I frequently get calls from people who have been looking at supply chain planning software
for months and cannot make a decision. They ask me, "Which vendor should I choose?" I never
make the decision for them. Instead, I facilitate a discovery process.
When it comes to selecting the right supply chain planning software, buyers really should
base their decision on whether the engine and the data model fit their particular operation.
Unfortunately, many find it difficult to make this determination. That's because most technology
vendor presentations sound alike, and the buyers' business teams cannot determine the important
differences from demos.
So what's my recommendation? Selection teams need to adopt former U.S. President Ronald
Reagan's slogan, "Trust, but verify." They need to ask software companies to demonstrate the proof
of their claims.
How to verify
How do you get this verification? I recommend inviting your most promising
technology providers to participate in a proof of concept. In other words, hold
a series of "bake-offs" that tests the different software solutions against your
particular use cases. Carefully provide the candidates with your requirements,
and ensure that your team is clear and in alignment on what the success
criteria will be.
Here are some suggestions for testing specific supply chain planning modules:
Forecasting/demand planning. Take four consecutive years of data and give
the technology providers the prior years' data. For example, provide the vendors with
monthly (or weekly) shipment and order data for 2012-2016, but do not share the data
from 2017. Be sure to divide the data into demand flows, such as new product launches,
trade promotions, line extensions, and seasonal builds. Also communicate the associated
demand streams, year-over-year. Next, ask the technology providers to load the data into
their engines and deliver what they believe is the forecast for 2017. Then calculate the
error and bias for each of the demand streams. Pay close attention to how well the
software's forecast or plan performed on items in the "long tail" (products that sell
in small quantities).
Production planning. Take a year of orders and share them with the software vendors.
Give them the characteristics of changeovers, constraints, and cycle planning, and ask them to
provide you with a sample production plan. Pay close attention to the details of the production
schedule plan and understand what drives schedule attainment. Evaluate the impact of the production
schedule output on cycle stock, and make a comparison to the cycle-stock requirements of your company's
prior year.
Transportation planning. Give the technology providers a year of orders along with
your route assignments and pooling specifications. Ask them to provide you with a set of sample
plans. Look for capabilities associated with load assignments, pooling, continuous moves, and
backhaul definitions. Compare the impact of each software program's plan on cost.
The unfortunate news is that few companies do this type of testing. I believe that this lack of
testing is one of the reasons why software satisfaction is so low. While there is a nominal fee
and a requirement of time and energy, performing such tests makes a difference in the end.
Five more recommendations
In addition to testing, I have five more recommendations for companies looking to purchase a
new supply chain planning suite. These suggestions are based on my 20 years of following this market.
Triangulate the market. Triangulation refers to using more than one research method in order
to eliminate as much bias as possible. Technology vendors usually supply only positive references. To
get a more accurate assessment of the technology's capabilities, you need to go beyond the salesperson's
references and try to find some along the entire spectrum—the good, the bad, and the neutral. You can
learn from all three. I know of no software where every implementation was positive. Rather than seek
perfection, the question the buyer should ask is, "What is the best fit for my company?"
Look for deployments in like industries. While strategic network design technologies
can be deployed across different types of industries, the more operational technologies, like
demand sensing, production planning, deployment, transportation planning, and material planning,
are very industry-specific. Do not try to cross the lines and apply one of these solutions that
was developed for application outside of your industry.
Know that an 80-percent "fit" is not good enough. Many times software sales teams
want to gloss over the details of optimization, stating that software that works effectively
for 80 percent of your processes is good enough. To drive business results, however, data model
"fit" and engine design are more important than software integration. In the implementation of
supply chain planning, integration is the easy part. Business-process optimization is the more
difficult and critical element. Test and verify that the technology you're considering can do
the job.
Beware of "we don't have it now, but we can build it for you." Often if desired
capabilities are not already included in the software, a vendor will claim that it can develop
them for you. However, I have found that building new software generally takes nine to 16 months,
and that companies are seldom satisfied with the results. In my 20 years as an analyst, I have
only seen two cases where this type of co-development was successful. Avoid one-off software efforts.
Be skeptical of software system integrators' recommendations. System integrators usually
get a commission on the sale of the software. They are often not a neutral party. Ask your system
integrator for details on its arrangement with the software provider.
In my experience, a little bit of healthy skepticism and some rigorous testing can go a
long way toward making sure you don't end up like many supply chain software users: dissatisfied with
your implementation.
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.
Economic activity in the logistics industry expanded for the 10th straight month in September, reaching its highest reading in two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI registered 58.6, up more than two points from August’s reading and its highest level since September 2022.
The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
The September data is proof the industry is “back on solid footing” according to the LMI researchers, who pointed to expanding inventory levels driven by a long-expected restocking among retailers gearing up for peak-season demand. That shift is also reflected in higher rates of both warehousing and transportation prices among retailers and other downstream firms—a signal that “retail supply chains are whirring back into motion” for peak.
“The fact that peak season is happening at all should be a bit of a relief for the logistics industry—and economy as a whole—since we have not really seen a traditional seasonal peak since 2021,” the researchers wrote. “… or possibly even 2019, if you don’t consider 2020 or 2021 to be ‘normal.’”
The East Coast dock worker strike earlier this week threatened to complicate that progress, according to LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. Those fears were eased Thursday following a tentative agreement between the union and port operators that would put workers at dozens of ports back on the job Friday.
“We will have normal peak season demand—our first normal seasonality year in the 2020s,” Rogers said in a separate interview, noting that the port of New York and New Jersey had its busiest month on record this past July. “Inventories are moving now, downstream. That, to me, is an encouraging sign.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).