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5 posts from January 2011

01/27/2011

ILC: Using Sensors, GPS and Cellular Networks to Improve Your Supply Chain

The lofty promise of RFID technology was that it would revolutionize global supply chains by letting retailers, shippers and other logistics players keep constant tabs on the whereabouts of their products – everything from TVs to clothes to lowly razor blades. That promise hasn’t panned out, for a number of reasons.

But one of RFID’s biggest drawbacks is now being addressed by a new, more sophisticated technology. It’s designed for tracking high-value goods – think pharmaceuticals, art, pricey electronics and even food – and adds value by monitoring the goods’ condition in transit, not just their location.

The new technology is called ILC, which is short for identification, location and condition. While RFID identifies a shipment and tracks its location as it moves past a special reader (perhaps one installed at a seaport, or a warehouse), the technology can’t tell you anything about the shipment’s actual condition. That’s a big problem. It means you’ll discern the condition of your shipment only when it’s packed at origin and unpacked at its final destination. If damage or theft occurs at any point along the way, your first indication that anything is wrong will come only at the end of the journey, when you – or, worse, your customer – opens the package to an unpleasant surprise.

Enter ILC, a cutting-edge technology that is the result of merging GPS, cellular-location and advanced-sensor capabilities. ILC makes it easier to track shipments and transmit information about them; it also makes it easier to pinpoint potential problems in transit. Specialized sensors embedded in ILC devices can include those detecting light, to track opening or tampering; temperature, relevant to food and drug shipments; and tilt/shock. ILC devices are portable, re-useable and configurable, meaning alert parameters can be set for each sensor. One or more individuals can receive the “exception notification alerts” when sensor readings are off.

These alerts are sent over the world’s widely available cellular networks in real time. That means shippers can be notified of changes in the condition of their shipments while they’re in transit, not just when goods are passing through a reader at a port or other facility. Each alert is time-stamped, providing a chain of custody for carrier management, performance grading and potential claims resolution. Some companies are working on ILC-type devices now. Many others are trying to move beyond RFID to offer asset-tracking products that incorporate GPS technologies, but not necessarily sensors, or more than one type of sensor, such as temperature. But true, comprehensive ILC devices have the advantage of being stand-alone solutions that can provide constant shipment surveillance without relying on other parties in the supply chain. Another big plus is that the devices don’t require process changes or on-the-ground investment in expensive readers or scanners. That more than compensates for their higher cost compared with RFID tags.

There are plenty of potential use cases for ILC devices. The temperature sensor is an excellent solution for tracking pharmaceuticals, lab animals, certain manufacturing components, artwork and food. Unlike a static temperature device, an ILC can graphically illustrate the temperatures to which a shipment’s contents are subjected throughout a journey. This can be critical if a shipment’s temperature fluctuates in transit, but still arrives at its destination within accepted parameters. In that case, spoilage or degradation may go undetected. In addition, the alert time stamp will pinpoint where the event occurred and who was in possession of the shipment when it happened.

Light sensors provide information about tampering or the unauthorized opening of a box, carton or container. This is particularly important for high-value or proprietary items moving from point to point. A light alert will allow for rapid response and chain-of-custody documentation. One example would be a high-end computer server stocked with confidential data that is being moved from one data center to another. If the security of that server is compromised, the impact could be enormous and result in huge financial or even regulatory liability for the customer.

The importance of in-transit data can’t be overstated, since it’s extremely valuable to both shippers and other parties. For shippers, such information provides a way to monitor not only the security and integrity of shipments, but also transportation companies’ service performance. Using a common geo-fence enabled by a GPS system, for example, a shipper can be notified when an order is approaching its destination, and this can have an impact on resource scheduling and planning. A shipper is no longer dependent on the tracking system of its carrier of choice.

For a freight forwarder who moves his customers’ shipments in an open-loop system, an ILC device allows for shipment management and proactive response to delays and other service interruptions. Consider a shipment carrying an ILC device that is sitting at an origin airport well after its scheduled departure time. This, obviously, indicates a potential service failure. A COB (confirmation on board) may take hours to reach the forwarder. However, an ILC will send an earlier warning: data indicating that the shipment’s intended aircraft has departed without it. (The ILC device would turn off once it got onboard the plane, so if it was still sending signals after the plane’s scheduled departure, there would be no doubt it didn’t make the flight.) The device also would be reactivated upon landing at the destination airport, immediately notifying shippers of its whereabouts. This level of near real-time data is a vast improvement over the current information and update flows exchanged between airlines and forwarders.

ILC devices’ use of GPS technology and backup cellular, location-based systems is also a plus. GPS is extremely accurate, provided signals aren’t blocked by specific building structures, metal containers and the like. While cellular-location systems aren’t as accurate as GPS, they still provide location data within 10 to a couple of hundred meters. And widely available cellular networks – not static readers – transmit the sensor data generated by ILC devices. Devices can be configured to report sensor status at regular intervals, or send notifications the moment changes are recorded. This is a key feature for customizing the devices around anticipated transit times, whether they involve air, ground, ocean or rail journeys. It also allows shippers to set battery-consumption rates to correspond to anticipated travel times. Obviously, cellular-signal strengths vary by location. But as technology improves and cell networks grow, LBS accuracy will also improve.

Currently, there are a number of GPS/cellular location devices on the market.  However, incorporating the third feature, condition sensors, is a new and highly important supply-chain innovation. Companies shipping high-value or environmentally sensitive items should explore this new solution. Shipping companies should also look at ILC devices as a way to bring value to their customers and their internal operations, and also to develop new revenue streams. Cell phones keep people connected. An ILC device keeps you and your supply chain better connected and greatly reduces surprises and headaches associated with shipping goods and products around the world.

01/25/2011

CEOs Much More Likely to Consider Sustainability Than Ever Before

A few months ago, IBM released the results of a CEO survey in which “environmental concerns” ranked seventh among the top external factors expected to impact business operations over the course of the next three years. In some corners, this statistic was viewed as proof of corporate executives’ inability – or perhaps even unwillingness – to integrate environmental stewardship into the strategic fabric of their core business operations.

Ten years ago, though, where would sustainability have ranked on such a survey? Or for that matter, how many CEOs would have indicated that their businesses would be seeking to deploy new technologies aimed specifically at addressing issues of sustainability? According to a separate study from Accenture, more than 90 percent of respondents indicated that over the next five years they will be doing just that. So, is the glass half empty or half full?

It seems that after years of much discussion, environmental stewardship is finally establishing a toehold in the corporate (and industry) psyche. Reducing paper consumption and energy conservation (e.g. turning off the lights and powering down PCs when not in use), for example, are now commonplace, and rankings such as Greenpeace’s Cool IT Leaderboard are tracking the sustainability efforts of some of the leading global information and communications technology companies.

01/18/2011

Supply Chain News: Supply Management Effectiveness can Make or Break Bottom Line Results

Supply chain management professionals have long known that "supply management" is a fundamental skill companies must master to achieve both supply chain excellence and solid profitability. As procurement-related people and processes have seen a dramatic rise in visibility and sophistication over the last decade, it turns out that some even very large and respected companies are still mastering the discipline.

Case in point: construction equipment giant Caterpillar. The Peoria, IL-based company is a global icon, one of the most respected companies in the world. Throughout much of the 2000s, it enjoyed substantial sales growth, both in the US and overseas, as the globe saw a rapid construction boom.

The problem? Profits didn't move upward anywhere near the pace of Caterpillar's revenue growth. As seen on the graphic nearby, produced by the Wall Street Journal, sales grew from about $37 billion in 2005 to $51 billion in 2008, yet profits stayed largely flat, staying right about $3.5 billion in 2006, 2007 and 2008 despite a 20% growth in revenue.

A key part of the problem: mediocre supply management.

As sales soared, the supply base for parts and other components couldn't keep up. As a result, Caterpillar had to pay premiums to get suppliers to produce additional volumes, and often resorted to expensive air freight or other forms of expedited logistics services.

In an interview with the Wall Street Journal, Caterpillar CEO Doug Oberhelman says the soaring procurement and logistics costs serviced as a "lightening bolt" that soon spurred a wide spread revamp in its approach to supply management.

One issue was that the company usually promoted from within. That often left it without an outside perspective and not enough fresh ideas. A talent gap was especially problematic in Caterpillar's busy international operations, where it lacked the time to well-train new managers.

The move to bring in outside supply management talent had started two years before, but in August of this year Caterpillar hire Frank Crespo as its new chief procurement officer, a titled he held previously at Honeywell.

Crespo is leading a charge to bring more "flexible manufacturing" capabilities to Caterpillar's supply base, so they can ramp up parts production more quickly based on Caterpillar's demand.  As the auto companies have done for years, Caterpillar will also work with suppliers so they can become more efficient , and Cat  will consider investing in a supplier if its needs financial help.

01/14/2011

John Chiappe, Dir. of Business Development, Logistics Products Crossbow Tech. | December 13, 2010

The lofty promise of RFID technology was that it would revolutionize global supply chains by letting retailers, shippers and other logistics players keep constant tabs on the whereabouts of their products – everything from TVs to clothes to lowly razor blades. That promise hasn’t panned out, for a number of reasons.

But one of RFID’s biggest drawbacks is now being addressed by a new, more sophisticated technology. It’s designed for tracking high-value goods – think pharmaceuticals, art, pricey electronics and even food – and adds value by monitoring the goods’ condition in transit, not just their location.

The new technology is called ILC, which is short for identification, location and condition. While RFID identifies a shipment and tracks its location as it moves past a special reader (perhaps one installed at a seaport, or a warehouse), the technology can’t tell you anything about the shipment’s actual condition. That’s a big problem. It means you’ll discern the condition of your shipment only when it’s packed at origin and unpacked at its final destination. If damage or theft occurs at any point along the way, your first indication that anything is wrong will come only at the end of the journey, when you – or, worse, your customer – opens the package to an unpleasant surprise.

Enter ILC, a cutting-edge technology that is the result of merging GPS, cellular-location and advanced-sensor capabilities. ILC makes it easier to track shipments and transmit information about them; it also makes it easier to pinpoint potential problems in transit. Specialized sensors embedded in ILC devices can include those detecting light, to track opening or tampering; temperature, relevant to food and drug shipments; and tilt/shock. ILC devices are portable, re-useable and configurable, meaning alert parameters can be set for each sensor. One or more individuals can receive the “exception notification alerts” when sensor readings are off.

These alerts are sent over the world’s widely available cellular networks in real time. That means shippers can be notified of changes in the condition of their shipments while they’re in transit, not just when goods are passing through a reader at a port or other facility. Each alert is time-stamped, providing a chain of custody for carrier management, performance grading and potential claims resolution. Some companies are working on ILC-type devices now. Many others are trying to move beyond RFID to offer asset-tracking products that incorporate GPS technologies, but not necessarily sensors, or more than one type of sensor, such as temperature. But true, comprehensive ILC devices have the advantage of being stand-alone solutions that can provide constant shipment surveillance without relying on other parties in the supply chain. Another big plus is that the devices don’t require process changes or on-the-ground investment in expensive readers or scanners. That more than compensates for their higher cost compared with RFID tags.

There are plenty of potential use cases for ILC devices. The temperature sensor is an excellent solution for tracking pharmaceuticals, lab animals, certain manufacturing components, artwork and food. Unlike a static temperature device, an ILC can graphically illustrate the temperatures to which a shipment’s contents are subjected throughout a journey. This can be critical if a shipment’s temperature fluctuates in transit, but still arrives at its destination within accepted parameters. In that case, spoilage or degradation may go undetected. In addition, the alert time stamp will pinpoint where the event occurred and who was in possession of the shipment when it happened.

Light sensors provide information about tampering or the unauthorized opening of a box, carton or container. This is particularly important for high-value or proprietary items moving from point to point. A light alert will allow for rapid response and chain-of-custody documentation. One example would be a high-end computer server stocked with confidential data that is being moved from one data center to another. If the security of that server is compromised, the impact could be enormous and result in huge financial or even regulatory liability for the customer.

The importance of in-transit data can’t be overstated, since it’s extremely valuable to both shippers and other parties. For shippers, such information provides a way to monitor not only the security and integrity of shipments, but also transportation companies’ service performance. Using a common geo-fence enabled by a GPS system, for example, a shipper can be notified when an order is approaching its destination, and this can have an impact on resource scheduling and planning. A shipper is no longer dependent on the tracking system of its carrier of choice.

For a freight forwarder who moves his customers’ shipments in an open-loop system, an ILC device allows for shipment management and proactive response to delays and other service interruptions. Consider a shipment carrying an ILC device that is sitting at an origin airport well after its scheduled departure time. This, obviously, indicates a potential service failure. A COB (confirmation on board) may take hours to reach the forwarder. However, an ILC will send an earlier warning: data indicating that the shipment’s intended aircraft has departed without it. (The ILC device would turn off once it got onboard the plane, so if it was still sending signals after the plane’s scheduled departure, there would be no doubt it didn’t make the flight.) The device also would be reactivated upon landing at the destination airport, immediately notifying shippers of its whereabouts. This level of near real-time data is a vast improvement over the current information and update flows exchanged between airlines and forwarders.

ILC devices’ use of GPS technology and backup cellular, location-based systems is also a plus. GPS is extremely accurate, provided signals aren’t blocked by specific building structures, metal containers and the like. While cellular-location systems aren’t as accurate as GPS, they still provide location data within 10 to a couple of hundred meters. And widely available cellular networks – not static readers – transmit the sensor data generated by ILC devices. Devices can be configured to report sensor status at regular intervals, or send notifications the moment changes are recorded. This is a key feature for customizing the devices around anticipated transit times, whether they involve air, ground, ocean or rail journeys. It also allows shippers to set battery-consumption rates to correspond to anticipated travel times. Obviously, cellular-signal strengths vary by location. But as technology improves and cell networks grow, LBS accuracy will also improve.

Currently, there are a number of GPS/cellular location devices on the market. However, incorporating the third feature, condition sensors, is a new and highly important supply-chain innovation. Companies shipping high-value or environmentally sensitive items should explore this new solution. Shipping companies should also look at ILC devices as a way to bring value to their customers and their internal operations, and also to develop new revenue streams. Cell phones keep people connected. An ILC device keeps you and your supply chain better connected and greatly reduces surprises and headaches associated with shipping goods and products around the world.

Source: Crossbow Technology

01/11/2011

Supply Chain Year in Review 2010

What happened in 2010 in terms of the supply chain? Time for my annual review.

In terms of broads trends, once again the economy probably has to take center stage, and I think the deep and direct connection between the economy and the supply chain has been burned into all of us for some time. At many of the events I attended, sessions on the economy and economic predictions seems to have packed audiences, which was telling.

So the economy was in recovery in 2010 - sort of. We've now had I believe 17 straight months, including December, of a reading of 50 or more in the Institute for Supply Management's Purchasing Managers Index, indicating manufacturing expansion. Retail sales excluding automobiles were up 5% or more each month this year over the dismal 2009 levels. Factory utilization has climbed from the abysmal 65% reached in June 2009 to about 73% currently. (By the way, we have assembled all these data/charts in one article released in our On-Target publication this week. You can read here: Major Macro Trends Impacting the Supply Chain in 2010. It is quite good, if I do say so myself.)

Yet, the recovery certainly didn't feel all that great, with unemployment hardly budging at near 10% for the entire year, and GDP growth of 2-3% per quarter - well below normal recovery levels, especially from very steep recessions.  Consumer demand was still wobbly and skewed heavily towards bargains - dollar stores enjoyed another banner year. Supply chain staffs, pared deeply in 2009, remained lean, as companies focused on doing more with less. But unit volumes didn't rise that much for most companies, even as corporate profits and cash flow soared for many due to deep cost cutting, and units volumes are what drive supply chain hiring, so that was weak too.

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In just one year China's world stature in economics, international relations and much else soared dramatically. A decade or more in a single year, if you will.

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It does appear there is a real chance 2011 could be a strong year - more good economic numbers this week - let's keep our fingers crossed. We've been much too long in the doldrums.

China, meanwhile, kept zooming along, with near 10% growth for much of the year. The lowest quarter of growth it had during the recession - according to official statistics anyway - was 6% in Q4 of 2008.  That led China to surpass Japan in 2010 as the world's second largest economy, and IHS to predict it could exceed the US in 3-4 years. In just one year China's world stature in economics, international relations and much else soared dramatically. A decade or more in a single year, if you will.

That led to much angst in the US and Europe, with strident calls for China to increase the value of the Yuan currency to make its exports more expensive. Numerous country leaders and corporate CEOs called on China to open its markets more and better protect foreign IP. The US levied several controversial tariffs on Chinese goods, and protectionism here and in Europe was in the air - but in the end, not that much really happened there.

In my view, the Green supply chain movement went sideways at best in 2010 - though many companies, especially in the consumer packaged goods industry, made many advances. (Procter & Gamble, as just one example, in May announced it would start requiring suppliers to start reporting carbon emissions soon; WalMart also announced a new program to work directly with suppliers to reduce emissions and other waste).

But the Cancun climate summit in December was a dud, and there was a sense of Green "fatigue" in face of the economy, frozen winters, doubts about some of the data, etc. Most interesting though was the US EPA's controversial move, now playing out, to reduce greenhouse gas emissions through regulation, not legislation. We've been keeping close tabs on this at our thegreensupplychain.com. Several Green groups bemoaned the fact that consumer interest in Green is not anywhere near as strong as they hoped. Frito-Lay dropped its fully bio-degradable bag for its Sun Chips line after sales plummeted because  consumers decided the extremely noisy crunching sound the bag made wasn't worth the Green benefits.

I am going to run out of room here, so below are what I view as the rest of the top supply chain and logistics stories from 2010:

Rising Input and Oil Costs: Does it feel like deja vu all over again? The price of most commodities soared in 2010, with items like cotton and wheat reaching record highs. Oil reached $87 per barrel by April and stayed elevated for the entire year, ending at over $90. Once again, we are hearing companies either blaming rising input costs for profit shortfalls, or predicting their coming impact, as Nike did just last week. We could be north of $100 a barrel soon, and who know from there. Manufacturers and retailers are uncertain how to respond with continued consumer price sensitivity.

RFID Comeback: The long-suffering RFID community was bolstered by WalMart's announcement, under a new program leader, that it was going to require item-level tagging for certain apparel products, joining American Apparel, JCPenney, and other soft goods retailers in the move. The program made sense, was incremental, and avoided many other aspects of its previously failed efforts. There were reports for awhile of shortages of tag inlays and mobile RFID readers due to the move. Not much news since then, but it seems to be moving along. Essentially, RFID is moving into a more mature stage where it will become very easy to use, like bar coding.

Trucking Industry Dynamics: Too much happened here to do much other than lump it under a catch-all. For the first half of the year, rates mostly stayed in the toilet, though signs of some capacity issues were starting to emerge by late Spring. The carriers have remained very disciplined about adding capacity, and in the second half we saw rates starting to rise and more capacity concerns. These were exacerbated by the new CSA 2010 safety reporting rules, which could take hundreds of thousands of drivers out of the employment pool, rising diesel prices which could again wipe out thousands of independents, and just officially proposed new changes to the Hours of Service rules that could put another big hit on productivity. Is there a "War on Trucking?" More on this soon.

China Labor: An almost unheard of publicly reported strike in China in May at Honda plant there leads to increased wages of 20% or more in a number of factories, leading some to believe the "cheap Chinese labor party" is coming to an end. Many apparel manufacturers already headed elsewhere.

November Election: Republican takeover of House and gains in Senate mean Cap and Trade and "Card Check" union bills are dead for at least two years; also likely to see some modest change in transportation policy.

Supply Chain Software: Sales for most supply chain software companies are strong, meaning companies are buying. JDA Software CEO just recently makes unusually strong statement about strength of company's "pipeline." However, pronounced change of tone during the year of the industry focus moving strongly to "cloud-based" delivery models. This is the future.

Toyota Fiasco: World's largest car company sees reputation sullied for supposed problems with sticking accelerators. Though later evidence seems to show Toyota should be vindicated, company loses market share, and the disaster causes many to ask if Lean was taken too far.

Dr. Tom Mentzer Passes: One of the industry's most well-known academics, the University of Tennessee's Tom Mentzer, loses cancer battle in March.

Logistics Costs Way Down: Annual State of Logistics report in June finds logistics costs as percent of GPD plummeted in 2009 to just 7.7%, after long upward trend.  That's the lowest level in the 21 years of the report.

Cargo Bombs: Crude attempts by terrorists in October to plant bombs in parcel packages causes mini-panic, renewed calls for higher levels of cargo screening.

More WalMart: Retail giant makes more news by earlier in 2010 announcing it is going to move to more direct sourcing of its goods rather than using intermediaries, especially for imports, and later that it is going to take more control over its inbound freight moves from vendors. Both actions cause many in the industry to discuss/rethink their own policies.

Material Handling Merger: Two giants in the materials handling industry, Dematic and HK Systems, announce they are combining in August.

There is more but I am out of space. Look for a detailed 2010 event timeline in next week's On-Target magazine