Supply & Demand Chain Executive December 2014

The 2014 Supply & Demand Chain Executive Green awards p.14 December 2014

Global Solutions for Supply Chain ROI

Track and Trace: Benefits Beyond Compliance p.18

The Holiday Consumer as Grinch

ing Homecom Is Not as

Leaving China p.8 Easy as You Think Landing in Latin America p.12

p.22

The Future of Work: You’re Not Ready p.28

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Risk Management

Procurement

Part I

Part I

Wednesday, February 18, 2015

The Risks of Globalization Whether you’re manufacturing offshore or shipping your goods to other countries, what are the risks and challenges to your supply chain and your business? What do you know about regulatory issues, compliance, even the customs of the other countries?

Part II

Wednesday, June 24, 2015

Wednesday, April 22, 2015

Procurement Challenges for the Small Company It might be easier for the big guys with established procurement departments to adapt, but what about smaller companies? Can their procurement leaders evolve with the industry? And what does the executive team need to know, and do?

Part II

Corporate Governance and the Risk Management Officer

Procurement and Your Suppliers

How do you convince the C-Suite that a risk-management specialist is necessary—even vital? What qualities and knowledge base does this person need? Do you hire/promote from within or search for an “independent” voice?

Treat your important suppliers like partners. How do you work with them to develop future strategies, market and technology needs, and opportunities? What do you do to create a beneficial, long-term and profitable relationship?

Part III

Part III

Wednesday, October 21, 2015

Wednesday, August 19, 2015

Wednesday, December 9, 2015

Safeguarding Your Data

Procurement Outsourcing: Is it Worth it?

Big Data! How do you identify what information you need to protect and how high a level of protection is required? What investments, both financial and in resources, are required?

While there are benefits, there are serious issues to consider. You have turned control of part of your business to a third party. If that entity loses efficiency or reliability, where does that leave you?

Interested in sponsoring this event? Contact Jolene Gulley at 480-413-0354 or jgulley@ACBusinessMedia.com for more information.

Table of Contents December 2014

Volume 15

Cover Stories

Issue 5

Inside 6 Executive Memo Ready for the Holiday Crush

8 Homecoming If you think you can just pack up, turn off the lights, lock the doors and go, you better think again

By Rosemary Coates

Bustling UPS Worldport is a whirlwind of nighttime activity

By Barry Hochfelder

14 2014 Green Awards Good for the People & Good for the Planet

American boards and executives are pushing to increase manufacturing in the U.S. and bring some of the outsourced production home.

Companies are deciding what part of their manufacturing they can peel off from China and bring back to the U.S., and what can be left in China to address the local and rapidly growing market there. It’s a complex decision.

12 Landing in Latin America

The 2014 Green Supply Chain Award Winners are leaving positive footprints as they achieve success

By Editorial Staff

18 Industry Focus: Pharma Track and Trace: Business Benefits beyond Compliance Tracking on an item level opens up a whole new range of options and can provide real value-added benefits

By Carrie Mantey The allure of lower transportation and labor costs is driving nearshoring to Latin America, while partners mitigate risk with support and expertise.

18

By Stefan Hockenberger

Lean Manufacturing in the Age of the Industrial Internet When technology supports the convergence of machine and intelligent data, and everything is connected, the power of the industrial Internet becomes real for manufacturing

By Bob Gates

28 Professional Development: The Workforce The Future of Work ... ... and why you’re not ready for it

By Tim Minahan

32 Final Thoughts: Learning Skills Multiply Your Skills or Be Left Behind

By Stephanie Crowe

22 Best Practice: e-Commerce The Consumer as Grinch Last-minute online shoppers bring holiday fear to the supply chain

By Todd Miller

4 Supply & Demand Chain Executive December 2014

24 Best Practice: Manufacturing

24

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December 2014 • Volume 15 • Issue 5

executive memo

®

Global Solutions for Supply Chain ROI

Ready for the Holiday Crush

W

Bustling UPS Worldport is a whirlwind of nighttime activity

Everyone remembers last year, when all carriers had issues with late deliveries.

While bad weather and a short shopping season played a role, volume generated by exponentially growing online shopping was a factor. As online sales continue to zoom, UPS is making major enhancements to be ready.

The company expects to deliver more than 585 million packages in December, up 11 percent from 2013. It also said shipments will peak on the Monday before Christmas when it expects to make more than 34 million deliveries— double its normal daily load. It also bolstered capacity by preparing “mobile delivery villages,” modular facilities that can expand existing shipping centers, as well as hiring 90,000-95,000 temporary workers. FedEx expects to make 290 million deliveries between Black Friday and Christmas, up nearly 9 percent. It will also hire 50,000 seasonal workers.

Here are just a few facts about Worldport: There are 70 aircraft docks, 33,496 conveyors (approximately 155 miles worth), 546 camera tunnels, 19 tilt-tray sorters (2.6 miles of track), 17,220 tilt trays, 325 unload positions and 1,520 load positions. All of this sits on an impressive 5.2 million square feet.

Speaking of impressive, I think you’ll enjoy this issue of Supply & Demand Chain Executive. As everyone gears up for the holiday crush, we have a story on how last-minute online shoppers are changing the game (p. 22). In addition to our annual Green Supply Chain Awards (p. 14), you’ll get the latest information on reshoring (p. 8 and p.

12), how track and trace can benefit pharma (p. 18), a look at the changing Barry Hochfelder Editor workforce (p. 28) and more. Happy Supply & Demand Chain Executive bhochfelder@acbusinessmedia.com holidays! ■

e’ve all walked through airports at midnight or later. Even the biggest, like Chicago’s O’Hare, can seem desolate. I experienced something completely different in late October when I visited UPS Worldport in Louisville. Between 11 p.m. and 3 a.m., dozens of UPS aircraft landed and took off from Louisville International Airport, which is adjacent to Worldport, the largest fully automated packagehandling facility in the world, and home to UPS Airlines. (Throughout a 24hour period, the operation handles 130 aircraft and sorts 416,000 packages and documents per hour!)

The tour began around 9 p.m. in the Global Operations Center, with monitors around the walls and staffers occupying roomy cubicles. A live map of the airport showed traffic coming in and out. There are six groups in the control center. A problem-solvers unit deals with issues that come up; another handles crew scheduling; a third is aircraft maintenance and control; and fourth is flight dispatch, the eyes and ears of the pilots and the Federal Aviation Administration (FAA) (route planning is their prime function). The fifth unit is on a raised platform in the center of the room—the Bridge, where the lead person from each of functions sits. There also is a meteorology center.

This efficiency and oversight is vital as we head into the holiday season.

6 Supply & Demand Chain Executive December 2014

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cover story reshoring

By Rosemary Coates

What Happens When

You Decide to Leave China?

If you think you can just pack up, turn off the lights, lock the doors and go, you better think again

R

eshoring is the hottest trend in U.S. manufacturing. According to a recent study by Boston Consulting Group, 54 percent of all United States companies over $1 billion in revenues are planning or considering bringing at least some of their manufacturing back to the U.S. But just how attractive is it to leave China? The decision isn’t an easy one.

With nearly 350 million people—and growing—in China’s middle class, the country is likely to be a company’s biggest target market over the next 20 years. As the Chinese middle class grows, so does its disposable income and the desire for all kinds of products, particularly those with Western brand names.

At the same time, American boards and executives are pushing to increase manufacturing in the U.S. and bring some of the outsourced production home. This represents a significant shift in thinking from determining where in the world to manufacture in order to take advantage of low labor and other costs to considering a more global manufacturing strategy.

Most of the cost comparisons and time-to-market research suggests that companies should be manufacturing local products in local markets. Now companies are deciding what part of their manufacturing they can peel off from China and bring back to the U.S., and what can be left in China to address the local and rapidly growing market there.

Wait a minute … it’s not that easy. Companies cannot expect to simply pack up shop, lock the doors, turn out the lights and move back to the U.S. There are many issues to consider when leaving China.

The Employees Western executive Chip Starnes is the president of a Florida-based medical supplies company that decided to leave its manufacturing site in China for an even lower cost manufacturing site in India. When the Chinese employees got wind of what was happening, they locked him in his office for days and would not allow him to leave. The 80 or so workers were concerned about getting paid for their final days at the factory, and didn’t want Starnes to leave until they had their money. The workers, who saw the equipment being packed for shipment to India, forced Starnes into his office, and even deprived him of sleep by shining bright lights and banging on the windows of his office all night until they were paid.

In China, it is not that unusual for managers (Chinese and Westerners) to be held by workers demanding back pay or other benefits owed to them. The local police don’t step in as they consider these types of things to

As the Chinese middle class grows, so does its disposable income and the desire for all kinds of products, particularly those with Western brand names.

8 Supply & Demand Chain Executive December 2014

cover story reshoring be private business disputes. Shutting for them again, even though there down a Chinese factory and releasing was never a sales transaction with the workers must be done carefully, and Chinese in the first place. companies must be prepared for If the tools and molds stay behind retaliation by employees. when a company leaves a Chinese If a company allows open-term factory, this equipment is likely to contracts with its employees, continue to be used. The equipment there is no definitive ending date may be used to produce the same to employment. In this case, the goods that are then sold domestically employer may be required by Chinese in the Chinese market, or to other law to compensate the employees for Companies should consider all of the exit early termination. costs, including employee payments, If employees are on tooling and molds, IP protection, exit fixed-term contracts, the employer may be taxes and fees when considering the required to pay wages restart-up costs in the U.S. until the end of the term. The costs of early termination markets around the world without must be considered as part of the the original company’s supervision or reshoring effort. permission.

Companies may also be sourcing Tooling and Molds tools, dies and molds inside of China Packing up and shipping, or trying for production there, but that does to retrieve tools and molds from a not automatically mean these can be Chinese manufacturing site can also shipped to the U.S. when the factory be problematic. Often, a Western closes. Export rules from China may manufacturer sends machine tools prohibit this. If equipment is sourced or molds to a Chinese original in China and not shipped to the U.S., equipment manufacturer (OEM), consideration must be given to where or to its own Chinese factory. These a manufacturer will source the same tools and molds, sometimes worth equipment and raw materials after hundreds of thousands of dollars, reshoring. Reestablishing sourcing in may be needed to produce products.

America is not a trivial task because If a company does not take steps many suppliers also moved offshore. to clearly identify ownership and sign an agreement to that effect, including Manufacturing Intellectual Property serial numbers positively identifying each item, it may never see the tools When a company leaves China, it and molds again. This is because, also leaves behind its manufacturing unless a company agrees in writing intellectual property (IP) if the otherwise, the Chinese believe that Chinese were taught confidential they were given the equipment. In production approaches and methods. some cases, molds were even held We all hear the horror stories hostage until the U.S. company paid about IP protection, copying and

10 Supply & Demand Chain Executive December 2014

counterfeiting in China.

To protect their IP, most U.S. companies now register their patents and brands in China. But production methods and raw materials aren’t always as well protected.

A popular strategy is to produce sub-assemblies in several locations or several different cities, so that no single factory knows how to produce an entire finished product. Other companies produce the latest or most innovative products in the U.S. or Europe, and earlier models or lowerend products in China.

Before a company packs up the Chinese factory, consideration must be given to manufacturing IP. In reality, there are few, if any, practical ways to protect manufacturing IP once the Chinese factory work is over and manufacturing operations are reshored. In planning for a closure, companies should expect the worst regarding IP and expect to have their product copied.

Taxes In addition to paying out employment contracts, there may be other regulations that must be considered. China’s Commerce Department issued guidelines for withdrawal from China by foreign investors. The intent is to protect Chinese creditors and others from manufacturers that try to escape in the middle of the night. Chinese law requires that foreign investors inform creditors of the closing, settle all outstanding taxes, pay all pending debts, liquidate property and deregister the business. In addition, companies may be required to pay closure taxes.

If a business is partially run or owned by a state-owned enterprise (SOE), companies may also have to ask permission from the Chinese Communist Party to shut down.

Getting permission to leave, and pay all of the associated fees and taxes takes some time—probably three to six months. Leaving without completing the exit process is not recommended and may disallow companies from ever returning to China.

The Way Forward So many companies make the mistake of simply comparing labor or energy costs when determining their reshoring pathway. But there is so much more to a reshoring decision. In particular, companies should consider all of the exit costs, including employee payments, tooling and molds, IP protection, exit taxes and fees when considering the restart-up costs in the U.S. Most important, though, is to ask the question, “Should we leave China?” If this rapidly growing market is where a company will be selling products in the future, perhaps it is best to keep at least part of your manufacturing operations there. ■ About the Author: Rosemary Coates is the executive director of the Reshoring Institute and president of Blue Silk Consulting, a global supply chain consulting firm. She is the best-selling author of 42 Rules for Sourcing and Manufacturing in China, 42 Rules for Superior Field Service and The Reshoring Guidebook. She has worked with over 80 clients worldwide and serves as an expert witness for legal cases involving global supply chain matters.

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cover story nearshoring to Latin America

Landing in Latin America

The allure of lower transportation and labor costs is driving nearshoring to Latin America, while partners mitigate risk with support and expertise

By Carrie Mantey

E

veryone is talking about reshoring these days, but a slightly less talked about variation is also garnering attention.

It is nearshoring, specifically in Latin America where labor is relatively cheap, yet still close to U.S. customers. Companies of all stripes are converging on Latin America in droves; one such company is DHL. Not only does DHL have more than 10,000 employees in Mexico, but it also has over 800,000 square meters of warehousing space, and the ability to handle 100,000 domestic shipments and international packages a day. The company has established itself in the area to support customers capitalizing on the nearshoring trend, supporting both existing and potential customers moving into the region.

Time Is Money One of the largest factors in the decision to nearshore to Latin America revolves around getting product to the customer faster. It’s common knowledge that customers are expecting more and more when it comes to delivery timeliness, especially when considering the stress that omnichannel retail is putting on the supply chain. One way to accomplish that kind of punctuality is to move closer to the customer base that is demanding the product.

12 Supply & Demand Chain Executive December 2014

“Over the past couple of years, we have been seeing a real shift, particularly in the demand of companies to deliver products faster to the market and to their customers,” according to David Fox, the vice president and head of business development for multinational customers, Americas, DHL Global Forwarding. “By nearshoring [to Latin America], our customers are able to shave weeks off their supply chain, which makes a huge difference” not only to those who are receiving the product, but also to the company shipping the product that must deal with inventory being tied

up during supply chain execution.

When you compare nearshoring in Latin America to offshoring to more far-flung regions, the largest single allure is reduced transportation costs, which is comprised of fuel prices, transit times (opportunity cost) and efficiency. Fox also cites general rate increases due to compensating for the peak season, which is upon us now due to the holidays, out of Asia.

But it’s really the longer transit times that provide an incentive to relocate offshored operations to nearshored locations. “If you look at when offshoring began, let’s say 20-plus years ago,” says Fox, “fuel costs were

cover story nearshoring to Latin America

four to five times higher than they are today. While energy costs [in Latin America] are not quite as cheap as they are here in the U.S., they are more competitive for manufacturing companies in Mexico” than elsewhere.

An unintended positive consequence of the shorter transit times is environmental stewardship as a result of the product traveling less miles between Point A and B. “Whenever possible, DHL focuses on how we can help reduce carbon footprint by having a product that travels less to the destination.

Our customers are very receptive to this,” notes Fox. “One of DHL Global Forwarding’s corporate social responsibility pillars is our Go Green program, which focuses on the importance of protecting the environment and reducing carbon emissions. That’s something we’re seeing more and more of in speaking to our customers. Within that Go Green product, we can additionally provide reporting capabilities to our customers to tell them what their carbon footprint reduction is. Being able to measure the shareholder value that it creates is immense.”

Location, Location, Location = Proximity, Proximity, Proximity When discussing nearshoring affecting the supply chain in the Latin America area specifically, Fox states, “Our goal is to simplify

our customers’ supply chains. For planning purposes, it certainly puts much less pressure on a number of components in the supply chain.”

He believes that being closer to your customer base affords the opportunity to not have “to plan for such contingencies as port congestion, peak seasons and capacity constraints that the market may place on you when you’re offshoring.

“It seems like it’s in the news every day that we’re talking about port congestion challenges in Los Angeles and how it’s negatively impacting supply chains. It’s a real pain point that our customers have to deal with now, which is certainly driving a lot of companies to look to get closer to where their customer base is.

If you look at the transit times in comparison from the West Coast to Asia vs. Mexico, you see the ability to reduce inventory-carrying costs is significant to manufacturing—it’s an advantage to manufacture in Mexico.”

The Labor Market Fox believes that Latin America’s labor costs are competitive and that the talent pool is ripe with skills.

“Higher labor costs in China are driving the trend toward nearshoring.

One of the statistics I recently discussed with customers is that the labor in Mexico is on par, for the first time ever, with China and that’s pretty well-documented. We’re also

“Over the past couple of years, we have been seeing a real shift, particularly in the demand of companies to deliver products faster to the market and to their customers. By nearshoring, our customers are able to shave weeks off their supply chain, which makes a huge difference.”

— David Fox, vice president and head of business development, DHL Global Forwarding

seeing training now, which is greatly improving the workforce further.

Judging just from the volume of recalls, one disadvantage that offshoring in Asia produced is lower quality goods. Companies considering reshoring may not need to worry about that pain point as much in Latin America, which has a ready and able workforce. “I think four or five years ago, quality would have been a discussion point. I was in Mexico earlier this year meeting with some of our automotive customers, and clearly, by visiting them, and looking at their facilities and the quality priority within their organizations, their systems and their technology, we see tremendous progress and that bodes well for the future for Mexico.”

Regulation Keeping Nearshorers up at Night Fox says that Brazil and Mexico are the two key countries that his customers are telling him that they’re setting up manufacturing in if they’re not there already. However, they are concerned about being faced with regulatory challenges by exporting goods: “Last week, we had an engineering and manufacturing conference in Chicago with over 80 customers, as well as a workshop on nearshoring. The key theme that came out of the workshop was regulatory compliance.”

Fox says that Latin America is historically known for challenges in regard to regulations and compliance, but “our regulatory folks are there to be able to assist our customers where they have challenges. This allows us to help our customers simplify their supply chains by having that expertise within all of the countries throughout Latin America.” ■ December 2014 Supply & Demand Chain Executive 13

2014 Green Supply Chain Awards

Good for the People Good for the Planet The 2014 Green Supply Chain Award winners are leaving positive footprints as they achieve success

O

ur featured Green Supply Chain Award winner, WhiteWave Foods (www.whitewave.com), produces, distributes and sells a variety of plantbased foods and beverages throughout North America and Europe. Along with its good-for-you products, WhiteWave is committed to a goodfor-you sustainability program that targets sustainable ingredient sourcing, water conservation, greenhouse gas (GHG) emissions, packaging and genetically modified organisms.

WhiteWave recognizes that how it makes its products is as important as what it makes. Sustainability is embedded in how it does business, including its supply chain strategy, with a commitment to responsible sourcing of materials, and sustainable packaging initiatives that address upstream and downstream solutions.

WhiteWave focuses its sourcing principles in three areas: transparency, continuous improvement and engaging as leaders.

In 2014, the company launched its WhiteWave Foods Supplier Code of Conduct as the next step in its responsible sourcing evolution. As part of the program, WhiteWave committed to mapping the supply chains of its most significant ingredients, including cocoa, almonds and coconut, in addition to palm and soy, in an effort to increase transparency and lessen its environmental impact. Ranging from

14 Supply & Demand Chain Executive December 2014

resource and business management to energy and transportation, WhiteWave better manages its sustainable supply chain through: ■■Energy efficiency: WhiteWave conducts energy audits, and has onsite champions bringing forward efficiency and reduction projects. The company also offsets much of its energy use through renewable energy certificates.

■■Water conservation: In addition to using less water, WhiteWave also invests in water restoration projects (or certificates) to balance its water footprint.

■■Business management: Sustainability is prominent in the company’s strategic growth plan and a consideration in all business decisions.

■■Sustainable packaging: WhiteWave designs all packaging with an eye to sustainability, using the least amount of the right kind of packaging materials without compromising product quality or safety.

Quality metrics and analysis exist at all levels of the supply chain.

WhiteWave used the Global Reporting Initiative (GRI) framework for its first sustainability report and participated in the Carbon Disclosure Project (CDP) to report sustainability metrics against international standards. Internally, WhiteWave created a set of targets to measure and manage its progress

against a variety of sustainability initiatives. These targets aim to reduce the impacts of the company’s operations, from manufacturing to administration to transportation and sourcing. Particular areas of focus for the company are its energy use, GHG emissions, water consumption, solid waste to landfill and finished product transportation. WhiteWave tracks progress with key performance metrics, including energy usage, emission levels, waste output, recycling data, transportation costs, fuel savings and material/ingredient sourcing data.

In terms of energy and water use, audits conducted in 2013 led to the development of a strategic roadmap to help move to a more environmentally responsible supply chain.

WhiteWave exceeded its 2013 goals with a 25 percent reduction in GHG emissions, a 30 percent reduction in waste to landfill and a 15 percent reduction in non-ingredient water usage. In 2013, the company offset more than 97.2 million kilowatthours through renewable energy certificates and restored close to 183.7 million gallons of water through water restoration certificates.

The company regularly evaluates and implements new sustainabilityrelated initiatives designed to protect and preserve the planet’s natural resources. It isn’t just about producing great-tasting food, but also about doing so in a way that’s good for people and the planet.

2014 Green Supply Chain Awards

Meet our Other Green Award Winners With Crossbow, ArrowStream (www.arrowstream.com) drives greater efficiency in inbound freight by establishing collaborative decision-making between purchasing and logistics, and connecting existing replenishment and transportation management systems. Supply chain teams can proactively plan the optimal product flow into distribution facilities, increasing truck utilization and reducing miles driven. With fewer trucks on the road, the carbon footprint is reduced. Using Crossbow across various supply chain organizations, ArrowStream measured an average mile reduction of 10 percent.

A Basware (www.basware.com) customer in the consumer electronics, lighting and healthcare space wanted to keep its carbon footprint as small as possible. It began an outbound e-invoicing project, sending e-invoices from several business units to its integrated electronic data interchange (EDI) partners, dispatching almost 500,000 e-invoices across Europe alone. The company reduced its paper flow, while providing customers with accurate information. The company optimized the invoicing process to ensure maximum energy savings and efficiency.

From energy-efficient warehouse upgrades to its Retailer Consolidation Program, CaseStack’s (www.casestack.com) solutions are based on a common-sense model: Reduce waste and maximize efficiency by streamlining processes and consolidating resources. Consolidation programs help conserve natural resources by reducing dock congestion, improving warehouse efficiencies and decreasing the number of trucks on the highway. The resulting supply chain consumes less energy and produces less carbon emissions.

By greatly reducing or eliminating paper usage, Cass Information Systems (www.cassinfo.com) helped customers achieve impressive results. The company receives electronic shipment documentation from its customers, and in many instances their carriers, eliminating paper from the process. For paper transactions, Cass images all documents, makes them available on the Internet, then shreds the paper. More than 99 percent of payments and remittance advices to carriers are electronic.

Celestica’s (www.celestica.com) Green Services team supports customer product redesigns with an offering of component lifecycle analysis, and the identification of alternate compliant parts along with component information. This data enables them to reduce the redesign cycle time with product that meets environmental legislation requirements with long-term production potential. Green Services’ priority is to understand

customers’ needs, and provide a solution that supports their methodology for greening their products and meeting environmental legislation.

Based on the use of a company environmental questionnaire and scoring tool, Comerica (www.comerica.com) assesses and rates its most significant suppliers, and sets goals for improving the performance of the group as a whole.

Previously rated suppliers are rescored on a three-year cycle. New potential suppliers of significant goods and services are evaluated and scored as part of its request-forproposal (RFP) process. Environmental performance is considered along with quality, pricing and delivery needs consistent with good procurement practices.

Diageo (www.diageo.com) considers sustainability in all it does. New plant expansions, for example, are built to maximize use of daylight. Smart lighting is now installed in 60 percent of its buildings and occupation sensors adjust the lighting. White reflective roofing reduces energy consumption, and optimized heating and cooling systems turn off in unoccupied areas. Its Plainfield, Ill. site also separates and recycles all wood, metal, fluorescent lights and spent oil, and is a zero-waste landfill since 2009.

DiCentral (www.dicentral.com) streamlines entire supply chains, creating a more efficient and environmentally friendly supply chain management process. For buyers, DiCentral offers reliable global platforms throughout its trading partner community, which reduces waste from landfills. Because its processes are electronic, tons of paper waste are also eliminated. DiCentral provides training and live support to assist customers with up-to-date information on green practices.

DSC Logistics’ (www.dsclogistics.com) Sustainability Steering Committee oversees its corporate initiative, which includes recycling, and energy and carbon footprint reduction. In 2012, DSC reduced water use by 24 percent per square foot, electricity by 5 percent, propane by 2 percent and natural gas by 22 percent. In 2013, it decreased its electricity use by 8 percent, natural gas by 10 percent and propane by 35 percent. eZCom Software’s (www.ezcomsoftware.com) streamlined EDI solution, Lingo, positively impacts the sustainability of subscribers’ supply chain strategies.

It facilitates the migration from paper to electronic transactions, which has a substantial environmental impact, reducing paper usage by thousands of tons each year, as well as the carbon emissions from reliance on traditional mail to facilitate trading transactions.

December 2014 Supply & Demand Chain Executive 15

2014 Green Supply Chain Awards HighJump Software’s (www.highjump.com) configurable warehouse management system allows customers to reduce their paper needs, as well as better control product flows and optimize product movements, which saves energy. With automated processes, many customers consolidated shift operations, saving energy by using less lighting and cooling. In addition, customers of the HighJump transportation management system can see a reduction in their carbon footprint thanks to a solution that implements route planning, mode selection and carrier choice.

At the center of Inmar’s (www.inmar.com) green initiatives is its One Touch Advantage returns program.

This environmental sustainability best practice reduces the carbon footprint for pharmaceutical trading partners through the elimination of redundant touch points. It uses single-site processing that eliminates unnecessary transportation of returned product, consolidates destruction, reduces repackaging requirements, and facilitates recovery and recycling of product packaging.

16 Supply & Demand Chain Executive December 2014

Computer-aided decisions ensure the proper waste stream is selected for product at the item level.

Kenco Logistics Services (www.kenco.com) upgraded lighting at two facilities it manages in Tennessee and Pennsylvania. The lighting array saved about 222,170 kilowatt hours annually and is anticipated to reduce GHG emissions by 137.2 tons annually. The emission reductions are equal to cutting 17,036 gallons of gasoline yearly.

Sustainability dashboards track electricity, natural gas and water usage, monitor labor costs, and measure the output of landfill waste and recyclable materials.

NeoGrid (www.neogrid.com) offers integrated supply chain solutions that allow for environmentally friendly supply chain management processes, saving more than 11,000 trees in the last 12 months by replacing processes that traditionally used paper with cloud-based technology.

Within the last year, its integration brokerage customers eliminated 1,095 tons of paper from their supply chain processes. These results were made possible by retailers and distributions using EDI for placing orders to suppliers, allowing them to exchange and validate data electronically.

NetSuite (www.netsuite.com) engaged an outside firm to perform a detailed analysis of its software-as-aservice platform to measure efficiency, cost savings and green benefits. The company produced 423,000 metric tons of carbon dioxide less per year, equal to the CO2 emissions generated by over 48 million gallons of gas, 1 million barrels of oil and the yearly pollution of more than 77,000 automobiles.

At PITT OHIO (www.pittohio.com), sustainability efforts are focused around “people, planet and profit.” The goal is to lower environmental impact, find efficient transportation solutions and be a good corporate citizen. In 2014, there was an 8.5 percent improvement in miles per gallon in its fleet and 1 percent improvement in electricity, while operations grew 5 percent in shipments and 8 percent in tonnage.

Emissions are down 4 percent from air travel and 1 percent from the company fleet.

SciQuest (www.sciquest.com) solutions helped the University of California (UC) minimize its carbon footprint. For example, UC San Diego’s

More Green Supply Chain Award Recipients procurement team discovered an extended service agreement for two turbo-generators that supply more than 80 percent of the campus’ energy needs, resulting in more than $770,000 savings in energy. A new supplier relationship is projected to save $2.9 million annually over the next five years on overnight and ground shipping, making transporting packages less harmful to the environment.

Transportation Insight (www.transportationinsight.com) customized a solution for a large fabric manufacturer using its Extended LEAN methodology. The client saved more than $2.7 million by eliminating waste, and 12 percent of the annual cost of outbound parcel freight, and 30 percent of the annual cost inbound less-than-truckload freight, which resulted in lower mileage, carbon emissions and fuel costs.

Tyco Retail Solutions (www.tyco.com) set up the industry’s first source tag recirculation program in which hard tags are applied at the manufacturing source and then fully recirculated back through the supply chain from the retail store. The initiative combines the recirculation advantages of hard tags with the business benefits of source tagging. ■

■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■

AFN ALOM Avid Technology Barrett Distribution Centers BlackBerry Ltd. C.R. England Cascades CHEP Pallecon Solutions CHEP USA Crown Equipment Corp.

DHL Express DHL Express India Eastman Chemical Co. Elemica eLynxx Solutions Enablon enVista FireEye GENCO Ingram Micro Mobility IHS INSIGHT, Inc.

■■ International Asset Systems ■■ Invata Intralogistics ■■ Kruger Products L.P. ■■ LOG-NET ■■ Method ■■ Murphy Warehouse Co. ■■ Penske Logistics, LLC ■■ PINC Solutions ■■ Ryder System Inc. ■■ Saddle Creek Logistics Services ■■ Samuel Strapping ■■ Satellite Logistics Group ■■ Source One Management Services ■■ Transplace ■■ Turnkey Solutions ■■ W&H Systems ■■ Westfalia Technologies ■■ Wolper Information Services ■■ Wynright Corp.

■■ Xerox Corp.

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December 2014 Supply & Demand Chain Executive 17

industry focus pharmaceuticals

Tracking on an item level opens up a whole new range of options and can provide real value-added benefits

Track and Trace: Business Benefits Beyond Compliance

By Stefan Hockenberger

G

lobal track-and-trace requirements increase the complexity of and demands on supply chains. More than ever pharmaceutical companies need to deploy applications, services and mobile solutions that satisfy many parallel goals. Pharmaceutical companies must consider areas of compliance, product integrity, product visibility and risk reduction, all while running supply chains at full speed and low cost. The decision to serialize and track products opens up a range of options and can provide value-added benefits beyond basic compliance.

What Is Traceability and Serialization?

Traceability is defined as the ability to track and trace products, batches, items or components through the supply chain from product manufacturing to final retail. Traceability helps ensure pharmaceutical customers get what they pay for, including product safety.

Targeting a product as part of a batch makes recalls easier if a safety problem arises. Traceability also helps stop 18 Supply & Demand Chain Executive December 2014

fraud by preventing distributors of counterfeit medicine from profiting off of fake products by verifying a given product identification and cross-referencing with information in the track-and-trace database.

Serialization means to make each product unique by placing an item identifier (serial number) on every single product. Then, the product can be traced through the supply chain. Barcodes and radio frequency identification (RFID) are two common methods that deliver traceability. Typically, a barcode or RFID transponder—usually containing a global trade item number (GTIN) and serial number— is applied to items on the production line. Once applied, all product-related events, such as “produced,” “shipped,” “received” and so forth, are captured along the supply chain by scanning these identifiers with mobile devices.

This captured information is then stored in a database, along with product-related information.

Current Regulatory Impact Although traceability may seem like a common practice, much more

can be done to ensure its use, level of penetration and ability to fulfill traceability goals, while also driving higher levels of integrity in any pharmaceutical company’s complete supply chain. The importance of traceability at an item level only intensifies as legislators introduce laws for food, beverage and drug traceability that manufacturers must abide by, including the 2015 requirements of the Drug Supply Chain Security Act (DSCSA).

Effective Jan. 1, 2015, the new requirements will require companies in the supply chain to do business only with trading partners that hold a valid state or federal license, and verify their customers’ credentials.

Companies will also have to provide transaction documents identifying items using the U.S. National Drug Code, packaging lot and quantity in either paper or electronic form, and maintain the documents for a minimum of six years. Under the law, all companies that are part of a supply chain must establish systems to properly quarantine and dispose of drugs they determine are suspect, or following reports by the Food and

industry focus pharmaceuticals Drug Administration (FDA), law enforcement or a trading partner.

Pharmaceutical companies can expect the requirements to continue evolving. Serialization is not a one-off development, and pharmaceutical companies are challenged to comply with serialization regulations quickly and effectively.

Meeting Regulatory Mandates Consulting companies offer traceability expertise through trackand-trace systems and applications to help ensure compliance with key regional computer system regulatory requirements. Regulatory requirements include Title 21 CFR Part 11 of the Code of Federal Regulations, which deals with the Food and Drug Administration guidelines on electronic records and signatures, and the European Medicine Agency’s Annex II, Computerized Systems—Guidelines to Good Manufacturing Practices.

Pharmaceutical companies should quickly and continually adapt information technology systems, production, packaging lines and business processes in order to achieve compliance with the ever-growing list of regulatory requirements for tracking and tracing goods throughout supply chains in the U.S., European Union, China, Brazil and Saudi Arabia. A quality track-andtrace solution can be implemented by any pharmaceutical company at any point in the supply chain regardless of the size of the business or current enterprise resource planning system.

Benefits Beyond Compliance Implementing track-and-trace infrastructure requires not only technology on the pharmaceutical packaging lines, but also change management within the entire supply chain.

20 Supply & Demand Chain Executive December 2014

However, there are several ways to leverage track and trace to produce business benefits beyond basic regulatory compliance, including: ■■Improved operations. By implementing track-andtrace systems, pharmaceutical companies can standardize operational procedures and harmonize processes, helping streamline operations.

the supply chain (and possibly being consumed).

■■The ability to combat parallel trading. Parallel trading can be avoided with a track-andtrace system. Parallel trading occurs when goods are bought in markets where the price is lower and sold in markets where the price of the same goods is higher.

Parallel trading is an illegal

A quality track-and-trace solution can be implemented by any pharmaceutical company at any point in the supply chain regardless of the size of the business or current enterprise resource planning system.

■■Competitive advantage.

With track and trace, pharmaceutical manufacturers are positioned to establish direct dialog with consumers and patients, and can integrate the system into customer loyalty programs, helping ensure any unique individual receives the appropriate quantity of rewards and that only authentic individuals are recognized.

■■Waste management.

Pharmaceutical companies are also able to ensure better waste management through a trackand-trace system. Scanning scrapped or decommissioned products whenever single items are taken out of the supply chain is normally required for a company that uses a track-andtrace system. The greatest benefit is for the patient, consumer and quality manager within the company, since flagging every decommissioned product in the track-and-trace database and offering the corresponding verification services can avoid waste product from re-entering

practice in many industries, especially when additional import and export taxes are added to the product price. Track and trace is a useful tool to investigate potential parallel trading activities among wholesalers.

■■Brand damage avoidance.

Track and trace can also help pharmaceutical companies avoid brand reputation damage. A worst case scenario is when a consumer is harmed—or even dies—due to consumption of expired, defective or counterfeit product. But even in less extreme cases, product reputations can be seriously damaged by counterfeits marketed and sold as genuine products, but are inferior in quality. In other industries, the problem is not the quality of the falsified products, but the fact that this results in revenue losses.

■■Improved recall management.

Finally, track and trace can help pharmaceutical companies improve recall management.

Batches can be recalled for many different reasons, but the most common is the detection

industry focus pharmaceuticals of faulty ingredients within a given batch. Once the affected batch is identified, track and trace helps the manufacturer discover in what storage locations, and wholesaler’s and retailer’s stocks the affected batch exists. The most common derived benefits resulting from improved batch recall capabilities include the ability to implement faster and partial batch recalls, faster version replacement (updates to labeling and graphics may require recalls of product batches even if the product itself is OK), and theft stock recalls (when genuine product is stolen and can later be traced through a unique identifier, helping simplify the recall process).

Considerations for Implementation Pharmaceutical companies interested in track and trace should consider several factors. Solutions should: ■■Support all serialization and regulatory reporting requirements around the world.

■■Be easy to implement with minimal internal resources needed and quickly achieve compliance with

transaction information, transaction statement and transaction history.

■■Achieve compliance with the DQSA Suspect Product Verification requirements.

■■Be highly secure, fault tolerant and operate via a highavailability software-as-a-service platform.

■■Run on a time-tested platform.

■■Integrate with partners using industry standards.

■■Enable compliance with regulatory requirements for computer systems.

■■Be a feature-rich serialization management and traceability solution.

■■Offer an extensive standard report set and 24/7 support resources. ■ About the Author: Stefan Hockenberger is the managing director at Movilitas Consulting AG, which he joined to head up the company’s track-and-trace solution offering. In addition, he has participated in several publications and wrote the book Track & Trace with SAP Solutions in 2012.

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December 2014 Supply & Demand Chain Executive 21

best practices e-commerce

The Consumer as Grinch Last-minute online shoppers bring holiday fear to the supply chain

By Todd Miller

I

admit it. I am one of the abusers.

An e-commerce abuser, that is.

The wonderful World Wide Web, and all the efficiencies and endless shopping it affords is indeed an enabler for those of us who wait until the very last minute every year to purchase our holiday gifts. (I knew it was wrong, but I couldn’t stop.)

Before e-commerce, I would find myself at the mall on Dec. 24, spending about eight hours in search of last-minute gifts. That was until six years ago, when my wife—who is not an abuser, but rather an e-commerce maven—suggested that we try our holiday shopping online. And, oh boy, we knocked it out in less than 45 minutes, routing everything directly to our families’ and friends’ respective destinations across the country, wrapped gifts and all. It was a beautiful thing.

It was not until last holiday season, though, that I started thinking about the behind-the-scenes logistics that were necessary to provide me and my fellow holiday shoppers with the joy and ease of online shopping.

Two things happened last year.

First, the supply chain was massively overwhelmed, making major

22 Supply & Demand Chain Executive December 2014

headlines and disappointing many e-commerce abusers who sadly did not have gifts in time for their loved ones. (I was one of them!) Second, my firm, Sterling Partners, made an investment in a supply chain company connected to e-commerce, which gave me a front-row seat to the logistical explosion that ruptures the supply chain during the holidays.

It’s important to note that e-commerce logistics are very different from traditional logistics for three reasons. First, directto-consumer orders are one by one, and require a pick, pack and ship operation that eliminates the

opportunity to drive efficiencies of fulfilling and moving product in bulk. Second, orders are highly promotional, and result in large peaks and valleys for volume. Third, online orders are unpredictable, both in terms of overall volumes, and which products will be hot and sell. Add it all up and the bottom line is that the holiday surge’s impact on the supply chain is exacerbated, ultimately crippling the e-commerce world.

As a result, supply chain executives have an entirely new set of logistical challenges to solve, and the solutions are wrapped up in process, network design and required new

best practices e-commerce technologies. Software with advanced algorithms are driving new ways in which fulfillment centers and carrier networks are operated, tailored for the unique volume and order flow patterns of the e-commerce supply chain. Nevertheless, despite all of the efficiencies, technologies and notable engineering that are evolving out of the logistics industry, there is a fundamental problem with online holiday shopping: the e-commerce consumer.

As digital consumers, we are attracted to the enormous benefits of shopping online: the convenience of shopping from home, the ease of researching and comparing product options, and often cheaper prices and no sales tax (albeit potentially going away). We are also trained to buy when and what we want, and we expect to receive our purchases quickly. Many recent research studies are identifying two-day ground as becoming the new e-commerce standard expected by consumers, and many retailers are investing heavily to solve for an increasing number of next- and same-day delivery options.

Retailers are also exploring various omnichannel strategies, including ship from store, pick up in store, pick up in locker and order in store/ship to home.

All of these options are training the consumer to believe it is cheap and easy to have a plethora of options to interface with the retailer in an omnichannel world. But it’s not.

These options are difficult to deliver, require extensive investment in both physical and technology-enabled assets, and demand that retailers change the way their infrastructure is deployed.

Consumers are demanding free shipping and shorter delivery times, and retailers are working tirelessly to design supply chain networks to

holiday shopping behavior. And why would we? The industry is training us that two-day (or shorter) delivery times are the new standard.

But the ramifications are severe.

As the ratio between normal volumes and peak volumes becomes more and more lopsided, it requires excessive investment to build a supply chain for an excessive peak. Instead, retailers and supply chain executives should train consumers to buy their gifts earlier—with incentives and/ or surcharges—to smooth the ratio Consumers are demanding free between normality shipping and shorter delivery times, and the peak, because a more even and and retailers are working tirelessly predictable supply to design supply chain networks to chain is cheaper. In the meet those expectations. long run, a cheaper supply chain benefits the online consumer the most as the Ultimately, the supply chain delivered cost of products is reduced, is built for peak volumes—it can hence consumers are able to buy only handle a certain amount of products online at lower prices. volume on any given day and, if As supply chain executives we continue to demand the same toggle between distribution center short delivery times during the peak optimization, delivery times, season as we do during normalized consumer satisfaction and the sum periods, we will then require a supply total of their delivered unit cost, they chain infrastructure that is largely should contemplate the reality that underutilized for most of the year and the costs should be and ultimately are unnecessarily expensive. passed on to the consumer, whether So what happened last year? A it’s transparent in pricing or absorbed combination of strong holiday online in the retailer’s margin. Normalized sales growth for yet another year period delivered cost is a fraction of coupled with even shorter delivery surge period delivered cost, and those time expectations led to a perfect of us e-commerce abusers need to be storm of last-minute volume surge trained to either pay a much higher on the supply chain. It was us, the premium for last-minute orders, or e-commerce abusers, who did not save ourselves the time and stress and consider the ramifications on the buy our gifts earlier! ■ supply chain of our tardy, last-minute meet those expectations. But the bottom line is that shorter delivery times require heavier and heavier investment. To cut delivery times, retailers continue to build more distributions centers. Multiple distribution centers not only require more fixed-cost overhead, but they also require stocking shelf-keeping units (SKUs) in multiple locations, which leads to larger working capital investments and more wasted product at the end of the season.

About the Author: Todd Miller is vice president at growth equity firm Sterling Partners. He focuses primarily on logistics-related investments. His representative portfolio companies include Innotrac, a provider of high-end fulfillment solutions to the e-commerce industry, and Livingston International, the largest pure-play customs broker in North America. Prior to Sterling, Miller worked at Tri-Artisan Capital Partners, and was the founder and principal of an investment firm in Brazil.

He can be reached at tmiller@sterlingpartners.com.

December 2014 Supply & Demand Chain Executive 23

best practice manufacturing

Lean Manufacturing in the

Age of the Industrial Internet

By Bob Gates

When technology supports the convergence of machine and intelligent data, and everything is connected, the power of the industrial Internet becomes real for manufacturing

D

iscrete manufacturers face increasing costs, global competition and growing consumer demands. They must move faster, better and leaner every day just to keep up with, let alone stay ahead of, competitors. They face pressure to produce more for less and quickly respond to changing market demands while lowering costs. In short, they have to capture every operational efficiency possible. Hence, lean manufacturing is more critical than ever and manufacturers need to take this to the next level, particularly in the face of the opportunities presented by the industrial Internet in which machines and devices are connected, and people have access to operational insight wherever they are working with business intelligence at their fingertips.

One way to take lean manufacturing to the next level is to complement it with the principles of Six Sigma, which also seeks to eliminate waste by streamlining and improving all business processes, and removing variations within the process. The combination of the two is dubbed Lean Six Sigma.

Manufacturers can get more out of Lean Six Sigma techniques because of the explosion of data from today’s connected machines that are enabled

24 Supply & Demand Chain Executive December 2014

by the industrial Internet. Applying advanced manufacturing execution system (MES) solutions, this data can provide insight to improve the top and bottom lines of a business— better customer service, shorter lead times, higher production performance and operations efficiency—all while avoiding costly mistakes. Digitization of manufacturing processes and data with a MES uncovers interrelationships and deep insights across the enterprise, and provides the underpinning from which big data analytics can inform strategic planning, guide real-time operations and uncover root causes of issues before they become problems.

Building the Foundation From a Lean Six Sigma perspective, MES software technologies are best leveraged once the proper foundation is in place that answers the following questions: ■■Am I collecting the right data?

■■Do I have an effective and efficient way to store and access it?

■■Do I have a way to visualize it in context?

■■Do I have a way to get it to the right people?

■■How can I integrate analytics into my production plan?

Collecting the right meaningful data you need from your manufacturing process, critical assets and people is imperative. Determine the key sources of that data—whether it’s product data, execution data, work instructions, quality metrics, supply chain metrics or genealogy/ traceability data. And remember that, in the age of the industrial Internet, the data is not only inside building walls, but also from sources and activities that feed the facility, like suppliers and customers who are served after products leave the factory.

The next step is to measure your manufacturing processes with capabilities that enable you to collect, store and manage your data at the enterprise level, which may require the consolidation of multiple plant historians into a single historian, with common configuration. Finally, you need the ability to handle a number of different types of data—time series, metadata, pictures, videos, etc.—and correlate them together within a common context. The right MES solution enables you to collect, store and manage your industrial big data to leverage higher level analytics.

This is where Lean Six Sigma delivers valuable business insight and powerful performance improvements start to take shape.

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best practice manufacturing Analyze for Data-Driven Insights With the foundation in place, manufacturers can leverage MES to build analytics that get at very specific problems for their business, such as helping operators visualize data and deliver data-driven root cause analysis to determine what the problem was, what happened, how often it happened, where it happened and what the final disposition should be. This manufacturing intelligence can drive significant and gamechanging productivity and efficiency for manufacturing operations.

Data-driven insights through advanced analytics help enhance asset performance by detecting and predicting the why, when, where and how of future potential production anomalies. Perhaps more important is the ability for manufacturers to assess,

26 Supply & Demand Chain Executive December 2014

through simulation, the impact a potential change will have before it is actually implemented. This allows the manufacturer to pinpoint the cause of a quality defect found during the final product test, or to note a difference in operating procedures between first and second shifts due to an operator removing the product too early from a critical operation. Having these scenarios identified beforehand allows for changes and/or contingency plans to keep production running in the event a failure occurs.

Improve with Actionable Data With the ability to measure and analyze in place, connecting the right people to the data is key. MES visualization technologies provide real-time operational intelligence so that the operator, control room

personnel, plant manager, engineer or maintenance staff can separate the signal from the noise. With relevant information in context readily available at their fingertips, they can prioritize the right actions at the right times to drive the best actions every time to achieve significant operational improvements. Further, since the industrial world is becoming increasingly mobile, steps must be taken to make data accessible. MES industrial mobility, powered by the industrial Internet, enables today’s manufacturers to connect to their production processes from anywhere at any time on mobile devices—a powerful business enabler. This fosters a virtual walk-the-plant-floor management approach as opposed to a spreadsheet-management approach.

This hands-on culture aligns with

best practice manufacturing the philosophy of Lean Six Sigma, whereby real-time information and action accelerates process improvement initiatives.

Control to Drive Operational Excellence As the industrial Internet enables connectivity between your machines, data and insights, and people, you have the infrastructure to leverage business and operational insights into the future, transforming your operations to be leaner than ever. To sustain these new levels of lean performance, MES enables you to integrate analytics as part of your production plan, so you can continually drive better outcomes, such as: ■■Scheduling production in plants, on lines or on machines to produce within defined targets.

■■Reducing work in process with real-time visibility.

■■Producing and delivering products to customers faster by closing the loop between manufacturing and engineering.

■■Increasing quality through real-time data collection and conformance metrics to verify as-built equals as-designed.

■■Leveraging full product genealogy for fast traceability and exposure containment.

■■Optimizing production based on energy constraints.

■■Integrating energy and water consumption into material management and consumption metrics.

In the age of the industrial Internet, manufacturers have the opportunity to leverage MES solutions to drive

better, leaner ways of doing business, with analytics connected at the point of control, and processes that enable manufacturing businesses to be self-learning, self-improving and self-leaning for accelerated competitiveness. When technology supports the convergence of machine and intelligent data, and everything is connected, that’s when the power of the industrial Internet becomes real for manufacturing operations. ■ About the Author: Bob Gates is the global marketing manager for GE’s Intelligent Platforms Business.

His responsibilities include strategic technical direction for the automotive, consumer and life science markets.

December 2014 Supply & Demand Chain Executive 27

professional development the changing workforce

The Future of Work ... ... And five reasons why you aren’t prepared for it

W

e’re on the cusp of the most diverse work environment that the world has ever seen.

By 2020, there will be five different generations working together—each with different skills, experiences, work habits and motivations. More of these workers will be freelancers and long-term contractors. All of this is unprecedented, and represents a major opportunity for productivity, talent development and employee engagement. But if you’re like most companies, you’re not prepared for it.

And here are five reasons why:

You’re out of Touch Most companies recognize that today’s workforce is markedly different than it was 10, five, even three years ago. But according to Workforce 2020, a sweeping global survey of more than 5,400 executives and employees in 27 countries conducted by the Oxford Economics Group, they don’t understand how it differs—and what makes employees tick.

At the end of the day, gyms and free yogurt don’t matter. When it comes to benefits, today’s workers care more about getting paid 28 Supply & Demand Chain Executive December 2014

By Tim Minahan

than looking good or getting fed.

According to Workforce 2020, competitive compensation was the most important attribute of a job to two-thirds of respondents—20 percent higher than the next highest benefit. Retirement plans, flexibility and time off ranked well ahead of amenities such as fitness centers, daycare and subsidized food.

You’re Losing the Skills Competition If compensation is what motivates employees, what they’re most afraid of is losing money as a result of insufficient skills, knowledge and keeping up with the latest technologies. Becoming obsolete is the most popular concern for today’s worker, twice as concerning as being laid off. And few companies are doing anything about it.

The need for skills like analytics and programming/development will grow sizably over the next three years, but less than half of employees expect to be proficient in most of these areas in those 36 months.

Further, less than half of employees surveyed as part of Workforce 2020 say their company provides ample

training on the technology they need and less than one-third say their company makes the latest technology available to them.

You’re Confused

by Millennials By 2020, Millennials will represent more than 75 percent of the workforce. As the single largest and most savvy workgroup, Millennials represent a significant opportunity. Companies that can excite them about work, train them to fill in gaps on experience and adapt to their style of working can build a workforce that can successfully execute on the objectives of today and adapt to drive advantage for the business of tomorrow. But most can’t because they don’t really understand them.

Millennials certainly are unique.

They are wired, or rather unwired, differently than other generations.

They are technologically savvy, and are transforming traditional thinking on how and what information we share, how we view brands, how we buy and consume, and how we work.

But as uncovered in Workforce 2020, they aren’t all that different

professional development the changing workforce

from their non-Millennial coworkers when it comes to workplace priorities.

For both groups, compensation rules, with 68 percent of Millennials and 64 percent of non-Millennials citing it as an important or very important benefit. And 41 percent of Millennials and 38 percent of nonMillennials say higher compensation would increase their loyalty and engagement with the company.

Millennials prioritize meeting career goals (35 percent), meeting income goals (32 percent) and meeting goals for advancement (29 percent), while non-Millennials prioritize corporate values that match their own (30 percent), achieving work/life balance (31 percent) and meeting income goals (30 percent).

And contrary to popular thinking, Millennials are no more likely than non-Millennials to leave their jobs in the next six months.

It’s Lonely at the Top Building a business requires a clear vision and strong leadership that can inspire employees to make it a reality.

But according to Workforce 2020, most companies are staring over the leadership cliff—and are about to fall off. Only 31percent of executives interviewed say that,

when a person with key skills leaves, they fill the role from within the organization. And less than half indicate their leadership has the skills to effectively manage talent, or inspire and empower employees.

And perhaps most troubling, almost half of executives surveyed say their plans for growth are being hampered by lack of access to the right leaders.

You Need New Tools As the economy continues to move to a state where nearly everything can be delivered as a service, companies are increasingly tapping external expertise and resources they need, as they need them, to fill skills and resource gaps, and to accommodate rapidly changing business and customer demands. That means more temporary staff, more consultants and statement-of-work (SOW) workers, and even crowdsourced projects.

This is changing the nature of employment and requires a new approach to human resources. To really optimize their workforce, companies need a comprehensive and flexible strategy that is fully integrated with all other business processes. And they need systems that allow them to engage all of their workers—both permanent and temporary staff, out of the gate and on the fly—in new and innovative ways to ensure they have the right people in the right

roles at the right times to deliver on their goals.

But as revealed in Workforce 2020, most companies lack both. While over half (53 percent) of executives say workforce development is a key differentiator for their firm, they do not have the tools and organization to back it up.

Just 38 percent say they have ample data about the workforce to understand their strengths and potential vulnerabilities from a skills perspective, and 39 percent say they use quantifiable metrics and benchmarking as part of their workforce development strategy. Only 42 percent say they know how to extract meaningful insights from the data available to them.

But it’s not all doom and gloom.

When it comes to preparing for the future of work, knowledge is power.

And the power is in your hands.

Tomorrow’s workforce will be more diverse and work differently. Start by understanding this. Then develop new strategies that support this diversity. And embrace emerging technologies that foster new levels of employee engagement and collaboration to drive them.

In doing so, you can build a workforce that can drive your business today and lead you to a promising future. ■ About the Author: Tim Minahan is the senior vice president of Network Strategy at Ariba, an SAP Company. He is also CMO of SAP Cloud and Line of Business.

December 2014 Supply & Demand Chain Executive 29

statement of ownership

13. Publication Title

14. Issue Date for Circulation Data Below

Supply & Demand Chain Executive

September 2014

15. Extent and Nature of Circulation

Statement of Ownership, Management, and Circulation (Requester Publications Only) 1. Publication Title

2. Publication No.

3. Filing Date

Supply & Demand Chain Executive

024-012

September 29, 2014

4. Issue Frequency

5. No. of Issues Published Annually

6. Annual Subscription Price

March, May, June, September, December

5

Free to Qualified Subscribers

7. Complete Mailing Address of Known Office of Publication (Street, City, County, State, and Zip+4)

Contact Person

AC Business Media 1233 Janesville Ave Fort Atkinson, WI 53538

Telephone

Tammy Steller

(920) 568-8393 8. Complete Mailing Address of Headquarters or General Business Office of Publisher

AC Business Media, 1233 Janesville Avenue, Fort Atkinson WI 53538 9. Full Names and Complete Mailing Addresses of Publisher, Editor, and Managing Editor Publisher (Name and Complete Mailing Address)

Average No. of Copies

Issue Published Nearest to Filing Date

51187 36966

50893 36754

0

0

5

6

a. Total No. Copies (net press run) Outside County Paid/Requested Mail Subscriptions stated on (1) PS Form 3541. (Include direct written request from recipient, telemarketing and Internet requests from recipient, paid subscriptions including nominal rate subscriptions, b. Legitimate employer requests, advertiser's proof copies, and exchange copies.)

Paid and/or Requested (2) In-County Paid/Requested Mail Subscriptions stated on PS Distribution Form 3451. (Include direct written request from recipient, telemarketing and internet requests from recipient, paid subscriptions including nominal rate subscriptions, (By Mail employer requests, advertiser's proof copies, and exchange copies.) and Outside the Mail) (3) Sales Through Dealers & Carriers, Street Vendors, Counter Sales, and Other Paid or Requested distribution Outside USPS. (4) Requested Copies Distributed by Other Mail Classes Through the USPS. (e.g. first-Class Mail) c. Total Paid and/or Requested Circulation [Sum of 15b (1), (2), (3), (4)] (1) Outside County Nonrequested Copies stated on PS form 3541.

(Include Sample copies, Requests Over 3 years old, Requests induced by a Premium,

d. Nonrequested Distribution (By Mail (2) and Outside the Mail)

No. Copies of Single

Each Issue During Preceding 12 Months

0

0

36971

36760

12651

12865

0

0

Bulk Sales and Requests including Association Requests, Names obtained from Business Directories, Lists, and other sources.)

In-County Nonrequested Copies stated on PS form 3541.

(Include Sample copies, Requests Over 3 years old, Requests induced by a Premium, Bulk Sales and Requests including Association Requests, Names obtained from Business Directories, Lists, and other sources.)

Jolene Gulley 1922 East Washington Avenue Gilbert, AZ 85234

(3)

Nonrequested Copies Distributed Through the USPS by Other Classes of Mail.(e.g. First-Class Mail, Nonrequestor Copies mailed in

0

0

1146

958

e. Total Nonrequested Distribution (Sum of 15d (1), (2), and (3))

13797

13823

f. Total Distribution (Sum of 15c and e)

50769

50583

Editor (Name and Complete Mailing Address)

excess of 10% Limit mailed at Standard Mail or Package Services Rates)

Barry Hochfelder 3030 Salt Creek Lane Suite 200 Arlington Heights, IL 60005

(4)

Nonrequested Copies Distributed Outside the Mail (Include Pickup Stands, Trade Shows, Showrooms, & other sources)

Managing Editor (Name and Complete Mailing Address)

Carrie Mantey, Associate Editor 1233 Janesville Avenue Fort Atkinson, WI 53538 10. Owner (Do not leave blank. If the publication is owned by a corporation, give the name and address of the corporation immediately followed by the

g. Copies Not Distributed

418

310

h. Total (Sum of 15f and g)

51187

50893

i. Percent Paid and/or Requested Circulation (15c / 15f x 100)

72.8%

72.7%

names and addresses of all stockholders owning or holding 1 percent or more of the total amount of stock. If not owned by a corporation, give the names and addresses of the individual owners. If owned by a partnership or other unincorporated firm, give its name and address as well as those of each individual owner. If the publication is published by a nonprofit organization, give its name and address.)

Full Name

Complete Mailing Address

AC Business Media

1233 Janesville Avenue, Fort Atkinson WI 53538

11. Known Bondholders, Mortgagees, and Other Security Holders Owning or Holding 1 Percent or more of Total Amount of Bonds, Mortgages or Other Securities. If none, check here. ¤ None Full Name Complete Mailing Address

Anil Narang Carl Wistreich

1233 Janesville Ave, Fort Atkinson, WI 53538 1233 Janesville Ave, Fort Atkinson, WI 53538

16. Electronic Copy Circulation

¤ Has Not Changed During Preceding 12 Months ¤ Has Changed During Preceding 12 Months

No. Copies of Single

Each Issue During

Issue Published Nearest to Filing Date

a. Requested Electronic and Paid Electronic Copies b. Total Requested and Paid Print Copies (Line 15C) + Requested/Paid Electronic Copies c. Total Distribution (Line 15F) + Requested/Paid Electronic Copies) d. Percent Paid and/or Requested Circulation (Both Print & Electronic Copies) x I certify that 50% of all my distributed copies (Electronic & Print) are legitimate requests.

17. Publication of Statement of Ownership for a Requester Publication is required and will be printed in the October issue of this publication.

18. Signature and Title of Editor, Publisher, Business Manager, or Owner

12. For completion by nonprofit organizations authorized to mail at nonprofit rates. The purpose, function, and nonprofit status of this organization and the exempt status for federal income tax purposes:

Average No. Copies Preceding 12 Months

5,211 42,182 55,979 75.0%

4,690 41,450 55,273 75.0%

Date

PS Form 3526-R Facsimile

Greg Udelhofen

September 29, 2014

I certify that all information furnished on this form is true and complete. I understand that anyone who furnishes false or misleading information on this form or who omits material or information requested on the form may be subject to criminal sanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties).

NOMINATE YOUR

PRO TO KNOW Do you value your industry provider or practitioner? Supply & Demand Chain Executive’s 15th Annual Pros to Know Awards Competition is now open for entry!

Deadline: December 19, 2014 The Supply & Demand Chain Executive Pros to Know are an elite group of professionals who exemplify the talent, knowledge, skills and efforts necessary for supply chain excellence.

Give your Pros the recognition they deserve.

We’ll celebrate the winners in our March issue, as well as in an industrywide news release.

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advertiser index

Advertiser Index Advertiser

Page Number

Results Through Applied Intelligence®

Amber Road.................................................7 www.amberroad.com American Public University...................21 www.studyatapu.com Basware.....................................................17 www.basware.com C.H. Robinson Worldwide, Inc.................2 www.chrobinson.com CaseStack Inc...........................................19 www.casestack.com Cass Information Systems, Inc...............16 www.cassinfo.com

Industries

JVKellyGroup, Inc. provides cost reduction and risk mitigation solutions for some of the world’s largest organizations. By offering an integrated set of analytics, sourcing services and technology, JVKellyGroup helps ensure that a company’s spend is effectively analyzed, sourced, managed, and monitored.

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Clients benefit from the expertise of years of experience our consultants have in actual sourcing roles including former CPOs, VPs of Procurement and Sourcing, Buyers, Analysts and Sourcing Technology Developers.

Our services will help decrease sourcing cycle time, increase potential savings capture due to expertise in commodity areas as well as improve supplier relationships and mitigate supplier risk.

Experience With a team of professionals, averaging more than 15 years of hands-on, industry experience, our projects provide practical solutions and quantifiable benefits. JVKellyGroup has led engagements across a diverse range of industry verticals and worked with virtually every category of indirect spend.

CONTACT US TODAY! phone: 631-427-2888

email: info@jvkg.com

web: www.jvkg.com

DSC Logistics..............................................9 www.dsclogistics.com E2open Inc.................................................27 www.e2open.com Emirates Group.........................................34 www.skycargo.com EXTOL International, Inc.........................11 www.extol.com JVKellyGroup, Inc.....................................31

One break in your quality supply chain could cost you millions.

www.jvkg.com Material Handling Industry....................25 www.promatshow.com Puridiom Inc..............................................26 www.puridiom.com Saia...............................................................5 www.saia.com Sparta Systems, Inc.................................31 www.spartasystems.com TMC/M2M Conference............................33 www.m2mevolutionexpo.com

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© 1995-2014 Sparta Systems, Inc. All Rights Reserved.

December 2014 Supply & Demand Chain Executive 31

final thoughts learning skills

Multiply Your Skills,

or Be Left Behind

By Stephanie Crowe

T

he reality is that supply chain has changed. It has moved beyond being a linear chain to a network of suppliers, distributors, facility types, forms of replenishment, cycles of supply, types of demand, the fickle nature of consumers or buyers, and the readiness of information about price, availability and alternatives. It is more complex and changing at an ever-increasing rate. Employees must multiply their competencies to keep up.

Companies and employees must create ways to continuously learn and learn rapidly. Innovation in supply and demand networks is happening so quickly that just learning the “new thing” and going back to business is no longer sufficient. We must change our approach to learning, making it both continuous and challenge-based, to create better learners, rather than just better doers.

Teams can no longer specialize in a single silo and expect to be rewarded for doing well only in their area of expertise. They must think in an integrated fashion across the entire supply and demand network. How do my actions, processes, decisions and priorities impact this now-magnified, super-fast, demand-driven world we live in?

Productivity of repetitive tasks is no longer the differentiator in the supply chain. It is the advanced decisionmaking, how we deal with exceptions, and the judgment that must be used to prioritize the company’s values that is now required to operate a 32 Supply & Demand Chain Executive December 2014

supply and demand network. Those values include customer satisfaction and responsiveness, environmental sustainability, employee appreciation and engagement, and brand perception. Each operational component of the commerce chain must be driven seamlessly, requiring a shift from functional silos to interoperable and conceptually aligned end-to-end flexible processes.

There is one more factor: Employees also have changed.

Approximately 40 percent of the workforce is now Millennials; by 2017, it will be about 70 percent.

Millennials learn differently, have different values in terms of how they relate to their work, and therefore demand different management styles and resources. In supply chain, integrated knowledge of how the networks operate is locked up in the minds of Boomers and Matures who teach the way they learn: by telling.

Millennials learn by doing. (See related story on Page 28).

So then, what type of new learning and development is required? First, it’s a new kind of learning. It’s challenge-based, with real context about the real environment in supply chain. We use online, interactive, game-based simulations for this because we are a global company with multiple locations. Similarly, valuable learning approaches can include stories, case studies and examples that have challenges for the learners to solve. In the day-to-day environment, you need real-time,

just-in-time performance support, which includes quick reference on how to perform tasks. Finally, the greatest impact comes from aligning each employee, team, location and function across the organization with the metrics and goals, vision and values of the organization—with reinforcement across tactical day-today activities, and especially when any organizational or systematic change is being implemented.

What we are seeing is an increased rate of cross-training, knowledge management and knowledge transfer out of the minds of a few longtenured experts into learning objects, real-time sharing of best practices for continuous improvement, and valuesand priorities-driven simulations to challenge the cross-functional thinking, which build a base of how to approach complex supply chain issues in the context of the challenges that occur. This type of learning enablement doesn’t create direct “if this, then do this” responses in employees. Instead, it creates good decision-makers who can reference examples they’ve heard, and make good judgment calls when a clear, black-and-white answer is not readily at hand.

It’s the cross-trained, contextenabled, integrated decision-makers that make the difference. How are you, as an employee or an organization, multiplying the impact of those employees by giving them learning and development opportunities and resources to keep up? ■ About the Author: Stephanie Crowe is the senior director of Global Learning and Development at Manhattan Associates. As leader of learning and change, she specializes in multiplying the return on investment of education for clients and employees, through growth, enablement and transformational change.