MHD September-October 2018

MHD Supply Chain Solutions SEPTEMBER / OCTOBER 2018

SELLING ONLINE?

How to design your logistics network

THE LEADERSHIP TRAP

How do you get out?

COVER STORY

Belt perfection

KNAPP-Store’s central belt technology

IN FOCUS:

OUTSOURCING AND ONLINE RETAIL

MHD FROM THE EDITOR

MHD Supply Chain Solutions CONTACT MHD Supply Chain Solutions is published by The Intermedia Group Pty Ltd ABN 940 025 836 82 41 Bridge Road, Glebe NSW 2037 Telephone: (+61) 02 9660 2113 Fax: (+61) 02 9660 4419 Email: mhd@intermedia.com.au

THE TEAM Managing Director: Simon Grover Editor: Charles Pauka Sales: Rod Riley Production Manager: Jacqui Cooper Graphic Designer: Alyssa Coundouris Head of Circulation: Chris Blacklock

FOR ADVERTISING OPTIONS Contact: Rod Riley rod@intermedia.com.au

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DISTRIBUTION Average Total Distribution: 6,764 AMAA/CAB Yearly Audit Period ending 31 March 2018.

ACKNOWLEDGEMENT MHD Supply Chain Solutions magazine is recognised by the Australian Supply Chain Institute, the Chartered Institute of Logistics and Transport Australia, the Supply Chain and Logistics Association of Australia and the Singapore Logistics and Supply Chain Management Society.

VALE RALPH MERRY

L

osing a colleague and friend is always a shock, especially when it is sudden and unexpected.

I regret to have to advise our readers that MHD and Transport and Logistics News’ longserving National Advertising Manager passed away at the end of August, after a short illness. He was working right to the end and I spoke to him a day or two before his passing, when he sounded, if a little croaky, his usual growling good self.

Ralph joined the Intermedia team in 2009, soon after the launch of Transport and Logistics News.

He was a real character who never left you in doubt about his opinion and feelings, with a voice and vocabulary of expressions that was direct to the point, good natured if sometimes rude, and entertaining beyond the usual.

His interpersonal skills allowed him, beyond achieving excellent sales results, to make many, many friends among his client base, who always had an open door for him even just for a chat.

And hidden behind that deep, croaking voice and hilarious expressions was a caring, sensitive man who would go to the end of the Earth for those around him.

He was remembered at a funeral service on 30 August attended by well over a hundred family members, friends and colleagues, many of whom spoke of the vacuum left behind by the character that would have had to be invented if he wasn’t with us, Ralph Merry.

SUPPLY CHAIN SOFTWARE SURVEY: TELL US WHAT YOU THINK! MHD magazine and Transport & Logistics News’ Supply Chain Software Users’ Survey is in progress, and many readers have already taken the time to say what’s good, what’s bad and what’s missing from the IT landscape in the supply chain world.

This is your opportunity to praise what works, put the boot into what doesn’t, and tell the good people on the supplier side what is missing, what you want, what would make your everyday working life so much easier. Head to www.TandLnews.com.au and follow the tags to enter the survey.

Enjoy reading your MHD magazine – and have a beer for Ralph!

Charles Pauka Editor charles@intermedia.com.au

DISCLAIMER: This publication is published by The Intermedia Group Pty Ltd (the “Publisher“). Materials in this publication have been created by a variety of different entities and, to the extent permitted by law, the Publisher accepts no liability for materials created by others. All materials should be considered protected by Australian and international intellectual property laws. Unless you are authorised by law or the copyright owner to do so, you may not copy any of the materials.

The mention of a product or service, person or company in this publication does not indicate the Publisher's endorsement. The views expressed in this publication do not necessarily represent the opinion of the Publisher, its agents, company officers or employees. Any use of the information contained in this publication is at the sole risk of the person using that information. The user should make independent enquiries as to the accuracy of the information before relying on that information.

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Copyright (c) 2018 - The Intermedia Group Pty Ltd.

MHD SEPTEMBER / OCTOBER 2018 | 3

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SKID STEER LOADERS

SCISSOR LIFTS

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LEBRATING

19 6 8 - 2018

ISSUE #5 VOLUME 48

SEPTEMBER / OCTOBER 2018

THIS ISSUE NEWS

COVER STORY

06 T he 2018 MHD Supply Chain Software Users’ Survey is on now!

Check it out and enter at www.TandLnews.com.au.

COMMENT 08 Digital transformation

IN FOCUS: OUTSOURCING AND ONLINE RETAIL 16 Teamwork is key

12

18 Selling online?

22 Is your supply chain fit?

24 Omni-channel DC

22

28 It’s a big industry 30 Paradise lost 33 AI is smart

SUPPLY CHAIN 34 Why fail?

36 The logistics revolution 38 Disrupting the leadership trap 40 Plan4demand – Part 2.

44 Open the door

MHD

THE LAST WORD

Supply Chain Solutions SEPTEMBER / OCTOBER 2018

45 Key issues in 2018/2019

DEPARTMENTS AND REGULARS

SELLING ONLINE?

How to design your logistics network

THE LEADERSHIP TRAP

46 Materials handling and management

How do you get out?

48 ASCI – contacts, courses, news COVER STORY

Belt perfection

50 F rom the Supply Chain and Logistics Association of Australia

KNAPP-Store’s central belt technology

51 Subscription information IN FOCUS:

OUTSOURCING AND ONLINE RETAIL

ON THE COVER Central belt technology with KNAPP-Store: the perfect combination for Sanacorp’s zero defect warehouse. See page 12

36 MHD SEPTEMBER / OCTOBER 2018 | 5

MHD NEWS

WHY AN IT SURVEY? If you work in supply chain management, you’ll want to enter the MHD magazine and Transport and Logistics News SCM IT survey. Apart from the chance to win a $2,000 prize package, here is why…

must be a top priority. This can be achieved with help from technology, including a warehouse management system (WMS) whose algorithms can ensure that processing a number of the same simple orders at once is handled as efficiently as if you were processing just one single order.”

YOU DESERVE THE BEST – SO TELL THEM WHAT YOU NEED

W

hile pen-and-paper supply chain management may be OK for beginner backyard operations, today’s competitive retail environment – both online and bricksand-mortar – means that distribution systems must be agile, prompt and precise. And flexible.

"Today's supply chain is everchanging,” said Microlistics chief executive officer Mark Dawson.

“Customers expect instant gratification and new trends are popping up every day hence agile, scalable and flexible software is required to keep up with these demands.

“Automation is coming fast and the balance between traditional operations and the blend of automation balanced against service demands and TCO are critical in the assessment of modern supply chain systems.

“Gone are the days of heavy software packages where it can take years to reap benefits. ROI is now measured in months, not years,” he said.

THE ONLY CONSTANT IS CHANGE Manhattan Associates MD Australia and New Zealand Raghav Sibal said: “The 6 | MHD SEPTEMBER / OCTOBER 2018

continued growth of e-commerce has dramatically changed how distribution centres operate. One example of this can be found in the way that orders are processed and shipping is handled.

Long gone are the times of shipping in five to seven business days; delivery expectations have changed, and distribution centres are feeling the pressure. They’re expected to take action on an order within minutes of when it’s received, and complete processing within a couple of hours.

“As e-commerce continues to grow, ensuring distribution centre efficiency

“Today’s software is smarter, faster, cheaper than ever before,” said Bestrane group managing director David Sanders. “In addition, many applications are available through an internet connected browser to all types of sensors that is rapidly expanding the number, type and location of ‘users’.

“This means that expanding software capabilities are beginning to blur organisational boundaries and make changes to business processes the norm rather than an event.”

This survey not only seeks to ask users the Good, Bad and Ugly of how supply chain software is currently being used, but also looks over the horizon to detect the key issues and trends driving the requirements of the future. The results will help leading software developers such as Microlistics, Manhattan and Bestrane develop applications that help drive maximum efficiency, productivity and flexibility in your warehousing and distribution operations.

And on top of that, you will have the chance to win a $1,000 travel voucher for yourself plus a $1,000 donation to the charity of your choice!

Go to www.TandLnews.com.au and click on the IT survey ad to enter. ■

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MHD NEWS

DIGITAL TRANSFORMATION Transforming standards in the digital world SUE SCHMID

S

tandards in the digital era are evolving just as fast as new digital technologies on a local and global basis. We have seen GS1 standards evolve over the last 25 years to meet industry needs.

GS1 standards have always adapted and transformed to align with new technologies and to support new industries and processes that did not even exist when GS1 was created.

Industries such as online marketplaces are driving the development of new standards to build smarter supply chains and enable the connection between business and consumer in the physical and digital world.

THE RISE OF AND SUCCESS OF GS1 STANDARDS GS1’s work with barcodes has been one of the most successful examples of international adoption of standards for business. Why are the GS1 standards are so successful and why does the GS1 system remain the most widely used identification system and supply chain standard in the world? The answer is in the common language that GS1 standards provide to make it easier to do business with trading partners and customers.

GS1 has been established for over forty years. The first GS1 barcode was scanned in 1974 at a checkout in the US with the purpose of getting shoppers (consumers) through the checkout faster, giving them better service. This first scan reshaped the supply chain forever and established the foundation that facilitates business today.

The GS1 barcode is the most wellknown component of the GS1 system and most people associate us as just the barcode people, but what we provide is a global identification system – and that’s what our members subscribe to when they join GS1.

The GS1 system is an authenticated, valid and verified system that is globally recognised and has become embedded in so many companies’ 8 | MHD SEPTEMBER / OCTOBER 2018

operations and processes. And with the internet world transforming the way we live, the GS1 system is a fundamental component to support the millions of transactions that happen each day. The humble, yet incredibly powerful barcode, is well entrenched in our daily lives and we don’t even realise it.

EVOLVING TECHNOLOGY PROVIDES MORE SCOPE FOR THE USE OF STANDARDS Standards have always been an integral part of the international business world and supply chain, and will continue to do so in the interconnected world of today and into the future.

As changes in technology continue to accelerate, the evolving role of standardisation in technological innovation is changing, too.

As we evolve the GS1 standards in the business-to-business space, the business-to-consumer layer continues to emerge and the GS1 standards are uniquely placed to support and connect these two together. Businesses have been responsible for evolving the GS1 standards over the past 40 years,

and the consumers of today are now also impacting how the standards are leveraged because they want more information to help them make better purchasing decisions, and they are using barcodes on a product to gain access to this information.

Although there are various mobile apps available for this that draw information from the many places via the web, consumers are putting pressure on organisations for accurate and real-time information. This is where the GS1 standards connect and facilitate the physical and online supply chain, along with providing a means to ensure accurate data and information for the consumer.

GS1 STANDARDS CONNECT THE CONSUMER AND BUSINESS Ms Schmid explained why the power of the GS1 barcode and the information behind it is becoming much more important to consumers beyond the familiar beep at the checkout.

“The GS1 barcode is a bit like the Intel chip in a computer. It runs the computer and does everything you

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MHD NEWS

“

We are at a very exciting time of change and we are looking forward to supporting our members and assisting them on their own evolution of improvement and implementation of digital technologies.

”

want the computer to do, seamlessly. The GS1 identification used in barcodes or in the exchange of data is just like an Intel chip, seamlessly integrating supply chains between businesses and consumers across the world. It integrates and connects the consumer with the information they want to know. Industry has a part to play in making sure the information is trustworthy in a collaborative world where information is more visible and more accessible.

As a consumer, I recently had to get a part replaced for my refrigerator. Having called the service centre, they requested I provide them with the date of purchase, where I had purchased and when, none of which I had.

They asked me to find a serial number for the item, it was on the inside of the door printed in the smallest writing possible that I had to twist my head to be able to read it!

At that point I was imagining being able to scan a barcode on the inside of the door that in an app, would identify my refrigerator uniquely. This can be done today with a GS1 number, called the Global Trade Item Number (GTIN), and a serial number, all possible in today’s GS1 system. All I would then have to do is scan it into the app and all the information they wanted would be provided, easy and simple.

The GS1 system facilitates the connection of all the information at our finger tips in our world today, with more simplified access, making our daily lives easier.

Most consumers today also want detailed information before they purchase a food item including allergy information, gluten free, sugar free, provenance, organically certified and much more. We need to have a system that enables the consumer to be able access this information and feel confident that the information is trustworthy.

This is where GS1 standards fit perfectly connecting unique product identification and organisations to provide trustworthy information about the product through the supply chain.

DATA ACCURACY IS CRUCIAL New and emerging technology is important for any size of business today with the rise of the digital era, however, the accuracy of data is the number one issue that seems to be overlooked.

GS1 has data quality frameworks for various processes such as data synchronisation but ultimately, it’s important to help GS1 members have the right things in place in the systems including access to technologies to help them make that journey of ensuring their 10 | MHD SEPTEMBER / OCTOBER 2018

data is accurate and remains accurate. GS1 provides members with tools and support for data accuracy which is becoming more achievable with newer technologies.

Implementing new standards in the digital era to embrace quality data is an important foundation for the transition from old to new.

There will always be new standards being developed and enhancements to the existing ones, depending on the needs of industry.

The GS1 product identification standards certainly sit in the digital age already today.

The only real change that needs to happen is in the world of the internet. We are heading towards integrating our identifiers on the internet, so the consumer can leverage this quality data and information beyond the point of sale.

Data accuracy is also crucial in healthcare.

In-home patient care is increasing, so what a wonderful way to validate that the patient is taking the right medicine at the right time by a simple scan of a GS1 barcode that is underpinned by GS1 identifiers.

These types of evolutions for creating standards are happening all the time – we don’t create standards for the sake of creating standards.

“We are also seeing a change in the profile of our members. Our corporate members, who are often at the leading edge of technology, may have challenges moving from a legacy system to a new system and new standards. In contrast, there is an opportunity for our smaller members who aren’t constrained by legacy systems, to leverage the GS1 system’s flexibility.

They can have an authentic GS1 numbering system and adopt new standards, because as the future evolves and the internet synchronises with the use of our identifiers, the opportunities for small business are enormous with less barriers.”

VISION FOR GS1 MEMBERS The priority for GS1 Australia is to make sure all members, particularly small to medium size businesses, understand the value and the opportunity the GS1 system can bring to them in both the physical and digital world.

We are at a very exciting time of change and we are looking forward to supporting our members and assisting them on their own evolution of improvement and implementation of digital technologies.

Sue Schmid is the head of customer relations and standards office at GS1 Australia. For more information on GS1 standards please contact Sue Schmid at sue.schmid@gs1au.org. ■

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MHD COVER STORY

Central belt technology with KNAPP-Store: the perfect combination for Sanacorp’s zero defect warehouse

BELT PERFECTION S

anacorp and KNAPP have been working together for decades. The first site where automated systems were implemented was the Sanacorp subsidiary in Ulm. Today, 15 Sanacorp sites use KNAPP’s automation technology, including conveyor systems and central belt auto pickers tailored specifically to pharmaceutical wholesale requirements.

Combined with Sanacorp’s own software landscape, the KNAPP technology ensures stable operating performance without downtime and high order processing efficiency. This supports Sanacorp in the fulfilment of its quality promise: to supply customers reliably and on time.

COMPLETE TRANSPARENCY WITH KNAPP-STORE Sanacorp now also relies on new KNAPP technology at its subsidiary in Bad Segeberg.

KNAPP-Store is used for the slow-moving article range, which increases the degree

of automation considerably. With KNAPPStore, KNAPP meets current pharmaceutical industry requirements – among other things, the autopicker supports lot tracking and the recognition of security features, thereby providing transparency of all stored articles.

Along with the KNAPP-Store, the highperformance SDA autopicker is used for processing fast-moving articles at Sanacorp, which allows high order volumes to be processed efficiently and safely. Thanks to the fusion of central belt systems, KNAPP-Store and SDA, the fastest and most expensive order lines can be processed within one system.

ARTICLE DATA CAPTURE WITH ISCAN During receipt in the goods-in area, articles suitable for the KNAPP-Store are scanned and thereby allocated to an order container, which is then transferred on the conveyor to its storage work station.

The innovative central belt combination of KNAPP-Store and fast-moving autopicker boosts both quality and efficiency at Sanacorp.

12 | MHD SEPTEMBER / OCTOBER 2018

Space-saving storage and efficient picking of a broad range of products is possible with the KNAPP-Store.

SANACORP The KNAPP-Store is easy to operate via a touch screen.

Founded in 1924, Sanacorp is the oldest pharmacy cooperative in Germany and is one of the leading companies in pharmaceutical wholesale. Sanacorp is a company run by pharmacists for pharmacists. Its 16 regional branches across Germany ensure the comprehensive, economical and reliable delivery of medicines and health products to 8,000 pharmacies. Sanacorp also supports pharmacists with market-appropriate strategies and measures ranging from logistics to quality management and marketing activities, in order to promote the competitiveness of independent pharmacists and ensure their independence.

Automatic capturing of product master data with iScan.

MHD SEPTEMBER / OCTOBER 2018 | 13

MHD COVER STORY

Optimal storage density and low storage location costs.

“

The two-arm gripper system of the KNAPP-Store is in charge of automatic storage with a transfer gripper placing the articles on buffer trays.

”

14 | MHD SEPTEMBER / OCTOBER 2018

The work stations are equipped with an intuitive touch screen monitor for straightforward operation. There, the employee places the articles on the storage conveyor – no time-consuming pre-sorting necessary. The image recognition technology iScan captures all article data automatically, including the article’s measurements. Errors are therefore eliminated up front during movement into the KNAPP-Store.

HIGH STORAGE PERFORMANCE The two-arm gripper system of the KNAPPStore is in charge of automatic storage with a transfer gripper placing the articles on buffer trays. The grippers take the articles from the buffer trays and store them randomly in the KNAPP-Store. The buffer function allows a single person to operate all 4 KNAPP-Stores simultaneously. This way, Sanacorp achieves very high storage performance at minimum personnel costs.

Monitoring the article’s features with precision is easy with the KNAPP-Store.

Articles with a specific date mark, lot or serial number can be retrieved at the touch of a button and be picked in due time. That’s why the KNAPP-Store is a

particularly efficient for returns that require considerable organisational effort to be fed back into the picking procedure, due to different lot numbers and date marks.

EFFICIENT PICKING When it comes to picking, the gripper moves to the specified position, picks up the requested articles, and transfers them to the buffer boxes on the retrieval side of the KNAPP-Store. The buffer boxes transfer the articles to an allotted order space on the central belt conveyor in the same way as the fast-moving auto-picker SDA does. At the transfer station the articles are dropped into the dispatch container.

All articles of an order are consolidated from all picking areas such as the manual area or the cold-storage area and once the order is completed, the articles are transported towards the goods-out area. A lid is automatically placed on the containers before they are ready to be loaded and dispatched to the pharmacies.

For more information contact Michael Kemeny at Michael.Kemeny@Knapp.com, call +61 428 884 177 or visit www.knapp.com. ■

THE PLACE TO GO FOR YOUR DAILY NEWS ON TRANSPORT & LOGISTICS www.TandLnews.com.au

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Being clear on what you are trying to achieve enables you to understand if it’s successful.

UNDERSTANDING SUCCESS

TEAMWORK IS KEY Key challenges when bringing in a transport team, and how to overcome them

WALTER SCREMIN

T

ransport is not just a critical area of the supply chain, it’s usually a top five business cost.

For efficiency’s sake, most transport divisions outsource at least some of their requirements to specialist suppliers.

The trouble is, transport suppliers vary greatly regarding professionalism and care, introducing many potential pitfalls when you bring in a new team.

When done right, partnering with the right transport operator is more like ‘insourcing’ a dedicated team but without the financial liabilities of owning your own transport resources.

Ideally, you bring in a team that becomes a genuine part of your business. Through my business, I’ve known delivery drivers to be placed with businesses for up to 25 years!

In these cases it’s more than just an outsourced arrangement – the driver becomes a genuine, often much-loved team member.

LET’S CONSIDER SOME KEY TRANSPORT CHALLENGES What are you really trying to achieve?

Motivations for bringing in a transport contractor are fairly similar: 16 | MHD SEPTEMBER / OCTOBER 2018

take liabilities off your books; focus on core business; and tap the flexibility to make changes at short notice.

What are you hoping to achieve by partnering with a specialist? If your motivations are mixed, or vague, it may be hard to measure success.

Flexibility and resourcing were front of mind for leading paper bag manufacturer the O’Kelly Group, as CEO Sarah O’Kelly explained: “We have to deliver when we are expected to, no matter what. If a driver was absent, it created problems. We would re-allocate staff from the warehouse or elsewhere to do the deliveries. But then we’d be one down and those areas of the business would be affected, so it made sense to outsource.”

Greg Welch from Welch Auto Parts said outsourcing certain risks was a motivator for outsourcing his delivery fleet. The main risks were those associated with HR and WorkCover claims: “We’re not experienced at managing HR. Our expertise is in parts.

But if your transport division is growing, all of a sudden you’ve got to manage it, or hire another person to manage it.

“Hiring and firing is not really our game, and it can be difficult to find quality drivers.”

Success isn’t only about numbers. So how is it best measured?

Ms O’Kelly said outsourcing transport has saved costs but some benefits would be hard to quantify.

“There is a saving but it was never about that for us. It was about the cost of interruption to the business, and it’s hard to quantify that.

“The flexibility would have a financial benefit, but it’s not always easy to put a number on it.

“When running your own fleet you’re dealing with vehicle costs, breakdowns, maintenance. Something could go on a truck and you’re up for $2,000. But then you don’t have access to the vehicle either, so you need to cover by short-term leasing a vehicle.”

The biggest benefit is flexibility to manage resources, according to Ms O’Kelly. She says the increase in control was an unexpected benefit and contradicted her initial worries about outsourcing.

Having regular back-up drivers on standby covers absenteeism and spikes in demand.

Greg Welch said freeing his auto parts business of fleet responsibilities has made it easier to achieve his motto of ‘right part, first time, on time’: “It has improved our strike rate no doubt.

I believe it has helped client loyalty.

It’s important for customers to know that the part is going to be there.”

Using a fleet telematics system has cut the risk of misplaced deliveries.

Mr Welch said in general, outsourcing has assisted with business growth by providing the flexibility and freedom to try new delivery runs. “A bonus is that at the drop of a hat we can get a driver in to do another run.”

VALUE FOR MONEY The biggest mistake when outsourcing in any field is putting too much emphasis on price. Going for the cheapest is rarely the best, and might actually cost you more in the long run.

A key challenge is knowing what value for money looks like. Price is important, but only one part of the whole – for example, a cheap supplier won’t be much value if they can’t

MHD FEATURE respond quickly to your needs. How do you rank other values, such as reliability or professionalism? These may be critical for customer service and business continuity.

SIZE OF COMMITMENT Biting off more than you can chew with a transport company creates more headaches if you later find out they’re not what you expected. Sometimes the best thing to do with a supplier is to start small. Many transport companies may not like starting small, but if they are serious about taking on your business they will be happy to prove their worth before you expand resources further.

Sarah O’Kelly said starting small helped make the decision easier: “It was a big decision, because my company had managed its own transport for about 60 years. But we put one driver on and it went really well, so we gradually increased our commitment.”

Starting small is a good way to discover and remedy any teething problems in the relationship. It will help ascertain their ability to communicate and respond to your

“

needs. But do ensure any transport supplier has the depth and breadth to grow with you.

Cultural fit drives teamwork – at its best, both parties work toward the same goal.

”

CULTURAL FIT A common mistake is rushing into a decision without really getting to know the people involved. Cultural fit is surprisingly important for success, and it’s worth taking the time to try and understand the organisation with which you are considering partnering.

Cultural fit drives teamwork – at its best, both parties work toward the same goal.

Consider this question: is your supplier identifying ways you can become more efficient and trying to make you better? Are they available? Good communicators?

Culture is two-way. When describing the drivers brought in to O’Kelly Group, Ms O’Kelly said: “They are part of our team. We treat them like employees. They wear our uniform, they are here every day.

“We can’t have couriers doing their role.”

Walter Scremin is general manager of Ontime Delivery Solutions. For more information visit www.ontimegroup.com.au. ■

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“

A survey conducted earlier this year showed that 86% of logistics decision-makers see technology as the best way to drive efficiency and reduce costs.

”

SELLING ONLINE? What it means for your logistics network design ROB O’BYRNE

O

nline retail is accounting for an ever-larger part of total retail sales.

Consumers armed with smartphones now expect increased choice, convenience and price savings by buying online. If enterprises are to provide such advantages, their logistics must be organised to match.

‘Born digital’ companies like Amazon and Alibaba started with a green field. Now, traditional ‘bricks and mortar’ companies like supermarket chain Woolworths in Australia and international home furnishings company IKEA are adding e-commerce to operations already in place to become ‘clicks and mortar’ operations.

MAKE NO ASSUMPTIONS Ideally, in a clicks and mortar business, logistics activities would be the same between fulfilment of online and physical sales. A common logistics network means simplification, efficiency, overall reduction of inventory and effort, and lower costs. By comparison, ‘variation breeds inventory’ and other expenses.

However, even if the process of designing a network stays the same, no assumptions can be made about current logistics practices being optimised for online retail. For example: 18 | MHD SEPTEMBER / OCTOBER 2018

• In physical retailing, your sales and service points, perhaps tens or hundreds of them, are probably collocated with geographical concentrations of customers.

Your regional distribution centres may follow a similar pattern. At each outlet local sales staff serve customers who travel to the outlets to buy.

• In online retailing, your sales people may all be in just one customer call centre on the Web. Your distribution centres (perhaps now just one or two big ones) may be remote from any cities. On the other hand, you now need to ship to thousands or millions of customer locations (their home addresses).

LET CUSTOMER NEEDS DRIVE NETWORK DESIGN Logistics network design for online retail must start from your customer service offer. Factors for consideration include: • Order size and predictability. In online retailing, orders tend to be individually smaller and less predictable than those shipped to physical sales outlets.

• Shipping destinations. With internet access widely available, e-commerce orders can originate almost anywhere.

MHD FEATURE • International shipments. E-fulfilment may be more complex internationally than shipping for traditional distribution.

• Return logistics. Online retailing may have higher product return rates for a variety of reasons. Examples are unsuitability of products that consumers cannot see or handle before ordering, damage in transit, or undeliverability.

Some products generate especially high returns. Statistics indicate that online consumers return 20% to 30% of orders of apparel.

FAST SHIPMENT, FREE DELIVERY, AND OTHER ONLINE RETAIL MYTHS Unfortunately, some traditional companies rushed into online retail. They were lured by new revenue or scared of falling behind competitors but omitted to plan the logistics.

Attractive conditions were proposed to customers without checking the financial impact. Free home delivery was a prime example. This was often offered in haste and regretted at leisure, especially with last-mile shipment expenses accounting for as much as 28% of total transport costs.

Although product range, convenience, delivery speed and prices are all factors in the design of a logistics network, trade-offs between them are possible. Unless you have a good reason for trying to be best-in-class in each category, your online retail logistics network may achieve overall customer satisfaction and profitability without offering fast shipment, free delivery, or rock-bottom prices.

• Retailers of mass-produced novelty goods and electronics accessories in China offer low prices but take a week or more to deliver. By batching international shipments into one container travelling by sea, for example, they can reduce shipping expenses.

“

Attractive conditions were proposed to customers without checking the financial impact. Free home delivery was a prime example.

”

Customers in Europe and the US accept the lead time in exchange for low cost.

• JingDong, the biggest online competitor to Alibaba in China, delivers products to password-protected pickup lockers and to nearby convenience stores for customers when home delivery slots are not mutually agreeable.

• Somebody, somewhere, will always offer a given product at a lower price. So, why engage in a lose-lose price war? Amazon prices while competitive are not always the lowest. But, the company offers huge choice, a reliable, secure payment mechanism, a simple returns policy, and has gained an enviable reputation for customer satisfaction and loyalty.

• IKEA makes no bones about charging for delivery. The firm’s website shows clearly how much extra customers will pay. However, for avoiding the hassle of trying to pick up bulky items like sofas directly from a physical sales outlet and counterbalanced by the distinctive ‘only-at-IKEA’ products, the delivery charge is acceptable to many consumers.

BASIC ONLINE RETAIL NETWORK DESIGN Online retail has grown more strongly for articles like electronic products, sports apparel, and fashion goods. These products are relatively easy to send through the post, compared to others such as groceries. Online logistics network design for easy-to-post products may look like this: • Large centres for e-fulfilment with warehousing and picking of products for shipping as parcels.

• Parcel hubs, geographically close to the e-fulfilment centres, for sorting parcels by post code.

• Local parcel delivery centres for lastmile delivery.

MHD SEPTEMBER / OCTOBER 2018 | 19

The e-fulfilment centres may be operated by the retailer or by a supplier or a 3PL. In some cases, the retailer never handles the products it sells online. It takes the customers’ orders via the web or mobile, and issues instructions to the product supplier for fulfilment. This assumes certain guarantees on levels of service by the supplier, to avoid situations where the retailer makes delivery promises to customers that are then not respected.

Getting smarter about e-fulfilment Although online retailing often means dealing with numerous, smaller, unknown customers, it presents a significant opportunity to gather information in ways that may not be possible in physical retailing alone. Because the customer interaction is digital, data can be collected automatically.

It can then be used to get acquainted with, analyse, and influence customer behaviour, while optimising logistics activities for efficiency and profitability.

Clicks-and-mortar retailers can also use data to decide if they should fulfil an online order from an e-fulfilment centre or from a physical sales outlet. The trade-off is between labour costs in the sales outlet and transport costs from the e-fulfilment centre. If it also turns out that the sales outlet has excess stock of the product concerned, direct fulfilment from the outlet avoids the transport costs of transferring the product to another location where the product is moving faster.

OMNICHANNEL AND RETURN LOGISTICS As retailers discover possible commonality between online and physical retail logistics, customers are also pushing for the same standard of service across all channels, including physical sales outlets, phone sales, and online shopping.

Combining and optimising service over multiple channels is naturally more complex than over just one channel. However, besides the flexibility of fulfilling orders from an e-fulfilment centre or a physical sales outlet, multiplying fulfilment channels can sometimes give clicks-and-mortar companies advantages over pure-play e-commerce firms.

For instance, a product, whether bought in a shop or ordered online, can be delivered at the customer’s option in a shop. The customer can then immediately check for suitability. An unwanted product can be absorbed into shop stock without the extra transport costs of being returned from the customer’s home address.

20 | MHD SEPTEMBER / OCTOBER 2018

MHD FEATURE

Similarly, for an unwanted product ordered online and delivered directly to the customer’s address, a clicks-and-mortar retailer can invite a customer to return the product via the nearest physical sales outlet.

The retailer saves on return transport costs and gains in ‘foot traffic’ and the possibility that in the shop the customer will buy something else.

(HOW MUCH) SHOULD YOU DO ONLINE LOGISTICS? There is always the choice of not doing online retail and simply avoiding the issue of online retail network design. A recent study showed that online retail profitability can be hard to achieve in some sectors. Less than half of online fashion goods retailers made money out of their activity. For online grocery, the figure dropped to below 10%.

Whilst immediate profit may not be the only objective (Amazon was unprofitable for several years after starting), losses cannot be sustained forever.

However, there are also other options.

Companies may choose to restrict the range of products they sell, to match customer needs without sacrificing margins. They may also be well-positioned to use the same supply chain and logistics for a large

“

Combining and optimising service over multiple channels is naturally more complex than over just one channel.

”

part of both their online and physical retailing. IKEA, for example, sells many of its products in its stores as flat-packs.

The same products can be delivered ‘as is’ to customers making online purchases. On the other hand, companies may decide to deliberately separate parts of their online and physical sales logistics. UK supermarket chain Tesco recently constructed purposebuilt food product picking and fulfilment centres for online sales after having used its existing supermarket infrastructure.

CONCLUSION While still growing, online retailing seems unlikely to supplant physical retailing. As large traditional retailers add ecommerce to their activities, large online retailers are integrating physical retail outlets. A recent example was the acquisition by Amazon of Whole Foods Market. The future of retail may be a combination of online and physical retailing supported by hybrid logistics networks, each network designed to the customer requirements and business strategy of the retailer concerned.

Rob O’Byrne is a consultant, coach and author in the field of supply chain and logistics. He publishes regularly at www.logisticsbureau.com/blog. ■ MHD SEPTEMBER / OCTOBER 2018 | 21

IS YOUR SUPPLY CHAIN FIT?

Who exactly are these leaders? There are many to choose from: the Asia Pacific market brings together the right combination of logistics and e-commerce expertise required to drive breakthrough innovation. Where this innovation happens, customer service is taken to new heights.

SUPPLY CHAIN TRANSFORMATION IN ACTION

STEVEN HAYES

Legacy supply chains aren’t fit for purpose in the age of customer experience

B

usinesses in Asia Pacific face what is arguably the most critical ‘customer experience’ imperative in the world. With 71 per cent of consumers making online purchases, investment in e-commerce is constantly on the rise.

Meanwhile, consumers are becoming more demanding; 76 per cent of consumers in the Asia Pacific region now say that customer service should be a company’s top priority.

Therefore, businesses must do all in their power to raise the bar and create winning customer service that keep people coming back for more.

Today’s business leaders are challenged with delivering differentiated ‘customer experiences’, and this has led many to rethink their supply chain operations. These organisations must cope with exponential demand, and supply chains need to become much faster and precise. 2018 looks set to be a critical year, with 94% of supply chain leaders saying that digital transformation will fundamentally change supply chains this year. Business leaders are moving quickly and investing in digital tools to obtain realtime demand data, shorten replenishment cycle times, optimise deliveries, and predict future demand. The rest will be left behind.

22 | MHD SEPTEMBER / OCTOBER 2018

Take SpeedFactory by Adidas, for example.

SpeedFactory uses advanced 3D printing technology from Carbon, Adidas’ supply chain partner. The printers allow athletes to order hyper-personalised running shoes with unique soles that are tailored to the individual’s weight, foot contour and running style. The shoe design even incorporates data that takes account of conditions in different cities, thereby meeting the needs of runners in the exact environment in which they’re running.

By rethinking its supply chain, Carbon has enabled something special: marketing on a truly individual level. In part, it has been able to do this through advanced cloud applications for areas such as customer service, procurement, inventory, order management, manufacturing, and supply chain. The cloud has made it easier for Adidas to interact with a global supply chain in an economical way.

But it’s not only consumer brands that are enhancing the customer experience through supply chain transformation. Take Bac Ky Logistics. This Vietnamese logistics company has embraced automation to deliver stronger overall customer service. The company has completely automated the scheduling of transportation and delivery management, in the process enhancing transparency and speed of service for customers. The company has also used advanced, data-driven cloud applications to better visualise its supply chain, logistics and trade information in realtime. This has helped it optimise resourcing and reduce the number of empty containers.

SUPPLY CHAINS IN THE DIGITAL AGE Such companies are disrupting the supply chain to drive innovation. They are doing this by using data to better join their back- and front-offices, influence product

MHD FEATURE and service development, enable hyperpersonalisation and drive efficiency.

According to Bain & Co, companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting costs up to 30 per cent. Agile supply chain operations are, therefore, critical to ensuring that frontoffice innovations are a success – but most companies are not yet rebuilding their back-office functions fast enough. In fact, according to research from Accenture and HfS, over 50 per cent of enterprises say it takes months or even years for their support business functions to make changes in response to evolving business needs. The reasons given for this include siloed internal processes, which approximately 80 per cent of organisations cite as barriers preventing them from achieving their business goals.

We believe the cloud roadmap, with Software-as-a-Service for supply chain operations as the core, is the answer. The cloud brings together the disparate data, systems, and partners that comprise supply chains and facilitates their integration across the enterprise. As such, the cloud

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Businesses must do all in their power to raise the bar and create winning customer service that keep people coming back for more.

”

provides the basis through which back-office operations can be made agile rapidly and with minimal disruption to the business. When you start adding AI- and IoT-led business applications into the supply chain operations, this transforms businesses into intelligent enterprises, further fuelling innovation and customer service differentiation.

ACT NOW Begin by debating questions at your next board meeting - what will business in Australia look like in five years, and what supply chain capabilities would you need?

Organisations that are leading the way in the adoption of cloud and data technologies are making e-commwerce faster and more personalised than ever. The supply chain is a fundamental driver of success in the digital age and all organisations need to act now by looking at how their own supply chain is set up and whether it is still fit for purpose.

Steven Hayes is the vice president of sales at Oracle Applications ANZ. For more information visit www.linkedin.com/in/stevenhayes. ■

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MHD SEPTEMBER / OCTOBER 2018 | 23

OMNI-CHANNEL DC

Travel and adventure brand Kathmandu has established one of Australia’s first purpose-designed omni-channel DC in Melbourne

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We knew we had to change, we knew we needed a larger site, the key question was what was the most appropriate design and automation.

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24 | MHD SEPTEMBER / OCTOBER 2018

THE WORLD OF KATHMANDU Kathmandu’s Truganina DC is responsible for distribution across its Australian retail network and to online customers globally.

“While the majority of our online business is currently in Australia and New Zealand, last year we launched a global website, so we are now responding to more demand,” said Kathmandu’s general manager supply chain Caleb Nicolson.

The Truganina DC is 25,000 square metres. It’s built for growth, and made it possible for Kathmandu to consolidate its previous operations.

A BIGGER, SMARTER DC The Kathmandu Supply Chain team started the journey about five years ago. “We knew we had to change, we knew we needed a larger site, the key question was what was the most appropriate design and automation,” said Mr Nicolson.

Kathmandu evaluated a range of order fulfilment options including zone-routed picking and goods-to-person (GTP), and it

took six to 12 months before the business got to the point where it was clear that a batchpick sortation solution would be the best fit.

“There were a lot of drivers for change,” said Mr Nicolson.

“The first one was that the lease on our building was ending, and we had run out of space and couldn’t meet our operational output per day.”

Kathmandu was seeking an operation that enabled high fulfilment responsiveness, which was critical, given the success of its strong promotional model.

With its previous discrete order picking strategy, Kathmandu’s staff would walk the DC 116 times to service its 116 stores. With the new batch-pick sortation system, they only need to walk the DC two to three times a day.

“With turnover increasing at double-digit rates for the last seven years, online has been a huge growth area for us.

“Our goal with the new DC is to be able to dispatch every order as it’s received on the day or, if not, the following day,” said Mr Nicolson.

MHD FEATURE Kathmandu has made a significant investment in systems in recent years, with its network built around responsiveness.

When a customer buys an item in a Kathmandu store, it is in demand in the DC the very next day, with all out-of-stocks prioritised for picking.

“With our new batch-pick sortation system, the pick accuracy is far beyond what we could achieve with our previous manual processes,” said Mr Nicolson.

“The trick for us has been to determine the timing of batch releases, aiming anything that’s been ordered in the morning to be dispatched that afternoon.”

Prior to implementing the system, Kathmandu contacted suppliers and changed packaging and barcodes etc. to maximise the volume of product and the width of its range that could be handled by the system, with items that transfer via the sortation system being the most cost-effective path to its customers.

The sortation system also provides a flexible conveying solution, with large items capable of being handled across two cells.

SEASONALITY AND PEAK PERIODS With its promotional model, Kathmandu experiences the majority of demand during sale events, which are effectively at the middle to end of a season. This means Kathmandu’s range launch or initial push quantities are potentially lower than for a traditional retailer.

A traditional retailer may push 50-60% of their volume at the start of a new season, before switching to a replenishment model.

“Kathmandu’s seasons are quite different,” said Mr Nicolson, “We have three seasons and our range launch volumes are less than half the industry standard due to our promotional model and the majority of demand occurring during key promotional periods.

“We saw the need for a logistics system that could be very responsive, as we needed to maintain high service levels for highly variable demand in stores.

“For us, the ability to have a system that had the flexibility to scale up output on a Monday without a linear relationship to labour is really key.

“Under our previous manual pick method, if we wanted to increase output by 50%, it was basically 50% more people in the building. That all changes with a sortation system, particularly when you’ve got the batch-pick opportunity.”

Kathmandu’s DC was designed to accommodate growth. The capacity of the sortation system can be scaled up by adding

TOP LEFT: Kathmandu’s general manager supply chain Caleb Nicolson and national distribution manager Shawn Silk.

ABOVE: An overview of stock being inducted onto the Kathmandu DC’s crossbelt sorting system.

more store or online chutes, which gives Kathmandu flexibility based on where its business grows.

The company currently inducts goods into the sortation system from one end only, and it is possible to significantly increase throughput by inducting from both ends.

It can also put a mezzanine floor above the pick module, and extend the building at a later stage.

“We also ran a really high pool of agency staff, particularly in the last year within our old distribution centres, so we knew – and the narrative to our team was – as we transition people across, our existing and core Kathmandu people would have a role, because we’d be able to remove the agency element from the business,” said Mr Nicolson.

MHD SEPTEMBER / OCTOBER 2018 | 25

“

With the configuration of the system, an order can be picked, processed, packed and fed to dispatch shortly after that order is made available for picking.

”

26 | MHD SEPTEMBER / OCTOBER 2018

AUTOMATED SPLITCASE SORTATION Dematic has implemented many cross-belt sorting systems for full case sortation in Australia.

“What was really new about the Kathmandu facility is that we’re using the crossbelt sorter to do split-case sortation to individual stores,” said Dematic’s solutions manager Darren Rawlinson.

“We take a batch of the store orders, together with some e-commerce orders, and group the demand.

“The pickers then pick those items and feed them into the sorter, which automatically allocates the picked items to the relevant stores,” he said.

Full cases can also be picked in the system. These are picked in the same manner and loaded onto the conveyor system, or, if they’re required to be broken and fed to individual stores, they feed up onto a mezzanine area ready for induction into the crossbelt sorting system.

The system can sort up to 254 store destinations together with the e-commerce areas and packing areas.

Because the crossbelt sorter does not rely on gravity and gives a positive sortation action, the system can handle a very wide

range of products from a small compass packed in a plastic wrapper, all the way through to a large sleeping bag.

When Kathmandu is picking a batch of orders for stores, it also considers family groups, with the system allocating each store and family group combination to a chute. When an item is scanned on the sorter, the control system looks up to see which stores require that product, and then sorts it into the chute that has been allocated for that store and that family group.

Going to a batch-pick concept means labour can be kept relatively static, even though Kathmandu is dealing with some very different throughput days.

PICKING E-COMMERCE ORDERS FOR FREE One of the challenges Kathmandu faced is that e-commerce is a rapidly growing part of the business.

“What we saw with batch picking was a unique opportunity to pick e-commerce orders essentially for free,” said Mr Rawlinson. “The way we achieve that is by grouping those orders in with the store orders, so that if any store needs a product that’s been ordered online, the operator is simply told pick two instead of one.”

MHD FEATURE

KATHMANDU SYSTEM BENEFITS • Increased productivity and accuracy.

• Reduced reliance on casual labour.

• Designed to suit seasonal high volume promotional requirements.

• Order can be picked on the same or next day.

• Batch-picking reduces need to walk the DC 100+ times/day to two or three.

• Batching store and e-commerce orders enables a high volume of ‘free picks’.

• Sortation system handles small to large SKU (over 2 cells) and sorts to 254 store destination chutes, e-commerce, and packing areas.

• Pick-to-Light put walls for secondary sorting of e-commerce orders.

• Improved order accuracy with 93% of SKU and 95% of volume processed via the DC’s automation.

• Ability to add more store/online chutes to sortation system, and thereby increase throughput.

• Pick module can be duplicated on a mezzanine floor, and building extended.

The items are sorted to a Dematic RapidPut wall, where an operator carries out a final sortation for the e-commerce orders and assembles those ready for packing.

At the put wall, an operator is faced with a chute where all the items for e-commerce orders have been consolidated.

The operator scans an individual item, and the system looks to see if the order has already been allocated a cubby in the put wall.

If it hasn’t, it allocates the cubby closest to the operator. After the item has been allocated to a cubby in the put wall, a putto-light (PTL) display comes on at the front of the wall, directing the operator to the position in which they need to put the item.

They then press a button to confirm the put operation.

Each of the put walls has 144 locations, meaning that one put wall can deal with 144 e-commerce orders at any one time. On the rear of the put wall, lights indicate the next order to be packed.

With the configuration of the system, an order can be picked, processed, packed and fed to dispatch shortly after that order is made available for picking.

For more information visit www.dematic.com/en-au. ■

LEFT: Pick-to-Light displays on the put walls indicate the number of items to be picked, enhancing accuracy.

BELOW: Split-case pick module.

MHD SEPTEMBER / OCTOBER 2018 | 27

IT’S A BIG INDUSTRY A big industry for a big country, with growing concerns

T

he Australian trucking industry is central to our economy. It’s big and it’s growing. Consider the following numbers: • There are 500,000+ registered trucks in Australia.

• Trucks move 3.5 million tonnes of freight around Australia every day.

That’s 70% of the total domestic freight task.

• Australian road freight has doubled over the past two decades and is set to double again by 2030.

Because we all share the roads, the culture and practices of the growing trucking industry are increasingly impacting all Australians. Any conversation about trucking inevitably turns to safety concerns, represented by these statistics: • In the ten years to 2016, 1,898 Australian road users died in truck crashes.

• Heavy trucks comprise only 2.4% of all registered vehicles in Australia, but they are involved in 16% of road crash fatalities.

• One in six drivers who own their own trucks do not believe they can refuse an unsafe load.

After road deaths, another national concern is the damage caused to road 28 | MHD SEPTEMBER / OCTOBER 2018

infrastructure by heavy vehicles.

Per kilometre travelled, a nine-axle B-double can cause 20,000 times the road wear and tear caused by a family car. The vehicle registration fees are not proportionate.

MOST TRUCKS ARE MINIMALLY REGULATED Except in Western Australia and the Northern Territory, the Heavy Vehicle National Law (HVNL) came into effect in 2014. It combines and harmonises highway and transport acts, labour, safety and criminal codes and fuel tax law, across state and territory borders. Standardising vehicle law reduces compliance costs for the trucking industry.

Under the HVNL, vehicles over 42.5 tonnes are classified as Restricted Access Vehicles (RAV). Operation is limited to certain parts of the road network and requires a notice or permit. Operators must have detailed work records (e.g. logbooks and routes) and carry on-board equipment providing accurate measurements of vehicle mass and axle loads.

Vehicles between 4.5 and 42.5 tonnes are classified as General Access Vehicles (GAV) and do not require a permit to

PETER KOSMINA

operate anywhere on the road network.

Operators don’t need to keep work records and are not required to carry on-board load measuring equipment.

These unmonitored GAV perform over 70% of Australia’s shipping container freight task.

CHALLENGING CHANGES ARE COMING To address this glaring safety issue, on 1 October 2018 the HVNL will be amended so that every party involved in consigning, packing, loading, moving or receiving goods is linked in a Chain of Responsibility and must have safety management systems and controls in place. Infringement penalties will increase to as much as $300,000 for individuals and $3 million for corporations, with drivers facing up to five years’ imprisonment.

Operators will have to verify that the weight of all vehicles (including GAV) is within axle limits and legal gross mass. This is a big challenge for the industry and many trucking businesses will struggle to comply.

The usual methods for measuring truck loads are weigh-bridges, air pressure gauges and on-board electronic equipment. There are

MHD FEATURE problems with each. To reach a weighbridge, a potentially overloaded truck must travel on the roads. If it’s discovered to be overweight, it must travel further to off-load cargo. Pressure gauges are often inaccurate.

On-board equipment – original or retrofitted – is prone to calibration faults.

GOVERNMENT AND INDUSTRY PRIORITISE A TECHNOLOGICAL SOLUTION, BUT IT MUST BE AFFORDABLE The Commonwealth Government has recently released the Report of the Inquiry into National Freight and Supply Chain Priorities.

The inquiry noted that governments ‘need to take a leadership role and take immediate action’ to secure greater supply chain safety and efficiency.

Infrastructure Australia’s latest report Prioritising Reform advocates for a nationallyconsistent approach to issues affecting supply chain safety and efficiency. The Australian Logistics Council concurred and recognised the lack of reliable data about the performance of freight supply chains. Reliable data is essential to plan and deliver effective reforms.

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The usual methods for measuring truck loads are weigh-bridges, on-board electronic equipment and air pressure. There are problems with each.

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When the NSW Draft Freight and Ports Plan was opened to industry feedback in 2017, Roads, Maritime and Freight Minister Melinda Pavey said: “Technological changes have the opportunity to provide huge opportunities for improving the movement of freight.

We want to play a strong role in supporting industry as it continues to innovate and take advantage of these opportunities.”

Around 70% of all trucking operators have only one truck in their fleet and approximately 24% have two to four trucks.

Less than 0.5% of all operators have more than 100 trucks. To stay in business, many of these small operators will choose not to comply with safety regulations to reduce their costs. Therefore, any technology aimed at addressing non-compliance must be affordable and efficient.

The big news is that Australia already has the technology to solve this problem.

Peter Kosmina has fulfilled management and executive roles in the freight industry for two decades and is now the CEO of Cindicium. For more information visit www.Cindicium.com. ■

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PARADISE LOST The lost promise of e-commerce

DR RAYMON KRISHNAN AND MS RENETTE LEE

S

tarting 1 July, e-commerce giant Amazon stopped shipping directly to Australian addresses from its US and other international sites. Instead, a reduced but growing selection of goods retailed by Amazon on its US site is listed on Amazon. au, the local site of the e-commerce multinational corporation.

Amidst outcry from online shopping enthusiasts, the online giant's move was in response to a decision by the Australian government to impose a 10 per cent tax on all imported goods into Australia, i.e. the removal of its De Minimis threshold (DMT) for consumption tax. Businesses with a local annual turnover of AU$75,000 or more are required to register with the Australian Taxation Office.

The DMT is a governmentimposed limit under which imports are exempted from taxes, import charges and most customs duties, with limited clearance processes and data requirements. Previously, the tax was imposed only on imported items worth more than AU$1,000; imported goods 30 | MHD SEPTEMBER / OCTOBER 2018

below this amount remained duty-free up until 1 July 2018.

The moves attempt to maximise tax revenue from what governments consider a major untapped source: digital trade. E-commerce is certainly a potential avenue for garnering additional tax revenue, especially since the worldwide e-commerce market is expected to grow to USD$4.479 trillion by 2021. Yet, it is essential to consider that the boom of e-commerce has been aided by the very absence of rigorous taxation policies across digital borders.

Australia’s DMT removal signifies an unusual measure of protectionism in the age of e-commerce; it is a stance that many other countries are considering adopting. This presents a unique situation with regards to DMT, as technology giants (like Amazon) striving for liberalisation stand at crossroads with governments looking to capitalise on the digital economy.

So, why may a DMT removal be detrimental in the long run?

COSTS OUTWEIGH POTENTIAL REVENUE Supporters of a DMT removal have commonly cited lost tax revenue

from e-commerce as an issue. For example, according to the Australian government, this exclusion on taxing low-value imports has cost Australia roughly AUD 390 million annually since 2013-14, and grows exponentially every year.

What we should note, however, is that there is no certainty that revenue will outweigh expenditure required for policy implementation. While there is no border processing or enforcement required under the Australian legislation, it seems inevitable that the government will need to address these shortcomings in the model over time, requiring investments in systems, staff and infrastructure to ensure overseas vendors comply with the law.

The European Commission announced plans to tax low-value imports in December 2016, intending to improve cross-border VAT rules in light of the burgeoning e-commerce market. However, studies evaluated that instead of improving growth, a removal of the VAT exemption on lowvalue imports in Europe would actually impede the growth of e-commerce.

Customs, e-sellers and delivery personnel would face the burden

MHD FEATURE

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Supporters of a DMT removal have commonly cited lost tax revenue from e-commerce as an issue.

”

of additional screening, compliance and delivery time for a high volume of smallvalue imports, with additional processing cost estimated to amount to a hefty €1 billion. In addition, paperwork completion adds to the tedious process, due to a lack in consistency for each country’s administrative procedures.

From an operational point of view, a tax exemption on low-value goods complicates processes. As costs of collecting tax for low-value items may outweigh potential maximum revenue collected through tax, the removal of the tax exemption directly runs counter to basic taxation principles.

Instead of lamenting over e-commerce earnings not yielded, a DMT should be approached in a practical perspective – in that its implementation reduces crossborder complications at customs, and also allows authorities to concentrate resources on more pertinent issues such as sieving out illegal goods and fraudulent items.

UNEQUAL PLAYING FIELD FOR SMALLER FIRMS Supporters of e-commerce tax often cite the entrance of global e-commerce giants resulting in drastic reductions in domestic consumption and profit margins. While the move attempts to equalise domestic and

foreign retailers, the greater issue at stake is the widening chasm between small and large firms, with small businesses ultimately placed at a severe disadvantage.

Small and large businesses alike benefit from DMT. Regardless of their size, customs exemptions on low-value goods would reduce overall costs for firms. Furthermore, certain small businesses particularly rely on tax exemptions to have a competitive volume of sales against large businesses.

The removal of a DMT will mean a smaller firm being subjected to the same taxes and compliance costs as large companies.

Unlike bigger firms that have advantages of economies of scale yielded from bulk purchases, small firms are unable to capitalise on cost savings. The creation of artificial barriers for small e-sellers to compete is detrimental, especially when small- and medium-sized enterprises (SME) account for over 95% of economic activity in many countries.

The qualifying AUD$75,000 for registration with the Australian Taxation Office continues further distortion between small and large businesses. Cautious traders in smaller firms who believe they are at risk will register to pay taxes, incurring additional costs. Small traders who choose not to register, but have an unexpected upsurge in sales, will be burdened with unbudgeted tax liability, and possibly be fined for failure to comply with taxation rules. This places smaller firms at a competitive disadvantage, where tax could be greater than their profit margin on already sold goods. Further, small traders selling through tax-compliant marketplaces will have GST applied from the first dollar of their sales, whereas their competitors selling direct to Australian customers will not. This will distort the market, as small traders looking to harness the tools and capabilities of marketplaces will be placed at a price disadvantage to non-compliant competitors.

For small e-commerce business owners who regularly import, a lack of sales tax can make the distinction between cessation and continuity; adhering to compliance costs equates to unnecessary revenue loss that small businesses can hardly afford.

Perhaps many legislators are looking at the issue on DMT from an erroneous perspective. Instead of looking at how much tax revenue is forsaken under a DMT when goods are imported into a country, a perspective to adopt is looking at how domestic firms – especially SME and homegrown firms – have much more to lose when exporting into a country without a DMT. MHD SEPTEMBER / OCTOBER 2018 | 31

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A deferral to remove the DMT is worthy of further consideration until a balanced approach is found.

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As an example, many smaller Australian firms export globally. With Australia removing DMT, countries that import Australian products could retaliate by removing their DMT as well, or worse, target Australia’s actions by specifically removing DMT on Australian products.

Tit-for-tat moves may sound petty, but what may unfold is merely borrowing from a precedence set in the global stage vis-à-vis the US-China trade war.

CONSUMERS LOSE OUT IN THE END However, consumers would be the biggest losers with increased costs, reduced varieties or even the withdrawal of goods shipped in from abroad, as seen from the Amazon example.

A high DMT decreases administrative and processing costs, encouraging more e-commerce retailers and suppliers to expand their businesses offshore and diversify their range of products.

In addition, a high DMT also eases entry of imports, enabling better quality of service, such as faster delivery and returns.

A no-questions asked returns policy is something many e-commerce platforms tout. The removal of DMT will complicate the returns process; tax would already have been paid on products being imported, and the likelihood of getting a tax refund is low due to cumbersome processes. For many a small business owner or e-commerce practitioner, efficient delivery and returns creates a distinguishable brand for them to ensure customer loyalty.

Even for larger firms, administration of an e-commerce tax is not favourable for fear of losing customers. For instance,

Matches Fashion, a luxury retailer for goods like Gucci and Prada, has absorbed Australia’s online sales tax for consumers as an advertising tactic: customers are informed of the company’s full subsidy upon checkout of purchases.

Other retail giants, like Marks & Spencer from the UK and US fashion retailer J.Crew, are examples of companies that chose not to add the Australian sales tax to final prices of their goods, choosing to conceal their tax obligations at the expense of keeping customers satisfied with low prices. It remains to be seen how the Australian Tax Office can successfully enforce taxation laws on imports in the long run.

NO EASY SOLUTION For the legislator, the intent to capitalise on untapped e-commerce revenue appears to be a good idea. The reality, however, is fraught with complications that extend beyond unhappy suppliers and consumers.

For plenty of government and trade officials worldwide, a deferral to remove the DMT is worthy of further consideration until a balanced approach is found.

For Australia, this marks the misplacement of dreams for digital trade.

Dr Raymon Krishnan is the president of the Logistics & Supply Chain Management Society and Secretary-General of the Asia Business Trade Association. He is also a director at the Asian Trade Centre.

Ms Renette Lee is a final-year sociology student from the University at Buffalo, who concluded an internship with the Asian Trade Centre. She takes a keen interest in the understanding of social relations through public and trade policies. ■

MHD FEATURE

AI IS SMART ALBERT NEL

How artificial intelligence is making the supply chain smarter

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I (Artificial Intelligence) was once a thing of science fiction but today, it’s being increasingly adopted in a number of industries.

Research from Accenture’s Technology Vision 2018 report suggests that Australian attitudes and perceptions of AI are evolving: 42 per cent of Australian executives believe AI will completely transform their industry in the next three years, which is almost double the global figure of 23 per cent.

One area where AI is making a significant impact is in supply chain and logistics, where it brings an abundance of benefits, most notably increasing productivity and reducing costs. Consider the countless hours that a business spends on chasing invoices or processing paperwork – hours that should be better spent on higher value activity.

When AI is applied effectively, it can drive significant business improvements. We’re already seeing it being used to manage inventory, track supply and demand and automatically adjust inventories, to streamline operations, adjust pricing data, plot the most efficient routes to physically move inventory and streamline customer service.

The question remains, how do businesses maximise the use and value of AI within their organisations? The

the platform to predict, for example, where and when a spike in consumer demand may occur. With this level of insight, an organisation can prepare so that its response or delivery time is not negatively affected by increased demand (or customers can be warned if they are likely to be), ultimately leading to greater customer satisfaction.

Implementing an AI system will demand resources from the organisation, some of which it may not already have, therefore requiring an investment. While this presents an initial short-term challenge, ultimately the long-term benefit will outweigh it.

Another often-cited challenge surrounding the implementation of AI is the perceived threat to human jobs.

However, this is not the case in the supply chain – instead, the technology provides assistance to people working in

that they can personally achieve through the use of AI. For example, they could reduce the time they spend on mundane administrative tasks, and instead focus on adding a human lens to the findings of the AI tool, to drive ac tionable insights and greater efficiencies across business operations. This could be in the form of better predictions about delivery dates - by analysing past variability in production lead times and logistics provider performance. Picture how well positioned a sales team would be to negotiate with a customer if they knew their inventory levels and how quickly they could deliver a product.

AI is poised to be a critical business tool, rather than a luxury that some businesses have. If businesses operating in the supply chain haven’t already started to think about the

short answer: data and information. By providing AI systems with a constant flow of structured and unstructured supply chain information – including logistics data, sensor information and news feeds – the technology can make intelligent decisions and process changes to mitigate any disruption that occurs across a supply chain.

Cognitive systems – like AI – develop and learn from the more information and data to which they have access. This, in turn, allows

the industry. According to Accenture’s report, four out of five executives (81 per cent) believe this will happen within the next two years: AI will work next to humans in their organisations, as a co-worker, collaborator and trusted advisor. It’s vital that employees look at AI through the same lens, so they are not seen to be resistant to change by their employers.

However, to reach this understanding, workers must be aware of the opportunities and tasks

implementation of AI, they’re already behind. Businesses should not fall into the trap of thinking that AI will automatically give them a competitive advantage. In order to gain a competitive advantage, businesses need to effectively use the technology in combination with their data, ensuring they do so better than their competitors.

Albert Nel is the vice president of sales, Asia Pacific, at OpenText. For more information visit www.opentext.com.au. ■ MHD SEPTEMBER / OCTOBER 2018 | 33

WHY FAIL? PAUL SARGEANT

Poor leadership, lack of methodologies constraining success of digital transformation projects for supply chain operators: survey

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een to use new technologies to streamline processes and lower costs, a majority of supply chain operators are finding lack of strong leadership and vague methodologies are hampering much-needed digital transformation projects.

Faced with increasing competition and shifting customer expectations, many operators are struggling to get much needed changes required to drive meaningful digital transformation over the line. The promise of advances such as fully integrated supply chains, driverless vehicles and fully flexible, customer-focused delivery scheduling tools is not being realised.

According to a recent survey commissioned by FTS Group and Software AG, 60% of respondents nominate a lack of tools and methodologies as the top factor inhibiting the successful completion of digital transformation projects.

Meanwhile, 41% indicate a lack of leadership from the top executive team is their biggest concern.

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These results are very concerning and highlight that there is considerable work to be done within many supply chain operators, if the promises of digital transformation are to be fully realised. In particular, senior management must clearly communicate that it is supporting these businesscritical initiatives and provide sufficient funding to allow the acquisition of the proper tools for the job.

Digital initiatives - at least the good ones - should be based around an end-to-end customer journey/experience. However, most organisations aren’t structured in this way and so the initiative will necessarily cut across multiple domains and lines-of-business. Consequently, you need both a strong commitment and direct, hands-on involvement from executive management to adjudicate competing claims and keep the program moving forward.

Other constraints flagged by survey respondents include a lack of funding, nominated by 34%, and a lack of leadership from line managers (28%).

This is also cause for concern, as organisations not taking advantage of technologies to improve the way they operate risk falling behind their competitors very quickly. The projects become just another point-in-time exercise and not a critical part of the company’s processes.

Interestingly, 44% of survey respondents still believe they are doing better than others within their industry sector when it comes to implementing digital initiatives. This compares with 39% who believe they are levelpegging and just 16% who feel they are falling behind.

Many senior executives still only view digital transformation as a way to streamline processes through automation. However, its potential for adding value is far more profound than this. As technology solution providers, we need to become more adept at explaining the potential that digital transformation can deliver in clear and definable business terms.

ROOM FOR IMPROVEMENT

The survey also sought to understand what key technologies Australian organisations feel will have the most impact on their digital transformation initiatives during the next two years.

Topping the list is cloud computing, nominated by 44% of respondents, followed by mobility (37%), the

Despite a clear need for digital transformation within many organisations, some for survival reasons and others for market growth, the survey found almost a third (32%) are not using digital technologies to transform their business processes and workflows.

KEY TECHNOLOGY CHALLENGES

MHD FEATURE

Internet of Things (35%) and advanced analytics (26%).

Here the results are not surprising as both cloud and mobile continue to be hot topics within the majority of organisations.

However, in reality, cloud and mobile are merely platforms to more easily connect the customer, supply chain and transport partners, and employee with the organisation. What is more important is what services and solutions the organisation will be providing in the cloud or on a mobile device. These are the things that will drive digital initiatives and have a positive longterm impact on this ecosystem.

KEY BUSINESS CHALLENGES The survey also revealed the key business challenges currently faced by Australian organisations that they are aiming to overcome through digital transformation projects. Topping the list is business agility, nominated by 52% of respondents, followed by cost efficiency (45%), and data capture and analysis (37%).

Where cost reduction had been top-ofmind for organisations in the aftermath of the Global Financial Crisis, these results show that attention has now shifted to becoming more agile. However, while they are often seen as competing priorities, they are actually two sides of the same coin, and both fall under the umbrella of driving organisational improvement.

So, for example, a digital initiative to transform customer service may lead to cost efficiencies in serving those customers

through less waste in the supply chain, but it is not necessarily the primary objective of the project.

Digital transformation programs can achieve both improved agility and cost reduction if some key guidelines are followed. These include: • Establish a digital champion. Assign an individual within the organisation responsibility for driving change and striking a balance between the needs of the business and fiscal discipline. There needs to be a cross functional approach adopted by this individual.

• Utilise off-the-shelf products and platforms. Most organisations see their operations and needs as unique and needing a custom solution.

However, this can often be addressed with process change. For example, by establishing ways to automate parts of the development cycle, an organisation can decrease the time needed for new products to be developed.

• Make iterative changes. Rapid, small changes ensure innovation is accessible and not intimidating for an organisation. It also ensures that efficiency improvements happen quickly, freeing up time that can be saved and re-invested. Small wins breed momentum for greater change.

• Don’t forget the human impact.

Technology-focused projects often neglect the human impact of the change. Include a human-centred design approach and back that up with a strong change management and training program to ensure the digital initiatives are adopted by people driving the business.

• Promote internal innovation. By focusing on internal innovation, particularly improving procedures and cutting down on waste, organisations can free up time that can be spent getting more of the usual work done or devoting more time to process improvements.

By following these guidelines, supply chain operators will be much better placed to succeed with their digital transformation projects. This means hey will be able to take advantage of the benefits offered by new technologies and services to drive efficiencies and improve organisational performance.

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By following these guidelines, supply chain operators will be much better placed to succeed with their digital transformation projects.

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Paul Sargeant is the chief operating officer at FTS Group. For more information call +61 2 9657 0999, email info@ftsg.com.au or visit www.ftsg.com.au. ■ MHD SEPTEMBER / OCTOBER 2018 | 35

REVOLUTION The logistics revolution: navigating the route ahead

BETH MORGAN

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ong the steady workhorse of supply chain, logistics has stepped to centre stage, carrying the responsibility as never before of delighting or disappointing the customer.

Driven largely by the impact of e-commerce, combined with advances in operational technologies, logistics has become the new playing field for competitive differentiation.

Logistics can’t operate in a vacuum.

It plays an increasingly vital role in orchestrating supply chain performance in a way that adds maximum value both to customers and the business. Achieving this requires opening up the flow of information between all parties in the supply chain.

As a function that relies heavily on third parties and outsourced services, an open approach brings both risk and reward.

Choosing the right partners, with the right infrastructure and technologies to support changing business models, is vital.

The opportunity to deliver value by optimising the logistics process through digitally enabled collaboration stands against a backdrop of increasing complexity on a scale not seen before.

In recent years, logistics has come under tremendous pressure from all corners. This includes increasingly demanding customer expectations, fluctuations in demand, rising

transportation costs, freight capacity issues, labour shortages and disruptions. It also comes from uncertainties around global economies and international trade routes and agreements. Last-mile logistics is in turmoil as dozens of new entrants compete for business.

NECESSITY IS THE MOTHER OF INVENTION In response, the logistics industry is in the midst of an innovation-driven shakedown, as it resolves ocean and air freight capacity issues, shifting increasing volumes to rail and tackles labour issues head on. In parallel, consumers, retailers and small start-ups leverage mobile, GPS and even drones to push the boundaries of what’s possible.

Logistics has the opportunity to move beyond being a mere commodity service function to being a strategic partner to the business, providing competitive differentiation through performance excellence and innovation.

Advances in digital technologies are making logistics more agile than ever before, turning it into a hotbed of innovation.

Automation in warehouses and distribution centres is driving process and cost efficiencies, helping to decrease delivery cycle times and optimise shipping options for customers in the most profitable way.

MHD FEATURE New sharing economy-based applications and services are exposing new opportunities for businesses to flex their logistics capacity by connecting them with idle assets and resources for storage and transport.

Control tower-type platforms connected via the cloud are helping provide greater visibility into logistics performance across the connected supply chain. This enables companies to be alerted to disruptions and quickly find solutions to mitigate operational risk, optimise processes and strengthen customer relationships.

These technologies promise visibility on a grand scale, offering a panacea to not only fix issues faster retrospectively, but to provide new levels of insight to drive increased optimisation and value.

This combination of pressures and opportunities puts logistics firmly in the driving seat to rethink and elevate its role within the business, its value to customers and its relationship with partners and suppliers.

TAKE CONTROL OF CHAOS As you consider the full range of possibilities made possible by new technologies and services, the key question is whether it makes most sense to run logistics fully in-house, in partnership with one or more third-party logistics service providers, or via a hybrid combination?

To help make this decision, start by determining the strategic value of logistics to your business. In the context of your three- to five-year strategic roadmap, review the current role of your logistics function as a source of competitive differentiation for your business.

If not already a strategic partner to the business, it’s possible that you’ll need to establish a new vision for your logistics function. This will require full representation at the highest levels of strategic supply chain and business planning.

Engage with your current logistics partners to understand their future roadmaps. Sit down with your key partners and have a serious conversation about their strategic development intentions over the next three to five years. If they don’t have the services you need and aren’t planning to develop them in a timeframe or direction that meets your future requirements, challenge them to consider developing them with you.

Otherwise, prepare to review your strategic relationships and establish new relationships elsewhere. But be warned: global logistics service providers are becoming increasingly discerning about the number and type of

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Prepare a plan now to develop your existing teams and prepare the organisation for a shift towards more automation.

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new relationships they take on. Be sure you have the leverage potential before thinking about jumping ship.

Take a creative approach to partnerships. Consider synergies in logistics beyond the usual suspects.

Look at other parties in your ecosystem who may offer opportunities to develop symbiotic relationships — some may even be competitors. In this brave new world, don’t dismiss the possibility to explore shared value through logistical execution that doesn’t compromise commercial competitiveness and differentiation.

PREPARE FOR THE FUTURE • Be prepared to invest. Although the focus in logistics has traditionally been on reducing costs, be prepared that elevating the role of logistics to a more strategic level will require investment.

Consider options for how logistics can generate additional revenue, as well as ways to incentivise logistics to keep any future cost savings for re-investment.

• Experiment with new services. Identify and seek out niche partners and evaluate them as solutions to capabilities not yet supported in-house or by traditional logistics partners. Set up quick ‘test and learn’ pilots with a trusted partner and/or customer to assess the value to the business and build out the model.

Then refine and scale to ascertain true costs and returns, pilot more widely, customising the service where necessary to meet the needs of individual customers or markets.

• Review your talent requirements. The skill profiles of tomorrow’s logistics teams will likely be very different from today. Logistics leaders are already telling us that they’re looking for people with strong analytical skills who can navigate in an increasingly businessfocused environment. Equally, a shift towards a more customer-centric outlook may be required.

Prepare for the future now by identifying the types of skills you’ll need over the next few years, and work with your HR partners to develop a pipeline of fresh talent. Also, prepare a plan now to develop your existing teams and prepare the organisation for a shift towards more automation within your warehousing and distribution facilities.

Beth Morgan is a research vice president at Gartner. She is focused on supply chain sustainability and talent management. For more information visit www.gartner.com/supplychain. ■ MHD SEPTEMBER / OCTOBER 2018 | 37

DISRUPTING THE LEADERSHIP TRAP SIMON POPLEY AND KIM WINTER

Many in the logistics and supply chain sector routinely work more than 60 hours a week.

How do you get out of this trap?

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eaders working in demanding roles tend to get little or no time to develop their own leadership ability. Focused on getting the job done and developing their own people, their own leadership growth often goes by the wayside. Australians work some of the longest working hours in the developed world, a study has found. About one in five Australians, or two million people, work more than 50 hours a week, the University of Sydney study shows, and many in the logistics and supply chain sector routinely work more than 60 hours a week.

Another trap that limits leadership development is underinvestment in the area by corporations. Research by Australia’s leading human performance technology specialist DTS International found that more than one in five companies (21%) have no leadership programs at all, while 36% of organisations are yet to establish a leadership development strategy. Only 58% of organisations spend more than US$1,000 per learner on training for senior leaders, compared to just 39% for high potentials and 32% for mid-level management.

The lack of investment – of both time and money – is at odds with a plethora of

evidence that indicates the magnitude of potential returns. For example, a recent report by the Human Capital Institute states that organisations that allot more than 31% of annual training and development budgets to leadership development are 12% more likely to report increased revenue.

TRAIN TO SURVIVE However, underinvestment in leadership development isn’t just a missed opportunity, it’s a major threat to a company’s longterm success. The fact of the matter is – when your leadership gets stale, so do results and the teams and leaders working with you. Everything becomes an effort and leadership feels like it’s sucking your will to live, rather than energising you and lifting up your people.

The fallout of neglecting your own leadership development is that you only have the same old skills, experiences and advice to hand down to your leaders and teams. It becomes a bit like leadership beans on toast, each and every night. After a while, the people to whom you serve your leadership learnings get bored and stop hearing the messages you want them to hear.

MHD SUPPLY CHAIN Your messaging is experienced as bland and your followers begin to feel that you have nothing new to offer or inspire them with. Preaching career development to them also invites hypocrisy that further diminishes your own leadership standing.

This is demonstrated by the fact that only 7% of senior leadership in an international survey by Deloitte finds themselves capable of developing ‘millennial’ leaders, signalling an impending leadership vacuum.

Here are a few practical ideas to assist you in developing some new thinking and raise the energy to revive your leadership.

Tips for revitalising your leadership 1. Set time aside to think about your current leadership – getting time to think about what changes you need and want to make is crucial. You may need to improve your ability to delegate work to be able to create this space to think: remember, thinking is working!

2. Ask for feedback from your direct leader and other leaders in your business – what areas do they see in which you need to develop further?

What is it they most notice about your leadership? Feedback is the fertile soil in which great leadership grows, without feedback we cannot grow. Feedback can also be hard to process and deal with if you are unfamiliar with getting feedback – think about working with a coach to navigate this journey.

3. Discuss taking on new leadership challenges. Take on leading a new team or project. Get involved in a different work experience that takes you outside of your current comfort zone. If you are beginning to feel the slight discomfort of being outside of your familiar way of leading, you are probably beginning to grow – this is good pain!

4. Read some latest thinking and research in leadership development. Read something about leadership you would not usually look at, and share this with another leader.

5. Develop your ability to reflect on your own leadership experiences. Consider reflective journaling as a means to develop greater insight into your own leadership practice from viewing situations from multiple perspectives.

Learn to become comfortable with the ambiguity that leading creates.

6. Find and join a leadership community of practice – build your own leadership network. The CEO Institute in Australia also organises various networking events, such as the CEO Connect

Conference and the CEO Institute Summit that feature top industry leaders. Chief Executive Women is specifically geared towards empowering women through leadership networks that aim to close the gender gap in senior leadership roles across Oceania.

7. Attends events and conferences that are specifically geared towards leadership development, that offer the opportunity to learn directly and network with inspiring leaders in your field and beyond. A good example is the Annual Leadership Summits organised by the Australian Institute of Management across the country. Logistics Executive Group, an Australia-based international talent management and executive coaching firm, also organises year-round networking events, including a CEO Breakfast Series and the international LogiSYM Conference Series.

8. Undertake some coach training to become a better-skilled coaching leader so that you are more effectively able to develop the potential of your own people.

9. Find yourself a qualified and experienced coach and begin a conversation about how to grow and develop your leadership capability.

Regardless of your seniority level and the nature of your organisation, effective leadership is necessary for your success, as well as the success of your team and your stakeholders. Therefore you cannot afford to let your leadership style get stale. Yes, it takes some time and some sweat, some investment on your behalf as well as your organisation and perhaps even the odd tear or two, but the reward is well worth the effort.

The most fruitful outcome is when your own leadership style becomes an example for others. This stimulates a domino effect as your mentees, peers and even seniors attempt to emulate your strategy and foster creative, productive and effective leadership across the organisation. Be the change you wish to be, as Gandhi said. The power rests with you.

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The lack of investment – of both time and money – is at odds with a plethora of evidence that indicates the magnitude of potential returns.

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Simon Popley is senior partner, leadership and coaching, and Kim Winter is the global CEO of the Logistics Executive Group. The Logistics Executive Group is celebrating its 20th Anniversary of talent acquisition, development and deploying bespoke leadership programs from their offices throughout Australia, Asia, India and Dubai. Contact Simon Popley at simonp@logisticsexecutive.com, or Kim Winter on +61 411 883 368, email kimw@logisticsexecutive.com. ■ MHD SEPTEMBER / OCTOBER 2018 | 39

PLAN4DEMAND Realising the full potential of demand planning – Part 2. in a series

ROD HOZACK

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n this series, we explore how the longer-term demand plan should play a more prominent role in businesses. The first two parts deal with the key elements in setting up the demand planning and forecasting process, and later, we will explore what are the key behavioural elements, i.e. what do we do with the process and the outcomes when we get them.

You can read Part 1. here: https://bit.ly/2MpyPzS.

2. Assign responsibilities for each layer of planning “If you don’t like my forecast, then just tell me the number you want, and I’ll do my best to deliver it, but I won’t guarantee it,” – a salesperson’s dilemma.

It doesn’t matter how you look at this problem, if a plan can’t be executed effectively, the plan is not valid. I wish I had a dollar for every time I’ve heard the statement: ‘It was a good plan, it just didn’t get executed properly’. This doesn’t apply exclusively to demand planning by the way, I have heard it being said about strategy, product plans, supply plans, and even between marketing and sales.

A second truism in demand planning is that you will never get the detail right if the aggregate is 40 | MHD SEPTEMBER / OCTOBER 2018

not right. The process needs to start with higher-level aggregate plans, coupled with feedback loops to continually align the detail back up to the aggregate. Typically, there are four major layers of planning in any organisation (see Figure 5.): 1/ The annual strategic and business planning cycle.

2/ The monthly cadence of re-planning and re-optimising the next 24-month rolling horizon.

3/ The weekly re-planning and tactical execution of the monthly plans.

4/ The daily execution of the weekly plans.

As illustrated in Figure 5., there should be an annual planning cycle, which (re-)aligns the longer-term strategic plans (usually five-to-10 years), agrees a more detailed business plan for the next three years, and then aligns the annual budget to the longerrange aspirations.

Everyone in a company needs to know about strategy and it is the lead team’s primary area of responsibility to develop the strategic plan and cascade it down to the rest of the business. The monthly cadence, is the routine ‘stop and check’, to make sure projections are still on track. This

Figure 5. The four layers of planning.

MHD SUPPLY CHAIN is also primarily the domain of the lead team, but also integrates middle and junior management in ensuring changes that occur each month are captured, assessed, and used for re-planning the medium-term horizon, i.e. the next rolling 24 months.

This will be discussed in more detail in Key 10 in following articles, but in short, it is the role of the integrated business planning (IBP) process to review the core plans of product, demand, supply, as well as the key input and output plans (asset, people, finance, and inventory), to re-align back to strategy every single month.

The purpose of the weekly cadence is to manage execution of the IBP plans in the shorter term, and because it is run by the next level of management, it is an essential element in freeing up the lead team to stay focused on the longer term. The primary objective of the weekly re-planning meeting and process is to deliver the signed-off IBP plan, or if it can’t be delivered, to communicate this as early as possible. It’s the ‘pulse check’ for how well core plans are being deployed.

Daily activities complete the topto-bottom alignment of planning with execution. To make this work, there needs to be an open and welcoming culture of ‘bad news early is better than bad news late’. So, each layer of process plays a vital role in ensuring top-to-bottom alignment and communication of the variance to plans. With the right people assigned to the appropriate horizon and clear escalation criteria, the lead team and other senior managers, can work in an environment of ‘silence is approval’, i.e. ‘if I don’t hear from you, I can safely assume the plan is on track’.

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When I was in industry, we used the term ‘continental drift’ to describe the way marketing and sales would slowly and imperceptibly drift apart.

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While the bottom level is more execution than prediction, it is nonetheless, important to have mechanisms to ensure the demand plan is being executed effectively. Referring back to Figure 5., this is how changes happening at a daily level, can be continually re-aligned and re-optimised back up to the IBP plan and ultimately back to strategy.

4. Spend more than 75% of the time in the monthly management meetings, on the four- to-24-month horizon “Those people who walk around looking down at their feet, will eventually walk into something solid.”

Increasing time on the medium- to longterm is easier said than done, in that it requires changing well-entrenched behaviour patterns. Combined with ‘Key 5’ below, the structure of the monthly demand review process needs to encourage (and measure) more time spent looking at the future.

Figure 6. Planning ownership.

3. Ownership and accountabilities defined “Our marketing forecasts are robust and supported by well-defined and quantified assumptions; I just can’t get the sales team to deliver,” marketing director’s dilemma To get the right level of input and perspective, and to achieve consensus without ‘drowning in the detail’, it is important to define who owns which horizon and to what level of detail. In the example shown in Figure 6., ownership of the higher-level, longer-term forecast is the responsibility of the most senior sales and marketing roles.

Depending on how big the organisation is, there can be a cascade of ownership, defined by an increasing level of detail, as the horizon becomes shorter and closer to ‘the here and now’.

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MHD SUPPLY CHAIN

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We need to set up the demand planning and forecasting environment to ensure the behavioural and process characteristics are understood and well embedded.

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When I was in industry, we used the term ‘continental drift’ to describe the way marketing and sales would slowly and imperceptibly drift apart as the year progressed to the point where it was almost impossible to bring them back together until the next annual planning cycle, and even then, that was a struggle.

Senior marketing and sales managers should, therefore, routinely spend oneto-two hours a month reviewing the 24-month demand plan. The key elements and flow of this meeting are shown in Figure 7. To support this, companies often measure where time is spent. The key parameters can be easily jotted down just using pen and paper, or set up in a simple a spreadsheet to measure: • Data accuracy / integrity discussion – this should be zero.

• Process integrity discussions – this should be zero.

• Assumption performance and key metrics – ideally this should be about 15% of the time.

• The short term, i.e. next three months – ideally this should be no more than 10% of the time.

• The next 12 months and this financial year – ideally about 35% of the time.

• Months 13 to 24 – ideally about 40% of the time.

Figure 8. is a representation of where time should be spent in the monthly cycle (IBP), but as shown in Figure 5., to facilitate this, an organisation also needs a weekly re-planning process, which we call integrated tactical planning (ITP), whose charter is to deploy the monthly plan through a series of weekly re-balancing iterations. This is to focus where time is spent on the shorter term.

5. Consensus demand planning “When I get everyone together to debate the demand plan, all I get is what I want, and then it turns out to be wrong. There’s’ got to be a better way to forecast,” sales director’s dilemma.

When the term ‘consensus forecasting/ demand planning’ is used, most people think that it is a group of people sitting around a boardroom table coming to a consensus on the plan. This is not the definition of ‘consensus’, and doing it this way only leads to ‘group think’.

Similar techniques to consensus forecasting, such as the Delphi technique and ‘panel forecasting’ have varying degrees of success, but to truly arrive at a consensus, the process needs to have three essential criteria: 1/ The individual forecasts must be done in isolation and derived from those forecasters’ perspectives.

2/ Key drivers or underlying assumptions have to be documented to describe the thinking behind how the numbers and plans were generated.

1.

Start with a review of progress to strategy or critic success factor – this sets the longer-term perspective up front.

2.

Assess changes to key strategic assumptions (also known as key performance drivers) – this is one of the most critical areas in managing strategically and will be discussed in more detail later under Key 6 in Part 2.

3.

Analyse performance of key operational metric (forecast accuracy and bias) – at least a little time needs to be spent on history to make sure we are continually getting better at planning and execution.

4.

Review projections in aggregate – an important element is to not “get lost in the detail”, so several families / aggregates / categories, are the best way to view the new demand plans, knowing that the detail is being managed by the demand management and planning team.

5.

Identify upsides and downsides to the projections, and most importantly, agreeing and documenting the contingency actions that will be deployed.

6.

Model possible scenarios for major events not covered in point 5 above.

Figure 7. Demand planning review structure.

42 | MHD SEPTEMBER / OCTOBER 2018

Figure 8. Demand planning time allocation.

3/ The consensus is reached by rigorous challenge and debate about the different sets of assumptions and perspective, not the actual numbers themselves.

4/ This has been demonstrated to deliver good forecast outcomes, as well as minimising the group think effect.

Typically, the three primary perspectives in most businesses are sales, marketing, and statistical forecasts, but could also include many other inputs, as shown in Figure 9.

5/ Each of these inputs needs to be quantified and time-phased, so there can be an ‘apples-to- apples’ comparison.

6/ A good starting point is to set up different views for sales and marketing, and add statistical forecasting projections to anchor the plans. Such as: 7/ - Sales forecast by ‘A’ SKU, by customer, for the first six months – the bottom-up forecast.

8/ - Marketing forecast by category for months one to 24 – the top-down forecast.

9/ - Document assumptions supporting each forecast.

10/ - Gaps to the bottom-up and top-down forecast, and the ‘step’ at month six, then become the topic of dialogue and debate.

11/ The important point is that we want to debate the ‘thinking’ behind the numbers, not the numbers themselves.

The critical elements are to ensure there is an ‘anchor’ as a starting point, ownership is defined for both horizon and level of details, and multiple perspectives are not only allowed for, but encouraged, before coming to a consensus on best possible demand plans based on the knowledge we have at hand today. As a last word in this section, I quote Brad Pitt in the movie Moneyball, “... it is a process, a process, a process ....”

In the next articles we will explore what to do with the demand plan once we have the process embedded in the business.

Figure 9. Demand planning inputs.

To be continued. Rod Hozack is a partner at Oliver Wight. For more information email information@oliverwight.com or visit www.oliverwight.com. ■

SUMMARY We need to set up the demand planning and forecasting environment to ensure the behavioural and process characteristics are understood and well embedded.

MHD SEPTEMBER / OCTOBER 2018 | 43

MHD SUPPLY CHAIN

OPEN THE DOOR KIM GARNER

Opening doors to enhanced transparency and security in the logistics industry with blockchain technology

H

aving garnered attention as the technology underpinning virtual currencies, blockchain is now revealing an extended set of possibilities beyond the financial realm. A Gartner report listed blockchain on its top IT trends to watch, predicting that the technology will revolutionise diverse fields from healthcare, media distribution, manufacturing and supply chain.

But what is blockchain? The technology adopts a distributed processing structure in which data is shared throughout the entire network rather than saved on a specific server.

The name ‘blockchain’ comes from the way that data is recorded in units called blocks, strung together like the links in a chain. Any attempt to tamper with the data in individual blocks requires the entire body of data to be rewritten. This mechanism guarantees the legitimacy of blockchain data, which is said to be effectively impossible to corrupt.

The fact that blockchain data is shared among network participants means that information is easily traceable. As the volume of e-commerce continues to grow in 44 | MHD SEPTEMBER / OCTOBER 2018

Australia, this level of visibility and traceability will be the next frontier in managing supply chains.

MAKING USE OF BLOCKCHAIN TECHNOLOGY IN THE LOGISTICS INDUSTRY As a ‘permanent‘ ledger that offers complete traceability, blockchain can provide the logistics industry with records of data that are almost impossible to falsify. Using blockchain, a package can be tracked through every stage of the supply chain, from the moment it is shipped to the moment it reaches the buyer. This end-toend traceability provides a level of trust between a buyer, seller and the appointed logistics provider, and helps to offer peace of mind. Retailers, too, would gain the ability to monitor the condition of merchandise before its arrival on shelves, assuring product quality and peace of mind for consumers.

The information that can be added to a blockchain is not limited to package conditions. Other information could include photo ID for delivery personnel and procedures for pick-up and delivery, which would strengthen security and reduce the chance of theft. Easy access to saved transaction information would ensure secure payment and settlement processes and provide new and additional data that would help in determining fees that is a more accurate reflection of services used.

Overall, the increased visibility that blockchain can provide may lead to

greater supply-chain efficiency, both by departments in charge of various logistical processes and partner companies. Blockchain could make it easier to identify redundancies and other issues in intermediate distribution to improve the overall process. It can also provide monitoring of fluctuations in demand and transport volume, giving rise to new business ideas.

As the logistics industry embraces blockchain technology, one notable development has been the August 2017 formation of the Blockchain in Transport Alliance (BiTA). This consortium, which has more than 100 member organisations including FedEx, promotes the industry-wide use of blockchain technology. By coordinating companies from a range of different sectors, the consortium aims to enable tracking that covers the entire supply chain — from the contract and shipment stages to the actual receipt of a package.

While blockchain technology is still in its relative infancy, leveraging the technology effectively within the logistics industry will require cooperation with a range of organisations and businesses. Through extensive trials, blockchain may provide greater efficiency throughout the supply chain.

Kim Garner is the managing director for international operations for FedEx Express in Australia and New Zealand. ■

MHD SUPPLY CHAIN

KEY ISSUES IN 2018/2019 TRAVIS BROOKS-GARRETT

The benefits of being a ‘Trusted’ logistics service provider

F

reight & Trade Alliance (FTA) has been a key supporter of the Australian Trusted Trader program since its inception, firstly participating in a co-design process with the Department of Home Affairs and then continuing to contribute to its development via the Industry Advisory Group (IAG).

The Australian Trusted Trader is a program managed by the Department of Home Affairs granting trade facilitation benefits to importers, exporters and logistics service providers who can demonstrate supply chain security controls. Logistics service providers currently accredited under the scheme include Toll, DHL Global Forwarding, Visy Logistics, Damco, UPS, and others. A full list of accredited service providers is available here: www.homeaffairs.gov.au/busi/ cargo-support-trade-and-goods/ australian-trusted-trader/accredited.

Whilst it is not necessary for a Trusted Trader cargo owner to use a Trusted Trader logistics provider, many large cargo owners are now including Trusted Trader status as a requirement in their Request for Tender processes.

As more logistics service providers and cargo owners join the program, we imagine that this trend will continue.

Essentially, the Australian Trusted Trader is dividing the industry into two distinct categories, those who are accredited as ‘Trusted’, and those who aren’t. It’s a compelling proposition for a logistics service provider trying to demonstrate their credentials to a cargo owner.

The department has an ambitious agenda for the program to accredit 1,000 Australian Trusted Traders by

2020, representing 30% of Australia’s two-way trade by volume and 50% of two-way trade by value.

On 8 August 2018, Minister Taylor and ABF Commissioner Michael Outram announced five new exclusive benefits at the 2018 Australian Trusted Trader (ATT) Symposium: • Duty deferral.

• ATT Origin Advance Ruling.

• Implementation of a Mutual Recognition Arrangement with the Republic of Korea.

• Implementation of Trader Identification Numbers, designed to simplify processes and make Trusted Traders more competitive internationally.

• Automation of an even lighter touch at the border for accredited Trusted Traders.

The most recent Federal Budget announced further detail, including a pilot program to significantly reduce Certificates of Origin (CoO) requirements for accredited importers.

Freight & Trade Alliance (FTA) continues to work with the Department to ensure that additional direct benefits are extended to logistics service providers accredited under the program.

We would welcome the thoughts of industry.

UPDATE ON THE NATIONAL FREIGHT & SUPPLY CHAIN STRATEGY Freight & Trade Alliance (FTA) was a key contributor in providing evidence to the Inquiry into National Freight & Supply Chain Priorities, which concluded earlier this year. The report from that inquiry is now available on the Department of Infrastructure, Regional Development and Cities website. With the report published, the department has now been tasked with the development of a National Freight

& Supply Chain Strategy, due to be released in 2019.

The Department is holding a series of industry roundtables to inform the strategy. These roundtables include specific sessions on: • Data.

• Regional Supply Chains.

• Institutional Frameworks.

• Infrastructure.

• Urban Freight.

• Supply Chain Connectivity.

The National Freight & Supply Chain Strategy will be an important piece of policy architecture for supply chain professionals.

FTA continues to make the case that the strategy should not exclusively focus on ‘high-level’ outcomes but should address real operational issues faced by industry, such as challenges relating to the landside interface at Australia’s ports and terminals, and the recent introduction of stevedore infrastructure charges.

Freight & Trade Alliance (FTA) will continue to represent industry on these issues. If you would like to contribute, please don’t hesitate to email me at tbrooks-garrett@ftalliance.com.au.

Travis Brooks-Garrett is a director of the Freight & Trade Alliance (FTA) and the Secretariat of the Australian Peak Shippers Association. For more information email tbrooks-garrett@ftalliance.com.au. ■ MHD SEPTEMBER / OCTOBER 2018 | 45

A

SEAMLESS SERVICE

legendary family name in refrigerated linehaul transport and cold storage is boosting efficiency at its Sydney depot with a new fleet of material handling equipment from Crown.

Don Watson Transport, which covers over 16 million kilometres per year with its 85-strong refrigerated truck fleet serving customers around the country, has updated its forklift fleet with six Crown SC 6000 Series counterbalance models.

The company is also saving time with a Crown-fitted charging room and the BTS 1000 battery transfer system, which allows one person to change batteries quickly and safely.

According to business manager Lyndon Watson, who has previously worked within the business as a diesel mechanic, truck driver and business development manager, the Crown units were selected to help the company run a more efficient and cohesive service for its customers.

“One of the main components of providing good service for our customers is getting the transport and cold store parts of our business to integrate in a seamless way,” Mr Watson said.

46 | MHD SEPTEMBER / OCTOBER 2018

“When it’s really time-critical to get the trucks moving and meet our fatigue regulations, the Crown forklift batteries can be swapped quickly to keep loading going.

“It means that the cold store can offer a service to our transport business that’s second to none.

“We can keep those vehicles moving through the site and get them on the highway and that’s a large part of what Crown has been able to bring to us.”

New South Wales cold store and transport manager Wayne Rhodes said the Crown units are a good fit for the company’s busy environment.

“At our cold store we have around 7,500 pallets of frozen goods, a crossdock of 2,500 square metres and we also provide a ‘blast’ freezing service.

The blast service averages up to four containers per day,” Mr Rhodes said.

“When I first started at Don Watson, we had older equipment and we were struggling to provide the service for our transport and operations – we were constantly doing battery swap-outs.

“We looked at using Crown over a three-year period and the costs justified the decision so we spoke to the company owners about bringing in Crown as a preferred supplier of equipment.

“I went through the numbers with them and showed that the time we were taking to change batteries and the downtime was costing more money having the old units.

“Currently we’ve got seven Crown units that we have purchased. Now we’ve got the blokes on the floor loading the trucks, sending them on-time and providing the right level of service for our customers.”

In addition to the increased uptime of the SC 6000, the Crown BTS 1000 battery swap system is providing measurable productivity benefits.

“Prior to having Crown on board, it used to take three staff members 30 minutes to complete a battery swap.

Now it takes one person four minutes to do one.

“So it’s a credit to Crown that they listened to the staff of Don Watson to find out what our business is about and what we are trying to achieve,” Mr Rhodes said.

The SC 6000, which was added to the Crown line-up in 2016, features a steering system on four-wheel models that provides manoeuvrability rivalling three-wheel models.

Don Watson Transport’s SC 6000s feature the optional Crown fingertip control system for easy-to-reach operation of the hydraulics. The SC 6000s have become a new source of pride among the workers who spend a few hours on them each day.

“The staff were very pleased to hear that the new forklifts were arriving.

They’re very passionate about them; I actually go out and see them wipingdown dust. I wouldn’t have seen that with the old units,” Mr Rhodes said.

Don Watson Transport was established in 1948 by George Watson. George’s son Don took over management of the business in 1973 and set about expanding the company until he died tragically while racing at Bathurst in 1994. The current owners have worked together with the employees to maintain growth within the business.

Don Watson Transport has been in the cold storage industry since 1999 when it established its Wodonga, Victoria, site. Its Wetherill Park, Sydney, site was completed in 2006.

For more information call 131 604 or visit www.crown.com. ■

MHD MATERIALS HANDLING AND MANAGEMENT

GOOD FOR BATTERIES

O

ne of Australia's fastestgrowing battery companies is sourcing forklifts from Toyota Material Handling Australia (TMHA) as it expands.

R & J Batteries' new distribution centre at Truganina in Melbourne's west has commissioned a new threetonne Toyota 8FG30 forklift and racking for 2,000 pallet spaces.

The centre is 20 minutes from the Melbourne docks and hence the main Victorian receiving centre for containers of stock.

The new Toyota forklift, one of two 8FG25 units at the distribution centre, is part of a company move to an allToyota fleet.

Victorian State manager Jason Handley said R & J Batteries had experienced massive growth in the last ten years, and has had new racking installed in company stores in Brisbane and New Zealand, with further expansion occurring in Adelaide.

Mr Handley said the company's decision to use Toyota forklifts was based on safety, efficiency and operator comfort.

"The company has been in business 22 years and two years ago we began switching to Toyota forklifts across our 20 stores nationally.

"Toyota forklifts are much more comfortable for the operators than our previous units.

"Overall, the Toyota forklifts provide greater efficiency and safety: they are a more stable forklift," he said.

Mr Handley said there we have a great working relationship with the team at TMHA. Toyota Material Handling Australia's national sales & product manager automation, Tony Raggio, said as well as being national market leader in forklifts, TMHA now offers a comprehensive range of driverless forklifts (Automated Guided Vehicles)- including selective, drive-in, gravity flow, push-back and satellite with auto shuttle.

"We can assist with optimising business flow, driving down costs and increasing productivity through the integration of Automated Guided Vehicles with pallet racking solutions," he said.

ABOVE: R & J Batteries’ new three-tonne Toyota 8FG30.

RIGHT: The Fiorentini Ecosmile 85B. In addition to its massive product range, TMHA provides the Toyota advantage, including quality, durability and reliability, industry leading forklift safety with its System of Active Stability, and a nation-wide parts and service network.

TMHA TO DISTRIBUTE FIORENTINI SWEEPERS Toyota Material Handling Australia (TMHA) has secured the national distribution rights for the Fiorentini range of floor sweepers and scrubbers and dryers.

Fiorentini Sweeper Company manufactures a large range of easy to use and highly manoeuvrable battery electric and internal combustion floor sweepers – ideal for use in warehouses, logistics and distribution centres and most industrial applications where a dust-free environment is essential.

The new Australian distribution agreement, signed between TMHA and Fiorentini owner Alessandro Fiorentini in February 2018, gives the sweeper range the product-support back-up of TMHA’s 17-branch national network and huge mobile service fleet.

The first of the units ordered from the Fiorentini factory by Toyota

Material Handling arrived in Australia early August and are already bound for customer sites. The units include the heavy duty Ecosmile 85B ride-on scrubber dryer, larger application I42 scrubber dryer with battery electric or LPG power, and the S38 and S48 LPG industrial sweepers already in high demand.

TMHA business development and compliance sales manager Andrew Jones said the company had selected the best suited models in the Fiorentini product range for Australia, to suit local customer needs and match the products they currently use.

The Fiorentini product range is also complimentary to the current extensive Toyota range and adds additional credibility to our one stop shop mantra.

For more information call 1800 425 438 or visit www.toyotamaterialhandling.com.au. ■ MHD SEPTEMBER / OCTOBER 2018 | 47

FIVE GOOD REASONS Why apics CPIM is a must for every user and consultant HATEM ABU NUSAIR

“

It’s why over 110,000 other SCM practitioners around the world have attained the CPIM. Now it’s up to you!

”

48 | MHD SEPTEMBER / OCTOBER 2018

F

or the most part of my career, I have been known to be an active member of the APICS community. This means that, quite frequently, I interact with SCM practitioners and ERP consultants from different industries and with different professional backgrounds. During discussions, I am often asked what ways are best to acquire more in-depth-knowledge of the SCM/ERP domains.

Drawing from my 9 years of extensive, hands-on experience in the fields of supply chain management and SAP ECC ERP implementation/support within the pharmaceutical and FMCG industries, and a unique techno-functional skill set in SCM enabling technologies and domain expertise in the SAP PP/PP-PI module, I have compiled some advice for others.

When reflecting on numerous SAP ERP implementation/improvement projects, I keep falling back on the certainty and solidarity of the APICS certification: Certified in Production and Inventory Management (CPIM) which I believe was one of the main factors that led to my implementation success. Here are five reasons why I believe the APICS CPIM is a must for every ERP user and consultant: 1/ It harnesses your talents: It is widely believed that a lack in SCM talent is the reason behind many ERP implementation failures or less than optimal ERP performances – both the user/consultant sides. And while there is no one-sizefits-all kind of advice, the APICS CPIM certification has so many benefits to both users/consultants that I almost always advise people to pursue APICS CPIM because it is more about getting the best ROI of an ERP implementation.

2/ It follows a process-orientated approach: ERP commercial packages are all built to computerise the classical value chain activities of a company. These value chain activities are resembled in the modular structure that all commercial ERP packages follow. For example, business processes relating to Supply Chain Planning including, Sales and Operations Planning, Demand Management, Production Planning/Scheduling would be found under the Production Planning “PP/ PP-PI” module in SAP ECC ERP. Likewise, other business process compromising a company’s value chain would be found as “canned” business processes across different modules of an ERP solution.

The CPIM follows a process orientated approach to Supply Chain planning in a fashion that’s is almost identical to what is found in a SCM/Manufacturing Modules of and ERP package. This strategic fit between how ERP systems are structured and the process-oriented structure of the CPIM courseware is what makes CPIM the most powerful framework for SCM/ERP professionals in both user/consultant roles.

3/ It mirrors the same language as your ERP: The concepts and terminology of an SCM/Manufacturing module of an ERP system, such as MPS/MRP, BOM, phantom assemblies, time fences and forecast consumption techniques, just to name a few, that prove tricky for most users/ consultants to grasp are explored in-depth in the CPIM courseware in an a clear and easy to follow approach with plenty of real life examples. This helps to better utilise system functionalities/features that are likely to be ignored due to the lack of underrating of such concepts.

4/ It builds confidence to apply a configuration effort: CPIM equips designees with knowledge that proves critical to guide system configuration efforts in the SCM area.

5/ It results in better, more streamlined implementations and a higher ROI for digital transformation efforts: Many companies the likes of BSAF, DuPont and Intel have adopted APICS frameworks which helped them achieve organisational goals and increase the efficiency of their systems and people. It’s why over 110,000 other SCM practitioners around the world have attained the CPIM. Now it’s up to you!

Hatem Abu Nusair holds a M.Sc. Engineering, CPIM-F, CSCP-F, SAP Certified Application Associate, APICS Master Instructor.

Hatem is a qualified industrial engineer and a Master of Manufacturing Engineering candidate at UNSW. He is a Certified Fellow in Production and Inventory Management (CPIM-F) by APICS, a Certified Fellow Supply Chain Professional (CSCP-F) by APICS and a Certified Application Associate by SAP SE. Hatem will be facilitator for Term 4 CPIM Part 2 Guided Learning for Australasian Supply Chain Institute where he will share his passion of streamlining supply chain processes, eliminating redundancies and utilising enabling technology to achieve operational goals with CPIM Part 2 students. ■

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Become a thought leader and guest contributor to the ASCI Blog, including unlimited blogs* also shared via ASCI’s social media channels Highlight your sponsorship via use of the ASCI logo on your own business cards, website and marketing collateral**.

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13 weekly Wednesdays 7-9pm AEDT commencing 26 September 2018

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1300 557 175 | enquiries@ASCI.org.au | www.ASCI.org.au MHD SEPTEMBER / OCTOBER 2018 | 49

MHD NEWS FROM SCLAA

CHAIRWOMAN’S REPORT

O

AMANDA O’BRIEN

“

The Australian Supply Chain & Logistics Awards for 2018 will be celebrated on Friday 23 November in The Grand Ballroom, Luna Park, Sydney.

”

50 | MHD SEPTEMBER / OCTOBER 2018

ver the next ten years, rising expectations, developing technology and the shift to urban living will challenge brick-and-mortar retailers, online retailers and third party logistics providers (3PL) alike, putting their agility, flexibility and responsiveness to the test.

Disruptors in the supply chain will considerably change the landscape such as the shift to B2C, short turnaround times, the rise of the machines, visibility, traceability and compliance all part of the unforeseen impacts to the supply chain in the next 20-30 years.

At SCLAA we understand the importance that technology has on our global supply chains and we are continually striving to implement and expand our horizons with innovative events, partnerships and information highways. I remember Dr John Gattorna’s words: “Being trusted and reliable, process driven, prefect ready, responsive and innovative is the result of robust processes and that people are the most important driver of supply chains.”

Of particular note with technology and ‘blockchain’ being at the forefront of people’s discussions in industry circles, SCLAA representatives attended the unveiling of the Trade Community System in Brisbane showcasing the future of international trade. Held in conjunction with PwC, Australian Chamber of Commerce and the Port of Brisbane, Bryan Clarke Director of Trade and International Affairs for the Australian Chamber of Commerce, opened proceedings to a full house. Mr Clarke said Australia relies on efficient and effective trade to drive its economy. Port of Brisbane’s CEO Roy Cummins said it is the right time for industry to initiate reform and modernise to cater to international business.

Presentation and a live display witnessed how technology is transforming Australia’s international trade environment, and opened the arena up to some interesting questions about how data security and the monopoly of intelligence would be a telling factor in future collaborative alliances to enable this technology to fulfil its prophecy of a transparent, seamless and integrated supply chain.

This leads me onto SCLAA’s Women in Logistics event held this year, ‘The Great Debate Luncheon: Progress or Paralysis?’, which really pushed the boundaries of what diversity means and how leaders in industry

can progress an inclusive agenda rather than an exclusive agenda in corporate Australia.

Panel discussions were robust and it was attended by policy makers, regulators and industry experts who became involved in the conversation. Great to see the impact the event had and I am sure the conversation for change will continue through next year’s event. View 2018 event highlights and photographs here: https://bit.ly/2vQEy6u.

COME AND CELEBRATE It would be remiss if we did not celebrate people within the wider supply chain environment achieving great things and making a difference. The Australian Supply Chain & Logistics Awards for 2018 will be celebrated on Friday 23 November in The Grand Ballroom, Luna Park, Sydney. These historic and prestigious national awards, presented by the SCLAA, have been running for fifty eight years making them the most sought after, recognised and influential awards across the supply chain, logistics and transport industries. Sixty-one submissions were received for the 2017 Awards from across Australia and the Asia Pacific, with representatives from China, India, Malaysia, Papua New Guinea, New Zealand and Australia attending the awards gala dinner.

To book for this year’s awards gala dinner go to https://bit.ly/2KNobgk.

Categories for this year’s Awards include: • ASCL Industry Excellence Award • ASCL Future Leaders Award • ASCL Environmental Excellence Award • ASCL Training, Education & Development Award • ASCL International Supply Chain Award • ASCL Supply Chain Management Award • ASCL Information Technology and Management Award Submission close on 7 September.

Should you want to view the awards criteria and additional awards information, please go to https://sclaa.com.au/awards, and to view last year’s highlights visit https://bit.ly/2zC68cY. For more information on how you can join the association and take part in the awards visit the website www.sclaa.com.au or call our secretariat on 1300 364 160. Amanda O’Brien is the national chairwoman of the Supply Chain and Logistics Association of Australia. Email amandao@xtremefreight.com.au. ■

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