Technology Soups Up the Supply Chain
Consumers slurped up e-commerce with gusto amidst boiling disruption in 2021. To sate that appetite, supply chain professionals can serve up technology that aids with visibility, intelligence, and efficiency.
Will 2021 be remembered as the year of the supply chain startup? In the first three quarters alone, investors poured $24.3 billion into budding technology companies aimed at smoothing out supply chain operations, according to Pitchbook Data. By the end of September, these startups had raised nearly 60% more than in the entire year of 2020.
This phenomenon can be attributed in part to rising consumer goods demand. Sparked by economic stimulus and a large-scale shift in preferences from services to goods spending, U.S. retail sales jumped 17.9% annually in 2021. E-commerce sales, which had a record year in 2020, rose 14.2% to $870.8 billion and accounted for 13.2% of retail spending, according to the Census Bureau.
As a result, businesses have been tasked with trying to meet demand while navigating through an obstacle course of logistics disruptions. It’s fueling a spate of technologies aimed at building intelligence, smoothing out disruptions, and averting bottlenecks.
stirring up Intelligent Supply Chains
Ask analysts to name the most important development in supply chain technology in 2021, and they will likely say something about visibility. A host of disruptions over the past two years underscored the need for companies to know the status of their shipments in real time.
Meanwhile, tracking technologies such as radio frequency identification (RFID), Internet of Things devices, GPS, and electronic logging devices (collectively known as telematics devices) have created a brew of data, giving shippers a high-level view into their entire supply chain.
“There’s a convergence of capabilities creating a new phenomenon,” says Fab Brasca, executive vice president of industry and market strategy at FourKites, a supply chain visibility platform based in Chicago.
“The availability of cloud computing power and abundance of data, sprinkled with advancements in machine learning and artificial intelligence, has generated a cauldron of amazing innovation,” he says.
This confluence of factors is paving the way for supply chain intelligence that is predictive, not just reactive, Brasca explains. For example, take an ocean container that’s in transit. Visibility can warn a shipper that the container will arrive three days late. But, by analyzing historical patterns of data, a visibility tool could also help predict when the goods that are being carried will arrive at their final destination.
Taken one step further, visibility can help shippers foresee chokepoints and design a plan to deal with them proactively. “Understanding your goods in motion and goods at rest, and understanding where you might have potential bottlenecks, both forward-looking and as they happen, is what gives organizations agility,” Brasca says.
One technology that’s helping shippers get a closer look at their wares is a supply chain control tower—a data visualization platform that allows shippers to view inventory throughout its entire journey. Control towers can track data from suppliers, factories, and distributors, and can even incorporate information gleaned from weather reports or social media.
Blue Yonder, a supply chain solutions software company headquartered in Scottsdale, Arizona, offers control tower technology that helped medical product company Becton Dickinson reduce complexity after it acquired two other healthcare companies. The technology also helped Becton Dickinson manage skyrocketing demand for their products after the pandemic began, says Chirag Modi, Blue Yonder’s corporate vice president of industry strategy.
a pepper pot of Predictive Analytics
One way that shippers can use the large quantities of data being amassed is through predictive analytics. This is done by funneling data into algorithms to anticipate future events or patterns.
“Predictive analytics is the culmination of historical data around certain data points in combination with some form of machine learning model,” explains Azad Ratzki, chief technology officer at BlueGrace Logistics, a third-party logistics provider in Tampa, Florida. “For example, you can look at your shipments and determine when they will get from point A to point B by incorporating traffic, weather patterns, or previous data into a model.”
A consequence of the pandemic has been lingering materials shortages. Odyssey Logistics & Technology, a third-party logistics provider based in Danbury, Connecticut, says its shipper customers deal with raw materials shortages from metals to cooking oil. The shortages inevitably lead to an increase in urgent and short lead time orders, which is exacerbated when there’s limited carrier availability.
Analytics can help identify chokepoints and find transportation capacity to keep materials flowing, notes Charlie Midkiff, Odyssey’s senior vice president of global managed logistics services.
“We capture so much data with our clients,” says Midkiff. “We work with our shippers to create robust forecasts. If you can provide a forecast, then you will get in line for carrier capacity.”
One way Odyssey does that is by using analytics to assess order patterns and carrier acceptance rates. The results of a forecast can help to identify potential bottlenecks in getting materials to clients.
From there, Odyssey creates “mini-RFPs” to make routing guide enhancements based on data from a particular set of lanes. Shippers can see whether particular carriers are performing and adjust the routing guide based on the results of the analysis.
However, be careful not to implement predictive analytics without the proper expertise behind it, cautions Deanna Kaufman, vice president of sales at enVista, a software and consulting firm headquartered in Carmel, Indiana. “There’s an opportunity for companies to use predictive analytics,” she says. “But data science roles are hard to fill right now. There are tool packages out there that will provide insights, but unless a company can understand, interpret, and do something with that information, it won’t help.”
a puree of Disruptions
Trucking sector disruptions have been a near constant since the start of the pandemic. Meanwhile, demand for consumer goods has driven up the need for transportation services, says Gregg Lanyard, senior director of product management at Manhattan Associates, a supply chain software provider based in Atlanta.
“The rise in transportation demand leads to a rise in the need for capacity to haul that freight,” Lanyard says. “That means a need for transportation resources. We’ve seen shortages in those areas when demand spikes.”
As a result of the turmoil, Lanyard says some shippers are seeing a 200% increase in their use of spot rates. He recommends using a transportation management system (TMS) as a tool to keep products traveling smoothly across the supply chain in today’s market conditions.
A TMS can help manage volatile market conditions in a few ways—determining optimal routing and carrier selection, consolidating freight, or selecting the right mode for a shipment.
Part of how it accomplishes this is through transportation modeling. For example, Manhattan Associates’ TMS technology includes a “what-if” analysis tool that allows companies to simulate changes to their supply chains. By proactively modeling different disruption scenarios, shippers will be better prepared when change does occur.
TMS technology can help even after changes stop being theoretical. One example is carrier volume restrictions. In 2020, thanks to the e-commerce boom, parcel shipments rose at an annual rate of 37%, according to Pitney Bowes’ Parcel Shipping Index. That’s well above what carriers were prepared to handle. In such circumstances, TMS providers can help secure capacity by consolidating shipments, for instance, or looking into multi-stop truckload routes.
In 2021, grocery chain Hy-Vee used Manhattan Associates’ TMS platform to move perishable items through its distribution network efficiently. Modeling transportation network changes helped the grocer optimize orders and reduce transportation costs.
E-Commerce turns up the heat
In 2020, COVID-19 kicked off an e-commerce bonanza that hasn’t let up yet. In 2021, market research service eMarketer forecast that e-commerce sales would reach $4.9 trillion that year (complete historical data won’t be available until the end of 2022). The growing market presents new opportunities for shippers—and new challenges.
Kaufman argues that these changes can be seen as a chance for shippers to reimagine their supply chain, starting with demand planning. The trick is to have software in place to gain visibility into inventory and maximize customers’ purchasing experience.
“Many companies see an enormous opportunity in direct-to-consumer, but they aren’t set up for it yet,” Kaufman says.
“Using an order management system lets shippers make purchases and understand when they’re actually going to get the goods,” she adds. “It improves the entire experience all the way from planning and sourcing to fulfillment and consumption.”
GNC, a health and nutrition brand, used enVista’s Unified Commerce Platform drop-ship feature to grow the array of products the company offered online. In March 2020, in response to the pandemic, GNC added enVista’s order management system to deploy buy online pick up in store (BOPIS) and ship-to-store strategies.
delivery in an instant
A final piece of the puzzle is maximizing speed and efficiency within the walls of a distribution center. On top of the usual complexity that accompanies e-commerce fulfillment, retailers in 2021 were challenged to meet expectations for faster fulfillment—and to do so with fewer workers, to boot.
“Speed of delivery is becoming a top-of-mind issue for our customers,” says Kim Baudry, market development director at Dematic, a materials handling systems, software, and services supplier headquartered in Atlanta.
“As Amazon pushes the envelope, fulfillment times have dropped from two days to a few hours,” she adds. “Companies are trying to shorten cycle times to deliver products within that time frame.”
At the same time, warehouse labor has gotten scarcer and more expensive. The State of Warehouse Labor, published by staffing solutions provider Instawork, finds that 73% of warehouse employers struggled to attract enough labor in 2021.
Once employees are hired, they tend not to stick around, either. As of January 2022, the Bureau of Labor Statistics puts warehouse labor turnover at 43%.
This is where automation enters the picture. Technology such as automated storage and retrieval shuttle and robotic piece picking are becoming increasingly prevalent to turn inventory faster and compensate for labor shortages.
One example is Landmark Group, an apparel retailer servicing 2,200 stores in 24 countries across the Middle East and Southeast Asia. Landmark uses Dematic’s garment-on-hanger and inter-aisle transfer systems to speed store replenishment and direct-to-consumer fulfillment. The technology has helped them move items into their distribution center and sort products for delivery to stores faster, while reducing reliance on manual labor.
Technology can also be used to optimize what labor there is at a distribution center. AutoScheduler.ai is an artificial intelligence tool that orchestrates production schedules within a warehouse setting. It works by creating mathematically optimized strategies for manual decisions (what trailer needs to be in what door or what inventory can be crossdocked), and then integrating the plan with a customer’s warehouse management system, says Keith Moore, chief product officer.
Let’s say that a team wants to avoid detention charges at a facility. Not only would employees have to factor in multiple truck’s arrival times, but they would also need a plan to unload inventory that accounts for outbound shipments. In that scenario, AutoScheduler could generate an optimal unloading schedule instead of having a staff member plan one out.
Procter and Gamble has used AutoScheduler technology to reduce workforce planning time from eight hours to 20 minutes per day.
Leaders are facing a pivotal moment, as they confront the twin needs to plan for the worst while remaining agile. One top challenge will be “investment in digital and driving toward autonomous supply chains,” finds Ernst & Young’s Future of Supply Chain report. And 52% of executives surveyed state that autonomous supply chains either are here or will be by 2025.
As a result, organizations are encouraged to digitally transform their operations with lights-out, hands-free and self-driving technologies. Doing so will optimize supply chains, make supply chain professionals’ jobs easier, and deliver needed products more effectively.
It’s time to roll up our sleeves.