supply chain convergence Archives

Why Supply Chain Convergence is Critical to Greater Agility and Resilience

Supply Chain Optimization | By Alex Zhong • 06/07/2022

Having an effective supply chain practice has always been a difficult balancing act, even in relatively stable times. Many factors need to align for an organization to be able to source materials, produce a product and put it in the hands of customers.

However, the last few years have been defined by disruption. The pandemic has exposed flaws in business practices across industries, which have been acutely felt in their supply chain and procurement operations. Furthermore, inflation has become a growing concern, causing price pressure up and down the supply chain. Mixed in are supply shortages, tariffs and geopolitical issues — all of which will likely continue for years to come.

Amid this perfect storm of disruption, GEP and the North Carolina State University (NCSU) Supply Chain Resource Cooperative surveyed supply chain, procurement and IT professionals across a range of industries to gain insight into their priorities and strategies regarding supply chain resilience and optimization.

Gaps

The survey’s results suggest a series of misalignments where gaps in process, technology and information flow can be a drag on productivity and optimization. Of the professionals surveyed, 59% saw the gap between procurement/sourcing and supply chain to be a major disconnect, and the most pressing pain point. Overall, the survey highlighted disconnects between supply chain and procurement, between middle management and executives within these operations, and between these functions and the enterprise.

The study highlighted a number of areas where these gaps arose.

Gap between supply chain and procurement

Executives within procurement and supply chain are not always in alignment on what guides their planning decisions, whether it’s reducing financial risk or prioritizing lowest-cost suppliers. In addition, from an operational perspective, supply chain executives saw on-time delivery as the highest priority, whereas procurement executives saw achieving lowest costs as the highest priority. Both procurement and supply chain leaders in the survey recognized that the gaps would have a significant impact on key supply chain KPIs such as higher costs, longer cycle times and reduced resiliency.

Gap between supply chain and procurement execs and middle management

Other major studies conducted in the same time frame have suggested that resilience should be the highest priority across the board; this study seems to have a different overall outcome. While those at the CPO and CSCO level concurred with the prior research and saw resilience as the highest concern, supply chain and procurement executives noted this as their third highest priority — which suggests that the C-suite is not effectively operationalizing resilience and communicating it to their teams.

Gap between enterprise goals and supply chain and procurement

The executives also had a different view on enterprise priorities. Supply chain executives noted sustainability as being the No. 1 enterprise priority, while procurement executives chose diversity.

This distinction reveals their different perspectives in these strategic efforts. Procurement executives rank diversity as the most important enterprise priority because a more diverse workforce and supply base leads to better performance on projects and creates teams that can leverage diversity of thought to expand options. Supply chain executives chose sustainability, as broader ESG goals help ensure the company’s long-term business interests while also reducing the carbon footprint and providing other environmental and social benefits.

The biggest impact on sustainability happens through external suppliers and partners up and down the value chain, so greater alignment internally is required to collaborate effectively with outside groups. In addition, to drive successful supplier collaboration and inclusion, diversity should be seen through a broader lens of sustainability rather than just a matter or procurement. There is also an important relationship between resilience and sustainability: while sustainability is the goal, resilience is a precondition for it; they are interdependent.

Gaps are problematic at all times and hinder operational effectiveness. However, in the current disruptive environment — one that we will likely experience for years — problems that arise from misalignment are exacerbated and amplified across supply chain, causing them to break.

What can organizations do to fix the disconnect and build resilience and flexibility into the supply chain?

Convergence

Supply chain convergence — a uniting of processes and information flows across the organization and its supply chain, organically and at a deeper level — is the path to resilience. To get there, organizations need to align their supply chain and procurement operations to address the key pain points of visibility and collaboration.

Technology offers solutions toward greater alignment, and supply chain and procurement executives largely agree on the solutions that can bring them closer together and are critical to convergence:

Solutions offering flexible workflows
Solutions for master data management
Supply chain visibility solutions
Control towers
Collaboration platforms

To drive convergence and alignment, the technology would need to feature solutions that can enable alignment along the enterprise, delivering:

Real-time visibility, tracking and collaboration across the supply chain
The ability to connect with multiple tiers of suppliers, logistics providers and partners
Configurable workflows to adapt to the organization’s processes
Holistic collaborations enabled by process and technology

Technology needs to work seamlessly with processes and enable flexibility, agility and configurability so the user can respond quickly to changing conditions on the ground. When such a solution is in place and there is harmony between technology and process through convergence, organizations may be able to enhance resilience in their supply chains. In doing so, they will bend rather than break when faced with disruption.

Alex Zhong is Director of Product Marketing at GEP. Alex has more than 20 years of practical experience in supply chain operations and has advised many Fortune 500 companies on their digital transformation. At GEP, he leads product marketing for the company’s AI-enabled supply chain solutions. He is passionate about the role technologies play in driving supply chain excellence and business growth.

Examining the HighJump Software Acquisition

Mergers-Acquistions | By Clint Reiser • 09/06/2017

The Acquisition In-Brief

Last week Körber AG announced that it had acquired HighJump. I first became aware of Körber in 2014 when the German holding company acquired Inconso, a German supply chain software provider. At that time, Inconso was a complementary addition to Körber’s other Intralogistics businesses, but was distinct in its focus on commercial software. Shortly thereafter, Körber expanded its software portfolio with the DMLogic acquisition. Now with the HighJump acquisition, Körber has greatly expanded the software segment of its Logistics Systems business. Körber AG is owned by the Körber Foundation, and as such, is not subject to the rigid investment time horizons often imposed by private equity firms. This provides additional latitude for post-merger integrations, strategy development, and product development roadmaps. In my opinion, the acquisition provides numerous growth opportunities, or potential “synergies” to the company. However, as with any acquisition, proper execution is essential to realizing these synergies.

Körber Logistics Systems

Körber’s Logistics Systems business includes two European-based warehouse automation systems integrators, a palletizing provider, a depalletizing solution provider, and the software businesses Aberle Software, DM Logic, Inconso, and HighJump. As I noted in previous LV posts, warehouse automation and warehouse software companies are being acquired due to the high growth rate of the warehousing technology space that is itself being propelled by the e-commerce boom. Körber is likely focusing on warehousing technology due in large part to this secular growth it is experiencing. Operationally, Körber tends to allow its portfolio companies to function as independent entities, but provides opportunity for cross-pollination in areas such as strategy and research and development. However, the software companies within Körber Logistics are expected to become more closely integrated. In particular, the businesses of HighJump and Inconso is where I see the greatest opportunity for growth synergies.

Strategic Fit

There are multiple ways in which the HighJump acquisition creates growth opportunities for Körber. Geographically, the companies are an ideal match with little overlap. Inconso is a well-established WMS and WCS provider to companies in Germany and other countries in Western Europe, but has limited presence in the North America market which is growing more quickly than Europe. At the same time, HighJump is well-established in North America but has limited presence in Europe. The combination of HighJump and Inconso also allows the combined entity to meet the needs of a wide range of warehouse complexity and throughput requirements. Western European warehouses are among the most heavily automated in the world and Inconso meets the needs of these operations with its integrated WMS/WCS solution set. These warehouses are often large facilities with high throughput and large capital investments. HighJump typically sells its Warehouse Advantage solution to companies that are running moderately complex manual or partially automated warehouses. These facilities have lower throughput than the large automated warehouses Inconso often supports. In addition, HighJump offers a WMS product for small to medium sized businesses and another designed for the needs of 3PLs. Furthermore, HighJump and Inconso offer additional complementary applications including TMS, labor management, yard management, and planning solutions that together can strengthen the company’s position in large platform deals.

Other Logistics Systems Businesses

Allowing the software businesses to operate autonomously ensures that the software companies will remain focused on their current customers and product development strategy. But it could also hinder potential synergies. There is a history of WMS software failing to flourish when combined with warehouse automation businesses. But more recently the trend appears to be reversing, as warehouse automation providers have seen their warehouse automation and mechatronics offering become commoditized while differentiation is increasingly being defined by the intelligence of the overarching software systems, including WCS, WMS, and facility-wide analytics. Körber has an opportunity to create a highly competitive global intralogistics offering if it can harness and integrate the individual strengths of its Logistics Systems businesses.

How Consumers are Transforming Supply Chain

Omni-channel logistics | By James LeTart • 12/01/2015

There’s a new boss in town and she is tougher than any boss you’ve had before. She wants what she wants, when and where she wants it. She’s the new digitally-empowered consumer and she is dictating how retailers and consumer goods companies must transform their supply chains to serve her.

This new boss will access your brand wherever and whenever she wants through the device of her choice. There are no channels for her, just a demand for consistent, seamless shopping experiences. She’ll reward those brands who provide this shopping experience with her loyalty. Those that don’t, get on her “naughty” list. In fact, in a survey of over 1,000 consumers conducted by JDA last month, one in four consumers who shopped online over the past year say they experienced a negative issue with delivery, and of those, 50 percent said they would not shop with the retailer who disappointed them over this holiday season.

What it Means for Brands
Gone are the days of linear supply chains. The convergence of physical and digital commerce through the consumer’s buy anywhere / deliver anywhere / return anywhere shopping journey is requiring retailers and consumer goods companies to rethink and transform their supply chains from a product-centric to a customer-centric focus. This has many implications for supply chain management.

First, companies have to get serious about finally establishing true end-to-end supply chain visibility. This includes accurate counts of what inventory is in each store, and extending this visibility to the consumer so if she places an order online for pickup in her local store, she knows it will be available when she gets there. And your ecommerce system must have that store-level visibility so that if the merchandise she wants is not in her local store, you can offer either for her to pick it up at another nearby store that has it in stock, or you can deliver it to her home or office.

Of course, making these kinds of decisions, such as offering a free home delivery alternative, requires that your ecommerce system has access to supply chain execution cost and constraint information. It doesn’t make sense to offer that alternative if you can’t meet the promised delivery timeframe or the cost wipes out your margin on the sale.

The second big change is in how your distribution centers must operate. Instead of just handling case or pallet picking for store replenishment, they now must also handle large volumes of small order picking along with cartonization, parcel manifesting and parcel shipping. While many companies outsourced ecommerce order fulfillment when channels were separate, that is a lot more problematic and expensive as physical and digital channels combine and online sales rapidly increase. For example, if an order is placed online through a separate ecommerce channel for in-store pickup, how is the inventory accounted for and how does that impact replenishment planning?

There are other considerations for the DC. Is automation equipment such as conveyors and sortation systems warranted to handle the higher each-pick volumes? Will slotting software improve picking velocity and cost? Should DC layouts be changed to accommodate these new requirements? These considerations aren’t just about cost, either. With consumers’ demands for same-day or next-day deliveries, the DC must now be much more agile than when you had standard replenishment processes.

The third major impact is on labor, both in the DC and in stores. Item-picking in the DC is more labor intensive and requires different skills and training than case and pallet picking. The new requirements for cartonization, packaging and manifesting for online orders add time and complexity. Labor management systems are needed for accuracy and efficiency.

In stores, order fulfillment is a whole new ballgame. It not only requires new skills, but also different scheduling, task management, training and incentives. For efficiency and accuracy, many of these new tasks are best directed through mobile devices.

Store associates also need help deciding what to do with the much higher volume of returns from online orders. Should the returned items be restocked, sent to another store or DC, repackaged or repaired, or returned to the supplier? Stores are much more complicated places to manage than they used to be. More automation is a must.

What it means for planning
Planning for consumer-driven omni-channel operations is much more complex than when ecommerce and store operations were separate. Basing inventory plans on what was shipped from DCs no longer is adequate because it doesn’t identify the source of the demand.

For example, if an associate at one store saves a sale on an out-of-stock item by locating it in another store, how is that demand accounted for in replenishment planning? Traditional planning systems will falsely identify the demand as coming from the second store, resulting in too much stock being replenished to that store versus the first one where the actual demand was generated. New demand-sensing planning systems are needed to accurately identify true demand in order to properly plan replenishments.

I am just hitting the tip of the iceberg in defining the many ways today’s new boss is transforming supply chain operations. Suffice it to say that those companies that achieve end-to-end visibility, develop efficient omni-channel fulfillment operations, and transform their stores will be the winners going forward. To learn more on this topic, go to JDA.com.

In his role as Director, Thought Leadership at JDA Software, Jim LeTart is responsible for developing thought leading content to support JDA’s Plan to Deliver suite of integrated retail and supply chain plan and execution solutions. Jim came to JDA in 2013 through its merger with RedPrairie, where he spent over 13 years in various marketing leadership roles. Jim has over 35 years of sales and marketing experience in the computer technology industry, and is a frequent speaker, writer and blogger on how technology can improve business processes and outcomes. Jim has an MBA from the University of Michigan and a BSME from Marquette University.

ERP vs. Best-of-Breed is History

Guest Commentary | By James LeTart • 11/10/2015

Do you remember the old days when the hottest topic in supply chain software evaluations was whether it was smarter to go with the “good enough” applications from the major enterprise resource planning (ERP) vendors or to go with the superior functionality of the best-of-breed vendors even though integration was a concern? IT argued that having a fully integrated approach and “one throat to choke” was more important than covering 100 percent of users’ needs. Users argued that enabling them to do their jobs thoroughly and efficiently was more important than minor integration issues. Both sides were right, and wrong.

Regardless of which side of that argument you were on in past, it no longer matters because today’s much more dynamic and complex marketplace makes both options obsolete. The concept that one corporate system can do all things for all people was never very viable, but is even less so now with the complexity of omni-channel fulfillment requirements and the need to respond agilely to volatile consumer demand. And the exacting requirements of customer segmentation and personalized offers make “good enough” solutions no longer good enough.

On the other side, providing seamless shopping experiences and running integrated, agile supply chains isn’t possible with a bunch of cobbled together best-of-breed solutions. Even if you can get the integration working right, the rapid rate of market change means you will have to do it over and over again, which is both too time-consuming and expensive. Neither the monolithic approach nor silos of automation are effective, therefore, for today’s volatile marketplace.

Business Support Platforms
Every business executive knows that to be successful in today’s market requires a combination of agility, collaboration, business process optimization and real time analytics. There is no room for silos in business operations or in the supporting technology. Companies have to work collaboratively, both internally and with their trading partners.

Operationally, this means that business process workflows must seamlessly cross organizational and functional boundaries. It means that planning and execution are no longer separate processes, but instead are part of an iterative loop where plans are adjusted in real time as constraints and disruptions occur during execution. And it means that the technology supporting these borderless workflows must not operate in processing silos either.

The alternative that has emerged to meet these new, more complex and real-time processing requirements is neither an ERP nor a Best-of-Breed system, although it has the best elements of both. It is a business support platform.

A business support platform is an integrated solution that supports end-to-end business functions such as supply chain management or retail operations. Like an ERP, it is a totally integrated solution operating off of a single data model and data management structure, but without the burden of all of those back office systems like accounting or general ledger. Rather than trying to be all things to all people, it is a very focused, in-depth solution for a particular area of the business. Like Best-of-Breed systems, a business support platform has deep fit-for-purpose functionality, but in an integrated platform rather than as standalone systems. Thus, a business support platform has the best of both options without their downsides.

A key benefit of business support platforms is their comprehensive, integrated approach to specific business issues. For example, business leaders and industry analysts have long claimed that supply chain planning and supply chain execution should be closely integrated. That has never been more true than today when rapid demand changes and shifting constraints often render traditional plans obsolete before they can be executed. A supply chain business support platform tightly integrates and optimizes planning capabilities that are constraint-aware with flexible execution functionality that can agilely react to revised plans in an iterative process informed with deep analytics and modeling capabilities.

Another aspect of a business support platform that can be quite helpful is deploying them in the cloud. Since most large corporations today have many sites and supply chain partners spread around the globe, coordinating and integrating these operations to support supply chain visibility and process workflows can be difficult and time-consuming. Deploying solutions through the cloud alleviates many of these challenges and helps ensure everyone is always up-to-date and that business processes, data structures and workflows are consistent.

Does this mean business support platforms replace ERP or Best-of-Breed systems? No, they still have their place. ERP systems handle important back office functions and share data with the business support platforms. Best-of-Breed systems continue to offer specialized innovation that often feeds into business support platform processing. The point is that it is no longer a choice between ERP systems and Best-of Breed systems. They both have their purpose, but neither adequately supports the specialized end-to-end business processes required by today’s complex, volatile and integrated marketplace. Business support platforms now serve that purpose and enable a level of proficiency and throughput not previously possible.

The Evolution of WMS Customer Requirements

Supply Chain Convergence | By Clint Reiser • 09/02/2015

Last month I posted a Logistics Viewpoints article on the evolution and growth of the WMS market. Today I am going to take a slightly different perspective and discuss the evolution of WMS customer requirements – how are WMS customers’ requirements different now than they were in the past, and what factors are driving these changing needs?

A Holistic Perspective
The WMS market is a mature enterprise software market. The growth rate of WMS sales has modified and the features and functionality of WMS applications have improved and expanded significantly. The “core” WMS functionality today is typically sufficient to meet the needs of practitioners. Today’s customers are making purchasing decisions based on a more holistic perspective. Many of these considerations, such as integration with other applications and a holistic view of the enterprise, often fall under the moniker of “supply chain convergence.” But customers are looking for more than than to simply break down silos. They’re also interested in the ability to standardize and replicate business processes across their organization, and to minimize implementation and upgrade costs. Essentially, the WMS buying perspective has evolved in scope from point solution to overall enterprise footprint, and from short-term focus to life-cycle costs.

More Modern Usability
WMS Customers are also looking for a modern user experience. For example, modern mobility is increasingly being utilized within distribution and fulfillment. Today’s smart phones and tablets provide robust, mobile platforms that can often be leveraged at a lower price point than legacy warehouse mobile hardware. Customers are interested in leveraging the inherent capabilities of tablets and smart phones in support of operational fulfillment roles as well as for warehouse supervision and task management.

Customers are also looking for improvements in traditional user interfaces. User interface improvements and pre-configurations can lower the TCO by streamlining the implementation process and by making the end-user business process more intuitive by presenting role-based information sets. For example, shipping clerks engage in different processes and require different information than yard managers or packing station workers. Role-based configurations provide users with the ability to better match the solutions to their particular business processes, while minimizing upgrade and customization costs.

Evolving Fulfillment Requirements
Although “core” WMS functionality is more often sufficient for customers today than it was in the past, there are some fulfillment processes that are evolving and require WMS modifications. Most notably, the rapid growth in e-commerce has placed additional burdens on fulfillment operations. Retailers, manufacturers with direct-to-consumer operations, and 3PLs need functionality that supports the changing fulfillment requirements driven by the growth of e-commerce and omni-channel fulfillment. For example, practitioners are increasing using put walls in their fulfillment processes to manage high volumes of e-commerce orders. They’re also looking for more flexibility in the software to mirror the increased complexity and shorter lead times driven by e-commerce. Packing and other processes have become more labor intensive as well. At the same time, retailers have been increasing warehouse automation investments to cost effectively handle the high volume of small, multi line-item e-commerce orders. The increased use of warehouse automation has increased the importance of warehouse control systems and interoperability between WMS and WCS. Practitioners also want choice in their material handling equipment vendors, so the option of standard integration with multiple third party MHE vendors is also of value. These are all examples of WMS features and functionality that retailers require to manage their changing fulfillment operations.

Conclusion
Concurrent with the evolution of user requirements, the WMS vendor landscape has consolidated through a wave of software company mergers. The result is a set of software suppliers offering broader solution sets delivered on native platforms, competing for a more stable market of potential customers. Many of today’s WMS suppliers offer a robust suite of solutions complementary to WMS along with a technology platform and a detailed product development roadmap. WMS market competition has undoubtedly benefited the customer.

Supply Chain Execution Convergence: Two Factors Driving the Need for Convergence

Guest Commentary | By Evan Puzey • 06/25/2015

Supply chain execution convergence is a hot topic these days. The need for end-to-end visibility and solutions that proactively enable planning and the ability to react to the unavoidable disruptions is paramount. Organizations need to evaluate their overall supply chain approach and to consider how supply chain execution convergence can get them to the next level.

Rethinking the Traditional Supply Chain
More than just a buzzword, supply chain execution convergence allows for better collaboration and optimization between each team and silos in the enterprise. Rather than optimizing individual operations – transportation, warehousing and others independently – it optimizes the entire flow to get the most benefit. The idea is to bring together the individual silos within a business, from the front end to the back end, from warehousing, manufacturing, logistics, purchasing, etc. to manage the end-to-end supply chain. Wouldn’t it be great to break down the silos between those parts of the organization, and start to get the systems, processes and people working together?

Two Factors Driving the Need for Convergence
Visibility and collaboration. It’s that simple. Or is it? If the functional domains have optimized their own internal business processes for better visibility, then getting to the next level of organizational visibility should be the natural next step. The problem is that each of these functional areas has gone about this process utilizing their own systems and technology and what works there might not be the best solution for the overall business.

One goal of the organization when developing its visibility and collaboration strategy is to understand the “what”, “who” and “how” with regards to the data – what information do we want to gather; who do we want to share it with and how do we want to share the information. By answering these questions, an organization can start down the path of supply chain convergence.

As an organization, another goal is to get systems aligned to enable end-to-end visibility and to facilitate cross functional collaboration. It may or may not be necessary to acquire new systems. It’s important to have a systems “strategy” that says these are the systems we are going to use and the ones we are going to integrate for information flow. Then wrap that up into an overall business process that links each of the individual components of the business and look to optimize those business processes to benefit the whole business rather than the individual silos that form the end-to-end supply chain network.

In order to have true visibility, a third goal for organizations is to have both internal and external supply chain convergence. Even though businesses today understand the need for visibility across the extended supply chains, they don’t have it. In a 2014 research study by Forbes/KPMG entitled “Global Manufacturing Outlook 2014,”40 percent of senior executives acknowledged their supply chains lack visibility and that they realize the value in data sharing with business partners.*

The challenge organizations face is that the problem starts to get more complex once they go outside their own business. In looking across the organization’s supplier and logistics networks, there are tens, hundreds or thousands of partners that you work with. In that network, there are a few very large partners, some medium partners and potentially many smaller suppliers. Cloud technologies can help break down the barriers for the small to medium supply chain partners, enabling them to afford systems and connectivity which will ultimately increase visibility and collaboration.

The ultimate goal for any organization is to move away from the notion of visibility as the ability to “see where my stuff is” and even beyond exception-based management to a more sophisticated level of visibility which truly enables them to proactively respond to the inevitable disruptions in their supply chain. More than ever, organizations want a control tower solution that oversees their entire set of processes, from PO to delivery. Agility is key in today’s organizations.

Technology that Worked Yesterday Might Not Work Today
Begin by taking stock of where your organization is at the enterprise level and bring people together to start thinking about a converged platform. Then map out the processes, from start to finish, making sure the right systems and technologies are identified, before getting people aligned and moving forward with connecting the processes and systems. Once that is solidly in place, you can move that forward to connect with like-minded business partners.

Businesses still have many options, from a “one-system fits all” to a “best-of-breed” approach –and there are benefits to both. A best-of-breed approach can optimize the best technological features and enable the combined solution to provide the individual functional domains their specific applications while providing the larger organization the visibility, collaboration and agility it so vitally needs. Organizations must understand what their goals are for supply chain convergence and end-to-end visibility and choose a solution that will best fit its unique needs.

* Source: KMPG Global Manufacturing Outlook 2014: Performance in the crosshairs.

With nearly 20 years experience in the supply chain industry, Evan Puzy has assisted enterprises and logistics service providers in more than 30 countries, across 5 continents, with their supply chain initiatives. Evan has been with Kewill since 2004 in senior Marketing and Product Management roles, most recently as Chief Operating Officer for Kewill Asia Pacific.

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