Supply & Demand Chain Executive December 2018

2018 GREEN SUPPLY CHAIN AWARDS Global Supply Chain Solutions Covering Procurement, Risk, the IoT and More

DECEMBER 2018

BRICK & MORTAR

LIVES Retailers leverage their stores in an Amazon world

A PERFECT STORM

Intermodal is growing as trucking battles its own set of challenges

SUSTAINABLE WAREHOUSING

Going green is a must but requires a complex strategy to execute

Fresh new content daily at SDCEXEC.COM

2018 SUPPLY CHAIN

11 th Annual

Supply & Demand Chain Executive

GREEN SUPPLY CHAIN AWARDS The following are select companies recognized by this year’s award, honoring leading organizations that envision and implement strategies to support green or sustainable supply chain goals. Turn to Page 16 to read about the practical steps companies are taking —and other companies can take — to green their supply chains.

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December 2018 | Volume 19 | Issue 5

CONTENTS FEATURES

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08 COVER STORY

Retailers Leverage Brickand-Mortar in an Amazon World

Retailers must focus on the ease of purchase, speed of delivery and overall customer experience to remain competitive.

16 AWARD

reen Supply G Chain Award

This year’s recipients are making a positive impact on the environment and their bottom line.

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SPECIAL REPORTS

24 THE INTERNET

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Companies are finding IIoT solutions for legacy assets as well as building connections to the cloud for greater data sharing and analysis.

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SDCEXEC.COM

OF THINGS nly the O Beginning for IIoT

Evaluating a Digital Procurement Solution

A few key questions can simplify a daunting task to evaluate which source-to-pay solution will be the best for the future of your company.

30 BLOCKCHAIN Blockchain Remains Relevant

With several companies involved in pilot programs, the next stage of blockchain technology rests on trust.

EXECUTIVE FOCUS

32 TRANSPORTATION Trains Take Advantage of ‘A Perfect Storm’

Once seen as an “elective option,” intermodal is growing as trucking deals with its own problems.

34 WAREHOUSING

Sustainable Warehouses and the ROI Equation

38 SOFTWARE

& TECH Advanced Manufacturing Technologies Drive Digital Transformation

Dassault Systemes is transforming aerospace manufacturing through innovation at its new experiential learning center.

42 PROFESSIONAL DEVELOPMENT Improve Your Training Through Coaching and Mentoring

If you are investing in employee training, you should expect a return on that investment.

COLUMNS

04 EXECUTIVE MEMO 06 CHAIN REACTIONS 22 MADE IN AMERICA 44 WORK HARD,

PLAY HARD

Being environmentally friendly is crucial for warehouse operators but requires a complex strategy to execute.

Exclusive online features and solutions for successful supply chain operations

OEM Technology to Drive Enterprise App Adoption

What’s Now and Next in IoTDriven Supply Chain Innovation

www. sdcexec.com/21029759

www. sdcexec.com/21029551

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26 PROCUREMENT

Are We Ready for Digital Procurement?

www. sdcexec.com/21031970

www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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EXECUTIVE MEMO

By John R. Yuva, Editor jyuva@ACBusinessMedia.com

CHANGE COMES IN MANY FORMS Regardless of your business role, everyone can bring something to the table.

uthor Neil Gaiman once wrote, “I hope that in this year to come, you make mistakes.

Because if you are making mistakes, then you are making new things, trying new things, learning, living, pushing yourself, changing yourself, changing your world.

You’re doing things you’ve never done before, and more importantly, you’re doing something.”

Inspiring words as we close on another year. Many of us are already thinking what lies on the horizon—upcoming projects, strategic partnerships, market opportunities and the like. However, as we embark on those endeavors, keep Gaiman’s words close. As supply chain management professionals, you have the power of change. With your reach extending across the globe, there are myriad connections to share ideas and influence others—to contribute to and cultivate change.

As an editorial team, it’s our mission to educate and inform with every piece of content we produce. Reflecting on what we accomplished this year, several articles emerged as popular topics with readers.

We encourage you to visit the Supply & Demand Chain Executive website 4

www.SDCExec.com PRINT AND DIGITAL STAFF GROUP PUBLISHER Jolene Gulley ASSOCIATE PUBLISHER Judy Welp EDITORIAL DIRECTOR Lara L. Sowinski EDITOR John R. Yuva ASSISTANT EDITOR Amy Wunderlin WEB AND COPY EDITOR Mackenna Moralez CONTRIBUTING EDITOR Barry Hochfelder SENIOR PRODUCTION MANAGER Cindy Rusch ART DIRECTOR Kayla Brown AUDIENCE DEVELOPMENT DIRECTOR Wendy Chady AUDIENCE DEVELOPMENT MANAGER Angela Franks ADVERTISING SALES (800) 538-5544 JOLENE GULLEY, jgulley@ACBusinessMedia.com SHEILA SPINCK, sspinck@ACBusinessMedia.com

(www.sdcexec.com) to read these and other articles the team produces. Below are the top five articles of the year.

1) Six Key Trends Changing Supply Chain Management Today—Reevaluate current processes and performance for a healthier supply chain.

2) 100 Great Supply Chain Projects— Inspire your team with profiles detailing innovative and transformative projects.

3) Checklist: Four Steps to Mitigating Supplier Risk and Protect Your Supply Chain—Examine four critical steps to protect the supply chain during the supplier life cycle.

4) The Keys to a More Responsive Supply Chain—Visibility and a holistic approach make the difference when responding to a supply chain disruption.

5) Five Steps to Improve Warehouse Employee Performance During and After Training—Finding the right warehouse talent is important, but training that talent to perform at the highest level is even more critical.

Reflect on your mistakes and accomplishments, and wipe the slate clean. It’s a new beginning to bring ideas and change into the world.

Happy reading!

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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Published by AC Business Media 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

EDITORIAL ADVISORY BOARD LORA CECERE, Founder and CEO, Supply Chain Insights TIM FEEMSTER, President, Foremost Quality Logistics JOHN M. HILL, Director, St. Onge Company, and Board of Governors, Material Handling Industry of America RORY KING, Analytic and Big Data Advisor, SAS Institute KAREN MASTER, Vice President of Communications, SAP Ariba WILLIAM L. MICHELS, CEO, Aripart Consulting JULIE MURPHREE, Founding Editor, Supply & Demand Chain Executive ANDREW K. REESE, Senior Portfolio Marketing Manager, IHS, and Former Editor, Supply & Demand Chain Executive CHRIS SAWCHUK, Global Managing Director and Procurement Advisory Practice Leader, The Hackett Group RAJ SHARMA, CEO, Censeo Consulting Group KATE VITASEK, Founder, Supply Chain Visions CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (847) 291-4816 Email: circ.sdcexec@omeda.com LIST RENTAL Jeff Moriarty, Infogroup (518) 339-4511 Email: jeff.moriarty@infogroup.com REPRINT SERVICES JOLENE GULLEY, jgulley@ACBusinessMedia.com AC BUSINESS MEDIA CEO Barry Lovette CFO JoAnn Breuchel DIGITAL OPERATIONS MANAGER Nick Raether DIGITAL SALES MANAGER Monique Terrazas

Published and copyrighted 2018 by AC Business Media All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher.

Supply & Demand Chain Executive [USPS #024-012 and ISSN 1548-3142 (print) and ISSN 1948-5654 (online)] is published five times a year: March, May, June, September and December by AC Business Media, 201 N. Main Street, Fort Atkinson, WI 53538. POSTMASTER: Please send all changes of address to Supply & Demand Chain Executive, P.O. Box 3605, Northbrook, IL 60065-3605. Printed in the USA. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the United States, Canada and Mexico to qualified individuals. Publisher reserves right to reject nonqualified subscribers. One-year subscription to nonqualified individuals: U.S., $30; Canada and Mexico, $50; and $75 for all other countries (payable in U.S. funds, drawn from U.S. bank). Single copies available (prepaid only) for $10 each. Return undeliverable Canadian addresses to: Supply & Demand Chain Executive, P.O. Box 25542, London, ON N6C 6B2.

The information presented in this edition of Supply & Demand Chain Executive is believed to be a­ccurate. The ­publisher cannot assume responsibility for the validity of claims or ­performances of items appearing in editorial presentations or advertisements in the publication.

December 2018 / Volume 19 / Issue 5

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CHAIN REACTIONS

NEWS FROM ACROSS THE DIGITAL SUPPLY CHAIN

FILAMENT RELEASES BLOCKCHAIN STARTER KIT Filament, a provider of comprehensive blockchain solutions for the Internet of Things, is making it easier for companies to take advantage of blockchain technology with the launch of its Blocklet Kit. The blockchain starter kit helps corporations easily build blockchain proofs of concept by including the hardware, software and security protocols, plus training and technical support. The kit is already in use by global corporations in the automotive, communications and other sectors.

“This has been a breakout year for enterprise blockchain technology. However, education and support remain critical as many companies are in the early stages of evaluation, exploration and deployment,” says Allison Clift-Jennings, CEO of Filament. “Our blockchain starter kit, which includes both the essential technology components and the on-site training, makes it as easy as possible for customers to get started with proofs-of-concept and production-use cases.”

SUPPLY CHAIN INDUSTRY LEADS IOT INVESTMENTS The Internet-Of-Things Spending Forecast, 2017 to 2023 (Global) report suggests that companies will spend upward of $435 billion annually to build, design, plan and run IoT solutions within the next five years.

The report divided those numbers into several sectors: IoT-specific security, software, platform software, service provider connectivity, application software, hardware and professional services.

Findings indicate the largest uses for IoT applications will be inventory and supply chain management.

IoT growth is expected to increase across all industries, with an estimated 18 billion IoT-connected devices on the market by the end of 2018.

ALLEGED CHIP HACK

Forces US Businesses to Rethink Supply Chain Security

After a report released in October by Bloomberg suggested that China had hacked into big-name U.S. companies using a microchip, experts remain divided on the truth.

But still, the allegations created concerns for many major supply chains. Technology hardware vendors are likely to undergo full supply chain audits to ensure that everything is bug free.

Meanwhile, the ramifications of the report are just starting to be felt as China’s manufacturing and supply chain is integrated with many U.S. business models. Supply chain dependency will have to be reassessed to fend off any potential attacks in the future.

HIGHJUMP LAUNCHES WAREHOUSE CONTROL SYSTEM AT CSCMP EDGE 2018

Supply chain professionals are rapidly automating operations to handle e-commerce, shorter delivery windows and enhanced consumer expectations. The integration of HighJump Warehouse Control System (WCS) with HighJump Warehouse Management System (WMS) enables supply chain professionals to streamline new business models and gain logistical system efficiencies. The comprehensive solution suite capitalizes on the connected and automated warehouse of tomorrow.

“The HighJump WCS is a testament to the possibilities our relationship with Korber AG has for warehousing and

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logistics worldwide,” says Chad Collis, CEO of HighJump.

“This is just one of many additions to our solutions that is based on the capabilities and the experience of our sister companies throughout Korber Logistics Systems.”

With HighJump WCS, businesses can integrate and manage the latest automation technologies while gaining real-time visibility to enhance complex workflows. The solution works with any material handling equipment provider, creating a single point of data and communication among MHE, WCS and WMS. Additionally, supply chain professionals have insight on how to adapt to high volumes, single-line orders, seasonality and more.

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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Verizon Connect Introduces Connected Commercial Vehicle and Asset Technologies to

HELP DRIVE SAFETY, PRODUCTIVITY AND EFFICIENCY

Verizon Connect introduced several updated offerings in October, including a new solution for asset tracking, feature sets that help drive the evolution of its Workforce Mobile application and an enhanced Verizon Connect Marketplace. Each development helps to automate, optimize and revolutionize the way people, vehicles and the like move around the world.

HONEYWELL PARTNERS WITH FETCH ROBOTICS

TO DELIVER AUTONOMOUS MOBILE ROBOTS TO DISTRIBUTION CENTERS Companies are increasingly turning to robotics to gain competitive advantage in the supply chain, with adoption expected to rise from 34 percent to 73 percent over the next five years, according to a survey in the 2018 Material Handling Institute’s annual report. The study identified the most common uses for robotics in warehousing operations as tasks like receiving and putting away inventory.

Honeywell has taken note of the growing trend, and through a new partnership with Fetch Robotics, the company is helping its customers tackle the growing volumes of e-commerce orders.

By deploying Fetch Robotics’ autonomous mobile robots, which operate in distribution centers alongside people to transport items without human guidance or fixed paths, Honeywell Intelligrated’s customers can increase productivity and boost labor efficiency.

“As staffing challenges and the continued growth of online shopping are pressuring supply chains, robotics can be an effective solution to help make large, integrated distribution centers more efficient,” says Pieter Krynauw, president of Honeywell Intelligrated. “With this arrangement, we can provide our customers with a complete suite of fixed and mobile robotics solutions, backed by the expert systems integration, solutions development and reliable 24/7 technical support they expect from us.”

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“Developing new solutions and services that put innovation, automation and connected data to work for our customers and their end customers are at the heart of what we do at Verizon Connect,” says Peter Mitchell, chief technology officer at Verizon Connect. “As part of our brand promise, we continue to guide a world on the go and deliver exceptional customer experiences.”

STUDY FINDS COMPANIES DEEMED ‘INTELLIGENT ENTERPRISES’ DOUBLED IN 2018 The number of companies deemed “intelligent enterprises” by Zebra Technologies’ Intelligent Enterprise Index nearly doubled in 2018, though the number still remains relatively low at 10 percent.

The index is a global survey that measures where companies are on the journey to becoming an intelligent enterprise—one that connects the physical and digital worlds to drive innovation through real-time guidance, data-powered environments and collaborative mobile workflows.

Companies must score more than 75 points on the overall index to be defined as intelligent.

Overall, the index revealed year-over-year growth of Internet of Things (IoT) deployment and investment, highlighting new momentum as enterprises expect less resistance to adoption and increasingly acknowledge IoT solutions as a core component for driving future growth across their organizations.

“As new technologies continue to transform the front line of business, real-time data-driven signals at the edge of operations are empowering front-line workers with the right information to optimize actions and outcomes,” says Tom Bianculli, chief technology officer for Zebra Technologies. “Based on our second annual Index, it’s clear that more companies acknowledge the value of leveraging IoT strategies, and they will continue to propel adoption and investment in the future.”

www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE

By Amy Wunderlin

RETAILERS LEVERAGE BRICK- A

IN AN AMAZON WORLD Today’s retailers must focus on the ease of purchase, speed of delivery and overall customer experience to remain competitive in the e-commerce landscape of tomorrow.

A

mazon reached a major milestone in September, becoming the second U.S. company to reach a valuation of $1 trillion. While the e-commerce giant continues to influence the retail industry’s every move, traditional retailers are flipping the script by leveraging their brick-and-mortar locations to offer new fulfillment options and a personalized customer experience.

“Retailers can reinvent themselves by…providing a curated buying experience, giving buyers options for delivery times—from same day to next day, just like Amazon—and by providing good customer service in the logistics operation, such as the ability to track shipments and alert customers if their orders will be delayed,” says Charles Moore, Transportation Insight’s vice president of parcel. “Superior customer satisfaction and service sets your business apart from the competition and ensures customer loyalty.”

Take Target, for example. The Minnesota-born retailer has invested in both its in-store experience and digital sales, while essentially overhauling its entire supply chain. The investments provide Target’s customers with numerous fulfillment options, many of which revolve around its physical store locations.

“Our strategic plan includes significant investments in the physical infrastructure of our stores…because our stores will continue to be the key fulfillment node for our guests—whether that’s a traditional store trip, a drive-up order, an in-store pickup order, a trip by a ship shopper or a traditional e-commerce purchase shipped from 8

a local Target store,” says John Mulligan, Target’s chief operating officer, during the retailer’s second quarter earnings call.

In the last few years, Best Buy has also found success in that consumers want to touch, feel and look at the more technical products it offers, as well as confer with the retailer’s in-store consultants.

“They embraced their sales force and their in-store associates to offer something you just can’t get online,” says Eric Lamphier, senior director, product management at Manhattan Associates.

Best Buy also leveraged its brick-and-mortar locations to its advantage by offering the right assortment of products, at the right price.

While Nike is not necessarily known for its physical locations, its focus on customization over the last few years is paying off. The footwear and apparel titan offers an online experience that allows consumers to personalize sneakers by color and style.

Key to this innovation is that the personalized option is only available directly from Nike and cannot be found at other retail outlets.

“Target, Best Buy and Nike have all made aggressive investments over the last five years or more in order to stay relevant, stay competitive, stay interesting, and retain or even grow their wallet share,” Lamphier notes.

Some of the key attributes of their initiatives, he says, involved taking advantage of their physical locations by getting people into the store in a number of ways, including: ❯❯ Supporting buy online, pickup in store to increase foot traffic ❯❯ Supporting curbside delivery ❯❯ Shipping product from stores to reduce the extreme peak season pain that was focused only on distribution centers ❯❯ Delivering product faster and more efficiently by bringing the store and customer closer

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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- AND-MORTAR

percent from 2017, and digital sales grew more than 40 percent in the second quarter.

And while e-commerce sales are a big part of its success, the store is central to Target’s operation— and it’s hard to argue with the numbers.

“Consumers continue to vote with their footsteps. The numbers tend to vary from weekto-week, but on any given day, 90 percent of retail sales were done in physical stores,” says Brian Cornell, Target’s chairman and CEO. “What you’re seeing right now from a macro basis is well-run retailers that are winning have strong balance sheets that generate cash that they can invest back into their business.”

BUY ANYWHERE, GET ANYWHERE

“It’s really flipping the Amazon advantage to make it your advantage,” Lamphier adds.

These wide range of investments have all also revolved around three basic principles, which Maria Haggerty, CEO of Dotcom Distribution, says are essential for brands to keep pace with Amazon: ❯❯ Ease of purchase ❯❯ Speed of delivery ❯❯ Customer experience “What Amazon has done is make shopping so easy,” Haggerty explains. “When I think of something that I need, I go on Amazon. Brands need to be able to say, ‘Maria, I know what you like, I know what you might like, and I’m going to make it easy for you.’”

Target has taken this to heart and is making the shopping experience easier with wall-to-wall remodels of approximately 1,000 stores over a three-year period; investments in employee training, wages and technological tools; and a constant drum of new and exclusive brands and merchandise.

Responses to these investments so far have been positive, with the retailer reporting stronger-thanexpected sales growth during its second quarter earnings call. Traffic to its stores and online sites grew at its fastest pace since the company began keeping a record in 2008, total sales were up 7

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The ease of purchase ultimately comes down to giving the customer the ability to buy anywhere, get anywhere. That is the philosophy Brooks Brothers, the oldest clothing retailer in the United States, was striving for when it deployed Manhattan Active Omni to improve contact center operations and deliver a seamless omnichannel shopping experience for its customers worldwide.

Manhattan Active Omni marries order management and store fulfillment applications on a single platform, providing Brooks Brothers associates with a 360-degree view of customer information and access to the company’s full network of inventory.

“The genesis and the center of the relationship is making sure that wherever the customer engages with them—be it a mobile device, browser, store, call center and the like—they can find the inventory regardless of its location in the supply chain. This, while making an accurate and profitable promise to the customer that it can get the product to them how they choose to get it,” explains Lamphier.

Target, another Manhattan customer, has made significant investments in how the customer chooses to receive their merchandise. In December 2017, Target acquired Shipt, a same-day personal shopping service, which is now operating in more than 160 markets and serving more than 1,100 Target stores.

Target also implemented a new service in dense urban market stores called “delivery from store.” With this service, guests pay a small fee at

“IT’S REALLY FLIPPING THE AMAZON ADVANTAGE TO MAKE IT YOUR ADVANTAGE.” — ERIC LAMPHIER

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FEATURE checkout and choose a time window later in the day when their shopping basket is delivered to their front door. This service is now available in 58 stores across five markets. The average basket size for this service is more than $200, the highest of any service the retailer provides, says Mulligan.

Additionally, to kick off the year, Target began offering “Drive-Up” in 50 stores, and at the end of the second quarter, it had expanded to more than 800 locations around the country.

“On top of these new services, we continue to see rapid growth and adoption of other digital fulfillment services, including restock, in-store pickup and, of course, shipping to our guest’s front door,” Mulligan adds.

“E-COMMERCE AND OMNICHANNEL FACILITIES AND STRATEGIES ARE NO LONGER AN INTERESTING SIDE PROJECT. THEY’RE NO LONGER OPTIONAL, AND THEY CAN NO LONGER AFFORD TO BE DELAYED IN ANY WAY. THIS IS NOT A PILOTING AND PROOF-OFCONCEPT MENTALITY ANYMORE.” — ERIC LAMPHIER

INVENTORY SEGREGATION Consumers want their products faster than ever, and as new fulfillment models emerge to address that demand for immediacy, the pressure for retailers to facilitate a seamless buying experience, regardless of how the purchase takes place, is escalating.

“E-commerce and omnichannel facilities and strategies are no longer an interesting side project.

They’re no longer optional, and they can no longer afford to be delayed in any way. This is not a piloting and proof-of-concept mentality anymore,” says Lamphier. “In our view, the best retailers are 10

the ones that…have set a foundation. It’s been built out, and they’re integrating their systems, processes, building, people and inventory to make sure they’re going to be successful.”

One of the biggest challenges that hinders omnichannel operations, though, is inventory segregation, where retailers have a separate pool of inventory that is isolated and dedicated for e-commerce channel activity.

“Quite often, step No. 1 is to figure out how to—both physically and systemically—merge those inventories together without disrupting the performance of either of those channels,” Lamphier explains.

This offers numerous benefits, including lowering your overall inventory carrying costs and reducing false shortages.

For example, when a retailer has two separate inventory pools, it may run out of a certain item SKU in one pool but have it in the other. This can result in a false shortage and the rejection of someone’s order—either a store replenishment order or an e-commerce order—when the inventory really exists.

“Without omnichannel fulfillment, many retailers lose sales because they have inventory in one store, but not another. With visibility into all inventory, the retailer could have an item shipped from another store to fill the customer’s order without losing the sale,” adds John Richardson, Transportation Insight’s vice president of supply chain analytics.

In fact, earlier this year, an IHL Group study found retailers are leaving roughly $1 trillion in consumers’ pockets from stockouts. But with the right digital tools, the study notes that retailers can overcome this problem.

“Having a single enterprise order management system that supports inventory regardless of its location and channel for delivery is crucial in today’s retail environment,” IHL researchers wrote.

“The enterprise order management solution needs to be smart enough to optimize the shipping for the greatest margin/sales opportunity. While one is more expensive on this sale, it avoids missing another sale by creating an out-of-stock.”

Lamphier agrees, noting that while there is no singular blueprint or sequence that works for every retailer, connecting all stores into an order management system should be a high priority. This allows the retailer to sell the network regardless of

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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FEATURE what channel the order originates and where the inventory may be.

“This is where the forward-thinking retailers have already taken these steps, and they’re able to drive product to your home or your office very quickly because they’re sourcing it from a nearby store,” he adds. “This gives them a competitive advantage or, at minimum, levels the playing field with respect to somebody like an Amazon.”

INNOVATION IN THE WAREHOUSE For those forward-thinking retailers, however, the challenges don’t stop with siloed inventory.

The merging of traditional retail replenishment fulfillment with e-commerce fulfillment in a single distribution center or warehouse has led to an influx of automation. E-commerce is also influencing localized distribution centers, meaning warehouses become more numerous, but smaller, and brick-and-mortar stores become strategic distribution centers that can enable faster delivery via ship from store. In all, these trends mean today’s distribution centers must welcome innovation in order to overcome the pressure to become more nimble, efficient and accurate.

“There’s been a lot of automation in omnichannel and e-commerce distribution centers because of the very unique e-commerce order profile, which requires a lot of product touch and a much higher volume of smaller orders,” explains Lamphier.

“IT’S REALLY NOW ABOUT GETTING CLEVER WITH HOW YOU USE THE DATA TO GET YOUR PACKAGES THERE AS QUICKLY AS POSSIBLE.” — MARIA HAGGERTY

The typical e-commerce order has a profile very different than that of a traditional retail order.

Retail orders are often quite large and take more time to assemble, and because they are being shipped from one store location to another, there is a certain amount of flexibility but not necessarily a need for stringent accuracy. On the flip side, every e-commerce order has a face, meaning there is a new sense of urgency to fulfill the service level promised.

While the major big box stores often have the resources to invest in their in-house distribution centers, other small- or mid-size retailers and e-commerce companies are turning to third-party logistics providers that offer customized solutions 12

such as returns processing and storage.

Dotcom Distribution, a 3PL that specializes in e-commerce, B2B and multichannel order fulfillment, is focused on using analytics to help its customers understand what they’re shipping, where it’s going and how much they’re willing to spend on transportation.

“Since we don’t really control the physical part of the transportation, we’re doing it all with analytics,” explains Dotcom’s Haggerty. “We have a software program that analyzes all of our clients’ packages, looking at things like dimensional weight to determine if we are using the right cartons for the right size things.”

Instead of receiving a tube of lipstick in a box big enough for a case of lipstick, Dotcom’s program can cut costs by choosing smaller and lighter packaging material.

“Dimensional weight is a big thing because that really drives up your transportation costs,” Haggerty adds.

The 3PL can also analyze what is more important—speed or cost—and determine the right carrier for the job.

“If they’re running a big Halloween promotion, and somebody’s sending Halloween costumes, speed is important on Oct. 29,” explains Haggerty.

“And if you need to get it there on Saturday, we’re going to switch over to FedEx who will deliver on a Saturday, whereas UPS won’t.”

Analytics can also help Dotcom make better judgement calls on expedited shipping. For example, if a customer who lives in New York orders something with next-day shipping from its warehouse in New Jersey, the system knows you don’t have to put it on a plane to still guarantee expedited shipping.

“It’s really now about getting clever with how you use the data to get your packages there as quickly as possible,” Haggerty says.

The e-commerce boom also provides an opportunity for 3PLs to leverage their infrastructure, offering small- to mid-size companies multiclient buildings where they receive the benefits of automation without having to pay for it.

“With e-commerce, you continue to get a lot more automation or mechanization brought into the distribution center to run those volumes through. The challenge is you need such a large annual volume to justify really sophisticated, high-end automation,” explains David Caine, chief

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FEATURE

AUGMENTED REALITY IN THE AISLE

By Justin Corbell, vice president of sales and business development, Americas, Scandit

One of the main things consumers love about e-commerce is that they can quickly find the exact product they want. Most online stores contain filters that can be adjusted to show products that are in a certain size, color, price range, or that have specific characteristics. This ability to filter searches can turn hundreds of random results into a few that you’re actually interested in.

looking for ways to blend the digital and physical worlds and bring the best features of e-commerce to the brick-and-mortar store. Visual filtering provides one key opportunity to do that. This technology brings the

Brick-and-mortar stores typically provide a much different experience. Instead of being directed to what you want, you’re left to wander through large stores and endless aisles packed with products that all start to look the same after a while.

Internet of Things (IoT) to everyday objects, which means that an item can be identified and treated like it’s connected online, even if it’s not embedded with a computer chip.

It doesn’t have to be this way, though. Mobile computer vision technology brings product filtering to brick-and-mortar retail by making it possible to search for items in a visual way using barcode scanning and augmented reality. Forward-thinking retailers are

Brick-and-mortar product filtering works just as easily as it works online.

Shoppers use their mobile devices to select the product characteristics they want (ingredients, size, five-star customer rating). They then point the camera of their mobile computer vision-equipped smart device at the

operating officer for Kenco Logistics Services, a family-owned and privately-held 3PL and supply chain management company.

“You may not have 25 million packages a year, but if you’ve got 3 million, and you can consolidate with 15 or 18 other companies that are using the same infrastructure, you get the benefits of that automation, which is hard to pay for and cost justify when your volume is not at the top tier,” he adds.

Whether you outsource your distribution or bring it in-house, a few similar trends have emerged from within the e-commerce warehouse. Of note, the average warehouse management system (WMS) has become increasingly advanced, switching over to

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shelf and scan the barcodes of the products and/or shelf tags. The matching goods are then highlighted on the device screen using augmented reality graphics. This enables customers to find exactly what they want, so they can make their intended purchase without wasting any time—just like they would do online.

Using smart device-based barcode scanning and augmented reality to filter and search for products is great for shoppers, but it’s also a powerful tool for store associates.

Routine tasks like inventory management and price verification are streamlined when an associate can point a mobile device at the barcode of an item on the shelf and instantly see how much they have in stock and if the price is correct, right on the screen.

No matter which retail environment you’re in, mobile computer vision and augmented-based data capture platforms open up new possibilities for bringing the efficiency of e-commerce to brick-and-mortar retail.

what Lamphier calls a “waveless strategy.”

Instead of a warehouse associate having to curate and batch together a large set of orders to be processed in the distribution center, a waveless system has these capabilities built into its WMS and can automatically process the most urgent orders that make the most sense.

For example, if you promised an order with nextday delivery and it’s already 4 p.m., the warehouse needs to work on that order very quickly. With a waveless system, that process occurs automatically, instead of waiting for a person to take action on it.

Manhattan Associates recently deployed what it calls “order streaming” in its WMS, which www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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FEATURE combines wave and waveless together, as well as a at a competitive price, with information available warehouse execution system that streamlines work to make an informed decision and the delivery into the building based on the availability of both mechanism they want to use.” the employees and the automated equipment.

Now more than ever, it’s about delivering more The warehouse has also transitioned to a greater than a product, but rather a brand experience. And use of mobile handheld devices and wearable whether that sale takes place in store or online, the solutions to boost efficiency and accuracy. Voice brand experience should be the same. picking is particularly popular, evolving far from “Brands are realizing and people are realizing the days of Google Glass. there is still this element of a good social “It works by highlighting locations that have experience. Consumers like going into the store to be picked from, and allows the user to keep and interacting live with the product, but they both hands free. It can also scan directly from the also want the convenience of not having to go to glasses,” explains Kenco’s Caine. the store. And if you’re going to do that, you have Technology has also moved to the wrist, to make sure that you don’t walk into the Marc transitioning away from hefty handheld devices to Jacobs store and have this absolutely phenomenal mobile devices like the Apple Watch. experience, and then when you buy that $3,000 “For decades, there was a large, heavy, keybag, it shows up at your door in a brown box,” laden device style that dominated explains Haggerty. “You want to feel warehouses,” explains Lamphier. that same experience, so you have to “Today’s focus is based on touch connect them.” screen apps that you use on your Manhattan’s Lamphier points out of consumers say they are phone. They’ve eliminated all those that this connection is especially likely to buy more often keys, making the user experience important for mid-size and specialty from brands that prioritize the customer experience. much more elegant and intuitive. It retailers that often are selling also allows bringing on new people something you want but don’t to support a growing business and necessarily need. shipping volume easier, especially “It’s just a very pleasing kind of during high-volume peak seasons.” experience where you feel more valued as a consumer. Retailers really CUSTOMER EXPERIENCE want to create that strong bond with Companies that have a strong a customer or make it really personal customer-centric philosophy and own their and valuable for both parties,” he says. customer data and relationships are rewarded by One way Manhattan customers are able to consumers who become repeat purchasers and do that is through its call center, which provides passionate brand advocates. retailers with a single source for all customer According to a consumer survey by the transactions. So no matter where the customer Ascendant Network, “Building Consumer Brand shopped, whether it’s a brick-and-mortar store Infatuation: How Popular Retail and Travel or online, each one of their transactions is fused Brands Are Crushing Customer Churn with Great together into one application that can support Experiences,” 40 percent of consumers say they are returns, discounts, promotions and more. likely to buy more often from brands that prioritize “The contact center app and all the intelligence the customer experience. it pulls together is a great step in the direction of “Since Amazon has reset shoppers’ expectations, a unified customer-centric experience,” Lamphier an obsessive customer focus built on the timeless notes, adding, “So many of the retailers today principles that a shopping experience with Amazon and businesses of all kinds, have fallen under this embodies will help retailers compete with Amazon. overgeneralized focus of customer centricity— Retailers must provide convenience, speed, price whatever the customer wants, we’re focused on and selection,” says Transportation Insight’s Moore. offering great selection, great quality and timely Transportation Insight’s Richardson adds that delivery of products that are going to delight the “the best experience is going to include having customer. And, if that’s the singular mission of the the product customers want, when they want it, enterprise, then you’re off to a good start.”

40%

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2018 GREEN SUPPLY CHAIN AWARDS

By Editorial Staff, Supply & Demand Chain Executive

CONSERVING THE ENVIRONMENT

—and the Supply Chain

Collins Dictionary has named “single-use” the word of the year for 2018, and no one is more familiar with the term than the supply chain professionals. This year’s recipients of Supply & Demand Chain Executive’s Green Supply Chain Award have made it their goal to eliminate the term from their vocabulary, focusing on ways to reuse or recycle items in their supply chain. Each company proves its commitment to sustainability by creating solutions that not only improve the environment, but also its bottom line. Those that made notable additions in the last year are listed below.

LOWER COSTS

3GTMS

www.3gtms.com 3Gtms’ transportation management solution (TMS) uses proprietary routing algorithms to help customers increase the efficiency of their routes in terms of miles driven and emissions expelled. The company’s technology responds in real time to dynamic routing factors, ensuring that customers are maximizing the efficiencies of their routes no matter what changes may occur.

As customers implement 3Gtms’ TMS, they’re reporting fewer miles driven and optimization of routes and truckloads by consolidating more orders and delivering them in the most cost-effective manner.

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2018 SUPPLY CHAIN

OPTIMIZE TRANSPORT

11 th Annual

ENERGYEFFICIENT

ALOM

www.alom.com ALOM and one of its biggest customers faced a critical supply chain challenge last year as demand for the customer’s product exceeded ALOM’s inventory and fulfillment capacity. The obstacle gave ALOM engineers the opportunity to develop an inventory management and order routing/fulfillment solution that would optimize and reduce transportation and freight load. The company met its objectives of increased fulfillment capacity and improved transportation sustainability by automating order routing/management and near sourcing. By executing the two strategies, ALOM not only achieved order processing and delivery volumes for its customers, but met its sustainability goals of paperless order management and significantly reduced its transportation carbon footprint.

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2018 GREEN SUPPLY CHAIN AWARDS AUTOSTORE SYSTEM

www.autostoresystem.com

CLIENTS HAVE SEEN ELECTRICITY SAVINGS AS GREAT AS

75% AND GAINED

NEW CONTROL OVER THEIR RECYCLING AND WASTE MANAGEMENT.

—AUTOSTORE SYSTEM

For AutoStore System, the warehouse is designed with its employees in mind. Aisles and lighting are all current on environmental settings, and the company condenses space by removing wasted areas around inventory. Meanwhile, its robots use energy-efficient motors and run on rechargeable batteries. Regenerative energy returns power to the robot’s batteries each time it lowers a bin or reduces speed. Additionally, the AutoStore controller creates a green solution by assigning the robots tasks with the shortest route to save time and energy. The company’s clients have seen electricity savings as great as 75 percent and gained new control over their recycling and waste management.

BGIS GLOBAL INTEGRATED SOLUTIONS

www.bgis.com

Environmental stewardship is a cornerstone of BGIS’ global operation philosophy. Its integrated management system is encompassed by the leading services it provides. Through its sustainability commitments, BGIS enables innovation across its clients’ and own corporate real-estate portfolios by developing and implementing industry-leading real estate and facility management solutions. In addition, the company’s sustainable procurement policy provides guidance to all personnel toward integrating environmental and social decisions to promote an eco-friendly way of doing business. At BGIS, a key corporate value is to achieve sustainable operating practices and promote the efficient use of resources.

BILLERUDKORSNAS

www.billerudkorsnas.com

BillerudKorsnas aims to help its customers reach their green supply chain goals by offering sustainable paper and board material packaging. When one of its customers needed a sustainable packaging solution for one of its products, BillerudKrosnas replaced the original materials with fluting that offered greater durability but was nearly 35 percent lighter in weight. Offering lighter packaging solutions reduces airfreight costs for its customers, creating significant savings and less CO2 production.

B-STOCK

www.bstock.com B-Stock was built on the idea that technology and analytics could revolutionize how organizations manage excess inventory. With a focus on the reverse supply chain, B-Stock is able to facilitate new ways to reuse or recycle unwanted products. By partnering with the company, its clients have access to a global base of vendors that are dedicated to recycling and repurposing salvage products for their own business needs. B-Stock’s transparent B2B marketplace platform connects sellers directly to buyers, so customers know exactly who is purchasing their product and what their intended purpose is. By using a B2B liquidation marketplace, over 180 million items have been sold for reuse, resale or recycling through a total of 338,748 auctions.

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GLOBAL4PL: THE IMPORTEXPORTTRADE COMPLIANCEEFFICIENCY SUPPLY CHAIN EXPERTS – so you can grow globally Exporting is a great way to increase sales since the market overseas is larger than the U.S. market. At Global4PL, we do our best to help our customers grow globally.

TO FIND OUT HOW YOU CAN RECEIVE A DISCOUNT FOR THE NEXT 3 MONTHS, email info@global-4pl.com or visit www.global-4pl.com.

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2018 GREEN SUPPLY CHAIN AWARDS CASS INFORMATION SYSTEMS INC.

www.cassinfo.com

Cass Information Systems provides sustainable solutions through the utilization of technology to obtain cost and processing efficiencies for its customers. The solutions help its customers meet their green supply chain goals by accelerating the amount of electronic interchange among the customer, its freight carriers and Cass, resulting in a significant reduction in paper transactions without sacrificing control or accuracy.

Currently, more than 99 percent of Cass payments and remittance advices to carriers are electronic.

The company provides further positive environmental impact for its customers by centralizing business intelligence to help manage the supply chain.

DSC LOGISTICS

www.dsclogistics.com

Sustainability is a core component to DSC Logistics’ supply chain. The company adopts practices that promote the responsible use of resources and aligns its efforts with its clients’ eco-friendly efforts.

The company’s Sustainability Steering Committee manages its green efforts and oversees initiatives in a three-pronged approach, focusing on opportunities in warehousing, transportation and network redesign.

The committee provides support for pilot projects and network wide rollouts for sustainability education throughout the entire organization.

THE RAYMOND CORPORATION

www.raymondcorp.com

56% REDUCTION

IN LANDFILL CONTRIBUTION SINCE 2010.

—THE RAYMOND CORPORATION

Sustainability is a core part of The Raymond Corporation. The company recently updated its supply chain to become more sustainable by upgrading software controllers to automated logic and light controls, programed to zone and control factory and office fixtures based on utilization. It also uses water reclamation from the powder coat paint system for utility water requirements and has installed supplemental active solar lighting throughout its locations that dim electric lights when sunlight is captured. To further its sustainability goals, its iWAREHOUSE forklift telematics solution allows Raymond and its customers to measure fleet and operator performance for greener results. The solution creates data to help identify ways to optimize their fleets, decreasing energy usage and lowering their carbon footprint and kilowatt usage in the process. The Raymond Corporation saw a 56 percent reduction in landfill contribution since 2010. The company also recycles 97.6 percent of its byproducts.

SCHAEFER SYSTEMS INTERNATIONAL INC.

www.ssitote.com

SSI Schaefer works with various clients in multiple industries to manufacture reusable containers, totes, pallets and bulk bins used in everyday storage, assembly and transport. The sustainable program is geared toward automotive OEMs that need to meet or exceed automotive sustainability goals. To help its clients become more sustainable, Schaefer implements recycling programs at their facilities.

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OTHER GREEN AWARD WINNERS Integrated Device Technology Inc. www.idt.com

4flow www.4flow.com

A. Duie Pyle www.aduiepyle.com

Ioxus Inc. www.ioxus.com

AFN www.loadafn.com

John Galt Solutions www.johngalt.com

Ardent Mills www.ardentmills.com

Kane Is Able www.kaneisable.com

Asia Pulp & Paper www.asiapulppaper.com

Kenco www.kencogroup.com

BNSF Logistics www.bnsflogistics.com

KNAPP Inc. www.knapp.com

CBX Software www.cbxsoftware.com

Kuebix www.kuebix.com

CHEP www.chep.com Comerica Inc. www.comerica.com Crown Equipment Corporation www.crown.com CT Logistics www.ctlogistics.com Diageo North America www.Diageo.com East Coast Warehouse & Distribution www.eastcoastwarehouse.com Elemica www.elemica.com

Mile Hi Foods www.Milehifoods.com

Symphony RetailAI www.symphonyretailai.com

MRV Engenharia www.mrv.com.br

Tata Motors Ltd. www.tatamotors.com

Murphy Warehouse Company www.murphywarehouse.com

TECSYS Inc. www.tecsys.com

PITT OHIO www.pittohio.com

Inmar www.inmar.com

Signode www.signode.com

Spoiler Alert www.spoileralert.com

PINC www.pinc.com

Holman Parts Distribution www.holmanparts.com

Sarasota County Government www.scgov.net

MatchBack Systems Inc. www.matchbacksystems.com

Penske Logistics LLC www.PenskeLogistics.com

HH Global Associates www.hhglobal.com

Safaricom PLC www.safaricom.co.ke

Spinnaker www.spinnakermgmt.com

Packsize International LLC www.packsize.com

FarEye www.getfareye.com

Ryder System Inc. www.ryder.com

made4net www.made4net.us

One Network www.onenetwork.com

enVista www.envistacorp.com

RLS Logistics www.rlslogistics.com

Source One Management Services www.sourceoneinc.com

NFI www.nfiindustries.com

Emerson Cargo Solutions www.emerson.com

Reverse Recycling www.reverserecycling.com

LLamasoft www.llamasoft.com

Neogrid www.neogrid.com

Elite Transit Solutions www.elitetransit.com

RELEX Solutions www.relexsolutions.com

Plug Power www.plugpower.com

Total Distribution Inc. www.peoplesservices.com TRANSPOREON Group Americas www.transporeon.com Turnkey Group www.turnkeygroup.net Viking Cold Solutions www.vikingcold.com Westfalia Technologies Inc. www.westfaliausa.com Wider Group Inc. www.widergroup.com Yale Materials Handling Corp. www.yale.com/north-america/en-us/ Zest Labs www.zestlabs.com

TRANSPORTATION INSIGHT

www.transportationinsight.com

Transportation Insight is a one-stop shop for its clients. The company’s solutions combine analysis, intellectual capital and a hallmark co-managed logistics approach to help customers achieve green supply chain results.

By using optimal mode and carrier selection, comprehensive data management and logistics reporting, and predictive supply chain analytics, Transportation Insight is able to streamline its supply chain networks through “what if ” scenario simulations based on historical data to reduce energy costs, vehicle miles, fuel consumption and air pollution emissions. Additionally, the company employs supply chain analytics based on a lean methodology that extends across the supply chain to perform assessments that determine where to cut waste.

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MADE IN AMERICA

By Mackenna Moralez

PACKING IT ALL IN Tough Traveler keeps comfort in mind while manufacturing backpacks.

hen Nancy Gold first started Tough Traveler 40 years ago, backpacks weren’t like they are now—especially regarding comfort. Single-strap, small briefcases were the norm and often caused much discomfort for those using them. It even led to students carrying their books to avoid shoulder pain. Eventually, two-strap bags, now known as backpacks, started to gain popularity. Not finding a comfortable bag for herself, Gold took to the drawing board to capitalize on the new fashion trend while focusing on a relaxed fit using materials produced in the United States.

“It seems random, but it really was about comfort for ourselves. There was nothing like it [comfortable bags] that we knew of,” Gold explains.

The company, which focuses on the manufacture and sale of luggage, bag and pack products, often mixes old designs with new and innovative patterns. Being fans of customizations, Tough Traveler often works with its customers to create bags for their liking—adding cosmetic details as necessary.

“It really is a service company, not just a design and manufacturing business,” Gold says. “If someone looks at one of our bags and wants a pocket, 22

we can add one for them.”

A natural problem solver, Gold finds herself constantly searching for ways to help people and often finds solutions within her own business. Tough Traveler’s popular laptop backpacks represent a unique product borne from her problemsolving method to benefit others.

“When laptops first became popular, we thought about how people would transport them. Surely they wouldn’t

carry laptops in their hands?” she explains. “Our solution back then is the same product we make today because of its durability.”

Innovation didn’t stop there, though.

The company branched out to different Tough Traveler is commited to sourcing its materials from U.S. companies in support of America’s textile industry.

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types of bags: luggage, duffle bags, fanny packs and even dog backpacks, which have become a staple on their website. The Fido-friendly bag allows customers to carry their pet with them wherever they go. It’s something that becomes a necessity as dogs start to age and are less mobile.

“The dog backpacks are sort of intriguing because many people are attached to their dogs. Instead of leaving their dog at home, our packs allow owners to take them on the go,” Gold explains. “Since designing our first backpack to carry dogs, we knew there would be a use for it. We think of ideas—not so much out of desperation—but what people need and how we can deliver on that.”

Gold’s need to help others isn’t just limited to carrying electronics and furry friends, however. Tough Travelers’ emergency responder bags are designed to have appropriate capacity and compartments for much-needed supplies. Gold says that the company’s bags are used by responders during medical crisis and have the durability to handle any scenario.

Durable is just one way to describe Tough Traveler’s bags. In fact, durability is part of the reason behind the company’s name. Using strong, reliable material is crucial to the bags’ production process. Gold explains that the company continues to make

its products in the United States due to the availability of high-quality materials. The company sources fabric and foam from other small businesses that also manufacture in America.

While sourcing challenges exist, Tough Traveler has the support of these businesses to help keep it focused.

“We want our products to last a long, long time, and they generally do.

If we don’t buy it [U.S. made products], how will they [the companies] stay in business?” Gold says. “We stuck to that method to help preserve small businesses because we appreciate the quality. The U.S. must maintain the textile industry because when we need it, where will we find it? And if we don’t help maintain it, who will?”

“I think that’s how we stayed in business— we remained flexible, but not flexible enough where they [backpacks] were made offshore.”

— NANCY GOLD U.S.-made products are typically hard to find in retail stores. With that challenge comes the need to remain flexible. By staying curious and noticing the needs of its customers, Tough Traveler has remained on top of the ever-changing fashion trends. No design is set in stone at the company, but as fashion often repeats itself, there are times when certain styles are more popular than ever. Gold cites the fanny packs as a design that she never gave up on because she knew it would come back around eventually.

Along with customization, Tough Traveler also offers bag restoration, though Gold says that request doesn’t come as often.

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“I think that’s how we stayed in business—we remained flexible, but not flexible enough where they [backpacks] were made offshore,” she says. “You really need people that are interested in this sort of thing.

You need the jobs for people that have these skills and to give them jobs in places that are adequate to work in.We need people to continue to come to us and ask for help. If at some point we don’t have the right manpower or equipment, we know how to accommodate them in the future.”

Loyalty continues to drive Tough Traveler. Originally starting out with just two employees,

the company has grown to as large as 150 workers manufacturing the bags that are widely loved by many. Gold says that every day she receieves comments from customers who have purchased her bags saying they will never use anything else. While bringing joy, the comments bolster Tough Traveler’s history as a product people can rely on.

“A lot of our business is based on the history we have. We have a history of good quality, good design and reliability, which keeps people coming back to us,” Gold says. “Being made in the U.S.A. is very important to some people, and it’s important to us too— it’s why we’re still here.”

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SPECIAL REPORT THE INTERNET OF THINGS

By John R. Yuva

Only the Beginning f Companies are finding IIoT solutions for legacy assets as well as building connections to the cloud for greater data sharing and analysis.

BARRY LYNCH, chief executive officer for Factora

LOU LUTOSTANSKI, vice president of IoT for Avnet

DR. RICHARD SOLEY, executive director for the Industrial Internet Consortium

24

I

n the world of supply chain technology, blockchain is dominating the headlines. And while blockchain certainly holds promise for many industry sectors, the Industrial Internet of Things (IIoT) continues to propel innovation and investment for companies of all sizes.

According to a report from Grand View Research Inc., the global Industrial IoT market is expected to reach $933.6 billion by 2025. As connectivity to the cloud evolves and a greater focus on edge computing occurs, IIoT holds significant possibilities for companies ready to leverage their data and expand their customer engagement.

Providing insights about the latest IIoT trends are Barry Lynch, chief executive officer for Factora; Lou Lutostanski, vice president of IoT for Avnet; and Dr. Richard Soley, executive director for the Industrial Internet Consortium.

Q:

In what ways are companies implementing Industrial IoT into their operations?

LYNCH: Before integrating IIoT into your company, there are two things to understand. The strength of IIoT is its flexibility because you can connect anything to anything, but that flexibility is also its weakness. Unless you have a real focus on what you’re trying to achieve as an outcome, you can waste a lot of time trying to connect things for the sake of the technology as opposed to driving a business outcome from the implementation.

Thus, what we found successful is not a rip and replace but a surround and extend approach. Companies take IIoT

technology and connect it to various data sources that already exist and extract new value from it such as business insights and revenue channels. At the end of the day, there has to be a business outcome or else why are you doing it? If you’re only doing it for a technology push, it’s never going to be successful.

SOLEY: The key idea is to sensorize systems—legacy or not—and as much as possible automate the actuators of systems. This allows one to take advantage of IoT, which simply means the gathering of data from many sensors, real-time analysis of that input, and control of real systems through Internetconnected actuators. Companies are also succeeding at bringing their legacy systems into an IoT world by tracking and controlling their performance.

Q:

How are companies utilizing the analytics gleaned from IIoT? LYNCH: Analytics are used in several ways for greater operational efficiency.

One is predictive reliability. With IIoT you can process so much more historical data using the elasticity of the cloud, where predictive algorithms can determine or prevent potential machine failure. Another way analytics are used is machine learning in real time. Whether it’s one machine or a fleet of assets, machine analytics can identify performance commonalities to improve overall machine design and output. Companies are also empowering mobile operators (using tablets and smartphones) to work in a more visualized environment where devices and machines combine for greater output.

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SPECIAL REPORT THE INTERNET OF THINGS

g for IIoT

products in a cost-effective way. It’s an evolving area but one that’s growing.

Companies need to think of IIoT as an integration platform not as a product. A platform that brings together your S&OP, your ERP and your warehouse management system.

With those systems stitched together, companies can better address such things as quality issues and customer feedback rather than waiting for a recall. It enables more proactive operations and supply chain model.

SOLEY: The most exciting opportunity from Industrial IoT is to completely change your business model—the iconic example, of course, being Power by the Hour, or the operational leasing (instead of capital sales) of jet engines. Airlines get propulsion—which is what they really want, rather than jet engines—and the lessor (jet engine company) can maintain the productivity of that engine better than anyone else (since they built it and have terabytes of performance data from that engine and thousands of others).

The most important aspect of IIoT is likely the opportunity to offer customers what they want rather than machinery that gives them what they want. Airlines don’t really want jet engines, they want guaranteed performance, propulsion and efficiency.

This results in better and closer customer engagement—and delight.

LUTOSTANSKI: There’s another big opportunity for IIoT that’s starting to form called as-a-service IoT. It’s about converting that capex to an opex model. You’ll see page-as-a-service, as people pay for output of pages instead of buying printers. And air-as-a-service for customers who don’t want to buy air compressors, but want to pay for the uptime and the amount of activity.

Thus, as-a-service is yet another area,

LUTOSTANSKI: We build devices

that attach to current legacy assets through ports and cloud, enabling them to transmit data to a cloud where it can be analyzed against other devices. Relative to how they’re used, predictive maintenance and anomaly detection are the most common IIoT applications. Within supply chain, the cold chain is a primary area for IIoT utilization for monitoring consumables from the point of distribution to the time they reach the consumer. Sensors are measuring temperature, humidity, damage impact and the like.

In addition to the cold chain, a smart factory is another example where you’re combining motion and sound anomalies with other big data sources, such as production output, environmental data and worker data that all combine to produce predictive analytics. While IIoT is retrieving information from a device, it is combined with enterprise data to draw an analysis on the overall system.

Q:

How can companies leverage IIoT for greater engagement with customers?

LYNCH: Attaining a closed loop

with customers is critical. In an industry such as consumer packaged goods there’s more customization today—a batch of one. Using IIoT technology, we’ll see more interaction with customers to personalize or brand

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beyond just advising people who are using the products, to generate revenue from the devices. We see a lot of traditional OEM customers that want a platform where they can keep track of their devices out in the field. Even the location of the devices is important.

Q:

What does the future hold for IIoT in tomorrow’s companies?

SOLEY: Without a doubt, it’s the

successful integration of artificial intelligence techniques like deep learning information IIoT systems.

An example: our Smart Building Testbed in Yokohama features some 35,000 sensors generating hundreds of terabytes each day—there’s simply no way any human can make sense of that data. It has to be done by a computer, thus the deep learning system we’re employing on the testbed.

LUTOSTANSKI: IIoT isn’t about technology, it’s about business transformation. The IoT piece, and the technology that goes along with it, is just an enabler. One of the top reasons that IoT hasn’t accelerated as fast as it could is the lack of imagination on the part of companies to use this technology for their benefit.

When I originally started in this business, people said I’d have to teach others why they should use IoT. I thought that was ridiculous. But in the end, it turned out to be absolutely true.

Companies understand they need to transform their business, but the business transformation with IoT must include information technology, the CIO and others in the C-suite, and the workers on the factory floor who have the data.

And that’s not an easy thing to do. Thus, they get focused on the technology and forget the business case for doing it— everything has to have an ROI.

www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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11/27/18 8:05 AM

SPECIAL REPORT PROCUREMENT

By Dr. Marcell Vollmer

GOING DIGITAL? Key Factors to Consider When Evaluating a Procurement Solution for Your Enterprise

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s previously discrete procurement activities converge onto unified, cloud-based networks—tying together sourcing, purchasing, payment and contract-management functions—many professionals in the field are no longer asking when or whether to embrace such systems, but which ones? Appreciating the value that networks can unlock for buyers and suppliers, procurement professionals need a set of criteria for selecting the digital solution best suited to their needs.

Exploring a few key questions can dramatically simplify what can seem a daunting, complex task to define and evaluate which source-to-pay solution will be the best for the future of your company.

How can you implement a strategic, value-oriented procurement function to focus on supplier innovations, risk management and a sustainable supply chain?

As it turns out, procurement is undergoing substantial change.

Transactional and operational tasks are rapidly becoming automated. Strategic activities, including category and supplier management, are becoming much more important and might be the core value proposition of the procurement organization of the future.

When you look at key activities like driving supplier innovations, you need to define the right platform to connect with your suppliers. Business networks are one very efficient way of doing that; eBay and Alibaba are two B2C examples.

Searching, finding and connecting with the right suppliers can be the key differentiator to drive impact for an organization’s lines of business. Look at the iPhone glass (Gorilla Glass), 26

invented when Tim Cook was the chief supply chain officer at Apple and running procurement. No company has all the odds to develop and to create every component on its own. You need to partner and bring innovations to your organization to ensure your company has competitive products in the future or can define new business models. An example of the latter is coffee capsules, which were invented by Nestle with a supplier for the right machines and is now a multibillion-dollar market.

What are the benefits to focusing on collaboration between buyers and sellers?

Networks like Facebook or LinkedIn are so successful because people love to connect and communicate. How can you stay informed about your friends and business partners, latest trends in technology and your industry news? A

highly efficient way is social media and networks. You can search and connect to people, receiving the latest updates in real time. You can discuss topics in groups and create a space to collaborate.

The great success—and 2 billion users on Facebook and more than 450 million users on LinkedIn—speaks for itself.

By linking together the right stakeholders with key operational data across the value chain, a network can open up broad visibility into the interconnected operations of buyers and suppliers. This heightened transparency, augmented by cloud-based technologies such as artificial intelligence and machine learning, yields valuable insights from immense troves of previously unexamined data. These cognitive insights arm businesses with the foresight to prevent bottlenecks in the supply chain before they arise, thus ensuring smooth operations and enhancing customer satisfaction.

Meanwhile, as automated procurement solutions take on many of the function’s day-to-day tactical activities, they free up professionals in the field to focus on strategic priorities, such as shoring up supply chain resilience, shielding the brand from third-party risk and spurring new sources of innovation. As digital technologies reshape the way businesses work together, procurement is evolving from its historic role of

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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SPECIAL REPORT PROCUREMENT generating cost-savings to fostering collaboration and, ultimately, driving much of the strategic value that fuels growth.

Does the proposed network approach provide an intuitive user experience, requiring little or no training for the procurement professional and novice alike?

Think about the brands in our lives that represent elegance of form and simplicity of function. Which ones spring to mind? The titans of consumer technology loom large: Apple, Facebook, Uber, Tesla. For too long, however, business-to-business offerings have lagged behind. Some of the most sophisticated (and costly) enterprise systems can be remarkably confusing to use, even for veteran technologists.

Fortunately, some business networks are beginning to narrow that gap as they emulate analogous consumer platforms, such as eBay, Amazon, PayPal and Alibaba. That’s because superior functionality alone, while important, falls short of delivering the rich, dynamic user experience that business professionals—particularly those raised on smartphones—expect in 2018. Today’s professionals, in procurement as elsewhere, demand intuitive design and ease of use from a business network just as they do from a social or consumer-oriented one. A procurement network should be as simple to navigate for the purchasing professional in search of 1,000 laptops as it is for the intern in need of a box of paper clips.

The key is Apple-easy and Googlefast solutions, which millennials, but also Generations X, Y or Z, are used to in their daily life. All are using smartphones, shopping online and using tablets for private and professional purposes.

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How well does a business network integrate with existing enterprise systems?

A stand-alone procurement system, no matter how elegantly designed or intuitive to use, offers limited value if it fails to “talk” to the enterprise resource planning (ERP) software running alongside it. For large organizations, it may even be insufficient. A business network for procurement must be nimble enough not only to “talk” with one ERP system but to carry on multiple “conversations” simultaneously, with different ones managed across far-flung business units.

deciding on any software solution.

The key is to have a modern user experience, ideally intuitive enough that you don’t need training and can find what you’re looking for fast.

Yet the complexity of an implementation with deep integration in one or multiple ERPs varies widely according to an organization’s unique objectives, the number and nature of its points of integration, and the internal change-management efforts needed to promote adoption. The best way to gauge the time horizon for a proposed implementation is by insisting on regular, candid dialogue with the software solution or business

ANY SOURCE-TO-PAY SYSTEM NEEDS TO BE VERSATILE ENOUGH TO OPERATE IN CONCERT WITH DISPARATE (AND EVEN DISSIMILAR) ENTERPRISE SYSTEMS, YET FLEXIBLE ENOUGH TO TAILOR TO A BUSINESS’ COMPLEX (AND, AT TIMES, CONFLICTING) REQUIREMENTS. Procurement professionals typically grapple with a range of unique constraints—some organizational, others regulatory—requiring that the networks they rely on be customized to exacting specifications. Any source-to-pay system needs to be versatile enough to operate in concert with disparate (and even dissimilar) enterprise systems, yet flexible enough to tailor to a business’ complex (and, at times, conflicting) requirements. Some organizations boast over 100 points of integration between procurement and ERP systems. A customized digital solution built on a cloud-based network aims to achieve a snug fit between them all.

How long does implementation take?

I wish I could say you can simply log on and start, but let’s be fair and look at the reality. It depends. Time to implement is a crucial factor in

network provider to manage risk, define successful outcomes and ensure satisfaction.

What about price? How much is a digital transformation of procurement likely to cost my organization?

As with time to implement, cost varies in relation to an organization’s unique requirements. Yet, it must, of course, be competitive. Just as important as the cost of implementing a procurement network is to factor in the short- and long-term savings that accrue after doing so. The savings can be substantial and enduring, and the effect can transform the role of the procurement professional, newly armed with the data-driven insights that propel organizations forward.

ABOUT THE AUTHOR DR. MARCELL VOLLMER is chief digital officer of SAP Ariba and the former chief procurement officer of SAP.

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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SPECIAL REPORT BLOCKCHAIN

By Larry Bernstein

BLOCKCHAIN REMAINS

RELEVANT With several companies involved in pilot programs, the next stage of blockchain technology rests on trust.

H

eadlines about blockchain promise grand things. No problem is unsolvable with this incredible new technology— or so the headlines seem to indicate.

While the excitement over blockchain has surely led to overblown predictions and expectations, the potential for it to be a disrupter in a positive way is already being realized. These days there are many blockchain pilots going on and investments in blockchain, start-ups are reaching into the millions.

One question that these pilots hope to answer is what is the next stage for this emerging technology, and how will it impact the supply chain?

GROWING PAINS While blockchain in its simplest form is an open ledger that can be used to track and trace transactions, the powerful technology needs to be more if it will fulfill some of the expectations that have been placed upon it. Like many new technologies, it needs to find a solution. Sam Radocchia, cofounder and chief marketing officer for Chronicled, which leverages blockchain and Internet of Things 30

technologies to deliver smart supply chain solutions, says “what blockchain is going through is typical for new technology products in that the pilots are studying where it is more applicable and scalable.”

But according to Ken Cottrill, cofounder and research principal of Chain Business Insights LLC, a company which conducts and publishes research on the intersection between blockchain and the supply chain, blockchain is getting to the point where it needs to deliver. “There was hype regarding blockchain suggesting that it could be a panacea for solving all supply chain problems,” he says. “It’s now moving into a phase where it might address some specific problems. The challenge going forward is that it has to start delivering value to overcome the skepticism some feel.”

The multitude of pilots occurring offer promise, yet some are also drawing skepticism. Some of the new pilots are being spawned by companies that are part of large corporations. However, there’s an issue

being overlooked according to Geoff Annesley, executive vice president of One Network, a cloud provider of enterprise applications and a platform for multiparty business networks for a host of industries.

“The problem with some of the blockchain pilots is that blockchain does not work with a party of one, and multiple blockchain networks need to be used to solve sophisticated enterprise problems. You need many parties participating on the network to deliver value. And developers are discovering that there is a lack of basic software services, such as multiparty workflows and community or multiparty master data, that need to be custom developed to enable useful enterprise solutions to leverage blockchain networks.”

BENEFIT OF SCALE There are 1,000 or so blockchains currently developed and more pilots looking to increase that number.

Most blockchains are specialized in terms of capabilities, from more and less complex. No one blockchain is a one-size-solves-all enterprise solution because they run differently and on different speed, cost and scale.

Companies may ultimately need to embrace multiple blockchains in order to be successful.

The promise of blockchain extends to companies of all sizes. In fact, Annesley believes blockchain will help smaller companies participate in networks previously closed to them due to a lack of IT capabilities and B2B resources. “Many middlemen, including online cloud services, will become

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SPECIAL REPORT BLOCKCHAIN

irrelevant, leading to greater cost, take several weeks but with blockchain TRUST IS CRITICAL time and speed efficiencies,” he says. it took several seconds. If this can be There are challenges in putting such “And transparency will lead to better implemented on a wide scale, fruits a blockchain into practice, though. A accountability and traceability, and and vegetables and all foods could be system would have to be created to track ultimately, enable trusted transactions tracked from grower to retailer. the items. This would add a cost. For between any party on the network.”

What’s the point of tracking the smaller companies and growers, the cost Blockchain will reduce the friction movement of food, some may wonder? could be prohibitive. How could they of working with each other as a single Cottrill gives a practical example. be brought into the system? Some have version of truth and eliminate the When bacteria appear in the food suggested subsidies or grants as a way need for reconciliation, speeding up chain, it’s hard to identify where to get all parties involved. In addition, multiparty B2B2C processes. “This it penetrated the supply chain. If a the data would have to be entered into will increase efficiency, reduce payment product needs to be recalled, it can the system accurately. And once again, delays, and allow smaller companies to be difficult to pinpoint exactly where there’s trust. It all seems to come back to provide services to larger companies the infected product originated. This trust when talking about blockchain. that might otherwise not be able to means all related products would For blockchain to really take engage due to cash flow, IT capability have to be removed from store shelves off, resolving the issue of trust and trust issues,” says Annesley. leading to waste. It also would take is imperative. Any party in the He adds that blockchain is set to longer to replace the product. blockchain can see information from impact supply chain networks other parties, and some may “With blockchain, each event is dramatically. “With today’s be leery of sharing that data. siloed, company-centric ERP Radocchia of Chronicled recorded, and every authorized systems (including cloud ERP), notes this is a serious concern. there are gaps in tracking, “Privacy is a big challenge party is automatically notified. duplicated information, messy with some blockchain This record could be consulted to reconciliation processes, as well implementations, as the risk of as room for fraud, overbilling, pinpoint where things went wrong.” revealing sensitive information counterfeit leakage into the or competitive business — KEN COTTRILL, CHAIN BUSINESS INSIGHTS supply chain and the like. There intelligence is high,” he says. is a lot of room to improve here.”

“By incorporating privacy into the architecture of the network, it allows TRACK AND TRACE participants to feel comfortable on the Many industries are in a position to same network.” benefit from blockchain. That impact, While the pilots are sure to reveal however, has yet to be felt in a significant interesting findings, companies might way. However, in the near future (one not want to wait for their completion. to two years), Cottrill says “blockchain Cottrill suggests companies, “start could streamline supply chains by Ridding the shelves of good building internal knowledge on what making them easier to track the flow of product and extra time replacing blockchain is, what it could do, and product and improve visibility.” it hurts the retailer’s bottom line. determine if it is really what the One of the current blockchain pilots “With blockchain, each event is company wants to use.” involves IBM and Walmart. They recorded, and every authorized party ABOUT THE AUTHOR aim to track the global food supply. is automatically notified. This record Part of the pilot involved tracing a could be consulted to pinpoint where LARRY BERNSTEIN is a freelance writer based in New York. He writes for a number of markets, package of mangoes to know where things went wrong,” says Cottrill. In including business, construction, retail and it was grown and monitor every addition to money savings, blockchain education. His articles have appeared in such movement it experienced along the could make companies less vulnerable publications as Construction Magazine, RIS News supply chain. This would normally to fraud and reputational risk. and The Chronicle of Higher Education.

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www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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11/27/18 8:21 AM

EXECUTIVE FOCUS

{ TRANSPORTATION}

By Barry Hochfelder

TRAINS TAKE ADVANTAGE OF ‘A PERFECT STORM’ “Every year for the last several, [intermodal] adoption has been going up. Last year it was up 3.9 percent over the previous year.

This year, it’s up 6 percent through September, the best nine months on record according to the Association of American Railroads.”

— GLENN RIGGS

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ot everyone is upset or suffering because of trucking’s driver shortage and capacity issues—for railroads, it’s an opportunity.

“In 2018 we saw the perfect storm— driver shortage, tighter regulations, economic demand,” says Glenn Riggs, senior vice president, corporate strategy at Odyssey Logistics. “With that, people are more willing to go intermodal.

Every year for the last several, adoption has been going up. Last year it was up 3.9 percent over the previous year.

This year, it’s up 6 percent through September, the best nine months on record according to the Association of American Railroads (AAR).”

In the past, Riggs says shippers viewed intermodal as an elective option.

Lead times were longer and, because there is more impact and G-forces acting on the cargo, it took more locking and bracing than trucks to keep the cargo secure.

“That was detrimental to wide adoptions, but if, for example, you have a shipment from Ohio to California, and the truck costs

$4,000 but intermodal is $2,500, it’s worth the issues,” he says.

For railroads, expanded intermodal services can also be a revenue producer.

Coal was once the No. 1 commodity on railroads, says Riggs. But with the shift to cleaner fuel and natural gas, railroads have lost revenue, so they’re looking at intermodal favorably.

“They see it as the growth to offset the loss and it will continue as a growth opportunity,” he says.

Fuel costs, of course, have been volatile for years. Intermodal aficionados have less to worry about.

The AAR says that, on average, U.S. freight railroads can move one ton of freight 479 miles per gallon of fuel.

Additionally, moving freight by rail instead of truck lowers greenhouse gas emissions by 75 percent.

PRECISION RAILROADING Shippers need to move their goods faster than rail has been known for in the past, says Peter Touesnard, chief commercial officer at OmniTRAX, and the key to doing so is increasing efficiency. This focus, he says, requires intermodal to be more consistent and faster. “If goods are being moved from the West Coast to New England, and [the shipper] knows that the transit time is seven days, they can game plan to when the customer can expect those goods,” Touesnard explains.

One popular model is the precision railroading system developed by the late executive Hunter Harrison at Canadian National Railroad

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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TRANSPORTATION

and later Canadian Pacific. Harrison converted the railroads from a “huband-spoke system” where railcars would arrive, then car-by-car form into new trains. Using the precision method, instead of waiting for a full trainload, the train would leave at a specific time on a specific route, much the way commercial airplanes leave on schedule, whether every seat is filled or not.

“The efficiency comes with focusing on distance to destination and moving quicker,” explains Touesnard.

“Eliminate stops in a yard and move more consistently. Now Union Pacific (UP) is looking to emulate that model.”

On Oct. 1, UP launched “Unified Plan 2020,” which will be rolled out in phases across its network. Its key principles include: ❯❯ Shifting the focus of operations from moving trains to moving cars ❯❯ Minimizing car dwell, car classification events and locomotive power requirements ❯❯ Utilizing general-purpose trains by blending existing train services ❯❯ Balancing train movements to improve the utilization of crews and rail assets “Every Class I railroad in America is focused on it,” says Touesnard. “It offers continuity, uses much less fuel and makes good average speed across the country.”

CSX Corp., a Jacksonville, Florida, transportation company, recently reached a new haulage agreement with the BNSF Railway Co. to increase western access into the Ohio Valley.

CSX also is enhancing its intermodal terminal about 30 miles south of Toledo, a region that serves about 30 million people. The service, which began in late October, will include an intermodal service between Los Angeles and the Northwest Ohio terminal. At the same time, CSX is

expanding its existing East Coast port offerings to and from Northwest Ohio by adding service between the intermodal facility and the ports of New York and New Jersey.

Odyssey Logistics is also creating efficiencies by changing the way containers are handled. Domestic intermodal uses 53-foot containers that are the size of the trucks. However, containers that come into ports on the West Coast from Asia are in 20- and 40-foot ocean containers.

The Odyssey Load and Roll Pallet (LRP) ensures damage-free transportation of goods in closed ocean containers.

Some products require even more specific handling. Odyssey, through CMI Logistics, its intermodal metals transport business unit, developed a Load and Roll Pallet (LRP) that provides metal shippers maximum flexibility. Here’s how it works: When an inbound truck arrives, a 52,000-pound capacity fork truck unloads the trailer and moves the material onto an LRP where it is

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blocked, braced and strapped in. The LRP then is moved via fork truck to the loading area where it is rolled into the container and blocked and braced.

WHAT’S NEXT? As with CSX, intermodal terminals are becoming more prominent. The AAR notes that many of the original rail terminals from the 19th century were converted into intermodal facilities by 1960. Today’s technology, as with so many other logistics and supply chain arenas, is playing a huge role.

“In recent years, railroads have spent billions of dollars to build and expand intermodal terminals and install modern equipment, including GPS-enabled cranes that can transfer intermodal containers between trains, trucks and ships in a matter of minutes,” the AAR wrote on its website.

Other technological advances include zero-emission electric cranes, optical scanners and automated gates that allow trucks to enter rail facilities quicker, and a network of “smart tracks” outfitted with detectors that provide real-time feedback on the status of the rail infrastructure and equipment.

While trucking’s challenges are of benefit to the railroad industry, these types of investments are also essential to growth.

“Certainly a large percentage of shippers in the U.S. never used rail,” says Touesnard. “It’s an education program to convert truck customers into rail/truck. It’s not a slam dunk, but they will turn to rail if we give them additional services.”

ABOUT THE AUTHOR BARRY HOCHFELDER is a freelance journalist who has covered a variety of industries in his career, including supply chain. He also served as the former editor of Supply and Demand Chain Executive.

Hochfelder is based in Arlington Heights, Illinois.

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11/27/18 8:27 AM

EXECUTIVE FOCUS

{ WAREHOUSING}

By Mary Siegfried

SUSTAINABLE WAREHOUSES AND THE ROI EQUATION Being environmentally friendly is a core responsibility for warehouse operators but requires a complex strategy to execute.

E

mbedding a sustainability strategy in warehouses and distribution centers ranges from reducing waste to installing alternative energy sources and even to deciding where to locate facilities. But balancing a cuttingedge environmental plan with a solid economic strategy is a tightrope walk many business and supply chain leaders find difficult to navigate. However, they agree it’s an important balancing act to perfect because warehousing, logistics and transportation touch just about every segment of the economy.

At the core of a sustainability strategy in warehousing and distribution is an economic equation, explains Jim Frazer, vice president of smart cities at ARC Advisory Group. The three pillars of sustainability, he says, are: ❯❯ Enhancing or preserving the physical environment ❯❯ Enhancing or preserving the societal quality of life (safety, human capital) ❯❯ Performing the first two in an economically reasonable manner While the third pillar is sometimes forgotten, Frazer notes, it’s at the heart of sustainability because, in the business 34

world, the ROI of sustainable practices and innovations are always top of mind.

“Often companies will say if we can’t do this project with an ROI of two or three years, it’s not going to get done,” he adds.

sequestration, pollution abatement, recycling and resource management.

“The business case for sustainability in our company is that a truly sustainable organization balances economic and environmental factors,” says Murphy.

It’s a business case the company backs up with a five-part plan focusing on leadership, strategic business strategy, independent certifications, a financial strategy, and marketing and branding.

“A truly sustainable organization balances economic and environmental factors.” — RICHARD T. MURPHY JR., MURPHY WAREHOUSE A BUSINESS CASE FOR SUSTAINABILITY The ROI hurdle in sustainable warehousing and distribution is a tough one for many companies to clear. That presents a dilemma for supply chain organizations that use a 3PL for logistics, warehousing and distribution, because they often rely on that third-party to help them meet their sustainability goals.

For Minneapolis-based Murphy Warehouse Company, the ROI challenge of sustainability is one the 114-yearold firm is willing to tackle. Richard T. Murphy Jr., FASLA, president and CEO of the full-service supply chain logistics company, says Murphy’s environmental strategy addresses energy savings and power generation, carbon

Murphy explains that the company’s commitment to independent certifications helps its clients reach their sustainability goals. “I know they can’t do it alone, they have to rely on their supply chain partners,” he explains.

For example, the company’s annual corporate sustainability report is prepared following the guidelines of the Global Reporting Initiative (GRI), which Murphy says “provides our clients a tool to use in their sustainability efforts.”

MAKING A COMMITMENT TO SUSTAINABILITY For Ventura, California-based Patagonia, its sustainability commitment is rooted in the company’s mission statement: “Build the best product, cause no

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WAREHOUSING

VALUE IN CERTIFICATIONS Murphy says LEED certification and Energy Star are measures supply chain partners understand and can be a key step in getting the attention

You can now lease or purchase a new natural gas fleet for the price of a diesel fleet.

unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Logan Duran, senior manager of environmental responsibility, metrics and reporting at Patagonia, says the statement is the lens the company looks through in all it does.

Patagonia grew out of a company that made tools for climbers and into an international brand that sells clothing and products for outdoor enthusiasts. Its environmental commitment has always been strong, Duran says, pointing to the company’s Reno Service Center, originally built in 1996 with the latest green innovations at the time. Those early innovations paid for themselves within three to eight years, with energy savings of 30 percent to 35 percent.

In 2006, the center doubled in size, and newer sustainable strategies earned it a gold level LEED certification.

Some of the sustainable measures in the building include: ❯❯ Skylights that track the sun and translucent roof-mounted smoke vents that reflect natural light ❯❯ A night-flush vent system that replaces the hot day air with cool, night-time air, eliminating the need for an air conditioning system ❯❯ Complex metering equipment that ensures the center is always operating at peak energy levels

Zero Emissions. Zero Added Costs. www.CleanEnergyFuels.com

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of clients. Frazer of ARC Advisory Group points out that certifications are expensive, however, and companies need to weigh them as part of their “economic equation.”

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WAREHOUSING

While LEED certification is not only expensive, Murphy also notes it is “extremely complicated,” often requiring the help of an outside consultant. Fortunately, LEED and Energy Star provides tools and systems to manage various sources of information.

“It has helped us develop measurable targets to focus on,” he adds.

Murphy Warehouse has achieved LEED Gold certification for the four buildings it owns and is exploring certification for buildings it leases.

Leased buildings present more of a challenge because the leases have to be long term, and the landlord must be willing to work with the company as part of the certification process.

Murphy says it’s important to understand the work required to obtain LEED and Energy Star. He suggests considering the following information before embarking on your journey to sustainability: ❯❯ Show me the data. Gathering and managing the data required for LEED certification can be difficult because some of the necessary data may reside with utility and supply chain partners.

Murphy Warehouse has relied on a consultant to help with this aspect of the process. ❯❯ Not one and done. LEED certification is for five years, and recertification is about a yearlong process that requires continual data collection and verification.

“You just don’t do this once and keep the flag up for the next 40 years,” says Murphy. All Murphy facilities have been recertified. ❯❯ Certification changes.

Organizations must keep up-todate with changes to LEED certification. “I would

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say, overall, LEED has gotten better organized, but the bottom line is you have to keep up with changes,” Murphy says. ❯❯ Taking the first step. Because Energy Star looks at energy efficiency, it is more focused and straightforward, Murphy says. It’s a good first step for a company beginning a sustainable journey.

LOOKING AT THE BIG PICTURE It’s clear there’s a variety of sustainable solutions to make warehouses and distribution centers more energy efficient and environmentally friendly. And because the buildings are basically “giant boxes” with minimal staff, they also offer a good place to start.

environmental efficiency in the building, it’s where the building is located—and it’s a lifetime challenge.

CONQUERING THE ROI CHALLENGE As for the ROI in sustainability, Murphy Warehouse Company’s financial strategy focuses on “green practices that show financial payback and positive ROI.” CEO Murphy says the company works hard to meet a reasonable period for ROI, something public companies often don’t have the luxury to do. He recalls a warehouse project where perseverance to find an acceptable ROI paid off.

The company purchased a building that needed upgrading, and as part of the work, Murphy wanted to include

“It’s not only about environmental efficiency in the building, it’s where the building is located—and it’s a lifetime challenge.” — LOGAN DURAN, PATAGONIA Duran says Patagonia is committed to embedding practices from recycling to energy efficiency in its distribution center but is taking a more holistic view of sustainability by again looking at the issue through the lens of its mission statement.

“We are taking a deep dive into how we pack and prepare items for shipment and how we ship products around the world with the goal of reducing our carbon footprint,” he explains. “We work with our supply chain partners to improve planning and provide more accurate forecasts so we can reduce or eliminate air shipments.”

He says a key sustainability issue in distribution and warehousing is where to locate facilities.

In other words, it’s not only about

solar, something it had installed on other buildings it owns. The building’s utility provider was a small co-op that was not required by the state to offer the same incentives as Minnesota’s larger utilities. “So my ROI for solar, which normally for us is four years max, was going to be 11 years,” Murphy says.

However, that didn’t stop Murphy from looking at other avenues. While talking with the bank about financing, he was encouraged to talk to the Small Business Administration (SBA). “We filed a loan application with the SBA and put on our application that we wanted to install solar energy on the building,” he recalls. “When the SBA saw we were installing renewable energy, we automatically became eligible for a loan where we only had to put 5 percent down, making the solar project financially viable. Sometimes being sustainable pays off.”

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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WAREHOUSING

FINDING SUSTAINABLE SOLUTIONS

for the buildings’ tenants, Murphy, who is a landscape architect, worked with an engineer to design retention basins, a complex piping system and the planting of native prairie to control water runoff.

As originally designed, it was estimated the credit for controlling runoff would be 78 percent, but with a project cost of almost $600,000, Murphy was unsure whether to move forward.

However, the “as-built” drawing came back with a 102-percent storm water fee credit on the 22-acre site. Plus, it received a 50-percent federal depreciation deduction, which all together translated to an ROI of seven years, which was acceptable to the company.

And the planting of colorful native prairie on the property had an added benefit that came as a surprise, even to Murphy. “We run 33,000 trucks a year

Embedding sustainable practices in the warehouse sometimes takes outof-the-box thinking. Many companies have harvested the low-hanging fruit such as recycling and LED light replacement, but now must look deeper to find strategies that benefit the company and its supply chain.

Murphy Warehouse Company found such a strategy when it became frustrated with the storm water fees it was paying. Communities charge fees for storm water runoff in order to control the volume and quality of runoff that goes into their system. Murphy says at one logistics campus, the fees started at about $58,000 a year but quickly began climbing to more than $81,000.

Knowing he didn’t want to raise rates

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out of that facility, but the No. 1 thing I hear when I go to the city is, ‘Oh, you’re the guys with the pretty flowers along Main Street,’” Murphy says.

“They talk about the flowers, not the trucks. That to me is branding.”

LOOKING TO THE FUTURE In the future, business and sustainability leaders believe there will be a greater emphasis on solar energy use, especially for battery storage; a greater push for environmental progress from supply chain partners; and a demand for greater transparency throughout the supply chain from customers.

ABOUT THE AUTHOR MARY SIEGFRIED is a freelance writer based in Chandler, Arizona. She has written about the supply chain industry for more than 20 years.

www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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EXECUTIVE FOCUS

{ SOFTWARE & TECH}

By Amy Wunderlin

Leveraging Advanced Manufacturing Technologies to

DRIVE DIGITAL TRANSFORMATION

Dassault Systemes is transforming aerospace manufacturing through innovation at its new experiential learning center.

W

hen the European aerospace company Airbus brought their first idea to Dassault Systemes’ 3DEXPERIENCE Learning Center, they were prepared to see it fail. What they discovered over the 83 days following the project’s transition from concept to full-scale functioning prototype, however, would lead them down a path to companywide digital transformation.

In April 2017, Dassault Systemes, a European software company, in partnership with Wichita State University (WSU) and the National Institute of Aviation Research (NIAR), opened a groundbreaking innovation campus aimed at bringing together students, researchers and industry experts to accelerate innovation and product development, virtual simulation and next-generation manufacturing.

Wichita, Kansas seemed a fitting home for the campus, which is widelyknown as the Air Capital of the World and also the home of Airbus where it opened its first design and engineering facility outside of Europe in 2002.

Shortly after the construction of the Innovation Campus was completed, Airbus moved the facility to a new building on the campus.

Its first project would be a prototype of a thrust reverser unit, a component that slows down an aircraft upon landing.

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Airbus sought to simplify the design and improve its efficiency in record time.

While this type of development project would normally take 18 to 24 months, Airbus set a goal to complete the work in a focused 90-day “sprint.”

This project gave Jeff Smith, director of the Aerospace and Defense Ideas Lab at Dassault Systemes, the clarity that taking a 3- to 5-year lifecycle to 90 days is achievable. But he says, there is still a lot of work to do before Airbus can complete its digital transformation.

“Now you’re talking about taking a project that was in a controlled work environment and replicating that across a whole company,” he explains. “When you want to talk about institutionalization of what we developed here and being able to replicate that across Airbus, that’s a business transformation that takes time.”

THE INNOVATION CAMPUS Digital transformation is on the mind of most of today’s CEOs—and if it’s not already, it soon will be. But transitioning people, products and processes is not easy.

“One of the hard things about people being innovative is the risk,” says Shawn Ehrstein, director of the CAD/CAM Lab and VR Center at WSU. “It’s great to have this new technology that you think might work,

but whose willing to put their job on the line and hope it works?

“The 3DEXPERIENCE provides a place to bring a project and utilize our environment, equipment and software platform without making the investment, to see if you can get your ROI on it before you make that full investment in your company,” he adds.

“We’ve found a way to minimize your risk and investment by trying a project here to make sure it works the way you think it will.”

Dassault’s Innovation Campus is comprised of three pieces that combine industry, academia and research all in one place: The 3DEXPERIENCE Learning Center, which demonstrates digital continuity; Go Create, a glorified makerspace or fab lab; and 24 classroom labs.

“It’s about the people, the product, the processes and the tools, and you have to have synergy with all of that if you’re truly going to innovate and make a business transformation,” says Smith. “They get to test drive the 3DEXPERIENCE platform in the context and richness of all these capabilities in the 3D Learning Center.”

Within the learning center, Dassault has created a set of applications and business practices that focus on each lifecycle in an aerospace complex (though they can be applied to an industry), from conceptual design through manufacturing, certification and support aftersales. The goal is to take that typical lifecycle of 3 to 5 years to 90 days. Those unique capabilities include: Customer collaboration rooms that allow teams of up to eight people across

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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The ongoing price escalation for commercial and industrial real estate across the U.S. is stoking investment in warehouse automation. Add to that a tight labor market and the ongoing quest for improved throughput, accuracy, and cost control and it’s clear that demand for warehouse automation solutions presents opportunities for users and providers alike.

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Risk May 15 June 19 Mitigation I _________________ Procurement Predictive Trends Analytics I _________________ _________________ The growing complexity of global supply chains equates to increased risks associated with regulatory compliance along with a greater higher potential for disruptions related to transportation, weather, changes in trade policy and a host of other issues. Identifying risk in your supply chain and preparing and planning accordingly is critical.

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Increasingly sophisticated machine learning and AI are resulting in even better predictive analytics, which in turn generate immense value for supply chains.

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In SDCE’s second blockchain educational webinar, panelists will evaluate a variety of industry use cases to help attendees understand how and where blockchain technology is making inroads in the supply chain and what ways organizations can start to build a strategy now in order to realize blockchain’s full potential.

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SOFTWARE & TECH

40

Smith adds that “by leveraging the virtual world prior to the physical world, for every dollar you invest, you save $7.”

Virtual simulation is still in its infancy, however, as Dassault works toward verifying its accuracy in the physical world.

Images Credit: Dassault Systemes

all functions to work together in one place on a single platform. These rooms include high-resolution screens and web conferencing, along with the full suite of Dassault Systemes’ solutions.

“Compressing the lifecycle, going from concept to flight in 90 days, is not just about applying technology. It’s also about tearing down the barriers to collaboration…and changing the way you want to work,” explains Lee Encapera, technical architect at Dassault Systemes.

Virtual reality technologies that allow users to explore new designs in fully immersive 3D and see the results of multiple simulations through the creation of digital twins in the areas of production, design optimization, certification and system engineering.

“A positive side effect of creating a digital thread is something you would call a digital twin and something we call a 3DEXPERIENCE twin,” says Encapera. “It’s a virtual realization of something that you’re trying to represent in the physical world.”

A digital production twin, for example, allows users to virtually simulate robots completing a task before ever spending a penny in the physical world. This allows users to optimize the operability of the manufacturing process, identify issues or risks early on, and continuously refine their designs.

The cost and time savings of this capability will vary by task, but according to Encapera they are difficult to pin down.

“If you take a simple case, you might see that the results are a little less beneficial, but if you take a complex case, the benefit becomes almost incalculable,” he says.

will in simulation.”

Additive manufacturing allows engineers to create custom parts as well as optimize standard parts for cost and weight, typically resulting in a 70 percent or more reduction.

Airbus, for example, leveraged additive manufacturing, also known as Customer collaboration rooms allow 3D printing, to create stand in parts for teams of up to eight people across all its thrust reverser prototype when its functions to work together in one place on a single platform. supplier was unable to deliver on time.

Instead of delaying the manufacturing process when the supplier missed its deadline, Airbus was able to print the plastic parts within hours that could fill the space until the metal parts arrived.

Multi-Robotics Additive Manufacturing (MRAM)—or the factory of the future—makes it possible to explore any shape without restriction and reduce material waste up to 90 percent as well as optimize manufacturing techniques using the latest in robotics.

MRAM can 3D print chopped fiber composite, mill, scan and execute many other advanced manufacturing techniques to Multi-Robotics Additive Manufacturing (MRAM)–or the accelerate production, factory of the future–makes it possible to explore and lower the number of optimize how robots can be used in your warehouse setting. parts and eliminate “The industry is not ready to do manufacturing waste. away with all physical tests,” says Mark Reverse engineering and inspection Beyer, value development consultant, allows engineers to scan complex parts SIMULIA strategic business to create new virtual representations development, Dassault Systemes. as well as to inspect new parts for “We still have a need to anchor our certification and quality control. simulation with empirical data. It “We believe that we have a allows us to do less testing in an transformative strategy in place to be accelerated program, but we still have able to demonstrate what the art of to prove to the certifying authority the possible is, to be able to innovate that we understand the limitations of the future of advanced product the simulation and go through a data development and manufacturing,” adds assurance process to verify that the Smith. “Integrating these technologies vehicle will perform the way we say it and software demonstrates that.”

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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BE RECOGNIZED FOR YOUR ACHIEVEMENTS

Each year, Supply & Demand Chain Executive recognizes individual and corporate leaders in the global supply chain. Plan now to enter your company, executive or a cutting-edge client or vendor in one of these industry-leading recognition programs.

2019

19th Annual

2019

SUPPLY CHAIN

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PROS TO KNOW AWARDS Honoring leading executives for improving the global supply chain through sustainable and proactive business initiatives.

NOMINATION DEADLINE: 1 /8 /1 9

Winners announced in the March 2019 issue.

SDCE 100 AWARDS

Transforming Supply Chains with Software & Technology The annual SDCE 100 is a projectbased award that recognizes leading software and technology providers that are helping transform supply chains with their products and services.

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Winners announced in the June 2019 issue.

Award results, information and nominations posted on: WWW.SDCEXEC.COM/AWARDS Nomination dates and issues may change. Consult the call-for-entries email and nomination survey for confirmation.

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EXECUTIVE FOCUS

{ PROFESSIONAL DEVELOPMENT}

By Bill Michels

IMPROVE YOUR TRAINING

Through Coaching & Mentoring with linkages to the business need. The need for quick training requires new techniques, measurement, and personal coaching and mentoring to achieve optimum results.

MISSING LINK

If you are investing in employee training, you should expect a return on that investment.

42

M

any companies think sending an employee to a public training course or mandating e-learning will cause the individual to learn new skills, broaden their horizons and apply those new skills to the job.

While they meet corporate objectives, without the appropriate follow up, it is likely that people will attend classes and get limited value. I have seen companies spend significant money on e-learning licenses and send people to training events to have them return to the job, put the books on the shelf, get certificates of completion and go back to business as usual, making the training a necessary evil to comply with company objectives.

Considering the current skill gaps and the need to drive teams to a new level of excellence as our product life cycles shorten, speed to market increases, supply chain agility expands, and economic cycles rapidly change, just-intime training programs are imperative

What is lacking is the ability to effectively embed the learning by linking the new tools and techniques with the sourcing process and providing coaching and mentoring.

These are essential elements that assure knowledge is integrated and used. In an environment where there is constant change, disruptive innovation, and regular mergers and acquisitions, education and development are ongoing and continuous.

In one company, the management team said, “We are providing this training for your reference and knowledge, using the tools and processes are optional.” When asked to provide feedback, I told them for the training, methodology and development to be effective they needed to be directly linked to the sourcing process to have the maximum impact on the company.

When the expectation is optional tools, with no formal process and no linkage to the sourcing strategy, the outcome is likely failure of the objective, as well as wasted money and wasted time.

Embeded learning at a diversified manufacturing company with businesses in aerospace, ATV’s, boats and defense provides a good example.

The company introduced prerequisites and required that on the last day of the workshop each delegate identify and commit to a project to add value to the

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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PROFESSIONAL DEVELOPMENT

The key to embedding the learning is to have a follow-up process to integrate the knowledge.

company using the methods, processes and tools from the course. The students had six months to complete the project.

They had access to the instructor and alignment with their manager on the project focus. Upon the completion of the project as validated by their manager, the student received credit for the course and recognition for the contribution to the company.

The sponsors were pleased with the program as they were able to return $40 for every $1 invested in the program.

The key to embedding the learning is to have a follow-up process to integrate the knowledge.

participate in the preparation or the development of the training program.

2» Set a goal with the employees that will target critical concepts from the training category plan or supplier plan.

3» Have the employee make a roadmap for reaching the project goal.

4» Give feedback as the employees work through the program and ensure all check-in and gate meetings occur. Encourage the employee, clarify any misunderstandings and understand what motivates the employee.

5» Upon completion of the project, debrief what went well; what could have gone better; the processes, tools and techniques used; the learning; and the next opportunity.

There is little doubt that coaching and mentoring after a training event takes time, energy and effort, but the long-term benefits to the employee and company are significant.

The satisfaction in working with an individual or team of people is substantial as new skills are learned, and the team increases its competence and capability while earning the stakeholder and company’s respect.

The real key to success is management participation in the overall

MAXIMIZE YOUR COACHING Coaching is one way to maximize the effectiveness of your training and development program. The manager or supervisor should oversee the coaching program as it codifies the way things will operate during the project. The coaching will be more effective if the training company standardizes processes and creates templates to facilitate the use of the toolkit. One example of this is to align the training to the category management and sourcing processes.

These templates can help the supervisor with the coaching process.

Five keys to successful coaching after a training are as follows: 1» Decide which tools and objectives will be accomplished. The manager must have a clear idea of which concepts from the training are applicable. The manager must

program, which can be accomplished through design, review of content or involvement in the training.

The choices are clear. Send people to class or assign e-learning modules and leave people unsupervised to use the concepts of the program.

Alternatively, engage management in the development of the program, or participation in the program with the objective to coach their team to success. The major complaint of both employees and managers is that there is not enough time to complete daily work. The training and development are considered a burden. If done well, the development process will create lifelong opportunities to improve effectiveness, drive change for the company and provide a platform to excel.

It is time to rethink training. If you are investing in employees, you should expect a return on that investment.

Are you coaching to embed the learning in your development process?

ABOUT THE AUTHOR BILL MICHELS is the vice president of operations at America for the Chartered Institute of Procurement and Supply Chain (CIPS). He previously served as CEO and founder of Aripart Consulting, president of ISM Services, and CEO of ADR North America. In addition, Michels has held senior procurement and supply chain positions in the manufacturing, paper and food industries.

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www.SDCExec.com | December 2018 | SUPPLY & DEMAND CHAIN EXECUTIVE

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WORK HARD,

By Mackenna Moralez

HITTING THE MATS Nature Gnaws’ operations manager Jay Mokbel combines logistics with Brazilian Jiu Jitsu.

I

Brazilian Jiu Jitsu t’s all about the adrenaline rush is known for “smaller” for operations manager and coor “weaker” individuals founder of Nature Gnaws’ Jay successfully defending Mokbel. Bodies slamming on themselves against a mats, hands grabbing at your uniform bigger and stronger and groans of pain are just a part of opponent. With Brazilian Jiu Jitsu. training, competitors can Mokbel was first introduced to the pass through the ranking martial art and combat sport when system, typically earning he was in college. Playing sports all a new colored belt every his life, he felt like he was lacking a two to three years. Mokbel physical outlet while he was in school took classes and competed and wanted to take some side classes. in competitions throughout “I was originally going “AT ANY MOMENT college, eventually earning to take a different class, but the instructor was moving YOUR PLANS CAN his black belt 12 years after away and suggested a Jiu GO WRONG, AND he started. have to find some Jitsu class,” Mokbel says. “A JIU JITSU IS THE sort“You of enjoyment in it. You 130-pound man beat the SAME IN A WAY. have to look something crap out of me that day. He YOU HAVE A PLAN, difficult in the eye and kind choked me out a thousand times and threw me around BUT YOU HAVE TO of deal with it,” Mokbel all day. It didn’t bruise my IMPROVISE A LOT explains. “If you’re only looking to get your belt, ego—it just made me want BECAUSE YOUR you’re not going to stick with to learn.”

BEST LAID PLANS it. It’s a long process, but if CAN GO WRONG.” you find the enjoyment in it, you’ll be able to take a hold — MOKBEL of it and carry it with you for the rest of your life.”

As Mokbel moved up in his career, training became a second priority.

However, he still found time to go to the gym on the weekends, referring to himself as a “weekend warrior.”

“If I can’t make it to actual training, I’ll go and run a bunch of sprints or work out hard so I can do something physical that day,” he says.

His work at Nature Gnaws, a 44

manufacturer of dog chews, was never far from his mind at the gym, though.

Mokbel explains that the sport reflects on similar problems that he has had while working within the supply chain, mostly wondering how whatever he is doing can be better than it was before.

“Everyone wants the supply chain to go smoothly and everything is mapped out on paper—but when does it ever go smoothly?” Mokbel says. “It’s a long series of steps to get from A to B that crosses all sorts of boundaries of the business. At any moment your plans can go wrong, and Jiu Jitsu is the same in a way. You have a plan, but you have to improvise a lot because your best laid plans can go wrong.”

Still, earning a black belt is the proudest moment of Mokbel’s Jiu Jitsu career. To him, the belt represents 12 years of consistency and self-improvement.

He advises those wanting to join the sport to just show up at the gym and take a class. However, it is important to not get so stuck on the belt ranking.

“The belt just holds your gi [your uniform] together. It doesn’t give you any powers. It wasn’t any better when I went from white to blue belt—and I’m still not any better now that I have a black belt. Every day you have to go in there [the gym] and be better than you were the previous day,” Mokbel says.

SUPPLY & DEMAND CHAIN EXECUTIVE | December 2018 | www.SDCExec.com

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