Agilent Technologies' "control tower"—an information hub linking the instrument maker with its suppliers to provide inventory visibility—has helped the company deftly model parts availability, manage order promising, and counteract parts shortages during a natural disaster.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
In 2011, when the worst flooding in decades swamped Thailand, many of the manufacturing plants that produce electronic parts and components in that country were forced to suspend operations. That left many of their customers—mostly large international manufacturers—without critical parts needed to fill orders. But not Agilent Technologies Inc. Although Agilent's contract manufacturer in Thailand was out of commission, the testing-equipment maker was able to fill most of the orders that normally would have included items produced by that supplier. That's because Agilent had a resource its competitors didn't have: a "control tower" it had installed a year earlier for its Electronic Measurement Group (EMG).
The control tower is an information hub that links Agilent with its suppliers to provide visibility of the inventory in its supply chain, at both the company's own locations and at the sites of its contract manufacturers and their suppliers. The control tower's staff uses simulation software to model the impact of parts shortages on production and devise a plan to solve any problems. In the case of the Thai floods, the company used that software to rapidly identify shortages so that alternative sources for parts could be quickly found, or in some cases to permit the redesign of parts. "The control tower helps us to be able to capture all components during a shortage so we can come up with risk-mitigation actions," says Michael Tan, Agilent's EMG Supply Chain Operations Director.
Inventory unknowns
Agilent Technologies was created in 1999 when Hewlett-Packard spun off its test and measurement instrument business from its computer business. Headquartered in Santa Clara, California, Agilent Technologies reported US $6.9 billion in revenue in 2012. The Electronic Measurement Group (EMG) is one of four groups within the company, and it's the most profitable one, with US $3.3 billion in revenue in 2012. EMG sells products like oscilloscopes, spectrum analyzers, and network analyzers that are used in such industries as aerospace, defense, communications, and computers. The group has 9,000 customers worldwide. (In September 2013, Agilent Technologies announced plans to make the Electronic Measurement Group a separate, publicly traded company.)
To make 5,000 different types of electronic instruments, EMG works with 1,100 suppliers, 52 percent of which are based in Asia. Although the measurement group operates some of its own factories, it relies on strategic contract manufacturers to make 70 percent of its products. On average EMG ships 70,000 units each month to customers.
Agilent's inbound supply chain spans the globe and requires the coordination of parts flows between its own factories and those of its contract manufacturers. For example, Agilent technology centers in the United States and Germany make integrated circuits. Contract manufacturers in Asia incorporate those components into what Tan refers to as printed-circuit assembly boxes. But Agilent's main manufacturing plant, in Penang, Malaysia, also incorporates the integrated circuits into microcircuit assemblies found in electronic instruments.
All of those factories, both in-house and contract, keep their own inventories of parts to support production. Each plant also has its own suppliers, which keep their own stockpiles of inventory.
The whereabouts and availability of inventory in Agilent's extended global supply chain became a concern in 2009. That's when the economic downturn subsided and business began to pick up again. Cutbacks in production and the demise of some suppliers during the recession had led to parts shortages throughout the electronics industry. As a result, when Agilent needed to ramp up production, it "had some challenges" in locating parts that were in short supply, Tan says.
Compounding the problem was the fact that Agilent needed accurate information about parts availability from its suppliers in order to make delivery commitments to key customers and win business, yet it had no way to get that critical information quickly. One reason was that Agilent, its contract manufacturers, and their suppliers were using different information systems. While Agilent relies on Oracle's technology to keep tabs on production, many of its contract manufacturers and suppliers use enterprise resource planning software from SAP. Because the different information systems in the supply chain were not linked, if Agilent wanted to determine whether it had all the necessary inventory to make an order delivery-time commitment to a customer, it could take three to four weeks to get an answer from all the parties involved.
Simulation saves the day
To solve this problem, Agilent decided to construct a control tower that would give the instrument maker visibility into inventory holdings down to the supplier level in as many nodes in its supply chain as possible. For this vertical supply chain integration project, it bought RapidResponse software from Kinaxis, a vendor of enterprise supply chain software solutions. Besides facilitating supply chain visibility, the software handles demand, supply, and inventory planning as well as what-if analyses, among other functions.
In 2011, Agilent got the control tower up and running with three contract manufacturers and two of its own technology center facilities. Since that time, the control tower's scope has expanded in stages. Currently, it extends to five contract manufacturers and five Agilent-owned sites. Three of the contract manufacturers are in Malaysia, one is in Thailand, and one is in California. Agilent's own facilities linked to the tower include its plants in Penang, Malaysia, and in Santa Clara, California. The tower is also linked to technology centers located in California and Colorado in the United States, and one in Germany.
Staff members who oversee the control tower's operation work out of Agilent's main facility in Penang. There are two teams involved: one conducts the analysis, while the other manages data governance to ensure that all linked locations provide correct, high-quality information.
The suppliers transmit information to the tower on a daily basis. As of this writing, the control tower has visibility of more than 94 percent of all parts used in the EMG supply chain. The tower uses this information to create a complete picture of Agilent's supply chain, which the company employs to manage both daily operations and crisis situations. The information is displayed on computer screens formatted in customized worksheets that show purchase orders, plan, and supply allocation. Tan says the customized worksheets allow Agilent to monitor part-by-part shortages throughout different levels of the supply chain via weekly projected balances based on demand.
The control tower is routinely used to simulate the impact of a major sales event on production. "Our sales engineers want to be able within a half day to come back to a customer and say whether we can support them and get the product in a four-week shipment time," Tan explains.
Whenever a major customer deal is in the offing, the control tower helps Agilent to determine an accurate commitment date for product delivery. It does so by simulating the parts requirements. The simulation allows Agilent to check with its manufacturers and suppliers to determine parts availability, including whether production would encounter any parts shortages. If the simulation reveals possible problems with the availability of components, Agilent can then work with its suppliers to source the part on the open market or obtain it from other distributors. In some cases, the company has re-engineered the product to use an alternative part when the original version was unavailable.
Tan says that the control tower can very quickly predict the revenue impact from any possible deal as well as the company's ability to meet a delivery date before promising it to a customer. "Because of the wide range of products, it was quite a challenge to do this manually in the past within a short time," he says. "The control tower lets you know how much you have on hand and how fast you can get these parts into the factory that produces the product for the final customer."
Since setting up the control tower, Agilent has speeded up its response time for customer order promises. In the past, turnaround time for demand propagation took three to four weeks, as the instrument maker had to contact manufacturers and suppliers involved in a particular order and wait for their responses to determine parts availability for production. Now turnaround time is a week or less.
The control tower also helps Agilent with crisis management, such as when the floods in Thailand affected its contract manufacturer there. The tower simulates the constraints facing a manufacturer or supplier when an unforeseen event disrupts the supply chain. It enables a bottoms-up modeling through the supplier levels to identify the total impact of a disruption on sales orders, forecasts, and safety stock for the various products. It also lets Agilent prioritize the allocation of constrained materials to meet critical demand on the basis of the greatest business benefit. "Because of this tool we are able to quickly simulate gaps [in supply]," said Tan.
As a result of this capability, Agilent was able to minimize disruption for its customers during and after the floods. In some cases it found other sources for parts that it normally would buy from its Thai supplier. In other cases, it redesigned the product or engaged in "value engineering," a technique that involves identifying acceptable substitute parts.
A winning concept
For the control tower to provide inventory visibility, Agilent's supply chain partners must furnish clean, accurate data. The original owner of the data—whether it's Agilent's procurement team or a supplier—is responsible for accuracy and timely updates. "When new products are introduced, the bill of materials needs to be set up correctly at each level," Tan says. "That's why governance is important. Any change needs to be communicated throughout all levels of the supply chain."
Because the control tower needs accurate data for its parts calculations, Tan says, the company must work closely with contract manufacturers and their suppliers. For any data-sharing effort to succeed, he adds, all parties involved must benefit. "It is very important to collaborate to ensure that the data sharing will help [manufacturers and suppliers] as well," he says. "They have to realize that they are linking to systems to let them know their shortages. Then they can see the benefits of linking to the control tower."
Given Agilent's positive experience, would Tan recommend that other companies with complex supply chains consider the use of a control tower to manage inbound supply? He's a firm believer in the concept. For one thing, he says, end-to-end supply chain visibility on a single platform will give companies the ability to manage their supply chains across regions and across time zones. "This will help the company to perform proactive and effective collaboration with suppliers and also enable speed in decision making in the shortest turnaround time," he says. That's key for avoiding unnecessary inventory and expediting costs. But just as importantly, he adds, "it will enable the company to win deals as well as provide customers the best customer experience in terms of delivery responsiveness."
This story first appeared in the Quarter 4/2013 edition of CSCMP's Supply Chain Quarterly, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media's DC Velocity. Readers can obtain a subscription by joining the Council of Supply Chain Management Professionals (whose membership dues include the Quarterly's subscription fee). Subscriptions are also available to nonmembers for $34.95 (digital) or $89 a year (print). For more information, visit www.SupplyChainQuarterly.com.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."