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The Most Important Considerations in Your Organization’s Supply Chain Technology Investment Plans

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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.

Bob Ferrari


Potential West Coast Port Disruption Raises Questions on Impacts to Upcoming Peak Shipping Period

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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.

Bob Ferrari


A Replay of the RFID Standards Mess? – You Tell Us

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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.

Bob Ferrari


Supply Chain Matters News Capsule July 11: Google Shopping Express, Typhoon Neoguri, Accellos and High Jump Software Merger

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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.


Daimler Demonstration of the Driverless Truck

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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.

Bob Ferrari


2M Alliance Announced as the Alternative to Abandoned P3 Network

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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 latelogistics_nanjin_port 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.

Bob Ferrari

 


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