THIS EXTRACT FROM THE NEW (AB)NORMAL: RESHAPING BUSINESS AND SUPPLY CHAIN STRATEGY BEYOND COVID-19 BY
YOSSI SHEFFI IS © 2020 AND REPRODUCED WITH PERMISSION FROM YOSSI SHEFFI, TRANSOFT INC.
Between the deep uncertainties wrought by the pandemic and the inability to travel or even go to the office, companies and managers sought understanding—and, in particular, visibility—into what was taking place throughout their global supply chains, and some semblance of control through data. Where is the shipment? When will the part be in stock again? How much product does the customer really need? Is the quality of a new supplier as good as they claim? Can the supplier make the quantity it promised by the deadline?
In the computer era, data has always been a source of competitive advantage. “Technology and digitalization enable end-to-end visibility across the supply chain,” said Joachim Christ, head of procurement at Merck. “Having this visibility—ideally in real time—is key to proactively run risk analyses and react fast when a crisis hits.”1
With COVID-19-imposed restrictions on in-person gatherings, data and its analysis became even more important. More than ever before, people wanted and needed to know what was really happening in the supply chain to separate fact from fiction and fear from reality. More broadly, the trend toward more data from more parts of the supply chain is a trend toward more control of the supply chain through digital technologies. Those technologies also enable contact-free operations—reducing the need for workers to touch potentially infectious surfaces or come close to other workers. Importantly, the technologies create data streams that enable process improvements.
Better shipment visibility
Express parcel carriers like UPS and FedEx pride themselves on offering almost real-time shipment movement visibility for shippers and consignees. By scanning every package at handover points along the journey, these carriers can show the customer the progress of their shipment at certain intervals. Unfortunately, the workaday world of larger shipments of ordinary goods moving between commercial enterprises does not provide such simple visibility.
Whereas UPS, for example, has direct end-to-end control of almost all of the facilities, conveyances, and people involved in transporting a parcel, the same cannot be said for most freight shipments, especially in global trade. For global trade, each shipment typically involves a series of independent truck, rail, and ocean movements managed by both independent carriers and intermediaries. Moreover, shipments might sit for a time in the no-man’s-land of a port’s container yard awaiting customs approval or the pickup for the next leg of the journey. The result is that most businesses cannot track a shipment seamlessly from an overseas factory to its destination.
Shippers (the beneficial owners of the cargo, like manufacturers, retailers, distributors, and hospitals) and carriers (the owners and operators of transportation assets) are working on improving visibility in transportation using technology. Smartphones put an internet-connected optical code scanner, machine vision camera, and GPS locator in every pocket. As shipments get scanned, images get processed, and conveyance location positioning gets updated. The data can be used for near-real-time shipment location information and stored for later analysis. Companies store more and more such data in the cloud, where users anywhere can find relevant data sets and related specialized applications. These visibility applications are typically part of event management systems designed to alert companies to deviations from the normal (or planned) patterns of shipments and movements.
In the broader world of supply chains, technology adoption faces a special challenge. Unlike the situation with the integrated carriers (UPS, FedEx, DHL, TNT, and postal services), shipment visibility—even just from a factory in Asia to a retailer in the US—requires more than just one company to have the needed sensors and other hardware and software to achieve continuous visibility into goods’ flows. Supply chain visibility also needs all (or at least enough) participants to adopt compatible technology and agree on a set of standards so that they can all use the data.
Many companies have not mapped their inbound supply chains and may not even know the physical locations of their direct (Tier 1) suppliers’ manufacturing and distribution facilities. However, what supply chain and material handling managers really want is more than just visibility of the inbound shipment from Tier 1 suppliers into their facility. They would like to know as early as possible if there is a problem—late shipment, quality issues, shipment damage, customs delays—anywhere in the supply chain, so they have time to react. For this to happen, they need visibility beyond their Tier 1 suppliers into deeper tiers of their supply chain. (See Figure 1.)
[Figure 1] An industry supply chain schema
Enlarge this image
Visibility into deeper tiers of the supply chain is a perennial challenge that, as yet, almost no manufacturer or retailer has cracked. The reasons for this are not so much technological (even though conflicting standards and noncooperating software platforms do not help). Rather, most companies do not know who their deep-tier suppliers are. Tier 1 suppliers consider the identity of their suppliers—who are Tier 2 suppliers to the original equipment manufacturer (OEM)—a trade secret. And even in cases where an OEM can identify its deep-tier suppliers, it has no leverage over these suppliers and cannot compel them to share data, because the OEM itself is not a customer of these deep-tier suppliers. Furthermore, parts made by deep-tier suppliers may end up at higher-tier suppliers, serving not only many companies but also multiple industries. As a result, it can be impossible for an OEM to pinpoint deep-tier suppliers that make specific parts.
Other companies are using more technology to gain visibility on the retail and consumer ends. For example, while many companies are wondering what panicked consumers are doing with all the products they bought during COVID-19 hoarding, Procter & Gamble (P&G) knows. The company knows that people aren’t just buying more product such as Tide detergent in order to hoard it; they really are doing more loads of laundry during the pandemic. P&G gets this insight from data collected directly from the washing machines of a select sample of consumers.2
P&G has long invested in efforts to gain more visibility into how consumers use its products. Its marketing mantra is grounded in two “moments of truth” for products. The first moment is when a consumer chooses a product in the retail environment from among the competing products. The second is when the consumer actually uses the product. P&G monitors the first moment of truth through interviews, Nielsen data, and point-of-sale data. Previously, P&G would ask a select set of consumers to keep diaries of their experiences using its products in order to understand the second moment of truth, but technology now enables a paperless process. “Why do a laundry diary study when you can put a device on somebody’s washer and dryer that tells you exactly when they’re doing laundry, how many loads, what type of loads, etc.?” said Michael Lancor, Procter & Gamble’s director of consumer fundamentals and insights.3
The P&G example illustrates another trend accelerated by COVID-19. This kind of seamless, contactless digital data collection is enabled by the Internet of Things (IoT), which combines specialized sensors, low-cost computer chips, and ubiquitous wireless networking such as home WiFi or cellular phone networks. These technologies are becoming more sophisticated and less expensive, leading to the presence of sensors everywhere to measure, gather, and transmit data continuously to analysts and managers who can act on it.
Tackling the shipment visibility challenge
Every automobile has an average of 30,000 parts made by thousands of component suppliers scattered across the globe. The parts flow from these suppliers into automotive assembly plants using every mode of transportation and hundreds of transportation carriers. To coordinate the flow of parts, material handling managers need to know when those parts are going to arrive at the plant. In fact, they often need these arrivals to be prescheduled in order to manage the dock doors where the incoming trucks unload the shipments.
While carriers serving commercial enterprises can give shippers an estimated time of arrival of their vehicles to a plant, a store, a warehouse, or a hospital, this does not address the needs of transportation and material handling managers. What they really need to know is when particular parts needed to make particular products at a particular time will arrive. For this, they need to know which parts are loaded on each of the hundreds of trucks, railcars, ocean vessels, or airplanes transporting those parts.
In 2014, former Ford material handling manager and serial entrepreneur Lorne Darnell launched FreightVerify Inc. to tackle the challenge of merging the carriers’ information (about the location of their conveyances) with suppliers’ data (about the contents of their shipments) and cross-linking these data to the shippers’ stock-keeping unit (SKU) numbering schemas. He started by focusing on some of the most daunting inbound transportation challenges—those of the automotive industry. By 2017, the company was offering a cloud-based platform on which an automotive manager could look up any SKU number and find where all those in-transit parts were at any given time. For example, some may be on a truck at the plant’s yard waiting to be unloaded, others may be several hours away on a truck heading to the plant, still others may be on a railcar several days away, and even others may be offloading at a port. In all cases, FreightVerify gathers the data on the location of the parts (and the specific trailers, railcars, vessels, airplanes, and containers these parts are in) and transmits it directly and frequently from the vehicle to its platform for the receiving plant to see. In addition to providing key information such as the location of the part number and the vehicle carrying it, the software provides a very accurate estimated time of arrival, accounting for road congestion, weather delays, highway construction, border crossing problems, and so forth. Each shipment movement is based on a plan that the platform follows in real time, noting any deviation, since many of the loads follow complex routes involving multiple stops and relays.
Naturally, companies also use the platform as a source of business intelligence, to evaluate carrier performance and to identify long-term bottlenecks. In 2019, General Motors adopted the software for all movements into its assembly plants as well as for tracking finished vehicle deliveries and aftermarket parts. Ford followed suit, and FreightVerify began serving other automotive companies and then other manufacturers—and even hospitals.
Extending the use of shipment visibility beyond tracking, FreightVerify builds on it to minimize the use of expedited freight, a source of significant expenditures for all manufacturers. The FreightVerify platform has visibility into both the daily production schedule at an OEM automotive plant and to the inventory levels of all needed parts. It is common in manufacturing to face problems of low inventory of several parts each day. The software identifies the shortages of specific parts given the production schedule and the available inventory, and then scans all the tens of thousands of trucks moving in the OEM’s system in real time. Since it knows the contents of each truck, it can identify the location of each needed part; choose the best truck to divert (or offload the part); and finally, schedule or divert another truck to pick it up to ensure not only that the shortage will not be a problem, but that no new shortage will result from the diversions at any plant in the system. This entire process is handled by artificial intelligence (AI)-infused optimization software, replacing personnel and drastically reducing expensive expedited shipments. The result is many fewer calls to suppliers to expedite the needed parts by flying them to the plant or trucking them using specialized (and expensive) carriers.
FreightVerify also integrates the in-transit tracking of SKUs with indoor tracking. Using a new generation of sensors, the company tracks movement of items inside various facilities. For automotive companies, the platform tracks returnable transport containers (the rigid containers carrying engines, transmissions, gas tanks, and other large parts inside the truck) from the supplier, through the OEM plant, and back, reducing substantial losses due to shrinkage. For hospital systems, it tracks supplies from suppliers to the patient’s bed.
As the pandemic was creating havoc in the reliability of transportation movement, such shipment visibility became more important than ever. Furthermore, going forward, such capabilities allow companies to improve service while cutting costs.
Preparedness = visibility + transparency
Supply chain problems such as supplier product fraud or customers gaming order allocation systems mean that to be relevant, supply chain visibility requires transparency on the part of supply chain partners. That is, suppliers and customers must be willing to share timely and accurate data with partner companies. Transparency on the part of suppliers means sharing essential data on their capacities, sourcing of key materials, and deeper-tier suppliers that might affect the supplier’s ability to deliver quality and quantity on time. Transparency on the part of customers means sharing downstream inventory and sales patterns so the supplier can plan its production.
Transparency enables cost-effective resilience. Correcting for unplanned situations requires physical resources in the form of both redundancy and flexibility of assets, labor, and processes. The ability to deal with unplanned events also depends to a large extent on the amount of forewarning—the time lag between receiving data about a disruption and the impact of that disruption. Such a lag can be used to redirect shipments, find alternative sources of supply, release inventories, alert customers, and more. Without it, a company will have to keep redundant capacity and large inventories in order to avoid stockouts, production disruptions, backordering, or worse: lost customers. Transparency provides greater forewarning.
In essence, transparency and visibility provide the eyes, ears, and nose for the supply chain while physical resources provide the muscles. The brains of the organization then connect the sensory apparatus of transparency to the muscles of resilience. Those brains include both people and technology. … .
Making hand-offs that are hands-off
“You are still handing them [drivers] paper bills, and they are signing them and exchanging them,” said Tiffany Parker, a potato grower in Florida. “There’s a lot of contact you could probably avoid.”4 COVID-19 pushed small shippers like Parker Produce Co. and the 3.5 million truckers in the U.S. to look for ways to eliminate paperwork.
Before COVID-19, people thought nothing of touching a keypad, signing in on a clipboard, or handing a credit card or photo ID to a cashier or lobby security officer. The fact that the SARS-CoV-2 virus can survive on surfaces for hours (sometimes days) applies pressure on supply chains to go paperless and, even further, contactless. Although supply chains do use a lot of electronic communications and documentation, some steps still require paper documents, especially in transportation and import/export transactions. Both of these activities involve legal or government documents such as purchase orders, bills of lading, and inspection certificates that must be scrutinized and signed by different parties as the goods travel.
One key example of supply chain documentation that is still often maintained in paper form is the bill of lading, which is the legal record of the traded goods. It goes with every shipment and must be signed by the carrier’s driver (in triplicate) and the consignee (after comparing the information on the bill of lading to the information in the purchase order). After many years of running 21st century companies with 19th century technology (bills of lading actually originated in the 16th century),5 almost every loading dock, warehouse, and logistics management office is looking to replace paper documents with digital versions.
Part of the challenge to going fully paperless (and contactless) is universal adoption of standardized electronic document systems among all the parties. At the very least, this involves the supplier, the carrier(s), the consignee, and government authorities. For international shipments, the parties can also include banks, multiple carriers, and various government bodies such as customs, export control, import inspections, and others at both ends of the trip. To be digital, all of these parties must all be able to access the right documents, enter data into them, be able to provide legally binding signatures, and yet not be able to tamper with the underlying information in the document. Such a system must be fully secure in order to manage trillions of dollars in trade and be acceptable to competing parties and all participating governments. One approach, being developed and tested by various companies, uses the blockchain technologies popularized by cryptocurrencies (such as Bitcoin) to create a secure, tamper-resistant, distributed database. Blockchain-based systems do not require a central managing authority and can ensure the integrity of the transactions without it.6
Another typical supply chain activity that requires hands-on, in-person interaction happens as companies work with suppliers to develop, refine, and manufacture new products. Representatives of the customer and supplier fly to present product designs, review materials, inspect prototypes, and assess manufacturing samples. COVID-19 brought an instant end to all that travel and even made express-air shipments of samples an expensive and unreliable process.
Though the trend of virtual product development existed before COVID-19, the pandemic greatly accelerated its rise. Instead of travel and express parcels, virtual product development uses instantly delivered digital files, 3D models, and high-resolution video for collaboration. Even before the pandemic, some companies (especially those in apparel) had been adopting virtual product development for speed: the shorter the development time, the better the company can handle fickle market trends. Digital design processes enable around-the-world, 24-hour, rapid development—an Asian supplier or innovation center can work during their day (overnight for U.S. headquarters) on a new product and send the digital results for early morning review at headquarters. The review staff—marketing, sales, customer representatives—can take all day and send end-of-day feedback that arrives early the next morning (local time) at the supplier.
Retail is another arena looking for contactless transactions. Walking into one of Amazon’s Go grocery stores seems like stumbling upon a sedate and leisurely looting incident. People seem to be plucking items off the shelf, putting them in their bags, and then walking out without paying. But that’s exactly what Amazon wants customers to do. The posted instructions say, “Use your app as you enter. Bag as you shop. JUST WALK OUT.”7 Scanning a customer’s smartphone on entry identifies the customer for billing purposes. Cameras and sensors throughout the store record everything and use computer vision to know exactly who is taking what (or putting it back). The store needs no checkout counters, cashiers, or baggers.
Remote control supply chains
Two-way flows of data enable both remote visibility and remote control. For example, contract manufacturer Flex created Flex Pulse, which is both a software-based system and a network of physical “control tower” facilities for using supply chain visibility to manage and improve supply chain performance. The software enables real-time visibility and control for some 6,000 users on their desktops, laptops, and mobile devices.
Nine Flex Pulse centers around the world have walls of large interactive touchscreens that display a wide range of user-selectable information, such as real-time news of supply chain disruptions, social media streams, maps of global in-transit shipments, heat maps of inventory levels, percent-of-revenue pie charts, maps of exceptions, graphs of lead times, and other supply chain data. Each Flex Pulse center acts as a network operations center. Operational information is also available on user desktops, which helped users navigate the situation during the pandemic. Flex’s chief procurement and supply chain officer Lynn Torrel and her associates used Flex Pulse to manage the supply chain during the COVID-19 crisis: “We created some specific dashboards to address COVID-19 so that we could understand at a customer level, at a site level, and at a part-number level where there potentially could be impacts,” she said.
COVID-related physical distancing, limited travel, and restrictions on group gatherings all accelerated the trend toward using telepresence technologies for control and management. For example, even before the pandemic, Walgreens used in-store sensors to monitor each of its 9,500 U.S. locations—mostly for security. But it also uses the system for other critical situations. For instance, electrical power sensors alert Walgreens to blackouts, which lets the company quickly contact the power company, supply backup generators, or send refrigerated trucks to recover perishable inventory. High-definition cameras allow managers to monitor inventory and manage personnel to serve customers faster. The video signals can feed into AI-based image recognition systems that either help measure the normal ebb and flow of activity or spot anomalies that need attention. These exceptions could include a wet cleanup in Aisle 5, a forgotten pallet by a dock door, a blocked conveyor belt, or a surge in customer arrivals in the parking lot that portends the need for more checkout lines in the next 30 minutes.
Video cameras and sensors also allow a worker to be at home and in the factory, warehouse, or store at the same time. The next step is the remote control of simple facility functions, leading to remotely operated robots, and even the science fiction concept of a “dark facility,” which is fully automated and operates on its own.
The doctor will “see” you now
While contactless, physically distanced interactions increased in all areas and industries when the COVID-19 crisis erupted, they exploded in health care. To serve their patients without spreading the virus (or catching it), doctors and nurses renewed the practice of house calls, but with a modern twist: Telemedicine over the internet let doctors see patients in their own homes without physically visiting them. Home-delivered sampling kits enabled patients to collect and send routine body fluid samples for lab analysis. Even new COVID-19 tests can now be done by patients at home and sent to laboratories for analysis.
Patients bought and used blood pressure monitors, pulse oximeters, glucose monitors, thermometers, and heart rate monitors to measure key health parameters. Many of these devices can connect to the internet, smartphones, or phone lines to automatically upload data for review by health care providers. In addition, smartwatches and fitness devices used by 21 percent of Americans can collect health-related data 24 hours a day, 365 days a year.8 These wearable digital devices—personal IoT—can track everyday patterns in physical activity and heart rate to spot changes in energy levels, body stability, heart health, and coughing/sneezing. Such data is fast becoming part of patients’ health records to provide visibility to doctors and alerts that trigger a timely diagnosis and treatment.
Secure, online health portals let patients access nurses, doctors, lab results, and health information at any time. They also let them access their prescriptions; COVID-19 spurred a big increase in pharmaceutical e-commerce.9 Overall, most patients using telehealth seemed to like it. Almost half of U.S. adults have used telemedicine since the beginning of the pandemic, mostly for convenience as well as to reduce anxiety about infection risk.10
Digitizing health care creates torrents of data on individuals, diseases, treatments, outcomes, and population health trends. COVID-19 has accelerated the use of big data and AI in health care for prediction, screening, contact alerts, faster diagnoses, automated deliveries, and laboratory drug discovery.11 For example, AI platform BlueDot “uses big data analytics to track and anticipate the spread of the world’s most dangerous infectious diseases” and was able to warn its clients about the COVID-19 outbreak as early as December 31, 2019.12 BlueDot’s founder, Kamran Khan, said, “On one hand, the world is rapidly changing, where diseases are emerging and spreading faster. On the other hand, we happen to have growing access to data we can use … to generate insights and spread them faster than the diseases spread themselves.”13
As with so many other technologies, telemedicine predates COVID-19 by decades, but it needed the pandemic to drive widespread adoption by motivating both patients and health care providers to use it. The pandemic has been forcing people to adopt new habits, some of which are likely to persist even as the virus recedes. And as with so many other technologies, in this book, telemedicine still needs more development. Any U.S. patient who has tried to coordinate care for themselves, children, or aging parents has probably experienced the frustrating lack of integration between different medical facilities.
1. Jennifer L. Schenker, “How to Rebound Stronger From COVID-19,” The Innovator (blog), Medium (May 8, 2020): https://innovator.news/how-to-rebound-stronger-from-covid-19-675b20602178
2. Sharon Terlep, “The U.S. Consumer Is Nesting. Will That Last?” Wall Street Journal (May 2, 2020): https://www.wsj.com/articles/the-u-s-consumer-is-nesting-will-that-last-11588392011
3. Stephen Whiteside, “How P&G Is Approaching the next Tide of Market Research,” Informa Connect (March 12, 2019): https://informaconnect.com/how-pg-is-approaching-the-next-tide-of-market-research/
4. Jennifer Smith, “Coronavirus Upheaval Triggers Corporate Search for Supply-Chain Technology,” Wall Street Journal (April 29, 2020): https://www.wsj.com/articles/coronavirus-upheaval-triggers-corporate-search-for-supply-chain-technology-11588189553
5. Daniel E. Murray, “History and Development of the Bill of Lading,” University of Miami Law Review 37, no. 3 (September 1, 1983): 689–732, https://repository.law.miami.edu/umlr/vol37/iss3/13
6. Jan Keil, “Blockchain in Supply Chain Management: Key Use Cases and Benefits,” Infopulse (blog), (August 8, 2019): https://www.infopulse.com/blog/blockchain-in-supply-chain-management-key-use-cases-and-benefits/
7. Nick Statt, “Amazon Is Expanding Its Cashierless Go Model into a Full-Blown Grocery Store,” The Verge (February 25, 2020): https://www.theverge.com/2020/2/25/21151021/amazon-go-grocery-store-expansion-open-seattle-cashier-less
8. Emily A. Vogels, “About One-in-Five Americans Use a Smart Watch or Fitness Tracker,” Fact Tank (blog), Pew Research Center (January 9, 2020): https://www.pewresearch.org/fact-tank/2020/01/09/about-one-in-five-americans-use-a-smart-watch-or-fitness-tracker/
9. Sophia Kunthara, “Telemedicine Is Becoming More Popular. That’s Good for Prescription Delivery Startups” Crunchbase News (May 14, 2020): https://news.crunchbase.com/news/telemedicine-is-becoming-more-popular-thats-good-for-prescription-delivery-startups/?
10. Jeff Bendix and Logan Lutton, “How Doctors Can Develop Patient Relationships Using Just Telehealth Visits,” Medical Economics (July 21, 2020): https://www.medicaleconomics.com/view/how-doctors-can-develop-patient-relationships-using-just-telehealth-visits
11. Kat Fu Lee, “Covid-19 Will Accelerate the AI Health Care Revolution,” Wired (May 22, 2020): https://www.wired.com/story/covid-19-will-accelerate-ai-health-care-revolution/
12. Steve Mollman, “How Artificial Intelligence Provided Early Warnings of the Wuhan Virus,” Quartz (January 25, 2020): https://qz.com/1791222/how-artificial-intelligence-provided-early-warning-of-wuhan-virus/