The annual “Supply Chain Planning Digital Transformation” report shows that digital supply chain technology can help companies better handle uncertainty and disruptions.
We never could have anticipated how dramatically the world was about to change when we launched our first “Supply Chain Planning Digital Transformation” report in 2019. The study, conducted jointly by ToolsGroup and Spinnaker, surveyed nearly 200 North American supply chain professionals in early 2019. Its goal was to understand and benchmark the drivers, obstacles, technologies, and progress of companies’ digitalization journeys. The results have subsequently provided a timely baseline for comparing the accelerated digitalization instigated by COVID-era disruptions. (An infographic developed for the 2022 Q3 issue of CSCMP’s Supply Chain Quarterly shows some of the results of the most recent report.)
If there’s one big takeaway from the surveys we’ve been running through 2022, it’s the value of “fixing the roof while the sun is shining.” In other words, those companies that had begun to introduce digital technologies to their supply chain planning processes prior to the pandemic fared better during the past few years than those that had not.
But we know that initiating a big change before an urgent business need arises can be a hard sell. It’s not surprising then that in the wake of the past few years of immense disruptions, we are seeing more and more companies looking to digitally transform their supply chain planning operation. And, as we’ll cover later, there can even be some advantages to transforming during a crisis.
Weathering the storm
Unsurprisingly, in our 2021 study (carried out in the throes of the crisis), the leaders with the most mature, digitally transformed supply chains reported weathering the COVID storm most successfully. In 2021, when asked what stage of digital transformation they were in, 12% of respondents said they were reaping the benefits after a successful digital transformation. Fifty-four percent of that group said that they were managing COVID-related demand and supplier uncertainty “very well.” In comparison, only 13% of those companies that were still “evaluating” or “not pursuing” a digital transformation reported handling the uncertainty “very well.”
Although many countries have come through the worst of the pandemic itself, supply chain storms show no sign of abating. Supply Chain Quarterly readers hardly need reminding that disruptions to supply chains and the talent pool are expected to last years, compounded by inflation, the war in Ukraine, and other factors.
It follows that in this year’s digital transformation survey, the biggest concern on leaders’ minds can be categorized as “external factors.” A full 64% of respondents were either very concerned or extremely concerned about “supply delays on supplier order fill rates” and “escalating fulfillment/delivery costs”; 56% were similarly concerned about “accurate demand forecasting.” All this tallies with the massive pendulum swing we’ve seen in supply chain strategy away from lean, just-in-time (JIT) models to ones focused on resilience and characterized by higher inventory buffers and more supply alternatives.
Transformation obstacles
In light of these continuing disruptions, it is not surprising that more and more companies are turning to digital technologies to help. Our 2022 survey with CSCMP reveals that 31% of respondents are now in the “executing” phase, or fully in the throes of a digital transformation effort. That’s four points higher from when we ran the first survey during a relatively “sunny” January 2019.
This jump is high enough to indicate that some companies are indeed reacting to the crises and stepping up transformation efforts. But it’s also small enough to suggest that for some companies, transformation has felt too onerous to get started with.
Indeed, other survey responses give clues to the extent that organizations are struggling with transformation. This year the majority (53%) of respondents cited the peoples/skill deficit as the number one obstacle to implementing supply chain transformation plans. Compare this to January 2019, before the pandemic, when the top reason supply chain leaders gave for delaying transformation was “fear of change” (30%). At that time, only 23% cited the people/skills deficit.
Our second clue is that this year “data quality/lack of data” was reported as the second biggest obstacle to transformation at 41%. Compare this to a much lower 25% in 2019. We know from our own customer experiences how difficult it is to undertake the exacting and laborious data hygiene and modeling work that underpins digital transformation when you’re in the midst of a crisis.
Deprioritize customer experience at your peril
A serious concern from this year’s study is that many organizations appear to have put some aspects of customer experience on the back burner. Our survey revealed that “keeping up with evolving customer behaviors and expectations” has plummeted to fifth on the list of primary objectives for supply chain planning digital transformations—sixth if you count that “better/faster reaction to unplanned disruptions” and “increase supply chain resilience” tied for second place.
Now is a very dangerous time to deprioritize adapting to meet new customer behaviors. The pandemic has radically altered people’s shopping habits. Taking your eyes off the ball now could have very damaging long-term consequences and allow new upstarts to steal market share by offering more competitive prices or appealing to consumers’ increasingly eco-friendly shopping habits.
For example, the cosmetics company Glossier and the apparel company Allbirds are just two of the many new direct-to-consumer brands that cut out the middlemen, offering premium quality products at affordable prices—very compelling during a cost-of-living crisis. Other clothing brands, like Zero Waste Daniel and Ruby Moon, are appealing to eco-conscious shoppers by offering garments made from leftover material and pre-consumer cutting room fabric scraps or postconsumer waste.
Meanwhile older retailers are realizing that if you don’t pivot and adapt to changing consumer expectations, consumers may opt for products that appeal to their wallets and their environmental conscience. As a result, companies like IKEA and Primark, which had long resisted adapting their channel strategies, are now finally pivoting to online sales, click and collect, and garment recycling.
The silver lining: innovation from chaos
There is a silver lining here. Throughout history, the most ground-breaking inventions, new business models, and solutions to enduring problems have arisen from large-scale disasters. The most obvious example is the COVID vaccines, which were developed and tested in record time thanks to an intense global collaboration from the scientific and medical communities. The urgency of the climate crisis has also given rise to some incredible new innovations in biodegradable packaging, water purification, waste management, and earthquake early warning systems—to name just a few.
The catalyst for all these innovations is technology, which has matured at an astonishing pace over the last 50 years while becoming more and more affordable. More companies are deploying advanced technologies for automating the supply chain including artificial intelligence (AI) and machine learning, analytics, drones, and others.
In fact, 51% of this year’s respondents said their top primary objective for supply chain planning digital transformation was to “increase level of automation to focus staff on higher value activities.” This addresses the talent shortage in two ways: It automates routine, labor intensive, and repetitive tasks, and it paves the way for people to do more interesting “human” work that makes the best use of their business knowledge and relationships.
So, although my opening gambit might have felt dark and ominous, I genuinely believe that the crises we are all battling to overcome will usher in a new era of supply chain solutions and creativity. And if you’re in the tricky situation of having to fix your roof in the current storm, you are likely to be rewarded with strength and resilience for many years to come.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
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Supply chain managers at consumer goods manufacturing companies are tasked with meeting mandates from large retailers to implement item-level RFID.
Supply chain managers at consumer goods manufacturing companies are tasked with meeting mandates from large retailers to implement item-level RFID. Initially these requirements applied primarily to apparel manufacturers and brands. Now, realizing the fruits of this first RFID wave, retailers are turning to suppliers to tag more merchandise.
This is one more priority for supply chain leaders, who suddenly have RFID added to their to-do list. How to integrate tagging into automated production lines? How to ensure each tag functions properly after goods are packed, shipped, and shelved? Where to position the RFID tag on the product? All are important questions to be answered in order to implement item-level RFID. The clock is ticking on retail mandates.
Different products, new RFID considerations
Hangtags, the primary form of apparel product identification, present a relatively easy way to attach an RFID tag. Pressure-sensitive labels likewise can carry an RFID inlay. The inlay, consisting of a microchip and antenna, holds the product’s unique identifying information. This tiny device is activated when the RFID reader passes by it. For nonapparel products, in many cases, there is no way to attach a hangtag. Therefore, a pressure-sensitive RFID label often must be put directly on the product. If the product is packaged in a box, the RFID carrier can be attached to or placed inside the box. Either way involves the use of just the right solutions, including the adhesive, shape, dimension, and placement. Moreover, there must be an efficient way to attach the labels to products. This requires process engineering and sometimes capital investment to integrate RFID labeling into highly automated manufacturing lines.
Metals, liquids, and low-surface-energy (LSE) materials pose hurdles for RFID item tagging. Tag and label inlays cannot be read properly through metals and liquids, and the pressure-sensitive labels do not always stick well to product surfaces containing silicone, vinyl, polyethylene, and polystyrene. Very small items are also difficult to tag. Metal paint cans, caulk or paste tubes, lipsticks, and reusable water bottles are just a few products that present RFID tagging challenges.
In other cases, it is not so much the product itself that hinders readability but rather the shipping method. For example, it is relatively straightforward to apply an RFID tag or label to a bag of fertilizer. But the fertilizer bags might be stacked 60 deep on a pallet. The pressure is too much. It damages the inlay, killing the tag’s readability. So, RFID tags, which were perfectly fine coming off the production line, are now dead from the stacking pressure.
Solutions and testing
RFID tagging and labeling programs take time to get right. While some manufacturers can set up a successful process in a few weeks or months, for others it can take six months, nine months, a year or longer. Variables influencing implementation time include capital equipment investments, the product types (for example, are the materials, shapes, or surfaces potentially problematic?), label supplier capacity and capabilities, and third-party testing rounds.
The good news is that best practices are being refined every day to incorporate RFID on difficult-to-tag products. A case in point is finding answers to RFID-inlay readability issues on metal or liquid products. There are ways to attach an RFID label to the product’s lid or cap.
The University of Auburn RFID Lab is the de facto U.S. authority on all things retail RFID. Through its ARC program, the lab works with end users to make sure RFID tags meet or exceed their required performance and quality levels. Walmart, for example, requires its suppliers to source from Auburn RFID Lab’s ARC program-approved inlay companies. “ARC is a test system and database that stores comprehensive performance data of in-development and market available RFID tags,” according to the lab’s website. “ARC has been working with end users to translate RFID use cases into specific levels of performance in the ARC test environment.”
High-quality RFID tags and labels are at the heart of it all. The following are some considerations to keep in mind when choosing an RFID tag and label provider:
What are their quality control and testing capabilities? Can they confirm that every tag is readable? Do they have software to verify that UPC and RFID information match up? Do they possess familiarity with Auburn’s RFID Lab approval process?
What is their capacity? How many thousands or millions of inlays do they create per day? Are there minimum order quantities?
What are their order management and shipping processes like? What is their delivery speed? How easy are they to order from? Where are their print facilities located?
Do they offer customization? Do they possess specialized equipment? Can they die cut irregular shapes, including very small dimensions? Do they possess adhesive expertise and application equipment? Do they have solutions for metal, liquid, and other difficult-to-tag items? Are they able to configure label rolls to work on automatic label dispensers?
It takes trial and error to implement RFID item tagging for nonapparel products. Effective, compliant programs do not manifest overnight. Collaboration with experienced label providers and the Auburn RFID Lab will help manufacturers overcome even the most complex RFID tagging challenges. There will be a roadmap to success, and the results in the form of better inventory visibility, swifter sell-through, and stronger sales will be well worth it.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on 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).