SupplyChainBrain May/June Digital Edition

MAY/JUNE 2014
www.SupplyChainBrain.com
Enter the global market.
Amber Road enables companies to export without
fines or delays, removing the risk in global trade.
AUTOMATE IMPORT & EXPORT | REDUCE RISKS AND COSTS OF EXPORTING |
GAIN A CENTRALIZED VIEW OF TRADE COMPLIANCE
For more information, please visit www.AmberRoad.com
VOLUME 18 NUMBER 3
MAY/JUNE 2014
38 CHECKUP TIME?
42 START-UP TAKES OFF
44 SWEET DREAMS
The Cure for
Sage Health Solutions
Rest Easy: Your
the Common
Taps Into a Global
Mattress Will Be
Supply Chain
Sourcing Network
Delivered on Time
Medical device original equipment
manufacturers can cure their supplychain ills with suppliers who do
more than supply.
Started by two sisters in South Africa, a
small provider of medical supplies
accepts an invitation from its biggest
customer to join an electronic sourcing platform—then sees the technology as an opportunity to enable
growth on a global scale.
UK retailer of beds and bedroom furniture makes 6,000 home deliveries
every week—on time—now that it
uses an automated routing and scheduling solution.
SUPPLYCHAINBRAIN
3
Brad Berger
Tel: 516-829-9210 • Fax: 516-829-9722
150 Main Street, Port Washington, NY 11050
e-mail: bberger@supplychainbrain.com
Group President & Publisher
Associate Publisher Emily Vaughn Janson
Tel: 847-266-9858 • Fax: 847-266-9868
e-mail: ejanson@supplychainbrain.com
20 EXECUTIVE BRIEFINGS
10
Global Sourcing Works for You
What’s Next for Omnichannel
Customer Experience?
Humanitarian Supply Chains
Role of Geographical Information
Systems in the Supply Chain
SCB EXCLUSIVE
14
SCB EXCLUSIVE
How Can Supply Chain Talk to Sales?
Russell W. Goodman
Tel: 717-525-9543
e-mail: rgoodman@supplychainbrain.com
Editor-in-Chief
Robert J. Bowman
Tel: 415-221-4396
e-mail: rbowman@supplychainbrain.com
Managing Editor
Editor Emeritus Jean V. Murphy
e-mail: jmurphy@supplychainbrain.com
Laraine Giordano
Tel: 516-342-6720
e-mail: lgiordano@supplychainbrain.com
Director of Client Relations
What’s Working—& Not Working—
in Supply Chain Management
Using Data to Mitigate Risk,Build
Supply Chain Resiliency
Promises and Challenges of
Omnichannel Retailing
46 THOUGHT LEADER
Exposing Weakest Security Link—
Your Supply Chain
48 THOUGHT LEADER
A More Profitable Industrial Asset
Management Function
Anthony Pastecchi
Tel: 516-323-1193
e-mail: apastecchi@supplychainbrain.com
Client Relations Manager
Kelly Keller
Tel: 510-526-0672 • Fax: 510-526-0672
793 Euclid Avenue, Berkeley, CA 94708
e-mail: kkeller@supplychainbrain.com
VP Marketing, Media & Partnerships
Brian Sacks
Tel: 310-777-8868
e-mail: bsacks@supplychainbrain.com
Director of Market Intelligence
Sensing, Shaping Future Demand
MIT’s Hi-Viz Supply Chain Project
50 THOUGHT LEADER
Visibility 2.0: New Framework
for Outsourced Manufacturing
Circulation Director Barry Green
Tel: 516-822-1216 • Fax: 516-349-0477
Demand Management at Fujitsu
Implementing Global TMS
Choosing In-Country Logistics
Provider
54 THOUGHT LEADER
Manufacturers Can Avoid MDM
Pitfall and Harness Big Data
Art Director Jill Stelmack
e-mail: jstelmack@supplychainbrain.com
OPERATIONS
Video Editor Marianne Jannace
58 THOUGHT LEADER
Successful Supply Chain
Segmentation
Carel Letschert
Tel: 31-20-633-4277 • Fax: 31-20-631-2669
VP European Operations:
Why Haven’t We Switched on the
Lights-Out Warehouse?
Director of Data Management Antoinette Cantwell
EXECUTIVE
President & Executive Publisher
Gerald E. Keller
Group President & Publisher
Transportation Technology Trends
Brad Berger
60 OPINION
Change Isn’t What It Used to Be
Health Care Industry Changes
Impact the Supply Chain
Manufacturers Need a More DataDriven Approach to Direct
Materials Sourcing
Executive Vice President, CFO
Irwin I. L. Levine
Executive Offices:
Keller International Publishing Corp.
150 Main Street, Port Washington, NY 11050
Tel: 516-829-9210 Fax: 516-829-9722
Art and Production Offices:
Logistics Outsourcing for Smaller
Companies
Joe Andraski’s Supply Chain Journey
Sunny Delight Balances Service and
Savings
Change Management in Healthcare
8
EDITORIAL
Isn’t It Time Your Supply
Chain Had a Checkup?
4
MAY/JUNE 2014
62 OPINION
Managing Sustainability Within
Global Supply Chains—5 Tips for
Achieving Success
64 THINK TANK
Same-Day Delivery Is Going to Be
Big—Some Day
Keller International Publishing Corp.
Attn: Jill Stelmack
30 Raven Road, Canton, MA 02021
Tel: 630-254-5602
EXECUTIVE OFFICES: SupplyChainBrain (ISSN 1949-2693) is published six
times per year by Keller International Publishing Corp.,150 Main Street,PortWashington,NY 11050. Periodicals Postage Paid at Port Washington,NY and at additional mailing offices. POST-MASTER: Send change of address to
SupplyChainBrain/EPSILON,151 Fairchild Ave.,Suite 2,Plainview NY 118031709. SUBSCRIPTIONS: Free to qualified logistics and supply chain professionals
in the U.S. All other U.S & Canada subscriptions: one year $289;two years $449.
Foreign: $399;two years $559. Single copies U.S.$20.00. All other countries:
$25.00. CUSTOMER SERVICE AND REPRINTS: Kelly Keller.Tel/Fax:510-5260672;Email:kkeller@supplychainbrain.com
68 TECHNOLOGY CASE STUDY
SHOWCASE
A Keller International Publication
Copyright © 2014 United Parcel Service of America, Inc.
3 WAYS LOGISTICS CAN KEEP HIGH-TECH
CUSTOMERS COMING BACK.
When UPS surveyed leaders in high-tech companies, we learned that a key
challenge is maintaining the bottom line while improving the customer
experience. This balancing act is not impossible. It just takes logistics, by UPS.
1) MOVE FASTER From international
2) RESPOND QUICKER With UPS
®
3) SIMPLIFY RETURNS When
air freight to next-day air shipments,
technology like Quantum View ,
customers need to return, repair
UPS can move critical parts or
you can see your supply chain and
or replace a product, UPS has one
finished components quickly
adjust to changing customer demands.
of the largest portfolios of reverse
and reliably. And technology like
With status updates for both package
logistics solutions to help streamline
UPS Paperless Invoice can help
and freight shipments — incoming
the process. And with millions of
reduce customs delays by up to
and outgoing — your supply chain is
UPS access points worldwide, your
56% —enabling you to meet service
more visible, and, consequently
customers can easily return their
agreements and satisfy customers.
your business is more responsive.
purchases to you.
®
For more high-tech industry insights, go to ups.com/hightechsurvey
ups.com/hightechsurvey
This month don’t miss today’s largest selection of:
• Thought Provoking SCM Features
• In-Depth Case Studies
• High Level Research
• Executive Opinions
• Industry Trends
• Conferences and exhibitions
• Exclusive video interviews with today’s
most informed supply chain professionals
• The most current job opportunities for
senior level supply chain executives
• SCM news and analysis
• Educational opportunities for career
advancement
Customize the Delivery of Your Content
A highly organized channel guide allows you to easily find what you’re looking for when you
visit SupplyChainBrain.com. However, you can also have specific information delivered to you
on a daily, monthly, or bi-monthly frequency. Go to SupplyChainBrain.com, click the
Subscribe/Login button in the upper left corner and select your preferences.
This month’s channels are:
INDUSTRY VERTICALS
Automotive
High-Tech/Electronics
Retail
CPG
Food and Beverage
Pharmaceutical/Bio-Tech
Industrial Manufacturing
Chemicals & Energy
Aerospace & Defense
Service Industries
Apparel
LOGISTICS/TRANSPORTATION
All Logistics
Global Logistics
Third-Party Logistics
Global Trade Management
Inventory Planning & Optimization
Transportation & Distribution
Warehouse Logistics
Reverse Logistics
LTL/Truckload Services
Air Cargo
Ocean Transportation
Rail & Intermodal
Service Parts Management
Facility Location Planning
Value-Added Services
Global Fulfillment and Distribution
TECHNOLOGY SOLUTIONS
All Technology
Asset Management
Business Intelligence & Analytics
Business Process Management
Collaboration & Integration
Customer Relationship Mgmt.
EDI Communication (XML/EDI)
Event Management
Forecasting & Demand Planning
Order Fulfillment & P.O. Mgmt.
6
MAY/JUNE 2014
Product Lifecycle Management
RFID, Wireless, Bar Code and Voice
Sales & Operations Planning
Sourcing & Procurement Solutions
Supplier Relationship Management
Supply Chain Analysis & Consulting
SC Finance & Revenue Mgmt.
SC Planning & Optimization
Supply Chain Visibility
Transportation Management
Warehouse Management
ERP & Enterprise Systems
Manufacturing Planning & Execution Systems
Cloud, SaaS and On-Demand Systems
Software Architecture & SOA
WORLD REGIONS
The United States
Asia Pacific
Europe
Middle East/Africa
Latin America
China
Canada
GENERAL SUPPLY CHAIN MANAGEMENT
Global Supply Chain Management
HR & Labor Management
Environmental
Network Planning
Quality & Metrics
Supply Chain Security & Risk Mgmt.
Legal, Gov’t & Regulatory Issues
Business Strategy Alignment
Humanitarian Logistics
RESEARCH
AND ANALYSIS
Aberdeen Group
APQC
ARC Advisory Group
ChainLink Research
Gartner
MAY/JUNE 2014
We challenge you
to challenge us
with your supply chain
planning puzzle.
Quintiq’s supply chain planning & optimization platform
is built to solve your planning puzzle. The Quintiq
platform transforms complicated processes into an
agile, consumer-centric supply chain. It addresses
all constraints and requirements towards delivering
optimal efficiency across all horizons.
What’s your planning puzzle? We love a good challenge.
Visit us or browse www.quintiq.com.
E: info@quintiq.com | I: www.quintiq.com
Isn’t It Time Your Supply
Chain Had a Checkup?
W
hat doesn’t kill you just makes
you stronger.
tance, production, finishing and
assembly.
Uh, not always. While some people do emerge from some difficult situ-
errors can cause staggering losses—
If there’s one industry where
ation wiser and better able to forge
and dreaded delays—it’s in produc-
ahead in some new endeavor, others
quite frankly remain tentative or even
ing medical devices. What doesn’t
shattered; theirs was hardly an
hamstring it for quite some time.
enabling experience.
The same is true for some compa-
Finding the right supplier can go a
long way toward ensuring the kind
kill the enterprise can certainly
nies. Clearly, many have come back
from bankruptcy or recovered from
some damaging occurrence, and then surged forward; others might stabilize, but they can remain in
fairly precarious health.
Our cover story this month prompts these
of healthy supply chain we’re discussing. However, OEMs must be
assured that their supplier can meet the exact specifications again and again.
To help make the right supplier choice, our article walks you through the appropriate supplier cri-
thoughts. ‘The Cure for the Common Supply
Chain’—which is about original equipment manufacturers in the medical device space—notes that
OEMs can’t control regulatory costs and increased
taxes, both of which can have numbing impact, but
they can stay on top of production costs and selling
teria. We think it has valuable lessons for any
number of companies, and not just in the field of
medical technology.
As it happens, the medical field is the subject matter of another piece in this technology-themed issue.
In South Africa, two sisters, stung by the agonizing
of their products.
Yes, you can simply pass your higher costs on to
your customers, but is that what a truly healthy supply
chain does? If manufacturers want to remain competitive, perhaps the better remedy is to look again at how
they streamline the manufacturing of their devices
death of their mother, started Sage Health Solutions to
provide for the medical-supplies needs of bedridden
and terminally ill patients in hospitals and other care
facilities.
Initially, the sisters’ company responded manually
to RFQs, which was too time-consuming and labor-
and lower production costs.
Consolidating the supplier base can help. But
medical device OEMs should select a partner that
does more than just supply. One that offers a vertically
integrated supply-chain solution adds value to the
manufacturing process.
intensive even for a company of its modest size. Then,
the government of South Africa, the provider’s largest
customer, asked the women to join the Ariba sourcing
and procurement network. Given that the government makes daily requests, automating the process
was the remedy Sage needed.
That entails evaluating suppliers based on totalcost-of-purchasing criteria rather than just on the price
of parts. A healthy supply chain involves suppliers
that combine manufacturing expertise with valueadds, such as ease of purchasing, engineering assis-
I certainly hope there are some good tips in
these articles—and in the rest of this issue—regardless of your vertical. In the meantime, what’s your
supply chain’s state of health? Perhaps it’s about
time for a checkup.
Russell W. Goodman
rgoodman@supplychainbrain.com
8
MAY/JUNE 2014
How Can
Supply Chain
Talk to Sales?
Managing Editor
Robert J. Bowman
A conversation with Wallace DeMent, demand planning manager with Pepsi
Bottling Ventures.
It’s the age-old problem that plagues every organization: how to get the various departments of a business to talk to one another. And, most importantly,
how to get supply chain to talk to sales. The lack of
communication between those two key disciplines is
one of the major reasons why forecasts consistently
fail to mesh with demand. Each corner of the company comes up with its own numbers, which it jealously guards from the rest. And no one has visibility
into what the customer is actually buying. Pepsi Bottling Ventures, with the help of a company-wide
sales and operations planning initiative, set out to
break that mold. Today, operations sits at the table
with sales. The result is greater forecasting accuracy, for a more complex assortment of SKUs. In this
interview, conducted by SupplyChainBrain Managing Editor Robert J. Bowman at the Supply Chain
Planning and Forecasting Conference of the Institute of Business Forecasting and Planning, Wallace
DeMent of Pepsi Bottling Ventures tells how his company achieved internal collaboration, and where it
plans to go next.
Q: On a philosophical level, how do you link those
two sides—supply chain and sales? They’ve been
very separate disciplines for many years.
DeMent: You start out with opening a line of
communication between them. I was given the role
of getting sales more involved in the forecasting
aspect of demand planning. I work in operations, but
I constantly attend sales meetings. I’ve gone through
sales training. I’ve basically integrated myself into the
sales organization, to improve the S&OP process.
Q: So from the very start, you understood the necessity of bringing down the walls between so-called
corporate silos. But what was it that got your company to embark on this path?
DeMent: I got the executive team involved in it
from the get-go, when we started the S&OP process.
Once we got them into it, they came to me with the
challenge of implementing a system that would bring
10
MAY/JUNE 2014
sales into it. I’m a firm believer in key performance
indicators—tracking, monitoring and measuring
things, to help build an infrastructure that will
improve forecast accuracy. I was going back to an old
adage: no matter what type of technology you have,
until you address the communication aspect of it,
you’re not really going anywhere.
Q: Were you embracing formal S&OP for the first
time, or did you already have a process underway?
DeMent: This was started in 2006. I came into
it in 2010. The foundation had been laid, but the
operations part of it hadn’t come to fruition yet.
From there, we took it to the next level of getting
sales more involved.
Q: Clearly you had seen a gap between the forecast
and actual demand that you wanted to close.
DeMent: Correct. I started with the company at
a time when forecasting basically was done on the
back of a napkin. We felt that bridging the gap [using]
sales and operations technologies would take us to
the next level, which I think it has.
Q: Is this a business where demand volatility is a
problem? I would think there would be a certain
amount of steady demand in the beverage business,
yet I’m sure there are unpredictabilities, such as seasonal aspects. Was there some challenging aspect of
your industry that made you wake up and realize that
you needed to undertake this process?
DeMent: The volatility of the food and beverage industry. You’re catering to the wants of consumers, and they’re driven by whatever account
takes the best ads, the best pricing and so forth.
Having to react in the old days, you found that out
after the fact. My challenge was to find that out
before the fact—to get sales to contact me, instead
of me having to contact sales.
Q: What level of management was involved in this
initiative? Were you going from the regional managers
The next generation of integrated supply chain solutions FOR LEADERS
erations P
p
O
d
lan
n
a
n
s
i
e
l
ng
Sa
S&OP
SUPPLYCHAINBRAIN EXCLUSIVE
Q: Was that the first time you had done
scorecarding?
DeMent: Yes. We adopted a weekly
scorecard system that graded the warehouses
on forecast accuracy. We had always been
held responsible for accuracy at year-end,
but had never gone that in-depth.
I’m still in operations, but the regional
sales and key account managers now contact
me first, even before they talk to their sales
teams. They know that without going
through me, they’re not going to have product to sell to their customers.
Q: You talked about the importance of having good key performance indicators. Was it
a challenge deciding what you needed to
measure, or did you already know what
those points were?
DeMent: We knew that we wanted
KPIs for inventory management, production
and transport. Taking it down to those levels
took time, and trial and error. We hold seven
to 10 days’ supply in-house. With food service, you’re dealing with a short shelf life,
maybe 13 to 26 weeks, so you have a narrow
window of opportunity.
We had to go from point A to point B as
efficiently as possibly. We tracked transport
weight, to figure out the maximum amount
of product we could put on a truck. We also
looked at how quickly we could get it, and
what was the best facility for supplying distribution centers. There were a lot of things
rolled into it.
Q: So you had the metrics. You had the
forecast. But how did you share them
between supply chain and sales?
DeMent: Anybody in business constantly sees e-mails with all these scorecards
12
MAY/JUNE 2014
Photo courtesy: Mike Segar/Reuters
all the way up to the senior team?
DeMent: It actually was a trickle-down
effect. Our vice president of operations
decided we needed an S&OP process, and
went to my boss, who in turn told me to
develop a strategy. That’s when I implemented a scorecard system that would track
forecast accuracy at the warehouse.
It started with the regional sales managers, and ended up back at the executive
level. So everybody in the company was seeing it. When a regional sales manager’s score
has been seen by the executive team, he’s
going to reach out to me and say, “I’ve got
some information for you.” So there was the
opening of the door for communication.
and data points. They might glance over it,
barely pay attention. So I said, let’s make it
interesting. Every sales person is a go-getter,
somebody who plays to win. So I designed a
scorecard system that looks like baseball
stats. It gives you accuracy scores for the previous week and prior year—something to
benchmark against.
Then I added an MVP card, which shows
the best of the best. It gives bragging rights to
the regional sales managers. After six
months, if I didn’t send it out, just to see if
anybody was paying attention, I would get
calls from the RSMs and executive team, saying, “I didn’t see your scorecard. Where’s it
at?” That opened the line of communication.
Q: I guess people really like that kind of
guidance. And once they get it, it’s hard to
shed it.
DeMent: I believe so. It’s an integral
part of helping them do their job better.
Q: What results have you seen, with regard
to forecast accuracy or other metrics that you
were looking at?
DeMent: When we started this in
2006, we had 350 SKUs within our portfolio. We were keeping a 15- to 20-day supply
of product and were at about 72-percent
accuracy. Now I’m looking at 800-plus
SKUs, a seven- to 10-day supply and 82.4percent accuracy, which was our benchmark. And for the first time, in 2012, I
accomplished that, based on total year-end
results. I consider that a milestone in providing and promoting an S&OP process.
Q: How long did it take you to achieve
those results?
DeMent: About five years. It takes
baby steps to initiate and get accomplishments. You do it on a day-to-day basis. But
once you start seeing results, there’s a
trickle-down effect.
Q: What’s the future look like? Where is this
initiative going to take you, and what goals lie
ahead?
DeMent: The executive team is raising
the bar even higher. It’s their job to improve
the company and its processes. And it’s our
job to make it happen.
To see a video of this interview online,
visit SupplyChainBrain.com.
Resource Link
Pepsi Bottling Ventures,
www.pepsibottlingventures.com
What’s Next for
the Omnichannel
Customer Experience?
Editor-in-Chief
Russell Goodman
A conversation with Chris Cunnane, a senior analyst at ARC Advisory
Group.
If any word is in danger of being overworked these
days, it must be “omnichannel.” At the same time,
in this age of hype, seldom have we seen anything
more aptly describe a phenomenon. Today, not
only do customers want products when they want
them, they want their orders to be fulfilled how
and where they want them—in store, home delivery, what have you. Moreover, customers aren’t
the least bit bashful in demanding a mixture of
fulfillment and other logistics services. For example, they may order something online, have it
delivered to their office and then return it to a
store they’ve never stepped foot in before.
From the retailer’s side, none of this is particularly easy to accomplish, and none of it would
even be possible without the enabling technology.
That, however, is the rub. Who is actually willing
and able to make the needed investment in, say,
distributed order management systems, inventory
optimization mechanisms or real-time inventory
location applications?
SupplyChainBrain Editor in Chief Russell
Goodman recently sat down with ARC Advisory
Gr oup senior analyst Chris Cunnane at the
annual ARC World Industry Forum in Orlando to
discuss these issues.
Q: When we speak of this so-called omnichannel
customer experience, what would you say is the
key driver behind it?
Cunnane: I think there’s really a few different ways to look at it. I think the first thing that
comes to people’s minds is that the customer
expects a similar experience across all channels.
And that’s where it kind of runs into problems. A lot
of retailers think that the customer wants to replicate a single experience from one channel to the
next channel. As we know, that’s really not the
case, and it’s not really a possibility either. Each
channel is its own interaction point, each channel is
its own opportunity to sell, its own selling channel.
So it’s not about replicating that experience. What
14
MAY/JUNE 2014
the customer is really looking for is more of a brand
experience rather than a similar experience. And
that’s what retailers need to take to heart when they
want to drive that customer experience. And when
you look at where that really needs to come from,
it’s all about product availability. The customer has
to be able to find the product they want in the channel they’re searching through, and they have to be
able to fulfill that order as well through whatever
channel they want. And that’s really becoming the
driver of today’s omnichannel customer experience. It’s less about the interactions at each of these
channels. Now that’s going to be an important part
of it, but it needs to be really driven by the ability to
fulfill orders.
Q: Well, clearly there are customer expectations.
So, if somebody comes to you and says, ‘Let’s score
the retailer, how is he or she meeting those expectations?’, what would you say?
Cunnane: For the most part they’re doing a
pretty good job. I think where they really run into
problems is around that fulfillment angle. So on a
study that we had worked on, we found that 70 percent of retailers we surveyed allow customers to
return an order to the store even though it was
ordered through another channel. That’s obviously
something that’s going to make the customer
happy, something that will really make it easier
from the return management standpoint. But on the
flip side, from a fulfillment standpoint, they’re not at
that point right now. So we’re seeing only about 50
percent of retailers are actually enabling pick up in
the store and only about 30 percent actually allow
the customer to order an item or product in the
store and then have it fulfilled from another store.
So they’re not really empowering the consumer to
get the product that they want through the channel
that they want. So the returns management aspect is
ahead of the fulfillment side right now.
Q: One function is not necessarily at full strength,
When you need to ship air cargo, there’s one team
you can count on. One team delivering Relentlessly
Reliable® service to over 90 destinations across
the map. When you need someone who’ll get the
job done, you need Southwest Airlines Cargo.®
SUPPLYCHAINBRAIN EXCLUSIVE
yet is performing much better than other
functions, it seems. What are the technologies that retailers are lacking?
Cunnane: There are three technologies that we can identify. The way that we
asked this question [in the survey] was,
which technologies do you currently need
but do not have in order to really fulfill that
omnichannel experience? And the first one
that came up was distributive order management systems. That’s all about collecting
the order entry all the way through sourcing, payment and then the actual fulfillment
of the order. But we’re seeing that a lot of
retailers don’t have that technology in place
right now, so that makes it a little bit more
difficult for them.
ideal, but it’s another thing to make the
investment, to find the dollars that go into
something. What are you finding in terms of
the willingness or the ability of these retailers to make the necessary investment in
these technologies that they so clearly seem
to be aware that they need?
Cunnane: I think we are at a critical
point right now for retailers. The customer
is driving innovation at this point, because
some of the big buzzwords we’ve seen over
the last couple of years—all around mobile,
all around social, all around big data, and
mobile and social specifically—all of that is
really being driven by the customer, their
needs, their desires. And retailers are really
trying to play catchup. The retailers know
nels and make sure that you can fulfill that
inventory. So the second part of the recommendation then is to really close that technology gap. You need to be looking at
distributed order management, looking at
inventory optimization, real-time inventory
location applications. These are the types of
technologies that retailers are going to need
to invest in, to really close that gap, that’s
what will actually enable them to fulfill that
overall brand experience and make it truly
omnichannel.
Q: You said this is not a wish-to-have kind
of technology, this is must-have. If you
don’t invest in such technology, you will fall
behind, perhaps catastrophically, and fail.
It’s not a nice-to-have technology, it’s a need-to-have technology to
be able to truly fulfill that omnichannel experience.
The second piece we’re seeing is on
inventory optimization. So retailers that
don’t have this technology in place, they’re
having a much more difficult job when it
comes to balancing the supply versus
demand. They’re overstocking things and
that leads to lot of extra inventory carrying
costs.
Then the third technology that we’ve
seen is all around real-time inventory location applications. This is if the customer
comes into the store and they want to buy
something, the store associate can actually
look it up, say we don’t have it in stock
here, but the store down the street does
have it, so I can get it from there, have them
hold it for you and pick it up from there, or I
can have it delivered to your house or we
can transfer it back to this store and you can
pick it up. But the retailers don’t have that
capability right now. They don’t have that
technology in place. That’s something that
would really allow them to have greater visibility into their inventory levels, and that’s a
big miss right now, and it’s really a lost
opportunity for them.
Q: It’s one thing to realize that you are
lacking a fulfillment capability or your
inventory management capability is not
16
MAY/JUNE 2014
that if they truly want to be an omnichannel
retailer, they’re going to need to make these
investments.
It’s not a matter of if, it’s more a matter of
when. They know it’s not a nice-to-have
technology, it’s a need-to-have technology
at this point if you want to be able to truly
fulfill that omnichannel experience.
Q: So your advice is, find the money.
Cunnane: Find the money somewhere. That’s easier said than done, but
still …
Q: Tell me about recommendations that
you would have for these retailers. If someone says they want to move into this
omnichannel environment, what are the recommendations you would have for them?
Cunnane: The first one is to
empower the customer. And this comes
down to allowing them to go though multiple channels in their buying journey. It’s not
a very linear path. You don’t walk into a
store and just buy something; a lot of
research goes into it beforehand these days.
And there are also a lot of different channels
that you can shop through at this point, so
you need to make sure that the customer
can seamlessly move between these chan-
But how hypothetical is all this that we’re
talking about? Are people in fact, beyond
certain large retailers, making these kinds of
investments right now, moving to this reality that we’re talking about?
Cunnane: They’re certainly exploring it right now, and I think because
omnichannel is not an easy place to get to,
to get to that true omnichannel experience,
it’s not a one- to two-year road map. In talking to retailers, to software vendors, you’re
seeing a five- to 10-year road map to really
get to where you need to be, to enable that
fully seamless experience across channels.
So I think people are at the beginning stages
of really looking at what they need to do
and when they need to do it.
Q: So this is a journey that’s going to take
some time, it’s not just one more step and
then we’re there.
Cunnane: Absolutely. It’s not going
to be a journey with a final ending; it’s going
to be constantly evolving.
To access this article online,
visit SupplyChainBrain.com.
Resource Link
ARC Advisory Group, www.arcweb.com
Make Distribution Your FORTE
Imagine your warehouse operations with higher performance.
FORTE builds supercharged distribution centers and overhauls underperforming operations.
With the industry’s most respected methodology combined with advanced, cost-effective
warehouse execution software, FORTE designs, engineers, implements and supports the
distribution operations that power many of the world’s fastest growing companies.
See how FORTE can deliver the high-performance solutions your operation needs at forte-industries.com.
Warehouse Automation / Warehouse Execution Software
©2014 FORTE
It’s sometimes called the Internet of Everything, the Industrial Internet or, simply, IoT. By whatever name,
the Internet of Things promises constant and continuous connectivity of machines and devices, but
what does that mean for your enterprise?
A number of industry experts attending the ARC World Industry Forum in Orlando tackled that topic. They included Andy Chatha, President of ARC Advisory Group; Fred Yentz, President & CEO of ILS Technologies; Colin Beaney, Global Industry Director, Energy & Utilities,
IFS; Rob McGreevy, Vice President of Operations, Asset Management and Information, Invensys; David Petrucci, Vice President of Business Development, Genpact; Dan Miller, Senior Director, Industry Solutions Practice, AT&T Business Solutions; Ralph Rio, Research Director, ARC Advisory Group; Mary Bunzel, Global Manufacturing Leader, IBM; Peter Zornio, Chief Strategic Officer, Emerson Process
Management; and Ron Mcleod, Director of Software Sales, Siemens Energy.
18
MAY/JUNE 2014
Andy Chatha, President,
ARC Advisory Group
We have some new technologies right now, like much more powerful Big Data and analytics, that plants can start to benefit from. And
we have 3D technologies and many other technologies that power
the internet of things. They are available so plants can now start to
take advantage of those as well.
Fred Yentz, President and CEO,
ILS Technologies
I think the big difference in the last several years is that we’ve
moved out of sort of the science project phase at most enterprises,
and manufacturers and other enterprises are actually implementing
some degree of connected asset management or connected asset
awareness, whether it’s monitoring or remote access remediation.
Monitoring things starts when they are made, through the production and ultimately through to the service chain. Supply chain services, support lifecycle management applications are kind of the
new buzz. Everybody’s working on service lifecycle management
solutions. Everyday I wake up, and there’s something new. This is a
wild, wild west in the internet of things right now. There are so
many opportunities, you have to be fleet of foot and be flexible.
Colin Beaney, Global Industry Director,
Energy & Utilities, IFS
I think it’s going to be much bigger tomorrow; I think it’s really only
just being adopted by industry. Traditionally, energy and utilities is a
relatively old-fashioned industry. It has to comply with so much legislation; it’s heavily regulated, of course, and as a consequence, it’s not
going to immediately jump on new ideas. But I can absolutely see, as
we move forward, assets will be providing real-time information back,
and systems will be used to manage and make decisions based on that
real-time information. I think that’s the key: decision making based on
up-to-date, real-time information.
Rob McGreevy, Vice President of Operations,
Asset Management and Information,
Invensys
We see a broad range of connectivity is one of the key things that’s
been changing in manufacturing. There’s a tremendous amount of
connected equipment, and all things have maintenance needs; they
need to be optimized to make sure they are safe and reliably managed. What’s changed here is just the sheer volume of new information and data available. You can do a lot more predictive
maintenance on these things, enable people to do their jobs a lot
better. The internet of things is about connecting disparate information sources, devices and sensors from all sorts of vendors with different form factors and data feeds.
David Petrucci, Vice President of Business
Development, Genpact
If you look at the internet of things, it’s really about more devices
being connected on a global basis. If you look at the amount of
things that have been connected even over the last five years, it’s
exponential growth. What’s happening is, more and more companies in industrial space are gathering information about their assets
or their things. What’s happening is, so much work has been done
on how to connect and collect this information, but there’s been
less focus on what to do with it once we have it. This is a struggle a
lot of customers and companies have right now.
Dan Miller, Senior Director, Industry
Solutions Practice, AT&T Business Solutions
Machine to machine is one of our major growth areas. At the end of
day, if you don’t have connectivity, there is no internet of things. We
are an easy access path into the internet of things.
Ralph Rio, Research Director, ARC
Advisory Group
My Blu-ray Wi-Fi player is a $100 player, and it’s attached to the
internet. It has software that can report its health, tell some equipment manufacturer, some central location, about its health, and as a
result they can take corrective action if something has gone bad. My
player automatically updated its software last time I turned it on.
These are examples of things really connected to the internet so a
central site can monitor its health. By doing so, they can improve
the asset lifecycle of the device. If my $100 Blu-ray player has that
capability in it, you can certainly afford to put it in a $5,000 or
$10,000 machine. There are huge benefits around monitoring the
health of that piece of equipment and predicting when something is
going to go bad. By predicting that failure you can then prevent it.
Instead of having unplanned downtime, you can now plan when to
take it offline to do the repair. The internet of things really could
change everything about asset management and maintenance.
Mary Bunzel, Global Manufacturing
Leader, IBM
You know, the internet of everything is really about innovation and
collaboration. Data is the fuel, again, to optimize efficiency. The
internet of everything provides the opportunity for collaborative
partners across a wide range of interests to participate in industryspecific solutions stacks.
Peter Zornio, Chief Strategic Officer, Emerson
Process Management
I think it’s amusing that whenever somebody talks about the internet of things they don’t really talk much about where all this new
data is going to come from. The answer is, it comes from sensors.
Everyone talks about how we’re going to get more data on the
equipment status, more data on corrosion, more reliability information, we’re going to get more data on energy consumption—well,
all those things require sensing.
Ron Mcleod, Director of Software Sales,
Siemens Energy
I think the thing I see is that the industrial internet, the internet of
things, is still quite young and quite immature, so a lot of development is needed. But the opportunities present themselves, such as
the streams of data that come off all these interconnected devices—
they can be fed into analytics to produce useful information that
you can take action on and improve your business. So these are the
key things I see with the industrial internet and the internet of
things. They’re going to bring things together for us.
To see the video of this conversation in its entirety,
visit www.SupplyChainBrain.com.
SUPPLYCHAINBRAIN
19
The World of Humanitarian
Supply Chains
Supply chain and logistics play key roles in responding to both
acute and chronic humanitarian crises. Whether the cause is a
natural disaster, armed conflict or simply undeveloped infrastructure, Jarrod Goentzel says the MIT Humanitarian
Response Lab is working to improve supply chain response.
One of the challenges of providing humanitarian relief in acute situations, such as the wake of a natural disaster, is that there are no
demand signals, says Goentzel. “There is no point-of-sale data and
no one placing orders, so you have to go out and assess needs and
prioritize which commodities are most needed where and what
quantities should be delivered,” he says.
The MIT Humanitarian Response Lab is trying to come up with
ways to do better assessments of needs in critical situations, he says.
One of the biggest opportunities lies in leveraging big data and social
media. “If we can mine data that comes from sources like Twitter and
perhaps combine that with complementary data from other sources,
we will be better able to understand needs on the ground.”
Of course, infrastructure resources like ports and highways also
can be compromised and there typically is confusion on the
ground, with many entities trying to secure aid, Goentzel says.
“There isn’t just one supply chain in these situations, there are many
and, while we want to work together, it is very difficult and complex
to manage these multiple supply chains one at a time.”
The Response Lab also is studying the operation of airports and
seaports during disasters as well as highway and rail infrastructure
used to move goods inland, Goentzel says. Inland transportation is
important not only in natural disasters, but also in situations of
chronic need, such as supplying medical clinics located in remote
and isolated areas. “We are doing fundamental research on how
transportation works in these remote areas,” he says.
The private sector also plays an important role in humanitarian
response, says Goentzel.
After Hurricane Katrina,
Walmart was very active
in getting supplies delivered and stores opened
as well as in helping its
affected employees.
“Getting stores stocked
and opened is a key conduit for meeting the
needs of people on an
ongoing basis,” he says.
“By actively working
with state and federal
agencies to get their
stores up and running,
while also providing
goods directly to people
affected, Walmart met
short-term needs and set
up long-term capacity
via their stores.”
Making Global Sourcing Work for You
Sourcing and transporting raw materials and components
are growing expenses for U.S manufacturers and distributors. Foster Finley, managing director, AlixPartners LLP,
offers advice on how better sourcing decisions can help keep
these costs in control.
Companies are leaving a lot of money on the table in their sourcing operations, says Finley. His company specializes in helping
The interviews for the Executive Briefings in this issue were conducted by SupplyChainBrain editors at major industry
conferences and seminars. Videos of these exclusive interviews can be seen in their entirety at SupplyChainBrain.com.
20
MAY/JUNE 2014
companies better manage these expenses and find opportunities
for savings.
When working with clients, AlixPartners looks at seven factors, Finley explains. These are: tariffs from origin country to destination country; exchange rates between origin and destination
country; inbound logistics costs from origin to destination; inventory implications associated with that inbound leg, i.e. needing
more buffer inventory for more distant origin points; manufacturing overhead in the origin country; the cost of raw materials in
the origin country; and, lastly, the cost and availability of direct
labor in the origin country.
Labor is the factor that primarily drives at lot of sourcing decisions, Finley says. “Companies tend to look at that to the exclusion
of the other six factors. But it is when we put all seven of those
together that sourcing becomes a controllable expense.” Making
changes in terms of vendor partners and supplier or plant locations
can have a dramatic impact on customer service, cost and reliability,
he says.
Sourcing networks need to be regularly
analyzed because things change so quickly
in the global economy, Finley says. “If you
source something from China today, that
may not be the most economical strategy
tomorrow, for any number of reasons –
landed costs, time in transit, responsiveness,
product quality or something else.”
says. The company currently has 70 offices around the world and
about a million users of its software, in the supply chain as well as
other industries.
One application where GIS plays an important role is risk management, says Hall. “If you think about the many natural disasters
we have had recently where suppliers were not able to ship product, you can see the value for strategic planning of knowing what
risks are inherent in the geography – flat coastal areas where a
tsunami might hit, for example. This type of information can be
seen ahead of time with mapping tools and overlaid data, so you
know which manufacturing facilities and which transportation
routes will be impacted.”
GIS also is valuable in real-time planning, Hall says, noting that
most emergency management organizations in the world use Esri
GIS to map those events . “We have that data available right away so
we can show people what is going on in real time,” Hall says. “They
can take that information and make operational decisions in real
time to help manage the supply chain and mitigate risk. There is no
The Role of Geographical Information Systems
in the Supply Chain
Geographical information systems and
advanced mapping tools will increasingly be used in the supply chain to map
potential risks and mitigation strategies
as well as to track people and assets
inside the four walls, says Wolfgang
Hall, global industry manager at Esri.
Geographical information systems (GIS) can
be used in the supply chain in many different ways, but the primary one is advanced
visualization, says Hall. GIS mapping ties
many different data sources together, he
says, so instead of just looking at spreadsheets, users can have a visual and intuitive
picture of what is going on in the supply
chain at their fingertips.
GIS uses GPS technology for location
purposes, but GIS adds data “in a way that
allows the user to make intelligent strategic
and tactical decisions,” says Hall. Esri makes
software that brings the data together, analyzes and maps it. “We also build the tools
that actually do the advanced mapping,” he
SUPPLYCHAINBRAIN
21
way to see that information looking at spreadsheets and databases.”
Another application is to map movement inside facilities to do pattern analysis, he says. For example, retailers can see which aisles get
the most traffic, providing insights on where to place merchandise.
The biggest challenge for this technology is the lack of standardization in terms of all the different data sources, says Hall. “Standardization needs to happen among industries to make it easy for
anyone to access any type of data.”
What’s Working, and Not Working, in
Supply Chain Management
Chasing cheap labor and managing in silos are just two of
the mistakes that Jeffrey Karrenbauer, president of Insight
Inc., says companies continue to make. Karrenbauer shares
his opinions about these and other practices that are, and are
not, working in supply chain management.
Supply chain management has made progress in the last few
decades, as demonstrated by professionals reaching executive
management positions, but it is still falling short of its potential, says
Karrenbauer. “The supply chain is an integrative function and we
still have too many companies practicing silo management,” he
says. “This results in a lot of dysfunctional behavior and a lot of
22
MAY/JUNE 2014
money being left on the table.”
This won’t change until companies
change their compensation and evaluation
structures, he says. “As long as silo management is rewarded, that is what we will get.”
Chasing cheap labor costs with manufacturing outsourcing is another tactic that often
has failed to return any real savings, he says.
“Savings from outsourcing were always
something of a mirage, but if they ever were
there they’re not any more,” he says. “Many
studies now say that the lines representing
the costs of producing in the U.S. and in
China will cross in 2015.” Instead of looking
at all the cost components of sourcing from
China, companies looked only at labor costs,
he says.
Another disappointing area is the scarcity
of good supply chain programs at universities, says Karrenbauer. “If you push me up
against a wall and threaten me, I might be
able to name 15 really good programs and
we have more than 850 MBA granting institutions. That is just plain wrong,” he says. Universities continue to funnel resources into
marketing, finance and accounting and
starve supply chain programs, even though
supply chain management has at least as
much to do with business success as the
other disciplines. “This is a real disappointment and there is just no excuse for it, other
than academic inertia.”
There are things for supply chain management to be proud of,
however, says Karrenbauer. “Supply chain has a lot more respect in
the C-suite than it used to, and that is a success. I also am very proud
of how many women are building successful supply chain careers.”
Using Data to Mitigate Risk and Build
Supply Chain Resiliency
Data-based predictive analysis that helps companies anticipate global catastrophes and model potential supply chain
disruptions is playing an increasing role in risk management, says Perry Rotella, supply chain group executive at
Verisk Analytics.
In addition, data plays a critical role in building resiliency in the supply chain, he says. Basic data essential to risk management includes
knowing who your suppliers are – not just tier one suppliers, but
also tier two and three – and where their production facilities are
located, says Rotella. “If your supplier’s plants are in a hurricane
zone or a zone that is prone to flooding, then you can factor in that
risk and build resiliency into your network, whether through redundancy or contingencies,” he says.
Verisk Analytics has been doing catastrophe models since 1987,
If you’re in the cards and capes business, so are we.
We may be in shipping, but your business is our business. That’s why in 2012,
InformationWeek 500 chose us as the top logistics and transportation company.
Our proven technology and real-time information reduce costs and increase effi ciency.
We deliver promises to help elevate your business.
odpromises.com/technology
®
OD s DOMESTIC
OD s EXPEDITED
OD s PEOPLE
OD s GLOBAL
OD sTECHNOLOGY
HELPING THE WORLD
KEEP PROMISES.®
Old Dominion Freight Line, the Old Dominion logo and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc.
All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2014 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
Rotella says. “We model earthquakes, typhoons, hurricanes, tornadoes, floods, fires, pandemics and terrorism in about 100 countries.
Using those probabilistic models we can help companies understand potential perils that can impact their supply chains.”
Corporations’ awareness of the need to do this type of modeling
has been heightened by recent disasters such as floods in Thailand,
the tsunami in Japan and Hurricane Sandy in the U.S., he says. “It is
an emerging area but interest is rising. The challenge is in putting a
dollar value on the risk.”
Verisk also has systems that track other risk elements, such as
those associated with global sourcing and extended supply chains.
“We do what we call risk adjusted optimization,” Rotella says. “It is
not good enough to have an offshore component of the supply
chain that optimizes costs. You also have to account for the risk elements, and we introduce those as part of the optimization.”
These risks include geopolitical events, says Rotella, noting that
Verisk focuses on predictive modeling. “When you get a news feed
about an event it is almost too late to react, so we look for data
sources that can be correlated to other elements to predict potential
unrest or problems before they happen.” These correlations are not
necessarily obvious. “The key is to gather as much data as possible
and let data scientists see where there may be correlations.”
There are tremendous amounts of data out there and plenty of
methods to glean insights from them, says Rotella. “But it’s critical to
put the data in context; that’s when you get really powerful results.”
Promises and Challenges of
Omnichannel Retailing
Supporting the many different channels through which
today’s consumers shop for, purchase and return products
presents tremendous challenges and opportunities for retail-
24
MAY/JUNE 2014
ers, says Annibal Sodero, assistant professor at the Sam Walton College of Business, University of Arkansas.
Multichannel retailing and omnichannel retailing both reflect the
many means that consumers use to interface with online and brickand-mortar retailers, but multichannel implies independent management of each channel, while omnichannel implies an integrative
approach, says Sodero.
The promise of omnichannel retailing is that companies will fulfill all orders from a single stock of inventory, “but firms are still
struggling to get to that point,” Sodero says.
The physical and virtual channels each have strengths. The
physical channel, or retail stores, enable consumers to touch and
inspect products and take purchases home immediately, he says.
The virtual channel requires a consumer to order without touching
the product and to wait for delivery, but it can offer a wider variety
of products at a lower
cost. “We call that the
long-tail phenomenon.
Consumers can buy
more obscure products
and discover products
online easier than in the
retail store,” he says.
Having both physical
and virtual channels gives
retailers the best of both
worlds, says Sodero. In
virtual retail, inventory
can be strategically positioned upstream in the
supply chain and then
shipped directly from
vendors to the consumer.
“Instead of carrying
inventory in the stores,
they can keep inventory
upstream and drop ship
it, which is a powerful
competitive weapon,” he says. For drop-shipping to work, however,
retailers must have visibility to the inventory being held by vendors. In
some cases, it may be more efficient to partner with a third-party logistics provider to provide that visibility and process returns, he says.
Sensing and Shaping Future Demand
Widespread market volatility since the economic crisis of
2008 means that traditional forecasting methods are insufficient, says Charles Chase of SAS. Fortunately, advanced technologies for collecting and analyzing vast amounts of
real-time data are giving companies new ways to sense and
even shape demand.
Before the 2008 economic meltdown, demand was reasonably
stable and companies could look at trends and seasonality to
forecast future sales, says Chase, chief of industry consulting at
SAS. Since the crisis, demand has become extremely volatile and
trends have been disrupted, rendering old forecasting methods
insufficient, he says.
Companies are compensating by using more robust analytics
to mine big data, Chase says. Big data includes both structured
data, such as that captured at point of sale, and unstructured data,
such as that shared between consumers over the internet and in
social media.
Additionally, companies are looking at both descriptive and predictive data. “Descriptive data is used for reporting purposes, to
look backward to see what happened in the past and to make yearover-year or month-over-month comparisons,” he says. “Predictive
data uses advanced math to predict what will happen, based on
what has happened in the past. The power of analytics is in the predictive data,” he says.
SAP customer Nestle provides a good example, he says. Nestle
uses the SAS demand planning and optimization solution along
with an SAP enterprise system. “SAS is SAP certified and is a strategic alliance partner with SAP,” says Chase.
A division of Nestle that sells ice cream and frozen pizza does
about 90 percent of its business around promotions, Chase
explains. “Our system calculates, based on prior promotions, the
incremental unit lift that an individual promotion will generate. We
then take it a step further. Based on the pricing, we can tell whether
or not the promotion will be profitable,” he says.
Most sales promotions are designed to gain market share
rather than make a profit, but companies are learning that this
approach often just rewards loyal customers, says Chase. “If we
help a company find an offering that generates revenue and
profit, they can shape demand by running that promotion in specific weeks. Our system predicts sales in the weeks when they
run the promotion and tells them how much incremental demand
and profit will occur.”
The idea behind demand sensing and shaping is to understand
what products consumers are buying and then align supply and
demand faster – and with less working capital, less waste and lower
inventory costs, he says. “Companies increasingly are trying to figure out what influences consumers to buy their products. In addition to the traditional demand signals of trend and seasonality, they
are looking at how things like price, advertising, in-store merchandising, promotions and even economic factors influence buying
patterns,” says Chase.
Fortunately, he says, technology is available today that allows
information to be gathered and analyzed on a grand scale. “The
bottom line is that domain knowledge and experience and judgment are no longer enough,” he says. “Demand driven forecasting
is all about the technology and analytic capability that allows you to
look at demand signals, measure them mathematically and run
‘what if’ scenarios to see how to shape demand.”
Your Link To Supply Chain Solutions
Named “World’s Greatest” in Logistics Technology
by How2Media
CTSI-Global has been providing supply chain mangement expertise and technology since 1955,
and informational within one global database. Solutions include:
-
Transportation Management System (TMS)
Freight Bill Audit and Payment
Business Intelligence
Global Consulting
Call today for a demo!
+1-888-836-5135
www.ctsi-global.com
Subscribe to our supply chain blog - The Link
http://blog.ctsi-global.com
SUPPLYCHAINBRAIN
25
When Implementing Global TMS, the
World Isn’t So Small, After All
Moving a box from A to B is much the same in any country,
but paperwork, processes, terminology and regulations vary
greatly, presenting a barrier to global TMS rollouts. Elie Hiller
of Transwide discusses ways to meet this challenge.
The challenges to deploying a TMS system at numerous global locations “are pretty large,” says Hiller, director of sales and marketingNorth America at Transwide.
Providers have learned how to handle the obvious challenges,
such as currencies, languages, and most technology, Hiller says.
Where they run into trouble is with the practical processes and
work flows that can vary greatly by region. “One of the functions of
TMS is to help you comply with all the rules and regulations or
processes you need to follow in
order to move goods from one place
to another, and when those are different wherever you operate, it can
create problems.”
One simple example is the document referred to in the U.S. as the
bill of lading and in Europe as the
CMR or road waybill. On the surface
these appear to be much the same,
but in fact are very different, he says.
“The BOL is a standardized short
form or long form, but how you fill it
out is not very standardized – as
long as the carrier has the basic
information, he can work with it.
The CMR, however, is a legal document and there are fixed formats
that have to be followed and rules
about how long the information
must be kept. The differences
between these documents mean
that you have to have two different
systems and understand the needs
for both,” he says.
TMS is very different from internal systems like ERP because it deals
with external parties, says Hiller. “So
much about transportation and
logistics management is about communications and collaboration
between you and your logistics universe: carriers, freight brokers,
forwarders, customs house brokers, vendors. Transportation management is designed to help you provide a single platform for dealing with these external parties on a regular basis. Once you go
external there are many more things to consider.”
Software can be designed to handle this, but the knowledge
base that has to be brought into a deployment project is a lot different than a simple WMS project, says Hiller.
Another factor in global rollouts of transportation manage-
26
MAY/JUNE 2014
ment is that everyone is not on the same level technologically.
“When you start dealing with transportation providers in places
like Brazil or Nicaragua or the Middle East, you can’t assume that
they are capable of transmitting via EDI or integrating with your
solution,” he says.
A TMS user looking at a true global deployment needs to have
resources from each of the regions contribute to the deployment
planning, looking for commonalities wherever possible, says
Hiller. “At the same time, they need to look for specific things that
need to be built into the solution, such as specialized processes,
as well as best practices that can be employed across the entire
organization.” Deploying TMS globally will take a lot of time and
planning and it can be costly, but there is a payoff, Hiller says.
“Having a single community of users on one platform with the
ability to share best practices and benchmarks across the organization is a huge advantage.”
MIT’s Hi-Viz Supply Chain Project
Aims to Automatically Map Supply
Chain Risk
MIT’s High-Viz Supply Chain Project is developing a way
for companies to automatically map and analyze supply
chain risk. Bruce Arntzen, executive director of the Supply
Global trade can open up
a whole new world.
Unless you’re doing it
the same old way.
There’s a world of opportunity out there for your company. But it’s not enough just to think globally; you need to act globally,
too. And these days, you simply can’t do it with that tired old ERP approach. At GT Nexus, we offer you the most powerful
cloud-based, single-platform solution available anywhere. Instead of merely staying in touch with your trading partners, now
you can turn your entire supply chain into a single, fine-tuned global moneymaking machine. On-demand and in real time,
you’ll be able to respond to every opportunity and every challenge with the kind of speed and precision you’ve never known
before. It’s time to say “out with the old, in with the new.”
Get your supply chain in the cloud.
gtnexus.com
Chain Management Pr ogram at MIT , explains the
methodology underlying this project, progress to date and
barriers that still exist.
MIT’s Hi-Viz Supply Chain Project merges two capabilities: automatically drawing a flow diagram and map of a company’s supply
chain using data stored in corporate databases and superimposing
on that map displays of alerts and other critical information gleaned
from outside sources. This visual would immediately allow companies to assess and manage supply chain risk, says Arntzen.
“We did a survey a few years ago of more than 2,000 supply
chain managers around the world where we asked them what supply chain risk they worried most about” says Arntzen. “The biggest
risk worry, far and away, was a supply failure.”
This worry has been highlighted since then by such disasters as
the earthquake and tsunami in Japan. “After that event most manufacturing companies established a war room for making phone calls
to suppliers and trying to figure out how great the impact would be
on their operations,” says Arntzen.
This wouldn’t be necessary if companies could quickly and efficiently create a picture of their supply chain that showed them
where their parts and raw materials come from, how much of the
company’s revenue is connected to these parts and materials and
where the most vulnerable links are. “Companies didn’t have this
information in 2000 and they don’t have it today. That’s the need we
are trying to address with the Hi-Viz Project.”
The method, Arntzen explains, is to develop software that can
create these visuals using information about suppliers, bills of materials and parts extracted from corporate databases, and couple that
with key risk indicators.
The concept of drawing pictures of the supply chain has been
tried using manual processes, but the automatic feature is new.
“When you try to do something no one has ever done before, you
28
MAY/JUNE 2014
find out why it hasn’t been done,” Arntzen says. “In this case, the
reason is that those big corporate databases and IT systems were
never designed to draw pictures and they don’t have all the right
information.” One glaring data gap is in the location of suppliers’
plants, he says, noting that most systems only have the address of
suppliers’ headquarters – the place they send the check. “These systems don’t even have a line for typing in the factory location,” he
says. “When a disruption or disaster occurs, you don’t care where
the headquarters is, but you care very much where your raw material is made.”
Also missing is the name of alternate suppliers and information
concerning how long it would take to get another supplier up and
running, Arntzen says. Both of these pieces of information are things
that the purchasing organization easily could capture but they have
never been asked to do so
and, as mentioned previously, there is no place to
enter it, says Arntzen.
“Trying to get the IT
department to add a data
field and put definitions
and rules around that and
then trying to get purchasing to capture factory
locations and make
guesstimates of how long
it would take to replace a
supplier takes a tremendous amount of effort and
cooperation,” he says.
“We have made a lot of
progress on the basic
structure of a solution, but
we are still lagging on getting this information.
Technology can race
ahead, but people’s attitudes and beliefs and the way they’ve been doing it for 50 years –
overcoming that is the slowest part of the process.”
Rick Blasgen Looks Forward and
Back as CSCMP Celebrates 50 Years
Rick Blasgen, president and CEO of CSCMP, reflects on the
organization’s accomplishments over its 50-year history and
shares his vision going forward for the industry and its practitioners.
The Council of Supply Chain Management Professional celebrated
its 50th anniversary at the CSCMP annual conference in October
2013. In those 50 years supply chain management – originally
called physical distribution management – has made great strides,
says Blasgen. “The supply chain and logistics professions are now
at the core of progressive companies,” he says. “They no longer are
considered costs to be controlled but revenue generating, viable
parts of the business.”
As supply chain management increasingly is viewed as a core
competence, corporate leaders are drawing on the expertise of professionals in the discipline to connect markets around the world
and to connect customers with manufacturing, he says. “And we are
seeing the results. Logistics costs as a percentage of GDP continue
to go down and supply chain managers are at the forefront of helping companies increase market share and grow their business.”
Looking ahead, Blasgen predicts that technology and innovation
will continue to drive supply chain improvements. He also envisions major changes in energy, with natural gas and other energy
sources playing important roles in equipment advances.
The most important issue, however, is talent, Blasgen says. “We
are going to need more labor and more management talent. This is
a terrific career for young people and there are terrific opportunities
for those currently in the profession to take it to a new level.”
CSCMP will continue to deliver content and education to
advance the competencies and careers of logistics and supply chain
professionals around the world, Blasgen says.
Demand Management at Fujitsu
When Fujitsu noticed diminishing returns in its ongoing
efforts to improve forecast accuracy, it adopted a new strat-
egy of product segmentation, changing inventory policies for
difficult to forecast items. Barry Chapman of Fujitsu explains
how this strategy was implemented and the benefits that the
company is reaping.
Fujitsu began a forecast improvement journey in 2000, moving from
a spreadsheet-based process to a demand planning tool, says Chapman. Subsequently, the company launched a major initiative about
every two years to improve service levels and inventory turns
through demand planning.
By 2008, additional improvements from these efforts were “less
than measurable” and the company concluded that the forecast was
about as good as it could get, Chapman says. “We knew that if we
wanted to continue to drive improvements through the demand
planning process, we had to consider a different approach.”
That is when the company started looking at segmenting
demand planning strategies, he says. The idea behind segmentation
“is to apply the appropriate inventory management scheme to a
particular product based on its value and variant characteristics.”
At Fujitsu, value is determined by a product’s actual sales and its
forecastability, with difficult to forecast products being the focus of
the segmentation initiative. “The area where we needed to make
changes was on parts that had high value and low forecastability,”
says Chapman. “We started a collaborative planning effort with our
largest customers to jointly plan demand for those products.” For
Is your S&OP cycle
taking you in all directions?
It shouldn’t.
What your supply chain software should do: make your planning cycle run smoothly and focus on value – without sapping your energy. With OM
Partners’ S&OP solution, you optimize resources, shape demand, socialize your plan and integrate all planning levels. A perfect fit, yet off-the-shelf,
software. The innovative technology of OMP Plus makes integrated visibility in Supply Chain Design, Demand Planning, S&OP, Supply Planning and
Scheduling a reality.
Optimize your supply chain management.
For Excellence in Supply Chain Software: www.ompartners.com
SUPPLYCHAINBRAIN
29
low value/low forecastable products, the company implemented a
min/max replenishment strategy
based on historical demand.
With this segmentation strategy
Fujitsu has reduced the average cost
of inventory per product by about
30 percent, without negatively
impacting service levels. “In some
cases, we were even able to
improve service levels,” says Chapman. “Of course, these savings get
passed on to our customers so they
have seen improvements in inventory and service levels as well.”
The company had a “couple of
false starts” with the collaborative
planning aspects, Chapman says.
“We have highly configurable products, so a single product may have
50 to 60 parts. To sit down with customers and have meaningful discussions on that many parts
overwhelmed the process.” After the
company pared the focus down to
10 or fewer parts, “everybody was
focused and showed up prepared to
talk to those parts. We had meaningful discussions and everyone was
cognizant of what the plans were for
those parts. Any changes were communicated rapidly. So reducing the menu of parts we were discussing really helped us get traction.”
The biggest lesson learned in this process was “that we had to
redefine what success looked like,” Chapman says. “In some cases
we were intentionally reducing inventory turns, so we were carrying more inventory than we had originally planned, with the expectation that overall inventory turns would actually increase. Those
were difficult lessons, especially for the people who were responsible for managing the products whose turns were reduced.”
The segmentation strategy is now in place with Fujitsu’s largest
customers and the company plans to continue rolling it out with
some smaller customers and with new business.
Choosing an In-Country Logistics
Provider
With warehousing and logistics operations in numerous
countries, Greg McKinley of InComm shares his experience
and advice on how to select a reliable in-country vendor.
InComm is the company behind many of the prepaid cards in
today’s markets, whether purchased by consumers in a retail environment or distributed by businesses as incentives or rewards.
“InComm acts as a hub,” says McKinley, vice president, global
30
MAY/JUNE 2014
warehousing and logistics. “If you purchase a $50 iTunes card at
Walmart, for example, the card is swiped through the cash register
at checkout. It hits our telecom equipment, we send out to Apple
for an okay, then we go back to Walmart with a validation and the
card is activated in 1.5 seconds,” he says.
The company stocks cold or unactivated cards all over the
world, with three warehouses in the U.S. and 13 abroad, which are
operated by local vendors. “Rather than set up and manage our
own warehouses offshore, we outsourced to vendors in country
and we have been successful with that strategy,” McKinley says.
Companies often are hesitant to begin global operations
because of worries around setting up facilities in regions where
they don’t understand employment laws or leasing practices or
pricing, he says. “Then there is the issue of spending tens of thousands of dollars for the equipment necessary to open a distribution
center.” Partnering with an established in-country vendor is a good
alternative, he says.
InComm honed its process for selecting vendors as it grew. “At
first, we would send out an RFQ, but that did not provide us with
enough detailed information to select the best vendor,” he says.
Over time, the company developed a five-phase system “that works
really well for us,” McKinley says.
The phases are:
• Qualification of vendors based on capabilities and requirements
• Pre-implementation, which includes legal work and developing an understanding of what the true costs will be
• Selection of vendor
• Implementation, which includes setting up SKUs and communications and integrating systems
• Post-implementation, or making sure what was agreed to is
being properly executed
This last phase includes having a good understanding of logistics, says McKinley. “It is one thing to set up a warehouse in
another country, but there is a lot that goes into shipping from
one country to another, so you need a really good understanding
of the logistics.”
This process cannot be done long distance but requires a visit
to the country and to potential vendor partners, he says. “I would
not buy a $100,000 sports car if I didn’t have a chance to go look
at it very closely or have it looked at by mechanics, so I am not
going to put millions of dollars of products in a warehouse that I
have not seen. It is very important to go to the country and tour
the warehouses and meet with management. There is nothing
like sitting in a conference room in an actual facility and talking to
people one on one.”
McKinley also stresses the importance of written processes. “We
developed a business requirements document that details every single thing that we are looking for from a vendor and we give that to
prospective partners prior to qualifying them,” he says. InComm
also shares written standard operating processes. “We use this document to go over with each vendor what we expect when an order
comes in and how we expect them to process and ship that order,”
he says. “If you have written processes in place and vendors know
you expect them to go by this, you are much more successful.”
Follow-up visits, perhaps once a year, are important in the postimplementation phase, says McKinley, as are quarterly business
reviews and KPI reports. “If you let things go astray, it can become
32
MAY/JUNE 2014
too difficult to fix, so the key is follow through, follow through, follow through,” he says.
Steps to Successful Supply Chain
Segmentation
In a manner similar to product or customer segmentation,
supply chains can be segmented based on service capabilities, says Lalit Wadhwa of Avnet. Identifying different supply chains within an organization through segmentation
can help companies improve service levels and lower costs,
he says.
Supply chain segmentation involves clustering services or capabilities that together are used to meet a specific set of requirements, explains Wadhwa, vice president of global supply chain
operations at Avnet.
While similar in concept to customer or product segmentation,
supply chain segmentation is all about capabilities, he says. “How
you take a product and
get it to the customer
involves a unique set of
capabilities that are
really not about the kind
of product or customer
involved,” he says.
Wadhwa says supply
chain segmentation is
important for three reasons: It enables companies to meet customer
needs at the lowest possible cost; it creates a
framework that focuses
the entire organization
on delivering value to
the customer; and it provides an effective way to
manage the entire life
cycle of a product.
There are multiple
methodologies
for
approaching supply chain segmentation and “no one is better than
others,” says Wadhwa. “Actually segmenting the supply chain is
easy. Execution is the hard part.”
Whatever process is used, the first step is to cluster products and
cluster the channels through which they are delivered, then create a
matrix, he says. Every product/channel combination in the matrix
represents an individual supply chain. The next step is to prioritize
the supply chains based on attributes like revenue, gross margin
and the number of SKUs.
The second step is deciding on the tradeoffs between cost, service and speed, using the early prioritization and customers’ needs
and value.
The third step is execution, “which is the hardest part,” says
Wadhwa. “This is where you take all the business processes within
the company, starting with supply management – how you negotiate contracts with suppliers, how you build products, inventory
policies, how and where you stock products, businesses processes
and metrics, supply chain performance – these all need to be
aligned with the individual supply chains that you have identified.
That is the critical piece where most of the challenges emerge.”
Supply chain segmentation is not a static exercise, Wadhwa
adds. “Over time customers change and what they perceive as
value changes. Supply chain segmentation has to keep pace, so it
is something you should revisit once a year or, at least, every couple of years.”
Transportation Technology Trends
Companies that view transportation management as a core
competency with a strategic impact approach technology
acquisitions as investments and not merely as costs, says Mike
Joseph, director of business development at LeanLogistics.
Joseph discusses how this mindset is reflected in other supply
chain trends.
Where a company is in its maturity cycle has a lot to do with how it
approaches logistics technology purchases, says Joseph.
“It is important for us to understand how transportation is
viewed within a customer’s company – is it an expense to be
managed or a strategic initiative?” he says. “Is this their first piece
of technology supporting transportation management or are they
in a mature cycle and looking to move to an even higher level? If
supply chain and transportation management are considered
strategic advantages and core competencies of the company, that
turns the technology purchase into an investment, not an
expense,” he says.
Where companies fall on this curve can be seen in their
approach to other technologies as well. “You can see it in the way
companies use big data,” says Joseph. “Do they just have a bunch of
data or are they using the information to work smarter? Are they
pulling data from multiple business applications within their organization and bringing all that information together to create analytics
and benchmarking and reporting? It all goes back to the level of
maturity of their supply chain and whether supply chain and logistics are strategic core competencies.”
This concept also applies to collaboration, Joseph says.
“When we talk about collaboration, the first thing that comes to
mind is a perfect round-trip or continuous move between a carrier and shipper. What we don’t see much of, except in mature
companies, is a broader view of collaboration, which includes
sharing information, not just data, and sharing technology platforms as well as equipment.”
I am New Frontiers
Astrid Schoenenberger
Continuous Improvement & Kaizen Executive
new solutions, unorthodox approaches, and imaginative concepts that will help our clients stay ahead of the game.
It is yet another way We care for your cargo.
SWISSWORLDCARGO.COM
SUPPLYCHAINBRAIN
33
Change Is Not What It Used to Be
Change still is a constant and it comes at today’s supply chain
professionals faster, with more intensity and greater risks
than ever before. Art Van Bodegraven describes what this
means for current and future supply chain leaders.
As the degree of change gets faster and more intense, the job of supply chain professionals becomes more challenging, “which is a
code word for difficult,” says van Bodegraven, managing principal,
van Bodegraven Associates.
“We are no longer talking about change that impacts transactional interchanges between businesses,” he says. “We are talking
about repositioning the role and enterprise-wide impact of supply
chain management. We are talking about supply chain leaders who
are looking at how to move the needles of corporate performance
in a way that makes a CEO recognize the value of supply chain
management. It is a radical repositioning of the role of SCM within
corporations.”
Companies have to master this new vision and positioning if
they hope to compete seriously on the global stage, van Bodegraven says. “This means reordering a lot of classical thinking about
who we are and what we do. Inventory, for example, is not a cost to
be managed or something to be trimmed every time the company
needs to save a few bucks. It is an asset we leverage to enable elevated enterprise performance, but that requires being smart about
how and where and why we have inventory – and sometimes that
means adding inventory rather than cutting back.”
Supply chain managers must become change managers, van
Bodegraven says. “They also have to develop the kinds of business planning and high-level analytic skills required to prioritize
among hundreds of opportunities – to decide which changes will
make the biggest difference the soonest for our companies. Analytics, problem solving, prioritizing and planning – these are the
skills to master as the role of a supply chain leader morphs from
managing transactions and people to aligning vision with strategy, gathering allies and integrating resources to work for common goals and outcomes.”
How Health Care Industry Changes
Are Impacting the Supply Chain
Rapid changes in the health care industry are impacting supply chain planning and execution. Philip Profeta, vice president of supply chain operations at Baylor, Scott & White
Health Care, discusses the implications.
With 43 hospitals and more than 500 patient care sites, Baylor, Scott
& White Health Care is the largest health care system in Texas and
the eighth-largest in the U.S. Profeta says his job is exciting and also
challenging.
“The changes in technology that we are seeing are rapid and
ongoing, but unlike many other industries these changes are not
related to fads or consumer trends – they are related to the heart and
soul of what we do, which is saving lives and delivering quality
34
MAY/JUNE 2014
care,” he says.
The supply chain is on the front line of this fast-paced change
“because we are the ones who have to figure out how to bring
everything in at a reasonable cost without disturbing the quality of
care,” he says. “Where we struggle is in how to do that in a changing
environment with the many unknowns facing us today.”
Everyone wants health care costs to come down, he says.
Undoubtedly some of the cost reductions being talked about will
come from the supply chain. “Those of us in the health care supply
chain are under pressure to come up with new processes, streamline the ways we do business and create formularies for patient
communities that reduce costs,” Profeta says.
Improvements in demand forecasting also are badly needed, he
says. “I think we can learn a great deal from other industries, particularly in the area of predictive modeling. How to determine what to
have on hand for that patient that you don’t even know will show
up is a real challenge for us.”
Another issue that Baxter, Scott & White is focusing on is the
supply chain talent pool, Profeta says. “Many of us, and I am of that
vintage, are approaching the time when they will no longer be
working, so we need to look at who will fill all the various positions
in the supply chain that have become extremely technical in nature.
An aging staff is one of the biggest problems we have.”
Logistics Outsourcing Is for Smaller
Companies, Too
Lise Bourjot, senior implementations manager of Celestica,
explains why smaller companies can benefit from the use of
an outsourced logistics provider —all the while ensuring continued operational effectiveness.
Supply chains are growing increasingly complex, says Bourjot, and
companies are finding themselves under more and more pressure
to drive down logistics costs. The tasks of carrier selection, contract
and operations management, and freight audit and payment can be
a drain on internal resources.
“For small to mid-sized companies,” Bourjot says, “this probably
isn’t even [among] their top items of what they need to work on.” So
outsourcing of those functions begins to make sense.
Working with an outside provider can help to streamline
processes and hold down overhead. Electronics manufacturing in
particular is a narrow-margin business, unable to take on costs that
aren’t strictly necessary to running the operation.
Small or mid-sized companies looking to outsource supplychain functions should seek out a provider that can combine their
business with a larger pool of spend, Bourjot says. In the event, they
get access to rates that they could never have negotiated on their
own.
Technology is another element to be considered. Many
providers of outsourced services include a transportation-management system as part of their offering. Customers can tap into the
application without incurring capital costs for system development
and acquisition.
Finally, there’s the relationship question. “You want to look for a
partner who is going to work to understand your logistics needs,”
says Bourjot. The provider should be able to maintain a steady, consistent environment throughout changing processes and organizational upheaval. “Your network is always going to evolve,” she says.
Bourjot further advises that companies looking for outsourcing
partners establish a baseline of services at the outset, with defined
freight savings. “When you go live,” she says, “you have a clear
expectation that’s immediately measurable.”
Joe Andraski: An Incredible Supply
Chain Journey
Supply-chain veteran (and former logistics executive with
Nabisco) Joe Andraski, founder of Collaborative Energizer
LLC, talks about his life in supply chain, the lessons he’s
learned along the way, and his new book detailing his
adventures.
Andraski’s book is entitled “My Incredible Supply Chain Journey,
and What You Can Learn From It.” The work relates his long and
successful career at Nabisco, in the midst of huge changes at the
company.
Andraski’s tenure in the world of supply-chain management
extends back to pre-regulation days, when carriers were ruled by
tariffs and strict classifications.
“Then all that went
away,” he recalls. In a
more free-wheeling
environment, transportation was combined
with
warehousing to create
the discipline of “distribution,” which was followed in turn by
“logistics” and finally
“supply chain” management.
Andraski credits his
success in the corporate world to “the
desire to have everybody in your organization be successful.”
Like every major shipper, Nabisco sought
the best freight rates it could get, but it also came to emphasize the
need for carriers to be profitable. “That was turning a leaf in the relationship we had with service providers,” he says.
Effective supply-chain management begins internally. At
Nabisco, the challenge was especially daunting because of a string
of mergers and acquisitions that kept an organization in a state of
constant flux. On the positive side, “the management team didn’t
have interest in anything other than making sales and margins,”
Andraski says. “We were pretty much left to ourselves.”
An internship program with universities helped to generate the
right entry-level hires. Every two years, each young intern took on a
new job within the company. The strategy developed their skills
and fostered a fuller understanding of the business. “That made it so
much easier to be able to manage a large organization,” Andraski
says, “rather than taking an older organization with people very
much set in their ways.”
In addition, Andraski’s team took care individually to model
each customer and product. The effort yielded “a good, strong
foundation of information,” he said.
Sunny Delight Finds the Balance
Between Service and Savings
Customer value and safe operations always comes first at
Sunny Delight, but the company also keeps a keen eye on
costs. Kevin Singletary discusses steps to the per fect
service/cost balance.
Sunny Delight closely tracks key performance indicators designed
to deliver a “perfect order” that is delivered to the customer in the
right quantity, on time and without damage, says Singletary, Atlanta
site director.
At the same time the company keeps a close eye on costs, and
3PL partner Transplace plays an important role in both those goals.
“With Transplace, we work on taking taking waste out of the supply
chain so we can bring better value to our customers,” says Singletary. For example, he says, if a customer’s delivery profile requires
shipping on Sunday, it may be possible to shift the delivery window
to the next day or to get that shipment out on Friday. “Of course, we
would first make sure that any change was aligned with corporate
SUPPLYCHAINBRAIN
35
goals and not creating any conflicts
internally or for the customer,” he
says. “Having very clear KPIs internally and externally ensures success.”
The company also uses a sales
and operations planning process to
keep operations in alignment. “S&OP
is an overarching process that
enables us to make sure we meet
promotions on time and that we have
good communications throughout
the planning process,” he says.
At Sunny Delight, the supply
chain is an important part of the
S&OP process. “Having back and
forth communications between the
supply chain and other departments
ensures that we are all together,” he
says. “People in the supply chain
might think we need to ship a day
early because of circumstances like
a holiday or bad weather. Keeping
clear communications is very
important because information flow
at the top determines material flow.
Making sure we have very clear
communications ensures that we
put the focus where it needs to be –
on the customer.”
Lean processes also help Sunny
Delight stay customer focused. “Lean
is all about taking the waste out of
each and every process so we can
flow material as efficiently as possible
and pass those savings on to customers,” Singletary says.
Driving Change Management
in Healthcare
Healthcare providers are playing catch-up, but they’re beginning to incorporate operations forecasts in their supply
chains, says Marie Fournier, director of marketing and business development with Tecsys.
Some healthcare providers are coming to recognize the role that
operational forecasts play in their supply chains, says Fournier.
Still, “this is an industry that has lagged behind in supply-chain
practices.”
For many in the sector, demand planning is a relatively new discipline. Up to now, companies have had little or no visibility of
inventory—in fact, inventory management wasn’t even valued as a
key talent. The focus was on patient outcome.
As a result, there were no centralized procurement activities,
which are necessary in order to adopt a comprehensive approach
36
MAY/JUNE 2014
to demand planning. Healthcare providers didn’t know how much
of a given item to buy, or when they needed it.
Now, says Fournier, the industry is seeing “a huge shift” toward
modern-day supply-chain practices. Hirings of supply-chain
experts are on the rise. Gradually, providers are moving away from
a system that saw doctors and nurses searching through hospitals
for needed items.
“That’s not what they need to be doing,” says Fournier. “They
need to be taking care of patients.”
Fortunately, companies are beginning to embrace both centralized procurement and storage locations. “Providers are getting
together and actually consolidating and creating independent distribution networks,” Fournier says. “This is feeding into supply-management systems in the hospitals, then feeding back into
procurement.”
Fournier likens the system to a retail supply operation drawing
on point-of-sale data, with sales at the register replaced by consumption of items by patients. Companies today are getting more
accurate data to create baseline forecasts. In the process, she says,
they’re seeing “humungous savings.”
The Cure for
the Common
Supply Chain
BY GORDON KNOTT & JIM SARTELL
Medical device original equipment manufacturers can cure their supply-chain ills with suppliers who do
more than supply.
T
he changing regulatory and
political actions imposed upon
medical device OEMs are pressuring them to further scrutinize
their businesses to remain competitive. Industry reports estimate that more
than 75 percent of the average $31m cost to
bring a low-to-moderate 510(k) medical
device to market, and 75 percent of the
average $94m cost to bring a high-risk
device that requires pre-market approval to
market, are related to clearing regulatory
requirements. Added to that is the impact of
the Affordable Care Act’s 2.3 percent excise
tax on all U.S. sales of medical devices—a
projected $30bn industry hit over the next
decade and a 33 percent increase in the
medtech industry’s overall tax burden.
While medical device OEMs cannot control regulatory costs and increased taxes,
they can control both the production costs
and selling of their products. Passing along
38
MAY/JUNE 2014
increased costs and charging customers
more is only a partial solution for OEMs. For
sustained competitiveness, manufacturers
should re-examine how they streamline the
manufacturing of their devices and lower
production costs.
One practical way manufacturers can do
this is to consolidate their supplier base.
The high cost of bringing product to market
can be attributed to outsourcing component
manufacturing from multiple—often hundreds—of suppliers. Managing these complex relationships can take a heavy financial
and logistical toll—slowing product time to
market and driving up the cost for the company, and ultimately, its customers.
Instead of having one supplier doing
specific things, medical device OEMs
should select a partner that does more than
just supply. A supplier that offers a vertically
integrated supply-chain solution can add
value to the OEM’s manufacturing process
by doing more of it for them.
That means OEMs need to evaluate
suppliers based on total-cost-of-purchasing criteria instead of the cost of the
parts—seeking suppliers that combine
their manufacturing expertise with valueadded services like ease of purchasing,
engineering assistance, production, finishing and assembly.
A vertically integrated design-engineering and product-manufacturing model simplifies the supply chain, helping OEMs
bring their products to life more successfully and economically.
But entrusting more of the product
development processes to one supplier
involves careful evaluation. Any error in an
OEM’s medical device can set the company
back weeks and cost millions of dollars;
therefore OEMs have to be sure that their
supplier can meet the exact specifications
time after time.
SUPPLYCHAINBRAIN
39
Choosing the right supplier among the
thousands is challenging. To make the right
supplier choice, OEMs should consider the
following supplier criteria.
Manufacturing Expertise
A supplier could wow you with its myriad
of services, but it should be completely
eliminated from your consideration if it is
not exceptional in the most basic function—manufacturing. Whether it is extruding, machining, molding, finishing, welding
or anything in between, a supplier should
be able to respond to an OEM’s unique
manufacturing needs.
Plenty of suppliers can do these things,
so separating them from one another
involves looking at their less-publicized
capabilities and determining if they can add
value to your process.
One such capability is in-house toolmaking. Many suppliers can produce your
components but they may be unable or
cepts that can help OEMs make their
devices more efficiently.
Other supplier capabilities, such as CNC,
vertical- and long-bed precision machining,
robotic pick-and-place technology, metal
finishing and multifunction manufacturing
processes improve manufacturing and
product details. Supplier operations with
complementary component manufacturing
services under one roof can help improve
accuracy and provide complete product
manufacturing solutions.
example, can lead to severe patient injury if
the functional components are not embedded in a fail-safe process. Such proper
mechanics need to be established in the
product development stage.
Suppliers who understand and comply
with medical device regulatory guidelines,
can help OEMs ease the due diligence
process. And those who go the extra mile
by offering engineering design assistance,
will continue to build successful relationships with their OEM customers.
Medical Industry Manufacturing
Expertise
Manufacturing expertise is fundamental but
because of the complexities of the industry,
suppliers should have medical industry
manufacturing expertise and a proven track
record. Without it, they are just taking
orders and skimping on adding value to the
overall process.
Proof can be found in a supplier’s robust
Engineering Savvy
After a supplier has passed the capabilities
and industry-expertise tests, the next thing
to evaluate is their engineering abilities.
Most suppliers offer engineering services to some extent, but relatively few
have the resources necessary to allow
OEMs to place most of their supply-chain
needs—from design to assembly—in their
supplier’s hands.
One of these resources is 3-D modeling.
By creating a 3-D, digital model of a component, engineers can make adjustments in
real time. This capability enables suppliers
to troubleshoot designs, create fabrication
tooling fixtures, order custom dies, and program machining and inspection equipment
without ever seeing the finished part.
This 3-D modeling allows for tremendous flexibility, as engineers are able to use
an active, working model to test the prototype components to help ensure they meet
the required tolerance and dimension specifications. If they do not, supplier engineers
can make real-time changes during the
design cycle instead of waiting to see how
the component turns out before going back
to the drawing board. This can be a huge
savings of time and resources.
A consolidated supply chain further
heightens these benefits. As the partnership
develops, the supplier becomes more familiar with the parts and the context in which
they are used. It can better understand each
part’s essential functions, how it interacts
with and impacts other parts of the system,
and why its aesthetic, durability and weight
requirements are what they are.
This familiarity puts the supplier on the
same page with the OEM design engineer
and enables them to work together to
design for manufacturability—to create
components that are easy to use and manufacture.
For example, one medical device man-
Suppliers should have medical industry
expertise and a proven track record. Without
it, they are just taking orders and skimping
on adding value to the overall process.
unwilling to make the machine tools used
to manufacture them. This type of outsourcing from other suppliers not only extends
the supply chain, but also can create the
opportunity for inaccurate communication
or even slight mismatches between tool and
component specifications.
In an industry where microns can make
all the difference and risk mitigation is a
must, the threat of even the slightest manufacturing inaccuracy must be eliminated.
OEMs should look for suppliers that have
chosen to keep toolmaking in-house—
designing both simple and complex tools
that efficiently take OEM projects from
design to production in order to significantly minimize the risk of error.
With in-house toolmaking as an integral
part of the supplier-OEM partnership,
skilled suppliers will often strive for continual improvement, such as creating new,
advanced tools and implementing new con-
40
MAY/JUNE 2014
internal auditing system, along with documented quality and delivery performance.
The FDA has not only stepped up the frequency and intensity of surveillance with
large medical device manufacturers, it also
is starting to directly interface with the supply chain, as well.
Compliance with ISO 13485 standards
and European medical device directives’
RoHS, WEEE and REACH (requirements for
hazardous materials used in medical
devices and disposing of electrical components and waste created during manufacturing), also adds evidence of industry
expertise.
Suppliers also need to understand and
collaborate with OEMs to help ensure their
manufacturing processes adhere to proper
tolerances, while meeting the functional
and “critical to safety” requirements of the
product. Machines that deliver x-rays and
isotopes using mechanical movements, for
ufacturer that was having design problems
with a component worked with a supplier
to seek an entirely new component solution instead of ordering the same set of
replacement components and perpetuating the problem. The new solution jointly
created by OEM and supplier engineers
involved evaluating the component’s
technical needs, including durability and
ease of assembly.
Instead of using the original design and
steel material, the supplier extruded and
hard-coat anodized a new aluminum component. The component profile also was
designed to snap fit with its mating components. This eliminated the previous need to
use hand tools during assembly, which
reduced assembly time from eight hours to
one. Not only did the new component meet
the requirements for durability, it helped
the OEM be more competitive by lowering
the manufacturing cost per part and reducing assembly time.
This sort of partnership will only work if
OEMs and their suppliers work closely
together to determine the best approach to
manufacturing components, which may not
be what the original design engineer
intended. Often, to know the best approach
requires customer-training services of some
kind. The best suppliers are willing to do
that—offering new product design-engineering assistance, on-site customized educational seminars, and tailored events to
inform customers on the latest industry
developments. All at no cost.
OEMs should work with suppliers that
want to be a part of the product development process and design for manufacturability. Good suppliers will need to know
what the OEM is doing, why they are
doing it, and how they can work together
to do it better.
Low Risk
With the high cost of creating medical
devices comes a low margin for error. Like
in the manufacturing of parts, one small
error in any part of the process is unacceptable. OEMs should look for suppliers that
embrace the same zero-tolerance approach.
Perhaps the easiest way to determine this is
by looking at third-party certifications.
These certifications, particularly those
administered by ISO, are given to suppliers
that meet the organization’s high standards
for safety, reliability and quality.
But these standards should just be a
starting point. Suppliers deserving of your
consideration should go beyond this by
minimizing your risks throughout the entire
product development process, not just during the manufacturing stage.
One way they can do this is through
data-driven predictive maintenance. By
analyzing manufacturing-process control
data, suppliers can predict how often a
machine tool can be used before it wears
down and replace it before it reaches that
point. This means no waiting for new components to be delivered and not worrying
about them meeting specifications because
they were made with a worn-out tool.
Consolidating several manufacturing
steps with one supplier also limits the risk of
transit damage. Instead of one supplier creating a component, boxing it up and sending it to another supplier that handles
another step in the manufacturing process,
a single supplier controls and manages the
entire process. Fewer hands touch the
product, leaving fewer opportunities for
freight or material-handling damage. This
also means decreased shipping and packaging costs.
Though significant, these risks pale in
comparison to one of the largest risks OEMs
face—not getting their medical devices to
market in time.
Since medical device patents last for
only 20 years—many of those years are
spent researching and designing the product—medical device OEMs have a limited
time to cash in on their innovations. Every
minute that production is delayed is
money wasted.
To counter this, certain suppliers have
adopted Quick Response Manufacturing
(QRM), a manufacturing philosophy that
strives to cut down lead times in all levels of
production. This approach essentially combines the waste-eliminating focus of just-intime, or lean, manufacturing with a
heightened attention to timing for all steps
in the supply-chain product development
process—from purchasing and engineering-design assistance to product development and delivery. Instead of waiting 30
days for a supplier to create a product, QRM
can allow the same process to be performed in just four days—a reduction of
almost 90 percent.
This speed allows OEMs to get their
devices to market more rapidly, respond
quickly to changes, avoid potential breaks
in the supply chain, and lessen downtime
and the high costs that accompany it.
Supplier Relief
For medical device OEMs, managing the
logistical maze of hundreds, sometimes
thousands, of suppliers adds unneeded
costs in time and money to transfer partially finished components from one supplier to the next.
Turning to a single-source supplier can
remedy that. The right one will provide a
team of dedicated engineers, manufacturing specialists and market experts to review
designs, discuss capabilities, and work with
OEMs to create real-time solutions that help
simplify their supply chain and get products
to market faster.
OEMs need to work with their suppliers
every step of the way, insisting on suppliers
who can help limit their costs while elevating product quality and taking some of the
responsibilities off of their plate. It may not
be a miracle drug, but it’s close.
Gordon Knott and Jim Sartell are medical market co-leaders with Alexandria
Industries.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Alexandria Industries,
www.alexandriaindustries.com
SUPPLYCHAINBRAIN
41
Sage Health Solutions
Taps Into a Global
Sourcing Network
BY ROBERT J. BOWMAN
Started by two sisters in South Africa, a small provider of medical supplies accepts an invitation from its
biggest customer to join an electronic sourcing platform—then sees the technology as an opportunity to
enable growth on a global scale.
T
he automation of sourcing and
procurement has been, for the
most part, a story of big, global
companies waking up to the
benefits of new information
technology. Early applications seemed
best suited to buyers looking to gain control over a large supplier base. In a sense,
it was the scale of their operations that justified the time and money spent acquiring
such systems. Smaller entities, with perhaps a handful of trusted suppliers, crept
along with manual processes and prehistoric spreadsheets.
That’s hardly the case anymore. Procurement technology, especially in the age of
the cloud, has matured to the point where a
far wider range of buyers and suppliers can
take advantage of its offerings, even in the
most specialized industries.
Take Sage Health Solutions. Started in
2000 by two sisters in Cape Town, South
42
MAY/JUNE 2014
Africa, it occupies a narrow but crucial
niche in the healthcare supplies industry.
Sage provides products for bedridden and
terminally ill patients in hospitals and
other types of care facilities. Items include
specially made, PVC-covered mattresses
and pillows, as well as sheets, blankets
and gowns.
The company arose from an instance of
highly personal grief. In 1989, the mother of
Ruwayda Tambe and Gheelmeyah Sulaiman
was left in a comatose state after an accident.
Her condition, lasting three years, made the
sisters acutely aware of the need for providing comfort and compassionate care to the
severely ill.
Their experience led to the formation of
multi-product Sage Enterprises, with operations out of Sulaiman’s home near Cape
Town. Initial turnover was less than $2,900
a month, growing into six figures in subsequent years.
In 2011, Tambe and Sulaiman created
Sage Health Solutions, with an exclusive
focus on medical supplies. Its first and still
biggest customer is the South Africa government, which generates daily requests for
quotation across some 2,000 categories,
says Tambe, who currently serves as the
company’s marketing director. Inquiries
number around 100 per category, and Sage
chooses the ones it wants to pursue.
A Manual Process
At the outset, Sage was responding to
RFQs manually, a process that proved
time-consuming and labor-intensive—far
from ideal for a company of its modest
size. As it happens, though, the South
Africa government was using the procurement platform of Ariba Inc. It asked Sage
to join the network so that the two entities
could do business electronically.
Sage was quick to agree. In addition to
the obvious benefits of automating transactions with its biggest account, the company
saw an opportunity to better manage its
own raw-materials suppliers.
Sage quickly experienced the benefits of
streamlined procurement via a network. It
started out on the Quadrem system,
acquired by Ariba in 2010. (Ariba was itself
acquired by SAP AG in 2012.) Tambe says
the company today can answer government
RFQs “anywhere and anytime,” from a
mobile device. That’s an especially valuable
capability, given the sometimes-spotty
nature of South Africa’s internet.
Invitations to join the Ariba Network
from a valued customer aren’t necessarily
mental accounts that still communicate by
phone and e-mail—at least for now.)
“Since we began working with Ariba, and
receiving and responding to all of our tenders via e-mail, we have been able to
grow our business from almost nothing to
a multimillion-rand venture,” says Tambe.
couched as a mandate, says Rachel Spasser,
chief marketing officer with Ariba. They
don’t have to be—typically the account
“will provide a pretty strong business case.
It really does become a win for both sides.”
For Sage and the South African government, the network handles the entire
“source-to-settle” process, including the
tendering, acceptance and completion of
RFQs; receipt of purchase orders; and
issuance of invoices. The system also monitors vendor performance, allowing the
buyer to determine whether an order was
fulfilled accurately and on time. And it provides opportunities for lead generation and
social matching.
Today, around 80 percent of Sage’s
business comes from Ariba’s automated
platform. (The rest is smaller, non-govern-
from around the world. Already she has
received inquiries from a number of companies outside South Africa.
Tambe also wants to expand the use of
Ariba for items beyond bed-patient products, such as wheelchairs. “We would like
to supply the whole range of equipment
and products for the disabled and terminally ill,” she says.
A sure sign of any company’s success is
the need for more workers. As of late 2013,
Sage Health Solutions was running with just
four people. Thanks in part to opportunities
afforded by a global procurement network,
Tambe expects to more than double staff
this year.
New customers will be the chief driver
of revenue growth, she says, adding that the
company’s website has been upgraded to
Broadening the Vendors
She expects to broaden her own vendor
base as well. At the moment, Sage’s suppliers are based locally. “I source whatever I need from the people I know,”
Tambe says. Access to Ariba’s Web-based
platform, however, is expected to broaden
the company’s options to include vendors
give it global exposure.
“We see our business growing quite
exponentially,” Tambe says. Sage hopes to
use Ariba to set up storefronts in various
product categories (it’s now selling over
the internet), and could also develop electronic catalogs through the network. For
that capability, however, “we need a bit
more training.”
Sage is just getting started with Ariba,
Spasser notes. The company has yet to take
advantage of such features as the ability to
offer discounts to buyers, based on adjustment of payment terms. Another service,
Ariba Discovery, matches buyers with sellers. “There are a lot of ancillary services that
live within the network,” she says.
“We are still very much learning the
process,” says Tambe. “I would like to
become part of this global network.”
For a small company with initially modest ambitions, automating and networking
the procurement function is helping to
broaden its scope of customers, suppliers
and markets. “It’s going to be a very exciting
year,” says Tambe. “I’m very nervous, but I
know it’s going to be big.”
To access this article online, visit
www.SupplyChainBrain.com.
Resource Links
Sage Health Solutions,
www.sagehealthsolutions.co.za
Ariba, www.ariba.com
SUPPLYCHAINBRAIN
43
Rest Easy: Your
Mattress Will Be
Delivered on Time
UK retailer of beds and bedroom furniture makes 6,000 home deliveries every week—on time—now that
it uses an automated routing and scheduling solution.
W
hen you purchase a mattress, bed frame or any
other type of bedroom furniture from Dreams Limited
in the UK these days, you
can rest assured that home delivery will be
made right on time. Unfortunately for a
number of customers in the past, not to
mention the company’s bottom line, that
wasn’t always the case. A move to an automated routing and scheduling optimization
solution changed things for the better.
Dreams, one of the premier retailers of
beds and bedroom furniture in the UK,
receives orders online and from showrooms
in its 165 stores. From there, the company is
tasked with making some 6,000 home deliveries a week throughout the land, according
to Ian Clarke, change controller at Dreams.
The company’s dedicated private truck fleet
makes the majority of those deliveries. Transportation is outsourced in parts of Scotland,
but Dreams management is looking to reel
that back in house.
44
MAY/JUNE 2014
The company, which manufactures
approximately 50 percent of its mattresses,
relies on Paragon Software Systems’ Home
Delivery System (HDS) to plan all its nationwide routes and schedules from its head
office. The system provides a selection of
optimized delivery days. Customers choose
the one that suits them at the point of sale or
when they make an online purchase.
“When a Dreams customer buys a bed
our Microsoft Dynamics NAV system will
calculate the earliest availability for the
product. This information feeds through to
Paragon HDS, which then works out the
available delivery dates to offer the customer. The information is presented graphically to our sales staff in red, amber and
green, with green being the most efficient
delivery,” Clarke says.
With the system, customers can book a
delivery up to 90 days in advance, though
most choose between 10 and 15 days after
making a purchase. “We also have much
more flexibility to move deliveries around if
we need to, and we can close off routes earlier,” Clarke says. “In fact, with the latest version of the software we can also shut off a
depot early and we can pause specific
routes, if necessary to maximise efficiency.”
Eliminating all manual elements from
delivery planning enables much tighter
control of how many vans are required and
the number of driver shifts needed to
achieve the plan. “Together with our stock
availability system, we have a much clearer
view of our supply chain as we can plan
when goods need to be in the depots, and
we’re now running some as stockless, having just the items they need to deliver within
the next 48 hours,” says Clarke.
Seamless integration with the GPS vehicle tracking units in the vans using Paragon
Fleet Controller allows the system to monitor delivery progress in real time. This provides a live report feed, which is published
on the Dreams intranet to show how deliveries are progressing and allows customer
service to keep clients updated with ETAs.
They can see the exact status of each delivery, whether the van is at the customer’s
home or has completed the delivery and is
on its way to the next drop.
It wasn’t always this easy, Clarke says.
Six years or so ago, management saw business accelerate: the company was opening
25 stores a year, yet had only three delivery
depots at the time and routing was manual,
literally “bits of paper and maps.” Says
Clarke: “From the route planning perspective, we relied on the drivers and their encyclopedic knowledge of the area.”
Schedulers knew generally which post
codes drivers would operate in on a given
day, Clarke says, but with no real visibility,
“We had to kind of take a chance and hope
that we could hit the delivery window.”
As it happened, at least 20 percent of
those deliveries were outside the promised
window, which brought predictable results:
mounting customer complaints, delivery
charge refunds and order cancellations.
Clearly, it was time for an automated system. Three vendors were vetted before
Dreams contracted with Paragon Software
Systems plc. (The company operates as
Paragon Software Systems Inc. in the United
States.) Clarke says it was the flexibility,
functionality and the scalability of the system that clinched the deal. “We were growing, and we needed the scalability. We’re at
10 depots now, so we needed something
that could grow with us.”
Paragon HDS is integrated with the
Dreams point-of-sale and stock management systems, so delivery can be promised
on any item sold.
HDS is a continuous optimization system,
which means it can provide a time window
on a given day, according to William Salter,
Paragon’s managing director in the UK and
CEO in the U.S. But Dreams management has
opted to allow customers to choose only the
day of delivery when an order is placed. The
day before, customers are contacted to
arrange delivery either in the morning or
evening. Clarke says that level of service
meets the requirements of most customers.
As it happens, Dreams Limited operates
in a highly competitive marketplace, says
Salter. “There are quite a few providers
here, and customer expectation is quite
high as well. It’s a tough area to be in, and
they simply needed the solution to support
what they do.”
Salter acknowledges that there are a number of routing and scheduling solutions on
the market, but he feels the continuous optimization of the Paragon product sets it apart.
Paragon HDS is linked into the ordering
and delivery booking process, so each home
delivery request is automatically optimized
into the existing route schedules.
All of which means that clients using
Paragon HDS can offer precise delivery
windows at the point of sale, he says. However, the level of service offered has to be
balanced with the cost of providing it. “Our
customers choose what level of time window they want to offer to their customers
because you want to offer delivery that’s
both viable and cost-effective.”
To access this article online, visit
www.SupplyChainBrain.com.
Resource Links
Dreams Limited, www.dreams.co.uk
Paragon Software Systems,
www.paragonrouting.com
“The Business of America is Business.” — Calvin Coolidge
The Business of Alliance Shippers Inc. is . . . “To Manage Our Customers’ Business.”®
The Perfect Shipment
®
Our Commitment To You.
Perfect Shipment ® Performance via Railroad Intermodal Service
Origin Pickup
Railroad Linehaul
Destination Delivery
January
February
March
April
99.0%
99.0%
98.9%
99.1%
98.0%
96.8%
96.8%
97.6%
98.7%
98.5%
98.1%
97.0%
94.2%
94.2%
94.1%
93.8%
97.9%
98.0%
98.4%
98.7%
95.6%
95.1%
96.1%
96.7%
Average
99.0%
97.3%
98.1%
94.1%
98.3%
95.9%
2013
2014
2013
2014
2013
2014
For more information about all of our services, visit us at:
www.alliance.com
® denotes a registered trademark of Alliance Shippers Inc.
Exposing Weakest
Security Link—
Your Supply Chain
BY SALLY LONG
Tainted and counterfeit technology is not a hypothetical issue. Threats are occurring daily, and managing risks to the supply chain—immediately—is imperative.
C
orporate criminals are using professional and systematic methods
to target the weakest link for
global organizations, the supply
chain. High profile exploits such
as Target’s supply chain disaster are raising
concerns across numerous verticals on
business stability. With the threat of tainted
and counterfeit technology products building every day, organizations must come
together now and take what steps they can
to mitigate risks to the supply chain.
Identifying the Risks
To survive against malicious attacks, organizations must guarantee and trust every link
in their technology supply chain. But as systems become more interoperable, more of
the supply chain is becoming exposed.
International connectivity created massive
benefits to large Commercial Off-the-Shelf
(COTS) Information and Communication
Technology (ICT) producers and consumers, but with those advancements come
46
MAY/JUNE 2014
a higher level of risk.
The introduction of maliciously tainted
and counterfeit components can occur at
various stages of the supply chain life cycle.
From design, sourcing, build, fulfillment,
distribution, sustainment and disposal
stages, the supply chain is wide open for an
unfriendly “passenger” to take a ride
straight into an organization’s computer systems and access intellectual property. This
has led to many organizations facing the
unknown when purchasing hardware or
software for mission-critical systems. There
is a huge possibility now that products are
filtering to them without any guarantee that
suppliers have used secure engineering
practices and supply chain management
practices.
Today’s technology supply chain is complex, with component suppliers located
across the globe. To ensure their supply
chain is secure, organizations need to guarantee that they are purchasing items from
trusted technology providers who follow
universally accepted best practices. This not
only includes standardizing secure development and engineering practices in-house
when creating software and hardware
pieces, but also that best practices are being
followed at every step of the supply chain.
In today’s global economy, the best way to
anticipate the massive threat of cyber criminals and counterfeit products is to identify
trusted component suppliers, trusted
providers and trusted integrators. With a
trusted network, organizations can know
who in the supply chain is following best
practices, and be sure they are aligned with
the best partners.
The Trojan Horse
Let’s take a closer look at the gateways that
are exposing the supply chain, starting with
the “Trojan horse” techniques. Tainted products introduced within the supply chain
increased the possibility of untracked, malicious behavior, as evident when Target’s credentials were stolen via a heating and
refrigerator contractor. This is known fondly
by hackers as the “Trojan Horse”, and may be
hiding within your company right now.
Customers and governments are moving
away from creating personal high assurance
and customized systems to secure against
these threats. Instead, they are adopting the
use of COTS because they are cheaper and
more reliable. But a maliciously tainted
COTS product, once connected or incorporated, can pose a substantial security risk
once it is operating at a customer site.
Unfortunately for organizations like Target,
it can allow hackers to take control of the
organization’s network or gain access to
sensitive intellectual property.
to mitigate the risk of tainted or counterfeit
components before they make their way
into mission-critical infrastructure. Aligning
this with a codified approach that is universally formulated with transparent standards,
which are recognized by multiple industries
and regions, will increase the integrity of the
supply chain and help protect against
cybersecurity attacks.
Creating global unity across industries
and establishing open conversations is key
to progressing supply chain security. With
dard and a formal accreditation program to
verify conformance, all parties involved in
the supply chain can have assurance that
they are working with trusted technology
providers. Thus making every enterprise
environment that partners with trusted technology providers safer and more secure.
The security bar must be raised across
the full spectrum of the supply chain, from
small component suppliers to the providers
who include those components in their
products, to the integrators who incorpo-
an open path to share best practices on how
to assure product integrity and secure supply chains, organizations can be in sync
with all parts of their supply chain. This is
crucial when developing a framework of
best practices as an open standard, which
can then be utilized to assess and guarantee
providers are conforming to the standard.
rate those providers’ products into customers’ systems. By accepting the realities
of the threat landscape and taking appropriate measures, like working only with
trusted technology providers who conform
to a universal standard for mitigating those
threats, organizations can be sure that they
will improve the integrity of their products
and the security of their supply chains.
Sally Long is dir ector of The Open
Group Trusted Technology Forum, an
international forum of industry providers,
third-party labs and governments developing standards and confor mance programs to incr ease security in global
technology supply chains.
Counterfeit Components
In addition to the maliciously tainted “Trojan horse” scenario, counterfeit products
within the supply chain are another major
threat to customers and suppliers. Manufacturers and suppliers have been plagued by
counterfeit products for years due to the
growth in outsourcing and expanded global
supply chains. These counterfeit products
can result in faulty or sub-par products, revenue and brand equity loss and even
expose sensitive intellectual property. With
these mounting risks to the supply chain,
how can vendors, corporations and suppliers increase the integrity of technology
products and help protect the supply chain
from the threat of attacks?
Creating Unity and Securing the
Supply Chain
Virtually nothing is made from one source
anymore, making it difficult to build security into supply chains. The global and
speedy manner in which technologies are
invented, produced and sold require agile
business processes to achieve routine and
scalable results. Combining an international
focus and the public-private partnership is a
big issue for all parties impacted by supply
chain security issues. Security value is now
broadening its reach from the end point
perspective and looking end to end at the
product lifecycle of the global supply chain.
The increased sophistication of cyberattacks has made it necessary for technology suppliers and governments to take a
more comprehensive approach to assuring
product integrity and supply chain security.
Customers and governments are now
beginning to seek universal guarantees that
their providers are following best practices
Universal Standard and Accreditation
of Conformance
Creating a global common standard of best
practices for securing supply chains is necessary to comprehensively tackle the vulnerabilities inherent in global supply
chains. A standard that is freely available,
and open to be adopted by all component
suppliers, technology providers, and integrators can help ensure that products are
built with integrity so customers can buy
with confidence.
With a universal understanding of the
issues, implementation of a universal stan-
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
The Open Group Trusted Technology
Forum, www.opengroup.org/ottf
SUPPLYCHAINBRAIN
47
A More Profitable
Industrial Asset
Management Function
BY DAVID PETRUCCI & GAURAV AGRAWAL
For many companies, their operating models leave altogether too much unrealized potential for properly
managing industrial assets. The solution to the problem lies in the flaw.
T
he goal of industrial asset management, or IAM, is to maximize
the value of a company’s assets.
An effective IAM solution can
make the business more efficient,
reduce downtime and improve service delivery. And yet, for many companies, the current
IAM operating model just isn’t cutting it. For
original equipment manufacturers or OEMs
in particular, the IAM function leaves a great
deal of unrealized potential on the table—in
some instances, up to 20 percent service cost
reduction, 15 percent revenue enhancement,
and 15 percent asset up-time improvement.
Why is this? The answer, in short, is that
the existing operating models of these companies face a set of real, yet surmountable,
structural challenges. Luckily, the flaws in
these IAM models also reveal the key on how
to fix them.
The Problem With Existing IAM Models
For many OEMs in a broad range of industries
from aviation and power generation equip-
48
MAY/JUNE 2014
ment to oil and gas equipment suppliers, the
main problem is limited “machine to
machine” or M2M connectivity. With limited
coverage comes inaccurate installed based or
IB data that can hinder service opportunity
assessment and potentially compromise up
to 20 percent of services revenues. Moreover,
the absence of remote machinery diagnostics
can increase service delivery costs by as
much as 25 percent and ultimately reduce
margins. In addition, unscheduled asset
downtime can impact the end-customer’s
profitability and consequently, their relationship with the business. Even a single hour of
unscheduled downtime can result in millions
of dollars lost.
The other drawback with current operating models is ineffective data analysis.
Flawed data analysis leads to inaccurate
forecasting which ultimately leads to inaccurate pricing. In service operations, the
first-time fix rate by service technicians also
suffers due to a lack of proper triage,
unavailability of spare parts and inefficient
service scheduling. And for many OEMs,
poor data analysis can impact engineering
design changes that can lead to higher
maintenance and poor reliability.
Transforming operations requires a specialized knowledge and expertise that can
tackle related operational and organizational
issues. Experience shows that these issues are
mainly of two kinds. The first includes strategies for driving revenue. And the second,
methodologies for optimizing service costs. A
failure to grasp and resolve these issues is an
important reason why service-oriented companies struggle with developing their best
operating models. Deeper scrutiny, however,
shows three main components of existing
operating model deficiencies. And creating
an effective IAM framework requires addressing these three components: processes, technology and people.
Fixing the Process
Existing operating models are frequently
inadequate because of imperfect or non-
Finding the Right People
Not surprisingly, finding people with Big
Data skills is not easy. And finding the right
people for remote monitoring design and
connectivity monitoring can be just as difficult. These areas require a broad range of
experts with very different niches. To start,
the organization needs senior field service
executives who can select the right
machines and operational parameters. It
also requires software experts to design and
support deployment; shared services
experts to set up the Remote Operations
Center (ROC); and those with skills ranging
from basic parameter monitoring to highend functional knowledge and equipment
expertise.
And bringing these experts together for
various types of equipment, across various
geographic regions, at a global scale is a
complex job. Companies must be prepared
to invest in finding and supporting these
resources in order to create a well-designed
IAM operating model that can ensure consistent, timely, and effective service delivery
at an optimal cost.
existent links along the service operations
chain. From setup and planning through
contract management, the functions, systems and departments are highly disaggregated. Fixing these fragmented processes
requires first and foremost, increasing visibility into the existing installed base.
What’s more, comprehensive real-time
equipment condition monitoring is crucial.
The equipment diagnosis process is ineffective if real-time monitoring is done selectively. By implementing real-time condition
monitoring, companies can get better diagnosis or triage at the initial call level,
improved availability of spare parts and
tools for field visits, more intelligent field
service operations, and improved training
for technicians.
Updating Technology
Companies need to look at more than just
updating outdated M2M technology. Legacy
field service platforms are generally among
the more disjointed service systems and frequently are incapable of providing the business with an integrated operational view.
A study conducted by Aberdeen
Research Group looked closely at the role
of automation among 156 companies pro-
viding field service to customers. It found
that the “best-in-class” performers were
those that were investing in up-to-date
automation technology—automating or
overhauling their processes for areas such
as enterprise resource planning, improved
billing and other financial record keeping,
customer relationship management, parts
management, and workforce management.
Aberdeen determined that in order to
achieve best-in-class, field service performance companies must be able to use technology to do things like integrating parts
management into scheduling criteria,
scheduling service tasks more frequently
and in a centralized manner and empower
field agents with real-time access to information via mobile tools and devices.
And for those that truly want to sit on the
cutting edge of technology, Big Data analytics, or the use of highly advanced analytic
techniques on large and diverse data sets,
has opened up a world of possibilities for
businesses. According to a 2013 McKinsey
Global Institute study, productivity
increases from sensor analytics, automated
predictive maintenance and enhanced field
services is predicted to increase manufacturing GDP by as much as $115bn by 2020.
Ingredients for Success
OEMs are facing many strategic and operational challenges, including cost pressures,
increasing competition and emerging market complexity. In a time when the global
economy has never been more competitive,
with investments in capital projects dwindling in many areas, progressive OEMs are
shifting towards aftermarket service as a
driver of profitable growth and a way to stay
relevant to the end-customer. For many
with a globally distributed asset base, service delivery can suffer. The best service
delivery, however, is evolving toward creating an optimal industrial asset management
function. With the right model, OEMs can
develop an integrated IAM function that
generates profits and increases customer
satisfaction—both the ultimate ingredients
for success.
At Genpact, David Petrucci is Vice President, Sales and Business Development, Industrial Solutions, and Gaurav Agrawal is
Assistant Vice President, Industrial Solutions.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Genpact, www.genpact.com
SUPPLYCHAINBRAIN
49
Visibility 2.0:
New Framework
for Outsourced
Manufacturing
BY HARI MENON
Extreme visibility into multiple dimensions of extended manufacturing is required now – a collaborative, gain-sharing framework on all aspects, from design to delivery.
G
one are the days when outsourced manufacturing was a
supplement to your business.
Today, it is your business. Building quality products quickly,
while remaining nimble to address market
feedback or unexpected manufacturing
snafus, can be the difference between success and failure. In contrast to the first wave
of outsourcing, where brands were focused
on cost, the new generation of outsourcing
sees brands expanding their network of
manufacturing partners around the globe to
leverage both manufacturing capabilities as
well as situate low-cost manufacturing sites
closer to the customer. In addition, since no
single partner is handling everything, the
process must be collaborative, starting with
design. As brands increasingly relinquish
control over critical business processes and
assets, they need to better optimize the outsourcing process in order to meet product
launch dates, ensure product quality and
stay competitive.
50
MAY/JUNE 2014
Brands that fail to manage this quickly
and properly risk death by a thousand cuts.
Manufacturing Complexity Calls for
Extreme Visibility
A decade ago, brands relied on outsourced
manufacturing primarily to reduce costs
and off-load excess capacity from their own
production lines. They “threw the product
design over the wall”—a unidirectional
buy-sell model wherein focus was only on
cost reduction. In this scenario, Visibility 1.0
comprised understanding inventory movements, which was adequately handled by
B2B integration tools and legacy supply
chain management and planning tools and
processes.
Brands have since learned that outsourcing manufacturing does not mean abdicating
all responsibility for orchestration, and manufacturing partners’ capabilities have become
an extension of their own capabilities.
This evolved approach requires extreme
visibility into multiple dimensions of
extended manufacturing. We call this “Visibility 2.0”—a collaborative, gain-sharing
framework on all aspects of manufacturing,
from design to delivery. By monitoring production events and transactions on a realtime, granular level, brands and their
manufacturing partners can discover
detailed causes (e.g., why a new product is
failing on the manufacturing floor and
under what conditions), immediately collaborate to address issues, and adapt on the
fly with decisions that impact output, inventory, costs and customer satisfaction.
As the industry has become more
sophisticated in how it operates, traditional
SCM, ERP and planning solutions—that
were built for “an arm’s length relationship”
with contract manufacturers (CMs) and
other outsourcing partners—haven’t kept
up. No longer is the ability to deliver data in
multiple formats across different integration
mechanisms sufficient. This new era of Visibility 2.0 requires new processes and a new
mechanism to monitor real-time data across
TO REDUCE THIS...
AND SAVE THIS...
Partner with SmartWay
®
SmartWay Transport Partnership is the smarter way to ship goods. With
enhanced tools and user-friendly reporting systems, the SmartWay program
can help your company put its best foot forward to reduce its carbon footprint,
improve its bottom line, and better manage its global freight supply chain.
This innovative public-private collaboration helps your company increase
operational efficiency, incorporate sustainability, and gain a competitive edge.
Drive over to epa.gov/smartway to learn more.
Any way you ship it, move it the SmartWay.
the entire partner base that will improve
orchestration of outsourced manufacturing.
The Components of Visibility 2.0
Deep visibility into manufacturing detail is
critical, especially for those industries that rely
heavily on complex outsourced manufacturing and multiple partners. To stand out in
today’s competitive business environment,
brands should focus on the following:
1. Enact a ‘trust but verify’ approach.
To eliminate non-value added steps from outsourced manufacturing, brands should adopt
a “trust but verify” approach, which stream-
lines processes, maximizes productivity and
strengthens the collaborative relationship
with the CM. Under this approach, both parties share access only to what they have visibility to on a continuous basis (not on an
episodic basis). This ensures both parties see
the same information and are making decisions based on a common source of truth. For
example, the brand provides the CM with
early visibility into the market success of their
new product launch and end-of-life plans,
while the CM provides visibility into quality
excursions, shortages and resource constraints. The result is efficiency and granular
visibility into each other’s operations where
the relationship involves both “gain-sharing”
and “risk-sharing.”
2. Embrace a collaborative ‘Design for
Manufacturing’ philosophy. In industries
that are characterized by complex, multi-tier
supply chains and/or a complex BOM,
52
MAY/JUNE 2014
where multiple suppliers and outsourced
manufacturers are involved in delivering the
final product, a sequential approach to new
product introduction (NPI) has become
extremely cumbersome and risky. This is
especially true for semiconductor equipment,
storage equipment, and networking and
communications equipment, where product
quality and delivery issues can significantly
threaten success.
Today, brands should strive for more visibility into processes by following a “Design
for Manufacturing” philosophy supported by:
• An iterative, “continuous improve-
ment” approach to product realization
built on close collaboration between the
CM and the brand.
• Active involvement of product and test
engineers working closely with the CM
to design the right manufacturing
process for the product.
• Constant monitoring of the “as
designed” versus “as built” variations.
• Processes and systems that support
partner compliance with quality parameters, BOM changes and spec changes
(e.g., ECOs and MCOs).
3. Establish strict protocols to meet
global regulations. In industries such as
medical devices and medical equipment,
regulatory compliance plays a critical role.
Brands have become better at understanding and addressing the political and social
environment through local experts, but
have yet to address the manufacturing com-
pliance of various geographies. Complying
with labor regulations (e.g., minimum age,
wage requirements) as well as local markets’ sensitivity to product content, for
example, requires transparency of the CM’s
operations. It comes as no surprise that
brands which have already faced market PR
disasters—e.g., the fires in garment factories
in Bangladesh, the FitBit product recall—
have been much more proactive in putting
in the processes and systems to manage
regulatory compliance issues as they pertain to manufacturing.
A strategic and comprehensive approach
involves establishing a protocol with the partner that covers frequency and granularity of
communication, as well as visibility into various manufacturing steps.
A Platform for Visibility 2.0 Success
As manufacturing continues to grow in
complexity, a technology platform that
meets the heightened requirements for visibility is critical for effectively orchestrating
cost-effective, on-time manufacturing, and
should include the following functionality:
• Extensible, real-time integration of
heterogeneous data sources from suppliers and manufacturing partners
• Support for collaborative workflows,
even when conversations happen over
email or Skype
• Ability to collect and analyze large volumes of transaction data at appropriate
levels of granularity
• Cloud-based platform for effective collaboration and ease of use within varying environments, regardless of CMs’
technical sophistication
• Analytics and data visualization to
proactively identify and quickly resolve
issues.
Many brands’ survival depends on
complex and outsourced supply chains.
While brands can’t plan around assets and
processes they don’t own, with Visibility
2.0, they can effectively orchestrate outsourced manufacturing to bring new
products to market faster, at lower cost,
and with higher quality.
Hari Menon is chief executive officer of
Serus.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Serus, www.serus.com
Manufacturers Can
Avoid MDM Pitfall
and Harness Big Data
BY CHRISTOPHE MARCANT
Gaining control of all the data elements in a business’s infrastructure is what master data management is all about.
B
ig data is the all the rage and getting tons of press as it has
allowed manufacturers and supply chain executives to create
new and compelling datadriven strategies that help them compete,
innovate and capture wallet-share.
Perhaps fueled in part by the likes of
leading database vendors or system integrators (SIs) looking to cash in on high-dollar
predictive analytic and scoring engagements, big data represents many things to
many people, but one of the most pragmatic applications is mastering all the data
elements used in a business infrastructure.
The term commonly used for this process is
master data management, or MDM.
Master data management continues to
gain rapid market adoption, as it comprises a set of processes and tools that consistently define and manage the
non-transactional data entities of an organization. According to Bloor Research’s
annual “Master Data Management Market
54
MAY/JUNE 2014
Update,” the market through 2012 and
early 2013 showed considerabale growth.
Andy Hayler, author of the report, suggests
that MDM is getting increased traction
among customers, and is moving from a
niche area into the mainstream.
Few would be surprised with this market growth as master data is the lifeblood
of most enterprises. This is especially true
for manufacturers as it is extremely difficult to conduct day-to-day activities without having basic records on customers,
products, suppliers, employees, locations,
assets and more. Yet across virtually every
industry, the volume of operational information is rising exponentially in both size
and complexity. The goal of any MDM initiative should be to provide processes for
collecting, aggregating, matching, consolidating, quality assuring, and distributing
critical data throughout an organization to
ensure consistency and control in the
ongoing maintenance and application use
of this information.
MDM Success Starts by Recognizing
the Business Need
For most manufacturing companies, operational information is duplicated and scattered across multiple systems and
applications which makes it difficult for
decision makers to achieve a unified view
of operational intelligence. The disparate
information also prevents customers from
getting the accurate and timely information
they need to make purchasing decisions.
In fact, most transactional data is linked in
some way to master data. So, missing data,
low-quality information and untrustworthy
or inaccurate records have a big impact on
revenue, productivity, costs, compliance,
agility and decision-making. Therefore,
managing this master-level information
proactively as it flows through the organization is essential to improving business
performance. But how does a manufacturer know if they need a MDM solution? A
good starting point is to ask if any of the
following holds true:
• Business groups manage data within
Excel spreadsheets
• Data is in disparate systems
• Company is unable to control brand
consistency
• Organization has multiple (potentially
inconsistent) versions of the same data
• Data quality is suspect or unreliable
• Classification, identification and reconciliation of data is inconsistent
• Company is going through or planning a merger or acquisition
Considerations for the First Time
(MDM) Buyer
For those considering a MDM solution for
the first time, the vendor selection process
can be daunting. While the concept of
MDM is not new, it’s a rapidly evolving marketplace that has become crowded with
“me too” applications and a blur of sameness when it comes to marketing messages
and positioning. There are a handful of vendors that make similar promises and claim
comparable feature sets, but when you look
under the covers, who offers true customer
value and who is merely checking the feature box? When evaluating MDM vendors,
manufacturers should conduct due diligence and take time to verify that the vendor under consideration has a team of
seasoned experts who can turn data into
revenue, regardless of industry or vertical.
Start by asking questions such as what is the
average tenure of your employees? And
what is the earliest deployment your customers have experienced starting from the
beginning of the project? More importantly,
ask them to list two references and to outline the scope of their project.
Never Underestimate the Importance
of the RFP
Let’s face it, since you only get the services
and capabilities that you ask for, choosing
the best vendor upfront starts with developing a well-thought out request for proposal.
Understanding the vendor’s strategy, product capabilities and long-term vision is critical to any MDM effort and is almost as
important as understanding the cost and
anticipated roll-out time of the program. To
avoid making a master data management
mistake, it is critical to draft a detailed RFP
that addresses the following four key areas
for evaluation:
Product: Does the functionality address
my organization’s major business challenges and goals we are trying to achieve
through MDM? Is it reliable in terms of deliverability? Can it scale with the growing
needs of our organization?
Support and Services: Does the vendor have a sound implementation process
that will ensure the solution meets the
needs of our organization?Does the vendor’s implementation bring together the
right teams and technical knowledge? Does
the solution provide or offer effective, comprehensive, and ongoing training that will
maximize the results of our MDM efforts?
Can the vendor provide the levels and quality of support to ensure a close knit, mutually successful relationship? And can the
vendor support any international requirements?
Infrastructure and Governance: Are
requisite governance controls and certifications in place to prevent security breaches
in the system? Does the MDM system proactively establish clear-cut roles, business
processes and responsibilities? Does it monitor data quality and ensure compliance to
corporate standards? What is the average
up-time of the system? Has the vendor
made sufficient investments in their backend infrastructure to sufficiently handle data
volume and capacity? Can the vendor’s
infrastructure scale to our current and future
needs?
The Company: Making a MDM project
successful takes an investment of time,
resources and money. Therefore, vendors
SUPPLYCHAINBRAIN
55
should have proven longevity and staying
power in tough economic times, the financial
resources to continue to grow, scale, and
innovate for the customer’s benefit, and management who are well-experienced thoughtleaders. Which vendor is best positioned to
be your partner by your side down the road?
Perform Due Diligence When It Comes
to the Product Demo
Everybody loves a good demo and almost
no one loves them more than the vendor
themselves. But don’t forget your day job!
Instead of watching a canned demo, ask
the vendor to show you how you would
manage your data today by providing
them with a few relevant use cases. This
will provide far more insight into how the
product will perform in your specific manufacturing environment. After all, for
MDM solutions where the sizzle of a fancy
UI can distract buyers from the reality of
what it takes to manage high volumes of
data from multiple sources, there are a few
questions that can help get the most out of
your next product demo. Ask the vendor
these questions:
1. Can you easily view multimedia/multilanguage of product(s) in one screen? Can
you view content versions (print, ecommerce, channel-specific) side-by-side?
2. How do you define and manage multiple taxonomies to categorize products
and other entities?
3. Demonstrate how to onboard new
items, look at the ease of use & configuration capabilities.
But that’s not all. It is equally important to
ask the vendor if the solution is capable of:
1. Configurable multiproduct views that
give users the ability to see differences in
product sets with visual indicators?
2. A graphical workflow designer capable of creating workflows? And, when
changes to a workflow are required, can
I simply drag and drop or is
scripting/coding required?
3. Configurable business rules that can
be linked to more than one workflow?
Mastering MDM First Hand:
The Reference Call
The reference call is a great way to get realworld insight into master data management
that you just can’t get from a vendor or even
a recognized industry analyst. Before making the call, and to ensure a more valuable
dialog, it is critical to make sure the cus-
56
MAY/JUNE 2014
tomer reference looks and operates like
your own organization as it doesn’t make
sense for a manufacturer with complex data
processes to talk to a start-up about MDM.
Ask your vendor for a reference that
matches your size, industry, complexity and
IT infrastructure. To make the most of the
reference call, consider asking the following questions:
1. How long has your company been
using the MDM solution as time equals
experience. If the reference company says
less than six months, ask about their
thoughts on implementation, training, and
initial set-up. If longer, ask which processes
have been successfully implemented and
whether they have kept up with the latest
releases. Has the system grown over time to
tackle additional business problems or been
opportunity to understand how this investment has augmented these processes.
5. What’s the single best thing about the
system? What is the worst thing? Time to get
down to the basics.
6. Did your implementation meet your
needs? Did your team have the training and
knowledge required to be successful with
the software? Getting off on the right foot
matters. It’s important to know if the vendor
meets the customer’s expectations concerning the launch. How was the project management? Integration? Training of the new
users? And if the implementation and
launch didn’t meet the customer’s expectations ask what could have been done differently and whether that feedback had been
given to the vendor.
7. Last, would you say this vendor
To avoid MDM failure, it’s essential to take
the time to identify and understand a vendor’s capabilities and value.
rolled out to other departments?
2. How has the solution helped you
address your business challenges? Business
users purchase software to solve common
problems in the execution and management of data. You want to know if those
problems have been addressed, and if not,
why not. Is the product being used in the
way it was intended? Was there anything
you wanted the product to do that it just flat
couldn’t do or be made to do? How do the
end-users describe their day-to-day interactions with the system?
3. How do you measure the business
value of this investment and report the
results to the management team or board?
It’s important to understand how the business value of a MDM solution is measured
and communicated within the organization
so look for business-level metrics like timeto-market and employee productivity.
4. How do you use the solution to import
data, enable sales, automate marketing
processes and measure results? Businesses
invest in a MDM solution when they need to
move beyond managing data in Excel sheets
or within silos, automate manually intensive
processes and/or mitigate risk. Use this
served you well and has been a true business partner?
Proactively managing operational
information as it flows through the manufacturing supply chain is essential in
today’s economy. MDM is a key enabler to
meeting business objectives and to creating shareholder value; it integrates all
operating and multichannel unit divisions
and links vendors, product and employee
information together into one management platform. However, to get the most
out of your master data management
investment, and more importantly, to
avoid MDM failure, it is essential to take
the time to identify and understand a vendor’s capabilities and value. After all, master data management success starts with
mapping your data management needs
with the appropriate partner.
Christophe Marcant is vice president of
product strategy at Stibo Systems.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Stibo Systems, www.stibosystems.com
Why Haven’t We
Switched on the
Lights-Out Warehouse?
BY KEVIN AMBROSE
Upfront cost, limitations of automation systems and, of course, risk, are among the reasons why so few
distribution centers are completely automated so far. But it's time to prepare for a bold new future.
T
he “lights-out warehouse” is a
little like Bigfoot: a mythical idea
everyone in the material handling industry has heard about
but few have actually seen. It’s
been a buzzword for years, yet just a handful of companies have made the leap to a
fully automated distribution center, despite
abundant indications that it would increase
efficiency and profit margins.
Even partial automation significantly
streamlines DC operations. When the
footwear manufacturer Skechers, in Rancho
Belago, Calif., consolidated its five DCs under
one 1.82 million square-foot roof, it automated several processes that were previously
handled manually, including storage of overflow items and its pack and hold system.
Skechers reduced the number of times
items were touched between shipping and
receiving by at least 50 percent. It now
requires just 500 employees during peak
times, down from 1,200 before the redesign
and has doubled the volume of product it
58
MAY/JUNE 2014
can process in an hour.
Now think about a future with fully automated systems. The machine-based output
is more predictable and accurate than what
hundreds of people accomplish. The system is always available and runs tirelessly.
Processes function with greater certainty
and less cost.
Another compelling reason is how it will
protect your business against competition.
Ideally, every successful business wants to
build a “moat”—an impenetrable barrier to
entry that keeps others from cutting into their
successes. The large, upfront cost for equipment, and the sheer amount of knowledge
and expertise required to run a lights-out
warehouse or DC create such a moat.
Think of it this way: If you want to open
a lawn-mowing business, all you really
need to get started are a few mowers, people to run them and a means of transporting
them. The barriers to entry are low, so ultimately the competition will be cutthroat.
But if you want to start a distribution busi-
ness where the established leader already
has a well-designed, multimillion-dollar
network and a great deal of expertise, you’ll
probably think twice before deciding to
compete in that arena.
Flipping the Switch
So why hasn’t the industry flipped the
switch on the lights-out warehouse
approach? There are a couple of issues
holding it back. One, of course, is the difficulty in justifying the upfront cost of fully
automating a warehouse or DC. While
humans can be expensive over the long
haul, you’re paying those costs in small,
weekly or bi-weekly increments. Robots
and automated equipment, on the other
hand, are paid for differently.
It can be difficult to get funding for large
capital expenditures, especially if the enterprise has a large percentage of its cash
already funding growth. But in an era
where corporate finance departments struggle to achieve 2 percent to 3 percent returns
on their investments, automation can
deliver annual returns in the 15 percent to
50 percent range—which makes it far more
compelling to even the most financially
cautious organizations.
Another issue is the capabilities of the
automated machines themselves. Traditionally, robots and other forms of automation
have been very effective at performing highly
repetitive, standardized tasks. In manufacturing, for example, they’ve been excellent at
putting the same screw into the same hole, or
making the same weld, on product after
product. But they haven’t been as effective in
dealing with a multitude of variables. And
what is a warehouse or DC if not an infinitely
variable environment, especially in today’s
fast-moving e-commerce world?
The third is the risk factor. There aren’t too
many truly lights-out facilities of any type
(much less a warehouse or DC specifically) to
look towards as a model to emulate. It’s a
pretty risky proposition for any venture,
much less one with such a high up-front cost.
The cost of failure—in terms of lost business
today, the loss of the lifetime value of customers and the expense of tearing it all out
and doing something else if you do survive—
is unpalatable to most organizations.
Yet many still see the upside potential as
huge. So, how do you decide whether to
embrace the darkness by going lights-out?
Here are a few factors to consider when
working through the positives and negatives
in order to come to a more-informed decision:
Business Conditions—Start by evaluating your current business environment.
Are you behind the pack in your industry? If
so, by how much? Are you so far behind
that not moving into (or at least down the
path toward) a lights-out approach will put
the business in jeopardy? How are labor
costs and availability affecting you? Labor is
one of the largest expenses in most businesses, so any sudden increases there may
make going lights-out more attractive.
Obviously, your current financial state
will have a bearing as well.
Finally, you want to look at the stability
of your market, and market conditions in
general. Is it time for a bold move, or are
you better off staying the course for now? If
your industry is already changing—such as
moving from a retail-only model to a goodsto-person or hybrid approach—you may
have to make changes anyway. In that case,
it’s worth considering a move to lights-out.
Flexibility—Another aspect to look at
is the amount of flexibility required for your
day-to-day operations. As mentioned previously, automation works best with simple,
repetitive tasks. While strides are being
made to build more flexibility and problemsolving capabilities into machines, the
industry still has a long way to go. Humans
are still far superior at decision-making and
adjusting to unplanned or non-standard
events. At this point, the fewer variables you
have, the better-suited your warehouse or
DC will be for lights-out operation.
Seasonal adjustments—The economics
of automation are best realized when it is
used 24x7x365. The seasonality of most retail
operations, however, requires significant
spikes in the workflow capabilities of the
warehouse or DC at certain times. Supplementing the baseline automation capabilities
with a seasonal manual operation is often an
important part of a well-crafted automation
plan. At the minimum, you need to consider
the equipment required, the space for the
equipment (and the people to work with it),
and how these manual processes will be integrated into what is a fully automated operation the rest of the year.
All at once or small bites—You need to
decide whether business conditions dictate
changing the whole operation all at once, or
whether you can move into full automation a
piece at a time. For the latter, you may want to
start with installing or expanding some
islands of automation to test the processes
and see how they integrate with the rest of
your operation.
Keep in mind, however, that even if you
are opting for incremental moves, you’ll
want to put together a comprehensive plan
and road map to get there. You need to be
sure all the pieces will fit together seamlessly, and that they can be easily managed—preferably using a common
interface that can be accessed over the
internet, since no one will be on site to react
immediately to any problems. That line of
thinking brings us to the following:
New construction or retrofit—Designing a brand new lights-out facility offers many
advantages. You can create the warehouse or
distribution center specifically for its intended
use—not just from a warehouse equipment
standpoint, but also from the perspective of
how typical building considerations such as
lighting, heating/cooling and plumbing are
incorporated. You don’t have to worry about
creating safety zones for robotics, office space
for supervisors, washrooms, lunchrooms or
other amenities, so you will have the ability to
maximize floor space. You can also run electrical power and computer networking more
easily, which is good considering you will
need more of both.
With a retrofit, of course, you have to
work with what you have. Equipment has
to fit into available space, and you may
have to perform some extra work to get
things such as power and network cabling
everywhere they need to be. You’ll want
to plan carefully to make sure you understand the space and its requirements.
Though it’s always a good idea to create a
simulation first to ensure that what looks
good on paper works properly in reality, it
is especially important when you are
retrofitting new technology into an existing space.
Staff expertise—Although the facility
may run lights-out under normal conditions,
that doesn’t mean humans will be taken out
of the equation completely. You will still need
knowledgeable staff to monitor the operation
(either on site or remotely) and troubleshoot
any problems that arise—at least until the
machines acquire enough intelligence to fix
themselves, which is still a ways off.
With that in mind, you need to have
employees that understand how the
machines operate and can work toward the
supply chain outcomes you’re trying to
achieve. Both aspects are important.
Proficiency with the machines will help
ensure they run properly, that any potential
problems are identified and corrected
quickly, and that exceptions are handled in
a timely manner.
However, expertise in the supply chain is
also required to help develop the larger picture and incorporate continuous operational
change and improvement. Going lights-out is
about increasing efficiency, so the more you
can learn and improve upon your original
design, the faster you’ll get to payback.
Though the mythical lights-out facility
hasn’t quite marched out of the wilds yet, it
is tiptoeing closer to the mainstream. Rather
than fearing its approach, it’s time to start
strategizing for an automated future.
Kevin Ambrose is CEO and president of
Wynright Corporation.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Wynright Corporation, www.wynright.com
SUPPLYCHAINBRAIN
59
Manufacturers Need
a More Data-Driven
Approach to Direct
Materials Sourcing
Greg Anderson is president
of Directworks, a software
company with a specific
focus on providing manufacturers a platform to
engage suppliers and
source direct materials.
BY GREG ANDERSON
F
ew decisions have as much power to make or
break a product’s success and profitability as
those around the sourcing of direct materials.
The components, parts and assemblies that go into
making products not only account for 70 percent of
an average manufacturer’s annual spend, they have
a significant impact on such critical competitive factors as brand reputation, time to market and supply
chain reliability.
Because a manufacturer needs to understand,
prioritize and weigh all of these factors—along with
a supplier’s capability, capacity and financial
strength—sourcing decisions for direct materials
are extremely complex. They require a data-driven
approach and the same kind of strategic and analytic thinking as a good game of chess. Unfortunately, most companies we see today approach
direct materials sourcing more like checkers, with
an emphasis on “piece”
price that is opportunistic
rather than strategic.
This situation is due
partly to the prevalence of
sourcing
solutions
designed for indirect
materials—all
those
goods and professional
services that a company
needs to do business, but
which are not part of the
manufacturing process.
These solutions do a great job managing indirect
spend, but notice that they work equally well in any
company, regardless of industry. This is because
indirect goods like office supplies are common
across industries—a legal pad is a legal pad, and
lowest price is nearly always the appropriate determining factor in purchasing.
With direct materials this is not the case. Parts
often must be custom made to precise specifications and such issues as lead time and order quan-
tity are critical to efficient production scheduling.
Selecting “best value” suppliers for direct materials
means weighing performance and risk as well as
cost, and cost considerations must include not only
the piece price, but also transit, financing, compliance and inventory carrying expenses. Sourcing
solutions built for indirect materials simply cannot
handle all these variables.
Spreadsheets can handle a lot of variables,
though certainly not efficiently. Nonetheless, Excel
has long been the favored fall-back solution among
manufacturers for managing direct materials sourcing. I admit, I have seen some great spreadsheets
out there in terms of complexity and number of
fields and they can produce some really good
results, but the process is extremely cumbersome
and time consuming. First, you must collect a load
of information from suppliers, usually via email.
The forms you get back
often are incomplete or
filled out incorrectly,
which requires a lot of follow-up. Finally, you
somehow have to take all
the information from multiple spreadsheets and put
the attributes of each supplier side by side so you
can see how well these
guys stack up against one
another and against your
requirements. Anyone who has been through this
process, as I have, knows how painful it is and can’t
help but think, ‘there’s got to be a better way!’
Well, good news: there is! The management
team at Directworks, who helped pioneer novel
approaches to strategic sourcing during the dotcom
heyday, addressed this problem head on and developed a solution designed specifically for manufacturers and direct materials. Instead of a spreadsheet,
templates within the software are published out to
Most companies’
approach to sourcing is
opportunistic rather
than strategic.
60
MAY/JUNE 2014
OPINION
suppliers to collect information and quotes,
all of which are then automatically served
up side-by-side for easy analysis by the
manufacturer.
With the Directworks solution, this
process takes less than half the time it
would using spreadsheets. That’s time
employees can use for more productive
activities, such as strategic discussions with
potential suppliers or deeper analysis of
bids and proposals. Executives we talk with
don’t want their people chasing spreadsheets; they want them looking for the best
possible tradeoffs to optimize cost, performance and quality.
Finding those optimal tradeoffs
requires accessible and actionable data,
and that’s where the supplier information
that Directworks collects really comes into
play. The template that Directworks publishes to suppliers collects all of the cost
and non-cost data that typically would be
required by an RFI or RFQ. But when the
information comes back, instead of being
locked in separate spreadsheets, it goes
into a database and is immediately available for analysis and side-by-side comparisons. A supplier in China can be
compared with a supplier in Mexico, not
only by piece price, but by total landed
cost and various performance factors.
This process also allows sourcing managers to ask specific questions and conduct
data-driven price negotiations. It even converts CAD drawings and specifications to a
neutral viewing format so suppliers can
know exactly what is required in terms of
dimensions and tolerances, enabling them
to give more accurate and complete quotes.
Moreover, the supplier has clear visibility
into what the end product will be and how
its part fits into production, which ultimately leads to better strategic discussions,
better choices of materials and, most importantly, lower costs.
The bottom line is that smarter, factbased sourcing decisions lead to competitive advantage for manufacturers through
lower direct materials costs, better performance and higher margins. Isn’t it time you
scrapped the spreadsheets?
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
Directworks, www.directworks.com
SUPPLYCHAINBRAIN
61
Managing Sustainability
Within Global Supply
Chains—5 Tips for
Achieving Success
Matt Scott is director of
business development at
CRedit360, a sustainability performance management solution provider.
BY MATT SCOTT
T
he challenge of managing corporate reputation in an era of complex global supply
chains is rarely out of the spotlight. From
poor working conditions to environmentally
unfriendly practices, there are a growing number of
areas where brands are at risk from the rise of multitier supply chains. A succession of scandals has
brought the supply chain to the public’s attention—
from horse meat being discovered in the ready
meals of UK retailers to factory fires in Bangladesh
and exploitation of tin for mobile phones in
Indonesia. The culmination of these stories means
what was once an internal company process is now
very visible to the public and runs the risk of inflicting serious damage on a brand’s reputation.
Regulation is another key driver for closer control
of supply chains. For example, the 2010 U.S. DoddFrank Act aims to address conflict minerals, while in
Australia, health and safety legislation is increasingly
placing obligations on company supply chains.
Within the EU, timber and chemical regulations are in
force and conflict minerals are being considered.
Companies in every industry therefore need to step
up their efforts to engage with their suppliers and
increase supply chain sustainability. But with many
organizations having hundreds or even thousands of
suppliers, how can they manage this daunting task?
Managing supplier risk effectively will only
become more important as consumer interest in
provenance increases, regulatory pressure to disclose indirect emissions grows, and suppliers grapple with such challenges as more extreme weather,
water scarcity and soil degradation. So, how can
you increase visibility of suppliers beyond the first
tier? Here are five top best practice tips:
Keep Business Aims Front of Mind
Any supplier sustainability strategy should be
clearly aligned with business and sustainability
aims. At a tactical level, plan exactly what you want
to achieve by measuring supplier performance.
62
MAY/JUNE 2014
This could range from ensuring suppliers are following your new code of conduct to working with
a particular sub-set of suppliers to achieve specific
environmental or social targets.
Take It Step By Step
Getting started can be daunting. This is particularly true for organizations with tens or hundreds
of thousands of suppliers. Making the process
manageable is all important. Decide on a first
tranche of suppliers to engage with, based on
how important they are to your business. Consider which suppliers are likely to pose the most
risk and where you stand to make major gains by
improving their performance.
What influence do you have over these suppliers and how much of their turnover do you represent? Also, is there anyone who requires urgent
attention? Are they located in a country known for
corruption or dubious labor standards, for example? This type of interrogation will help to determine the level of detail you require.
A transport company wanted to improve the
sustainability of its supply chain and ensure that its
suppliers were committed to respecting its code of
conduct. By asking a series of structured questions
aimed at understanding exactly how critical certain
suppliers were to its business and how much
power it had to influence these suppliers, it collected a more detailed picture of its supply chain. It
then gave suppliers a risk score and branded them
as low-, medium- or high-risk.
So, in this way, companies can build questionnaires to suit their needs (or simply use a standard
questionnaire), identify “hotspots” and plan the
next stages of how to tackle key issues.
Manage Performance
Track and manage performance across key environmental and social indicators but also keep a
sharp eye on suppliers’ plans for improvement. For
OPINION
example, ask suppliers about their environmental policies, through high-level questions about how they work and their
strategies for sustainability. This allows you
to really get to the heart of what your suppliers are doing to improve, the specific
issues they’re tackling and what they’re
doing on key topics such as health and
safety and labor conditions.
own profitability, but with time and determination, you can build stronger relationships that benefit the whole supply chain.
The Rainforest Alliance is using technology to trace companies’ supply chains
per product all the way back to how the
raw materials were sourced and
extracted. They also check performance
against PEFC and FSC sourcing criteria.
annually demonstrating tangible progress
on sustainability. These best practice examples can then be used to educate its wider
supply base.
With the ever increasing length and
complexity of global supply chains building in sustainable practices can seem like
an insurmountable challenge. However,
the risk of inaction to a business can be
Building in sustainable practices can seem like an insurmountable
challenge. However, the risk of inaction to a business can be profound.
Engage With Suppliers
Once you have all the relevant supplier data
in place, get going and be patient. There may
be some inertia to start with, but with persistence you will make progress, as suppliers
realize the business benefits of becoming
more sustainable. Be clear about your expectations, encourage transparency and adopt a
collaborative approach, running training or
workshops, if appropriate, or recruiting an
in-country representative to build relationships with suppliers on the ground.
Of course, suppliers further down the
chain may be less willing to engage, particularly if your business is not integral to their
This has been instrumental in helping the
organization to go well beyond monitoring first-tier suppliers and examine the
performance of many more distant suppliers, while maintaining accuracy of data
throughout. From there, the organization
can set education programs in motion
and work with suppliers to resolve the
issues identified.
Promote Best Practice
It doesn’t all have to be doom and gloom—
use positive examples of best practice to
motivate suppliers and help educate them.
A major food company, for example, invites
its suppliers to submit robust case studies
profound—reputations and balance sheets
can be destroyed. By taking a step-by-step
approach, and ensuring you engage with
your suppliers along the way, you can start
building sustainable best practices into
your supply chain. The impact can be
transformative—not only do you reduce
the risk of a potential PR disaster or regulatory fines, but the increased visibility can
bring its own benefits.
To access this article online, visit
www.SupplyChainBrain.com.
Resource Link
CRedit360, www.credit360.com
SUPPLYCHAINBRAIN
63
Same-Day Delivery
Is Going to Be
Big—Some Day
Think Tank is where the
editors of SupplyChain-
It’s the ultimate expression of the sped-up internet age: getting your order deliv-
Brain share their thoughts
ered on the same day that you placed it, without having to leave your home or
and comments on the lat-
office. But if same-day is to become an everyday practice, there are some obsta-
est supply chain trends
cles to be overcome.
and developments.
You can read what they
have to say online and
then join the discussion
by posting your own
observations. Here are a
few of our recent posts.
Host: Robert Bowman
64
MAY/JUNE 2014
S
ame-day delivery of items ordered online or
from stores is an irresistible idea. Now if retailers could only figure out how to make it work.
The concept goes hand in hand with the very
nature of the internet—fast, efficient, readily available. If consumers today aren’t exactly demanding
same-day delivery, they’ll want it when it arrives.
When, of course, is the big question. In most
markets, same-day delivery appears prohibitively
expensive, if not logistically unsound. (There are
obvious exceptions, such as grocery delivery, corporate accounts and boutique-style services for
very high-priced goods.) Which hasn’t stopped a
number of providers from launching tentative
efforts in that direction.
“Consumers are not the driver for the emergence of same-day,” says Rob Howard, chief executive officer of Grand Junction Inc., which sells a
software platform for executing local delivery. “It’s
really about competitive response.”
Meaning that just about every major retailing website feels that it has to jump in the game. Already we’re
seeing limited same-day offerings from eBay Inc.,
Google and Amazon.com. On the logistics-provider
side, same-day is on the menu from FedEx, UPS and
possibly the U.S. Postal Service.
Typical of any emerging market, the various
services are taking varying forms. In the San Francisco Bay Area, Google is deploying a fleet of some
50 Priuses, while eBay is drawing on the assets of
Shutl, a U.K.-based service that it acquired last year.
Then there’s Amazon, with its dream of drones that
can carry packages to the consumer’s doorstep.
The nature of the service can vary as well. For the
moment, the most feasible flavor consists of buyers
ordering online, then picking up that day from a retail
store. In such cases, of course, the responsibility for
ensuring same-day receipt rests with the consumer.
In the alternative, an order can be delivered to the
consumer directly from the store, rather than being
run through a distribution center. Retailers might
accrue multiple orders, then deliver them together to
their individual destinations. That type of service is
already being regularly provided in the maintenance
and repair sector, and from industrial parts sellers
such as W.W. Grainger Inc.
Amazon continues to open regional distribution
centers all over the country. Currently it operates
108 fulfillment centers, with 74.6 million square feet
of space. With that kind of a network, you would
think that Amazon could deliver within hours on a
regular basis in major markets.
One of its newest D.C.s is in Tracy, in California’s Central Valley. That’s less than 90 minutes
from San Francisco, but Howard doubts Amazon’s
ability to offer near-instant delivery to the Bay
Area’s population of some 6 million consumers.
More likely is the possibility of Amazon taking
orders placed before, say, 11:30 a.m., and delivering then throughout the day. “That’s the fear of
every retailer we talked to,” says Howard. Amazon’s huge volumes could allow it to provide sameday within a defined area at relatively low cost.
“Retail stores have got to be able to match that,”
Howard says. “The only way is with local store
presence.”
Most stores aren’t designed as warehouses,
however, so retailers would need to make certain
changes to enable delivery from a sales floor. In
addition to expanding or reorganizing the back
room, they would have to employ associates as
pickers, creating the possibility that shoppers will
confuse them with sales clerks. In any case, the
setup could never be as cost-efficient as an auto-
THINK TANK
mated, purpose-built D.C.
The retail store also serves as picking
location for e-tailing sites such as eBay and
Google, whose employees assume the role
of shopper in order to purchase product
and drive it to the actual buyer.
Retailers can’t be too happy with that
arrangement, as it cuts them out of the loop.
“If I’m a retailer,” says Howard, “I prefer to
sell and deliver it myself.” Either way, the
use of human avatars for online buyers is
likely to be too expensive for most
providers. That’s why eBay and Google’s
same-day option “is very limited so far.”
The more likely role for those online
giants is to collaborate with retailers, offering fulfillment and delivery for orders taken
by the stores. Yet they’re far from being
experts in executing that delicate task. And
retailers might well worry that any service
failures will reflect poorly on them, not the
middleman.
Which leaves the real experts in logistics—UPS, FedEx and their direct competition—to ramp up their same-day options
on behalf of retailers and e-tailers alike. In
addition, a number of entities specialize in
expedited delivery of critical items, but their
services are pricey and not easily extended
to everyday retail purchases.
With its extensive network of vehicles
and sorting centers, USPS would seem a
natural candidate for same-day delivery.
(That, at least, was the rationale behind the
Metro Post pilots.) But Howard thinks that a
large-scale commitment to same-day could
be disruptive to the Postal Service’s existing
offering. “There are some fundamental
infrastructure things that prevent them from
doing one-hour or same-day,” he says.
In the age of the impatient consumer,
same-day delivery is an inevitability. But it
won’t become economically viable until
there’s a shakeout of the players, a clearer definition of their roles and a market that’s much
less fragmented. Which is … some day.
To make a comment on this post, visit the
SupplyChainBrain editors’ blog at:
http://goo.gl/X5RElj
The Air-Cargo Freighter as
Endangered Species
It’s getting harder and harder to keep aircargo freighters profitably aloft.
The industry is undergoing a dramatic
transformation, driven by the advent of
flashy new widebody passenger planes.
And with those aircraft comes a huge
amount of additional belly capacity.
This year should see a 19-percent
increase in deliveries of new passenger
widebodies, adding 8 percent to the capacity of the existing fleet, according to the latest Cargo E-Chartbook of the International
Air Transport Association. The trend could
reverse the rise in aircraft utilization rates,
which had contributed to stability in the
Most stores aren’t
designed as warehouses, however, so
retailers would need to
make certain changes
to enable delivery from
a sales floor.
freighter fleet, IATA said.
Not anymore. To meet growth in passenger traffic, we’re seeing a wave of new
widebodies, including the Boeing 777, and
Airbus’s new-generation A350. They are far
more fuel-efficient than such predecessors
as the Boeing 747-400 and the McDonnell
Douglas MD11 (later built by Boeing)—the
“workhorses of air cargo’s golden age,” as
FedEx chairman and chief executive officer
Frederick W. Smith described them.
Speaking at IATA’s recent World Cargo
Symposium in Los Angeles, Smith said the
new aircraft “will create increasingly lowcost underbelly lift, and more origin-destination pairs.
Still, the new planes have plenty of
under-deck space. One of the newest widebodies can handle 20 to 30 tons of cargo
with a full passenger load, says Stanley G.
Wraight, executive director of Strategic Aviation Solutions International (SASI). By
comparison, a 747-400F carries around 100
tons, so three 777 passenger planes can
handle the equivalent of one older
freighter. And the frequency of passenger
flights on heavily traveled routes trumps
just about any pure freighter service in the
market today. According to Wraight, avail-
able belly capacity on the Chicago-toFrankfurt route is equivalent to more than
20 747 freighter loads.
To read the rest of this post or comment
on it, visit the SupplyChainBrain editors’
blog at: http://goo.gl/7sNmlS
Will Ocean Carriers Scuttle Their
Future (Again)?
It looks as though we’re in for a year of continued economic recovery and job growth,
however gradual. That should be good
news for ocean carriers—assuming they
don’t undermine their own success by
flooding the market with capacity, then
engaging in rampant discounting to fill it.
Which, of course, they’ve always done
in the past.
Carrier executives give lip service to the
need for compensatory rates. Between
2007 and 2012, the top 15 container lines
suffered combined net operating losses of
$1.1bn. Every major carrier in the Asia-U.S.
trades operated at a loss last year. Any quarterly profits they managed to eke out were
the result of cost-cutting, slow-steaming
and service reductions—not revenues.
“Prohibitively low rates prevent longterm reinvestment, hurting carriers and
shippers alike,” states a fact sheet issued by
the Transpacific Stabilization Agreement, a
discussion group of 15 carriers in the trade.
The need for cost control has brought
about a wave of giant new containerships
and mega-alliances among the dominant
players in the trade. At some point, though,
revenues have to rise. Carriers can’t go on
losing money forever.
TSA is forecasting cargo growth of
between 4 and 5 percent in the Asia-U.S.
trades this year. Mario Moreno, economist
with JOC Group Inc., concurred, predicting
5-percent growth in the eastbound transPacific trade, totaling 13 million TEUs.
Assuming that recovery continues,
Moreno’s trade figures assume average
annual growth of between 2.8 percent and
3.1 percent over the next two years, and 3
percent over the next five.
That’s a reachable target, barring economic shocks caused by natural disasters,
terrorism or political upheaval. The real
question remains: can ocean carriers handle success?
To read the rest of this post or comment
on it, visit the SupplyChainBrain editors’
blog at: http://goo.gl/X933qL
SUPPLYCHAINBRAIN
65
Welcome to SupplyChainBrain’s IT Case Study Showcase!
Presenting case studies from some of the industry’s foremost supply chain technology suppliers.
Read on to discover how companies have implemented innovative IT solutions to meet their greatest challenges… with solid results
Talk with a featured provider to learn more. Contact information is provided next to each case study.
And, let us know what you think of our IT Case Study Showcase.
Email us at kkeller@supplychainbrain.com with the subject line: May/June Showcase.
GLOBAL TRADE MANAGEMENT
Global Semiconductor Provider Streamlines
Compliance and Logistics with Amber Road
Challenge: Our customer, a global provider of high performance power semiconductors used in electronic devices, had grown quickly with eleven acquisitions over seven
years, and they needed an effective global trade strategy. The company needed to prioritize export compliance, simplify international trade, and standardize worldwide business
processes across its offices in 17 countries.
Solution: The company selected Amber Road’s Trade Export solution for all departments in order to streamline and automate the global logistics process, ensuring full compliance with various country-specific rules and regulations.
Results: With Amber Road, the company now ships goods with confidence, and has an
auditable shipping record along with electronically-archived and easily-retrievable trade
documentation. Increasing the consistency and dependability of its documentation has
significantly improved its Customs clearance rates, as well as shorter transit times,
reduced shipment delays and overall inventory carrying costs. As a result, 90% of the
company’s shipments are pre-cleared with Customs today.
About the Solution Provider:
Amber Road is a leading provider of ondemand Global Trade Management (GTM)
solutions that automate import and export
processes to enable goods to flow unimpeded
across international borders in the most efficient, compliant and profitable way.
Web: www.AmberRoad.com
Email: Solutions@AmberRoad.com
Phone: 201-935-8588
PLANNING/FORECASTING
Global Consistency and Accuracy: Supply Chain
Synchronization Through Forecast Planning
Challenge: A leading global OTC company needed to standardize its demand planning
process across 8 countries, utilizing technology and services to create a consensus plan
regardless of technical, language and cultural challenges.
Solution: Eight markets with various challenges and differences are now using a standardized system, with each demand planner in the global markets following a consistent
process, including expectations that have been clearly defined. NeoGrid enabled them to
integrate key customer data with internal data from existing legacy systems while planning for future integration to other solutions. Data is cleaner and more reliable than
before, allowing for the company to standardize demand planning - which ultimately
makes for a more accurate S&OP process.
Results: The manufacturer improved visibility and forecast accuracy, and increased sales
and service levels while reducing returned products from its retail partners. It also
improved performance on promotional and new product launches, enhancing communication between Commercial and Supply Chain teams.
66
MAY/JUNE 2014
About the Solution Provider:
NeoGrid delivers quick time to value through
our fast-to-implement next generation supply
chain solution - which provides analytics,
planning and execution from production to
store shelves in a global cloud-based platform.
Web: www. NeoGrid.com
Email: info@NeoGrid.com
Phone: 888-709-0018
Brewer Reduced By 50% Planning and
Control Processes Implementation Time
Challenge: One of the world’s leading brewers challenge was how to develop planning
competencies, across six businesses in Latin America, which were consistent, sustainable, and contributed to operational and financial results.
Solution: Oliver Wight’s Class A best practices in Integrated Planning and Control.
Results: Benefits at a glance: Increased the level of maturity and common understanding
among the supply chain teams in the LatAm region; Evolved practices so that today they
focus in on the broader supply chain with better quality interactions, not only inside the
end-to-end scope, but also with other functions; Established Communities of Practice to
create a highly effective platform for sharing best practices between the company’s businesses in the LatAm region; Reduced by 50 percent the time to implement planning and
control process and operate the process to Class A best practices standards.
About the Solution Provider:
Oliver Wight principals are thought leaders
in Integrated Business Planning (Advanced
S&OP) and Integrated Planning and Control.
We not only educate, we coach and mentor
your people so that they have the understanding needed to sustain the operation of the
processes using best practices and to continuously improve the processes.
Web: www.oliverwight-americas.com/
Email: info@oliverwight.com
Phone: 603-526-5800
OMP Plus Footprint with Central & Collaborative
Forecasting and Inventory Optimization
Challenge: The Demand Planning function fits well into customer’s strategy for a comprehensive Production Planning software suite. A key consideration is on the agility
within the Demand Planning process as well as its integration to other functions of the
Supply Chain.
Solution: Our customer has decided to implement the Central & Collaborative Forecasting and Inventory Optimization solution from OM Partners within its Hard Surfaces division. They plan to roll these solutions out to other divisions in the coming years. The
richness of functionality, expertise in the floor covering, integration with planning and
the ability to extend functionality made OMP Plus the obvious choice.
Results: The customer’s choice to extend OMP Plus to the demand planning function
confirms the leading position of OM Partners in the floor covering. These implementations prove that we understand the volume, the business and the constraints from yarn
extrusion to dye lots and from kiln planning to hand finishing.
About the Solution Provider:
OM Partners is a software and consulting
company delivering Supply Chain Planning
Solutions for Mill Products (paper and packaging, metals, floor covering, ...) and Semi
Process industries (chemicals, pharmaceuticals, consumer products...). With 250 customers and over 550 implementations, OM
Partners has established solid partnerships
with customers all over the world.
Web: www.ompartners.com
Email: info@ompartners.com
Phone: 770-956-7118
Inventory Control & Service Delivery with Service
Parts Management
Challenge: Our client, an aircraft manufacturer, needed a sophisticated parts planning
process to support an increased demand for aftermarket parts services. The existing ERP
and legacy parts planning systems couldn’t meet the needs of an increasingly complex
services organization, causing insufficient service levels, low inventory turns, and high
levels of obsolete stock.
Solution: The PTC Service Parts Management solution helped the aircraft manufacturer
create an integrated logistics ecosystem. The solution enables a single strategy to manage
complex interchangeability relationships, rebalance inventory across a global network,
create location and part types with associated attributes, forecast demand streams, and
automate inventory replenishment.
Results: Today, the aircraft manufacturer’s spare parts planning team creates accurate
parts-consumption forecasts. Commercial aviation inventory has reduced by 12.5%,
inventory turns have increased by 35%, and service parts network visibility has
improved. Our client has achieved impressive growth in business volume and increased
customer value through improved service delivery.
About the Solution Provider:
PTC’s Service Lifecycle Management (SLM)
solutions optimize the system of people,
processes, and technology employed by service
providers. SLM connects the planning, delivery
and analysis of service across the entire service
network. PTC’s SLM solutions empower companies to transform into strategic service
organizations that increase revenue, profitability, and customer value.
Web: www.ptc.com
Phone: 781-370-5000
SUPPLYCHAINBRAIN
67
SUPPLIER MANAGEMENT/PROCUREMENT
Source Smarter: Cross-Company Consolidation
Generates Savings While Reducing Risk.
Challenge: An $8B Aerospace & Defense manufacturer identified that it was sourcing
the same or similar specialized fasteners from many suppliers across every division,
reducing its ability to attain volume-based discounts and increasing supplier risk and
management burden.
Solution: This manufacturer established a global initiative to collect the specifications,
timing, and volume requirements for fasteners across all divisions. They leveraged
Directworks’ cloud-based sourcing and supplier management solution to gather requirements, distribute the RFQ, analyze supplier quotes, and award the business.
Results: In one sourcing event, this global manufacturer identified $56.5M in savings. These
savings were driven by the ability to execute five rounds of quoting in the time it historically
took to do one. Finally, they rationalized their supply base to one primary, and several
backup, suppliers. By automating the sourcing process, Directworks freed them from data
transcription and rework, enabling focus on more strategic activities that generate results.
About the Solution Provider:
Directworks provides cloud-based software
solutions purpose-built for manufacturers to
improve supplier collaboration, total cost visibility, and the efficiency of sourcing and supplier management activities. Leading
manufacturers use Directworks to accelerate
product launches, expand margins, and optimize their direct materials supply chain for
cost, performance, and risk.
Web: www.directworks.com
Email: info@directworks.com
Phone: 724-933-1180
Transforming Sourcing And Supplier Management.
It’s In Your Grasp.
Challenge: In a highly competitive and dynamic environment, a leading manufacturer of
home appliances set out to transform its global sourcing functions with the goals of sustaining quality, maintaining production, and most important of all, preserving profit margins.
Solution: The manufacturer utilized lean principles, a philosophy of collaboration, and
an openness to automation in its organizational transformation. Driven by a need to perform more sourcing activities more quickly, the company evaluated its existing eSourcing tool - built primarily for indirect sourcing - and found it to be lacking for direct
materials sourcing. They chose Directworks.
Results: Freed from the burden of mundane tasks, the sourcing team could more easily
collaborate with suppliers and negotiate the best total cost, while maintaining quality and
managing risk. In a short period, the manufacturer had increased its number of eSourcing
projects by a factor of 7x, streamlining its processes while identifying millions of dollars
in potential savings.
About the Solution Provider:
Directworks provides cloud-based software
solutions purpose-built for manufacturers to
improve supplier collaboration, total cost visibility, and the efficiency of sourcing and supplier management activities. Leading
manufacturers use Directworks to accelerate
product launches, expand margins, and optimize their direct materials supply chain for
cost, performance, and risk.
Web: www.directworks.com
Email: info@directworks.com
Phone: 724-933-1180
SUPPLY CHAIN VISIBILITY
Manufacturer Increases Visibility and Marketshare
with Acsis ProducTrak
Challenge: This leading global manufacturer needed to connect over 125 incremental
value-add partners to its SAP system to manage the supply chain effectively end-to-end.
Solution: Acsis ProducTrak Partner Management connected over 125 value-add partners
to the customer’s SAP system to enable end-to-end supply chain visibility with the use of
a simple, menu-driven web-based interface.
Results: Acsis ProducTrak significantly improved accuracy and error rates, which
increased customer satisfaction, and as a result, the company gained market share and
increased gross cash flow by 28% the year the solution went live. Additional benefits
include: Provide third-party partners with a simple task interface requiring no SAP training. Gain E2E visibility of inventories and progressive manufacturing process stages for
all work in process. Provide third-party contractors with visibility of incoming demand.
Standardize labeling of products globally from a central source, using ERP data and producing labels directly at third-party sites over the Internet.
68
MAY/JUNE 2014
About the Solution Provider:
Acsis Inc. develops innovative software for
data capture, track & trace and enterprise serialization for warehouse and packaging applications. Acsis enables global companies to
gain real-time visibility of data, and to share
data with suppliers, partners and customers.
Acsis leads the industry with end-to-end Enterprise SerializationTM solutions for regulatory
compliance and brand protection.
Web: www.acsisinc.com
Email: info@acsisinc.com
Phone: 856-673-3000
Our Client Takes the Wheel with a
Machine-to-Machine Solution
Challenge: Our client collects, reports, and analyzes fleet vehicle data before, during,
and after trips. They needed Machine-to-Machine connectivity for sensitive communications from vehicles to back-end systems. To maintain their rapid business growth, they
wanted an easily managed solution with international reach.
Solution: We provided an M2M solution including secure, reliable, private networking
delivering real-time data, with a service management platform to easily manage the data,
devices, and services supporting their customers. Our extensive international roaming
helps meet their global expansion plans as well as those of their customers.
Results: Our client continues growing as they innovate in their industry. They’ve
launched ruggedized tablets for on and off vehicle use providing applications for inspection, allowing messaging and navigation, and tracking driver behavior and hours of service. As our client and their customers speed ahead, the future looks as bright as a truck
stop at night.
About the Solution Provider:
AT&T is a premier communications company
and one of the most honored companies in the
world, providing services in the United States
and internationally. With powerful network
resources including the nation’s most reliable
4G LTE network, we’re a leading provider of
wireless, Wi-Fi, high speed Internet, voice and
cloud-based services.
Web: www.att.com/m2m
SUPPLYCHAINBRAIN
69
Fleet Tracking and Delivery Management Improves
Armored Car Company
Challenge: Our client needed to move away from a paper-based solution, which was
inefficient, expensive, and error-prone. Under the historical system, paperwork was
involved with every step of the parcel dispatch and delivery process. Our client wanted
to automate its dispatching operations and collect better data in the field, plus reduce the
number of potential misdirects.
Solution: The company chose a software application developed by Barcoding, Inc. and
Motorola MC9590s mobile computers.
Results: Currently, the company has 1,250 mobile devices deployed for its fleet of nearly
1,600 vehicles. The benefits of barcoding included saved time from each route stop,
streamlined billing processes, and accurate visibility into driver performance. The combination of bar coding and mobile computing has helped our client ensure accurate deliveries, while eliminating time-consuming paperwork in the field and manual data entry in
the back office.
About the Solution Provider:
Barcoding, Inc. is a systems integrator, specializing in the development, deployment, and
management of supply chain and mobility systems based on automated data capture, RFID,
and wireless technology.
Web: www.barcoding.com
Email: info@barcoding.com
Phone: 888-412-7226
National Beverage Distributor Uncovers New
Operational Efficiencies with Mobility
Challenge: Our client was in need of a more intuitive, point-and-click route accounting
solution. To complement the new route accounting system, our client needed to procure
and manage new hardware throughout the products’ lifecycles.
Solution: The client chose Rutherford and Associates eoStar route accounting platform,
Motorola MC75 handhelds for delivery, Motorola MC9190s for the warehouse, and Panasonic Toughbook Tablets for the sales teams, in addition to iPhones and iPads. For device
deployment and lifecycle management, our client chose Barcoding’s GoLive and
StayLive services.
About the Solution Provider:
Barcoding, Inc. is a systems integrator, specializing in the development, deployment, and
management of supply chain and mobility systems based on automated data capture, RFID,
and wireless technology.
Web: www.barcoding.com
Email: info@barcoding.com
Phone: 888-412-7226
Results: The beverage distributor gained efficiencies that delivered greater visibility into
company-wide operations (delivery, warehouse, sales, and office management). This
level of productivity and visibility helps our client better serve their own customers.
Auto Auction Company Upgrades Mobile Computers
to Track Vehicles
Challenge: Our client is a leading independent, dealer exclusive auto auction offering
over 2,000 vehicles a week. Their in-house inventory tracking software was running on
outdated mobile devices, and its upgraded wireless network had strict requirements for
compatibility, thus limiting the number of devices available.
Solution: Psion Workabout Pro G3 rugged computers (now Motorola Solutions) for
managing and tracking vehicles, provided by Barcoding, Inc.
Results: Faster processing speeds and zero-downtime for increased worker productivity,
and seamless integration with our client’s new wireless network.
70
MAY/JUNE 2014
About the Solution Provider:
Barcoding, Inc. is a systems integrator, specializing in the development, deployment, and
management of supply chain and mobility systems based on automated data capture, RFID,
and wireless technology.
Web: www.barcoding.com
Email: info@barcoding.com
Phone: 888-412-7226
Connecting A Family Of Brands
Challenge: Client had multiple divisions/business units that operated independently
with their own set of carrier rates, payment processes, shipping systems and no visibility
of their freight practices/ spend across all locations.
Solution: CTSI-Global consolidated each business unit under one freight payment
process, giving them complete visibility of their transportation spend for the entire organization. Client also implemented CTSI-Global’s Web-based TMS applications for headquarters to standardize shipping systems across each division.
Results: CTSI-Global re-rated all their shipments, performed modeling, break-even
analysis, reviewed data and made recommendations to execute Carrier Contract Negotiations. The information gathered from freight bill audit & payment and TMS applications,
enabled Client to leverage their freight spend across all locations and negotiate contracts
at a lower rate. The TMS Routing Guide reflected the new contracts to ensure the optimal
carrier for each shipment was selected. Now, reports are generated to monitor on-going
savings, performance metrics for continuous process improvement.
About the Solution Provider:
Since 1955, CTSI-Global has provided valuable logistics insight, solutions and services,
helping shippers and 3PL’s to manage their
physical, informational and financial supply
chains. By providing TMS, Business Intelligence, Freight Bill Audit and Payment and
Consulting, CTSI-Global gives clients more
control, improved efficiencies and a cost-effective process for greater savings.
Web: www.ctsi-global.com
Email: solutions@ctsi-global.com
Phone: 901-766-1500
Proprietary Software Improves Visibility
of Returned Products
Challenge: A major national retailer of home improvement products was plagued by an
inefficient reverse logistics process. Products returned to vendor were controlled on an
ad-hoc basis by individual stores or regions, creating major disruptions and poor visibility
throughout the supply chain.
Solution: The retailer chose GENCO to implement their proprietary R-Log software to
track the movement of goods through return channels in real time, and enable immediate
application of vendor credits to the retailer’s accounts payable system. GENCO also
designed and built a custom reverse logistics network for the retailer.
Results: Through the implementation of R-Log, the retailer has realized improved tracking and visibility for returned inventory across all channels. In addition, the size of the
workforce dedicated to returns management has been substantially reduced. The new,
centralized return network has been a resounding success, delivering speed, efficiency
and automation across the complete returns process.
About the Solution Provider:
GENCO is the recognized leader in product
lifecycle and reverse logistics solutions
designed to maximize value and reduce costs.
GENCO operates 140 value-added warehouse
locations comprising 35 million square feet
and manages $1.5 billion in freight annually
throughout North America. For more information, visit www.genco.com.
Web: www.genco.com
Email: solution@genco.com
Phone: 800-378-9671
CPG Eliminates Delays and Theft by Investing
at the Border
Challenge: A leading food provider that ships fresh fruit from Mexico was impacted by
two major issues:
1. Delayed deliveries. When they looked closer into milestone events they found all
delays were occurring when trucks went through customs. The delays were having a
direct impact on goods quality.
2. Missing trucks and drivers. Drivers in Mexico were being kidnapped.
Solution: The CPG company leveraged technology to come up with two solutions:
1. After identifying that delays were occurring at customs, they automated the documentation process through a cloud-based supply chain solution. It could feed data directly
into customs to get it signed off quickly and avoid delay.
2. The company invested in geo-location devices to track each truck. If a truck stops for 5
minutes or goes off route, the company is notified immediately.
About the Solution Provider:
GT Nexus is the largest cloud supply chain
platform of its kind, managing over $100 billion in goods annually. GT Nexus connects
physical and financial supply chains for
companies in all industries, allowing manufacturers, suppliers, financial institutions
and logistics providers to collaborate on a
common platform and improve supply chain
speed and margins.
Web: www.gtnexus.com
Email: information@gtnexus.com
Phone: 510-808-2222
Results: The company cut down on lost product, ensured fresh quality goods and
reduced kidnappings. And its suppliers feel better about driving their trucks.
SUPPLYCHAINBRAIN
71
High-Tech Manufacturer Increases Operational
Efficiency And Improves Customer Service
Challenge: This successful high-tech manufacturer needed to deploy a shipping solution with the flexibility, integration, customization and carrier adoption capabilities
essential to accelerate and maximize its shipping operations to better serve customers.
Solution: Kewill provided an easy-to-use enterprise parcel shipping solution with bestin-class functionality: scalable to meet shipping requirements of global operations, easily
customizable business rules to accommodate customers’ preferred carrier or shipment
mode, variety of integration templates and interfaces to all major ERP/WMS applications.
Results: Streamlined, automated processes; leveraging the web- based Kewill platform,
shipping practices are transformed into a highly efficient operation. All shipments run
through the platform with built-in business rules to accommodate different distributor
requirements. Shipments can be prepared throughout the day working off of customized
business rules within the system, which makes recommendations for each box. New carriers are supported with automatic updates and no reconfiguration required.
About the Solution Provider:
Kewill is a global leader in multimodal transportation management software, providing
organizations with a comprehensive end-toend platform for managing the complexities of
transportation, logistics and trade compliance. The Kewill platform supports supply
chain execution activities for in excess of
7,500 companies in more than 100 countries.
Web: www.kewill.com
Email: kewillmarketing@kewill.com
Freight Forwarder Creates Agile Global
Logistics Network
Challenge: This global freight forwarder needed to create a single, scalable platform for
freight forwarding that was transparent, flexible and could be easily integrated with multiple third-party applications and partner networks.
Solution: Kewill provided a single system to handle all of the customer’s critical capabilities, including: global shipment handling, real-time visibility on goods and items in transit, comprehensive reporting and revenue snapshots, connectivity to carriers and
government regulatory agencies, one platform and one view worldwide but configurable to local needs by region or customer.
Results: A single solution now supports global operations, with fast ROI and scalable global
deployment. Global freight forwarding is handled through a single database allowing visibility, shared information and agile decision-making. Automated and standardized business
processes, along with automated carrier connectivity and compliance checks, have
improved efficiency and regulatory compliance and reduced costs and errors.
About the Solution Provider:
Kewill is a global leader in multimodal transportation management software, providing
organizations with a comprehensive end-toend platform for managing the complexities of
transportation, logistics and trade compliance. The Kewill platform supports supply
chain execution activities for in excess of
7,500 companies in more than 100 countries.
Web: www.kewill.com
Email: kewillmarketing@kewill.com
TRANSPORTATION MANAGEMENT
Providing High-Tech Transportation Management
Solution To High-Tech Company
Challenge: Client needed to track shipment costs for moves initiated/ linked with
another contracts/work order system and to request freight rates for various activities
from contracted carriers, obtain quotes and select appropriate carrier, track shipment,
obtain final carrier invoice for each move, capture contract/ work number. The only way
to track shipment costs were to capture system project numbers on freight invoices, but
the data wasn’t always available. The process was manual; carrier selected by hand and
dispatched via telephone/ email. Costs couldn’t be tracked if system project number wasn’t provided by the carrier.
Solution: CTSI-Global’s TMS suite, a web-based solution enabled Buyer’s Project Managers to enter requests, electronically select appropriate carrier from contracted carriers,
and track the resulting shipment activity from inception to completion.
Results: Client can electronically generate invoices to the customer. The CTSI TMS solution was configured to meet the client’s specific requirements on White Glove Service.
72
MAY/JUNE 2014
About the Solution Provider:
Since 1955, CTSI-Global has provided valuable logistics insight, solutions and services,
helping shippers and 3PL’s to manage their
physical, informational and financial supply
chains. By providing TMS, Business Intelligence, Freight Bill Audit and Payment and
Consulting, CTSI-Global gives clients more
control, improved efficiencies and a costeffective process for greater savings.
Web: www.ctsi-global.com
Email: solutions@ctsi-global.com
Phone: 901-766-1500
MD Logistics Offers Clients More Efficient
and Effective Transportation Options
Challenge: MD Logistics existing legacy Transportation Management System was used
to manually optimize freight solutions for customers that elected for the value-added
service. However, it lacked full integration to the Warehouse Management System and
the ability to rate shop and optimize freight spend and routing automatically.
Solution: To better serve customers, MD Logistics implemented the Agile TMS and integrated it into its current Red Prairie WMS. This integration allows MD Logistics to find customers the most strategic carrier based on a variety of factors, including price, transit
times and retail compliance. Agile TMS works with the WMS to automatically price shipments simultaneously amongst carriers that meet a customer’s specific delivery needs.
About the Solution Provider:
MD Logistics is a third party logistics (3PL)
company specializing in customized supply
chain solutions. Our vertical markets include
Life Sciences and Pharmaceuticals, Retail and
Consumer Goods, as well as Transportation
Services. Our services range from packaging,
fulfillment and distribution, to global supply
chain solutions, freight forwarding and
freight management.
Results: MD Logistics can efficiently and cost-effectively handle freight selection and
important tasks such as filing claim paperwork, auditing invoices and managing nondeliverables for customers that opt for the value-added service.
Web: www.mdlogistics.com
Email: sales@mdlogistics.com
Phone: 317-838-8900
WAREHOUSE/INVENTORY MANAGEMENT
Warehouse Execution System Delivers a Fresh
Solution for Perishable Foods Manufacturer
Challenge: A leading perishable foods brand was experiencing high transportation
costs, extended delivery times and loss of selling time, when shipping product lines from
multiple manufacturing locations to a network of food distributors.
Solution: FORTE was asked to implement a solution to consolidate goods to better manage spoilage, improve service and reduce transportation costs. A centralized, automated
DC was proposed, using FORTE’s warehouse execution system (WES) to manage fulfillment versus replacing the legacy WMS and ERP systems. Providing operational control
and required functionality not available in the company’s legacy systems, the WES
spared the time and expense of new WMS and ERP applications.
Results: Merging several manual DCs into one automated facility improved service,
removed distribution activities from manufacturing facilities, reduced transportation
costs, improved tracking and traceability, and maximized resources utilization. The
FORTE WES is orchestrating operations within, yet far beyond, the capabilities of the
manufacturer’s existing ERP and WMS.
About the Solution Provider:
FORTE is a leading distribution center
design/build and warehouse execution software (WES) technology firm. FORTE provides
client-side, network-wide engineering, systems
integration and operations optimization services for existing distribution facility upgrades
or greenfield operations. FORTE’s expertise
and services include logistics network optimization, facility sizing and design, material
handling systems and WES.
Web: www.forte-industries.com
Email: info@forte-industries.com
Phone: 800-796-5566
It’s Music to My Ears
Challenge: The customer manufactures and distributes products for musical instruments
globally and wanted faster and more accurate processing of their orders. Their goal was
to accomplish these goals by using the existing footprint of their current warehouse.
ScottTech was engaged to engineer and integrate an automated warehouse control system.
Solution: ScottTech’s PickPro WCS software modules were installed and integrated with
automation systems which included: Automated Horizontal Carousels with Light
Directed processing; Conveyors with Controls and bar code scanning; Carton Flow lanes
with Pick to Light; Bulk processing utilizing mobile wireless devices; Printing and scanning of barcoded lists and labels. Systems installations were performed and managed by
ScottTech: Mechanical; Electrical; Controls; 2nd story mezzanine.
About the Solution Provider:
ScottTech provides its clients with innovative solutions using the best technology to
improve inventory control and associated
business processes. We are committed to
exceeding our client’s expectations and to
delivering complete automation and inventory management solutions.
Web: www.scotttech.co
Email: info@scotttech.co
Phone: 315-214-6065
Results: Increased production with minimal additional staffing; Customer orders are
being completed more efficiently and with increased accuracy; The project was completed on time and within budget.
SUPPLYCHAINBRAIN
73
Ad Index
ADVERTISER
PA G E
Alliance Shippers Inc., www.alliance.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Amber Road, www.amberroad.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
AT&T, www.att.com/cargoview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
CTSI-Global, www.ctsi-global.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
FORTE, www.forte-industries.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
GT Nexus, www.gtnexus.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Kelly School of Business, Indiana University, www.kelly.iu.edu/kd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
NeoGrid, www.neogrid.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Old Dominion Freight Line, www.odfl.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
OM Partners, www.ompartners.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Penske Logistics, www.penskelogistics.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Quintiq, www.quintiq.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
SATO America, Inc., www.satoamerica.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SmartWay Transport Partnership, www.epa.gov/smartway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Southwest Cargo, www.swacargo.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Swiss WorldCargo, www.swissworldcargo.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
UPS, www.thenewlogistics.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Yang Ming Line, www.yml.com.tw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
EXECUTIVE OFFICES: 150 Main Street, Port Washington, NY 11050.Telephone: 516-829-9210; Fax: 516-829-9722. SupplyChainBrain is published six times per year by Keller International Publishing Corp. All rights reserved. Reproduction in
whole, part or in any form of electronic means, is prohibited without written permission. POSTMASTER: Send change of
address to SupplyChainBrain/Epsilon, 151 Fairchild Avenue, Suite 2, Plainview NY 11803-1709.
74
MAY/JUNE 2014
A Keller
International
Publication
WE HELP YOU
FEEL THE WIND
IN YOUR FUR.
What do many of the world’s top carmakers have in common? Penske
Logistics. We manage the flow of thousands of parts, from hundreds
of suppliers to dozens of manufacturing plants. We also facilitate the
distribution of aftermarket parts to dealers. Penske’s there, at every
stop along the automotive supply chain, from Point A to pointers,
retrievers and terriers, too.
penskelogistics.com