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From Desert Storm to the retail store: Five technologies that are closing global supply chain gaps
Both government and private industry play important roles in developing technology, from concept to implementation. Very often, a technology developed in one realm is adopted by the other, and the benefits of the technology become more widely available.
For example, the U.S. government, specifically the Department of Defense (DoD), paved the way for the use of advanced solutions in private industry by deploying the world's largest visibility network back in the early 1990s. After Operation Desert Storm left "iron mountains" of abandoned cargo and essential equipment in the desert, which would have proved extremely dangerous if it fell into the hands of the enemy, the DoD used a sophisticated visibility network to track and trace cargo in real time, allowing the military to know the status of and maintain control over moving cargo.
This project was very successful because it provided improved visibility, better tracking, and significant cost savings for the world's largest and most complicated supply chain. But the technology and application developed for this project had an impact far beyond the U.S. military: Today, commercial organizations that move everything from pharmaceuticals to consumer packaged goods are seeing the impact that better tracking and analytics can have on their global supply chains.
The Desert Storm visibility solution also solved some of the longstanding challenges associated with deploying a global supply chain and was the forerunner of many of today's supply chain analytics solutions. Since the early 1990s, the value of advanced analytics solutions has been recognized not only by government operations, but also by private industry as companies found ways to improve their business processes through the use of analytics, specifically the data generated by this technology.
This trend will undoubtedly continue. According to a recent Business Insider Intelligence Report, the logistics industry is primed to see technology investments of roughly US $112 billion by 2019, especially to automate warehouses and shipping.1 Many public and private organizations have already begun to implement cutting-edge logistics technologies, from high-tech sensors to predictive technologies that optimize the supply chain.
Which technologies will have the biggest impact in the near future? Here are five areas where both government and commercial supply chains continue to effect significant change through the use of technology and data analysis.
1. Cloud technology
Cloud technology, also called cloud computing, is a model for delivering information technology (IT) services from the Internet via Web-based tools and applications, rather than through a direct connection to a server. The commercial use of cloud technology has driven government organizations to embrace the cloud for cost savings. Earlier this year, for example, the U.S. National Security Agency (NSA) announced that it would move its infrastructure relating to its Intelink portfolio, which provides the national security enterprise with information sharing, collaboration, and discovery services, to Amazon's government cloud for cost savings. The DoD, the National Geospatial-Intelligence Agency, and the Central Intelligence Agency (CIA) had previously announced their plans to make the switch.2
According to the NSA's chief of engineering, cloud technology shows significant IT efficiencies and will allow the agency to save 50-55 percent on infrastructure costs alone.3 The research firm IDC Government Insights estimates that in fiscal year (FY) 2014, the federal government spent US $2.3 billion on private cloud (services delivered from its own data center to internal users), and just $173.3 million on public cloud (services provided by a third-party vendor). IDC expects U.S. federal government spending on private cloud will reach more than $3.0 billion by the end of FY 2015 and exceed $5.9 billion in FY 2018. IDC also is forecasting that U.S. government spending on public cloud will soar to over $3 billion in FY 2017.4
The ability to store and host large volumes of data on cloud infrastructure, simply and more cheaply than ever, could potentially have a massive impact on government and commercial supply chains. However, it is the management of that data through data mining and analytics that will unlock that unforeseen potential and enable a shift from reactive to predictive and prescriptive supply chains.
2. Network infrastructure
It is easy to forget that seven years ago the iPhone did not even exist. A recent study by Cisco Systems reported that since 2008, the average monthly data use by U.S. smartphone users grew from 36 MB to more than 1.4 GB.5 At the same time, we are seeing significant growth in the availability of low-power wide-area (LPWA) connections that are specifically designed for machine-to-machine (M2M)-level communications. LPWA, which facilitates low-power, low-cost transmission of data in certain types of devices, will be useful in enabling the "Internet of Things" (IoT)—the network of Internet-enabled objects that can wirelessly send and receive data, and in some cases act in response to that data.
Advancements in the underlying network infrastructure—from fixed-location radio frequency identification (RFID) readers that only provide information on milestone-based events to real-time 2G, 3G, 4G, and LTE high-speed mobile wireless communication—has been the catalyst behind the growth in both the number of devices and the data produced by those devices. At the same time, the "per-byte" cost of wireless communication continues to plummet. The ability to tag an asset or a person with a low-cost sensor and then have all of that data carried across a high-speed, high-availability network is the biggest contributor to the explosion of information that is driving the expansion of the Internet of Things.
3. Real-time visibility
With an integrated link between real-time asset information and planning systems, defense forces are in a much better position to match execution to logistics plans. Real-time visibility of supplies helps to identify high-threat zones, flag suspect cargo, and understand hazards to receiving troops.
In the commercial world, companies also use real-time visibility to monitor supply chain operations, especially for high-value assets like pharmaceuticals that have crucial delivery timing and government-imposed regulatory-compliance requirements. For example, for supply chains with tens of thousands of assets stored on-site at any given moment and hundreds of thousands of assets moving in and out of their facilities every week, detailed and accurate knowledge of asset status, location, and security is critical. With real-time visibility, organizations are afforded near 100 percent knowledge accuracy for assets stored in and across the hundreds of thousands of containers, pallets, vehicles, and shipping crates in their supply chains. Thus, real-time visibility reduces personnel costs, improves response times, and decreases asset spoilage.
4. Predictive analytics
Machines—sensors in particular—generate massive amounts of data every day. Many organizations store some of this information but are unable to tap into all of it or uncover all of the powerful supply chain intelligence it offers. This is where the value of predictive analytics lies. It is not about the sensor, or the "data producer"; rather, it is about data management.
Government organizations have taken steps to start implementing predictive analytics, a process in which modeling and machine learning strategies are used to discover trends and patterns in real-time and historical data; that analysis is then used to predict outcomes. An example would be the customizable geo-fences that define "safe zones" for high-value shipments and cargo. In real-world applications, predictive analytics can predict high-risk zones based on such information as where risk events occur, how often risk events occur at specific locations, and what time of day risk events occurs. In the case of geo-fences, we have seen predictive analysis related to cargo shipments across high-risk corridors lead to a nearly 38 percent reduction in cargo loss due to theft by anticipating such risk events and successfully avoiding those situations and locations.
Now, real innovation in supply chain analytics is happening in the commercial sector, too. Recently, a large consumer packaged goods (CPG) company that manufactures a high percentage of its products realized that it needed a supply chain visibility solution that could help it to better monitor, predict, and ultimately improve the timeliness of its deliveries. Its visibility was limited to the day of delivery, and it lacked precise and accurate data about the time of shipments' arrival. The company had been relying on truck drivers to provide estimated time of arrival (ETA) and on employees to manually update the status of shipments.
In order to better predict transit times, the CPG company needed a purpose-built analytics application that processed real-time and historical data. Working with our company, the CPG company rolled out an analytics solution on its busiest transit lanes to track and secure a portion of its global shipments. With real-time and historical data, the CPG company was able to understand carrier and transit-lane patterns and optimize its transportation decisions. For example, the analytics application allowed it to determine the optimal times for departures based on day of the week and time of day, as well as on the number of risk events and delays per carrier and transit lane. As more data was acquired, advanced machine learning capabilities allowed the analytics algorithms to become "smarter" and more accurate. This has led to improved planning for shipments, cross-docking, and on-time arrivals.
5. Global asset tracking
The most challenging, fluid, and dynamic supply chains in the world are those that support military forces wherever they are deployed, including in extremely remote and dangerous areas. As the nature of warfare and peacekeeping has evolved over time (compare today's battle against ISIS vs. the period of the Cold War), the need to have precise, real-time logistical information in the hands of military planners and logisticians has become ever more critical. At any moment there are literally tens of thousands of physical assets in motion across an operational theatre. Not surprisingly, the U.S. Army, NATO, and their allies have aggressively evaluated and deployed technology that creates real-time reports on asset location and status in order to give decision-makers the information they need to successfully complete their assigned missions.
An example of the need for this real-time visibility into asset tracking and monitoring is the DoD's globalization efforts, which originally focused on the tens of billions of dollars in abandoned (and filled) shipping containers—the "iron mountains" referenced at the beginning of this article—that were left in the desert after Operation Desert Storm and Operation Desert Shield. Losing visibility into these items effectively armed those who would again become America's enemies. As a result, the U.S. government identified a global need for better insight into the location and movement of cargo and high-value resources, with the objective of ensuring the security of assets around the world while also saving time and money.
The U.S. Department of Defense sought a solution that would provide real-time information on asset location and status. It chose an approach called Radio Frequency In-transit Visibility (RF-ITV), a comprehensive array of hardware and software products, including active radio frequency identification (aRFID) sensors, readers, and related solutions for global asset planning and tracking of personnel, equipment, and sustainment cargo worldwide. Using this software and associated solutions, the DoD and allied militaries are able to leverage real-time sensor data to track and monitor high-consequence assets, improving operational efficiency and achieving logistics excellence across all DoD and NATO initiatives.
With the total asset visibility afforded by this information system, these allied forces are able to confidently plan and execute complex missions in harsh environments throughout the world. Such capabilities are being adapted for commercial supply chains as well. Military-grade asset tracking can help commercial organizations to expand and fine-tune their operations in emerging markets, where they may they face some of the same challenges that the military encounters in remote and risky areas.
Moving innovation forward
The expanding adoption of cloud and mobile technology, together with the rise of predictive analytics and real-time visibility solutions have transformed the way commercial and government organizations think about the global supply chain. Much of the innovation in these areas originated with government supply chains in the 1990s; now industry has catapulted that innovation forward yet again.
Technological advances are making massive amounts of data available to organizations today. It is crucial to be able to manage data, understand it, and make optimal use of it to enhance and improve business processes. By utilizing the five data-related innovations discussed in this article, global supply chain organizations—whether commercial or government—can not only fill information gaps, but they also can significantly enhance their operations and performance wherever they operate.
1. Business Insider.
2. Logicworks, "Government cloud on the rise: NSA and DOJ move to Amazon Web Services," June 30, 2015.
3. Logicworks, June 30, 2015.
4. "U.S. Federal Cloud Forecast Shows Sustained Growth Through 2018, According to IDC Government Insights," Sept. 16, 2014.
5. Cisco Systems, "Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update 2014-2019 White Paper," February 3, 2015.
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