The days when it was easy to gloss over a supply chain fiasco are over. Today when things go horribly wrong, the person in charge can expect to pay the ultimate career price.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
For years, America's supply chain managers toiled in obscurity. No matter how many millions of dollars they saved or how many days they cut out of the order cycle, they knew they could expect little in the way of acknowledgment from on high.
It certainly wasn't for lack of trying. "We fought for years to get the supply chain noticed in the board room," says Rick Blasgen, senior vice president of integrated logistics at ConAgra Foods. Yet those efforts went largely unrewarded. Most CEOs and board members knew little about what went on in the distribution center or on the loading dock and cared even less.
Not any more. Today it's easy to make out the path worn into the carpet between the CEO's suite and the office that is the supply chain manager's command central. Not only does the CEO know who leads the supply chain team and where to find him or her, but that CEO won't hesitate to seek that person out if supply chain performance starts to stumble. The job security these managers once took for granted is a thing of the past. Today's CEOs and CFOs have no trouble connecting the dots between a supply chain disaster and the financial hit the company takes, and they're holding the supply chain leader accountable.
Which is really just a genteel way of saying that if you screw up, heads will roll. And if that sounds like an empty threat, consider this: When the UK-based retailer MFI Furniture Group traced financial losses suffered last summer to a supply chain glitch, its director of supply chain operations was promptly fired (see below). And just last month, another UK company, grocery retailer Sainsbury, gave its supply chain management team the sack after they botched a $714 million DC automation initiative.
Closer to home, executives at Hewlett-Packard were luckier. When HP announced that its third-quarter earnings had suffered because of order fulfillment problems in its enterprise storage and server division, the company's sales director got the ax. Management in the supply chain sector survived, but they might not be so fortunate next time around. Halloween may have passed, but those in the know say HP Chairman and CEO Carly Fiorina is still wielding her hatchet and won't hesitate to use it should the supply chain falter again.
It's not personal, it's just business
It's hard to tell if supply chain miscues are more common now, or whether the slipups just receive more attention when they do occur. What is clear is that chief executives are no longer willing to simply dismiss a supply chain problem as a temporary blip in their operations.
Even if they were, dismissing the problem is no longer an option. "If the problem is bad enough to spill over into the press, then the company has to demonstrate to the shareholders that it's taking action," says Alan Taliaferro, president and chief executive officer at KOM International, a supply chain consulting firm. Giving the supply chain executive the pink slip "is an acceptable and almost expected way to take action and show your shareholders that you've dealt with the problem."
Some theorize that more is expected from supply chain execs these days. Years ago, a vice president of distribution at a grocery store chain might have started out as a bag boy and worked his way up. If he screwed up, it could be written off as a lack of training and development. But what was forgiveable in a former bag boy is intolerable in a highly compensated executive with an MBA. "Today, the person filling those shoes will be much more of a professional with lots of front-line experience and a considerably higher level of education," says Taliaferro. "With that comes a higher pay scale—and higher expectations."
And make no mistake, the expectations are all about delivering financial results. "More often than not it's the chief financial officer who is now monitoring the [supply chain]," says Patti Satterfield, business development manager with Q4 Logistics, a systems integrator and consulting firm. "The CFO is taking a more hands-on approach than in the past and is much more [visible] now."
The CFO's interest in all things related to the supply chain is no surprise. The financial benefits of a smoothly running supply chain are well documented. According to From Visibility to Action, an annual report on logistics and transportation trends, a well-managed supply chain that provides visibility of products and materials at every stage vastly outperforms its more loosely run counterparts. The report—sponsored by Oracle and produced jointly by Capgemini U.S. LLC and Dr. Karl Manrodt of Georgia Southern—showed that high-performing companies averaged 14.6 inventory turns, 22.1 days' sales worth of inventory and 26.1 average days' sales outstanding compared to 9.8, 38.2 and 39.4, respectively, for their less well-managed counterparts. No wonder the CFO gets hot under the collar when the supply chain team fails to deliver.
Ironically, the profession's unrelenting push for recognition over the years is at least partially responsible for that newfound scrutiny. "The education we have provided as an industry to senior-level executives has allowed them to focus on parts of the supply chain they didn't focus on before," says Blasgen. He sees that as a mixed blessing: "It's great to have the organization understand the supply chain, but you have to deliver because upper management is able to see when the supply chain doesn't perform up to its standards."
When projects go bad
Though you might get a different impression from corporate statements, technology is rarely to blame for supply chain fiascos. The problem is far more likely to be poor planning. According to research firm Gartner Group, almost three-quarters of large supply chain projects crash because of a lack of solid supply chain strategy or problems with underlying processes.
Other times, the problem turns out to be miscommunication between the vendor and the customer. One manufacturer Satterfield's familiar with recently purchased a warehouse management system fully expecting it to arrive ready for integration into its enterprise resource planning (ERP) system. "They were assured the integration would be there and it would be a simple drop in," says Satterfield. "But lo and behold, when they started doing the testing, they discovered the system didn't interface to specific modules. They ended up having to hire someone to write custom interfaces."
Satterfield says that's not uncommon. She reports that she's seen many cases in which a company goes into a project thinking it can handle the job on its own (or with a little support from the vendor) only to run into trouble. If the supply chain executives sound the alarm in time—that is, as soon as they suspect there might be a problem—they can usually salvage the project (and their jobs) by bringing in a third-party systems integrator.
Why don't they just call in a third party to begin with? Satterfield says companies often have misplaced faith that their regular IT staff can handle the job. But competent as their IT people may be, that's a recipe for disaster. "Those people already have a full-time job," says Satterfield. "Adding an implementation on top of their normal work load can [prove to be too much]. Certainly there are technical issues that come up and derail a project, but in our experience, the resources issue is the biggest problem. People just underestimate the amount of time and effort that the implementation will take."
the best laid plans
There was nothing in the early days that hinted of a disaster in the making. MFI, the UK's largest furniture retailer, announced plans to replace its 20-year-old legacy supply chain systems with a fully integrated enterprise resource planning system from SAP. True, the upgrade would cost $100 million, but in five years' time MFI would be running a reliable, state-of-the-art system that would put its competitors to shame.
Still, the company didn't want to rush headlong into anything. The new system would be implemented in phases—starting with financials and indirect procurement, moving on to inventory and scheduling, and finishing off with the human resources and retail components. By converting over to the new software in stages, the company could use the lessons it learned early on to prevent mishaps down the road. What could go wrong?
Unfortunately for MFI, just about everything. Just two years into the second phase, the company last summer was forced to issue a warning of an expected earnings shortfall. The problem? Software implementation problems had led to botched orders.
For an operation of MFI's scale—the company builds, distributes and sells household furniture across 192 stores in the UK—even a small bug could mean big problems. And that appears to be exactly what was responsible. According to one analyst, MFI belatedly discovered that a glitch in the system had resulted in its making only partial deliveries. In fact, the company ended up making three deliveries on average to fill a single order. Transportation expenses soared and productivity plummeted as the pickers' workload tripled. As word got out, sales began to slip.
Shortly after issuing the earnings warning, the company announced that Gordon MacDonald, group categories and manufacturing director with responsibility for the supply chain, and Martin Clifford-King, the chief financial officer, were leaving the company. "I'm not surprised," says Richard Ratner, an analyst at London brokerage firm Seymour Pierce. "MFI issued a profit warning and in this case the chief executive had to take some responsibility for things gone wrong."
Though things may have gone terribly wrong in the past, the company is now confident that things are about to go right. It says its delivery problems will be ironed out by the holiday ordering rush.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.