Faster, better, now!
A wave of radical innovation is making it possible to respond to the clamour for faster delivery, better service and the pressures of a “I want it now!” society. RFID, robotics, drones, Blockchain… here we look at the technology remaking the supply chain and how it will impact procurement, inventory management and delivery.
The Internet of Things
The Internet of Things refers to the ability of each individual manufactured item to be part of a network
The key to understanding the Internet of Things (IoT) is, first, to realize that every manufactured object can have its own internet identifying number (IP address). Second, each of your items or SKUs (Stock Keeping Unit) can communicate with the network.
When you combine a unique identifier with the ability to communicate, you’ve got a network in which each item can be constantly broadcasting its presence. The result is that you’ve substantially increased the transparency and visibility of inventory within your supply chain.
Today, objects from lightbulbs to thermostats come with embedded systems, unique identifiers and the ability to connect to Wi-Fi networks so that they act as parts of the network and can be continuously visible and trackable. This also increases the number of trackable events within the logistics/supply chain process. This enhanced visibility in turn increases the flexibility of the supply chain because you have no need to wait for inventory to be checked in at a point in the distribution supply chain. Its location is always known.
By eliminating the need to perform manual inventory counts, you reduce the cost of managing the inventory and the costs in the warehouse. The number of process steps in managing the inventory is also reduced, making for a simpler network.
The Internet of Things continues to grow exponentially and, according to Business Insider, is expected to expand from 10 billion devices in 2015 to 34 billion devices in 2020.
RFID (Radio Frequency Identification)
RFID technology has been available for a long time, but it is only now starting to gain significant traction in more sophisticated adaptations.
At its heart, RFID consists of a “tag” that is inserted into a manufactured item. It can be placed or sewn in. Each RFID tag comes with a chip and an antenna, capable of being programmed with basic stock-keeping data and able to broadcast that data to a reader.
It is wrong to think of this technology as a new technology. Booksellers, among others, have been using RFID tags to prevent theft for decades. To understand why it has taken so long for RFID to become more widely adopted, it is best to think of the technology as an ecosystem. In order for this ecosystem to work, it needs:
• RFID tags embedded in each SKU or item.
• A standard way, or language, to manage the database and describe the product so that all inventory management systems can interpret the data the same way.
• Scanners and readers at points in the network or supply chain where the presence of the SKU needs to be inventoried.
The cost of the tag has been a barrier to adoption. As the cost of garments and other manufactured items decreases, the relative cost of the embedded tag has also had to decline. Otherwise, the tracking technology is a disproportionate share of the cost of the item and the manufacturing process.
RFID’s role in the supply chain holds great promise because tag costs are declining, large manufacturers and retailers are mandating their use. As the ecosystem expands, it is easy to see why contactless scanning of an entire warehouse filled with RFID-tagged merchandise could reduce inventory management costs. Continuous inventory management at multiple points in a supply chain also enhances visibility and increases the track-ability of products.
Sensors are embedded components that help track the “state” of objects in the flow of the supply chain.
Today’s sensors help measure and preserve any changes in state of inventory – temperature, for instance – sending alerts when an SKU ventures outside tolerance parameters.
State-aware sensors that change displays can be used to track whether or not a packaging container has been opened and whether or not the inventory has experienced temperature, humidity or other environmental factors that are outside certain ranges.
The use of sensors can help either with real-time tracing of such changes or for a permanent record of the impact being created by changes. The inventory owner gets visible evidence of integrity.
Sensors are of particular use in cold chain logistics, typically for high-value pharma and life sciences products, or for other fragile and perishable goods. These are goods for which ordinary visible inspection might not reveal that an unacceptable event occurred in the shipment or in the progression of the inventory through the supply chain.
Use of sensors can cut inventory costs and increases reliability of supply chains, reducing supply chain risk at eventual point of consumption.
The use of machines to manufacture products has long been a feature in automotive manufacturing and other high-value production chains.
Sophisticated manufacturers in Japan, Germany and the United States have been using robots in production for years. Now though, the cost of developing and installing industrial robots is dropping significantly, so manufacturers in developing countries such as China and India are aggressively adopting robotic production.
In addition, the proliferation of cameras, processors and other underlying technology means that smaller, more mobile robots can now be deployed in warehouses and used for very specific purposes: picking specific SKUs and bringing them to a packing station. With the growth of companies like Kiva (now Amazon Robotics), there has been wider adoption and scale availability of robots in this segment.
At the same time, it’s important to note that robotic systems in distribution centers are now able to pick and palletize stock, making it possible for DCs to prepare and ship “store ready” pallets that are specifically built with inventory required by a specific store. That reduces warehousing and inventory costs – not just at the DC but also within the store.
Robotics can improve warehouse and supply chain efficiency and dramatically lower costs.
You’re aware of the small unmanned aerial devices that are self-powered, guided remotely or self-guided, and capable of carrying and delivering small(ish) payloads over relatively short distances.
You can tell that a technology has achieved mainstream recognition when a government body regulates it. In June of this year, the US Department of Transportation and Federal Aviation Administration announced regulations for the licensing of Small Unmanned Aircraft Systems, known to teenagers and YouTubers everywhere as drones.
Implied in the growth of this technology is a significant – but still distant – disruption of the last-mile delivery model. Drones have limited range. Their most immediate promise is in delivering small packages from a relatively close inventory storage facility to a customer’s place of consumption.
Currently, drone technology is limited by:
- Adoption and regulation – chaos to be prevented by regulated use of a spectrum
- Shorter range
- Lifting capacity or size of package
The most likely place in the supply chain for this technology is in the last mile or final leg of delivery. Amazon and others are experimenting with it. Clearly, the most significant impact in the medium to long term will probably be to lower the cost of transportation in the last mile.
Like all disruptive technologies, self-driving cars and trucks appear to have arrived on the scene all of a sudden.
Volvo and other companies are conducting trials with self-driving trucks while auto manufacturers such as Ford, Tesla and Audi are developing cars that operate by computer with no human driver needed.
The reality is that development of self-driving and self-navigating vehicles has been under development for a long time – Google’s self-driving cars have driven over two million miles in four cities. Progress is underpinned by the simultaneous arrival of advancements in the underlying component systems: cameras, GPS and the ability to interface with cellular towers, amongst others.
Currently, the wide-spread deployment and availability is constrained by the need to develop legal and insurance frameworks. Who is responsible in the event of an accident? Another issue is the ability for the vehicle to communicate with sensors and guidance equipment embedded in the roadways. This requires statutory and government involvement, as well as financing and construction.
The most likely impact of this technology innovation is in the reduced cost of the road transportation leg of the supply chain. Those savings are achieved by removing the human driver. To some extent, predictability of the supply chain is also enhanced by this development.
For more about autonomous shipping and how Rolls-Royce Innovation Marine is responding to the challenge see Autonomous Shipping.
GPS & GIS
These are two different but interrelated technologies that are sometimes confused with one another or thought to be the same thing.
A Global Positioning System (GPS) is a space-based radio navigation system made up of multiple satellites that transmit timing and geographical location information. Ground receivers such as the navigation system in your car use signals from multiple satellites – typically three for latitude and longitude, and four to add altitude – in order to develop a precise location of the receiving unit. Like many major technology advancements, the system had its basis in military needs and today supports commercial positioning and a more precise, government positioning option.
Geographical Information System (GIS) is software/database technology that uses the data from GPS. Different GISs are set up for different purposes. They provide the databases showing what exists in the surrounding area. An interface to the GIS allows the use of that database. The database of “what is around you” is derived from a GIS or mapping database while a GPS tells you “where you are in relation to what is around you”. The two work together to provide location specific technology uses.
In the world of logistics, the ability to track the location of freight is clearly valuable: you are increasing visibility. Expect the continuing proliferation of devices that allow real-time tracking of assets in motion – for example, container seals. A GPS-enabled container seal has the advantage of being able to identify where the container is at all times. When combined with GIS, a history of the movements of that seal can be visually inspected. In this way, these multiple but related technologies combine to resolve complex logistics problems.
The use of GPS/GIS-enabled devices also provides an ability to ensure that anytime a container leaves a space designated by a range of latitude / longitude, alarms are generated (or at least tracked and saved for later access). This increases security and lowers costs arising from loss. Similarly, higher visibility reduces the need to reposition freight as often, reducing associated transportation costs.
However, current GPS technology has inherent technical and security shortcomings. GPS signals are weak due to distance between satellites and terrestrial applications, making them vulnerable to jamming. A $10 jamming device powered by a car lighter could render a GPS-dependent port inoperable. Current GPS systems are controlled by countries, giving governments the ability to deliberately degrade signal quality and accuracy if they choose. Finally, GPS technology is ineffective in urban, indoor and other settings that multiply reflection of errant signals – places that include ports and warehouses. Hence, the need for GPS 2.0.
Web 2.0 (Incorporating Cloud Computing, SaaS and Mobile Apps)
Web 2.0 refers to the evolution of the Internet to allow for more participation and collaboration between internet users. It expands the definition of “the web” – used interchangeably by many people with “the Internet” – beyond a static place to find information.
It changes the nature of the interaction from one-way communication by a “publisher” for a “consumer” of information, to a two-way interactive dialog with ongoing updating for a community of users.
Underpinning Web 2.0 has been the emergence of social media and the creation of web sites that allow interaction between internet users. Both factors have pushed the underlying technology of the web to evolve into newer programing models.
With the growth in interactive participation has come the opportunity for disruptive business models that involve crowdsourcing, or the ability to outsource to a large number of people simultaneously. The so-called “gig economy” – the ability for non-traditional players such as Uber and AirBnB to enter and compete in established industries – is another outgrowth. Closely tied to the disruption made possible by Web 2.0 are some underlying trends:
- Cloud computing – the ability to access a software application over a browser rather than having to install the software on your own computer (think Google Docs)
- The Software as a Service (SaaS) business model – the ability of companies to make the use of their software available for a periodic fee per user. This makes software costs for a business variable in nature, rather than fixed, capital investments
- Mobile computing and smartphones – devices with a software application or app ecosystem so that the interaction can occur over a choice of Wi-Fi and cellular, making access to the information more or less ubiquitous. Supply chain executives can monitor worldwide developments that affect their businesses – say flooding in a critical supply center location – allowing them to respond quickly to minimize risk and avoid losses.
Web 2.0 makes it easier for supply chain executives to have continuous visibility, regardless of location of goods or time of day. At the same time, use of social media such as Instagram expands the number of sales channels for a company’s product.
For more about web2 take a look at Techtarget.com
Web Services (including EDI)
One of the best ways to eliminate inventory bottlenecks that require clearance or the stock-outs caused by improper demand forecasting is to better connect the participants in the supply chain.
As integration increases, supply chain participants are able to quickly increase or decrease their order levels based on upstream and downstream visibility. That prevents the creation of obsolete stock or unsatisfied demand that goes off in search of substitutes.
There are two ways to increase integration and communication. One is unstructured human-to-human communication, such as emails. The other is structured integration that is system-to-system. Systems and applications that are programed to take action by, for example placing or cancelling orders, rely on system-to-system communication, which in turn calls for structured data to pass between systems.
Electronic Data Interchange, or EDI, is a long-established method of conducting system-to-system communication. Typically, it involves two trading partners adopting one of many published standards and implementing a protocol to have their computer programs talk to each other, without needing to both be using the same programs and applications.
Web services is a more modern implementation of the same system-to-system principle, except that it is based on internet protocols and standards. Web services typically consist of one web-based application, say a tracking system that needs to get the latest carrier schedule, sending a message using coded internet protocols to another web-based system. In response, it gets the information back in the same coded internet protocol.
In logistics, there is a large body of communication that takes place via EDI. In all likelihood, that will remain the case and perhaps even be expanded. Adding a new trading partner to an existing EDI implementation represents a fractional, incremental cost and provides scalable integration. However, where web services are available, it makes sense for new trading partner relationships to be implemented using web services.
Over the next few years, most organizations will continue to implement and maintain both forms of structured communication and integration. There is generally less sizzle associated with these technologies but they still play a strong, integrative role in smoothing supply chains.
For more about Web services see Turtorialspoint.com
Blockchain technology is often confused with or used interchangeably with Bitcoin. In fact, Bitcoin, the digital payment “currency” is an application that is based on underlying Blockchain technology.
Blockchain technology relies on five key components that give it the strength to form a platform for applications that require a high degree of trust, such as finance:
- A historical transaction-tracking database (also called a “ledger”), which is stored on thousands of distributed computers, thereby avoiding a single point of weakness
- Peer-peer transactions that eliminate a middle man (most certification authorities and financial institutions are middle men)
- Constant synchronization – say, every 10 minutes – across the distributed network
- Heavy use of cryptography for security
- Public inspection of the records to ensure integrity
The term itself comes from the fact that every computer on the distributed network stores transactions in a “block” and these blocks are synchronized in a “chain” across the computers on the network.
The net effect is that making an unauthorized change to the data on any one computer puts it out of synch with the synchronized blocks on the other computers. Further, due to the constant synchronization, it becomes impossible to alter the historical record.
The result is a highly secure way of proving trust in transactions. It is foreseeable that Blockchain (or Bitcoin) technology could be used on a large scale to make financial payments and to keep real estate records, online ID verification and even voting records. Currently, stock exchanges such as NASDAQ and the Australian ASX are experimenting with Blockchain for securities transactions; and countries such as Estonia are working with governance programs ranging from identity cards to marriage certificates.
Wide adoption is slowed down by the speed of the system and risks associated with early adoption; however, the next decade should see continuation of the excitement generated by Blockchain and wider adoption.
In the logistics world, the most immediate application includes self-settling invoices, payments systems and ultimately verifiable devices in the Internet of Things. Further, the use of Bitcoin can make previously inaccessible applications, like online payment for freight forwarding transactions on a website, a distinct possibility.
Everything we do online or on our smartphones generates data. Additionally, Software as a Service (SaaS) and cloud computing are getting more ubiquitous.
Enterprise Resource Planning (ERP) systems are becoming more widely available to businesses of all scales and sizes, and these businesses are using web-based technologies to deepen integration of their supply chains.
All of these trends generate lots of data that require ever-bigger databases, which is where the term “big data” originally comes from. They also require newer ways of thinking to cope with and manage the explosion in data volume.
By one account, our accumulated data will have grown from 4.4 zettabytes at the end of 2015 to nearly 44 zettabytes by 2020. That is equivalent to 44 trillion gigabytes. It means we will be adding 1.7 megabytes of new information every second for every human being.
The proliferation of data is both a problem and an opportunity. There are two obvious questions it raises:
- How do we manage this data explosion? That’s a technology answer that involves the use of specialized databases like Hadoop and the evolution of skills sets and professions like “data scientist”
- What do we do with the data? That’s something that explains the growth in the fields of data science and predictive data analysis
Currently, data science and predictive data analysis are growing as a discipline. Universities and other educational institutions are coming to grips with the value of the algorithm in business and as organizations learn to manage and go beyond the “business intelligence” wave of the last decade.
Logistics and supply chain planning is an area particularly amenable to the application of Big Data methodologies. Predictive analysis and data modeling are helping with development of algorithms that maximize demand forecasting, inventory balancing and route optimization.
Additionally, supply chain organizations are able to leverage Big Data to create better service opportunities. This could range from generating customized discount offers for each retail shopper to making “on-the- fly” recommendations from prior history for what else the consumer might find of interest.
Go to Forbes.com for 20 mind boggling facts about Big Data.
Machine learning is a newly popularized term in the supply chain world, one closely linked to the Big Data trend.
The term refers to the concept of a computer learning to make sense of patterns from data analysis without necessarily being programed to do so. Machine learning is focused on the algorithm, rather than the data itself. The focus is to generate those algorithms that can both learn from and then turn around and make predictions based on the data.
Logistics and supply chain problems are especially amenable to solving through machine learning, particularly as the size of the data sets grow. Network optimization, demand forecasting and supply planning are all problems that can use large data sets to reduce risk in the supply chain.
Paperless technologies continue to evolve, even if they have become pushed aside by sexier technologies such as drones and machine learning.
The incorporation of paperless technologies continues to help logistics providers and their customers reengineer process flows, reducing process friction through streamlined administration. The benefits are felt through the entire supply chain as document repositories can be shared with trading partners and customers.
The pace of growth has been exponential, supported by three main underlying trends:
- Advent of scanning technologies to the desktop
- Continuously dropping costs of data storage
- Cloud and web-based access to stored images
The resulting paperless environment from electronic document management systems is making it easier to provide self-service opportunities to customers and trading partners in the supply chain.
IT Ops – Agile
Clearly, the array of new technologies on the horizon demonstrates that the pace of change and adoption is quickening.
First, the arrival of new technology is itself driving demand for even more advanced innovation and applications. Second, developers and implementers are under incredible pressure to deliver the benefits of technology sooner.
One result has been a change in organizational behavior. Companies are adopting new ways of working in order to speed up systems development and technology implementation. Since the turn of the century, information technology has seen an increasing reliance on “lighter development methods” called Agile methods. While some of these methods have been around longer, it’s clear that nearly everyone is using them in some form.
Agile calls for cross-functional collaboration between the day-to-day business and the technologists, working together in the simultaneous development of new applications. Agile methodology emphasizes speed to market and an iterative approach to technology development, particularly software development.
A number of Agile approaches are available for organizations to use. Each places an emphasis on collaboration and short bursts of iterations to reduce risk, particularly in high-cost technology development and deployment fields.