A commentary posted on Logistics Management makes the observation that the threat U.S. West Coast port disruptions as a result of current ongoing labor union contract negotiations raises an open question as to “peak shipping season” this year. News Editor Jeff Berman makes note that inbound container shipments destined for the ports of Los Angeles and Long Beach, which together account for upwards of 40 percent of incoming U.S. container traffic, increased 16.5 percent and 8.8 percent respectively during June. The premise presented is that buyers scrambled to move cargoes earlier to avoid the potential of goods being caught-up in a port stoppage.
Logistics Management further conducted a reader poll of 103 buyers of freight transportation and logistics services. That survey indicated 68.1 percent of respondents expecting a more active peak shipping season this year. Some respondents are reported to be concerned about potential transportation lane disruptions in the fall.
Meanwhile, as we approach the end of one month since contract expiration, no real news has come forward regarding the ongoing labor talks between the Pacific Maritime Association and the International Longshore Warehouse Union. That provides continued uncertainty and concern among industry supply chains.
Supply Chain Matters proposes to conduct its own reader poll. For those readers managing inventory, procurement, transportation and logistics services, here’s the question:
What are your organization’s current plans or strategies regarding a potential disruption or work stoppage among U.S. West Coast plants?
Provide your responses in our interactive poll at the bottom of our right-hand panel. We will open this poll for two weeks and will announce the final results.
A recent posting on CNET reports that standards related to support of the Internet of Things (IoT) has now become a lot more complicated.
The potential benefits of IoT is rather broad and today comes with significant technology vendor hype cycles. Numbers such as 20, 50 100 million connected devices are quoted based on the most favorable market research numbers a vendor can find. There is added confusion related to IoT associated with consumer devices such as appliances, thermostats and wired homes vs. industrial networks of sensors and other equipment.
A handful of tech heavyweights, namely Intel, Broadcom, Dell and Samsung Electronics recently unveiled a new non-profit termed Open Interconnect Consortium (OIC) with a mission to come-up with certification standards for devices operating in an IoT environment. This announcement comes after a December announcement from nonprofit Linux Foundation in conjunction with names such as Microsoft, Panasonic, Qualcomm and others that calls for the AllSeen Alliance to come up with a similar goal.
Both consortiums rightfully communicate that wider adoption of the benefits of IoT cannot be gained without common standards among technology providers. However, many of these vendors have different goals related to how they will strategically leverage this new market in longer-term business plans. One example could be Qualcomm, which has garnered significant influence and revenues pegged on its mobile phone related proprietary technologies.
For our supply chain and B2B business network focused readers, these tech dynamics will sound quite familiar. They are very similar to the dynamics that occurred in the hype cycle of RFID enabled item-tracking as vendors jockeyed around various standards development initiatives, each with different strategic agendas. The end-result is one that we are very familiar with, the true business benefits of RFID and item-level tracking was stalled because multiple debates and conflicting standards approaches confused many technology implementation teams, making the technology choice too risky and too expensive.
In the early days of RFID this author wrote some guest columns in RFID Journal. In January of 2006 this author penned the following opinion:
“As for RFID, over the next two to three years, the industry standards for automatic identification and product information transfer will mature. Generation2 standards and the decreasing cost of individual tags will facilitate the ROI thresholds required to justify RFID as a transformational enabler of accurate, timely supply chain business intelligence. But RFID can and should be used alongside other traditional sensing technologies. Taking a sensory network platform view that includes all the available and/or appropriate technologies to enable more responsive and accurate supply chain business intelligence is a path to meaningful ROI.”
I along with other industry analysts obviously miscalculated on the real effort in coming up with common technology standards and subsequent attractive cost of infrastructure. Too many vendors became consumed with individual interests and we as analysts were too vested in technology vendor hype.
I now pose this question for open Supply Chain Matters reader comments: Is the current path of multiple IoT standards-based consortiums a replay of history?
Discuss among yourselves and share your views in the Comments block.
Supply Chain Matters News Capsule July 11: Google Shopping Express, Typhoon Neoguri, Accellos and High Jump Software Merger
It’s the end of the calendar work week and we continue with our news update series related to previous Supply Chain Matters posted commentaries or news developments. In this capsule commentary, we include the following topics: Google Shopping Express, Typhoon Impacts Japan, Accellos and High Jump Software Merge.
Google Shopping Express
While there is lots of attention being directed at Amazon, Wal-Mart and other online retailer same-day delivery capabilities, Google is about to invest serious money to provide its own capabilities.
A posting on ReCode.net: Inside Google’s Big Plan to Race Amazon to Your Door, Jason Del Ray writes that the Google Shopping Express service has been piloting in select cities and is about to receive some serious investment money from Google. He writes that the search provider who has been displaying local shopping results is now coupling a same-day delivery capability.
Rather than operating a network of physical fulfillment centers, Google will rely on inventory from local retail outlets. Rather than compete directly with retailers, Google’s thrust is to become an ally and complement a retailer’s local brick and mortar presence. Shoppers in select cities visit a dedicated web site and select the goods such as groceries, clothing or consumer staples, that they desire to purchase. A network of local couriers is then marshalled to pick-up the goods at local retailers and delivers them. Del Rey indicates initial retail partners are Costco, Target, Toys ‘R” Us and Whole Foods. For its efforts Google charges retailers a transaction fee while consumers pay a $4.99 delivery charge. Eventually, Google plans to charge shoppers a flat membership fee, similar to Amazon Prime. Retailers themselves are reported to be taking a cautious approach to the service for fear that that Google may assume more of the direct consumer connection including the mining of valuable shopping trends.
The posting cites a source familiar with the company’s plans indicating that Google executives have set aside upwards of $500 million to expand the service nationwide. That obviously, is some serious money when one considers that the model does not require inventory or warehouse investments. This will be an important area to watch for B2C online fulfillment.
Typhoon Neoguri Continues to Impact Japan
After slamming the southern islands island of Okinawa, Typhoon Neoguri has continued on a path across the main island areas of Japan and is being classified as the most severe storm to have impacted the country in the past 15 years. While the storm was recently downgraded to a tropical storm, there remains a concern for very heavy rains and subsequent flooding. According to the latest media reports, this storm is likely to reach areas near the tsunami-crippled Fukushima nuclear power plant sometime today.
Neoguri impacted the mainland yesterday near Akune City on the southern main island of Kyushu, which is home to 13 million people. Kyushi lies next to the country’s biggest island of Honshu where major cities including Tokyo and Osaka are located which could also be impacted by the storm. The storm’s strength weakened somewhat overnight, packing gusts of up to 126 kilometres (80 miles) per hour as it moved east. Latest reports indicate that the storm passed just to the southeast of Tokyo but concerns remain for torrential rains and landslides across the country.
Although the storm does not represent the massive supply chain impacts that occurred from the 2011 earthquake and subsequent tsunami that impacted the country, there could be some impacts depending on the amount of flooding, landslides or other damage to factories or transportation infrastructure.
The next few months represent the monsoon season across eastern and coastal Asia and this may just be the beginning of other super storms.
High Jump Software Acquired by Accellos
Warehouse and logistics management software providers Accellos Software and High Jump Software have announced a merger, but that appears very much like an acquisition. According to the announcement, “the combination of the two companies creates a product portfolio that is uniquely positioned to meet the advancing needs of retailers, distributors, manufacturers, and logistics service providers to manage complex order fulfillment cycles and collaborate with supply chain partners.” The merged company will operate under the name HighJump and continue to use the Accellos brand for midmarket supply chain execution technology. Accellos founder and CEO Michael Cornell was appointed CEO of the merged company. Terms of this merger have not been disclosed.
A posting on the Minnesota based StarTribune news site headlines the merger as an acquisition. It notes that the merger is driven in large part by the need among retailers for added online fulfillment process flexibilities including the ability to deliver goods quickly from a warehouse, as an online-only retailer would, if such goods are not available in a store. Both High Jump and Accellos have backing from respective private equity partners which implies that this was an engineered marriage.
Today’s logistics and transportation headlines frequently highlight the ongoing challenges for recruitment and retention of truck drivers. The perception of low pay, long hours and a constrained career path continue to inhibit the recruitment of added drivers. Transportation carriers themselves complain of increased regulation, especially those related to governing hours-of-service (HOS) requirements for drivers.
Daimler Trucks demonstrated a potential answer to all of these challenges. The Future Truck 2025 demonstration was conducted before a large group of media. Daimler officials where the truck demonstrated its capabilities on the A14 autobahn highway near Magdeburg, Germany under realistic driving conditions. A video highlighting the demonstration can be viewed at this Yahoo Business page.
The vehicle was equipped with Daimler’s Highway Pilot System, a highly intelligent autonomous assistance control system along with other technology such as Predictive Power Train Control which leverages information on road topography and other conditions to automatically adjust the operation of the drivetrain for maximum fuel economy. Thus far, the overall speed of the future truck has been limited to 50 miles-per-hour.
In its media briefing, Daimler officials pointed out that to provide more career attraction, the driverless truck will free operators from having to perform monotonous tasks and provide more time to perform tasks handled by office workers. In essence, drivers can multi-task in duties related to transport management, perhaps calling ahead to destinations to make loading arrangements, making calls to customers, or dare we state, performing analysis of transportation and fleet-wide big-data. Sound crazy or far-fetched? Maybe or may-be not.
But, can the truck effectively back itself up in the very tight loading dock? Can you view the scenario of the operator leaving the cab and performing back-up requirements by remote control, in the rear of the vehicle? Who knows!
Daimler is quick to note that a lot has to happen before we ever seen this type of vehicle on global highways. Governmental agencies will need to legislate the control of driverless vehicles, especially those related to big rigs. Highways themselves will need to be fitted with sensors. Areas of insurance and liability will have to be ironed-out. And then there is the response of drivers themselves, especially those in organized labor unions.
Daimler chose 2025 to connote technology that would be universal sometime in the next decade. The takeaway however is that commercial technology that all of us believed was a vision of tomorrow is now well within reach. Ocean container lines are exploring ships that control and navigate themselves while airplanes fly themselves.
One wonders what the new world of logistics and transportation will turn out to be?
Add to the discourse and jump-in with your views.
As we anticipated, the march toward consolidation in the ocean container shipment segment continues.
Having been thwarted by Chinese regulators, the proposed P3 Network alliance was suspended in late June. Yesterday industry leader A.P. Moller-Maersk announced a new ten year vessel sharing cooperation agreement with Mediterranean Shipping Company (MSC) for designated Asia-Europe, Transatlantic and Transpacific routings. The new co=operative services agreement will be referred to as 2M and will replace all existing service and slot purchase agreements.
The outlined 2M will include 185 vessels with an estimated capacity of 2.1 million TEU’s, deployed on 21 routes. Maersk will contribute 110 ships involving capacity of 1.2 million TEU’s while MSC will contribute 55 vessels equating to 900,000 TEU’s. The overall purpose is described as sharing of infrastructure networks. Both carriers are stressing that the 2M arrangement will not involve the prior tenants of P3, namely co-ownership of ships, co-operative logistics, pricing and marketing strategies. Both carriers will maintain independent customer relationships. The new pact is expected to begin in 2015.
According to reports from business media, the aim of this altered new alliance is the ability to capture some of the cost savings that both lines were anticipating to achieve under the P3 Network arrangement. The parties expect that 2M will not encounter the same regulatory resistance since it is narrower in scope and no formal clearance is necessary. However, regulators will require continual updates on the alliance.
The implication of this newest development is that remaining industry players, particularly CMA CGM, will be at a cost dis-advantage unless they act on further consolidation of networks to counter the effect of 2M. Thus, more announcements can be anticipated in the coming weeks and months. Of course, shippers and third-party logistics providers remain caught in the middle of these ongoing industry dynamics for some time to come.
The obvious real issue continues to revolve around excess industry capacity and capital asset management. Until either the industry or the market itself addresses this broader challenge, shippers will have to bear the ongoing dynamics of co-operative networks.
Government IT: A One Billion ERP and Logistics Systems Failure Still in the Light and Has Anything Been Learned?
In December of 2012, Supply Chain Matters featured a commentary: A Billion Dollar Failed-Software Implementation-Why?. Our commentary at the time was a response to a published New York Times article describing the failed attempts of the United States Air Force to implement a new and long overdue modernized logistics system. The system was named Expeditionary Combat Support System (ECSS) and was targeted to implement commercial off-the-shelf ERP software. The Air Force eventually cancelled its six year long effort to implement the new software system after spending more than $1 billion dollars of taxpayer money and determining that it would take an additional billion to implement a workable system. At the time of our commentary, we were very frustrated at the news since the situation described was one of a classic systems failure.
Earlier this week, the United States Senate finally got around to completing its investigation of the Air Force system effort and issued a report that lambastes the U.S. Air Force for poorly managing the acquisition and attempted implementation of the ERP logistics management system. The Senate report, which can be easily downloaded, classifies the system failure “As a waste of $1.1 billion in taxpayer money, a loss of eight years of effort, the same old inadequate logistics system far inferior to the promise of ECSS, and a major setback to the Air Force’s attempt to transform how it does business.”
The comedy and/or tragedy of this week’s Senate report is that it took roughly 18 months for the Senate to get to the investigation and set of recommendations. Its investigation places majority of blame on the Air Force without addressing in-depth, a government systems acquisition environment or an overall organizational culture that might have contributed to the failure. That alone is a testament to the bureaucracy and inefficiency of federal agencies when it comes to IT systems implementation. The high visibility of the initial failures of healthcare.gov is yet another testament to an inherent problem.
With Internet based information discovery being what is today, a simple Google search yields a lot more learning and perspectives relative to the specific ECSS debacle.
Here is a sample:
Sanjiv Karani in a commentary on the Cincom ERP site outlined the full scope of the effort:
“The scope of the ECSS ERP project included: advanced planning and scheduling; material management, contracting and logistics finance; configuration and bill of material; repair and maintenance; product lifecycle management; customer relationship management; order management; distribution and transportation; decision support; facilities management; quality control; document management and budgeting. ECSS would have replaced the capability of approximately 400 or so legacy IT logistics systems with Oracle’s integrated IT suite of modules comprised of product support & engineering, supply chain management, expeditionary logistics C2, and maintenance, repair and overhaul.”
Obviously, the systems scope was rather large.
The Federal Times web site provides a download of the ECSS Acquisition Incident Review Team Final Report. This comprehensive report outlines the background and contributing causes to the systems failure. Key highlights include:
The Air Force’s strategy was to acquire commercial off-the-shelf ERP software with a provision for “bolt-on” applications. A systems integrator was to be tasked with both implementations of standard ERP and bolt-on applications, along with the other program implementation needs. In late 2005, Oracle E-Business suite was elected along with two bolt-ons: Click Commerce for planning and Industrial and Financial Systems for maintenance process support. In 2009, a major restructuring of the program addressed the need for product lifecycle management and logistics financials. The Oracle contract was modified to include an Oracle only footprint including PLM and other needs. A restructured systems integrator contract with CSC outlined four releases with six pilots.
The planned first release dragged on into late 2010 prompting the Department of Defense to conduct a technical risk assessment. Both Air Force teams and CSC attempted to implement a “recovery plan” but the report indicates that it became apparent the plan was failing to meet its objectives. A series of Air Force leadership “deep dives” concluded that significant shortcomings in program progress had not been remedied. A side note- we take that to mean that Air Force leadership was not getting what it perceived it wanted. Eventually by 2012, the Air Force recommended cancellation of the program when discovering that Release 1 was pushed back to fiscal year 2017.
The Air Force Incident Review Team described contributing causes to the failure as follows:
- Governance- described as confusing and, at times, ineffectual governance structure evident throughout the program. Noted in the report: “There lacked coherent leadership guidance and coordination from process ‘owners” on how to seamlessly mesh and implement the intermingled methodologies , thereby driving needless delay, frustration, uncertainty, and labor burden on the program office.” The above statement should resonate with our IT and systems consulting readers since active governance this is a fundamental tenant for success.
Other contributing factors were described as;
- The lack of effective change management made worse with a lack of successful implementation progress, in effect, signaling that “the program was not worth supporting.”
- Program leadership management churn that included six program manager changes in eight years along with five program executive officers over six years.
- A lack of understanding by the Air Force of all of its data along with the “as-is’ or “to be” architectures, coupled with a transition plan for resolving differences between the two states. Even though the Air Force determined that no single, stand-alone commercial system could satisfy its needs, there was apparently no singular specific articulation of the “to-be” state. The report notes that this was compounded by the addition of multiple subject matter experts with no single vision as to how a transition would occur.
- An unrealistic development environment, one that did not mirror the reality of the required operational environments.
As noted in our prior 2012 Supply Chain Matters commentary, more disturbing is that multiple U.S. military and government agencies are in need of modern logistics processes and yet the track record for software and change management implementation efforts is marginal at best. The latest reports of the Senate investigation makes mention of an additional Defense Enterprise Accounting and Management System that is in a similar mess, upwards of $1.7 billion over budget and considerably behind schedule. Another report makes mention of the Air Force’s F-35 Joint Strike Fighter aircraft program, an aircraft that requires 24 million lines of code to operate which has experienced multiple development setbacks.
Private industry has garnered its share of previous painful learning regarding multi-million dollar big-bang software implementation projects that ultimately failed to see the light of original scope or intent. Some brought businesses to their knees, with painful consequences. Yet, the technology successes of Amazon, Google, Facebook, and Linked-In, to mention but a few, are testaments that technology is no longer the sole obstacle. That learning is available to any implementation team today, including U.S. government agencies.
We seriously doubt that the watered down recommendations from the Senate and other agencies will get to the heart of badly needed the government IT modernization efforts. It is clearly time for U.S. government to seriously consider the adoption of business transformation practices of private industry that include:
- Establishing clear vision of future state needs that are not, business as usual which favors continued existence of added complexity and bureaucracy?
- Avoiding huge-scope big-bang systems efforts in favor of incremental steps of manageable projects
- Senior agency leadership singularly accountable and responsible for program success.
- The recruitment of IT and CIO leadership with proven private industry track records provided with the organizational clout and support to get things done.
Finally, the Congressional toxic political environment being what it is today, requires that political leaders stop thinking in the context of blame and retribution, especially when the process drags on for years. The federal government needs both visionary agency leaders and legislators who can think outside the box of bureaucracy.
Whether any of this happens in our lifetimes is certainly food for thought and constructive debate.