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.
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”