A "well-crafted digital transformation strategy" is key to fighting increasing supply chain complexity, report says | September 18, 2017 | The Supply Chain Xchange
The only effective way to manage the complexity that is increasingly plaguing today's supply chains is to develop "a well-crafted digital transformation strategy," according to a recent report from the information technology consulting firm PointSource. Under such a strategy, companies would invest in digital technologies—such as the Internet of Things, artificial intelligence, machine learning, and cloud computing—that support their business strategies and goals, according to Supply Chain Digital Transformation Report 2017: Digital-Ready Solutions and Insider Tips for 21st-Century Supply Chain Organizations."
Supply chains typically stretch across the globe and are dependent on a high volume of information. Accordingly, the PointSource report describes today's supply chain environment as "increasingly dispersed and diverse," involving a wide variety of actors with different information needs, digital fluency levels, work styles, and communication preferences.
Digital technologies can help manage that complexity in a number of ways. These may include aggregating data from diverse sources, recording product and shipment hand-offs, identifying recurring issues, providing the right information to the right people, and initiating the most appropriate actions. These technologies can provide companies with insights that would be impossible, or nearly impossible, for human beings to quickly discover on their own. For example, artificial intelligence and machine learning could help a clothing retailer that is having problems with product defects quickly identify the source of the defects, communicate the problem to the responsible party, place an order with a more reliable source, and follow up with better quality-assurance standards.
Obstacles and first steps
Achieving digital transformation, however, will not be easy. One major obstacle is companies' continued reliance on outdated information systems, communication, and transaction recording practices. According to a recent PointSource survey, 88 percent of respondents with supply chain responsibilities still rely on disparate legacy systems that are not connected and are slow to produce the needed information. Only 44 percent said they could access the information they need whenever or wherever they wanted regardless of what platform or device they were using. This issue is often compounded by a lack of understanding of what specific information a particular party needs. For example, even though fleet managers and truck drivers are involved in the same supply chain activity (transporting goods), they have very different information needs.
To get started on a digital transformation strategy, PointSource recommends that companies ask their employees where they lack visibility, and what processes do they think are outdated. By starting with these questions, the consulting firm says, companies will engage employees in the project and be sure to implement technology that solves real problems.
The paper also warns against "change fatigue." PointSource cites the example of aerospace giant Boeing Co., which tried to make too many supply chain changes at once; this put production of a new aircraft model three years behind schedule. While the ultimate goal may be total digital transformation, PointSource says, any such project should start with "microinnovations" that focus on a specific pressing need and improve employees' day-to-day interactions and work activities. If employees believe that the technology is improving their daily lives, they are more likely to fully embrace it, the report says.
Mega-retailer Amazon says its newest fulfillment center, located in Shreveport, Louisiana, uses 10 times more robots than previous warehouse designs, and relies on artificial intelligence (AI) to direct the eight different models deployed in its bustling operation.
“Over the years, we’ve built and scaled the world’s largest fleet of industrial robotics that ease tasks for employees and improve operational safety while creating hundreds of thousands of new jobs along the way,” the company said in a blog post Wednesday. “For the first time, we have introduced technology solutions in all key production areas at the site, meaning our employees will work alongside our growing fleet of robotic systems seamlessly in a way that wasn’t possible until now.”
The Shreveport site spans five floors and more than 3 million square feet—equivalent to 55 football fields—making it one of Amazon's largest sites. It will employ 2,500 employees once it’s fully ramped up.
The technology at the center of the huge building is called Sequoia, a “multilevel containerized inventory system” that can hold more than 30 million items, making it five times bigger than Amazon’s first deployment of that system in Houston, Texas.
As inventory and packages move through the facility, Robin, Cardinal, and Sparrow—an AI-powered trio of robotic arms—sort, stack, and consolidate millions of items and customer orders. The latest version of Sparrow uses computer vision and AI systems that give it the versatility to handle over 200 million unique products of all different shapes, sizes, and weights.
And Proteus, which Amazon calls its “first fully autonomous mobile robot,” navigates carts of packages to the site’s outbound dock so they can be loaded into trucks, while safely moving around employees in open spaces. The remaining three robot models include larger AMRs called Hercules and Titan and a packaging automation system that creates custom-sized packages to fit each order’s dimensions.
Although the increased automation allows the facility to handle more orders than older sites, Amazon insists it is not replacing workers’ jobs. “As we deploy this new generation of robotics across our network, we expect our headcount to continue to grow and we’re really excited by how this technology also creates more opportunities for skilled jobs. In fact, our next-generation fulfillment centers and sites with advanced robotics will require 30% more employees in reliability, maintenance, and engineering roles,” the company said.
According to Amazon, it trains workers for skilled jobs by helping them earn certifications through a corporate “Career Choice program” and a “mechatronics and robotics apprenticeship” that provides hourly wages up to 40% higher than entry-level roles.
For example, millions of residents and workers in the Tampa region have now left their homes and jobs, heeding increasingly dire evacuation warnings from state officials. They’re fleeing the estimated 10 to 20 feet of storm surge that is forecast to swamp the area, due to Hurricane Milton’s status as the strongest hurricane in the Gulf since Rita in 2005, the fifth-strongest Atlantic hurricane based on pressure, and the sixth-strongest Atlantic hurricane based on its peak winds, according to market data provider Industrial Info Resources.
Between that mass migration and the storm’s effect on buildings and infrastructure, supply chain impacts could hit the energy logistics and agriculture sectors particularly hard, according to a report from Everstream Analytics.
The Tampa Bay metro area is the most vulnerable area, with the potential for storm surge to halt port operations, roads, rails, air travel, and business operations – possibly for an extended period of time. In contrast to those “severe to potentially catastrophic” effects, key supply chain hubs outside of the core zone of impact—including the Miami metro area along with Jacksonville, FL and Savannah, GA—could also be impacted but to a more moderate level, such as slowdowns in port operations and air cargo, Everstream Analytics’ Chief Meteorologist Jon Davis said in a report.
Although it was recently downgraded from a Category 5 to Category 4 storm, Milton is anticipated to have major disruptions for transportation, in large part because it will strike an “already fragile supply chain environment” that is still reeling from the fury of Hurricane Helene less than two weeks ago and the ILA port strike that ended just five days ago and crippled ports along the East and Gulf Coasts, a report from Project44 said.
The storm will also affect supply chain operations at sea, since approximately 74 container vessels are located near the storm and may experience delays as they await safe entry into major ports. Vessels already at the ports may face delays departing as they wait for storm conditions to clear, Project44 said.
On land, Florida will likely also face impacts in the Last Mile delivery industry as roads become difficult to navigate and workers evacuate for safety.
Likewise, freight rail networks are also shifting engines, cars, and shipments out of the path of the storm as the industry continues “adapting to a world shaped by climate change,” the Association of American Railroads (AAR) said. Before floods arrive, railroads may relocate locomotives, elevate track infrastructure, and remove sensitive electronic equipment such as sensors, signals and switches. However, forceful water can move a bridge from its support beams or destabilize it by unearthing the supporting soil, so in certain conditions, railroads may park rail cars full of heavy materials — like rocks and ballast — on a bridge before a flood to weigh it down, AAR said.
The North American robotics market saw a decline in both units ordered (down 7.9% to 15,705 units) and revenue (down 6.8% to $982.83 million) during the first half of 2024 compared to the same period in 2023, as North American manufacturers faced ongoing economic headwinds, according to a report from the Association for Advancing Automation (A3).
“Rising inflation and borrowing costs have dampened spending on robotics, with many companies opting to delay major investments,” said Jeff Burnstein, president, A3. “Despite these challenges, the push for operational efficiency and workforce augmentation continues to drive demand for robotics in industries such as food and consumer goods and life sciences, among others. As companies navigate labor shortages and increased production costs, the role of automation is becoming ever more critical in maintaining global competitiveness.”
The downward trend was led by weakness in automotive manufacturing, which traditionally leads the charge in buying robots. In the first half of 2024, automotive OEMs ordered 4,159 units (up 14.4%) but generated revenue of $259.96 million (down 12.0%). The Automotive Components sector was even worse, orders 3,574 units (down 38.8%) for $191.93 million in revenue (down 27.3%). Declines also happened in the Semiconductor & Electronics/Photonics sector and the Plastics & Rubber sector.
On the positive side, Food & Consumer Goods companies ordered 1,173 units (up 85.6%) for $62.84 million in revenue (up 56.2%). This growth reflects the increasing reliance on robotics for efficiency in food processing and packaging as companies seek to address labor shortages and rising costs, A3 said. And the Life Sciences industry ordered 1,007 units (up 47.9%) for revenue of $47.29 million (up 86.7%) as it continued its reliance on robotics for efficiency and precision.
The warm waters of the Gulf of Mexico are brewing up another massive storm this week that is on track to smash into the western coast of Florida by Wednesday morning, bringing a consecutive round of storm surge and damaging winds to the storm-weary state.
Before reaching the U.S., Hurricane Milton will rake the northern coast of Mexico’s Yucatan Peninsula with dangerous weather. But hurricane watches are already in effect for parts of Florida, which could see heavy rainfall, flash and urban flooding, and moderate to major river floods, according to forecasts from the National Oceanic and Atmospheric Administration (NOAA).
As it revs its massive engines with fuel from the historically warm Gulf of Mexico, Hurricane Milton could possibly hit Tampa as a Category 5 storm, according to the FEWSION Project at Northern Arizona University, which tracks supply chains throughout the country.
With that much power, Milton could shut down the port and seriously disrupt the fuel supply into western and central Florida, which could then hinder recovery efforts. That’s because fuel supplies for much of Florida, especially central Florida, arrive from Texas and Louisiana through the Port of Tampa. That means that anyone who depends on generators or fuel for critical functions should plan for an extended period without access to fuel. And recovery crews and logisticians should consider bringing their own fuel when responding to the storm, FEWSION said.
One of those disaster recovery efforts will be led by nonprofit group the American Logistics Aid Network (ALAN), which is already mobilizing its forces for Hurricane Milton, even as it devotes other energy to the Hurricane Helene response. “In an ideal world we’d have plenty of time to focus all of our efforts on Hurricane Helene clean-up and recovery,” Kathy Fulton, ALAN’s Executive Director, said in a release. “But in the real world, major hurricanes don’t always wait for their turn. As a result, we are officially activating for Hurricane Milton.”
In the meantime, many weary residents of the region are thinking of moving to another part of the country instead of getting hit by vicious storms several times a year. Nearly one-third (32%) of U.S. residents aged 18-34 say they’re reconsidering where they want to move in the future after seeing or hearing about the damage caused by Hurricane Helene, according to a survey commissioned by real estate brokerage Redfin.
“Scores of Americans flocked to the Sun Belt during the pandemic because remote work allowed them to take advantage of the region’s relatively low cost of living. Some thought Appalachia was insulated from hurricane risk, not realizing that the area is prone to flooding and that hurricanes can sometimes cause flash flooding far away from the ocean,” Redfin Chief Economist Daryl Fairweather said in a release. “Americans are beginning to realize that nowhere is truly immune to the impacts of climate change, and we’re starting to see that impact where people want to live—even people who haven’t experienced a catastrophic weather event firsthand.”
The report is based on a commissioned survey conducted by Ipsos on Oct. 2-3, fielded to 1,005 U.S. adults. After making landfall in Florida in late September, Hurricane Helene wreaked havoc across Appalachia, becoming the deadliest storm to hit mainland America in almost two decades. In North Carolina, the death toll has surpassed 100 and the city of Asheville has been devastated.
Shippers and carriers at ports along the East and Gulf coasts today are working through a backlog of stranded containers stuck on ships at sea, now that dockworkers and port operators have agreed to a tentative deal that ends the dockworkers strike.
In the meantime, U.S. importers and exporters face a mountain of shipping boxes that are now several days behind schedule. By the latest estimate from Everstream Analytics, the number of cargo boxes on ships floating outside affected ports has slightly decreased by 20,000 twenty foot equivalent units (TEUs), dropping to 386,000 from its highpoint of 406,000 yesterday.
To chip away at the problem, some facilities like the Port of Charleston have announced extended daily gate hours to give shippers and carriers more time each day to shuffle through the backlog. And Georgia Ports Authority likewise announced plans to stay open on Saturday and Sunday, saying, “We will be offering weekend gates to help restore your supply chain fluidity.”
But they face a lot of work; the number of container ships waiting outside of U.S. Gulf and East Coast ports on Friday morning had decreased overnight to 54, down from a Thursday peak of 59. Overall, with each day of strike roughly needing about one week to clear the backlog, the 3-day all-out strike will likely take minimum three weeks to return to normal operations at U.S. ports, Everstream said.