Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

The Contribution of Supply Chain Networks To Smart Manufacturing and Industrial IoT

Production | By •

ValentijnIn my keynote, I stressed that Smart Manufacturing initiative around the world, are all inspired by research that indicates that manufacturing growth, competitiveness and resilience are directly correlated with high technology intensity and manufacturing complexity as well as quality.  These three key factors can be improved and maintained by investment in product, process and productivity innovation.  The smart manufacturing initiatives around the world (for example Industrie 4.0  Smart Manufacturing Leadership Coalition (US), or Horizon 2020 (EU)) all aim to impact these factors and create growth from manufacturing innovation.

To create some clarity, we decompose smart manufacturing in advanced manufacturing (such as modular production technology, additive manufacturing, nano technology or biotechnology) and smart manufacturing technologies.  Among the latter industrial IoT (Internet of Things) has obtained a lot of attention, and contributes to global awareness and determination to implement IT-related manufacturing solutions to create a multitude of benefits, new business models, additional productivity and more.

Looking closely at today’s developments in supply chain networks within these initiatives, we find an initiative piloted by General Mills as part of the Smart Manufacturing Leadership Coalition (SMLC) to reduce the implementation of supply chain applications dramatically.  The company aims to reach implementations with durations of months rather than years.  In Europe, ThyssenKrupp is one of the integrated companies that consistently implements Industrie 4.0 across domains and operations.  The company was able to increase the throughput of a plant producing intermediate products (transforming steel slabs into rolled steel), by applying pull manufacturing and coordinating manufacturing and logistics with real-time information.  While pull manufacturing is not new, it a great opportunity for many industry sectors to apply it.  Fortunately Industrie 4.0 creates momentum to do this.  In specialty and performance chemicals as well as life sciences, the NAMUR organisation is well known for their vision and standards, mostly in automation and IT for manufacturing.  In supply chain coordination, the contribution by Dr. Poetter from Bayer Technology Services in 2013, anticipated the use of wireless and/or internet connectivity to faster order raw materials to variable production orders.  A Supply Chain Operating Network such as Elemica could perfectly play its role in such a scenario to make the link between supplier and manufacturer to find the raw material that could arrive earliest at the production site, when the supplier has IoT connectivity with its logistics network.  The latter could then directly coordinate via Industrial IoT connectivity with the manufacturer to reserve a docking station and creating an unloading appointment.

In the near future, modular production technology – miniature chemicals plants in a container – will make supply chains much more agile than today’s.  But to plan and optimise them, they become also more complex. Manufacturing capacity can be very fast and flexibly scaled up and down, and production units can be shipped to sites close to raw material production or consumers.  Early examples today are on-site production of liquified air and dangerous gases as feedstock for downstream production.

As a result of these developments, ARC expects that supply chains will become fare more agile, dynamic and complex over the coming years. Not only the number of permutations of possible routings will become orders of magnitude larger, also the tighter supply chain network integration will cause important supply and demand volatility that should be damped with high quality supply chain coordination and professional operation of Supply Chain Operation Networks (SCON).  New developments in discovery, predictive and prescriptive analytics applied to supply chain network regulation and optimisation are very promising to assist the operators.  As these can operate in-memory and in the cloud, they take out ‘latency’ of previous-generation applications and can compensate for supply chain volatility.

Industrial IoT, supply chain optimisation and analytics can help the operators best, when they allow them to focus on problem solving by providing easily interpretable analyses within context and unload the them from repetitive tasks.  Then the operator can work at his best, and assess, delegate, interpret, judge and decide with consciousness and skill.  As each decision involves emotional processing in the brain, for example when it concerns ethics, we will continue to need operators as part of our systems.

ARC recommends users to take time for planning the future and set radical improvement targets in product, process and supply chain performance, as Industrial IoT solutions have shown to be able to provide those.  These goals should be aligned with the users’ strategies, and a roadmap should include quick wins – as incremental solutions are available today – as well as a long term plans.  Since the smart manufacturing landscape changes quickly these roadmaps must be updated regularly.

There were many other excellente presentations at Ignite, both by Elemica, users, partners and consultants.  Dr Stefan Artlich from Bayer Technology Services gave a very crisp presentation on the state of the art in serialisation for drug manufacturing, reporting about a pilot in Sweden, technology maturity, challenges and benefits.   Dr. Olaf Stange from Bayer Health Care spoke about supply chain innovation, and both referred back to the modular production technology introduced by me.  These were additional indications that industry transforms these concepts into momentum.   Dr. Stange mentioned many challenges that the pharmaceutical industry needs to respond to, ranging from patient information, through societal cost, via complexity of invidualized therapy and short shelf lives as well as the complexity and variability of labelling and legal requirements. Supply chains need to be very accurate he said, and to increase the speed through the network the company studies ‘virtual factories’ with ‘late nationalisation’, referring to an as-late-as possible labelling of ‘white products’.

Another fascinating presentation was made by Mark Babbit from Switch and Shift  who talked about the power of social networks, with recommendations of who to manage them professionally as a corporation.

Most presentations can be viewed as Video’s or PDF’s at the following link http://resources.elemica.com/h/c/212968-conferences-and-events.  We encourage our readers to explore these further.

Valentijn de Leeuw is a Vice President of Consulting at ARC Advisory Group. Based in Europe, Valentijn’s responsibilities include research and consulting in process industries, with focus on clients in Europe, Middle East and Africa (EMEA). His technology focus is on manufacturing operations management, performance management, knowledge management and the role of the knowledge worker in manufacturing. Valentijn holds a PhD of technical sciences from Delft University of Technology (NL) in cooperation with Ecole Nationale Supérieure des Mines de Paris and IFP.

This Week in Logistics News (September 23-27, 2013)

Cloud/Software-as-a-Service | By •

Tuesday night, I went to Staples with my daughter to buy some printer ink. She was immediately attracted to a colorful display, which caught my attention too. I took a picture of it and shared it on Twitter, which became my most popular tweet of the week: 

Yes, the future is coming faster and faster. And I’m guessing it won’t be long before many of us will head out to Staples, not to buy ink, but to buy 3D printing supplies.

In other news…

The needle keeps moving forward for omni-channel fulfillment and same-day delivery. According to an article in The Cincinnati Enquirer, Macy’s has expanded its network of fulfillment departments to 500 stores. Here’s some insights and details from the article:

Every morning, staffers from the merchandise team [at the Macy’s store in Springdale, OH] – who normally stock shelves and set up displays – fan out across the store and collect ordered items. Items are brought back to the fulfillment center where staffers wrap and tag orders for the afternoon UPS pickup. On an average day, the store will prepare 50 to 60 orders. On a one-day sale day, it’s more likely to be 75 to 100 orders, and during the busy holiday season after Thanksgiving, the store will handle 300 to 400 orders a day.

The article also states that to enable omni-channel retailing at the store level, Macy’s replaced all its 40,000 cash registers with Web-enabled machines. The cost is a drop in the bucket compared to the $1 billion per year in sales growth the company has experienced the past three years due in part to its omni-channel fulfillment strategy.

Meanwhile, Google announced that it is expanding the rollout of its same-day delivery service, Shopping Express, “to everyone living or working in [its] Bay Area delivery zones, from San Francisco to San Jose.” The company also launched a new mobile app, available for both Android and iOS, “to bring [consumers] the convenience of Google Shopping Express even when you’re on-the-go.”

I don’t know about you, but it’s very exciting to see supply chain and logistics come out of the shadows and take center stage in the business strategies of manufacturers and retailers — and, in some cases, become the difference between corporate failure and success.

On the technology front, Kewill announced the release of Kewill MOVE, “a complete, comprehensive platform for managing the complexities of transportation, logistics and trade compliance.” The press release provides additional details, but simply put, Kewill MOVE brings together the various solution capabilities Kewill has developed or acquired over the years into a single platform. We’ve seen other enterprise software vendors move (no pun intended) to a “platform” architecture in recent years, so Kewill is basically adopting the same strategy to strengthen its competitive position. I’ve been a big proponent over the years of bringing together transportation, global trade, and connectivity solutions into a single platform. Kewill certainly has all the right pieces — whether it can assemble them effectively into “comprehensive” solutions, as well as meet the rapid time-to-value and fast innovation cycles customers expect — remains to be seen. Nonetheless, I believe Kewill is heading in the right direction with its strategy.

Oracle OpenWorld was held this week in San Francisco. I didn’t attend, but based on all of the press releases, I’m guessing “cloud” was mentioned at least a billion times during the event. The news that caught my attention the most was the launch of Oracle Cloud Marketplace, which features “more than 100 business applications developed by Oracle partners…and enables Oracle Cloud customers to easily browse, evaluate, and buy trusted business applications.”

Almost five years ago, I wrote about the growing role “app stores” will have in enterprise software (see “An App Store for Logistics Software”), and over the past few years, Salesforce.com (with its AppExchange marketplace) and NetSuite (with its SuiteApp marketplace) have proven the model. The launch of Oracle Cloud Marketplace, while late to the game, is further validation that the future of enterprise software will look drastically different than the past, especially when you add social networking and mobile to the equation.

Finally, according to a Bloomberg article, it seems like Walmart is having some inventory management issues. Here’s an excerpt from the article:

U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.

Read the rest of the article and you’ll see why technology is not a silver bullet, why under-investing in people ultimately costs you in the end, and how the potential gains of innovation are washed away by poor execution.

And with that, have a happy weekend!

Song of the Week: “Waiting for My Real Life to Begin” by Colin Hay

Ariba: At the Intersection of Social and Business Networks

Logistics Software Vendors | By •

Last week at the Ariba LIVE 2013 conference, I led a discussion session titled “At the Intersection of Social and Business Networks” with about fifty senior executives in supply chain and procurement. I made the case that we are currently seeing the rise of supply chain operating networks, the business equivalents of Facebook and LinkedIn, which are enabling communities of trading partners to communicate, collaborate, and execute business processes in more efficient, scalable, and innovative ways. We then explored several questions together, including:

  • What are the most promising opportunities business networks have to offer companies?
  • What are the main obstacles and concerns companies must overcome to further adopt network-based business processes — and how do they overcome them?
  • What can business networks learn from Facebook, LinkedIn, and other mainstream social media sites in terms of user experience?

The timing of my session was perfect because it followed a keynote presentation by Sanish Mondkar, Executive Vice President and Chief Product Officer at Ariba, where he showed (via a demonstration of a new solution called Ariba Services Procurement) what’s possible at the intersection of social and business networks. Here are some highlights from his presentation:

  • Sanish highlighted one of the hidden values of a business network: the creation of a Commerce Graph, which maps the business relationships between companies. Ariba believes that Commerce Graph-aware business apps are inherently more intelligent than traditional applications, and they will drive the next wave of business productivity and effectiveness. I completely agree, as I outlined in “Facebook Graph Search, Through a Supply Chain Lens” earlier this year.
  • The ability to provide users with network-based intelligence is arguably the most important attribute of a business network. As I’ve written about many times, what sets a network-based solution provider apart from a traditional software vendor is their ability to leverage the vast quantities of data flowing through their network to provide customers with timely insights and intelligence that they otherwise couldn’t get. In the Ariba Services Procurement demo, for example, the system automatically presented the user with network-based intelligence and recommendations (based on real-time data from the Ariba Network and various third-party data sources) about labor rates, lead times, job skills, and other information to help the user make smarter decisions about the task he was performing.
  • In a posting last month, I argued that supply chain solution providers will start to compete on design, with the “consumerization of IT” being a key driving force. The UI presented in the demo was a perfect example — simple, intuitive, and similar to the look and feel of consumer sites and applications. The most interesting part, however, is how Ariba is integrating its online user community (Ariba Exchange) into its user interface and leveraging it as another source of network intelligence. As a user is performing a task, related content from the user community is automatically pushed to the UI to provide the user with insights from other customers about the task he is performing.
  • Ariba plans to expand into supply chain, logistics, and inventory management processes, with the first solutions coming out in 2014. No details were provided, but clearly SAP and its customer base will play an important role in defining the roadmap.

I had the opportunity to interview Sanish afterwards to discuss the points above in more detail. Watch the video below for Sanish’s comments on:

  • The three important attributes of a business network
  • Why Ariba is looking to expand into supply chain, logistics, and inventory management
  • The role and value of network intelligence
  • The biggest misconceptions and questions companies still have about business networks

Even though I’ve been talking about supply chain operating networks for more than a decade, in many ways we’re still in the early stages of making the vision a reality. Thanks to the consumerization of IT and the growing recognition by technology companies and customers that “software is not enough” when it comes to supply chain management, I predict we’ll see more innovation and market adoption of supply chain operating networks (or, if you prefer, “social business networks”) over the next 2-3 years than we’ve seen in the past decade.

Ariba is certainly not alone in pursuing this path. Descartes, E2open, LeanLogistics, Elemica, and others are also pushing the envelope in this area (see my interview with Descartes CEO Art Mesher from earlier this year). How these networks will continue to evolve and interoperate remains an open question — but I’m very bullish on the future. Stay tuned because I believe the best is yet to come.

(Note: Descartes, LeanLogistics, and SAP are Logistics Viewpoints sponsors)

This Week in Logistics News (May 6-10, 2013)

This Week in News | By •

After spilling coffee all over my desk this morning and cleaning up the mess, I am short on time, so let’s go straight to the news this week:

C.H. Robinson reported mixed results for Q1 2013. On a pro forma basis, total net revenues increased 3.8 percent and income from operations increased 0.3 percent in the quarter compared to Q1 2012. Truckload net revenues increased 1.9 percent, less-than-truckload net revenues increased 12.9 percent, and intermodal net revenues decreased 6.3 percent compared to the same period last year. One bright spot was the company’s “Other logistics services” net revenues, which include transportation management services, warehousing, and small parcel, which increased 22.3 percent in the quarter compared to Q1 2012; the increase was due primarily to transaction increases in its transportation management services. John P. Wiehoff, chairman and chief executive officer of C.H. Robinson, said the following in the press release:

“Our results for the first quarter of 2013 reflect the slower growth and continued margin contraction that we have seen in the markets we serve. They also reflect our continued investments in our future and adjusting to the changes we see. We remain positive in our long term performance outlook. Our investments, including the acquisitions executed last year, continue to drive our revenue growth and ability to service the global supply chain needs of our customers.”

Back in January, I discussed the “Rise of Supply Chain Operating Networks” on Talking Logistics. Based on Elemica’s announcement this week, and what I saw and heard at Ariba Live 2013 (more on that in a future posting), I am very encouraged by the developments occurring in the market — including the incorporation of social networking capabilities, something I never imagined when I first coined the “supply chain operating network” term a decade ago. According to Elemica’s press release:

The new Elemica QuickLink Network captures transaction data across the entire network, creating a critical mass of real-time business information allowing partners to collectively sense and properly respond to supply and demand changes in the market. Built in social collaboration [emphasis mine] gives clients the ability to discover, create, and build new or more robust business relationships faster. In addition to being an efficient method for broad collaboration, social also provides clients with the ability to quickly analyze the marketplace and assess partner performance.

Meanwhile, Ariba and Discover Financial Services announced AribaPay, “a new service to be offered by Ariba [will be generally available in 2014] that is expected to transform B2B payments by eliminating paper transactions, providing better visibility into cash flow and producing rich remittance information that improves reconciliation processes for buyers and sellers.” In short, this new service will strengthen the Pay side of the Procure-to-Pay process through the Ariba Network.

Thanks to the consumerization of IT and the growing recognition by technology companies and customers that “software is not enough” when it comes to supply chain management, I predict we’ll see more innovation and market adoption of supply chain operating networks (or, if you prefer, “social business networks”) over the next 2-3 years than we’ve seen in the past decade.

Speaking of software not being enough, JDA held its JDA Focus 2013 user conference this week and many of its announcements were focused on services rather than software. For example, the company announced the release of six JDA Cloud Optimize services — demand planning, replenishment planning, inventory optimization, next generation collaborative planning forecasting and replenishment, category management, and workforce management for retailers — that “enable customers to enhance and transform their supply chains by expanding their internal teams to include JDA expertise and standardized, repeatable processes that yield consistent results.” This is yet another example of how solution providers can differentiate themselves by combining software with human IP (supply chain talent), which many companies lack these days.

In other technology news, Roadnet Technologies launched Roadnet Transportation Suite version 3.6.2 that includes new enhancements, such as improved self-installation software upgrade mechanisms, fleet route profitability calculations and processes to efficiently calculate optimal route distances. Here are some additional details from the press release:

The Optimal Route Distance function allows transportation logistics professionals to quickly compare the mileage of a route to the “optimal” route by distance. This new vehicle routing feature enables users to determine the impact of tight time windows on route performances, as well as quickly identifying those with excessive mileage figures. This feature is also a key indicator for routers to understand how manual movements affect the routes.

 

In addition, the new route profitability functionality highlights the profit a fleet’s route generates based on total route cost and revenue per order. This exact data enables fleet routers to determine the cost to add stops or make manual moves relative to revenue generation and profitability as well as export information for use in analysis of profit per delivery or profit per customer relative to delivery.

Finally, as yet another example of how maps are becoming a killer app, and how business, mobile, and social networking apps are coming together, Facebook is reportedly in talks to buy Waze, an Israeli company that calls itself “the world’s fastest-growing community-based traffic and navigation app.” Here’s an excerpt from the Reuters article:

Maps and navigation services have become a key asset for technology companies as consumers increasingly adopt smartphones and other mobile devices.

 

Waze uses satellite signals from members’ smartphones to generate maps and traffic data, which it then shares with other users, offering real-time traffic info.

Time to get some more coffee. Have a great weekend!

Song of the Week: “Don’t Let’s Start” by They Might Be Giants


Note: C.H. Robinson and JDA Software are Logistics Viewpoints sponsors.

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