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11/29/2010

Even High-Cost, 'High-Criticality' Goods Can Be Secured from Risk Across the Supply Chain

From the iconic to the mundane, consumer and enterprise technology products have transformed how we work, play and relax. From portable computers to wafer-thin personal media players to vast server farms, these products are at the center of our lives. Yet the more ubiquitous these products have become, the less value they have generated for their makers. The software, services and content bundled with and flowing through these devices have relegated all but a few devices to commodity status. Commoditization brought with it a focus on cost and perhaps an inevitable rush towards low-cost, high-scale manufacturing.

As a result, fewer high-tech original equipment manufacturers (OEMs) are indeed manufacturers. Contract manufacturers (CMs) and original design manufacturers (ODMs) make the outsourcing of manufacturing and even design a very appealing cost and capital proposition. Save for those OEMs that view manufacturing as a strategic differentiator, most have turned their focus to complex design, sales and bundled services.

Yet the supply chain is subject to Newtonian principles.  Outsourcing has reduced manufacturing cost but has created a complex, multi-tier global supply chain of primary and secondary suppliers.  OEMs may have good visibility into their primary suppliers, but beyond that the view becomes murky. This lack of visibility is a key component of a significant challenge of the multi-tier supply chain: supply chain security.

A secure supply chain ensures that a product and associated software moves from original design to end-customer free of tampering, with authentic components, and at minimal risk of failure. The multi-tier supply chain, while lowering manufacturing costs, has opened multiple entry points for product quality to be compromised. Poor quality and improperly designed materials, counterfeit components and corrupt software are symptoms of the gap in security.

Poor supply chain security causes public and internal damage. The public damage to customers is visible and palpable. Internally, brand devaluation, recall costs, engineering and design changes as well as short- and long-term lost sales are but some of the costs to the companies involved. For high-technology companies, the external damage can be significant.  For example:

  1. Faulty or compromised PCs, networking gear and mobile devices can lead to lost productivity and leaks of proprietary data;
  2. Insecure routers and switches expose private networks to external attacks; and
  3. Compromised networks and equipment can put national security at risk.

A secure high-tech supply chain provides end users with a high degree of confidence that both the physical asset and the embedded software they have purchased meet the OEM’s technical and quality specifications. This encompasses:

  1. Protecting hardware from poor quality and counterfeit components;
  2. Protecting against malicious code in embedded software, operating systems and applications; and
  3. Securing all components and finished goods to prevent diversion and tampering during transportation.

Tracking all components, subassemblies and finished goods as they move from point to point in the supply chain might provide the optimum level of security but is cost prohibitive. Still, high-tech companies can take important steps to intelligently improve supply chain security across the markets they serve.

High-tech companies can take a structured approach to supply chain security based on a consideration of a product’s complexity and criticality. “Complexity” is a reflection of the investment in hardware and software, ranging from commodity components such as transistors to highly customized or proprietary components and software. “Criticality” represents the potential impact that a counterfeit or poor quality component or product could have on its end use, from a minor inconvenience to a national threat.

Low-complexity products are relatively simple to manufacture. They have a limited number of often commodity parts in their bills of material and require a limited or less complicated logistics and manufacturing infrastructure. Typically, the end product is itself a commodity, such as a netbook, common mobile phone or set-top box. Low-criticality products, should they fail, have little impact on their end users beyond inconvenience and a few missed hours of content consumption.

Low-complexity, low-criticality products can be managed more from a quality than security perspective. Product defects may annoy customers, but the impact on the user and the OEM is less likely to be severe. High-complexity products often possess multiple, proprietary or costly parts.  High-criticality products can have a serious impact on end-use applications. These include electronics for military applications, public internet, aerospace, power grid and public safety. The failure of any of these critical systems would be intolerable.

Companies can use such segmentation logic to help balance the investments in supply chain security for a specific product with cost and risk. Applying rigorous security standards across the full supply chain is costly and impractical. Investing based on product complexity and criticality is an initial step to an effective, cost-appropriate solution. This approach allows OEMs to create a differentiated set of supply chain security capabilities that accurately pair investment with potential risk.

Most OEMs have access to tools for managing low-complexity, low-criticality products. Rigorous sourcing processes that evaluate long-term quality, regularly scheduled audits and long-term supplier relationships are typically adequate safeguards.  Existing data exchange and performance metrics with suppliers and logistics providers are typically sufficient. For those companies seeking a slightly higher degree of visibility the use of third-party auditors or certification agencies may be an option.

The highest end of the complexity-criticality range requires investments in process and technology, particularly product pedigree and track-and-trace solutions. Product pedigree solutions provide serialized tracking of components and finished goods, linking components and sub-components to their sources while providing overall visibility through a centralized data repository. Track-and-trace capabilities are the inclusive set of technologies and processes that continuously monitor the physical location of goods through the supply chain. Rather than fully bearing the cost of these investments, OEMs should also look to work with ODMs, CMs, logistics providers and professional service providers with elements of pedigree and track-and-trace solutions already in place.

Today’s multi-tier supply chains require pragmatic, cost-effective investments in supply chain security. The criticality of a product’s end application and the complexity of its design can be guideposts for supply chain executives responsible for supply chain security. As they consider supply chain security business cases, executives should also account for benefits beyond incident avoidance such as reduced costs, increased margins and improved working capital that arise from improved visibility and reductions in poor quality and counterfeit components. Investments in global supply chain operations have transformed how high-tech companies deliver innovative products and services to their customers. It is now time for pragmatic investments in security to protect those gains.

 

The Dollars and Cents of Supply Chain

The financial aspect of a supply chain is every bit as important as the efficient flow of product and information. Dan Gardner, vice president of business development with ATC Logistics & Electronics, outlines some of the elements on which global companies ought to be focusing.

Companies are well-accustomed to focusing on the global movement of physical goods, as well as the documentation that goes along with them. They are less skilled in managing the third important aspect of any supply chain: the money. Gardner says they need to be tracking such key financial elements as total landed cost and cash flow.

Setting up specific key performance indicators can aid them in their task. They include total return on assets, inventory expense, accounts receivable and inventory turns. Traditional formulas for measuring financial performance in domestic operations can be applied to global supply chains, says Gardner. “It just has to be in proper context.”

Financial concerns are not always on the mind of the typical supply-chain manager, whose level of expertise depends on the individual corporate culture. Awareness of financial issues should be “pervasive” throughout the organization, Gardner says. “Execution is very important – but what are the financial implications? Are you carrying millions of dollars in inventory to achieve the goal of good customer service?”

There are pitfalls in merging supply-chain execution with financial outcomes, he acknowledges. Companies attempting to apply the same principles in both areas must deal with long lead times, multiple time zones and ethnic and cultural differences. They must have a clear idea of how the steps in an international transaction can cause glitches in the chain.

The recession has prompted a rethinking by many companies of their approach to global financial management. In the process, they might discover that actions that seemed to make sense from a cost standpoint, such as reducing inventory levels, ended up costing more in the long run. Yet another important consideration is a company’s ability to secure credit or obtaining financing for new-product launches. For a time, Gardner says, access by most businesses to credit came to a halt. “I don’t think it’s in crisis mode [today],” he says. “It’s come back a bit.”

 

Importance of Real-Time Location Systems Extends Beyond the Supply Chain

Though the supply chain is still the dominant market for RTLS, the door has been opening for a vast array of applications that can be categorized as follows.

Capacity Management such as:

  • Helping cities manage transit capacity, traffic flow and traveler alerts
  • Helping cell phone coverage with concentrations of calling and texting
  • Commercial services and supplies to concentration sites (crowds after events)
  • Recalls and return flow
  • Inventory ‘build-up’ for shipping or promotions

Tracking and Routing such as:

  • Location-, condition- and identification-related information are the fundamental underpinnings for a broad array of higher-level applications. Of course, asset tracking has gotten much better in recent years, but just as soon as new offerings boost performance, expectations quickly morph into an even more aggressive set of demands. Many users today want slot level visibility (bed, parking, etc.), and not simply to know that it is in the building, yard or room.
  • Social networking applications seem to intrigue the new generation with clustering and ‘tribe’ identity that can be applications on top of location-based services that leverage cell/smart phones, challenging our traditional concepts of RTLS for asset tracking.

People Management such as:

Enhanced visibility of staff, patients, buyers, suppliers, carriers and others for a multitude of purposes such as access control, egress, coverage, security, enforcement (time, perimeter, etc.), and much more.

 

10/30/2010

ASSET VISIBILITY FOR EQUIPMENT & TOOLS

Rental companies and large manufacturing suppliers need to know where their inventory is located, be it in their facility or in use by a customer. If you have made large investments in equipment or tools you want to have precise information on where each item is, its condition and be notified if it moves outside its assigned area.

Crossbow’s Asset Visibility Solution is an un-tethered device that you can affix to an inventory item and track its movement without on the ground infrastructure. If you are a rental company,   Crossbow allows you to monitor location and if the item strays from a site or geographic area you can be alerted immediately. This capability minimizes your risk of theft and unauthorized movement.

Companies who support large scale manufacturing lines often ship their products and components on custom-made racks and carts. It is critical to have these re-useable conveyances returned. If they are not returned, the supplier is forced to purchase additional conveyances in order to delivery to his customer. Crossbow’s technology allows you to independently locate your property, be it in your facility, your customers’ facility or on the road. Protect and manage your investment with Crossbow.

  • Peel and stick
  • No physical infrastructure needed
  • No significant changes to existing processes
  • Reduce need to maintain higher inventory levels by improving visibility on where your assets are located
  • Reduce man-hours needed to search and locate assets
  • Real-time alert notification if asset moves outside assigned area or geography
  • Reduce your cost of doing business

10/28/2010

Cargo Theft: An Interview with Michael St. Hill of ISO

by Emily Holbrook

I was lucky enough to have the opportunity to speak with Michael St. Hill, director of insurance services for ISO crime analytics. We talked cargo, but more specifically, the major problem of cargo and equipment theft.

RM: Tell me a little about what you do exactly, will you?

MSH: Been working in insurance industry for over 15 years. I go out and speak to insurance companies and agents and brokers. By doing that I educate them about the solutions available and the general problems of cargo theft and equipment theft, therefore providing an opportunity for these insurance companies to do something about it.

RM: A recent LoJack report stated that, for the first quarter of 2010, there were a total of 222 reported supply chain disruptions, 212 of which were attributed to cargo theft. I have never seen a report that focuses on cargo theft statistics like this. Would you say these numbers represent an increase in thefts?

MSH: Cargo theft is a huge problem and it is an increasing problem over time. Where we fall short, as you just indicated, is the gathering of data. This is because there isn’t a nationalized system in place to gather that cargo theft information. It’s very hard to determine accurate trends without national statistics. There are reports out there that estimate cargo theft as a $30 billion problem, but there are other reports that state that it’s a $5 billion problem. Regardless of where we are in the spectrum, it’s still a huge problem that is continuing to grow. That’s where CargoNet comes in. CargoNet is the first nationalized system that addresses the problem of cargo theft through data sharing. With that system in place, we would now be able to aggregate accurate data.

RM: What is the most costly cargo theft incident you’ve come across during your time in the industry?

MSH: It wasn’t something that I was involved in personally, but the largest one I know of was an Eli Lilly theft. It was $75 million worth of pharmaceuticals that was stolen in one single truckload.

RM: Wow!

MSH: Yes, it was large. And, of course, a huge business interruption. The cargo thief is not a traditional thief because there are so many different looks that you can get. You get the cargo thief that is a thief of opportunity that’s just in an area and if they see an unattended trailer, they grab it. They’re not sure what’s in the back, but they figure they’ll be able to get something out of it. Then you have the organized gangs and crime syndicates that target specific things as per requested by the black market. Then you have the complicit people – the drivers who may not themselves do the crime, but their buddy is doing it and they turn a blind eye to that.

RM: What about vehicle telematics. Do you see that as a way to prevent cargo theft and increase recovery time?

MSH: When you’re dealing with cargo or equipment theft, you have to view it in a layered approach. There is no panacea for cargo theft prevention or recovery. Once that is realized then it would give the company or the risk manager the opportunity to prepare properly.

10/26/2010

CROSS BOW QUALITY

Crossbow Technology strives to deliver high quality sensor products on time and at competitive prices. Customer satisfaction is our most important goal. We constantly strive to improve customer satisfaction by listening to our customers' needs and continuously improving our products and services.

Crossbow Technology is the world leader in intelligent asset tracking and high accuracy military sensor applications. Crossbow Technology is a registered ISO 9001:2008; FAA approved and ITAR compliant company. ISO certification in itself does not guarantee quality.

Quality requires a commitment from management to place quality first - this flows down through the rest of the company and affects how work gets done.

The Crossbow quality system starts with needs of the customer. We strive to place customer needs above all other goals. Company management focuses on customer requirements from the start of the sales process, through delivery, and continuing on to post-sales support of our products.

Our quality goals originate from the Customer. We use several customer feedback sources including customer complaints, customer surveys, customer quality audits, and external audits. We also use feedback from employees and review of defective hardware from internal tests and ongoing accelerated life tests to prevent potential customer problems. Technical issues are discussed weekly at the Crossbow Quality meeting.

Many of our products are mission critical and a failure is not an option. Every Crossbow employee and every chosen business partner stand behind this commitment.

We ensure: “YES, IT WORKS”

For Quality Management related questions please contact Crossbow Quality Department. qmgr@xbow.com

10/24/2010

You Can No Longer Be Blind to Shipment Details in Inbound Transportation Pipeline, Report Finds

Aberdeen Group

Increased visibility is vital to successfully managing global inbound transportation, says a report from Aberdeen Group.  The report, International Transportation: Optimize Cost and Service in a Global Market, documents processes and capabilities of 181 companies surveyed between June and July 2010.

"Customer demands for high delivery performance, and the increased demand for accurate delivery status information are driving the need to ensure shipment integrity and enhance internal and external communications across the entire supply chain. In the past, many organizations were blind to shipment details within the transportation pipeline," said Bob Heaney, senior research analyst of supply chain management at Aberdeen.

The focus of the report is on companies that have realized the significance of gaining more visibility and control of inbound transportation. These companies have looked beyond their internal capabilities and systems and have successfully partnered with a solution provider or a managed services provider to enhance their processes. The research findings and case studies presented underscore the value and growing relevance that dynamic supply chain optimization capabilities, and near real-time visibility to detailed supply chain events play in successfully managing inbound transportation.

ASSET VISIBILITY FOR LARGE SCALE MANUFACTURING & ASSEMBLY

Companies that build or assemble large items, such as aircraft, helicopters, ships, cars and the like, bring into their manufacturing plants large components. Very often these components are “parked” until needed. However, due to space constraints and other factors they may be parked wherever there is adequate space and not in an assigned location. When the line calls for the item it can be a time consuming exercise to locate it. Time equals cost in the manufacturing setting. Crossbow’s Asset Visibility Solution delivers a real time location feature to identify where the desired item is located in your plant or yard. Crossbow’s Asset Visibility Solution delivers a real time location feature to identify where the desired item is located in your plant or yard. Reduce shipment tampering with in-transit GPS tracking, cold chain, supply chain solutions. Also, increase theft detection, maintain chain of custody, establish asset location capability and asset visibility for high value assets. Equipment and tool companies and software developers are also seeing the benefits Crossbow’s technology.

Those who support the production line, purchasing and suppliers, can have real time visibility of items as they leave the supplier’s dock, while in-transit and final arrival to the production site. Location and condition information means constant management of critical parts and components and the ability to respond in real time if schedules are in jeopardy due to delays or conditions, i.e. tilted, dropped. Crossbow’s technology gives you a “response buffer” through real time reporting rather than responding after a deadline is missed or the item is found to be damaged upon arrival at the production site. If you do not know you have a problem until you see the item at the production site it is too late.

  • Peel and stick
  • No physical infrastructure
  • No significant changes to existing processes
  • Manage exceptions in near real-time
  • Reduce man-hours needed to expedite replacement parts and components
  • Reduce the risk of shutting down the manufacturing line
  • Ensure items are on time to meet delivery and production schedules
  • Near real-time alert to possible damage if item is subjected to tilting or excessive shock
  • Reduce your cost of doing business

Filling the Black Holes in Your Supply Chain

Robert J. Bowman, Global Logistics & Supply Chain Strategies

Outsourcing. Multi-tiered supply chains. Shrinking product lifecycles. SKU proliferation. Incompatible information systems. Is it any wonder that companies are still losing track of goods as they make their way to market?

For all of the technology promising “end-to-end” supply chain visibility, there remain a number of “black holes,” where shipments simply drop out of sight for a time. Years ago, businesses might have tolerated such gaps as the natural by-product of complex, global operations. Today, they don’t have that luxury. Efforts to slash inventories hinge on the ability to track product in transit every step of the way.

In recent years, North American companies have stepped up the outsourcing of manufacturing to offshore vendors, especially in China. The trend has increased the number of partners in the supply chain and the distance between them. At the same time, sellers of finished product have sought to widen their markets, adding new customers into the mix.

“In the past, you could have managed an efficient supply chain just by focusing on a small set of suppliers and customers,” says Nari Viswanathan, vice president and principal analyst with Aberdeen Group. “That’s very difficult to do now.”

Black holes tend to appear “on the edge of enterprises,” Viswanathan says. Any time that raw materials, production parts or finished goods change hands, there is the potential for a loss of communication. Yet many companies attack the problem exclusively through internal programs, such as pricey enterprise resource planning systems. They aren’t looking beyond the organization’s walls, to where the gaps are actually occurring.

What’s needed, Viswanathan says, is an underlying information system that links disparate applications across multiple partners. The emergence of the software-as-a-service (SaaS) model is a positive step in that direction, he says.

Physical goods aren’t the only things that are getting temporarily lost in the shuffle. Supporting data and financial flows can also be difficult to monitor, says Aberdeen research analyst Viktoriya Sadlovska. Aberdeen’s own studies have revealed a particular lack of visibility in the areas of trade-document flow and costs that occur on the financial side.

“A lot of companies have a very vague idea of where those costs are accruing and being incrementally added,” Sadlovksa says. “They’re trying to find ways of reconciling their front-end cost estimate with back-end balance sheet results.” The problem is likely to become even more acute with recent implementation of the “10+2" filing requirements of U.S. Customs and Border Protection. The new rule adds data elements that must be reported to Customs prior to an import shipment being loaded at the port of departure. But it doesn’t suggest how companies can achieve the additional visibility.

Information or Inventory?

Black holes disrupt the precise timing that is necessary for keeping pace with customer demand, says Terry Harris, managing director of Chicago Consulting. “The single most important lack of visibility in a supply chain is knowing when a specific item will be ordered,” he says. Lacking such knowledge, companies must carry extra inventory, which weighs down the balance sheet.

Having good visibility means coping with a number of “invisible” issues, such as carrier reliability, efficiency of order-picking processes and, most of all, correct forecasting of demand. Such intelligence can only be obtained through close collaboration with supply chain partners and customers, Harris says.

The other key element in achieving total visibility is knowing the status and nature of standing inventory, according to Harris. In theory, this should be the easier goal to achieve, as it involves knowledge of an existing reality. But inadequate business processes often stand in the way. A vendor might have failed to ship a full order, without informing the consignee. Basic standards could also be lacking, with supplier and customer classifying parts and finished product in different ways.

Companies need to understand what those invisible issues are costing, both in overhead and lost sales, says Harris. They should make a point of dealing only with suppliers that have product on hand and can ship it as quickly as possible.

Suppliers, for their part, must be up-front about any back orders or missed shipments, instead of scrambling to correct the problem before the customer finds out about it.

The same lack of communication exists between sellers of finished products and their ultimate buyers. Even in the age of the internet, many companies continue to operate with paper-based systems, says Richard Yim, vice president of product marketing and services with San Francisco-based SmartTurn. They don’t necessarily inform customers about what’s available or is being shipped.

Small and medium-sized businesses are in particular need of systems that can report the status of orders in real time. “Not having visibility to stock levels creates the need for a high level of safety stock,” Yim says.

Merchandisers can no longer afford to attack the problem by flooding the channel with product. “Push-based” systems, in which supply levels are dictated by guesswork instead of actual knowledge of demand, don’t meet today’s need for mass customization and shorter product runs. Says Yim: “We have to expose the dark spots.”

SmartTurn’s Inventory Grid, a remotely hosted warehouse-management system, allows for the sharing of information across multiple applications and facilities. Data can be entered in a variety of ways, in line with the sophistication of each partner’s technology platform, according to Yim. In the process, a company can understand for the first time which raw materials it is actually using, and eliminate the waste.

Redefining Visibility

In recent years, the whole definition of visibility has changed. It used to mean receiving confirmation via electronic data interchange (EDI) that a purchase order was shipped. Now companies want the ability to track that order from door to door, says Scott Fenwick, senior director of product strategy with Manhattan Associates in Atlanta, Ga. Sellers of fashion apparel go further than that, insisting on monitoring key aspects of the manufacturing process, such as style and color. Still, with the use of so many different tools across partnering organizations, the formation of black holes is inevitable.

Almost perfect isn’t good enough, says Fenwick. He cites the example of a Manhattan customer that achieved 95-percent coverage of product in transit. Because the system lacked visibility 5 percent of the time, it wasn’t trusted at all by internal users, who refused to use it.

“Just getting the data is not the complete challenge,” says Fenwick. “If you’re not looking at your organization from a change-management perspective, you’re not going to get the benefits of visibility. Projects are not going to go forward.”

Complexities often emerge in the course of shipment. Another Manhattan customer was tracking containerized shipments across the Pacific into the Port of Long Beach. It knew the contents of containers down to the case level. But once they got to the port, the orders within each box were divided into two trailers by the deconsolidator. The consignee didn’t knew the precise contents of each truck, or when they would arrive at destination.

The solution, says Fenwick, lay in creation of a centralized Web portal, into which multiple logistics vendors were required to input status information. Such a tool can be especially useful when supply chain partners lack fully integrated information systems.

Tom Kozenski, vice president of strategy with RedPrairie Corp. in Waukesha, Wis., divides supply chain black holes into three broad categories: inventory, labor and shipments in transit. In the case of inventory, he notes that gaps in visibility can occur even within a single warehouse. (A company might do a good job on the receiving end, but lose track of product when it moves through the facility and gets mixed together with other items, he says.) Throw in the many tiers of a modern-day supply chain, and the challenge becomes even more daunting. Upstream supply chain partners might balk at the notion of using advance shipment notices (ASNs), for example, if they don’t want to spend the money to acquire that capability.

On the labor side, visibility is often lacking from a planning and forecasting standpoint, says Kozenski. Companies fail to establish the standards needed to link planning with execution, making it difficult to determine whether a workforce was deployed in the most efficient manner. The problem applies to labor in the warehouse, at manufacturing plants and on the road. A lack of visibility in any of those areas can disrupt the entire chain and take its toll on customer service.

In the area of transportation, a consignee must know whether and when a shipment has been picked up, what’s on the truck and whether it will arrive on time. That level of awareness requires the tracking of product through multiple hand-offs. “Otherwise, when you open the back of the truck, you never know what you’re going to get,” says Kozenski.

CROSSBOW TECHNOLOGY

Crossbow’s asset tracking solution is unique in providing customers with instant global monitoring capabilities while requiring very little initial investment. This is accomplished by combining a variety of established technologies with state of the art hardware and software development.

The following list describes some of the key technologies used:

  • GPS/AGPS worldwide location tracking with special provisions for orientation independent GPS reception
  • GSM/GPRS worldwide cellular radio communication
  • GSM based worldwide location tracking in GPS denied environments
  • Environmental sensor suite to monitor acceleration, temperature, humidity, and other conditions
  • Ultra low power system processor to enable long battery life
  • Optional µWlan radio for P2P and local communications
  • Standards based communication (IP/XML) to back end server
  • Scalable cloud based device management as well as data processing, visualization and storage server
  • Browser base user interface for PCs and mobile devices including real time alerts
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