Improving Supply Chain Performance

Q1 2014T H E I N D U S T R Y T H AT M A K E S S U P P LY C H A I N S W O R K ®

The The Next Next BIGBIG IDEA

+Technology trends

3-D dilemmaLeveraging data

Managing risk

What trends and technology will benefi t supply chains?

MH

I Solutions | THE N

EXT BIG IDEA

Q1 2014 MODEX 2014 PREVIEW ISSUE

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CONTENTS Volume 2, Number 1

FEATURES

10 Technology Trends What new trends in technology are coming up for supply chains? We’ll look at the focus moving forward, including visibility and data analytics. By Dinah Wisenberg Brin

16 3-D Dilemma Businesses throughout the supply chain need to prepare for changes as 3-D printing becomes more integrated into the manufacturing process. By Mary Lou Jay

22 Leverage Data to Produce Accurate Inventory Demand Forecasts Every business has an abundance of data on consumer preferences and purchasing history that can be used to forecast demand and plan inventory appropriately. By Sheryl S. Jackson

28 Managing Risk Anticipating risks and planning ahead make a difference in how a company overcomes disruptions. By Sandy Smith

34 The Exponential Growth of Omni-Channel How companies are employing several strategies to stay ahead of the curve. By Fiona Soltes

IN EVERY ISSUE 9 CEO Update By George W. Prest

41 Economic Market Analysis By Alan Beaulieu

45 Industry Trends By Jeff Woroniecki

47 Education By Gary Forger

51 MODEX 2014 Preview

63 Solutions Spotlight By Michael Fickes

67 MHI News & Milestones

71 Calendar

72 Index of Advertisers

Go to mhi.org for more information.

3-D Dilemma p 16

Leveraging Data p 22

Technology Trends p 10

p 45Industry Trends

10 Q 1

FEATURE

While data analytics and end-to-end visibility receive much attention, they’re far from the only supply chain technologies gaining hold.

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TThis “telematics” data contributed to UPS’ recently

deployed route-optimization software ORION, or On-Road Integrated Optimization and Navigation, which the company says reduces miles driven, fuel used and carbon dioxide emitted. Most routes designed by ORION, which combines mapping data with algorithms, have shown a mileage reduction, according to UPS, which says it can save $50 million annually if each driver travels just one mile fewer per day a year.

Deployment to all 55,000 U.S. routes is scheduled for completion in 2017.

“UPS is one of the best examples of pushing analytics out to front-line processes – delivery routing in par-ticular. This initiative, ORION, is arguably the world’s largest operations research project. It will eventually

reconfigure a driver’s pick-ups and drop-offs in real time,” Tom Davenport, International Analytics Institute co-founder and Babson College professor, said in the UPS release announcing the rollout.

UPS’ optimization initiative is one example among a wide range of new technologies that manufacturers, logistics providers, retailers and other companies are using to make their supply chains and general opera-tions more reliable, adaptable and efficient. The broader emergence of cloud-based and mobile technologies, along with other advances, has fueled growth in new supply chain tools and made them available to a wider array of businesses.

“I think companies are embracing technology faster than they used to in the past,” said Hakan Yildiz, assistant

hose brown UPS trucks have been doing more than hauling online purchases

and wedding gifts. For the past few years, the delivery company has used tens

of thousands of its trucks as “rolling laboratories,” analyzing data from on-board

sensors and using the findings to optimize routes, cut idling time, assess driver

safety and make vehicle maintenance more efficient.

TECHNOLOGY TRENDSVisibility, data analytics are a big supply chain technology focus

BY DINAH WISENBERG BRIN

12 Q 1

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professor of supply chain management at Michigan State University’s Eli Broad College of Business. He sees data analyt-ics, or “big data,” as a noteworthy, new supply-chain trend, with companies like UPS and Walmart using point-of-sale, geolocation, sensor, RFID and other data to cut costs and improve customer service and operations.

While such data previously was used in a descriptive sense, as in the display of sales data, Yildiz said, companies are trying to convert the information into profits by using predictive as well as prescriptive models. Walmart in June acquired predictive analytics startup Inkiru to help boost its big data efforts, with an eye toward customer personal-ization on the retailer’s website, better search capabilities, fraud prevention and marketing.

The global supply chain management software market grew by 7.1 percent to reach $8.3 billion in 2012, despite economic pressures, Gartner Research reported in May. While global eco-nomic conditions caused businesses to cut costs, supply chain remained “a key source of competitive advantage in driv-ing business growth objectives,” Chad Eschinger, research vice president at Gartner, said at the time.

The top five vendors – SAP, Oracle, JDA Software, Ariba and Manhattan Associates – accounted for nearly half of the market revenue. (SAP acquired Ariba in 2012, and JDA merged with RedPrairie that December, forming the largest supply-chain-focused vendor, Gartner noted.)

Lisa Harrington, supply chain man-agement professor at the University of Maryland’s Robert H. Smith School of Business and president of consultancy L. Harrington Group of Easton, Md., sees the concept of end-to-end visibility across the supply chain as perhaps the hottest area now.

That visibility encompasses not just a company and its tier-one suppliers and customers, she said, “but kind of deeper into the bench on both ends of the sup-ply chain,” including tier-two and -three suppliers and their inventories, their production cycles and their potential risk factors, like sourcing issues, that

could affect a company’s operations. It also includes a company’s customers’ customers, she said. Such technology aims to help a company understand demand signals, achieve good visibil-ity into final demand, and then transfer that visibility back through the supply chain, explained Harrington.

This interest in end-to-end visibil-ity has led to talk of a “control tower,” an entity or mechanism “to sit on top of your supply chain much like an air-port control tower does,” monitoring the health and wellbeing of the supply chain in real time. “Then you have the opportunity to see problems and issues before they become problems,” she said.

“The idea in this whole control tower concept is not just to manage more effectively, but it streamlines the flow of goods through the supply chain” to remove costly delays, missed ship-ments and customer service failures, said Harrington. The control tower can be internal or outsourced to third-party logistics providers like DHL or Ryder. The automotive industry has success-fully put the concept into practice, on the in-bound side, to their production lines, relying largely on 3PL companies, she said.

“This requires a lot of very robust capabilities both in supply chain man-agement expertise as well as in technol-ogy expertise, so the model seems to be toward outsourcing this to a third party, like to a global third-party logistics ser-vice provider,” said Harrington.

Mining data from the supply chain and using business intelligence to plot trends sooner allows companies to react to demand more agilely and adjust pro-duction, she noted. Consumer goods companies such as Unilever and Procter & Gamble have started to explore their

options in this area, according to Harrington. The control-tower concept has been discussed for five or six years, “but what’s different today is that our technology tools have caught up with the concept,” she said.

Dwight Klappich, a Gartner vice president for research, agreed that many companies are emphasizing end-to-end visibility, and he expects more focus on that area over the next few years.

“Visibility’s a very hot topic. It’s a very fragmented market at this place in time. I think it’s progressing and I think what we’ll see is the definition of visibility will solidify over the next couple of years,” he said.

Klappich noted that many compa-nies over the last 25 years have oper-ated in “silos” in terms of organization and technology, but that the idea of “executive convergence” in the supply chain has become an emerging trend. Companies now are moving toward put-ting in place tools that span the organi-zation. Not managing the supply chain process end to end can create problems, he said. For example, if manufacturing becomes more efficient without look-ing at the bigger picture, the operation might make more products, placing a burden on warehouse workers who must sit on the inventory, Klappich said.

Industry is starting to take baby steps in this direction, according to Klappich. Some companies are trying to do this on their own by cobbling technology together, but the systems must work well together, not simply pass data back and forth, he said. “That’s why I think the vendors are going to be pushed in this direction,” Klappich said.

New technology is increasingly accessible to smaller businesses, the University of Maryland’s Harrington

While such data previously was used in a descriptive sense, as in the display of sales data, companies are trying to convert the information into profits by using predictive as well as prescriptive models.

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noted. While systems from big ven-dors traditionally were too expensive and complex for small and medium-sized companies, the growth of smart, cloud-based and mobile technologies are changing the landscape, making such applications available to a broader array of companies.

“It gives smaller-size companies access to technology that they would not have been able to afford five years ago. It kind of starts to level the playing field. If I’m a small to mid-sized company I

can now operate as effectively as a big company,” said Harrington. Cloud tech-nology makes some of these tools avail-able in scaled-down versions, she said. “You don’t necessarily have to invest huge amounts in all kinds of bells and whistles these days. You can use some-thing as simple as a smartphone” to bring technology to companies, she said.

Harrington cited IBM’s cloud-based platform, IBM Smarter Commerce, which promises to give mid-sized businesses the same tools as large

enterprises, including operations data and customer insights analyses. IBM in 2012 announced a multi-million-dollar deal with Australian department store David Jones Limited to develop a cross-channel retail platform to allow custom-ers to shop through the Internet, mobile phones or physical stores.

While data analytics and end-to-end visibility receive much attention, they’re far from the only supply chain technolo-gies gaining hold.

In the past 12 to 18 months, Gartner has seen an exponential increase in interest in material handling automa-tion, or warehouse control systems, according to Klappich, who now receives several inquiries a week, versus one or two a year just two years ago. Many companies have solid warehouse foun-dations and now are looking to squeeze out more performance, he said.

Warehouse control systems are add-ing business logic-like analytics on top of convergence tools, Klappich said.

Longer term, he also predicts a major emergence of robotics.

“We’ve only scratched the surface,” Klappich said, noting Amazon.com’s acquisition of material handling-robot company Kiva Systems Inc. in 2012.

Companies also are using technol-ogy to keep supply chains transparent, equipping laborers with mobile phones, for instance, to gather real-time data from factory workers around the world to assess the health, safety and fairness of their supply chains. ●

“You don’t necessarily have to invest huge amounts in all kinds of bells and whistles these days. You can use something as simple as a smartphone.”

– Lisa Harrington, supply chain management professor,

University of Maryland’s Robert H. Smith

School of Business

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