating through a packing system that may see very few human hands. Amazon is on the forefront of automation in the warehouse, operating more than 45,000 Kiva Robots since purchasing the company Kiva Systems in 2012 (they’re now renamed Amazon Robotics). These robots fulfill the picking and packing at Amazon warehouses, continuing to refine the e-commerce giant’s process. Standing at 16 inches, weighing a little over 300 pounds and running at 5 mph, Amazon robots are capable of lifting up to 700 pounds—and can also lift entire stacks of shelves. Since these robots are internal to Amazon, there have been many new competitors to enter the robotics playing field. As warehouse demands grow and change, these innovators continue to introduce exciting new features to the autonomous warehouse. The following list features 10 of the best. 36

1. Scanning—High accuracy counting robots cruise through the warehouse, scanning aisles. The information received can be checked for accuracy with the company’s inventory software. Human workers can then check tablets or computers to find out if there is any missing product. This allows for inventory to be viewed in real time. 2. Real-time Inventory—Lost inventory can become extremely expensive. Screens can show exactly where each crate is at any moment and where they are located as they are navigated through the system. For every crate, the journey from shelf to shipping is adjusted and configured through an algorithm. Depending on the order of items, the system might be adjusted accordingly (i.e., a heavier item might not be stacked on a lighter one and so on). 3. Systems Integration—In an autonomous warehouse, systems integration will pull the whole structure together. The robots are typically connected to a robotic management system (RMS) that

integrates data regarding product— what’s high in demand, what needs to be picked and shipped quickly. The RMS will also help make sure that robots aren’t going to the same location, are completing tasks individually and not getting into each other’s way. 4. Metrics—Autonomous vehicles have sensors to automatically gather data, which can be uploaded to various applications, hosted onsite or in the cloud. There are various apps that can be used to track metrics from data that includes pick up size, the time needed for delivery, where the delivery vehicle is, how long it’s been in the facility and more. This allows customers to determine whether factors in the warehouse climate need to be changed, as well as figure out if there are any issues with vehicles, automated or otherwise. This also contributes to more predictability in the warehouse; it becomes much easier to tell what is being moved, when and where. 5. Driver Scanning—Driver scanning software can be fluidly

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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n April, Seegrid announced that its self-driving vehicles reached 1 million production miles at customer sites without a single personnel safety incident. The milestone is significant, and Seegrid’s vision guided vehicles (VGVs) have now logged more infrastructure-free miles at customer sites than any other infrastructure-free AGV company. The company’s VGVs can be found in some of the largest manufacturing and distribution companies in the world, including Amazon, General Motors, Whirlpool and Boeing. But how are humans adapting to an increasingly automated warehouse? According to a senior supply chain executive at Giant Eagle, “Seegrid self-driving vehicles have reduced the number of miles driven by the team members who work in our retail support centers, allowing us to redeploy our folks to more value-added roles while improving overall safety.”

integrated with your warehouse system. Already, truckers can easily scan and send documents and integrate with logistics systems and apps. Documents can be routed to multiple departments and integrated with dispatch, billing, TMS and other document management systems. They can then be automatically routed to different people, and delivery receipts can correspond with metrics from data showing information about the delivery process. 6. Lighting and Security—It’s important that autonomous vehicles are safe and fully integrated with human coworkers. Laser sensors can distinguish employees from autonomous vehicles to prevent collisions. Autonomous vehicles might also emit a horn automatically. In other cases, guide wires lay out a definite path for vehicles, rather than free roaming. With the correct safety precautions in place, however, free roaming vehicles should not present a danger. Vehicles are typically programmed to reduce speed around corners, and can detect when objects or humans

are in its way—then it will stop. Lighting can also be automated for human workers, as the robots don’t need light to operate. 7. Automated Gate System— When gates can be controlled automatically through an automated gate system, throughput is increased at access points. An automated gate system will typically include the ability to centrally control gates from other facilities, calling for less management to monitor functions and cut down on staff crowding at exit and entrance points. This would also increase visibility and improve the capacity to predict and plan for driver traffic and patterns. 8. Business Continuity—Strategies to prevent accidents in automated warehouses include robotic functions that reduce the risk of physical strain in human workers and automated routes that decrease the chance for warehouse collisions. Robotized movements are also believed to improve warehouse safety and reduce the risk of work-related injuries. Automating these processes only increases productivity and output.

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9. Mobile System—A mobile robot system means that robots can handle an operational system without the need for physical or electromechanical direction. Mobile shelves in a warehouse also mean that product is always accurately located. 10. Employee Tracking—It’s now possible to gauge the moments when employees are genuinely productive. While that might raise concern about privacy, it’s an efficient approach that can accurately detect what’s working at a company and what’s not. Automated systems can track employee time and location, automatically track the amount of time worked and allow for more efficient accountability. As the warehouse environment grows and evolves, humans and robots must work alongside each other to efficiently navigate the new automated landscape. As tools and techniques are developed, it’s important to stay well informed about the continually changing scenery of automation.

www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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WAREHOUSING

Removing humans from assembly lines and repetitive tasks and assigning them to more value-added roles is undeniably a positive outcome of increased automation. However, humans are not always receptive to change, even when the results are positive. Seegrid notes in its e-book, 5 Steps On Your Journey Toward Industry 4.0, that “introducing new technology can be disruptive; upending the status quo

“THE IDEA OF THE SMART FACTORY OF THE FUTURE IS QUICKLY BECOMING A REALITY, AND EVEN THOSE HESITANT TO EMBRACE THESE ADVANCEMENTS ARE FINDING IT HARD TO IGNORE.” — SEEGRID

is always challenging for business and their employees.” Yet for manufacturers, “the idea of the smart factory of the future is quickly becoming a reality, and even those hesitant to embrace these advancements are finding it hard to ignore. As we advance steadily 38

toward Industry 4.0, companies should prepare to redefine how they approach materials handling.” At the same time, with regards to the Industry 4.0 lifecycle, Seegrid emphasizes that, “before real change can happen, employees must be sold on the true value that new technologies can provide…the technologies must prove they can make significant improvements in efficiency and predictability.” Seegrid concludes in its e-book that the future will be marked by “self-driving vehicles working side by side with human employees, and plant managers staying up to date with reports and dashboards that monitor, control and optimize their operations.” Jeff Christensen, vice president, product, at Seegrid, met with the Supply & Demand Chain Executive (SDCE) team during MODEX last month in Atlanta. The discussion included the safety aspect of humans co-existing with automation. When asked how the company’s VGVs managed to exceed 1 million miles without a single safety incident, he explained that, “first, you have to make safety the No. 1 requirement with regards to product development.” The next requirement he said is to “surpass industry standards.” Of course, adequate training is another key ingredient for safety, particularly when humans and autonomous vehicles or robots are working in close proximity to one another. Derek Byrd, marketing and inside sales manager at Evans Distribution Systems, says that aside from exercising common sense, training is essential. He acknowledges that “anytime you have humans and machinery operating in close quarters there is the potential for injury.” Nonetheless, he adds, “a lot of stuff can be avoided with the right training.”

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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GET THE RECOGNITION YOU DESERVE! 18th Annual

2018

PROS to 2018 KNOW

SUPPLY CHAIN

11 th Annual

GREEN SUPPLY CHAIN AWARDS Recognizing companies that implement green practices as a core function of their supply chain operations.

NOMINATION DEADLINE: 9/7/18

Winners announced in December 2018 issue.

SDCE 100 AWARDS

Transforming Supply Chains with Software & Technology The annual SDCE 100 is a project-based award that recognizes leading software and technology providers that are helping transform supply chains with their products and services.

NOMINATION DEADLINE: Applications Closed

PROS TO KNOW AWARDS Honoring leading executives for improving the global supply chain through sustainable and proactive business initiatives. Winners showcased in March 2018 issue.

Winners announced in June 2018 issue.

Each year, Supply & Demand Chain Executive recognizes individual and corporate leaders in the global supply chain. Plan now to enter your company, executive or a cutting-edge client or vendor in one of these industry-leading recognition programs.

Award results, information and nominations posted on:

SDCEXEC.COM/AWARDS

Nomination dates and issues may change. Consult the call-for-entries email and nomination survey for confirmation.

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EXECUTIVE FOCUS

{ SOFTWARE & TECH}

By Christian Floerkemeier

SMART MANUFACTURING

GETS A BOOST FROM MOBILE DATA CAPTURE TECHNOLOGY Advancements in augmented reality, wearables and drones help to make the manufacturing process smart— from start to finish.

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t’s easy to see how transformative Industry 4.0 has been for forward-thinking manufacturers. The assembly line has been made smarter with leading-edge technologies such as artificial intelligence, cloud computing, advanced robotics and sophisticated sensors. And while you may see innovation on the assembly line, you don’t always see it in the processes that take place before and after an item is manufactured. Even in a modern factory or warehouse, you’ll see workers carrying out tasks such as sorting, order picking and inventory management with pen and paper. They’re also still using computers and devices that look like they were released in the 80s. For Industry 4.0 to really make a difference, it has to bring advanced intelligence to every step of the manufacturing process. Mobile devices such as smartphones, tablets and wearables are ideally suited to help Industry 4.0 optimize critical manufacturing processes. Mobile technology has transformed business and the lives of consumers, and that same technology can be used by manufacturers today. Instead of using obsolete, dedicated devices or manual means for data capture and related tasks, manufacturers and other supporting organizations throughout the entire supply chain can use smart devices that connect to the smart

manufacturing and IoT systems that are powering the industry. These connectivity benefits, combined with vastly improved data capture software solutions, have made mobile devices an indispensable part of the critical supporting operations that happen off of the assembly line.

USING SMART DEVICES FOR MOBILE DATA CAPTURE Mobile technology can extend smart manufacturing all the way to the customer. Now any customer with a mobile device can be a part of the

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supply chain and make custom orders, see live inventory numbers and track deliveries on a map, bridging the physical and virtual worlds to make processes more efficient. Here are just some of the ways that mobile data capture technology can benefit the supply chain:

Thanks to augmented reality (AR), employees can point their mobile camera at a warehouse shelf and see current inventory numbers displayed on the items through the screen. AR overlays on the screen can show items that have satisfactory inventory numbers highlighted in green, while items that are running low are highlighted in red. It can also include information about whether the item has already been re-ordered and when the delivery is expected. Drone-based data capture can further automate inventory management by flying past the shelves to scan the barcodes on the stored items to get an accurate inventory count. This eliminates the need for a human to complete this timeconsuming task with the help of a colleague in a forklift. Search and Find— Another use case for AR comes into play when you’re trying to find something specific in a sea of items. By pointing your mobile camera at a shelf, all of the barcodes will be scanned and processed at once, and the correct item will then be highlighted in green on the screen. Track and Trace—Serialized 1D or 2D barcodes can be printed or engraved on manufactured items and then tracked through the supply chain to help facilitate recalls and detect counterfeit goods. Shipping and Receiving— Mobile scanning will reduce labor costs and streamline warehouse processes because entire shipments can be scanned and processed with a single

Order Entry—Customers and employees can quickly place orders through an app or mobile website by scanning barcodes on products or shelf labels in their own warehouses and storage rooms, which is more efficient than using pen and paper to record items to be re-ordered. Inventory Management— Managing inventory manually is a time-consuming process that is prone to errors. Mobile inventory management makes it fast and easy to get accurate counts through barcode scanning.

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scan. The barcode scan can also be combined with image and document capture so that the state of a damaged shipment can be documented, and delivery documents are digitized right when shipments are received. Field Service—Field service technicians can use their mobile device to identify the device or machinery they are maintaining. This eliminates errors typing long serial numbers and makes the data capture process more efficient. With the machinery uniquely identified, maintenance records can be inspected and updated, and the relevant repair manuals are easily accessible. Digital eyewear can even make hands-free operation possible for a technician, with the built-in camera identifying the machinery and the built-in display showing maintenance records and repair instructions.

BENEFITS OF MOBILE DATA CAPTURE TECHNOLOGY Building on the previous examples, there are three overall benefits that come from using mobile data capture technology in your smart manufacturing processes: reduced costs, increased productivity and minimal training. One of the main concerns for many enterprises about using new technology is the price tag. Some executives are still stuck in the mindset that new technology has to be exceedingly expensive, even though that’s not always true. Others only think about the initial purchase price without thinking about the total cost of ownership, which can be a real eye-opener. Mobile devices equipped with mobile data capture software offer the same barcode scanning performance as traditional scanners, and factors such as much lower upfront cost help reduce

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SOFTWARE & TECH

the total cost of ownership up to five times over the lifetime of the device. You can save even more money by implementing a bring-your-own-device (BYOD) program, as almost every employee already owns a mobile device. Dedicated scanners can only perform one job, but a single mobile device can handle countless tasks in a handheld, ergonomic way through

DEDICATED SCANNERS CAN ONLY PERFORM ONE JOB, BUT A SINGLE MOBILE DEVICE CAN HANDLE COUNTLESS TASKS IN A HANDHELD, ERGONOMIC WAY THROUGH APPS, WEBSITES AND PERIPHERALS. apps, websites and peripherals. Using mobile technology will also make your IT department happy because the number of devices they’ll have to manage will decrease, and mobile device management solutions make it easy to manage them effectively. In addition, your employees have smartphones they use every day, so using mobile technology as a part of their job will feel natural and eliminate extensive training time.

NOT JUST SMARTPHONES AND TABLETS ABOUT THE AUTHOR CHRISTIAN FLOERKEMEIER, Ph.D., is chief technology officer and co-founder of Scandit.

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Most of us immediately think of a smartphone or tablet as being a mobile device, but our imagination may dry up beyond those two examples. The truth is that devices such as wearables,

drones and digital eyewear are quickly becoming important parts of the mobile landscape as well. One of the main reasons smartphones and tablets are so useful for smart manufacturing is that each one has a built-in camera, which can capture information and allow intelligence to be added to the information that is captured. Drones, digital eyewear and other wearables, such as smartwatches, can also be equipped with cameras, which make them ideal devices for mobile data capture. Most of the mobile data capture activity today focuses on hands-on scenarios where smartphones and tablets are directly manipulated in the hands of the user. In the future, a larger percentage of this activity will be hands-off or even hands-free. Think about how a camera in a pair of smart glasses could enable someone to visually scan a shelf and find the right item in a hands-off way, or even how a drone could use its camera to take inventory on its own in a handsfree way. This isn’t science fiction; these things are happening today because of advancements in mobile technology and data capture.

IT’S TIME TO ADOPT When you consider where mobile technology has been and where it’s going, it only makes sense that an effective Industry 4.0 strategy would include mobile data capture as a critical part of the equation. It’s important that the assembly line is intelligent, but the assembly line is only one part of a much larger manufacturing process and supply chain. For manufacturing to be smart, it has to be smart throughout the entire process—from before items are being manufactured all the way to when they’re delivered to their final destinations. Mobile data capture technology makes this concept possible.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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EXECUTIVE FOCUS

{ PROFESSIONAL DEVELOPMENT}

By Bill Michels

There’s A Big Difference The use of training courses are sometimes seen as the easy way out. The best results, however, combine these courses with a development approach focused on long-term mentoring and measurable goals.

M

any companies think sending an employee to a public training course or mandating e-learning will help the individual learn new skills, broaden their horizons and then apply them to the job. While many employees may learn new skills, their work environment does not always enable them to effectively use the skill set. With a training course alone, there is little to no support within the business to encourage the application of something new. Change, for most companies, is difficult at all levels, and time constraints force people to use time-tested habits like sending employees to training courses. With a standalone training course, there is no accountability placed on the individual and little measurement of progression. The reality is that we are experiencing a real skill crisis in procurement and supply chain. Baby Boomers are dropping out of the workforce in large numbers with no one skilled enough to replace them. 44

While companies look to recruit new talent, they are largely unsuccessful, leaving procurement and many supply chain positions unfilled for a year or more. There simply is not enough talent to fill the amount of open positions in the marketplace. For every three candidates found, eight jobs go unfilled. Companies are realizing there is a deep need to grow and develop the talent they have internally, as they are not likely to find recruits ready to meet the challenges of a changing and dynamic supply chain. Whether to train or develop staff is the key question of this discussion. Many companies waste countless dollars and enormous man-hours on training programs, which are likely to deliver a low return on the investment and little value to the business. To further complicate this issue, many companies have low expectations for the “trained employees” and virtually no follow-up programs to

This figure details the sustainability of training and development programs. High Organizational Impact

TRAINING -orDEVELOPMENT?

embed the learning. The impact of the training will be realized between a few days and a few months after it took place. Some companies are only half committed to developing their procurement team. One example I’ve witnessed is an HR director responsible for professional development who allowed their stakeholders to take an easy path by purchasing a group of e-learning modules, which were used to report to the business that the procurement department was getting the needed training. The HR director admitted that his motivation was to cut travel costs, minimize the investment and meet company objectives regardless of the outcome. My experience with e-learning is that students wait until the last minute and then take the modules because of time constraints. As they come close to the expiration of the license or their annual performance review, they binge on the modules, often multi-tasking at the same time. The result is minimum absorption of the learning points. This is not to say that e-learning doesn’t have a place in the development process; it is a great prerequisite

Low

SUSTAINABILITY

Development Training

Year 1

Year 2

Year 3

Time

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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Assessment of Skill Sets Needs Assessment

to get everyone on the same level at the start of the program. E-learning requires self-discipline and commitment to work, but what I have found with most companies is that e-learning by itself will not get the desired results. Attending a one-time public training course can expose a participant to new tools, techniques or processes. However, when employees return from training with new ideas and are highly motivated to apply learning, they are faced with constraining processes, risk averse management, business culture, paradigms and tradition. Over time, those blocking factors inhibit employees, and motivation is lost. The development approach is targeted on individual and team needs. It provides long-term mentoring, coaching and measurement of progress. Detailed expectations and deliverables are understood in development programs. While development programs have a high cost, they also have a high return and deliver enhanced organizational capability. A one-time training course, or group of e-learning modules, are effective if targeting one skill set. They fall short in developing the competency of the team, however. A development program should focus on current and future business needs and align to the strategic sourcing process.

Assessment of Business Culture & Needs

Critical Gaps Blended Learning Solution

Gap Analysis Individual Competence Profile Customized Metrics Deliverables Individual Program Formal Reassessment & OJT Development of Individual Team Development Program

The chart above is an example of the development process.

There are several competency assessment tools in the marketplace that will assist your team with the gap analysis. You can even develop your own based on the business need and strategic sourcing process used by your company. I have used and built face-to-face assessment centers, which incorporate an interview approach, test collaboration skills, develop case studies and see the individual’s presentation and influencing capabilities. While the assessment center is stressful on individuals, it is very effective at measuring the capabilities and gaps of the high potential performers. Once you define the business and industry needs, finding the method to determine the gaps is the solution to building a program. As you recruit new people to the organization, you can use the assessment to assure the skill set is compatible with your team and development program.

Finally, it is essential that the training delivery method be considered. The best result to close individual and team gaps is by using a blended learning approach of e-learning, webbased real-time learning, classroom learning and real-time coaching. If this program requires the completion of a project using the tools of the training, it will show a return on investment for the training and embed the learning. Not many companies tie the deliverables to the course. When they do, the return is high. In one company the return was $40 for every $1 invested in development. If you are looking to grow talent, consider the development approach. The learning can be geared to accommodate the industry, company culture and align to the business strategy. It is also important to remember that it will be necessary to protect your investment. Reward people as their skills grow, because your employees can be an attractive target to industry competitors. ABOUT THE AUTHOR BILL MICHELS is the vice president of operations at America for the Chartered Institute of Procurement and Supply Chain (CIPS). He previously served as CEO and founder of Aripart Consulting, president of ISM Services and CEO of ADR North America. In addition, Michels has held senior procurement and supply chain positions in the manufacturing, paper and food industries.

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www.SDCExec.com | May 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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WORK HARD, By Mackenna Moralez

OUTLINING A STORY

Sam Polakoff relates his life as a business owner to his new science-fiction novel.

S

am Polakoff ’s memory of “It [writing a novel] was his grandfather is similar always something that I to most. Bouncing up and wanted to do, but never down on his knee and achieved,” he says. playing an occasional game of catch in Polakoff, a self-claimed the backyard. procrastinator, says that he waited on Following his death, those memories writing the novel, partially blaming his continued to live on not only through age as a factor. It wasn’t until one of Nexterus, the company he founded his friends pushed him to start writing in 1964, but in Polakoff ’s creative that he felt like the timing was right. endeavors. Nexterus, a provider of One of the first steps he took toward integrated supply chain services, writing was to create an outline of the became a family business, with story. He plotted out the characters and Polakoff serving as a third-generation twists. And to further his craft, Polakoff owner and CEO. While his day job took writing classes after work and focuses on supply chain engineering, wrote in his notebooks during meetings. in his free time he publishes scienceHe would describe how a person fiction novels. spoke and sprinkled those “boredom “When I was descriptions” a teenager I kept across the pages of on having this Hiatus. Polakoff dream about my also contributes ACTION PACKED, PAGE TURNER: grandfather coming characteristics of With each chapter a complex plot back to life and people he knows unfolds. Technical details make seemingly spending a single into the novel, even impossible events appear feasible. Sam’s day with me once a including his own research and careful plot development year,” Polakoff says. traits from time to make for a very readable novel with some truly unexpected twists and turns. RecomHis debut novel time. mended for high-tech and business types Hiatus, published Regardless of who will enjoy the elaborate science that in January 2018, his age, however, makes the plot literally come to life. was based on that Polakoff always had dream. The novel the urge to write. GREAT READ: A riveting, thought profollows main It got to the point voking page turner. Intricate detailing, Hicharacter Ben as he where he would find atus gives the reader ownership to a host reunites people with himself awake at all of emotions notwithstanding suspense for the next link in a chain of mysterious their deceased loved hours of the night events. The indepth scientific knowledge ones for 24 hours writing his story. and remarkable cast of characters make until the technology “I have a Hiatus a believable science fiction. Truly falls into the wrong profound inability to an “ on the edge of your seat,” great read. hands. sleep more than five 46

or six hours a night,” he jokes. Polakoff also credits his adult children for not living at home so that he was able to write more. “I’m an empty-nester, so there’s not many distractions,” he explains. Hiatus features the trials and tribulations of businesses, and as a business owner Polakoff could attest to his characters’ struggles. “My experience as a business man is pervasive throughout the novel,” he explains. “In fact, you can argue that the book is as much a business thriller as it is about science fiction.” Polakoff wrote Hiatus in three years while working full-time at Nexterus. Although there were times when he grew frustrated with the writing process, he never wanted to quit. In fact, he wanted to write more. “What gets frustrating when you’re a beginner novelist is you have this idea, but you don’t know how to write it,” he says. “I had all these great ideas and plot twists, but I really didn’t know how to write a novel.” Like a supply chain, Polakoff knew that the first product of his book needed more time and work. Before the final version hit shelves, he re-wrote it several times, aiming for perfection. “I think writers have this yearning to get it perfect,” he adds.

SUPPLY & DEMAND CHAIN EXECUTIVE | May 2018 | www.SDCExec.com

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Supply & Demand Chain Executive May 2018  

The only magazine and website covering the entire end-to-end global supply chain in every vertical. It's all done in a solutions-based forma...

Supply & Demand Chain Executive May 2018  

The only magazine and website covering the entire end-to-end global supply chain in every vertical. It's all done in a solutions-based forma...