Innovation Takes a Turn at the Wheel
When it comes to meeting supply chain goals, many companies want to take a breather and buy a vowel. But with some innovative thinking, they can boost visibility, increase fulfillment operation efficiency, and streamline transportation, without losing a turn.
When your supply chain extends from The Sunshine State to the moon, things can get complicated. The NASA Deep Space Logistics Project at Kennedy Space Center is charged with delivering the cargo and payloads NASA astronauts will need as they venture into space, says Jeffrey Smith, Ph.D., element architect with the Deep Space Logistics Gateway Program. Each mission will carry 5,000-plus kilograms (about 11,000 pounds) of cargo to the NASA Gateway, a small space outpost orbiting the moon.
“Every kilogram of cargo is precious,” Smith says. The four-person crew needs enough food, clothing, air, and water to sustain them for up to a month, plus room to conduct critical science experiments. The cargo needs to be packed to withstand the force of the rocket launch and organized into individual containers so the crew can quickly find what they need. At times, the packaging for a particular cargo item can outweigh the item itself, he says.
Deep Space Logistics is exploring technologies that can recycle cargo packaging waste and other materials, turning them into useful items, Smith says. The system, which NASA calls, “Point-of-use Recycling for Optimized Space-Age Logistics,” needs to be efficient, small, easy to use, and require little maintenance. One potential technology is additive manufacturing, or 3D printing, to recycle waste into utensils, replacement parts and other items. Another is the catalytic conversion of waste plastic to hydrogen.
Like NASA, many organizations are exploring and introducing innovative solutions into their supply chains to meet a range of goals. Topping many priority lists are boosting visibility, increasing fulfillment operation efficiency, and streamlining transportation. Sustainability and cybersecurity are capturing attention and investments, as well.
The recent shipping disruptions have highlighted the need for resilient supply chains, and the role technology can play in building them. Eighty percent of manufacturing executives experienced either a heavy or very heavy impact from supply chains disruptions over the last twelve to eighteen months, says Paul Wellener, vice chair of the U.S. industrial products and construction practice with Deloitte. “To mitigate this moving forward, companies are focusing on relationship management and supply chain transparency, capacity investments, and digital technologies,” he adds.
“Our supply chain capabilities allow us to be a market leader,” says Guru Bandekar, global vice president, supply chain management with Carrier Corporation, which is known for its heating and cooling solutions. The company’s transportation management and network and route optimization solutions are enabling Carrier to build its direct-to-consumer business, while artificial intelligence (AI) and machine learning allow it to continuously re-optimize routes, he adds.
Along with improving operations, investments in supply chain technology can enhance the customer experience. For instance, tracking solutions allow companies to monitor packages in transit and send updates to e-commerce customers.
VISIBILITY HITS IT BIG
One area of focus when it comes to supply chain innovation is visibility. “During the pandemic, many companies realized how little they knew about their supply chains,” says Aaron Parrott, managing director with Deloitte.
Few could easily identify the suppliers that truly mattered to their operations. Gaining visibility to rapidly fluctuating demand has also proved important.
Faribault Foods, a mid-sized manufacturer of branded, co-manufactured, and private label foods, specializes in dry beans, soup, and chili. The company deployed demand planning and sales and operations planning cloud-based software applications from New Horizon in March 2020, right before the pandemic.
Like many consumer goods companies, Faribault Foods faces volatile demand and changing customer behavior. “AI and machine learning have given us better visibility into demand and more accurate forecasts so we can become more responsive to changing conditions,” says David Mörker, senior director and head of information technology. He adds that Faribault Foods can improve customer service levels while reducing inventory and supply chain costs.
In addition, New Horizon automates the forecasting process, insulating Faribault Foods from the technical complexity of AI technology.
The New Horizon solution offers 10 forecasting models, each tailored to a different situation, such as seasonal or highly promoted products, says Chao-Ming Ying, Ph.D., and chief technology officer.
Machine learning technology chooses the model that provides the best forecast, and compares each product forecast with actual orders, to continuously adjust model parameters or even change models as market conditions shift.
Among other benefits, AI can automatically segment customers into different demand categories so a company can prioritize which customers to focus on.
Blockchain technology can also enhance supply chain visibility.
“Blockchain technology has the potential to significantly improve supply chain operations by providing a secure, decentralized, and transparent platform for tracking and verifying the movement of goods and materials,” says Anand Swaroop, founder and president of Cepham, which manufactures herbal ingredients, and phytochemicals for dietary supplements.
Cepham uses blockchain-based tracking and visibility solutions, along with real-time cargo visibility tools, to identify bottlenecks and inefficiencies. AI-based data analytics tools help to predict product demand and optimize inventory levels.
Some visibility tools help supply chain and other organizations collaborate even when they’re not physically together. Many organizations turned to video-conferencing technology when pandemic lockdowns restricted travel. Video conferencing works well for most meetings, but less effectively when it comes to showing, for instance, a warehouse operation.
Those meetings are “designed for faces and not places,” says Devon Copley, co-founder and CEO of Avatour, which uses 360-degree video encoding and delivery, along with AI for image processing and multi-party collaboration tools to capture a space or operation, like a packaging line, as activity occurs.
5G, or the fifth generation of mobile network technology, can help supply chain organizations better track and trace assets, says David Joosten, president and CEO with Vodafone U.S. Inc. Among other capabilities, 5G offers greater speed and lower latency than its predecessors, and allows multiple types of devices to connect.
Vodafone helped Sicli, a provider of fire protection services, to manage, track, and communicate with its fleet in real time, enabling it to immediately respond to emergency calls.
SOLVING FULFILLMENT EFFICIENCY
As supply chain organizations aim to streamline and accelerate fulfillment operations, many are turning to technology. Automation can help organizations tackle the labor shortage by taking on routine tasks to free employees for more strategic work, and by making many jobs more appealing.
Werner Electric Supply, which offers electrical products and services, recently integrated into its picking process an augmented cluster builder (ACB) solution from Tecsys, a supply chain management solutions provider.
“We saw an opportunity to improve productivity and decrease our reliance on staff expertise,” says Mark Mueller, Werner’s regional distribution center continuous improvement team leader.
Previously, operators would manually sort and determine which products needed to go to which of Werner’s 10 branches and on which routes. This required extensive product and organizational knowledge, so many new hires needed three to six months to become proficient.
What’s more, it could take four operators about one hour each to build their clusters.
ACB, which is driven by artificial intelligence, accelerates the learning curve. One supervisor now spends about 90 minutes creating all four clusters, using the ACB to identify the optimal size and configuration of products. This frees employees’ time and cuts downtime.
Using a 3D model of the warehouse, the ACB solution maps out how employees can most efficiently traverse the space, cutting the distances they travel by about 4% “The solution goes through a shortest-distance calculation and finds the most efficient picking path,” says Philip Fisher, regional distribution center warehouse manager.
Robotics also play a critical role in enhancing fulfillment operations. Amazon, for instance, recently launched Sparrow, the first robotic system in its warehouses that uses AI and computer vision to detect, select, and handle individual items.
Plus One Robotics, Kindred, and several other companies have deployed a total of approximately 1,000 such robots globally, says Rueben Scriven, senior analyst at Interact Analysis. However, Amazon’s announcement likely will prompt other companies to implement this technology.
PUZZLING OUT PROCUREMENT
Technology is also improving the procurement function. CALA, a fashion operating system that unifies the product creation process within one digital platform, recently announced a partnership with SEKO Logistics, and the launch of a pricing engine that incorporates a total landed cost calculator.
“Our advanced pricing calculation system utilizes a proprietary algorithm that leverages a vast amount of data to accurately and consistently determine prices,” says chief executive officer Andrew Wyatt. The pricing engine is fueled by more than 80,000 data points, including product type, price breakpoints, materials, and origin countries, he adds.
To run its calculations, CALA’s engine uses predictive analysis tools that are similar to linear regression. (Predictive analytics makes predictions about future outcomes using historical data combined with statistical modeling, data mining techniques and machine learning.)
CALA can break products into their key elements and extrapolate pricing based on the data collected. “This allows us to confidently offer pricing for any item at any scale,” Wyatt says.
Even within a single company, the procurement process can require gathering information from multiple areas. In particular, sourcing direct materials has often required a reliance on information scattered across multiple spreadsheets and stored in employees’ minds, says Keith Hartley, chief executive officer with LevaData, Inc., which uses AI and analytics to “shine a flashlight” on companies’ procurement operations and alert management to discrepancies, such as various divisions of a company paying different prices for the same material.
Carrier Corporation is turning to electronic request for quotation (eRFQ) solutions to more quickly assemble data that often resides in different areas, Bandekar says. “Digitizing eliminates the work (of assembling data) to some extent and allows Carrier to focus on sourcing,” he says.
The rise in e-commerce deliveries has made efficient, accurate transportation operations even more critical. Getting there, however, has become more complicated.
Fewer drivers are interested in 1,000-plus mile trips, so planners must develop multiple shorter trips, says Balaji Guntur, COO of Hoptek, which offers fleet technology.
Advancing technology can help address these challenges. Artificial intelligence can automate dispatching and assign trucks to reduce “deadhead” or empty miles. “If you can get a bird’s eye view, you can start to squeeze out inefficiencies,” Guntur says.
Real-time data from trucks and TMS systems can be combined using AI and machine learning to create a ‘digital twin’ of the transportation network. A digital twin represents the current network state, showing where the trucks are, which loads are dispatched, and what needs to be assigned, among other information.
“This is the starting point of a dispatch plan that will consider all possible trip options for trucks, and then optimize for the best options that maximize revenue and revenue miles and minimize inefficiencies,” Guntur says.
Technology can also help smaller companies access the transportation capabilities many large enterprises enjoy. Hi-Tech Fasteners is an ISO-certified, distributor of industrial supplies. By leveraging a transportation management system (TMS) from BrillDog, a provider of supply chain solutions for smaller companies, Hi-Tech automated its rate quote system and claims filing processes. “As a mid-sized company, this allows us to play in the world of bigger companies,” says Patrick Wiegand, director of distribution and logistics.
The solution’s reporting capabilities also alert Wiegand and his colleagues when a shipment is delayed. “If there’s a problem, it will blink red,” Wiegand says.
Future versions of the software will incorporate machine learning and artificial intelligence. The more companies use it, the more advanced it will become.
BETTING ON SUPPLY CHAIN INVESTMENTS
Before the pandemic, even many large and sophisticated supply chain operations limped along with minimal investment, Hartley of LevaData says. The result often was a hodgepodge of offline processes and a lack of transparency that left companies unable to make optimal, fact-based decisions.
That has changed, and companies’ focus on supply chain technology appears likely to continue. What’s more, many are backing this up with investments. For example, by 2026, 75% of large enterprises will have adopted some form of intralogistics smart robots in their warehouse operations, Gartner reports.
And while many applications likely will focus on straightforward operational visibility and efficiency solutions, a few are heading in different directions.
Swaroop says Cepham is dedicating resources to learn about machine learning tools that can decipher ancient Ayurvedic texts. (Ayurveda is a system of holistic medicine with roots in India.) This will help his team better understand plants and their potential uses in self-care.
SUSTAINABLE TO A T
Consumers and businesses increasingly consider sustainability in their purchases, and their choices impact many supply chains. Technology can provide solutions.
Technology helps drive Fernish, a furniture rental subscription service that enables customers to rent pieces of furniture or full-room designs from brands like CB2, Crate & Barrel, and Fernish’s personal line.
“It’s a circular business,” says Kristin Toth, president and COO. The company’s products might be rented and returned multiple times, by multiple customers.
To create a supply chain model that accounts for this, Fernish needed a way to record the history of each piece: How long has it been out? What repairs has it had? This information helps the management team make data-driven decisions.
For instance, if a piece is coming to the end of its life, should Fernish offer it at a good price to the customer that has it, eliminating the need to pick it up? To answer these questions, each piece would need a barcode so the Fernish team could track it across multiple orders and locations.
Smith and her colleagues considered third-party systems, but ultimately developed Fernish’s system and database internally. “We tried to be thoughtful about what we needed to build ourselves,” Smith says.
For instance, when considering purchase order management systems, the Fernish team recognized their process was similar to many others, and
a third-party solution would work fine.
For its supply chain, however, Fernish developed its own system. “We are excited about the customized software we are building for our circularity oriented subscription business,” Smith says. “It’s unique, and a major competitive advantage as we grow.”
As more consumers and businesses look for information on the environmental footprint of the companies they do business with, many firms, including
those outside sectors typically considered green, are assessing their environmental footprint.
For example, Wisconsin Aluminum Foundry (WAF) makes aluminum parts for the automotive, defense, and other industries.
“Our production process is energy intensive,” says Sachin Shivaram, CEO. While an aluminum foundry may not seem to have much connection to the new age economy, he takes a “modern, forward thinking” approach to the business.
Part of that is working to monitor and reduce carbon emissions. Many of WAF’s customers are large, blue-chip firms, and they ask for information on WAF’s environmental footprint.
About 10 months ago, WAF began working with Gravity Climate, which harvests, categorizes, and reports on data from WAF’s invoices for diesel, natural gas and other substances.
In addition to providing this information to its customers, WAF can use it internally. For example, one report showed that forklifts running at night use dramatically less diesel than those running during the day. While it’s not yet entirely clear why, it’s possible nighttime operators don’t have to avoid congestion as much as those working during the day. As a result, their travel paths are more straightforward and they use less fuel.
As WAF’s example shows, monitoring carbon emissions can have a bottom-line payoff. Not only are many customers looking to do business with environmentally conscious companies, but reducing carbon emissions usually accompanies a reduction in the use of energy, cutting costs.
“Sustainability is becoming synonymous with business resilience,” says Saleh ElHattab, founder and CEO of Gravity Climate.
As supply chains become increasingly digital, cybersecurity becomes a bigger concern. More technology, digital systems, and IoT devices also mean more points of entry for cyber-criminals, says Brianna Leddy, director of analysis with cyber defense firm, Darktrace.
What’s more, supply chain attacks likely will intensify because “They’re proven to work,” says Gabi Reish, chief product officer with Cybersixgill, a provider of threat intelligence solutions. Criminals are able to gain exposure to different organizations.
Proactively managing supply chain risk is now paramount. “Armed with AI, organizations are able to understand the ‘normal’ behavior of these devices in order to proactively prevent, detect and respond to attacks,” Leddy says.
Organizations also need to assess and identify potential weak spots and threats early on, Reish says. This means asking, among other questions:
- Where are the threats?
- What are our weakest links?
- Which risks are of greatest concern?
“Knowledge is power,” he adds. “You can take action based on knowledge.”
9 WAYS TO MAXIMIZE TECH INVESTMENTS
A few guidelines can help your company fully exploit its investment in innovative supply chain technology.
1. Consider the longer term. “Think about how you want the solution to look years down the road before you get into the nitty-gritty of the architecture,” says Kristin Toth, president and chief operating officer with Fernish, a premium furniture rental company. Account for growth and different users as you plan, she adds.
2. Meld technical skills and operational expertise. “The marriage of great operations and software can be powerful,” Smith says. Operations experts can remain focused on what the system needs to do, and the engineers can focus on getting there.
3. Confirm data quality. For technologies like artificial intelligence to work effectively, data structure and quality matters, Guntur says. “If you’ve been managing dispatch planning on the back of an envelope, you likely have work to do before implementing technology,” he says.
4. Know how much data you have. Artificial intelligence works best when it’s working with massive amts of data, says Dusan Rnic, senior vice president, Europe and International, with SymphonyAI Retail CPG.
5. Allow time for the technology to learn. Just like a new employee, solutions like machine learning require time to get up to speed, Rnic says.
6. Act on the information. If you’re accessing data, but not fundamentally changing processes to make real time decisions based on the information you’ve assembled, you won’t get the full benefit of these technologies, says Atul Vashistha, chair and chief executive officer with Supply Wisdom, which offers risk intelligence.
7. Decide when to involve humans. At what threshold do you want employees involved in the decision-making? Issues involving low-value items or low risk are probably a better candidate for automated action than higher value products or higher risk scenarios.
8. Prepare workers. It took time for operators at Werner Electric to see that ACB, while creating what seemed like weird picking paths, actually was shortening their trips. To help employees get accustomed to the technology, Werner started gradually, Fisher says. They’d use the solution several times each week and then compare the results to manual clustering. Eventually, employees saw how the technology was helping.
9. Focus on the vision. A strategic vision should guide your investments in technology. Otherwise, you risk ending up with “random acts of digital,” Parrott says.