This author has been writing and speaking on the significant impacts that the Internet of Things (IoT) will have on industry supply chains in the next five years. Physical devices such as sensors, production equipment, transport vehicles and other supply chain focused devices connected to the Internet, transmitting valuable data and insights, literally bring the notions of connecting the physical and digital supply chain closer to reality.
More and more industry supply chains have opted to outsource logistics, transportation and customer fulfillment to outsourced logistics and transportation partners and thus leveraging the potential benefits of IoT becomes a de-facto capability requirement. They also require broader vision among supply chain service providers for incorporating such strategies in their strategic planning.
Industry supply chain teams have gained significant learning from previously vendor hyped, single focused initiatives such as RFID, which ultimately had to overcome initial unplanned and unforeseen cost and technical infrastructure hurdles to reach compelling cost and operational benefits. The broader vision of cost-effective item tracking and data management was a missing element. Similarly, the context for the benefits of IoT itself need to include leveraging the convergence that is now occurring in data analytics, in-memory, mobile and software engineered systems technologies that are providing deeper capabilities at less cost than a mere few years ago.
Last week I had the opportunity to speak with Chris Power, Director of Product Management for Airclic. For those readers unfamiliar, Airclic supports the critical last-mile of the supply chain, providing a cloud-based proof-of-delivery and routing service for food service, retail, healthcare, third-party logistics (3PL) and transportation industries.
In our discussion, Power observed that B2C/B2B Omni-channel fulfillment requirements are presently driving profound impacts on logistics and customer fulfillment needs. More and more B2C focused supply chains are moving their focus toward increased requirements for cross-dock, sorting and service center capabilities. Goods are becoming more in-motion vs. traditional aspects of transport, store and ship. From Power’s observations, teams initially tend to seek more and more data regarding different logistical touch points, but “their eyes more often become bigger than their stomachs” when all that data overwhelms systems and people resources. That is often when Airclic gets the call. The need then shifts toward the broader need for making more effective use of data and avoiding data overload.
We discussed the notion that the term “big-data’’ may be disserving, and that a better term may well be what we at the Ferrari Research Group advocate, which is “smarter data”. Smarter objects that report on exceptions or abnormalities beyond a threshold provide a huge opportunity for managing the critical last mile of the supply chain.
Airclic advocates a three-stage maturity model. First is harnessing capabilities to gain more automated visibility. A second phase addresses managing exceptions, “tell me when there is a problem” vs. a hose line of streaming, overwhelming data. The third phase, one that Powers observes that few supply chain have achieved to-date, is predicting what is going to occur, especially in peak or seasonal demand periods when all resources are stretched. One example we discussed was last winter’s situation when horrible weather conditions caused noteworthy transportation and logistics delays, especially during the critical holiday buying period. Supply chain teams were often reacting to bottleneck disruption vs. anticipating such disruptions and executing alternate strategies that buffer or overcome disruption quicker.
However it is quite important to point out that the true benefits of harnessing IoT, smarter sensors and more predictive analytics within the physical aspects of products in movement is highly dependent on the ability of key upstream supply chain participants to have vision and commitment to invest in IoT, coupled with smarter data capabilities. As a community, 3PL’s, with the exception of FedEx, UPS or other visionary players, have not had a track record for investing in leading-edge technologies unless prompted and compensated by specific customers. In this author’s view, the time is long overdue for the broader logistics and 3PL community to broaden their vision and invest in such capabilities without solely passing the tin cup of customer donation. Leveraging the physical and digital capabilities is a service that will attract customers, and the economics for such investments will change for the better.
The time is now for bold vision and broader technology perspective across supply chain execution partner ecosystems.
Supply Chain Matters invites other supply chain logistics and transportation industry players to share their views on the business benefits of harnessing IoT, enhanced mobile, smarter data and decision-making capabilities for industry supply chains.
At the beginning of this year, a 2014 Supply Chain Matters prediction and consul was that industry supply chain teams should anticipate continued consolidation activity for the ocean container industry. That indeed has been unfolding. The failed attempt among the top three global ocean container carriers to form the P3 Network was quickly followed by the announcement of the 2M Alliance and the Hapag-Lloyd – MSC merger. Now comes the next iteration.
Today features the announcement from French container shipping group CMA CGM that the service carrier has entered into service-sharing alliance with China Shipping Container Lines (CSCL) and United Arab Shipping (UASC). According to the announcement, the alliance will be termed Ocean Three, and will extend among Asia-Europe, Asia-Mediterranean, Transpacific and Asia- United States East Coast transit routes. The agreements will reportedly cover vessel sharing, slot exchange and slot charter agreements among the three carriers. Routes will be utilizing transshipment hubs common to the three partners. Rather noteworthy is that this alliance covers container shipments originating from the Middle East, Indian sub-continent and West Africa.
This new alliance requires the approval from the U.S. Federal Maritime Commission before it can go into effect.
Readers will recall that CMA CGM was one of the lines originally included in the former P3 Network alliance proposal, and was not included in the 2M Network alliance announcement among industry leader Maersk Lines and Mediterranean Shipping Company (MSC). If approved the Ocean Three alliance will also compete with the announced merger of Hapag-Lloyd and Chile based CSAV, an effort to create the fourth largest global container shipping line by consolidation. That merger is still subject to approval from European Union maritime officials.
Industry supply chain teams and transportation and logistics service providers should anticipate further announcements related to consolidation as the industry domino effect continues. While the various ocean container carriers continue to point out the benefits of increased efficiencies, schedule frequency and overall capacity utilization from these consolidation moves, the smoking gun remains as to the impacts to future tariff rates.
Some fitting good news came prior to the Labor Day holiday weekend in the U.S. concerning the ongoing labor negotiations concerning the Pacific Maritime Association, representing numerous west coast ports, and the International Longshore and Warehouse Union. The existing labor contract involving 29 U.S. west coast ports expired on July 1st.
The Associated Press and other supply chain focused business media report that ongoing talks have made significant progress with a tentative deal reached on the critical knotty issue of healthcare benefits. According to the AP report, the association especially focused on limiting fraud in health plans to avoid penalties that may occur under the Affordable Care Act. The AP report further cites a federal grand jury investigation in California indicting three people for an alleged $50 million scheme to swindle health plans involving dockworkers along with other federal investigations concerning fraud among the subject health plans.
In conformance to negotiation practices, no details have been released concerning specifics to the tentative agreement on the healthcare component. Other remaining issues involve compensation, job security and workplace safety, which imply that contract negotiations will most likely continue for several additional weeks.
Industry and retail focused supply chains have already implement contingency plans including the re-routing of inbound and outbound ocean shipments to U.S. east coast and other North American ports. That activity will likely continue as supply chains move into the critical pre-holiday surge of inbound products from China and other Asia-based producers.
With an office in the suburbs of Boston, Supply Chain Matters has observed and experienced an extraordinary event, the power of a workforce that has no real hierarchy and loyalty. Our readers residing in the United States may have already heard or read of the developments concerning Demoulas and Market Basket supermarkets within the New England region. The story has become viral. It is a chain of supermarkets with no equal. Workers decided to express loyalty to a CEO by refusing to work until that CEO was re-instated, which turned out to be a five week long standoff. The Boston Globe described the situation (paid subscription required) as “truly a breakthrough for middle-class workers” and provides a detailed account of the event.
In a capsule, this was about a private company that has an ample share of family focused dysfunction that spilled over in business relationships. It is a story of cousins, Arthur T. Demoulas (Arty T.) and Arthur S. (Arty S.) Demoulas at odds, and years of power struggles for control of the supermarket chain. Arty S. with a philosophy of seeking maximum return of profits and equity, assumed control of the Board of Directors earlier this year. Arty T., the operational CEO, who led with a philosophy that workers should be treated as true equals and share in the benefits of success with paid health benefits and profit-sharing, was removed in June. He was admired by the employees.
Employees, not belonging to any organized labor union, with many having multiple years, some decades, of employment history began figuring what was at stake. They surmised potential moves toward sale may have been in the works and elected to support their fired CEO by refusing to work. Arty S. hired two new co-CEOs who asserted themselves early in the game by dismissing eight organizers of the protests. The move galvanized workers and hardened opposition. Solidarity among both workers and customers was astonishing and again, there was no organized union. The next five weeks bore witness to an extraordinary meltdown of business with revenues reported to be down nearly 90 percent. Many believed, including this author, that the situation would end badly. It was a standoff that ultimately prevailed in favor of Artie T. and his management philosophy.
We often shopped at the local Market Basket store. The prices were far below any other outlets. We were by no means, alone. The shopper loyalty was extraordinary and became a key factor in the past five weeks of standoff. Market Basket employees often demonstrated commitment and caring for what they were hired to do. If you did not find an item, store clerks were more than willing to search the store or seek out a manager. Store managers listened and accommodated requests; including stocking a new item if there was local demand.
From this author’s supply chain management lens, this local chain was extraordinary. Highly competitive pricing fueled remarkable volume inventory turnover per store which translated to buying power directed at food suppliers. At certain times, the physical volume of shoppers in the store made navigation in the aisles a challenge. It often seemed that navigating within the store was of equal peril to navigating through the parking lot. Yet, in spite of this volume, a stock-out of an individual item was not as bad as one would think. Even more extraordinary for today’s retail culture, if you asked the store manager when an item would be back in-stock, he or she had an immediate answer. Managers demonstrated intimate knowledge of their individual stores and were not bashful to lend a hand in bagging or at checkout aisles.
The true scope of Market Basket’s supply chain prowess actually came to be appreciated during the work stoppage. As thousands of shoppers sought alternative competitive chains, it became apparent that many of these chains were ill-equipped and ill-staffed to accommodate shopper volume surges. Check-out lines were slow. Stock-outs were plentiful and replenishment was painfully slow. We speculate that the reason was that other chains were regionally based retailers serviced by distribution centers located in other states. In contrast, the main distribution center for Market Basket was located in the town of Tewksbury, about a 40 minute drive north of Boston, close enough to accommodate same-day deliveries.
Centralized planners and buyers of competitive chains initially seemed not to be aware of a local condition. We speculate that replenishments were pegged to normal shopping volumes, not to the extraordinary opportunity unfolding for competitive chains. As replenished inventory arrived, it was quickly consumed. By our observation it was near the fourth week of the Demoulas shutdown before competitors were able to muster an adequate supply response.
Now that the Market Basket crisis has been resolved, the test will be how many former loyal shoppers return. We visited our local Market Basket on day two of the resolution. While the store lacked a full complement of inventory, a good amount of shoppers were buying and the store was fully staffed. Once more we received multiple personal greeting from store employees, management and clerk alike: “Thanks for supporting our cause and thanks for being a loyal shopper.”
How many times have you experienced that greeting in this era of online mass retailing?
Business media has been reporting on recent rulings from the U.S. National Labor Relations Board (NLRB) that has implications for hiring and labor negotiations practices related to contract workers. Supply Chain Matters advises operations and customer fulfillment teams to stay abreast of these developments since certain rulings can have noteworthy implications for existing supply chain work practices and cost structures.
Essentially, the NLRB is re-visiting long-standing practices as to when contractual business arrangements, such as the use of supplemental contract workers render the contracting business a joint-employer of workers that are employed by the contract worker firm. An initial ruling involved global restaurant firm McDonalds and its franchisee restaurant operators, when the NLRB reviewed complaints alleging that the restaurant chain and its franchisees had violated the rights of employees who were involved in protest activities. After finding what it believed to be merit in the complaint of unfair labor practices, the NLRB ruled that McDonalds should be considered a joint employer.
A second potential ruling involves Browning-Ferris Industries of California and Leadpoint Business Services, a supplier of contract workers, which concerns a factory located in Milpitas California. A local Teamsters labor union is arguing that as a labor union, it cannot adequately bargain over labor practices unless Browning Ferris is at the bargaining table as a joint employer. The argument is that since Browning dictates labor practices, scheduling and work duties of both permanent and temporary workers as a single unit, it is a de-factor joint employer. How the NLRB rules in this case has far broader implications for various industry supply chains and partner service firms.
With the dynamic ebb and flow of business operations today, supply chains often have to manage spikes in operational and customer fulfillment, especially in seasonal or holiday-related time periods. A keen focus on costs has caused many production, fulfillment and logistics firms to utilize significant numbers of on-call temporary contract workers to supplement a leaner full-time, permanent workforce in such periods of work surges. Such practices have drawn protests directed at well-known brands, with protests involving two-tiered labor rates, avoidance in hiring full-time staff, or too much dependence on temporary contract labor in supporting supply chain operational needs. Supply Chain Matters has previously called attention to protest actions involving Amazon, Wal-Mart and certain third party logistics providers, to name but a few, to be placed in the public spotlight.
If the NLRB begins to consistently rule that brand owners who dictate work schedules and practices are to be considered joint-employers, the implications for supply chain flexibilities and costs can well be significant. Readers need to stay abreast of these developments and we at Supply Chain Matters will continue to provide updates as to implications.
Tomorrow, this author will be joining a distinguished compliment of speakers at the 7th Annual Supply Chain Management Summit sponsored by Bryant University and Benneker Industries. This event is turning out to be one of few premiere New England regional conferences focused on current issues and learning in supply chain management. Last year’s event drew upwards of 250 attendees among many industry settings.
Since many of our readers are located across the globe, the purpose of this Supply Chain Matters commentary is to summarize the key messages and takeaways of my talk.
My presentation is titled: New Developments in Supply Chain Technology- What to Consider in Your Supply Chain Investment Plans. The key takeaway messages I’ll be delivering is that three converging mega-forces:
- Constantly shifting customer and business needs requiring sense and response, as well as more predictive business processes and decision-making capabilities.
- Supply chain process and IT technology convergence providing more cost affordable opportunities for integrating both physical as well as digital information and decision-making capabilities.
- Digitally enabled manufacturing enabled by the Internet of Things.
are aligning toward extraordinary opportunities for what has long been the Holy Grail of our community, namely, integrating information and decision making across physical and digital supply chain spectrums. The alignments of the above mega-forces are providing significant opportunities in management alignment and top management sponsorship which can be leveraged. New and emerging technologies, especially engineered systems, cloud computing, predictive and prescriptive analytics are becoming the technology catalysts. Besides touching upon the latest advances and significantly changed IT market dynamics surrounding supply chain technology, my primary goal in this talk will be to advise supply chain teams on the most important investments to focus upon in the coming months and years.
First and foremost, and without question, the most important initiative for any supply chain organization today is a concerted set of initiatives directed at Talent Management. The business benefits of advanced technology are marginal without people who have the necessary and required skills to be able to leverage and harness these technologies. Recruitment, retention and increased skill needs are constantly identified as the single biggest challenge across C-level, business, IT supply chain and manufacturing teams, and the challenge will continue as newer technologies make their presence among industry supply chains.
More than ever in the past, supply chain, procurement, customer fulfillment, product lifecycle management and service management teams must have active technology awareness and planning strategies. The umbrella and accountability of the supply chain now involves far broader dimensions of common information and related decision-making needs. The notion of the goal for pursuing Integrated Business Planning is not just IT vendor hype, but a necessary and required capability. An organization’s Sales and Operations Planning capability is thus the most critical to focus and improve upon. That stated, an important reminder for cross-functional and cross-business remains that final objective is not technology alone, but rather required business objectives and outcomes.
I’m also urging technology selection teams to broaden their context of their technology planning to include leveraging information and decision-making capabilities across an end-to-end, value-chain and B2B business network. With today’s pace of business change, supply chain planning or forecasting can no longer stand-alone as a capability, and must be augmented and synchronized with the sensing of actual events occurring across the supply chain network. The good news here is that the supply chain technology market has shifted its emphasis toward broader support capabilities in this area.
For those who plan on attending tomorrow’s Summit, I look forward to meeting and chatting with all of you regarding your organizational and personal objectives. For those unable to attend, be advised that next week we will post a PDF copy of the presentation in our Supply Chain Matters Research Center for complimentary reader downloading. Minimal registration information is all that is required.
As always, give as a call or contact us via email if you require further assistance or if this type of presentation can assist your organization or forum in setting its supply chain management objectives for the coming year. Our home page can be accessed at this web link.