Steve Geary is adjunct faculty at the University of Tennessee's Haaslam College of Business and is a lecturer at The Gordon Institute at Tufts University. He is the president of the Supply Chain Visions family of companies, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly.
At first glance, DIU appears to be a typical Silicon Valley startup with a supply chain focus. It's a relatively small organization with 75 employees, headquartered in Mountain View, California, (also home to Google) with satellite offices in tech hubs like Boston, Massachusetts; Austin, Texas; and Washington, D.C.1
Like many high-tech startups, DIU is focused on "delivering advanced commercial technology"—such as artificial intelligence (AI), autonomous solutions, and augmented reality—to its customers. And it takes a Silicon Valley-style approach to accomplishing this goal, saying that it will "seek out and rapidly prototype commercial solutions to challenges while lowering barriers to entry for nontraditional companies."
Dr. Ash Carter, currently a professor at Harvard, says he helped establish DIU because he saw an opportunity to "capitalize on U.S. business' growing investment in research and development (R&D) and venture capital funding in high-tech startups."
Yet while the DIU team may look and act like a typical Silicon Valley startup firm, it's not. The DIU acronym spelled out is "Defense Innovation Unit," and it reports to the Pentagon. Ash Carter may now be a professor at Harvard, but when DIU was established in 2015, he was the U.S. Secretary of Defense. Today DIU reports to the Office of the Under Secretary of Defense for Research and Engineering.
Why did the Department of Defense choose to structure the DIU this way? Well, an elephant cannot be taught to dance. Instead of attempting to reform the Pentagon, DIU elected to immerse itself in the land of innovation. Through immersion, DIU is becoming infused with agility and speed.
A different sort of integrator
At its heart, DIU acts like a supply chain integrator, translating capabilities created by technology innovators in hubs like Silicon Valley into bundles of solutions to a targeted set of customers. DIU finds interesting innovations, packages them, and links them to its customer: the Department of the Defense (DoD) and its entities. In this way, DIU acts like a business-to-business integrator in its target niches. Currently DIU has five main areas of focus: AI, autonomy, cyber, human systems, and space.
Artificial intelligence: In this space, DIU is investigating whether commercial AI can be applied or adapted to solve high-impact DoD problems. Recent projects include prototypes to develop algorithms for humanitarian assistance in post-disaster environments and strategic reasoning to deliver insights about force deployment in wargaming and planning environments.
Autonomy: DIU is focused not only on developing autonomous applications for the DoD but also on developing technology that can counter them. Recent projects include: counter-unmanned aerial systems (UAS) that would be able to identify, track, and remove small UAS like drones; autonomous quadcopters designed for indoor flight and tactical early-warning systems; software to defend commercial drones against cyber vulnerabilities; and "distributed autonomous logistics" for long-range delivery of small cargo like medical supplies.
Cyber: This portfolio of projects seeks to deliver cybersecurity and enterprise IT solutions that would aid cyber warfare operators and analysts. Recent projects include "security-as-a-service" prototypes and multifactor authentication for enterprise security.
Human systems: Here, the aim is to enhance warfighter survivability and mission accomplishment. Recent prototype projects include augmented reality display technology with night vision capability for enhanced situational awareness in high-threat environments and predictive analytics for early warning of infection and threat agent exposure.
Space: These projects facilitate the Defense Department's ability to access and leverage the growing commercial investment in space to address existing capability gaps, improve situational awareness and decision making, and increase interoperability with international partners.
DIU has had an impact. For example, in October of 2019, the organization announced the results of an 18-month project in predictive health monitoring with the multinational electronics company Royal Philips.2 The project team used a blend of machine learning and artificial intelligence to develop an algorithm that predicts the likelihood of an infection before symptoms even begin to show. The new product delivers predictive capabilities, allowing users to anticipate requirements—patient medical needs—up to 48 hours in advance. DoD and Royal Philips are now working on a wearable device that would use this algorithm to monitor a soldier's health and deliver earlier alerts to potential infection.
Two other current projects involve preventive maintenance for vehicles. DIU has contracted with Uptake, a predictive analytics software company, to apply its Asset IO solution to the U.S. Marine Corps' M88 armored recovery vehicles and the U.S. Army's Bradley Fighting Vehicle.
The need for speed
Today seems to be an era where national consensus is out of reach. Yet there is broad agreement on one thing: The DoD supply chain is ossified, ponderous, and in need of overhaul. The United States needs innovation and approaches to stay ahead of its adversaries and protect the national interest.
Yet DoD research and development budgets are not limitless. This is exactly where DIU fits in. Commercial technology vectors are evolving alongside the defense requirements. This creates an opportunity for the government to cross-pollinate with private sector entrepreneurs. Instead of trying to expand government R&D budgets, DIU seeks to connect with R&D from the commercial supply chain and venture capital funding. Its portfolio companies have been backed by such venture capital partners as Andreessen Horowitz, Founders Fund, GV, In-Q-Tel, Lux Capital, New Enterprise Associates, Sequoia Capital, Social Capital, and Spark Capital. In other words, DIU looks and acts like a typical Silicon Valley player working with top venture capital partners on some extremely difficult problems. Those problems, however, just happen to be related to national security.
If you have a truly innovative concept that you'd like to move through the DoD supply chain quickly, reach out to DIU (www.diu.mil/contact). They are open for business.
The practice consists of 5,000 professionals from Accenture and from Avanade—the consulting firm’s joint venture with Microsoft. They will be supported by Microsoft product specialists who will work closely with the Accenture Center for Advanced AI. Together, that group will collaborate on AI and Copilot agent templates, extensions, plugins, and connectors to help organizations leverage their data and gen AI to reduce costs, improve efficiencies and drive growth, they said on Thursday.
Accenture and Avanade say they have already developed some AI tools for these applications. For example, a supplier discovery and risk agent can deliver real-time market insights, agile supply chain responses, and better vendor selection, which could result in up to 15% cost savings. And a procure-to-pay agent could improve efficiency by up to 40% and enhance vendor relations and satisfaction by addressing urgent payment requirements and avoiding disruptions of key services
Likewise, they have also built solutions for clients using Microsoft 365 Copilot technology. For example, they have created Copilots for a variety of industries and functions including finance, manufacturing, supply chain, retail, and consumer goods and healthcare.
Another part of the new practice will be educating clients how to use the technology, using an “Azure Generative AI Engineer Nanodegree program” to teach users how to design, build, and operationalize AI-driven applications on Azure, Microsoft’s cloud computing platform. The online classes will teach learners how to use AI models to solve real-world problems through automation, data insights, and generative AI solutions, the firms said.
“We are pleased to deepen our collaboration with Accenture to help our mutual customers develop AI-first business processes responsibly and securely, while helping them drive market differentiation,” Judson Althoff, executive vice president and chief commercial officer at Microsoft, said in a release. “By bringing together Copilots and human ambition, paired with the autonomous capabilities of an agent, we can accelerate AI transformation for organizations across industries and help them realize successful business outcomes through pragmatic innovation.”
Census data showed that overall retail sales in October were up 0.4% seasonally adjusted month over month and up 2.8% unadjusted year over year. That compared with increases of 0.8% month over month and 2% year over year in September.
October’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were unchanged seasonally adjusted month over month but up 5.4% unadjusted year over year.
Core sales were up 3.5% year over year for the first 10 months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023. NRF is forecasting that 2024 holiday sales during November and December will also increase between 2.5% and 3.5% over the same time last year.
“October’s pickup in retail sales shows a healthy pace of spending as many consumers got an early start on holiday shopping,” NRF Chief Economist Jack Kleinhenz said in a release. “October sales were a good early step forward into the holiday shopping season, which is now fully underway. Falling energy prices have likely provided extra dollars for household spending on retail merchandise.”
Despite that positive trend, market watchers cautioned that retailers still need to offer competitive value propositions and customer experience in order to succeed in the holiday season. “The American consumer has been more resilient than anyone could have expected. But that isn’t a free pass for retailers to under invest in their stores,” Nikki Baird, VP of strategy & product at Aptos, a solutions provider of unified retail technology based out of Alpharetta, Georgia, said in a statement. “They need to make investments in labor, customer experience tech, and digital transformation. It has been too easy to kick the can down the road until you suddenly realize there’s no road left.”
A similar message came from Chip West, a retail and consumer behavior expert at the marketing, packaging, print and supply chain solutions provider RRD. “October’s increase proved to be slightly better than projections and was likely boosted by lower fuel prices. As inflation slowed for a number of months, prices in several categories have stabilized, with some even showing declines, offering further relief to consumers,” West said. “The data also looks to be a positive sign as we kick off the holiday shopping season. Promotions and discounts will play a prominent role in holiday shopping behavior as they are key influencers in consumer’s purchasing decisions.”
That result came from the company’s “GEP Global Supply Chain Volatility Index,” an indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses. The October index number was -0.39, which was up only slightly from its level of -0.43 in September.
Researchers found a steep rise in slack across North American supply chains due to declining factory activity in the U.S. In fact, purchasing managers at U.S. manufacturers made their strongest cutbacks to buying volumes in nearly a year and a half, indicating that factories in the world's largest economy are preparing for lower production volumes, GEP said.
Elsewhere, suppliers feeding Asia also reported spare capacity in October, albeit to a lesser degree than seen in Western markets. Europe's industrial plight remained a key feature of the data in October, as vendor capacity was significantly underutilized, reflecting a continuation of subdued demand in key manufacturing hubs across the continent.
"We're in a buyers' market. October is the fourth straight month that suppliers worldwide reported spare capacity, with notable contractions in factory demand across North America and Europe, underscoring the challenging outlook for Western manufacturers," Todd Bremer, vice president, GEP, said in a release. "President-elect Trump inherits U.S. manufacturers with plenty of spare capacity while in contrast, China's modest rebound and strong expansion in India demonstrate greater resilience in Asia."
Even as the e-commerce sector overall continues expanding toward a forecasted 41% of all retail sales by 2027, many small to medium e-commerce companies are struggling to find the investment funding they need to increase sales, according to a sector survey from online capital platform Stenn.
Global geopolitical instability and increasing inflation are causing e-commerce firms to face a liquidity crisis, which means companies may not be able to access the funds they need to grow, Stenn’s survey of 500 senior e-commerce leaders found. The research was conducted by Opinion Matters between August 29 and September 5.
Survey findings include:
61.8% of leaders who sought growth capital did so to invest in advanced technologies, such as AI and machine learning, to improve their businesses.
When asked which resources they wished they had more access to, 63.8% of respondents pointed to growth capital.
Women indicated a stronger need for business operations training (51.2%) and financial planning resources (48.8%) compared to men (30.8% and 15.4%).
40% of business owners are seeking external financial advice and mentorship at least once a week to help with business decisions.
Almost half (49.6%) of respondents are proactively forecasting their business activity 6-18 months ahead.
“As e-commerce continues to grow rapidly, driven by increasing online consumer demand and technological innovation, it’s important to remember that capital constraints and access to growth financing remain persistent hurdles for many e-commerce business leaders especially at small and medium-sized businesses,” Noel Hillman, Chief Commercial Officer at Stenn, said in a release. “In this competitive landscape, ensuring liquidity and optimizing supply chain processes are critical to sustaining growth and scaling operations.”
With six keynote and more than 100 educational sessions, CSCMP EDGE 2024 offered a wealth of content. Here are highlights from just some of the presentations.
A great American story
Author and entrepreneur Fawn Weaver closed out the first day of the conference by telling the little-known story of Nathan “Nearest” Green, who was born into slavery, freed after the Civil War, and went on to become the first master distiller for the Jack Daniel’s Whiskey brand. Through extensive research and interviews with descendants of the Daniel and Green families, Weaver discovered what she describes as a positive American story.
She told the story in her best-selling book, Love & Whiskey: The Remarkable True Story of Jack Daniel, His Master Distiller Nearest Green, and the Improbable Rise of Uncle Nearest. That story also inspired her to create Uncle Nearest Premium Whiskey.
Weaver discussed the barriers she encountered in bringing the brand to life, her vision for where it’s headed, and her take on the supply chain—which she views as both a necessary cost of doing business and an opportunity.
“[It’s] an opportunity if you can move quickly,” she said, pointing to a recent project in which the company was able to fast-track a new Uncle Nearest product thanks to close collaboration with its supply chain partners.
A two-pronged business transformation
We may be living in a world full of technology, but strategy and focus remain the top priorities when it comes to managing a business and its supply chains. So says Roberto Isaias, executive vice president and chief supply chain officer for toy manufacturing and entertainment company Mattel.
Isaias emphasized the point during his keynote on day two of EDGE 2024. He described how Mattel transformed itself amid surging demand for Barbie-branded items following the success of the Barbie movie.
That transformation, according to Isaias, came on two fronts: commercially and logistically. Today, Mattel is steadily moving beyond the toy aisle with two films and 13 TV series in production as well as 14 films and 35 shows in development. And as for those supply chain gains? The company has saved millions, increased productivity, and improved profit margins—even amid cost increases and inflation.
A framework for chasing excellence
Most of the time when CEOs present at an industry conference, they like to talk about their companies’ success stories. Not J.B. Hunt’s Shelley Simpson. Speaking at EDGE, the trucking company’s president and CEO led with a story about a time that the company lost a major customer.
According to Simpson, the company had a customer of their dedicated contract business in 2001 that was consistently making late shipments with no lead time. “We were working like crazy to try to satisfy them, and lost their business,” Simpson said.
When the team at J.B. Hunt later met with the customer’s chief supply chain officer and related all they had been doing, the customer responded, “You never shared everything you were doing for us.”
Out of that experience, came J.B. Hunt’s Customer Value Delivery framework. The framework consists of five steps: 1) understand customer needs, 2) deliver expectations, 3) measure results, 4) communicate performance, and 5) anticipate new value.
Next year’s CSCMP EDGE conference on October 5–8 in National Harbor, Md., promises to have a similarly deep lineup of keynote presentations. Register early at www.cscmpedge.org.