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HELP WANTED: TAKING CONTROL OF THE TALENT MANAGEMENT CRISIS Global Supply Chain Solutions Covering Procurement, Risk, the IoT and More

SEPTEMBER 2017

SUPPLY CHAIN IN REVERSE

Navigating reverse logistics in an e-commerce world

SHOW ME THE MONEY

Successful companies leverage IoT data to produce measurable results

Consumers take the

E-commerce Driver’s Seat With a host of customer fulfillment channels, the retail supply chain is in reactive mode

Fresh new content daily at SDCEXEC.COM


C S C MP AT T E ND E E S

 Visit the Relaxation Station, sponsored by BluJay.  Hear from BluJay with customer Ace Hardware in EDGE Session 5.  See BluJay present with partner Uber Freight in EDGE Session 6.

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September 2017 | Volume 18 | Issue 4

CONTENTS FEATURE

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06 Consumers

Sit in the E-commerce Driver’s Seat

With a host of customer fulfillment channels, the retail supply chain is in reactive mode.

SPECIAL REPORTS

16 THE INTERNET OF THINGS  Show Me the Money

How successful companies apply IoT data to produce measurable results.

06

20 PROCUREMENT  Getting a Handle on Indirect Spend Its importance can not be overlooked; companies must have a system in place.

24 TRADE

20

FINANCE  Blockchain’s Impact on the Supply Chain The supply chain is becoming increasingly reliant on secure digital technology.

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30

SDCEXEC.COM

26 T RANSPORTATION Supply Chain in Reverse

The challenges of navigating reverse logistics in an e-commerce world.

30 WAREHOUSING

 The Key to Holistic Inventory Optimization Supply chain design helps organizations deploy the most accurate and robust inventory strategy.

32 SOFTWARE

& TECH  Knocking Down Data Silos

Service relationship management is helping companies turn big data into real business value.

38 PROFESSIONAL DEVELOPMENT  Taking Control of Talent Management

How to build an effective training and development program.

COLUMNS

04 EXECUTIVE MEMO 12 MADE IN AMERICA 42 WORK HARD, PLAY HARD

Exclusive online features and solutions for successful supply chain operations

5 Ways Procurement Transforms Stakeholders into Advocates

Restricted Party Screening Gains Importance in Trump Era

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EXECUTIVE FOCUS

Improving Service Response Times for Multi-Day Trips sdcexec.com/ 12362042

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

THIS IS NO JET PLANE

There are few times during a career when an opportunity to make an impact at the foundational level presents itself.

D

uring her 2012 speech to the graduates of Harvard Business School, Sheryl Sandberg, COO for Facebook, shared some career advice that newly named Google CEO Eric Schmidt espoused to her in 2001. Schmidt said, “Get on a rocket ship. When companies are growing quickly and you are having a lot of impact, careers take care of themselves. And when companies aren’t growing quickly or their missions don’t matter as much, that’s when stagnation and politics come in. If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.”

IF YOU’RE OFFERED A SEAT ON A ROCKET SHIP, DON’T ASK WHAT SEAT. JUST GET ON. After serving 18 years at Institute for Supply Management as a writer, editor and eventually publications director, a rocket ship of its own presented itself. AC Business Media, which publishes Supply & Demand Chain Executive (SDCE) and Food Logistics as part of its supply chain group, provided an opportunity to step aboard something special. This is the first time in my career to experience the growth and prosperity of a B2B media and business intelligence company in its relative infancy—and I’m excited to be part of it. When Sandberg was looking for her next opportunity after Google, Schmidt’s words struck a chord. Rather than accept a CEO position, of which there were a number of offers, Sandberg went with 4

her heart and chose to work for a young Mark Zuckerberg at Facebook. While on a smaller scale, I feel that same kind of magic with AC Business Media and SDCE. In just my short time as editor of SDCE, I realize the impact this publication has on our 50,000 subscribers and their daily supply chain roles. That realization became even more apparent when our publication received a personal invitation from the Consul General of New York and the Thailand Board of Investment to travel to Thailand and learn about the country’s new Eastern Economic Corridor (EEC). This economic initiative along Thailand’s eastern seaboard is ambitious and, if successful, a significant turning point in the country’s competitiveness within the ASEAN region and throughout the world. We accepted the invitation and will be offering exclusive coverage on the country, its EEC initiative and the supply chain implications in upcoming issues of SDCE and Food Logistics. I look forward to learning more about you, our readers, so that we can provide you with the best supply chain content available. We’re all part of this rocket ship ride. Let us know what we can do to make you more effective supply chain leaders. Your success is our success. The helm is yours to help steer the ship. Happy reading!

SUPPLY & DEMAND CHAIN EXECUTIVE | September 2017 | SDCExec.com

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Published by AC Business Media Inc. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

www.SDCExec.com PRINT AND DIGITAL STAFF GROUP PUBLISHER Jolene Gulley ASSOCIATE PUBLISHER Judy Welp EDITORIAL DIRECTOR Lara L. Sowinski EDITOR John R. Yuva ASSISTANT EDITOR Amy Wunderlin SENIOR PRODUCTION MANAGER Cindy Rusch ART DIRECTOR Kayla Brown AUDIENCE DEVELOPMENT DIRECTOR Wendy Chady AUDIENCE DEVELOPMENT MANAGER Angela Kelty ADVERTISING SALES (800) 538-5544 JOLENE GULLEY, jgulley@ACBusinessMedia.com STEPHANIE PAPP, spapp@ACBusinessMedia.com EDITORIAL ADVISORY BOARD 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 Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18, Fax: (847) 492-0085 Email: ejackson@meritdirect.com REPRINT SERVICES JOLENE GULLEY, jgulley@ACBusinessMedia.com AC BUSINESS MEDIA INC. CHAIRMAN Anil Narang PRESIDENT AND CEO Carl Wistreich CFO JoAnn Breuchel DIGITAL OPERATIONS MANAGER Nick Raether DIGITAL SALES MANAGER Monique Terrazas Published and copyrighted 2017 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Supply & Demand Chain Executive [USPS #024-012 and ISSN 1548-3142 (print) and ISSN 1948-5654 (online)] is published five times a year: March, May, June, September and December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, Wisconsin and additional entry offices. POSTMASTER: Please send all changes of address to Supply & Demand Chain Executive, P.O. Box 3605, Northbrook, IL 60065-3605. Printed in the USA. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the United States, Canada and Mexico to qualified individuals. Publisher reserves right to reject nonqualified subscribers. One-year subscription to nonqualified individuals: U.S., $30; Canada and Mexico, $50; and $75 for all other countries (payable in U.S. funds, drawn from U.S. bank). Single copies available (prepaid only) for $10 each. Return undeliverable Canadian addresses to: Supply & Demand Chain Executive, P.O. Box 25542, London, ON N6C 6B2. The information presented in this edition of Supply & Demand Chain Executive is believed to be a­ccurate. The p­ ublisher cannot assume responsibility for the validity of claims or ­performances of items appearing in editorial presentations or advertisements in the publication. September 2017 / Volume 18 / Issue 4

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$2 million worth of product hits the dock. Without insurance, it’ll take $33 million in new sales to cover it. It’s simple math. At a profit margin of 6%, it would take more than $33 million in additional sales to cover a $2 million loss. Most companies don’t think of that until it happens to them. Before it happens to you, call UPS Capital. UPS Capital Insurance Agency, Inc. can provide a customized policy that covers losses up to their full sales value. Protect yourself before a problem becomes a disaster. upscapital.com

UPS Capital insurance Agency, Inc., and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. Insurance coverage may not be available in all jurisdictions. Insurance is underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. ©2017 United Parcel Service of America, Inc. UPS, UPS Capital, the UPS brandmark and the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved. *Business Continuity Institute and Zurich Insurance Group, 2014 Supply Chain Resilience Survey

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FEATURE

By John R. Yuva

Consumers Sit in THE E-COMMERCE DRIVER’S SEAT With a host of customer fulfillment channels, the retail supply chain is in reactive mode.

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ince the emergence of the first department stores in the 18th century, the barriers between the physical and digital retailers have faced the same challenge— storefronts blur—resulting in channel-agnostic meeting customer expectations. Using consumers,” says Zaballos. “With the touch of a storefronts with exquisite window displays to lure finger, consumers are engaging with retailers and passersby evolved into more complex strategies to brands on their own terms through apps, mobile attract and retain consumers, as shopping malls and sites, product reviews and social media—even big-box retailers consolidated the retail experience. while they are shopping in-store. They view all Today, retailers are experiencing a new phase in the interactions—both online and offline—as a single industry as e-commerce and m-commerce reshape experience.” the supply chain and customer focus. What was once an industry responsible for driving consumer FULFILLMENT EXPECTATIONS EVOLVE strategies is transforming into one that is customerWill Binns, senior consultant for led and demand-oriented. FitForCommerce, a boutique digital and In the e-commerce and omnichannel consultancy, says m-commerce world, retailers are customers today expect a fully facing new operational and customer seamless process across all channels challenges. Pete Zaballos, senior vice and throughout the end-toNearly all leading president, chief marketing officer end process. The immediacy of retailers in the U.S. have for SPS Commerce, says before m-commerce requires accuracy and mobile-optimized sites. e-commerce came into play, retailers Source: FitForCommerce 2017 Annual Report low latency of data availability across were in control of merchandise at the all locations: in-store, distribution store and category level. They presented an array centers and throughout the supply chain. Customers of items on the shelves and expected consumers expect products to be available immediately in-store, to shop from what was offered. For the first time or shipped next-day, or even same-day. in the history of retail, the consumer is setting the “M-commerce powers in-store competitive course, and the retailer is the one on the chase. shopping. If a product or specific SKU is unavailable “Technology and mobile device advancements in-store, shoppers can quickly check online during the last decade have redefined retail as availability from you and your competitors without

95%

6

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rely on supplied devices is critical,” says Coates. “Having a strong sense of your customer segmentation enables you to tailor the desired experience when it’s rolled out.”

SYSTEM INTEGRATION FOR GREATER VISIBILITY

engaging a sales associate. Siteto-store, store-to-store, and delivery options need to be available and seamless to prevent loss of sales,” says Binns. Amazon, to a large degree, has set the bar for customer expectations, says Glen Coates, founder and CEO for Handshake, a B2B e-commerce platform provider. The availability of same-day delivery, for example, is driving the need for greater immediacy, which is placing pressure on traditional fulfillment models for many companies. “By going beyond the traditional, wholly-owned and operated model, distributors are attempting to create a more immediate customer and fulfillment experience relative to the competition,” says Coates. “And outsourced distribution models like Fulfillment by Amazon and similar services are filling the void of traditional models.” However, executing on that immediacy often requires understanding customer needs and segmenting customers appropriately. Coates explains that when companies initiate a web and m-commerce experience, it’s seldom a onesize-fits-all approach. There may be customers with high-order volumes or localized order requirements, while others are web or mobile focused in their buying patterns. “Even within a mobile experience, knowing which customers can implement a BYOD model versus those that

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Balance Inventory and Customer Demand How are retailers optimizing their sourcing decisions and aligning their inventory strategies? According to FitForCommerce’s 2017 Annual Report, to improve inventory planning and sourcing, retailers must:

WWLeverage tools that The complexities of include scenario modeling e-commerce and m-commerce and analytics. doesn’t end with customer WWOptimize sourcing segmentation. It’s just the strategies, supply and beginning. E-commerce served distribution network, as a disruptor to the supply transportation routing and chain. Zaballos says that prior inventory levels. to e-commerce it was much simpler and easier to track WWMatch supply to demand with near real-time product moving from the inventory visibility enabled manufacturer, to the distributor, for product-specific, eventto the retailer’s warehouse, level tracking. before arriving at the retailer’s store. The arrival of e-commerce WWStreamline customer and omnichannels, however, order, fulfillment and return transformed demand planning processes across your enterprise and supplier and inventory optimization network, regardless of strategies—and those strategies channel. continue to evolve. “Retailing has moved beyond WWImprove sourcing and separate omnichannel strategies supplier collaboration. toward one strategy that unifies Source: www.fitforcommerce.com/ the organization and its systems resources/whitepapers/ to create a seamless shopping experience for the consumer. To support this, some retailers are including a unified commerce platform as part of their omnichannel strategy,” says Zaballos. “Unified commerce enables retailers to use a centralized platform for all consumer engagement, providing them with a unified focus on the consumer across all channels, including digital and brick-and-mortar fulfillment.” Within the constantly evolving retail landscape, brands are orchestrating digital engagement across all channels and require complete visibility into the sell-through performance and demand of all retail channels, says Zaballos. “Retailers and brands now depend on moving beyond traditional data sources SDCExec.com | September 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE to gain a comprehensive view of their business to offer the seamless shopping experience today’s consumers demand. Legacy solutions focus only on in-store point of sale data and do not provide suppliers the meaningful insight they need to win across all of their retail channels.” Traditional enterprise systems often are unable to easily provide customer purchasing data and segment reports to track buying patterns and future demand, says Coates. He agrees with Zaballos that more retailers are turning to commerce solutions to complement their enterprise systems and transform the buying experience with richer analytics and business intelligence capabilities. “While back-end systems provide access to transactional data, commerce solutions can also provide analytics of user engagement behavior around the products you’re offering,” says Coates. “A company can launch a new product on its e-commerce website or local commerce app and extract customer data about their product engagement online or through campaigns driven across email, push or in-app notifications. Analytics from the user engagement and marketing data can help build a more complete and robust picture of customer intent.”

AMAZON 40% REACH

As of February 2017, Amazon was the most popular shopping app in the U.S., with a mobile reach of 40 percent, ranking ahead of local competitors Walmart and eBay. Source: Statista Zaballos adds that retailers are using solutions for analytics that share data and key insights throughout their entire organizations to provide a comprehensive view of demand. “This allows companies to better react to the rapidly changing market and emerging consumer needs across all retail channels. Visibility is crucial to enabling companies to easily and quickly make fact-based, data-driven decisions that increase profitability and maximize sales.”

COLLABORATION IS CRITICAL The key to visibility is collaboration, internally and throughout the retail supply chain. Due to customer demand and the need to remain competitive, companies want to fuse the experience of buying and selling into one interconnected solution, says Coates. Thus, they turn to an 8

e-commerce or mobile solution, which can introduce tension between sales and marketing teams that traditionally control and direct their own customer experience with strategies for which product lines are introduced and to whom. “Companies want to reap the benefits of meeting customer expectations with an e-commerce and m-commerce roll-out, while maintaining engagement between sales and marketing,” says Coates. “As an example, rather than send customer orders directly to fulfillment through the e-commerce application, there’s a review stage for sales to check the order for upsale opportunities and engage with the customer.” Coates adds that without a built-in collaborative workflow, companies can feel like they’re robbing Peter to pay Paul. When opening a new retail channel, it’s important not to undermine the ability to control sales and marketing that’s critical to the business. “This issue doesn’t just occur in a B2B environment but also in B2C where there’s integration between e-commerce and the point of sale,” says Coates. “You need to maintain a 360-degree view of the customer and the continuous retail experience to avoid a disconnect with in-store sales associates and what’s occurring online.” Zaballos says results of SPS Commerce’s 2017 annual benchmark study, conducted in partnership with Retail Systems Research, indicates that of the 500 surveyed retailers, suppliers and logistics companies, inventory visibility throughout the supply chain is the leading priority across the board for how retail businesses plan to enhance collaboration this year. “Our report also showed that order fulfillment execution continues to be difficult due to significant increases in order volume and complexity, with 53 percent of respondents expecting increased online orders,” says Zaballos. “Overall, the findings from this year’ report demonstrate the urgency of streamlining order fulfillment, the importance of real-time inventory visibility and the crucial role accurate item information plays in unified retail success. All areas where collaboration is a critical factor to successful execution.” Early identification of demand trends and quick reaction in the supply chain enable businesses to maximize customer satisfaction and profits by ensuring availability and minimizing over-supply and markdowns of underperforming SKUs, says Binns. “This requires collaboration across all

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FEATURE sales channels and the entire supply chain. Also, return and exchange processes in your operation are imperative to drive loyalty and customer satisfaction,” he says. “Dissatisfaction with the return process can drive customers to competitors quickly. Simple, flexible and collaborative processes can cement the customer relationship.” Robert Andris, director of business development for Avondale Décor, a manufacturer and supplier of kitchen and bath products to e-tailers, and client of SPS Commerce’s retail supply chain solutions, says collaboration has been the most critical element in establishing and building strategic relationships between the company and e-tail partners. In fact, Andris believes it levels the playing field for small companies like Avondale Décor that lack the resources of larger manufacturers. “Collaborating with e-tailers provides us with tremendous opportunity to sell to consumers who didn’t have access to our product in the past. What we lacked in a wide distribution network, e-commerce was able to solve.”

The company typically interfaces with one buyer who has a support team managing the relationship. “The e-commerce environment is continuously evolving. Thus, the partnership requires constant maintenance,” says Andris. “E-tailers that lack the infrastructure to support suppliers will have a difficult time being successful. Collaboration is everything. E-sales can decline quickly without alignment with your e-tail partners.”

FUTURE REDEFINES CUSTOMER EXPERIENCE As companies look to the future of e-commerce and m-commerce, collaboration will surely remain a staple for success. Binns says e-commerce and mobile commerce are making headway in new product categories at a rapid rate. Products from groceries to automobiles are seeing swift adoption of online buying channels. “Consumers expect availability of the exact item at the best price, fulfilled in the manner most convenient to them and in a best-in-class experience each time they

46% E-commerce is growing 23 percent yearover-year, yet 46 percent of American small businesses do not have a website. Source: Big Commerce

TOP WAYS TO COLLABORATE BETTER WITH PARTNERS NEXT YEAR The following details the importance retailers, distributors and manufacturers/suppliers place on collaboration to enhance their inventory data, attribute data and data analysis.

Provide visibility to available inventory Provide more or improved item attributes Analyze sellthrough data Increase product promotions Provide dropship fulfillment details Comply with trading requirements

65% 64% 60% 60% 57% 57% 60% 60% 65% 51% 68% 61%

43% 27% 29%

22% 24% 29%

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Retailer Distributor Manufacturer/ Supplier

Source: RSR Research in cooperation with SPS Commerce: Retail Insight: Moving Beyond Omnichannel

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FEATURE interact with a business,” says Binns. New innovative ways of doing business are emerging where technology is not the focus; but it plays a central role in customer fulfillment. Trevor Blumenau, founder and CEO of Voodoo Robotics, a warehouse automation solutions provider, says the purchase of Whole Foods Market by Amazon is an absolutely brilliant move. “It’s not simply Amazon moving into the food business, but rather Jeff Bezos understands it’s about quality. A customer who goes online to purchase a banana wants the finest bananas, so Bezos chooses the brand with the best reputation in food quality,” says Blumenau. “There are many types of innovative business models that are not necessarily technology-driven but will have an important impact on distribution channels for e-commerce and m-commerce.” And what does lie on the horizon for technology? At Handshake, Coates is witnessing the possibilities of fusing mobile technology with artificial intelligence (AI)- and Internet of Things (IoT)driven experiences. Consider a food and beverage company that receives 30 percent of its orders via text message, says Coates. A solution with a chatbot, AI-driven experience that operates via text on customers’ mobile device opens many options. An example, says Coates, is a restaurant chef who texts his or her supplier at 2 a.m. to deliver 10 pounds of mushrooms later that day without a salesperson ever opening the message; AI processes the text order and product delivery. Or pick up a cell

FACTORS EXPEDITING OMNICHANNEL STRATEGY & EXECUTION With the threat of losing customers due to unavailable product or lack of service offerings, retailers cite competitive and consumer pressures as the drivers to expedite their omnichannel implementations. Source: RSR Research in cooperation with SPS Commerce: Retail Insight: Moving Beyond Omnichannel

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Competitive pressures

60% Consumer pressures

Sales growth from initial projects

50%

45%

Industry expert advice and recommendations

Executive mandate

29%

29% Partnering with logistics firms

18%

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phone to ask Google for the mushroom delivery, and a chatbot responds recommending an order of onions as well based on the chef ’s ordering patterns. “It’s fusing the traditional world of contacting sales to place an order with the technology world that responds to customer demands in a natural language and beyond,” says Coates. What makes this all possible, explains Coates, is the level of penetration of modern mobile platforms (iOS and Android). The general population has now reached its saturation point where BYOD m-commerce strategies are viable. It’s an opportunity for companies to bring those strategies to their customers and leverage mobile commerce innovations ahead of the competition. Coates says the differentiation value can best be described through Uber and Lyft. “The immediacy and convenience of using a smartphone to order a cab through Uber and Lyft versus calling the cab company is subtle, but massive in terms of the business value it created. I encourage companies to think about that dynamic in their own business,” he adds. “How can you become the Uber or Lyft in your category, using mobile to enhance or transform the customer experience?”

Cloud technologies

24%

Increased budgets

22%

Partnering with technology firms

23%

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PLM BORATI ON LLA CO

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AL

L -I N - O N E

QMS

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MADE IN AMERICA By Amy Wunderlin

Q Products Stitch Together

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titched with love may sound a bit farfetched coming from a manufacturer, but for Q Products and Services (QPS) nothing could be truer. QPS manufacturers passive thermal protection products, which protect temperature sensitive commodities in transit for the pharmaceutical, food, beverage and chemical markets. Their most popular passive thermal protection products include PalletQuilts, CargoQuilts and ThermaPaks, which are all produced at a recently renovated facility near Chicago, Illinois. Part of the 20plus companies parented by familyowned LANCO International, most recognized for Mi-Jack Products, QPS is proud of its rich American history. “To us it’s more than a quilt. We’re giving temperature protection to industries that need solutions to better retain product freshness. Plus, these products are quality-made in the United States by skilled employees,” says Paul Yadron, vice president of sales at QPS. Adds Kevin Lynch, director of sales, food and beverage, at QPS, “Jack Lanigan Sr. made manufacturing a top priority when he founded the company in the early nineties. He believed that if we were going to put our name on something, we should control how that product is produced. That was really important to him.” And because QPS manufactures everything in house, they do have total control—start to finish—and with that, the flexibility to offer customized solutions for their customers. Backed by the strength of LANCO 12

the American D

International, they have ample resources to react quickly and sustain future growth. Yadron believes you control your own destiny in manufacturing, and maintaining every aspect of their supply chain locally —from sourcing to shipping—plays a large role in providing a quality product for QPS customers. “People like seeing our product is made in facilities that are pristine, and that quality controls are consistent,” he adds. Lynch notes that QPS customers also like knowing they can visit and see the products and understand firsthand how they are manufactured.

AUTOMATION IS NOT THE ENEMY QPS continues to develop cost saving solutions for transporting temperature sensitive commodities every day, with a game-changing line of new proprietary passive thermal protection products set to hit the market later this year. The manufacturer also has expanded its product line to include innovative

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n Dream

a growing demand for the products QPS Manufacturing today may not be offers. And with that growing demand, what it was 20 to 30 years ago, but it came room for improvement. still exists in American communities About three years like the one QPS ago QPS invested in calls home. automation with state-of“We are always the-art sewing machines looking for ways to boost efficiency. to improve our Automation can be a manufacturing scary word to skilled process, and while laborers, but once QPS manufacturing has employees understood the changed over the need for automation, they years, it is still here, quickly got on board. providing great jobs,” “Adding automation in Yadron says. the flow of manufacturing “Yes, there’s really improved operations automation; yes, there’s and the wellbeing of new ways of doing our employees,” Yadron things. But it’s to — PAUL YADRON, QPS explains. “Once employees improve the process and understood the need for provide jobs,” he adds. automation because the company was “It’s important our customers know we growing, they were excited because it can react quickly to meet their needs, meant more job security.” and automation combined with skilled employees, gives us the ability to Though automated exceed expectations.” sewing machines play

ONCE EMPLOYEES UNDERSTOOD THE NEED FOR AUTOMATION BECAUSE THE COMPANY WAS GROWING, THEY WERE EXCITED BECAUSE IT MEANT MORE JOB SECURITY.

a role in the creation of QPS products, much of the production proccess is still done by hand. Industrial sewers, like those shown here, offer an invaluable skill set.

And not only has QPS’ growth provided more job security, it continues to create more job opportunities. The company has grown from just under 30 employees to more than 70 in the last few years. “The machines increased efficiency so much that we needed our industrial sewers more than ever,” Yadron says. “There is a skill level to the industrial sewer that is irreplaceable.”

internal trailer smart locks and wireless temperature monitoring technologies—but it’s bread and butter remains its handmade quilts. Consumer demand for fresh perishable goods, which often comes with temperature sensitivity and regulatory pressure due to the implementation of the Food Safety Modernization Act (FSMA), has created

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HOME GROWN OPPORTUNITY Manufacturing state side can come with its challenges, but QPS only sees opportunity. “Our business is growing because the passive thermal protection industry has seen more acceptance amongst shippers, carriers and logistics providers as an alternative option to secure product integrity,” Yadron says. And above all else, U.S.-based manufacturing means creating jobs in the community and giving people opportunities close to home. “Manufacturing is alive and well in the south suburbs of Chicago, providing jobs, producing quality products and ingrained in the community and its continued growth,” adds Yadron.

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ADVERTORIAL

By: Kit Boyd, Chief Operations Officer, Neovia and Tim Garfield, Vice President of Logistics Services, Neovia

UNTAPPED POTENTIAL: Optimizing Your Inventory

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oday’s clients are looking for their 3PL partners to deliver enhanced, data-driven insight into their supply chains, so they can control and improve their costs and deliver better service to their customers. Traditionally, many companies have had a heavy focus on transportation and warehousing; however, one of the largest improvement opportunities can be achieved by taking advantage of today’s more advanced planning capabilities to better manage inventory. Perfecting the balance of minimal on-hand inventory while simultaneously increasing availability to customers maximizes the use of working capital and brings a competitively advantaged customer experience.

THE EVOLUTION OF INVENTORY OPTIMIZATION Over the last 10 years, inventory planning has transformed dramatically. Past practices focused on optimizing a single node, were very static by nature, and were not capable of responding to rapid change. There was a heavy reliance on manual processes, spreadsheets, and planner discretion that resulted in significant inefficiencies, often leading companies to overspend on inventory - or worse yet, to run the risk of dissatisfied customers. Today’s supply chains are far more complex, but with the right strategy, processes, tools and people, the opportunity to optimize inventory is greater than ever. To remain ahead of the competition, companies need to take advantage of planning automation and sophisticated software offerings to optimize their inventory across all echelons of the network. 14

A SIMPLE INVENTORY OPTIMIZATION FRAMEWORK While each company will have different inventory challenges and needs, this simple three-pronged approach gives companies a way of thinking about what matters when it comes to inventory optimization. 1. STRATEGY: Successful inventory optimization begins with defining business and customer service goals. These goals set the stage to evaluate multiple scenarios and tradeoffs between cost and service, as well as to assess current processes and technology to determine if investments are needed. Clear direction on parts strategy is essential to an efficient supply chain. However, agility and flexibility are key, since the ideal network solution today is unlikely to remain optimized forever. 2. EXECUTION: While companies often employ consultants and software to determine what is achievable, this creates a gap between modeling and execution. This is where a 3PL with capabilities in both strategy and execution can deliver improved outcomes by using proprietary configuration technology to implement the best possible solution.

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CASE STUDY At Neovia, for example, we use SAP’s Service Parts Planning (SPP) system for global, multi-echelon companies and a proprietary system for smaller, standalone locations. Coupled with the powerful predictive analytics of our simulator, each system can be optimized to make best use of the forecast models, to decide which parts to stock and to efficiently allocate investment. Set up correctly and in stable business conditions, the system can do 95% of the work with little interference required. 3. PERFORMANCE MONITORING: As with any aspect of business, measurement and analysis are crucial. Advanced analytics can provide a detailed view of your business, enabling 3PL partners to add value beyond simply managing warehouses and transportation. With constant monitoring of KPIs and metrics, combined with advanced analytics, areas for change and continuous improvement can be easily identified. Some change might incrementally deliver improvements at an individual SKU level, but when significant business change occurs (e.g. large shift in demand, adding new warehouses, changing supply), performance monitoring enables 3PLs to reoptimize the inventory through simulation, taking the business back into the strategy phase of the cycle.

For more than 25 years, Neovia has provided spare parts logistics for a world-renowned automotive manufacturer. In the spirit of continuous improvement, Neovia implemented a new best-of-breed inventory planning solution to replace Neovia’s global, multi-echelon legacy system. Together, Neovia’s proprietary simulation technology and unique inventory planning system could further optimize fill rates and increase the performance of the supply chain.

SAP SERVICE PARTS PLANNING & NEOVIA’S SIMULATOR

SAP’s Service Parts Planning system was specifically developed to meet the complex forecasting, inventory planning, procurement, and distribution requirements of expansive, global multi-facility service parts supply chains. Neovia’s proprietary simulation technology allows clients to test millions of parameter and configuration combinations to determine optimal settings and seamlessly transfers them into the SAP Service Parts Planning production environment.

CHALLENGE

THE PAYOFF Inventory optimization is a source of untapped potential for many businesses, and the payoff can be significant. By optimizing their inventory, businesses can achieve:

›› Improved cash flow ›› Higher levels of customer service and satisfaction ›› Stronger performance throughout the supply chain ›› Improved velocity and productivity ›› Reduced inventory and related costs (e.g., storage, transportation, handling) ›› Improved space density As products and corresponding supply chains evolve, inventory planning and optimization must evolve as well. Even with advancements in 3D printing and robotics, companies will continue to manage inventory from manufacturer to end user for many years to come. To tap the full potential offered by inventory optimization, we recommend coupling simulation technology with robust processes and a culture of continuous improvement. To see these best practices in action, please reference the case study sidebar.

LEARN MORE ABOUT NEOVIA’S ABILITY TO MANAGE UNTAPPED POTENTIAL THROUGH INVENTORY OPTIMIZATION: www.neovialogistics.com/services/inventory-optimization

WWSeamlessly replace the legacy inventory planning system WWMaintain existing parts availability fill rates WWProvide enhanced functionality and capabilities to drive future benefits WWReduce inventory

SOLU TION

LOOKING AHEAD

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Neovia Inventory Optimization

Moving to SAP Service Parts Planning offered dramatic improvements and functional enhancements to benefit the client’s network. Neovia ran both systems in parallel for several months to ensure the system performed as expected in the real-world production environment with full inventory volume. Joint like-for-like tests were also conducted to validate forecast statistics, supplier schedules, and deployment volumes across the network.

RESULTS

The implementation was a resounding success producing no major system outages or negative impacts to the client’s customer network. It also drove tremendous results for the client’s distribution network as seen in the results taken 6 months after go-live. With the foundation of SAP Service Parts Planning in place, Neovia is now applying additional functionality to drive even greater benefits throughout the spare parts supply chain. Key result metrics include a:

WW7.1% reduction in total supply chain inventory WW0.5% increase in global network facing fill WW20% reduction in dealer back orders WW6.3% forecast accuracy improvement

SDCExec.com | September 2017 | SUPPLY & DEMAND CHAIN EXECUTIVE

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SPECIAL REPORT THE INTERNET OF THINGS

by Amy Wunderlin

SHOW ME THE MONEY:

IoT AND THE SUPPLY CHAIN How successful companies apply IoT data to produce measurable results.

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s the Internet of Things (IoT) becomes more ubiquitous throughout the supply chain, more useful data is being captured. The challenge is applying the intelligence and analytics to produce measurable results. Some companies have been successfully doing it for decades, but on a smaller scale. UPS and other major distributors have used barcodes, ruggedized handheld scanners and wireless networks to optimize their supply chains and improve service. Beyond distribution channels, however, IoT is seeing new life on the manufacturing floor. “IoT technology is revolutionizing supply chain management across many different vertical markets, allowing improvements in efficiency, productivity and profitability,” says Chris Moorehead, IoT sales for Gemalto, an an international digital security company. “Successful companies are using IoT systems and data to make informed changes to their processes that result in better products, reduced development time and resources, more effective customer service, and improved security.” Another reason for the surge in IoT-related data analysis adds Jeffrey 16

Shorts, chief information officer for third-party logistics provider Neovia Logistics, is the lower costs associated with its vast acceptance in the supply chain. “Many of the benefits of IoT have been around for a while. It is of greater interest now given the scale, lower cost of entry and commercialization of the platform,” he says. “Previous business cases can now be dusted off and reexamined in light of the lower capital costs.”

DATA TYPES Moorehead explains that both the challenge and key to success in smart manufacturing is connecting equipment, integrating diverse industrial data and securing industrial systems for the entire lifespan of the equipment. “The most successful companies are using embedded systems and cloudbased solutions to instantly analyze data to drive real-time actions,” he adds. “Results are measured in terms of cost and time savings, improved productivity and efficiency, and increased profitability. The reach of the IoT is vast, and the possibilities are truly endless.” The type of IoT data being used throughout the supply chain varies by vertical market, but can include energy

consumption and production data, as well as GPS data temperature, tracking and vibration. “The types of data collected and utilized are determined by the user based on what is most beneficial to their business optimization,” says Moorehead. “In supply chain management, IoT data are being used to improve the entire company’s ecosystem and its interaction together—from design, to manufacturing, to distribution and logistics, all the way to sales.” In design, he says, companies like Amazon are using social data and ordering histories to better understand product requirements. They also can use sourcing data, to identify which components and manufacturing variables led to the highest quality and/ or lowest priced products. “Understanding your product demand and flow in real-time enables you to meet customer needs, and avoid the pitfalls of overstocking items in lesser demand,” adds Shorts. In the manufacturing plant, data are collected from sensors throughout the floor to analyze operational performance and determine optimal parameters and keep manufacturing lines running at peak performance. Distributors have been using IoT data from fleet management and monitoring solutions to dynamically reroute trucks and improve distribution

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SPECIAL REPORT THE INTERNET OF THINGS networks, saving time and money, while keeping the end customer in the loop on when they can expect their shipments.

DATA COLLECTION IoT data are collected through sensors and systems and sent to cloud-based applications that analyze it and transform it into meaningful information that companies and individuals can use to make better decisions. Data are indexed, analyzed and stored at various points throughout the ecosystem—in embedded system devices collecting data, in the cloud within IoT enablement platforms that receive data SUCCESSFUL and merge it with COMPANIES contextual data, and ARE USING IOT in backend systems SYSTEMS AND that receive IoT data. DATA TO MAKE Redwood Logistics, a INFORMED full-service CHANGES transportation TO THEIR brokerage that PROCESSES THAT RESULT specializes in moving freight throughout IN BETTER North America, has PRODUCTS AND REDUCED built its business DEVELOPMENT model around data movement—whether TIME. it be from an IoT— CHRIS MOOREHEAD enhanced device or an onboard electronic logging device (ELD). “We’ve taken an IoT data pipeline approach to everything we do, says Redwood Logistics’ chief information officer Eric Rempel. “We’ve reengineered our entire connectivity platform to an API-led architecture, where we can receive and connect data from anywhere and to anything, and enrich that data, as well as pump it into a data warehouse.” In the past, he adds, most business’ data warehouse endeavors have been more of a data swamp than a data lake 18

because the data just sits there. You might be dumping all of your data into the cloud bucket or into a database, but the question is: Do you know how to access it? And is it performant, so that if someone has an analytical business question, you can answer it quickly and easily without the IT department getting involved? Rempel adds, “We’re trying to move all of that data away from IT to line-ofbusiness users.” And while Redwood Logistics does not leverage a lot of IoT devices (IoT devices are probably sending in about less than 5 percent of the data they collect), the end goal is having the ability to capture data no matter the source and index it, while also replaying and enriching it later at high speeds.

Chirs Moorehead, of Gemalto, recommends four fundamental elements to effectively secure all IoT applications and markets:

WWAuthentication/

identification—Each device in the IoT ecosystem needs to be able to identify itself and prove its entitlement to access the system.

WWConfidentiality—

Data transmitted must be encrypted effectively, ensuring it has no value to anyone stealing it.

WWIntegrity—Companies

must ensure that what is sent is what is meant to be sent.

WWNon-repudiation—

Companies must have incontrovertible proof of the validity and origin of all data transmitted.

SECURITY RISKS Arguably, the biggest challenge facing the IoT today is one of security. Over the past few years, IoT products and processes have progressively gained momentum in nearly all sectors. Therefore, the risks associated with IoT also have increased. At Allianz Global Corporate & Specialty (AGCS), a large part of the insurance provider’s job is to underwrite, examine and prevent said risks, explains Jenny Soubra, U.S. head of cyber and tech E&O at AGCS. “IoT, specifically, generates an exponential amount of information. One of the biggest challenges is that many companies cannot quantify how much data they have and where inside or outside their network it is stored, accessed or passed through,” says Soubra. “Additionally, a manufacturer, for example, may have multiple data feeds from different sensor-embedded automation technologies that need to be integrated with each other. We analyze how organized and available the data are, what potential liability is involved if it’s unsecure or under

protected, and what damage may be done if the technology malfunctions.” Soubra says AGCS encourages its clients to utilize integrative technology platforms and consultants, such as dashboard management, to sync all processes most concisely. There are a number of technological solutions by way of risk management, which include automated technology or the use of cloud dashboards, to monitor devices and ensure there are kill switch and override options to avoid manufacturing delays and damage. Most popular now, Soubra says, is the potential to integrate and leverage machine learning/artificial intelligence into this process to understand patterns. Machine learning allows companies to identify this in real time, or even preemptively, and implement appropriate solutions. “Companies with a strong understanding of the storage, nature and integration of data are most successful in producing measurable, actionable results from both a product and security perspective,” she adds.

SUPPLY & DEMAND CHAIN EXECUTIVE | September 2017 | SDCExec.com

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SPECIAL REPORT PROCUREMENT

By Barry Hochfelder

GETTING A HANDLE ON INDIRECT SPEND Its importance can’t be overlooked, so make sure a system is in place.

I

t’s human nature to concentrate on what we deem most important while shrugging off—or at least paying less attention to—other tasks. On a personal level, that can be good, but in business, maybe not so much. When it comes to direct spend versus indirect spend, procurement professionals face a challenge. They know indirect is important, but its impact on the bottom line often is overlooked.

GET AHEAD OF INDIRECT “Indirect spend is related to the categories crucial to operating a business,” explains Michael Jud, director of product marketing at Tradeshift, a cloud-based business network that connects buyers and 20

sellers. “By contrast, direct spend accounts for the raw materials and components required for production. Because directs are more vital to a company’s business and value proposition, such as quality, on-time delivery and customer satisfaction, they are managed more closely and inventoried.” On the other hand, indirect spend is not managed as closely, yet is still necessary to do business, Jud adds. That includes IT equipment; office supplies; and maintenance, repair and operations (MRO) replacement parts. In some cases, such as MRO, where parts and services are critical to keep production going, indirects can be inventoried and managed like directs. Direct purchases generally are forecast, scheduled and ordered

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SPECIAL REPORT PROCUREMENT

one-time suppliers, online purchases, event marketing and emergency spend, referred to as long-tail spend, are not usually on procurement’s radar.

GAIN SPEND VISIBILITY

SAP Ariba looks at spend a bit differently than many procurement software companies, according to Lorne Jones, senior director of market programs. “We have a new way of looking at spend—you shouldn’t silo, but instead have a single process in a CURB YOUR MAVERICK SPEND standard system,” he says. “Looking at It’s not easy to get all suppliers things like MRO items and services on the same page, regardless of the as being necessary, but not critical, is purchasing tools available. a mistake. MRO is really important. “Solutions today enable [Consider] airlines, construction, ships procurement to guide users to the and industrial. If a right process, policy, piece of equipment supplier and so on,” goes down, it says Jud. “However, can compromise many systems often your operations. are challenging Where do you find to use, leading to replacements?” users who bypass For SAP Ariba, the system in favor that means not of something more referring to spend user-friendly—a as direct or indirect. phone call, red card One of SAP Ariba’s or online purchase. clients, a large The systems lack European retailer adoption.” Often, the with revenues of answer is to purchase — LORNE JONES, SAP ARIBA more than $63 from consumer billion and 15,000 sources, such as suppliers, wanted to gain control of its Amazon, Staples or Home Depot. $4.5 billion in indirect spend, as well “You’ll hear people say, ‘My as centralize and standardize its spend employees can shop online at Amazon processes across thousands of sites. with no training. Why can’t they do it at It also wanted to improve supplier work?’” he adds. “Solutions are creating management. that Amazon experience, and at the “Visibility is mission critical,” Jones same time, driving compliance. The says. “Everything is depending upon spend visibility they also get with the external suppliers, so it’s critical that solutions allows procurement to create a you bring everyone into your planning better deal the next time they negotiate system. We have a whole catalog with suppliers and/or realize the rebates of indirect spend categories, with after they reach a spend threshold.”

VISIBILITY IS MISSION CRITICAL. EVERYTHING IS DEPENDING UPON EXTERNAL SUPPLIERS, SO IT’S CRITICAL THAT YOU BRING EVERYONE INTO YOUR PLANNING SYSTEM.

with automated processes, while indirect materials are likely bought by individuals who need the parts. And that’s where the challenge lies, Jud says. “Some companies have thousands of employees that need to buy things for their jobs,” he points out. “Procurement and accounts payable (AP) are tasked to ensure employees keep to budgets, supplier agreements and company objectives, such as sustainability, diversity spend, savings goals and contract compliance. It is procurement’s job to create the supplier relationships that achieve company goals.” Procurement generally lacks the time and resources to account for all spend categories, Jud adds. So, they manage the most critical spend categories— spend under management. However, such things as infrequent purchases,

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a requisition approval process, and governance and rules to control spend.” The solution enables the retailer to control $3.5 billion of its $5.3 billion annual spend on indirect procurement. It realized increased savings from standardization and better-quality information for purchasers, effectively managed all indirect spend, and most importantly, established a consistent approach for all buyers and users.

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SPECIAL REPORT PROCUREMENT

HAVING A STRONG, USER-FRIENDLY SYSTEM IN PLACE DRIVES RULES AND GOVERNANCE, AND GIVES VISIBILITY INTO APPROVED SUPPLIERS. To help its customers deal with long-tail spend, Tradeshift created an app to offer the convenience of a credit card, with the control of a procurement system. “Where long-tail is not managed well today, companies can use Tradeshift Go for users to identify their fund request,” Jud explains. “After a collaboration and approval, the user is given a virtual card to make the purchase. The spend now is visible, and follows the company’s procurement policies.” Another challenge, Jud says, is having the right content in place. Companies are dependent on suppliers for the content and keeping it updated. Tradeshift’s network approach, which

makes it easier for suppliers, allows them to support their customers and promote their products and services with the latest content and pricing. Having a strong, user-friendly system in place drives rules and governance, and gives visibility into approved suppliers. Jud points out a few examples: ❯❯ A catalog that contains contracted, approved and preferred suppliers with the right pricing. Catalog content also can include policy items—what’s the right policy or process for the spend? ❯❯ Spend over time that allows procurement to recognize when they achieve spend thresholds for volume discounts. “I’ve seen companies build spreadsheets over a few weeks to determine if they should be getting discounts or rebates,” Jud says.

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SPECIAL REPORT PROCUREMENT ❯❯ Workflow to make sure the spend is approved by budget owners, by people with the right spend authority, and by people who know the category, such as IT approving computer purchases. ❯❯ Two- and three-way matching processes to make sure that invoices are paid based on what was actually ordered and received. The right price in the purchase request improves downstream process efficiency— downstream doesn’t need to correct invoices, for example. The invoices can be paid in a timely

manner, and the company will have more time to look at options for better cash management. Some Tradeshift customers are using the platform to create their own marketplace. For example, logistics providers that secure pricing deals on tires can offer their contracted rates (plus a margin) to anyone looking for a better tire rate. Jud adds: “We have many companies invested in building their own marketplaces to offer their contracted rates, orchestrate multiple business units (or across franchises) and orchestrate their own value chain.”

THE RIGHT PRICE IN THE PURCHASE REQUEST IMPROVES DOWNSTREAM PROCESS EFFICIENCY— DOWNSTREAM DOESN’T NEED TO CORRECT INVOICES.

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ABOUT THE AUTHOR BARRY HOCHFELDER is a freelance journalist who has covered a variety of industries in his career, including supply chain. He also served as the former editor of Supply & Demand Chain Executive. Hochfelder is based in Arlington Heights, Illinois.

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SPECIAL REPORT TRADE FINANCE

By Sean Riley

HOW BLOCKCHAIN IS POISED TO IMPACT SUPPLY CHAINS The supply chain is becoming increasingly reliant on secure digital technology.

In a nutshell, a blockchain is a neutral, transparent and unalterable database, living in multiple locations and shared by a community.

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lockchain is set to shake up supply chains—in a good way—by streamlining secure communications between manufacturers, logistics suppliers and third-party partners. It is no secret that supply chains around the world are becoming increasingly digital. New technologies, such as the Internet of Things (IoT), 3-D printing and robotics, are fundamentally changing the way goods are produced and distributed, with new solutions popping up every day. Blockchain is already making waves in other industries, but so far, has arrived to supply chains with little fanfare.

permanently, ensuring everyone on the ledger’s network sees the same history as everyone else. In a nutshell, a blockchain is a neutral, transparent and unalterable database, living in multiple locations and shared by a community. Does this mean that Bitcoin is the global currency of the future for supply chain and trade payments? Most likely not, but the Blockchain concept can be applied to global supply chains to facilitate better, more efficient interactions.

WHAT IS BLOCKCHAIN?

TRANSPARENCY

Blockchain is the core system that underpins the cryptocurrency Bitcoin. It is a ledger of records structured in data groups called blocks, which use secure cryptographic validation to connect themselves together. Put simply, each block references and detects its predecessor by a hashing function, creating a continuous chain. What makes this data chain noteworthy is that the ledger is not stored in any one master location or managed by any one body, but rather is distributed among numerous bodies. The data exists on multiple computers at the same time, allowing any vested entities to have access, with all parties sharing visibility of the records. Blockchain preserves old transactions forever, and adds new ones to the chain

International trade payments, tariffs and taxes depend upon exact, precise documentation. Specifically, when a document is created for an export and sent to a trade bank or government, that exact same documentation format and ledger has to be used for the import portion. Any discrepancies allow the import bank to withhold payment until the issues are resolved. Though it usually is not more than a matter of days, when compounded by a massive amount of global imports and exports, the finance matter becomes extremely relevant. One immediate benefit of operationalizing blockchain focuses on recent weight regulations, which require shippers to verify the actual gross mass of packed containers before

SUPPLY & DEMAND CHAIN EXECUTIVE | September 2017 | SDCExec.com

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SPECIAL REPORT TRADE FINANCE

COMPLIANCE

SAFETY & SECURITY The impetus behind the VFW regulations is to enhance safety by controlling shipping weights. Implementing blockchain allows items to be added for verification without the possibility of data tampering in the chain by any invested parties, ultimately helping to optimize safety for shippers by holding all parties accountable. It is virtually impossible to “hack” a blockchain because every block is dependent upon the previous block, and verification of an added block is incentivized. With Bitcoin, the first person to authenticate a block receives a small bitcoin payment, but this also could apply in the form of other currencies. To “hack” a chain, the hacker has to go back and change all of the verified blocks previous to theirs, and then change all of the blocks being added to the chain after theirs.

they can be loaded onto a ship. Verified gross weight (VGW) is becoming a nuisance for many shippers as it drives up costs, and they struggle to adapt to the new requirements. When a shipment is weighed and entered once, the VGW is very difficult to manipulate by any further parties. Blockchain is not widely understood yet by shippers and manufacturers, but it will be a great tool for complying with these new regulations by holding them responsible for misrepresenting the weight on a product. Through blockchain, weights can be logged first at the factory, then again by shippers at the beginning of a shipment, and so on at each stop when items are loaded or unloaded. All parties on the chain see the same data, without the ability to alter it.

Blockchain is not widely understood yet by shippers and manufacturers, but it will be a great tool for complying with these new regulations by holding them responsible for misrepresenting the weight on a product.

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In the past, freight forwarders or other entities have manipulated shipping weights to pay smaller tariffs and lower shipping fees. Traditionally, those changes on paper documentation are difficult to find, but not through blockchain, where each party can see if an event does not correlate to an earlier event. Ultimately, it significantly assists in the identification of supply chain fraud. If blockchain is used as a new communication hub between manufacturers, providers and regulatory authorities, operations will be streamlined. From a payment verification perspective and goods verification perspective, organizations will not be able to cheat the system by misrepresenting goods, tariffs, taxes and entire shipments. The basic advantage of blockchain is that no single company has control. Questions of transparency and accountability between bodies whose interests are not necessarily mutual are quashed. With important data being updated in real time, the need for arduous, faulty reconciliation with each other’s internal records is removed. Each member of the network has far better visibility of the total activity. In an industry dominated by an array of complicated regulations, maritime law and commercial codes, the supply chain is becoming increasingly reliant on digital technology to maintain successful operations. Secure technologies such as blockchain are sure to continue streamlining the channels of communication throughout the supply chain. ABOUT THE AUTHOR SEAN RILEY is the global industry director of manufacturing and transportation at Software AG.

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EXECUTIVE FOCUS

Industry

{ TRANSPORTATION}

By Amy Wunderlin

Recycling

SUPPLY CHAIN IN REVERSE The challenges of navigating reverse logistics in an e-commerce world.

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ost think of the supply chain as a forward-moving process with one end goal—getting product into the customer’s hands. But the growth of e-commerce and greater consumer awareness has created new challenges not only in moving a product forward but also backward. The days of a linear supply chain have long passed, making way for a circular economy, where your supply chain’s reverse logistics are just as important as its forward movement. According to the Reverse Logistics Association (RLA), the term “reverse logistics” refers to all activity associated with a product or service after the point of sale, with the ultimate goal to optimize aftermarket activity, thus saving money and environmental resources. “If you build and design products for cradle to grave operation, they’re built in a factory, shipped, sold and eventually, when they stop being useful, end up in a trash heap,” explains Tony Sciarrotta, executive director, RLA. “You can look at that process in many ways. While it’s not environmentally sound, it’s also a bad business decision. If you can recover assets from the product at the end of its life, by reusing, rebuilding or refurbishing it— anything that you can do to bring that product back to life— not only is it avoiding landfills but also protecting assets and resources. We used to call it sustainability, but it’s become more than that.”

REVERSE LOGISTICS Collection & Selection End

User In today’s supply chain, when a product reaches end of life, the question has become: What else can you do with it? What can you do with this product instead of disposing it? Sciarrotta says there a number of answers to that question. “There is no one silver bullet in this gun. There’s a lot of them, again, depending on the product category,” he says. Walmart, he explains, is a great example of a circular supply chain. The retailer partners with third-party solutions providers, who say, “I’ll go to your warehouse, and sell the product right from your warehouse to an end consumer.” Some manufacturers, such as Nike or Peppermill, however, prefer to take product back, and then sell it themselves to secondary outlet stores like Big Lots or Bargain Outlets. Sciarrotta adds that currently there is a lot of creativity in the reverse logistics space “in the sense of using Craigslist, eBay or Amazon Warehouse for open box goods.” Linda Li, chief strategy officer at Re-Teck, which provides reverse

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TRANSPORTATION

Distributor supply chain management (RSCM) solutions for OEM and enterprise businesses in the technology, electronics and telecom (TET) sectors, notes that there is another side of reverse logistics, or reverse supply chain, beyond the more commonly understood retail space. The second categorization, Retail post-industrial recovery, pertains to supply chain assets that could be spare parts, situated anywhere along the supply chain network, such as a retail center, a distribution center, or even in the factory, but not yet in the consumer’s hands. “The post-industrial side is actually quite substantial as you can imagine,” Li explains. “Part of what Re-Teck does is make sure these assets are being handled properly, whether they can be repurposed or recycled in an environmental and socially responsible way.”

what to do with the item, based on the financial aspect,” emphasizes Sciarrotta. For example, as a manufacturer, if it’s a $50 pair of shoes being returned, is it worth it to pay for the shipping all the

way back to you? “That’s a financial decision, and the best companies are using good financial analysis to figure out what the disposition should be,” Sciarrotta adds.

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FINANCIAL MOTIVATION Whether your reverse supply chain is in the post-retail or post-industrial market, what to do with a return ultimately comes down to the bottom line. “You have to make these decisions of

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TRANSPORTATION

Once a financial decision is made, the disposition must be executed— whether the product is repacked and sold to a wholesaler, refurbished and sold online or sent to a liquidator and auctioned off to the highest bidder. Re-Teck provides leading technology brands, such as Microsoft, NEC, Amazon and Motorola, a simple solution to the complex issue by dismantling obsolete technologies and re-purposing valuable components into new devices. Re-Teck’s engineering teams consider the aftermarket value for devices; the primary market value for component parts such as screens, switches and chips, as well as the recycling value of metals; and extract the usable elements for re-sale to Re-Teck’s global partner network. Remaining non-usable parts are disposed of via highly regulated, compliant systems. “At Re-Teck we take the hard work out of doing the right thing,” says Li. “Our programs have been proven by the most demanding brands at the highest levels and have allowed our partners to deepen their customer relationships, strengthen their organizational/culture initiatives, maintain the highest levels of compliance and even return a profit. It’s a win-win for the brand, the customer and the environment.” Another player in the reverse logistics space is B-Stock, an online marketplace that offers liquidation auctions of excess inventory, customer returns and overstock inventory directly from major retailers and manufacturers. “In many cases, when products move backwards through the supply chain, they end up in a place where they can’t be re-entered into the forward supply chain and pushed back out to consumers again. Rather, they’re liquidated to the secondary market,” explains Howard Rosenberg, chief executive officer at B-Stock. “We 28

help (retailers and manufacturers) maximize the value of their inventory by selling it for them in a more efficient way than traditional liquidation … by building and managing online private auction marketplaces for these companies. These are online environments or websites, where each of our major enterprise clients can sell pallet loads and truck loads of excess inventory to small business buyers.” Traditional liquidation, Rosenberg says, can be inefficient. “If you talk to most retailers and ask them how they do it, the answer is something like, ‘Oh, I’ve got a couple of guys I sell to.’ And it’s all handled rather informally or inefficiently. Thus, we bring an efficient process that maximizes the value of all these products. So again,

IMPLEMENTATION Reverse logistics is a necessary part of the supply chain, but where it fits within an organization is a big question mark for many companies. Sciarrotta explains that ultimately, no matter where a company places the department, it is just important that it has one. “Many companies are starting to recognize that importance, so it isn’t a question of where does reverse logistics belong in an organization, but an understanding that reverse logistics should be a group within every product organization out there.”

FREEING UP

YOUR SUPPLY CHAIN A RETURNS DEPARTMENT OVERFLOWING WITH PRODUCT PUTS PRESSURE ON A COMPANY’S ENTIRE SUPPLY CHAIN—from inventory to transportation to employee satisfaction. A good reverse logistics plan allows your supply chain to focus on new goods for sale at the store, rather than the replenish and replace flow of returned product. “The supply chain focus should be on forward-moving, low inventory, just in time processes. Once you mix in returns within your facilities, things can turn badly quickly,” says Tony Sciarrotta, executive director of the Reverse Logistics Association. While employed in the reverse logistics department at Phillips, Sciarrotta says the electronics company had either separate warehouses or a designated returns location in their warehouses to keep that part of the supply chain separate. “You have to treat it as a reverse supply chain and not a forward supply chain,” he adds. In addition, removing reverse logistics from the forward supply chain, or running it as a separate entity, frees up staff who are more knowledgeable about how to move new goods efficiently.

“YOU HAVE TO TREAT IT AS A REVERSE SUPPLY CHAIN AND NOT A FORWARD SUPPLY CHAIN.”

“It’s not the same thinking; it’s a reverse mentality,” notes Sciarrotta. “It really is a reverse sale, and unless it’s thought of that way and treated that way, you can’t apply the same supply chain forward processing and thinking.”

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it’s squeezing margin out of this piece of the pie for the retailers, so that they can invest that back in their business.”

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TRANSPORTATION

According to Li, a lot of manual analysis is required to manage a reverse supply chain, so creating an in-house department tasked with handling returns is not always the most cost-efficient method. “(Re-Teck) exists because it is not economically efficient for (a company) to run a reverse logistics operation by themselves,” she says. “Having a reliable partner that can manage the reverse side for you is probably the best way to do it.”

E-COMMERCE IMPACTS The return rate at a brick and mortar store is about 8 to 9 percent, so in a $5 trillion retail economy, that is about $400 to $450 billion in returns. At the e-commerce level, return rates are three to four times that rate. The why’s and how’s of this phenomenon are many and brewing into what Sciarrotta fears is the perfect storm. “The growth is in e-commerce. The trend line is straight up— 15 to 20 percent a year. So, as the trend increases and the e-commerce world and the IoT (Internet of Things) make it more difficult for things to work with each other, you’re going to have a tipping point where we’re going to have a significant number of returns,” he explains. And though that tipping point is a bone of contention for retailers, e-commerce has affected reverse supply chain service providers, such as B-Stock and Re-Teck, in a much more positive way. Those Nike shoes or that twoyear-old iPhone being traded in must go somewhere, and often it is not traveling forward. “What drives our business is the volume of product that needs to be liquidated,” says Rosenberger. “One of the drivers of that is the volume of returns that are experienced—items coming back from consumers to retailers. That leads to more liquidation requirements, which means it becomes that much more important for retailers to squeeze every dollar by doing it as efficiently as possible.” Li adds: “Given how competitive e-commerce has made the consumer, having a very efficient reverse logistics or post-consumer take back platform or channel is becoming a strategic and important tool in selling new products.”

THE GROWTH IS IN E-COMMERCE. THE TREND LINE IS STRAIGHT UP—

15-20% A YEAR.

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EXECUTIVE FOCUS

{ WAREHOUSING}

By Toby Brzoznowski

THE KEY TO HOLISTIC INVENTORY OPTIMIZATION: SUPPLY CHAIN DESIGN

Supply chain design helps organizations deploy the most accurate and robust inventory strategy to maintain the balance between service and cost.

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or any organization, inventory inefficiencies can be disastrous. Optimizing inventory requires finding the elusive balance between cost and service—overstocks and lost sales in retail-speak. Unfortunately, many organizations are challenged with an incomplete view of their supply chain, which leads to an inability to quantify all stages of inventory (safety stock, cycle stock, in-transit inventory, work-in-process, pre-build and promotional positioning) and difficulty understanding SKU-level demand behavior. What compounds the problem is that most traditional inventory management applications are limited in scope, only focusing on safety stock settings, and even then, without proper segmentation of demand. In order to reach desired service levels at the lowest possible cost,

companies must step back and attain a holistic view of their inventory policies. This can only be achieved by modeling the end-to-end supply chain structure and policies, and modeling demand down to the SKU and site level of detail. This type of modeling is called supply chain design, and global leaders across every industry are creating centers of excellence to make supply chain design a key competency and competitive advantage.

TODAY’S INVENTORY OPTIMIZATION ROADBLOCKS The modern supply chain is an increasingly complex and volatile network that often stretches across continents and supports numerous market segments. Thus, the impacts of change are harder to determine, and the risks involved in being unprepared increase. Changes in demand and customer preferences, shifts in commodity prices, supply disruptions, variability in transportation availability, natural disasters, geopolitical change and regulatory issues all impact the flow of goods to market, and make it increasingly difficult for supply chain professionals to achieve end-to-end network optimization. As a result, inventory placement and

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WAREHOUSING

policies often are the last detail of the term effects of different supply supply chain view. However, the process supply chain to be addressed. Rather chain footprints, structures and does not end once inventory has been than analyzing the impact across the flow patterns. successfully optimized based on supply supply chain, companies are making It’s true that companies can identify chain design models—far from it. decisions in a vacuum, relying on millions of dollars in annual cost While supply chain design is inventory applications that fall short in savings through right-sizing inventory absolutely the critical component three key areas: levels. However, optimization to inventory optimization, it is not ❯❯ They assume that all demand is technologies have limitations to how a one-time experiment or event; smooth and normally distributed. well they can predict operational rather, organizations should establish ❯❯ They only consider safety stock performance under the stress of reala continuous process. The idea of for the existing supply chain world, day-to-day variability. The only running a model and then turning over structure. way to truly test the effects of these the inventory targets to their planning ❯❯ They do not simulate real-world multiple levels of variability is to use and execution systems is outdated; “set behavior or enable what-if analysis. discrete event simulation. Simulation and forget” does not work in a dynamic In contrast, supply chain design can digitally “run the clock” to fill each and volatile market. accounts for all variables and order and schedule each shipment to Leaders now are establishing a scenarios to help companies continuous design approach create effective strategies for and using the design models to While supply chain design is inventory, along with improved support the planning function. absolutely the critical component This approach ensures that customer service levels. to inventory optimization, it is not a companies are continuously SUPPLY CHAIN DESIGN reviewing and adjusting one-time experiment or event; Without a way to digitally inventory targets at the SKUmodel supply chain operations location level, rather than using rather, organizations should establish rules of thumb across broad and inventory policies, companies would need to categories, leaving shelves bare a continuous process. experiment in the real world, or backrooms overflowing with which is time-consuming, risky and provide detailed performance metrics, inventory. Once an inventory strategy cost-prohibitive. Supply chain design such as on-time deliveries, stock-outs has been chosen using optimization, enables companies to create living or capacity bottlenecks. it’s also important to continue using models of the end-to-end supply chain, The design approach also enables simulation to test it further, providing encompassing physical infrastructure, companies to analyze and properly validation that the new inventory policies, demand and inventory. These categorize demand, factor all aspects policies work as intended. models provide a true holistic view of of inventory for both existing and new For sustained success, inventory all the interdependencies and tradesupply chain structures, and simulate optimization needs to be thought of as offs throughout the supply chain. real-world behavior to enable true a repeatable process and organizational Issues addressed in the supply chain “what-if ” capabilities. Together, these best practice. If there’s one thing we’ve design process include: capabilities provide a prescription for learned, it’s that supply chains are ❯❯ Identifying demand patterns and the right levels of working capital across dynamic. With constant changes, static buying behaviors for each product a continuously-changing business on a inventory policies could be a huge and customer. detailed daily/weekly/monthly view. competitive disadvantage and lead to ❯❯ Determining the cost associated waste in the millions. with implementing different SUSTAINING AN ABOUT THE AUTHOR service targets. INVENTORY STRATEGY ❯❯ Quantifying the impact of Results of a company’s supply TOBY BRZOZNOWSKI is the co-founder and executive vice president of LLamasoft. Over the last decade, he variability (lead-times, production, chain design and modeling can—and has helped bring supply chain design into the corporate transportation, demand and the should—be used to inform its overall mainstream as a key business process and competitive like) on service and cost. inventory optimization strategy—one weapon, and has positioned LLamasoft as the leading ❯❯ Evaluating the long- and shortthat is based on a complete, end-to-end global supply chain design technology provider.

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EXECUTIVE FOCUS

{ SOFTWARE & TECH}

by Dick Hyatt

N W O D G N I K C NO

S O L I S A T A D

K

M

Service relationship management is helping companies turn big data into real value.

any companies design applications to perform a single purpose, for a single department or function, while little thought is applied to the broader implications and value of frictionless data sharing. But just capturing and sharing data in and of itself is not enough. Quality data, shared with the right people, at the right time, in the right context is critical for success in the connected world. In fact, in-context access to information at the right point in any process is the foundation of new digital relationships that are changing our economy. Without it, it’s impossible to live up to today’s customer expectations. In many cases, getting information access right means the difference between having a competitive advantage and suffering major financial losses. The physical supply chain has demonstrated the value of a wellexecuted digital ecosystem. However, the supply chain of information and services, which ensures the health and optimal performance of commercial vehicles, as well as heavy and industrial equipment, is not quite as mature. The journey to digital maturity is 32

a complex one, and many have failed because they focused on “quick wins” without understanding the goals and ramifications around data. So while supply chain management holds great promise when it comes to the potential of big data, a few things need to be made clear at the start of the digital journey.

ENABLING CONNECTED ASSET INFORMATION Clearly understanding the difference between “lots of data” and “big data” is foundational. The growth of the Internet of Things (IoT) enables the capture of more data than ever, and it’s easy to assume more equals better. However, according to a recent study by Cisco, more than 75 percent of

SERVICE VALUE CHAIN BEFORE Communications Data Entry/Info Access

Phone, email, paper (chaos) Paper-Manual

Connected Assets

Siloed applications/ Alert (Knowing)

Process Management

Alerts/Notifications Disconnected

Data Quality

IoT initiatives are failing. In a rush to implement techie-sounding solutions, companies have prioritized style over measurable business outcomes. Why does this happen? Often, the data derived from telematics, sensors and other smart connections are incorrectly viewed as the end game. Not enough thought is put into how companies will consume and share this information, how they will ensure data quality and consistency, and how they will measure success (or if they’ll be able to measure it at all). Once you dive deeper into questions about data collaboration and use, it quickly becomes apparent that information from connected assets and equipment is only one of many key data sources required to improve operational efficiencies, maximize profitability, and improve employee job satisfaction.

AFTER Integrated In-Context/Legacy Integration Aactionable/Outcome Driven (Doing) Closed Loop Big Data

Lots of data

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SOFTWARE & TECH

BREAKING DOWN BARRIERS

uptime and performance; and enable people at the right time. SRM is more consistent, reliable and less costly the first effective way of breaking maintenance processes. through the existing information and With a shared SRM foundation, all communications barriers. With this service supply chain participants have approach, organizations achieve greater the right information, at the right time return on investment (ROI) from and in the context of what is important their IoT solutions, and enhance the to them. This ensures more efficient value of the data from their existing management and improved decision applications. Ultimately, this helps making. teams make better decisions more Because it is cloud-based, an SRM quickly, and achieve lower costs, solution ensures a closed loop process. increased asset availability, improved This means that data is captured from job satisfaction and improved customer all parties, from beginning to end, and experiences. then is stored and available for future ABOUT THE AUTHOR events—no more information silos. For service management, SRM provides all DICK HYATT, CEO of Decisiv, has more than 25 years of experience building, managing and supply chain members with immediate growing early stage tech companies. Prior to his access to detailed equipment tenure at Decisiv, Hyatt was a director of marketing information, real-time communication in Cisco’s Unified Communications business. and collaboration, business intelligence tools for risk mitigation and compliance management, and after the fact trend analysis. Data now can be used to inform future decisions, in addition to speeding up Talk with KPMG. Let us help you solve your business challenges existing service with insight, integrity and passion events. to accelerate your organization A healthy toward a better future. Learn more at kpmg.com/supplychain. service supply chain keeps your physical supply chain moving. To enable a winning service supply chain, you need the ability to quickly and easily capture, analyze, act and deliver © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm on information of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. to the right

In any supply chain where there are multiple groups and businesses within an enterprise, each has its own siloed systems and depends on email and phone to share information. This is especially true in the service supply chain. Manufacturers have their own proprietary portals (sometimes more than one); service providers also may have their own portal or—more commonly—rely on phone, email, invoices and fax. Fleets also have their own systems and data. As a result, chaos ensues when something goes wrong. In the North American heavy duty trucking industry, more than 90 percent of downtime for repairs is not related to actually turning a wrench. Managers and team members spend an inordinate amount of time trying to communicate with each other and piecing together the information needed. Seemingly endless volleys of phone calls, emails and paper shuffling are not unusual, as teams attempt to identify the cause of the issue, track down warranties, service history, maintenance status, share repair status updates and more. This chaotic environment leads to decreased efficiency, increased frustration, reduced productivity and the potential for lost revenues. So how do you get from lots of data (and chaos) to big data that delivers real business value? Service relationship management (SRM).

How do you accelerate the future of supply chain?

SRM KEEPS THE SUPPLY CHAIN UP AND RUNNING SRM is a strategic business approach to asset maintenance that focuses on creating new digital relationships from a variety of information and business sources, including connected assets, to create and strengthen customer-supplier relationships; drive improvements in asset and equipment

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ADVERTORIAL

THE POWER OF PARTNERSHIP: How Albemarle Corporation and Intrigo Systems partnered to enable Better Forecasting and Reducing Working Capital Requirements with SAP Integrated Business Planning (IBP)

A

lbemarle Corporation is a Specialty Chemicals Company headquartered in Charlotte, North Carolina, and provides innovative Chemistry solutions to customers in approximately 100 countries. With 3 main business lines Lithium for batteries, Bromine for flame-retardants and electronics industry, and catalysts for refiners. Being on a growth and acquisition path, Albemarle needed to inject innovation in its supply chain activities, and partnered with Intrigo Systems to implement SAP IBP to transform their Supply Chain. According to Padman Ramankutty, CEO of Intrigo, “Intrigo is one of the select partners of SAP in the area of SAP IBP. We were able to bring our collective experience in Supply Chain Planning and the insights from our many SAP IBP implementations to make the project at Albemarle a resounding success. We are at the forefront of the Digital Transformation in Supply Chain and Procurement, and this project is a testimony to our expertise�. Let us take a closer look at the Digital Transformation journey at Albemarle.

THE NEED FOR SUPPLY CHAIN TRANSFORMATION: Like most companies expanding and trying to bring better processes into their Supply Chain, 34

Albemarle was faced with Business Challenges that they wanted to address. With sales in excess of $2.5 billion per year and plans for significant future growth, there was a need to minimize working capital requirements through better inventory management. Also, a common data model had to be defined to consolidate Demand, Supply, and Finance Plans. Equally important was enhancing sales forecasting accuracy, implementing a global Sales & Operations Planning (S&OP) Process, and tighter integration between S&OP and manufacturing planning.

THE PATH TO INTEGRATED PLANNING Albemarle implemented SAP IBP for S&OP to bring process discipline and collaboration. They get demand forecasts from different teams like Sales, Demand, and business users. They use these forecasts to arrive at a consensus demand and an optimal production plan across various nodes of the supply chain to improve customer order fulfilment. The scenario/ versions capability of IBP allow

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what-if simulation options to the planner tool kit. Albemarle chose IBP in part for its user-friendly Excel interface and the HANA platform, which they saw as the future platform for Albemarle SAP environments. According to Pushpinder Singh, Practice Director at Intrigo, “With SAP IBP, Albemarle has been able to evolve its S&OP to be demanddriven. By building out a reliable and extendable supply demand balancing component, Albemarle can benefit from reduced working capital costs and enhanced forecast accuracy which have added to Albemarle’s competitiveness”.

IMPLEMENTATION HIGHLIGHTS: UNIFIED PROCESS FOR FORECASTING AND NO MORE SPREADSHEETS ›› Single global tool and one data model for S&OP, Demand & Supply Planning Processes; 300 Plus global planners enter forecast data in IBP using Microsoft Excel. ›› Quicker volume to manufacturing time; S&OP cycle time has reduced by 40%, and data collection/alignment time for the S&OP process has reduced by 65-70%. ›› Planning decisions are integrated back with execution system (SAP R/3 & ECC) as an automatic feed. ›› Common Unified planning process, reports and dashboards for better visibility

BUSINESS BENEFITS Albemarle got much better visibility of asset utilization and inventory projection across finished goods, intermediates, and raw materials. Manual errors were reduced and the Planners’ performance was improved. They were able to move from a stand-alone spreadsheet environment to a fully integrated central planning framework.

Enabling Effective Control on Working Capital and Enhancing Forecast Accuracy

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“It has been a great partnership with Intrigo from the start” says Rodney Nijoka, Global Director, Integrated Business Planning at Albemarle Corporation. “Leveraging their expertise as our implementation partner, we have been able to successfully embark on the Supply Chain Transformation journey at Albemarle. With a better control on working capital, enhanced forecast accuracy, and greater visibility into our operations, we are able to benefit from reduced inventory and tighter integration between S&OP and our manufacturing Planning” The Central Planning Framework enabled Albemarle to have one planning area to view all Demand & Supply Elements. Volume planning enabled them to allow planning for finished goods, intermediates, and raw materials, which are used in more than one plant location as well as keep track of products/by-products and recycle streams. Capacity planning enabled planning campaigns for multiple products at the asset level, and the ability to plan single product across multiple assets to maximize capacity utilization. Inventory planning delivered the ability to look at inventories at various levels of supply chain nodes.

THE INTRIGO ADVANTAGE Intrigo designed, deployed, and provided global support for the Supply Chain Transformation project at Albemarle that included rolling out IBP-S&OP to multiple business units. With this implementation, Albemarle was able to see better visibility of asset utilization, forecast accuracy, and inventory projection across finished goods, intermediates and raw materials. There were big improvements by moving from a stand-alone spreadsheet environment to a fully integrated central planning framework, which also reduced manual errors and improved planner’s performance at Albemarle.

FOR MORE INFORMATION: www.intrigosys.com

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ADVERTORIAL

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EXECUTIVE FOCUS

{ PROFESSIONAL DEVELOPMENT}

By Bill Michels

L O R T N O C TAKING OF THE

How to build an effective training and development program.

38

H

ow effective is your training and development initiative? Many organizations devote a large portion of their annual budget to developing their teams, but rarely get the desired results. Those of us who work in the supply chain industry understand that budget approval is usually linked to measurement, and easy to quantify metrics tend to rule. Traditionally, employee training is measured in hours of training and course evaluations. Time spent and evaluation results are easy metrics, just like cost savings is easy for procurement staff. Organizations usually don’t take the time to develop key metrics to measure

the learning experiences, change in skillsets, behavior or impact of the training. I have led and participated in training and development (T&D) initiatives where the results in the classroom are great. The class is motivated and excited about the new tools and concepts, course ratings are high, and everyone feels really good. When the class participants return to their work, they may try a few of the new techniques, but soon it’s business as usual. Has this ever happened to you? Measurement-wise, the time and evaluation boxes are ticked, so it was a success—right? Think online learning is the better approach? Businesses can agonize over

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PROFESSIONAL DEVELOPMENT

finding the right online program, roll it out and require that each team member complete the course. The online course system will report on course completion compliance. Unfortunately, most people have busy schedules and cram multiple modules into a short timeframe near the deadline for completion. Some extend the course over a longer time, failing to absorb the concepts because too much time has passed between sessions. The result is the same for both types of course-

takers; the learning is not embedded, and the new skills are not utilized. Face it, it’s easy to spend training budget on courses, check the box

for the task “deliver training,” then deliver poor to mediocre performance appraisals to employees because there’s little application of new skills in

Driving Results P

aladin Associates partners with clients to maximize the benefits of strategic sourcing, improve your company’s profitability and increase shareholder value. Our veteran professionals from GE, P&G and other industry leaders bring broad and deep sourcing, procurement, financial, and operations experience and expertise in many functions and industries.

WAYS TO EMBED LEARNING

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1. Establish course completion timelines for online courses. Use an outsourced provider to work with individuals, chart progress and report status.

Paladin also partners with several other leading service companies to provide our clients with resources and services in many spend categories.

2. Require a pre-requisite online course before delivery of a classroom course or workshop to orient participants, so class time learning is optimized.

Go to paladinassociatesinc.com for more information.

3. Include a work project in the training. » Alert the participants ahead of the training. » Allow class time to get the project started. 4. Provide coaching and mentoring post training by the training provider, internal resource or both. 5. Launch category management teams with: » A kick-off workshop. » Weekly coaching. » Project management.

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SDC0917_38-41_ProfDev AW.indd 39

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PROFESSIONAL DEVELOPMENT

an internal corporate university work with an outside firm to roll-out competency assessment, online learning and instructor-led classroom 1. Create linkage between training tools training—it’s the and business processes. implementation of a 2. Build metrics and checkpoints to assure requirement following that tools are embedded and used. classroom time to 3. Align all development programs to the complete an action industry and company, using case studies plan for an expenditure and real-life examples. category in their 4. Build programs on a fundamental portfolio over the six and advanced level that add value to months with coaching participants. or mentoring available by the course instructors 5. Measure and report ROI resulting from and the individual’s the training. supervisor during this time. Action plans had to be approved by the their job. The employee must be the instructor and the supervisor. problem, right? Wrong! The results were astounding. The While procurement and supply documented return on investment chain training provides best practices (ROI) from the training delivered $40 and new tools, many organizations for every $1 invested in the program. fail to embed the learning through Besides the millions in savings and a linkage to the business process. the value from innovation and other Unfortunately, over time, the learning improvement, the learning was is lost as people return to their daily embedded and skillsets enhanced. routines and old processes. What’s the solution? Training supported by active projectbased coaching. Here are two examples of disruptive T&D that continues to C ASE 2 : deliver high performance and results. A medium-sized company with four C ASE 1 : divisions was unable to get A global conglomerate needed cost collaboration, leverage and synergy. and value improvement by enhancing The project focused on small category tactical and strategic procurement teams comprised of members from skills. While the initial overall program each business unit. A four-day components are not unusual—human workshop was delivered, during which resources, the procurement team and tools and concepts were introduced,

COMPANIES CAN DO TO IMPROVE THE EFFECTIVENESS OF THEIR DEVELOPMENT PROGRAM

To be successful, training must be meaningful and provide tools and value linked to a process that will

DELIVER RESULTS AND A HIGH RETURN ON INVESTMENT.

40

the teams selected projects, identified opportunities, built initial strategies and presented them to senior management. After the workshop, the teams launched weekly conference calls with mentoring and coaching. The teams presented monthly updates to senior management. At the end of the six months, the supply base was optimized, and $64 million in cost and value improvements were achieved. Most companies are reluctant to engage in programs like these because of complexity and the additional cost of engaging an instructor or coach for longer than a two-day course delivery. The right training provider can manage the complexity and offer a coaching program on a per person or monthly fee option that works for your budget and delivers the breakthrough you need. Today, the employees are in an environment where they are multitasking, highly distracted and working in matrix organizations with multiple masters. They resent spending time in a training environment that provides limited value. To be successful, training must be meaningful and provide tools and value linked to a process that will deliver results and a high (ROI). How effective is your company’s training?

ABOUT THE AUTHOR BILL MICHELS is the CEO and founder of Aripart Consulting. He helps companies transform business strategies into maximum value, and is a leading expert in purchasing and supply chain management.

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

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SUPPLY CHAIN

11 th Annual

PROS TO KNOW AWARDS Honoring leading executives for improving the global supply chain through sustainable and proactive business initiatives.

NOMINATION DEADLINE: 1/12 /1 8 Winners announced in March 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: 3/16/18

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

NOMINATION DEADLINE: 9 / 7 / 1 8

Winners announced in December 2018 issue.

Winners announced in June 2018 issue.

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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WORK HARD, By Ronnie Garrett

A RACE TO THE FINISH

JDA’s Fab Brasca tests his endurance by taking on an Ironman.

“I

wasn’t an athletic kid,” says Fab Brasca, vice president of industry strategy at JDA Software. Though Brasca was a wrestler in high school, he didn’t start running and biking until his 20s. And, he definitely didn’t swim. Then, like many people, he fell away from fitness in his 30s when life with kids got in the way. His 40s represented a return to his fitness commitment, and he has gone from jogging in his spare time to running regularly, and eventually adding regular biking and swimming to the mix. “I’m just one of those guys, where once I latch on to something, I keep setting higher and higher goals,” Brasca says. “When I was hired for my first job as an account executive for a small transportation software company, I didn’t have any transportation experience, any software experience, or any software selling experience,” he says. “The company took a chance on me, and I reached beyond my limits to learn.” Mastering swimming in open water is an achievement Brasca says he is especially proud of. He says he went from being able to swim to the edge of a pool to being able to swim in open water without fear. “In open water, there is no edge, and you can’t see the bottom. Add to that the confines of a wet suit, and 40 or so thrashing bodies around you, and there is a lot to mentally overcome—it’s not just the physical,” he says. 42

Achieving fitness goals has not been enough for this supply chain exec. Mastering these skills has propelled him down a path that has taken him from half-marathons, to marathons, to competing in his first triathalon, half Ironmans, and now in 2018, hopefully crossing the finish line of his first Ironman Triathlon in Mont Tremblant. An Ironman Triathlon consists of a 2.4-mile swim, a 112-mile bicycle ride, and a 26.22-mile marathon, raced in that order without a break. This test of human endurance requires incredible fitness and stamina, but Brasca stands ready. Though Brasca just completed his fourth half Ironman, and won’t begin training in earnest for the full Ironman for a few months, he says he has been preparing himself in other ways. His job takes him across the globe, and that alone puts time and physical constraints on his training. “I’ve had to learn to be very diligent in how I manage my time, so that even when I’m traveling, I get up at 4 or 5 a.m. to get a run in before my day starts,” he says. “I’ve learned if people really take a close look at what they do every day, they will find that they waste a lot of time on trivial things.” He’s also had to remind himself that sometimes “life happens.” The father of four, and grandfather of one, says he has had to strike a balance in his time management. This began with identifying the three most important things in his life: Family, work and fitness. The long-term commitment and fortitude involved in getting in top shape to compete is an effort that Brasca says he takes with him into the office. He explains, “There are decisions you have to make in supply chain where you have to look long-term, where it’s not about today or tomorrow, it’s about being successful a year from now or five years from now,” he says. “I tell my customers that my measure of their success is not whether they get value from when they go live, but whether they are getting value from that solution five years from now.” ABOUT THE AUTHOR RONNIE GARRETT is a freelance writer based in Fort Atkinson, Wisconsin, and the former editor of Supply & Demand Chain Executive.

SUPPLY & DEMAND CHAIN EXECUTIVE | September 2017 | SDCExec.com

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% 1 7

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Supply & Demand Chain Executive September 2017  

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...