Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Cutting Edge Control Towers

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My main current research focus is supply chain control towers. ARC’s 20th Annual Industry Forum took place last week in Orlando and a panel I moderated was focused on this topic. But the topic was discussed in other tracks, and in informal off the record discussions as well.

control tower

An Advanced Control Tower

Here are some takeaways:

  • One supplier of visibility solutions argues that control tower visibility can be built bit by bit, pay for a bit of order tracking here, ocean container tracking there, and this software supplier’s experience is that companies tend only to pay for a slice of visibility when they can justify the ROI. Over time this can develop into a broad visibility solution. But the companies with the most advanced control towers in the world made an upfront commitment to advanced control towers often without fully knowing what the payback would be or even believing a business case could really be quantified.
  • A supply chain control tower implies some degree of centralization. But one very large manufacturer with advanced visibility capabilities has 40 control towers. Different brands have their own control towers. And not all control towers that contribute to supply chain capabilities are strictly speaking supply chain control towers. For example, a control tower focused on social media can provide key demand insights. At this company, there is a centralized control tower that the CEO visits on Monday mornings, looks at key issues, and directs key personnel to follow up.
  • Control rooms have long been in existence at utilities, chemical plants, and refineries. One core focus is safety, but these rooms also focus on process efficiency and asset utilization. Over time, the industry has moved from a control room at a plant to a control tower managing several plants. The industry has focused heavily on ergonomics, a simple look and feel that makes instant decision making possible, and security. When it comes to usability, despite the investment top supply chain software companies have made in user interfaces, professionals in our field can learn a lot from the process industry.
  • Leading manufacturers do not believe that any one software supplier will be able to provide most of what they need to build an advanced supply chain control tower. Some leading enterprise software suppliers are being described as being years away from having the kind of capabilities that are needed.
  • An advanced supply chain control tower will always contain information that goes beyond what is in internal enterprise applications. The Internet of Things buzz is leading to more focus on how GPS, social media, and internet data (like online newspaper articles) can be used, mashed up, layered over a company’s supply chain network map, combined with existing data (like EDI event notifications), and result in far more timely and meaningful warnings about a wide variety of supply chain risks that have historically been poorly monitored.
  • An advanced supply chain control tower is a hub for analytics. Depending on the problem the analytics can range from simple to very advanced. For example, if the problem is stock keeping unit (SKU) rationalization you might look for data that says a SKU has not been purchased in 90 days. A simple rule can be put in place that says if that occurs, remove that SKU from the list of items our company sells. On the other end of the complexity spectrum, detailed supply chain design models can be rerun just before a product is introduced to make sure the initial assumptions are still largely valid about where products should be manufactured and how they should be distributed.
  • Analytics get better when data scientists (statisticians, mathematicians, operational researchers, and industrial engineers) work with subject matter experts (SMEs). There is a component of continuous improvement at work where the SMEs continue to come up with ideas of how processes could be improved, and the data scientists then access the necessary data and provide analytic tools to help solve the new problems.

In conclusion, I would like to sincerely thank the executives that participated in the supply chain control tower panel – Jan Theissen of AGCO, Jeff Tazelaar of Dow Chemical, and Tom Moroney of Shell. Their content and insights were excellent. This was the best panel I have ever have the privilege of participating in. This track was taped, and the session will be viewable online in about a month.

Procter & Gamble’s Supply Chain Control Tower

Business Intelligence | By •

Procter & Gamble (P&G) has one of the best supply chains in the world.  But when their top supply chain executives talk about supply chain management, it can be hard to understand what they are talking about.  P&G has rather forgone talking about supply chain systems and instead talks about their investments in analytics. They believe their supply chain systems are too siloed and they are missing global optimization opportunities. They are looking for a “fully interconnected platform” that delivers “holistic optimization.”  If they can get to a “real-time instrumented supply chain,” P&G believes the upside is a 1-2% sales increase, 2-5% margin improvement, and 5-10% improvements in asset utilization.  (See Procter & Gamble Speaks at the 3PL Summit).

But what could a real-time instrumented supply chain actually be?  Some hints are starting to emerge. One thing it appears to mean is a cross functional control tower that exists in a “visually immersive data environment.”  P&G does not call it a control tower, they call it a Business Sphere. But if you read the description, and look at some pictures, it sure looks like a control tower environment.

PandG-control-tower

One of the partners they list that helped them build this “patent-pending integration of technology, visualization, and information” is BOI Solutions.  The BOI technology is really cool.  In science fiction movies we see users manipulating computer images with their hands, stretching some images, swatting other images off the screen.  That is pretty close to what BOI’s technology allows users to do.

Another partner for the P&G Business Sphere solution is SAP.  Perhaps not entirely coincidentally, SAP begun talking about their new supply chain control tower solution last year.   Their control tower incorporates the idea of reacting to alerts with prebuilt playbooks that allow an organization to react quickly and with agility to unexpected situations.  (See The New SAP Supply Chain Control Tower for a description of playbooks and their control tower solution stack).

P&G, being P&G, appears to be using a more difficult to understand vocabulary to describe the playbook concept.  They talk about “business sufficiency analytic models that focus the business on exceptions and provide forwardlooking projections and scenarios.”  You say tomatos (to-may-toes) and I say tomatos (to-mah-toes).

P&G says they were able to leverage “supply chain sufficiency models to bring together multiple data points, analytics, and visualizations” in a manner that resulted in an inventory savings of tens of millions of dollars.

Finally, I’ve begun to understand why P&G and other supply chain leaders are beginning to talk about supply chain analytics rather than optimization.  An optimization solution starts with certain policies and network flows in place.  The optimization is based upon those flows and policies.  Optimization is great, but optimizing an inefficient network and nonoptimal policies is itself not optimal.  (See An Innovator’s Journey to a Segmented Supply Chain).

The New SAP Supply Chain Control Tower

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SAP’s SAPinsider supply chain conference was held a week and a half ago in Las Vegas. At this conference SAP announced a new product that will be a critical part of their supply chain solution stack – a Supply Chain Control Tower.  Several of ARC’s supply chain software supplier clients have discussed with ARC how their solutions can be used to build control towers (Manhattan Associates Control Tower, C.H. Robinson TMC’s, and JDA’s). Clearly, the term “control tower” is used in many ways by software suppliers.

SAPscmStack

SAP Supply Chain Solution Stack

Two of our supply chain software clients have also talked about how play books can be used to make better supply chain decisions (JDA’s playbook, IBS’s).  What is interesting is that SAP’s conception of what a proper supply chain control tower should look like now includes the idea of a playbook, even though they don’t use that term. Partly for that reason, SAP’s “control tower” is the market’s broadest and deepest conceptualization of this term.

The SAP control tower incorporates end-to-end visibility. SAP understands that the best end-to-end visibility solutions are built upon a many-to-many, public cloud architecture that is built with common network master data.  SAP intends to leverage the Ariba Network to build out the visibility portion of this solution.

The idea behind a playbook is that businesses need to plan, but businesses also need to adjust plans based upon unexpected surges or shortfalls in demand and changing supplier capabilities.

An analogy can be made to professional football. A team starts with a play that is called in the huddle, in this case a wide receiver running a post. But professional football teams are able to adjust that play based upon what the defense is doing. So if the opposing team’s safety has moved closer to the line of scrimmage (potential blitz), and the corner-back is playing up on the line of scrimmage (in order to jam the receiver coming off the line), then the play as called will not work unless key players – the quarterback, the receiver, and the fullback – see what is happening and are working off the same playbook. If the offense can execute – the receiver beats the jam and runs straight down the field, the fullback picks up the blitz by blocking the safety before he can get to the quarterback, and the quarterback throws an accurate long ball – then potential disaster turns into a score.

Similarly, it is nice for a supply chain solution to have alerting capabilities. But those alerts serve a limited purpose unless key players across the enterprise or even extended supply chain are working off the same playbook.  So for example, if demand for key products exceeds the forecast, one playbook adjustment may be to cancel a planned promotion. But to “score,” the marketing, procurement, and warehousing team members all need to properly execute that play variation.

The SAP solution set allows for alternative scenarios to be examined in their Integrated Business Planning application. After the right response is determined, a history of the logic that went into why that is the best of different alternative responses can be stored.

Once the proper playbook response is developed for a particular type of situation, the business process for responding to that situation can be defined in the control tower. The control tower has capabilities for business process definition and enforcement, social media style collaboration tools, and role definition (defined responders to the problem).  Thus, when a particular playbook response is defined – cancel a planned promotion – the responders are defined and the proper marketing executives have the ability to drill down from the control tower to the promotion management or marketing applications where the proper adjustments can be made.

SAP has a great vision. Now they must execute on that vision.  There are hurdles.  The ability to provide advanced visibility will be related to the size of their supply chain community.  Acquisitions to build their network may be called for. The platform will need to include network master data that is not currently part of the solution set. Finally, the visibility component must mirror the kind of value-based pricing common among other providers of supply chain visibility in order to be successful.

Guest Commentary: Driving Value from a Transportation Management Center: Think Global, Act Local

Guest Commentary | By •

To centralize or not to centralize? That is the question – or at least it is a major discussion point for many large, global companies considering how best to manage transportation across today’s vast supply and distribution networks. The argument to centralize usually includes the advantages of economies of scale when dealing with carriers and opportunities for better utilization through back-hauls and continuous moves. The argument for decentralization often involves strong relationships with local carriers, faster handling of the inevitable hiccups in execution, and long histories of successful delivery.

So which is the right answer? Fortunately for everyone involved, the right answer might be both. No, I’m not equivocating in an attempt to keep everyone happy. The truth is that there are advantages to both approaches. The problem is that people have assumed it is an either/or decision. It is not.

The Control Tower
Often the either/or decision comes about when companies feel it is time to replace less efficient, multi-site manual transportation functions with a transportation management system (TMS). Logic dictates that the new system should be run from what is typically called a load control center, or more recently, a control tower. The thinking is that the control tower has visibility to the transportation needs of all sites as well as to the carrier resources available to complete the moves. The control tower can more effectively negotiate carrier rates through a centralized bid procurement process and more efficiently match loads to the least expensive carriers using the TMS.

If your distribution sites are in Pittsburgh, Youngstown, and Cleveland, for example, this centralized control tower approach makes sense, especially if you are shipping similar products. The shipping profiles and carrier resources will be familiar and well-known, so matching loads to carriers will be straightforward.

But what if your business is something like this: you ship electronics from China, component assemblies from Thailand, fabrics from South America, manufactured parts from Mexico, apparel from Europe and finished goods from the United States? Suddenly the centralized control tower approach seems less certain. There are real advantages to local resources in each country making transportation decisions.

The Transportation Management Center
A different approach, and one that I am a particular fan of, is the concept of the Transportation Management Center (TMC). A TMC is an evolutionary step beyond just centralization. It is a merging of technology, organization and processes that establishes a set of services leveraging the scale and efficiency of consolidated network planning, procurement and unified metrics with the agility of localized execution.

The concept of the TMC is to provide a set of services that leverage the visibility afforded by a centralized view of all business activities. The TMC enables the business to think holistically about its transportation needs across all functions and locations, and to plan accordingly. It also allows the business to go beyond traditional transportation planning activities to include value-add services such as network modeling, centralized procurement and a wide range of analytics. This helps companies to better utilize all transportation assets, be more agile in adapting to changing requirements, be more resilient in responding to disruptions, and improve contract and governmental compliance.

Just as important is what the TMC doesn’t do. It doesn’t ignore local relationships or customs. It doesn’t handcuff local transport operations when last-minute changes need to be made. Yes, the TMS will still plan and execute 85-95 percent of all loads, but local resources can manage the exceptions and peculiarities.

Of course, the key to making a TMC successful is having the right technology supporting it. The technology must be comprehensive enough to cover the myriad of transportation modes and methods across all locations while also being flexible enough to support local execution deviations. It must offer global visibility with built-in analytics. And it must offer a simple, yet powerful user interface that cuts across organizational silos so all appropriate parties can use it.

The Next Stage
As the TMC is the next evolution of the control tower, I think there is an additional iteration on the horizon. Current TMC-type logistics operations tend to be regionally focused. This makes a lot of sense considering the value of creating geographic centric scale for such processes as procurement and network route consolidation. As the consumer-driven supply chain continues to grow, however, the need for new definitions of network agility will grow as well. This will force organizations to extend the notion of the TMC beyond continental boundaries and to provide capabilities beyond visibility, creating a more dynamic environment where previously existed segmented rigidity.

To centralize or not to centralize? Maybe it’s not the question at all.

As Vice President of Global Logistics at JDA Software, Fabrizio Brasca (@FabBrasca) is responsible for developing innovative transportation and logistics strategies across all industry verticals, strengthening executive-level relationships with JDA’s key customers and prospects, and advising companies on best practices to become more profitable. He holds an Honours Bachelor of Mathematics co-op degree with a specialization in business and information systems from the University of Waterloo, Waterloo, Ontario.

Dell Uses Artificial Intelligence at Global Command Centers

Logistics Technologies | By •

At the ToolsGroup North American User Forum earlier this fall, the company’s CEO talked about how ToolsGroup is incorporating machine-learning technology into its demand planning solution. Machine learning, which is a branch of artificial intelligence (AI), uses specially-designed algorithms to generate predictions based on entered data. ToolsGroup is using AI to improve its demand forecasting capabilities. For example, the company is looking to see if it can create variables based on new sources of data, such as social media, to improve demand forecasts.

Historically, companies bought demand management solutions developed by smart humans, and then implemented the algorithms that came prepackaged in the solution. For a while, these solutions were periodically tuned by humans to make sure forecast accuracy did not degrade. But newer demand management solutions have “self-healing” capabilities — i.e., they can look at historical forecasts, and the accuracy of those forecasts, and then suggest using a different prepackaged algorithm in particular situations.

I recall the first time I heard about self-learning software programs. I had a hard time wrapping my head around the concept. But these programs exist, and self-healing demand management solutions are a good example.

But AI solutions that build complex supply chain models autonomously? A technology that replaces the need for smart analysts? Wow!

I asked ToolsGroup if I could talk to a customer using AI in this manner, but at this point, the company is not ready to provide references. But one of my long term industry contacts, who was also at the forum, told me that Dell is using AI technology, provided by a different vendor, in its global command centers. So I reached out to and spoke with Owen Panko, the Director of Program and Project Management at Dell’s Global Command Centers. Dell has five global command centers, analogous to NASA’s mission control center, staffed with about 200 people globally.

These control towers use business process management (BPM), AI, and analytics as core tools to support their service delivery supply chain. These command towers provide visibility and process flows to parts, people, call center activity, and their technology resolution experts. For large corporate customers, their standard service level agreements include same business day, two hour, and four hour response times.

They have a tool they’ve built on top of a BPM solution that provides business process rules at the transaction level. A particular type of service request, for example, might need to be routed to a technician with a certain skill set. The BPM level of their solution also provides alerts. For example, if a dispatch order includes both a motherboard and a processor, an alert is raised to take another look at that order because including both items should really not be necessary.

On top of the BPM level runs a complex event processing (CEP) engine. CEP is also a form of AI. The CEP layer looks at the thousands of alerts generated at the transaction level and looks for larger patterns. For example, Dell expects to receive acknowledgements from 3PL partners when they receive a service request. If Dell is getting a myriad of non-acknowledgements, the CEP engine knows to look to see if the non-acknowledgements are all coming from the same 3PL. If so, it makes sense to contact that 3PL and have them correct the problem. Or the CEP might detect that call volumes have dropped in a certain region. One of their managers is flagged, and with a couple of phone calls he might be able to provide an explanation (perhaps there is a holiday in that region, for example).

Now, as far as I was concerned, the critical question was this: Did the CEP engine find these patterns itself, or did analysts program it to find the connections? Owen says they have an analysis team that includes statistical experts. These experts look at historical trends, deviations from expected service levels, and they look for significant patterns. They can then program the CEP to detect and respond to these deviations in real time. So, in short, Dell’s AI solution is not a self-learning entity capable of building or augmenting complex supply chain models autonomously.

However, that does not mean that what Dell is doing is not cool; it is very cool. The company’s command centers, and the technology that supports them, provides a competitive advantage. Thousands of customers and prospective customers tour these command centers every year. They see what Dell is capable of, and many decide that Dell is the right partner for them.

We’ve written about robots replacing people in warehouses. But apparently, supply chain analyst jobs are safe for a little while longer.

Takeaways from MercuryGate 2012 User Conference

Business Intelligence | By •

A couple of weeks ago, I participated in the MercuryGate 2012 User Conference in New Orleans (MercuryGate is a Logistics Viewpoints sponsor). There were more 40 presentations throughout the three days, with the first half of the event focused on logistics service providers and the other half on shippers. Many of the company’s 200+ customers were in attendance. While MercuryGate has historically had a strong presence in the 3PL market, its shipper customer base continues to grow, with close to 50 clients in manufacturing, retail, and distribution.

On the first day of the conference, which was focused on logistics service providers, I moderated a panel session on “Delivering Customer Value Beyond Operational Excellence,” with Jeff McDermott, VP of Transportation Management at OHL, and Brad Young, Vice President at Mode Transportation. I kicked off the conversation with a question I raised in a recent posting: If operational excellence is not enough for 3PLs to differentiate themselves in the market, then what else matters?

The ability to respond quickly and cost effectively to new customer requests and requirements was viewed as a differentiator by the panelists. Of course, as they noted, technology plays an important role here — specifically, having the ability to deploy and configure new functionality quickly, easily, and inexpensively. The panelists also talked about some other important technology capabilities, including business intelligence, mobile applications, and modeling capabilities.

But technology alone is not enough; a 3PL also needs to position its people as a competitive differentiator. As one 3PL in the audience said, “A shipper can deploy a TMS themselves, but many of them don’t have the resources internally to effectively use and manage it, so they don’t get the full value from the application or stop using it. What a 3PL brings is not only the technology, but also the experts that know how to use it to continuously deliver value.”

As for the rest of the conference, I was only able to attend a few of the presentations, but here are some of the new capabilities that caught my attention:

Freight Forwarding: Many of MercuryGate’s 3PL customers have freight forwarding operations, and the overall freight forwarding market is still highly fragmented and underserved, so this is an important extension of the company’s TMS. MercuryGate has developed a multi-phase roadmap, with Phase 1 completing this year, and Phases 2 and 3 by the end of 2013. Phase 1 capabilities include:

  • Quotations (the ability for LSP clients to obtain quotes online via branded portals)
  • Order Management (portals for vendors to create shipments and request routing)
  • Shipment Planning (multi-mode, multi-leg, including air and ocean)
  • Carrier Booking (includes integration with INTTRA)
  • Automated Air/Ocean Schedule Update (via Linescape and Flightstats)
  • Customs (AES, 10+2, via partnership with Integration Point)
  • Visibility and Financial Settlement

Many of the capabilities MercuryGate plans to add in Phases 2 and 3 are customs related, such as restricted party screening, harmonized tariff schedules, and integration with Canadian and Mexican customs. The speed and success of these phases will depend on how well MercuryGate and Integration Point can work together to integrate their solutions.

RateFriend: One of the biggest trends in the TMS market is embedding benchmark data within the application (see here and here for related commentary). RateFriend uses data from the MercuryGate customer network to calculate monthly benchmarks by lane. The data is batch updated nightly and scrubbed to preserve anonymity. Customer rates are maintained separately from carrier rates, as are contract rates from spot rates. Below is one of the screenshots.

Source: MercuryGate

I haven’t seen a demo of the solution or spoken to a customer using it, but based on the information presented and planned enhancements, RateFriend seems like a good start for users looking to compare their rates with a reference point, but it lacks some important features found in competitive offerings (such as integration with their procurement solution, which is in the works, and using more sophisticated data modeling and analysis techniques, which is also in the works).

Mobile and MercuryTouch: MercuryGate was among the first TMS vendors to provide mobile access to its application (see “TMS for iPhone: There’s an App for That!”), and the company continues to enhance the capabilities of its mobile interface, which works on any smartphone with a browser (it’s delivered via a URL, so you don’t need to install an app). The screenshot below provides a high-level overview of the mobile features.

Source: MercuryGate

For the executive team, MercuryGate has introduced MercuryTouch, which is basically a business intelligence dashboard formatted for tablet computers like the iPad (see screenshot below). Users can track shipments on demand and plot shipment reports to a Google map, and they can access reports created within the TMS that are formatted specifically for the tablet platform.

Source: MercuryGate

Control Tower Visibility: Many shippers and 3PLs with operations across multiple geographic regions (and sometimes with multiple operations within each region) are looking to take a “control tower” approach to managing their freight. The main objective is to have global visibility to what’s happening across the network, particularly from a business intelligence and reporting standpoint, while enabling each region and operation to set up their processes based on local requirements (see here for related commentary). MercuryGate walked through the process of how to set up control towers with its TMS, using various templates and configuration settings, including creating reusable workflows (“ezClick”) that guide users through a set of defined process steps.

This was the seventh consecutive year that I’ve participated in this conference, so I have some perspective on how far the company has come. Over the years, MercuryGate has diversified its customer base, has expanded into new geographic regions, and has increased its solution footprint. Simply put, MercuryGate has achieved critical mass in the TMS market. The question now is where does the company go from here? Every year I wonder if this will be the year that MercuryGate gets acquired by a bigger fish in the market, one that offers a broader logistics solution footprint, but so far it hasn’t happened. If anything, maybe it’s the smaller fish entering the pond — coming to market with new architectures and rapid and inexpensive deployment models — that MercuryGate needs to pay more attention to moving forward, because in the software industry today, “big eats small” is giving way to “fast eats slow.”

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