managing supply chain complexities intelligent ports … · expanding & innovating to fulfi l...
TRANSCRIPT
GETTING THE RIGHT 3PLExpanding & Innovating To Fulfi l Expectations
MANAGING SUPPLY CHAIN
COMPLEXITIES
INTELLIGENT PORTS
RISE OF GLOBAL
CONTROL TOWERS
ISSN 2010-4235 MCI (P) 121/07/2013 PPS1672/01/2013 (022917)May-June 2014
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THIS WILL (NOT) WORK
GETTING THE RIGHT 3PLExpanding & Innovating To Fulfi l Expectations
MANAGING SUPPLY CHAIN
COMPLEXITIES
INTELLIGENT PORTS
RISE OF GLOBAL
CONTROL TOWERS
ISSN 2010-4235 MCI (P) 121/07/2013 PPS1672/01/2013 (022917)May-June 2014
www.LogAsiamag.com
In the weekends leading up to this issue, I have been catching up with some non-fiction reading of an old interest of mine – World War military history. The campaigns have been fought, victors and losers declared and the loss of life incurred, an immeasurable loss to the relatives and loved ones who survived. While we are not here to debate on the spoils and annals of war, one thing that never ceases to fascinate me, no matter how many times I re-read it, are the tactical miscalculations made by leaders and politicians of those wars.
One famous mistake made on the side of the Allies was the decision not to stop the Nazis when they declared Anschluss on Austria. Then Prime Minister Chamberlain insisted on a wait and see tactic hoping that Hitler would stop and be satisfied. But as history pointed out, the rot never stopped and what resulted was tens of millions of deaths, which could have been avoided in its entirety in my opinion. Another mammoth miscalculation was by Hitler himself in the disastrous Russian campaign in which an otherwise invincible looking force was reduced to tatters by (get this) one of the worst Russian winters in history (thank heavens for this!).
Tragedy can and should always be avoided if there is proper planning in the value chain. Proper planning means a sound understanding in the complex hierarchical mechanics of an organisation. It is the ability of the leaders to see the important value of the most critical parts of the business structure and not let personal shenanigans rule the mind. The road to hell is not paved with good intentions – it is paved by misguided albeit good intentions. Supply chain management in this case is a complex yet essential component to be managed by today’s business leaders. They cannot avoid it; even more so, put it in the peripheries of their planning.
CEOs of SMEs (Small Medium Enterprises) in the manufacturing sector must break out of the “stop-gap” mentality when it comes to problems that arise in the supply chain. While cost is always an immediate concern, ROIs need to be looked at from a longevity vantage point in my opinion. Mindsets need to be reframed to see the link between business strategy and the supply chain. The new CEO Series segment which will run for the next five issues (this being the first of six) will attempt to guide C-Level executives to adopt strategies in investing greater time and eventual value to their supply chains.
So was the solution to drop the A-bombs in 1945 the right move? Probably or probably not would be amongst the many answers but I think the question to be asked is: Do we really need history altering decisions that will cause immense ramifications to meet an end? Technically, not really if the right amount of attention is given to critical details in the overall strategy – now that will work.
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www.LogAsiamag.comMay-June 2014
[ STRATEGY AND BUSINESS ] 08
LINKING IT UP RIGHTG VENKATESH explains why 3PLs have to continuously expand and innovate to fulfil the expectations of their clientele in order to stay in business.
DOING IT 3D STYLE 14
3D Printing is set to turn manufacturing and potentially global supply chains on their heads. With the pace of its adoption and capabilities rapidly gaining speed, alongside a dramatic reduction in cost, technology experts say it represents nothing less than the beginning of a “Third Industrial Revolution”. By DONALD URQUHART.
[ CEO SERIES ] 18
MANAGING SUPPLY CHAIN COMPLEXITIES Business leaders find it difficult to manage their supply chains effectively. Is it really due to the complexity of the supply chain or is there something more fundamental within the organisation that needs to be addressed? STEPHANIE KRISHNAN, JOE LOMBARDO and RAYMON KRISHNAN look into this.
[ TRACK AND TRACE ] 20
GETTING THE CLEAR PICTURE Greater visibility into supply chains is possible with the use of image-based code readers. DIDIER LACROIX explains.
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CONTENTS
Logistics Insight Asia is published six times a year by Contineo Media Pte Ltd, located at 61 Ubi Avenue 1 #05-17 UB Point Singapore 408941. All rights reserved. Please address all subscription mail to Logistics Insight Asia at the above address, or Fax (65) 6521 9788. Annual air-speeded subscriptions for non-qualified subscribers is US$125. Single copies are available for US$25. Logistics Insight Asia Volume 8, Issue 3.
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[ SPECIAL FEATURE ] 24
THE ADVENT OF INTELLIGENT PORTS DEREK MAGGS discusses about the changing business models of port operators and their inevitable road towards becoming “intelligent ports.
[ EDITOR’S COMMENT ] 01
THIS WILL (NOT) WORK
[ INDUSTRY NEWS ] 04
• China E-Commerce Needs Better Logistics Support
• Singapore Manufacturing Output Up In March
• DHL To Open Warehouse Facility At Tampines Logispark In Singapore
• Menlo Opens Second Hub In Singapore
[ SOFTWARE AND SYSTEMS ] 27
THE RISE OF GLOBAL CONTROL TOWERS RICHARD STROLLO gives the facts to how these high tech nerve centres are redefining supply chains in Asia.
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] CHINA E-COMMERCE NEEDS BETTER LOGISTICS SUPPORT
SINGAPORE MANUFACTURING OUTPUT UP IN MARCH
According to news reports, Alibaba’s plans for a giant initial public offering in New York highlight vast potential for e-commerce in China – and the weak link the logistics industry must fix if explosive growth projections are to be reached.
The old warehouses that supply goods to customers across the world’s second-largest economy are clearly lacking the technology that has given rise to the Unit-ed States and Europe of Amazon.com. By 2020, China’s e-commerce sector will be larger than those of the US, Britain, Japan, Germany and France combined, consultan-cy KPMG said in a recent report.
To cope with the China surge, as much as US$2.5 trillion may need to be invested in buying land and constructing warehouses alone over the next decade and a half, ac-cording to one builder. That is drawing the attention of global private equity firms such as Blackstone and Carlyle as they seek to benefit from an anticipated invest-ment boom.
“Over the next 15 to 20 years, the real cost of building warehouses is going to be staggering,” said Jeff Schwarz, co-founder of Global Logistic Properties, the biggest
Singapore’s manufacturing output grew a stronger-than-expected 12.1 percent in March from a year ago according to news reports. This was helped by a surge in the production of oil rigs, pharmaceuticals and petrochemicals. On a seasonally adjusted month-on-month basis, manufacturing output increased by 6.1 percent in March, a tad below the 6.5 percent expansion re-ported in February, the Economic Develop-ment Board (EDB) said.
The output of the electronics cluster grew 8.7 percent year-on-year in March. Accord-ing to EDB, growth was mainly contributed by the other electronic modules and com-ponents and semiconductors segments.
The marine and offshore engineering segment, which is part of transport engi-neering, expanded by 45.1 percent, with several rig building and ship building pro-jects achieving milestone completion in March. Pharmaceuticals, a key segment within biomedicals, gained 19.4 percent due to a higher value-added mix of active
foreign builder of logistics facilities in China. With each new facility the size of several large sports stadiums, that trans-lates to about 2.4 billion square metres of new warehouses – an area close to two-thirds of the total land mass of Taiwan.
And Global Logistic estimates the US$2.5 trillion needed over the next 15 years will still only increase per capita fully auto-mated modern warehouse space to just a third of that in the US. Alibaba controls 80 percent of all online retail in China, and its logistics partners delivered five billion packages last year from deals struck on its internet marketplaces.
While transport infrastructure has kept pace so far with Alibaba’s rise, warehous-ing is a key to the supply chain across the e-commerce industry that logistics special-ists say is in serious need of a makeover: Boston has more modern warehouses than the whole of China, says Stuart Ross, head of Industrial at property consultancy firm JLL China. Less than 20 per cent of China’s warehouses are categorised as modern, with fully computerised tracking systems and the latest in retail technology, accord-ing to Global Logistic and other warehouse builders.
pharmaceutical ingredients being pro-duced, along with higher output of biolog-ics. The petrochemicals segment posted growth of 14.4 percent, as plants that started operations last year continued to ramp up their production.
Singapore’s manufacturing output, which
Many facilities serving Alibaba and its peers are in areas that are tough for trucks to access. They often lack raised loading bays to let packages simply roll off con-veyor belts into the back of trucks: instead, trucks are loaded and unloaded by manual labour. That is a headache that can cut into profits for e-commerce firms. Despite China’s wages being much lower than in the US, it can cost more than twice as much to transport goods in China, Global Logistic said.
Improving the logistics of China’s ware-houses has been prioritised by none other than Alibaba co-founder Jack Ma Yun. Last year, Alibaba announced a plan to lead a consortium to invest US$16 billion in the first phase of building a national logistics business, a unit of Alibaba to be chaired by Ma.
Beijing has also made a modern sup-ply chain a priority as it looks to build a consumer-driven economy.Since the be-ginning of last year, about US$22 billion has been earmarked by buyout firms, including Blackstone and Carlyle, and private companies to buy land and build new warehouses in China. – South China Morning Post.
includes manufacturing-related services, has been rising steadily since the middle of last year, in contrast to non-oil domes-tic exports which remain in the doldrums. Domestic exports declined 6.6 percent in March following an 8.9 percent increase in the previous month, IE Singapore reported earlier this month.
[ The output of the electronics cluster grew 8.7 percent year-on-year in March. ]
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DHL TO OPEN WAREHOUSE FACILITY AT TAMPINES LOGISPARK IN SINGAPORE DHL Supply Chain held a groundbreak-ing ceremony at Singapore’s Tampines LogisPark to unveil the blueprint of DHL Supply Chain’s Advanced Regional Centre, an integrated build-to-suit (BTS) logistics warehouse facility boasting an investment of more than S$160 million. This is a com-bined investment of approximately S$40 million from DHL and over S$120 million from Cache Logistics Trust, the appointed logistics real estate solutions provider.
With a warehouse floor area of over 90,000 sqm, the DHL Supply Chain Advanced Re-gional Centre will occupy the largest parcel of land in Tampines LogisPark, spanning nearly 60,000 sqm. It is set to increase DHL Supply Chain’s warehouse capacity in Singapore by 40 percent. The facility will also house Asia Pacific Solutions & Inno-vation Centre (ASIC), a joint development with the Singapore Economic Development Board (EDB).
The groundbreaking ceremony was graced by the guest of honour, Mr Teo Ser Luck, Minister of State, Ministry of Trade and In-dustry of Singapore.
“This S$40 million state-of-the-art facility will enable DHL’s regional customers in the aerospace, healthcare and technology sec-tors to benefit from the advanced technol-ogy and automation solutions,” said Jason Goh, Managing Director, DHL Supply Chain Singapore. “Coupled with the improved workflow processes, the automation tech-nology will reduce the time required to pick, pack and ship items, enabling faster order fulfilments. Our continued focus on improving workflow processes has already resulted in a 25 percent growth in topline revenue in Singapore since 2008.”
DHL expects its Singapore staff strength to reach over 2,000 upon completion of this facility. These numbers will bolster the company’s regional goal of 25,000 staff by 2015, representing an increase of 65 per-cent in regional staff strength from 2013.Cache Logistics Trust is the appointed de-veloper of the facility. Listed on the Singa-pore Exchange since April 2010, the real estate investment trust (“REIT”) invests in quality income-producing real estate used for logistics purposes, as well as real es-tate-related assets, in Asia-Pacific.
Mr Daniel Cerf, CEO of ARA-CWT Trust Man-agement (Cache) Limited, the manager of
Cache Logistics Trust, said: “We are hon-oured to be selected by DHL as the pre-ferred logistics real estate solutions pro-vider for this prestigious and strategic development. Cache Logistics Trust will be the first REIT to develop and own a prop-erty in the highly sought-after Tampines Logispark. Working hand in hand with our partners and sponsor, CWT Limited, we look forward to delivering an outstanding property and the opportunity to partner with DHL in their growth throughout Asia Pacific.”
The Asia Pacific Solutions & Innovation Centre (ASIC), the first innovation centre for DHL outside Troisdorf, Germany, will be the first Centre of Excellence for in-novative logistics services and solutions in the region. The facility will serve as a regional platform to engage customers, industry partners and the Singapore re-search and government community on business and innovation-related matters. Besides live demonstrations of the latest logistics trends and innovative solutions, the Innovation Centre will set new indus-try standards through the set-up of several competence centres dedicated to identify-ing, monitoring and harnessing specific logistics industry trends and market devel-opments.
One of the first competence centres to be established under the ASIC umbrella will be
the Centre of Excellence for Automation. The facility will be designed for complex multi-sector and multi-user operations, showcasing cutting-edge automation solu-tions, such as an automated storage and order picking system. In addition, DHL will hire and train a local team of skilled spe-cialists in automation for the new facility.
Mr. Kelvin Wong, Assistant Managing Director of EDB, said: “DHL’s continued pursuit of achieving operational excellence and productivity is clearly demonstrated in its latest investment in sophisticated automated warehousing solutions. We also welcome its first innovation centre out-side its global headquarters, which marks another significant milestone in the strong partnership between DHL and Singapore. The innovation centre joins a rich sup-ply chain eco-system in Singapore that enables logistics companies to continually develop innovative supply chain solutions to better address their clients’ complex supply chain needs. This development fits well with our vision for Singapore to be a thought-leader in supply chain innovations and applications.”
Construction of the new facility is expect-ed to be completed by the second half of 2015. DHL’s Asia-Pacific, Middle East and Africa (APMEA) regional office and Singa-pore country office will then be re-located to the premises.
[ The warehouse floor area will cover over 90,000 sqm and will occupy the largest parce of land in Tampines LogisPark. ]
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] MENLO OPENS SECOND HUB IN SINGAPORE Menlo Logistics has opened its latest warehousing and distribution manage-ment centre at the Benoi Sector in Singa-pore in May. The new 50,000 sqm Benoi centre brings the company’s footprint in Singapore to eight facilities totaling 219,700 sqm. From Menlo’s standpoint, the opening of the hub demonstrates its commitment to investing in the growing market for distribution services in Singa-pore, and the country’s rising prominence as a strategic logistics hub for Asia.
“Singapore and the regional Asia markets are some of our fastest growing sectors, due in large part to our strong market share and industry-specific expertise in wine and spirits distribution,” said Rob-ert Bianco Jr., president of San Francisco, California-based Menlo Logistics, who will headline Menlo’s dedication ceremony here today.
“Our long-term lease for this facility with our real estate partner, Mapletree Logis-tics Trust, is another demonstration of Menlo’s commitment to the Singapore market, not only in wine and spirits, but also in distribution capacity for automo-tive, consumer electronics and apparel, aerospace and industrial. We are invest-ing to grow with our customers.”
Established in Singapore over a decade ago, Menlo’s services range from dedi-cated contract logistics to warehousing, distribution and transportation manage-ment; supply chain engineering and other value-added services across multiple in-dustries.
Representing a capital investment of S$127 million by Mapletree Logistics Trust (MLT), the new distribution centre with a gross floor area of 92,500 sqm features specialised warehousing ca-pabilities for servicing the global wine and spirits industry. It also supports the warehousing and logistics requirements of various clients engaged in a variety of other industries for which Singapore is a growing market. The facility has been awarded the prestigious Building and Construction Authority’s Green Mark Plat-inum Award, the highest certification for sustainable buildings in Singapore.
The Benoi facility elevates Menlo to be the largest tenant of MLT, with leased warehouse space across seven properties in Singapore, Malaysia, Hong Kong and
China, noted Miss Ng Kiat, Chief Execu-tive Officer of Mapletree Logistics Trust Management Ltd, the manager of MLT.
“We have been working with Menlo, our valued customer, over the last nine years to support its continued growth across Asia. Menlo’s commitment to this project and our growing relationship underscore MLT’s position as a preferred partner of choice for customers seeking quality lo-gistics real estate solutions in the region. We look forward to strengthening this partnership further as Menlo continues on its growth path,” said Miss Ng.
“This redevelopment project has trans-formed Benoi Logistics Hub from an old, single-story warehouse into a modern, five-story ramp-up facility with signifi-cantly improved efficiency and capabili-ties. We will continue to look out for asset enhancement or redevelopment opportu-nities that are aligned with the expansion needs of our customers like Menlo, while concurrently unlocking additional value from our portfolio,” she added.
“Our customers expect consistent, effi-cient, high-quality service, and this new facility, coupled with our commitment to sustainable business practices and Lean continuous improvement, delivers on that promise,” noted Menlo’s Bianco.
“When Pernod Ricard, Asia Pacific Breweries,
Bacardi and Tradall, all global wine and spirits distributors, require either secured, temperature-controlled or ambient ware-housing, we can provide that servic along with time-sensitive fulfilment and delivery to Singapore and throughout the region,” Bianco added. “And with the resources and capabilities we now have at Benoi, we can service our clients faster and more effi-ciently than before.”
Mr. Bianco also cited the support of Sin-gapore Customs and its promotion of prudent regulatory policies that protect the country while encouraging free and open trade.
“Initiatives like Singapore Customs’ Secure Trade Partnership program, which provide sensible regulation and a secure environ-ment for trade, are a major incentive for expansion. It’s a key reason why we have continued to invest and build capacity here,” he commented.
“We are delighted to have fostered a close Customs-Business partnership with Menlo Logistics since 2002,” said Mr. Lim Teck Leong, Deputy Director-General, Compli-ance and Facilitation, Singapore Customs. “Over the years, Menlo has participated ac-tively in the various schemes and licences offered by Singapore Customs to safeguard the integrity and security of the supply chain in Singapore.”
[ The Benoi facility elevates Menlo to be the largest tenant of MLT, with leased warehouse space across seven properties in Singapore, Malaysia, Hong Kong and China. ]
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LogiSYM CEO SeriesEffective Supply Chain Management is the backbone of many businesses today. It is all about the ability to deliver. One of the takeaways from LogiSYM2014 was that more can be done to highlight the impor-tance of effective Supply Chain Manage-ment to an organisations ongoing success.
LSCMS believes that effective Supply Chain Management strategies are most effective when it is championed by the CEO, CFO and a senior-level officer specifically des-ignated to monitor SCM execution. Relying on internal stakeholders and logistics com-panies alone is not enough to build a sup-ply chain strategy that not only generates revenue but also increases profitability.
With this understanding we have planned a series of CEO, MD, CFO, Finance Man-ager talks from September to December of this year to help highlight how effective
supply chain management can lead to an organisations profitability. Please visit the LogiSYM website for more information on contact the Secretariat at [email protected]
Supply Chain Dictionary, iPhone and Android AppsThe SCM Dictionary that can be accessed from the Society’s home page at www.lscms.org is now an iPhone and Android app. The application is available FREE from January 2014 and can be downloaded from the iPhone and Google Play stores. For more information on this and other devel-opments at the Society, please feel free to visit our website and subscribe to our fort-nightly newsletter.
Raffles College joins LSCMS as Corporate MemberRaffles College of Higher Education, a subsidiary of Raffles Education Corpo-ration Limited has recently joined the
Logistics and Supply Chain Management Society. Raffles is the largest private ed-ucation group in the Asia Pacific region and has an extensive network of 34 col-leges in 31 cities across 12 countries in Asia Pacific: Australia, Cambodia, China, India, Indonesia, Malaysia, Mongolia, Philippines, Saudi Arabia, Singapore, Sri Lanka and Thailand.
Raffles will be launching a new course on supply chain and logistics and will be col-laborating with the Society in a number of ways such as inviting industry profes-sionals to conduct talks, workshops and seminars for Raffles students. Industrial attachments with the relevant industry players, site visits, and networking op-portunities with LSCMS’ extensive net-work of organisations and individuals are also some of the things that can be coordinated to enhance students’ career advancement.
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The “moving” between the “making” and the “using” can never be taken for granted; often times, one gets the impression that it is. Its failings (the occasional delays in deliveries) tend to get noticed. The clock-work precision with which it otherwise links “me” to “thee” does not get the appre-ciation that it richly deserves. Third-party logistics – abbreviated as 3PL – the “he” (and “she”) linking “me” to “thee” – is now truly a norm and not an exception, a near-compulsion rather than a matter of choice. However, the 3PLs have to compete to ex-pand and retain their clientele by fulfilling the expectations the latter have when they go about selecting the 3PLs they would want to sub-contract their logistics opera-tions to. Further, it is good to bear in mind that 3PL revenues accounted for nearly 10 percent of global GDP, in year-2012.
It would be apt to flash back to July 2009, and start with a quote by Sebastian Chan, the senior VP for freight forwarding and contract logistics, UPS Asia Pacific (at the time of writing that piece) from an article on 3PL published in Logistics Insight Asia – “The moment you ask another to manage the transport for you, you have a case of a 3PL! Over the years, it has become a norm, and we expect it to remain so – and also to become more entrenched in the global business arena.” That, in effect, serves as both the “alpha” and the “omega” of third-party logistics!
Let us start with figure 1, which shows the split of the revenues which have ac-crued to 3PL companies in the Asia-Pacific in year-2012. The total of US$243 billion is equivalent to eight percent of the re-gional GDP. Since year-2006, the growth in this revenue stream has been phe-nomenal – a compounded annual growth rate of 14 percent. Figure 2 indicates the percentage contributions of the 3PL revenues to the national GDPs in the re-gion. China, with US$118 billion (44 per-cent of the Asia-Pacific regional total, and 17 percent of the global total of US$685 billion), was second only to the USA (US$142 billion; quintupling over a 17-year period, according to Armstrong
LINKING IT UP RIGHT G VENKATESH explains why 3PLs have to continuously expand and innovate to fulfil the expectations of their clientele in order to stay in business.
Associates, Inc.). Japan followed China in this region of the world, with US$53 billion; In-dia and Australia com-ing in joint-third with US$17 billion each. As far as the contribu-tion to the national GDP was concerned, Singapore led the pack with 12 percent (see Figure 2).
The growth over the years and the expected growth in the years to come, can be attributed to a combina-tion of a rise in world trade, an increase in the number of clients for the 3PLs (in the primary, secondary and tertiary sec-tors of the global economy), and also the fact that the activities outsourced to 3PLs have diversified from freight forwarding and transportation management to include warehousing and distribution as well.
This diversification has been prominent in India, China, Indonesia, Thailand and Singapore. Another encouraging piece of statistic is the fact that 86 percent of Fortune 500 companies in the USA avail of logistics services from 3PLs. Of these, the likes of General Motors, Proctor and Gam-ble, and Wal-Mart outsource their logistics operations to more than 50 3PLs each. Globally, Fortune 500 companies contributed US$250 bil-lion to the revenues of 3PLs in year-2012 – a rise of 67 percent vis-à-vis year-2005.
As reported by news sources, 3PL CEOs in the Asia-Pacific have projected a growth rate of 11.6 percent over the next three years. This report also adds that an increased focus on servicing do-mestic consumption
[ Figure 1: Revenues for 3PLs in the Asia-Pacific region in year-2012 (Country; Revenue in USD billion; % of regional total of 243 USD billion) (Data source: Article by Vijay Sangam in Supply Chain World Magazine, January 27, 2014). ]
[ The growth over the years and the expected growth in the years to come, can be attributed to a combination of a rise in world trade. ]
within China can provide 3PLs with the op-portunity to strengthen and stabilise their operations in the country.
IN THE NEWS – TO EACH ONE HIS OWNE-commerce may have upset the apple-cart for the solely brick-and-mortar type of retailing, but it has turned out to be ‘precious gold dust to be amassed’ for 3PLs. Speaking at the prestigious Express Logistics and Supply Chain Award ceremo-ny in Asia, in September 2013, the awar-dee Percy Avari, Regional Manager (South Asia), Aramex, called e-commerce a vital growth area for his company, globally, and promised to maintain strategic focus on the development of ties with clients in this sector.
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originating from Tur-key, France, India and Brazil, maintenance and security.
In 2012, DHL won the “Best 3PL of the year award” in the Logistics Service Pro-vider award category at the Logistic Week Enter-prise Awards 2012, in India, based on param-eters like key business performance excellence, customer delight, cost efficiency, management excellence, and green logistics. Early in 2013, DHL bagged a 10-year contract worth US$40.18 million with Gatwick Airport (London). As part of this contract, it will manage inbound de-liveries for the airport’s 150 partners and retailers provide highly secure and effec-tive logistics drive, significant reductions in CO2 emissions and congestion. DHL’s experience with the airport sector and its track record of developing solutions giving full visibility and tracking of cli-ents’ products is essential were the main factors that Gatwick Airport’s Logistics Programme Leader considered to be para-mount in its selection as the 3PL partner.
In the last quarter of 2013, DHL Supply Chain, was presented with the Global 3PL of the Year Award in a ceremony in Hong Kong, in recognition of its innovative, cus-tomer-focused supply chain solutions for a wide range of industrial sectors. At about the same time that it was felicitated in Hong Kong, a multi-million pound contract came its way from the FMCG sector.
As part of this contract with Hain Daniels, till the end of year-2017, DHL will manage storage, handling, dispatch and customer deliveries for the food processor, from its multi-user distribution centre in Hunting-don (UK). Hain Daniels latched on to DHL as its preferred 3PL, encouraged by the German firm’s experi-ence in the FMCG sector, its penchant for cost-effectiveness and con-tinuous improvement, and its reputation for managing sophisticated change management programmes efficiently.
In early 2014, DHL an-nounced its plans to in-vest 680-crore (US$112.6 million) in India, in mod-ern warehouses (one million square feet of multi-user warehouses
A more specialised client-sector for 3PLs is the pharmaceutical industry, which puts a lot of emphasis on safe transit and timely delivery of its raw materials and finished products. Not very long ago, Ara-mex launched Biocare, a gate-to-gate ‘cold supply chain’ service for the healthcare in-dustry. Biocare, in a nutshell, is a temper-ature-controlled (up to three days), timely delivery service knitting together laborato-ries, hospitals and pharmaceutical compa-nies, and handles clinical specimens and medical samples around the world. With the pharmaceutical and healthcare sec-tor expected to rise to US$45 billion by the end of year-2015, in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE – Aramex’s home-ground in other words – Biocare promises to bolster the company’s bottom line in the years to come.
Akin to Aramex’s Biocare, UPS’s Proactive Response Secure – a proactive shipment monitoring and risk management solution ensures time-and temperature-sensitive shipments for the healthcare sector, to reach their destinations safely, without de-lays. UPS’s clients in the automotive, high-tech and retail sectors have also benefitted in different ways from its 3PL-support over the years. For instance, while General Mo-tors has improved its materials recovery time and increased its dealer return rate, Silicon Graphics has been able to central-ise the distribution of over 65000 parts. In the retail sector, inter alia, Skirts Plus has been able to reduce its shipping costs by 18 percent courtesy UPS.
Kuehne + Nagel (K+N), about a year ago, strengthened its presence in the Asia-Pacific region by opening an office in Myanmar, at Yangon, the former capital city. There are hopes that the Myanmar (Burmese) economy will grow in the years to come and its trade with Europe, the USA and the rest of Asia will pick up strongly, with Yangon serving as the nodal port on its southern coast. It will essentially be the primary sector in this ASEAN country – agriculture, gems, metals, oil and natural gas – which will be availing of the services of 3PLs like K+N.
A few months before the Myanmar base was set up by K+N, the 3PL giant was awarded a contract by AGCO (USA-head-quartered farming equipment major) to manage its aftermarket parts distri-bution centre with a capacity for hous-ing 40,000 parts, close to the interna-tional airport in Johannesburg (South Africa). The contract encompasses the following activities: receiving, inventory control, picking & packing, handling of dangerous goods, pre-packaging and returns handling of spare parts, sea-freight and airfreight inbound services of parts
in south and central India, to take its to-tal warehouse capacity in the country to seven million square feet), larger-ca-pacity 40-tonne trucks, IT solutions and human resources (doubling its workforce to 10,000). DHL and for that matter all oth-er 3PLs would be aware of the fact that the 3PL market in India is growing faster than the country’s GDP, courtesy the increased outsourcing of logistics operations by firms in the retail, pharmaceutical, auto-motive and FMCG sectors. In year-2008, the 3PL market accounted for a measly six percent of the total logistics market in India. In 2015, it is likely to account for nearly one-eighth of it (Business Line, In-dia; February 20, 2014).
APL Logistics, in mid-2013, started an online sales channel for Wal-Mart in Mex-ico. As mentioned earlier, APL Logistics is one of several (50plus) 3PLs managing the Arkansas-based retailer’s worldwide operations. Later that year, in December, on the other side of the globe, CEVA Lo-gistics opened a new 56,000 sqm multi-user warehouse complex in Australia, with advanced infrastructure including con-tinuous loading docks and dock levellers, state-of-the-art racking with a layout con-figured for maximum efficiency, advanced material handling equipment, integrated IT and warehouse management systems and
[ Figure 2: 3PLs’ contribution to national GDP in the Asia-Pacific region in year-2012 (Data source: Article by Vijay Sangam in Supply Chain World Magazine, January 27, 2014). ]
[ The 3PL market in India is growing faster than the countru’s GDP, courtesy the increased outsourcing of logistics operations by firms in the retail, pharmaceutical, automotive and FMCG sectors. ]
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This came a month after CEVA started con-structing a similar, albeit smaller facility – 33,000 sqm – in Bukit Jelutong, Shah Alam, a strategic industrial area in Malaysia. A little south, at about the same time, this 3PL introduced a new 1,200 sqm, special-ised aerospace storage area at its recent-ly-opened Logistics Centre in Singapore. CEVA’s prior experience in the aerospace sector came in handy here.
Damco, in its sustainability report (press release dated 8 May 2014), has stated that all its regional divisions will have Respon-sible Procurement targets in the plans for year-2014. This year, in addition to engag-ing more suppliers, the company’s focus will also be shifting to the assessment of supplier’s practices against Damco’s own code of conduct. The company will also be launching a global supply chain Security management programme this year.
Agility plays a significant role in many of the emerging markets in the Asia-Pacific region, with India and China being its major markets, supported by about over 400,000 square metres of warehousing infrastructure. On date, its cross-border trucking in the ASEAN region continues to grow, connecting the ASEAN to major Chi-nese cities.
GREENING ON THE AGENDATruncating their respective environmen-tal footprints has been foremost on the agenda of almost all the 3PLs (this has also become a key criterion clients adopt while going about selecting the 3PLs they would outsource to). Take FedEx for example. It recently announced that it would be investing in 1,900 lightweight, composite-body Reach vans from a divi-sion of Spartan Motors. Just as the name of the supplier suggests, the vans are frugal when it comes to fuel consump-tion – a 35 percent improvement in fuel efficiency over traditional vehicles in its fleet, is what FedEx will enjoy courtesy this investment. While FedEx would re-duce its carbon footprint by improving the fuel efficiency of its vehicle fleet, Ara-mex, driven by the desire to make its key Dubai Logistics City facility more energy efficient, availed of the services of Philips to get the right lighting solutions for the said facility.
Philips customised the standard TMX204 luminaire with an occupancy sensor in the warehouse area to provide light only when it is needed, where it is needed! The Smartform TBS460 luminaires in the office spaces were factory fitted with Luxsense controllers, which save energy by automat-ically regulating the luminaire in accord-ance with the level of daylight available.
Agility Logistics was felicitated by Nokia (one of its clients) with the Sustain-ability Award in February 2014 for de-veloping an innovative supply chain solution at Agility’s Goods-in-Transit Centres in Chennai (India), Komaram (Hungary) and Manaus (Brazil) used by Nokia, to reduce its carbon footprint by six to nine percent while also cutting costs for Nokia. Jens Wessel, SVP - Sales and Market-ing, Asia Pacific Region, Agility Logistics, tells LIA that the company has mapped its carbon footprint in 70 percent of its core logistics operations and continues to participate in dialogues with civil society and industry partners on important envi-ronmental issues.
Damco has reduced its carbon footprint by 21 percent over the period 2009-2013. On date, in its North American opera-tions, by resorting to distribution network optimisation, transport mode optimisa-tion, transport carrier selection and equip-ment utilisation improvement, Damco envisages a possibility of a 12.8 percent reduction in greenhouse gas emissions and a concomitant cost reduction of 13 percent.
Overall, by end of year-2014 (vis-à-vis 2009), Damco hopes to have truncated its carbon footprint by 30 percent. It has been working very closely with the indus-try in order to improve the availability and quality of environmental data for ocean container transport. In its own facilities (a la Agility Logistics) in the US, Canada and Indonesia, Damco has installed more efficient lighting systems.
Alfred Goh, Senior Vice President and Global Head, Fast Growing Enterprises, DHL Customer Solutions & Innovation, tells Logistics Insight Asia (also read sidebar item) that customers have, of late, been requesting DHL to help them not just with reporting their global carbon footprint,
but also to assist them in truncating the same.
3PLs have been raising the bar for each other, and innovation and pursuit of excel-lence on their parts, have benefited their clients immensely. To use a metaphor, it is quite like a series of keenly-contested cricket matches in the ongoing IndianPremier League (IPL-2014) cricket tourna-ment!
THEN, AND NOW, AND HENCEFORTHNearly a decade ago, the following observations were made about 3PL• Security concerns involving import con-
tainers, air transportation and illegal al-iens will continue to be prominent in the future for the westernised countries.
• A major challenge for international supply chain logistics companies and their customers will be to avoid produc-ing processes that are too expensive and/or not in the public interest.
• A global issue that will affect 3PLs sig-nificantly in the next 10 years will be balancing MNC interests with those of individual countries.
• For users, investors and researchers, gaining better transparency into the finances and operations of major 3PLs will be important, especially when achieving good logistics operating results remains difficult.
• The technical supply chain management capabilities of 3PLs (should and) will continue to improve.
• Third-party logistics will expand faster in China, India and Southeast Asia.
Change has truly occurred over the last decade, and it continues as it is wont to. It has been very conspicuous of late. And besides, change, as we all know, is the only constant, irrespective of whether it is good or not. In this case though, it is indeed good!
[ 3PLs have been raising the bar for each other, and innovation and pursuit of excellence on their parts, have benefited their clients immensely. ]
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1. Can you comment on DHL’s market size and share in the Asia-Pacific re-gion? Can you also throw light on the prospects from now till 2020?
DHL is the market leader in the Asia-Pacific region on date; and has been operating in this region for over 40 years. At present, the Asia Pacific mar-ket accounts for 20 percent of the rev-enues of the group on the whole. By 2017, we expect this share to grow to 30 percent. 2. Can you comment on the challeng-es posed by socio-cultural, political, linguistic and geographical differ-ences among countries you operate in? Especially the difficulty to recon-cile local interests and those of the clients you are servicing?
From my perspective, there are two key aspects to this – Glocalisation and Di-versification. Being Glocalised means that the company is able to balance global standards and practices with local requirements and customisations. This is not only in the form of how a company operates but also the prod-ucts and services that the company brings to their customers in various markets and the need for Glocalisation is especially apparent in emerging mar-kets. On the other hand, Diversification deals with the human resource aspect of companies. Companies who can lev-erage the power of diversification in their workforce in different cultures can bring about an inclusive workforce that can generate new innovation and ideas that can be a differentiator in the mar-ket place.
To ensure Glocalisation and Diversifica-tion, many Asian companies will only deploy two to three people from their headquarters when they expand into new markets to ensure the consist-ency of the setup. The rest are hired locally. In DHL, we set up what we call Asian Desks in Europe and the Ameri-cas, and deploy Asian staff over to spe-cifically help Asian companies expand into these regions. By deploying staff with the same ethnic and cultural back-ground as our customers in overseas markets, we enhance communications
with our customers and help them to navi-gate local market challenges effectively. 3. Different companies may give differ-ent weightages to different criteria for selecting 3PLs are different times. This surely makes it difficult for a 3PL?
No single company can provide everything to everyone. I believe the key factor is business fit. If your customer has a good business fit with what you are offering, the business is sustainable. Otherwise, winning a piece of business with a weak business fit may not necessarily be a good thing as operations and profitability may suffer. 4. On the environmental aspect of DHL’s performance, how crucial is it these days?
Environmental protection is an integral part of our corporate strategy, which is aimed at long-term value creation; as well as an important part of the way we evaluate our business activities and performance. The primary focus of our environmental protec-tion program, GoGreen, is to minimise our business operations’ greatest impact on the environment – greenhouse gas emis-sions. By 2020, we aim to improve our car-bon efficiency by 30 percent as compared to a year-2007 baseline.
Recently, we customers have been requesting us to help them to not just report their global carbon emission foot-print, but also to truncate the same. A good example of what we have done with a customer is that we proposed an optimal scenario that reduces carbon emission from their transportation by 1,700 tons per year, which will take ap-proximately 9,700 trees to absorb in 25 years.
5. Does a 3PL sub-contract to a 4PL? Is this common?
I take 4PLs as companies who only do supply chain manage-ment without actual execution of logistics operations. In that sense, 4PLs are mainly manage-ment consulting companies. What I have seen more often is a 4PL contracting a 3PL to execute while the 4PL just manages the logistics business. Cases of a
3PL contracting a 4PL are rarer. This is because a 4PL does not usually commit itself to one specific 3PL.
The other key observation I have is that companies who want 3PLs to assist in more strategic management of their sup-ply chain often look at the Lead Logistics Model (LLP) rather than the 4PL model. The LLP model assigns a lead 3PL to manage all the logistics for a company, including the management of other 3PLs in areas where the Lead 3PL does not op-erate. This model is preferred over the 4PL model because the added manage-ment cost is minimal, and the model is more operationally effective. It is use-ful to note that the concept of 4PL was trademarked by Accenture many years back, but this concept has not been very well adopted in the industry. 6. Has “liability-sharing” become rela-tively easier and clearer over time?
This has never been an easy topic. A lot is dependent on the level of “partnership mindset” between the company and the 3PL. Bearing in mind that 3PL services typically have low margins, it is difficult for any 3PL to agree to taking on liabili-ties outside of logistics. However, the is-sue can be solved by getting necessary insurance policies that cover unexpected events, either by the company or from the 3PL on behalf of the company. This obviously adds cost, but it is necessary. If all else fails, a 3PL can still fall back on the agreed Geneva Convention.
ASIA-PACIFIC A SIGNIFICANT REVENUE CONTRIBUTOR BY 2017ALFRED GOH talks to G VENKATESH about the challenges and opportunities of doing business in the Asia Pacifi c.
Alfred Goh is the SVP and Global Head for Fast Growing Enterprises, DHL Customer Solutions & Innovation.
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NOT ALL 3PLS CAN BE ‘ALL THINGS TO ALL MEN’JENS WESSEL explains to G VENKATESH on 3PL selection criteria by shippers.
1. Can you comment on Agility’s market size and share in the Asia Pacific region?
Agility plays a significant role in many of the emerging markets in Asia, includ-ing Indonesia’s oil and gas sector. China and India are among Agility’s biggest markets supported by close to 400,000 sqm of warehousing infrastructure. Southeast Asia, which includes Singa-pore, Indonesia, Thailand and Malaysia, is another strategically important pillar within this region. Agility is a leading logistics provider in Thailand, and we also have a long established presence in Vietnam. Our cross-border trucking operations continue to grow, connecting countries across Southeast Asia and into major cities within China. Our focus has been on the provision of the best solu-tions and service quality in the industry to customers and not on gaining greater market share.
2. With more companies now outsourc-ing their logistics operations, is it right to say and wise to believe that there is room for all the existing 3PL compa-nies and some more?
The increasing number of 3PL compa-nies in Asia has resulted in increased competition and pressure on rates. Many of the new opportunities in the 3PL sector are driven by SMEs, particu-larly for manufactured goods and prod-ucts. These SMEs engage their logistics providers for transportation and distri-bution services locally or regionally.
While we are seeing increased competi-tion in certain sectors across Asia, we believe there is still room for additional players based on the continued outsourc-ing trend throughout Asia. However, the need for differentiators and the ability to provide customised solutions to serve different supply chain needs become paramount for incumbents and new po-tential providers entering the market.
3. Can you comment on the challeng-es posed by socio-cultural, political, linguistic and geographical differenc-es among countries you operate in? Especially the difficulty to reconcile local interests and those of the clients you are servicing?
Agility is no stranger to challenges, hav-ing first built our business in emerging
In general, the handling of such goods, whether by Agility or other forward-ers, follows standard terms and condi-tions imposed by the forwarders. These terms are similar in many respects to the local national freight forwarding association’s standard trading condi-tions recommended to the association’s members. For example, Agility’s liabili-ty for handling these goods is governed by Agility’s own General Trading Condi-tions.
markets. These challenges are common in many emerging markets and they play to our strengths due to our unmatched record of performance in challenging environ-ments such as war zones, disaster zones, and areas with little infrastructure.
Through our various supply chain services offerings, we help companies to review their supply chain and develop the relevant supply chain strategies to mitigate these challenges and achieve cost efficiencies. For example, we have a strategy of hiring locally to ensure that we operate with cul-tural sensitivity and have the expertise on the ground to support our customers.
4. Different companies may give different weightages to different criteria for se-lecting 3PLs at different times. Does this mean that every 3PL has to make efforts in ‘honing up every virtue’, so to say?
While not all 3PLs can be “all things to all men”, logistics providers need to have a solid foundation in providing their exper-tise, knowledge and services in order to deliver world class supply chain solutions. From Agility’s perspective, we march to the drumbeat of our customers and oper-ate in sectors where our customers need us to drive their business, including multi-ple industry verticals.
5. Can you comment on the nature of “liability-sharing” and how it has changed over time?
[ Agility is no stranger to challenges, having fi rst
built our business in emerging markets. ]
The liability limitation under these conditions does not vary according to the nature of goods. Increasingly, cargo interests are better educated today than they were a few years ago, especially in developed and developing economies. They are used to buying insurances to cover these exposures with the knowledge that they need to assume the cost of risks due to the liability limitation which exist in many of these countries.
Jens Wessel is the SVP for Sales & Marketing, Asia Pac, Agility.
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3D STYLE 3D printing is set to turn manufacturing and potentially global supply chains on their heads. With the pace of its adoption and capabilities rapidly gaining speed, alongside a dramatic reduction in cost, technology experts say it represents nothing less than the beginning of a “Third Industrial Revolution”. By DONALD URQUHART.
[ New technology could dramatically revolutionise production techniques, reducing the need for large and costly work forces and thereby reversing, to some degree, the trend of globalisation. ]
This new technology has suddenly exploded into mainstream consciousness thanks to a gun proponent in the US. It was quite simply a ‘shot that was heard around the world’ – but this time it was not the start of a world war, nor of colonial rebellion, but perhaps the starting gun for a different kind of revolution. With the successful crea-tion and firing of the world’s first 3D print-ed plastic gun, the average global citizen suddenly became aware of this seemingly futuristic manufacturing process. In a recent white paper, Transport Intelli-gence (Ti) highlights that 3D Printing or ‘ad-ditive manufacturing’ as it is also known, “has the potential to become the biggest single disruptive phenomenon to impact global industry since assembly lines were introduced in the early twentieth century America.”
For the global transport logistics sector this new technology represents potentially both a threat and an opportunity as this new technology could dramatically revolutionise production techniques, reducing the need for large and costly work forces and thereby reversing, to some degree, the trend of glo-balisation, according to Ti. And while the plastic gun is hopefully not the technology’s most lasting memory and one surely eclipsed already by the wide range of medical and scientific objects al-ready being constructed, it is a technology still clearly in its infancy. Speaking at last year’s Ti Emerging Markets and The Future of Logistics Conference 2013 in Singapore, Ken Lyon, CEO of UK-based consultancy Vir-tual-Partners and co-author of the Ti white paper estimated that the current state of the technology is “roughly analogous to where PCs were in the mid-1990s, but we see the rate of acceleration both in terms of price reduction and capabilities.”
Nascent as it is, the technology has already
an over-grown ink-jet printer, according to the digital model. It differs from traditional manufacturing processes which rely most-ly on the removal of material by methods such as cutting, drilling, etching, lathing, etc., which is known as ‘subtractive pro-cesses’. In the 3D printing process prod-ucts can be lighter, but just as strong, with less wastage and to very fine tolerances.
While current 3D printing is limited in what raw materials it can currently print – includ-ing plastic resin, metal such as aluminium and titanium, carbon fibre, glass and ceram-ics – the range of materials is expanding quickly. The fact NASA used the technology to produce a rocket injector which was suc-cessfully test fired in August is proof of its robustness. In comparison, manufacturing the same injector the traditional way was a complex process taking six months, in-volved multiple parts and at a much higher cost. Using 3D printing techniques it was
chalked up an impressive resume – creat-ing everything from novelty items, iPhone cases, jewellery, foot wear (Nike’s Vapor Laser Talon boot for American football), medical devices, prosthesis, artificial hip joints, dental crowns, car parts, jet engine parts, rocket nozzles and even human skin, blood vessels and a fully functioning human kidney.
WHAT IS 3D PRINTING?So what exactly is this revolutionary new technology which made its debut with the first 3D printer created in 1984? Although a bit of misnomer, 3D printing is the manufacture of three dimensional objects of virtually any shape from a digital model produced by CAD software, by an ‘additive process’ similar to that of ink jet printers in which ink is deposited on paper layer-by-layer. In the case of 3D printing, the object is created by laying down succes-sive layers of material by what looks like
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single part, took three weeks, at half the cost and it can be reused.
Similarly GE is increasingly using 3D print-ing and is now testing jet engine injectors using this technology with company now operating a full-scale additive manufactur-ing facility in the US focused on the devel-opment and scale up of new alloys, pro-cesses and parts for additive use.
Indeed, in just four years’ time, GE’s new-est aircraft engine, the CFM LEAP, will fly with parts made from additive, or 3-D printing processes with the jet engine manufacturer predicting that within four decades an entire engine could be printed in this manner.
“We may not fully realise it yet, but we are at the dawn of the next Industrial Revolu-tion with additive manufacturing. It has the potential to fundamentally disrupt how complex products like jet engines are de-signed and made in the future,” Michael Idelchik, VP, Advanced Technologies at GE Global Research wrote recently in a science and technology blog.
Although the technology has been around for nearly three decades it has made its first mark in prototyping with Martin Weg-ner, VP research & development for DHL Customer Solutions and Innovation, noting it has “revolutionised rapid prototyping.”
“Starting a new business is now very easy and cheap to produce the first design and functional prototypes and the first series production up to certain batch sizes to test the market acceptance of a new product. Start-ups benefit as there is no investment in costly tooling is necessary,” he says.
IMPACT ON MANUFACTURINGBecause the nature of 3D printing in its current form is more individual in nature it is so far limited to more niche areas but
[ GE Aviation’s new fuel nozzle for the LEAP engine manufactured by 3D printing. ]
[ 3D printing technology automates production and eliminates the need for low cost labour meaning that manufacturing facilities could be sited closer to the customer in Europe or North America. ]
one area where experts see the technology having far reaching implications is in the area of ‘mass customisation’. Consumers want to be individual and not limit them-selves to mass produced items, says Weg-ner. “Consumers will, in theory, be able to have a much greater say in the final format of the product they are buying and have it manufactured to their precise specifica-tions,” add the authors of the Ti report. This means for instance, that consumers could order shoes specifically tailored for their unique foot shape, or order iPad cov-ers of their own design and colour speci-fication. Nokia for instance, has released the 3D designs for its case so that owners can customise their own case and have it 3D printed.
“In the long run 3D printing will be an inte-gral part in any production process, driven
by consumer requirements and opportuni-ties which come along such as more com-plexity which comes at no additional cost when printing as well as individualisation,” says DHL’s Wegner.
More basic manufacturing can even be done in the home, with entry-level ma-chines available for as little as US$500 while industrial versions run into the mil-lions. Analysts expect 3D printer sales to surge next year as prices are set drop due to the expiry of key patents in February 2014. These patents cover a technology known as ‘laser sintering,’ which produces high resolution in all three dimensions meaning no further finishing is required. And express delivery giant UPS has recent-ly announced it will be placing mid-level 3D printers in select retail outlets across the US making the technology available to a wide spectrum of individuals.
The 3D printer used to create the plastic gun was bought for only US$8,000 on eBay and thousands of 3D ‘blueprints’ are avail-able both commercially and for free on the Internet. The people behind the first 3D-printable gun have also launched a brand new search engine for 3D-print models which has been labelled the ‘Pirate Bay of 3D printing’. The site, defcad.com, al-though barely off the ground and with lit-tle press attention, has quickly grown its library to nearly 75,000 files.
But as Ti rightly points out, there is an enor-mous leap between a manufacturing process which can presently produce one-offs and one that can replace large scale manufactur-ing. But the report adds, “there is no reason
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If this did happen there would be many con-sequences, bringing about relatively minor (and then potentially major) changes to the global manufacturing industry, Ti continued citing the example of how 3D printing is al-ready very good at producing products, even with moving parts, which previously would have required the assembly of multiple com-ponents. “By eliminating the assembly phase there will be huge savings for the manufac-turer in terms of labour costs, but also po-tentially in the removal of storage, handling and distribution costs involved in bringing together the relevant components.”
The other key impact on manufacturing is due to the fact this technology automates production and eliminates the need for low cost labour meaning that manufacturing fa-cilities could be sited closer to the customer in Europe or North America. And in the case of complex machinery located around the world – say health care equipment or a print-ing press – a 3D printer onsite would mean spare parts could be created on the spot.
“3D Printing, combined with efficient manu-facturing, will revolutionise the principles established in the first Industrial Revolution,” said the Ti white paper authors. “Not only will local manufacturing re-establish itself close to end markets, but it will allow the flexibility to reconfigure in response to changing consumer demands. The nature of manufacturing will be very different from traditional models in which it takes established production plants months (or even years) to retool.”
Ti also highlighted that in 2012 it is esti-mated that up to 30 per cent of finished products already involve some kind of 3D printing. By 2016, this is expected to rise to 50 per cent and by 2020 potentially up to 80 per cent.
IMPACT ON SUPPLY CHAINSCertainly the potential impact on sup-ply chains is clear. The logic behind 3D printing’s transformation of the supply chain is that it allows production to be extremely local and completely just-in-time/demand driven. In such a scenario there would be no need to transport or hold any inventory – other than the raw materials that feed the 3D printers. Prod-ucts can be produced on demand at a lo-cal location which supports the concept of near- and on-shoring.
But for this technology to have a far-reach-ing impact it must be able to mass produce goods in the same volumes as traditional manufacturing techniques, Ti notes. “At
present the jury is still out on whether this is feasible.”
Taking an optimistic view on the develop-ments, at least in the near term, is Oliver Evans, chief cargo officer Swiss World-Cargo, who notes the greater level of ex-perimentation that 3D printing fosters. “In the past people would laboriously develop a prototype and then find that it didn’t work and develop another, now they can do it much more rapidly and much more effectively using 3D printing. The sys-temic manufacturing that follows, of a car or whatever, will probably continue to be done basically in the way it’s being done today.”
But he adds that importantly this faster and more effective prototyping, means there will be a lot more experimentation and development of new products and that bodes well for air freight. “There are peo-ple who imagine that manufacturing will be localised and yes some will be, but the potential for innovation with 3D printing I think means great news for the air cargo industry.”
“One of the implications that hasn’t been discussed widely is the implications for the tier one two and three suppliers,” said John Manners Bell, the white paper’s co-author and CEO of Ti. “The main trend over the last 30-40 years has been the unbundling and outsourcing of production. Now with the 3D technology – in which the main adopters have been the Chinese manufac-turers who have been heavily investing in this technology – is to actually manufac-ture all components on one site so this will have major implications for intra-Asia flows of goods impacting on both air and sea freight because there wouldn’t be a
need to move these goods across borders because they would be all internalised within one production facility.”
And potentially a proportion of goods which were previously produced in China or other Asia markets could be ‘near-sourced’ to North America and Europe which would drastically reduce shipping and air cargo volumes.
“The ‘mass customisation’ of products would mean that inventory levels fall, as goods are made to order. This would have the effect of reducing warehousing requirements. There would be fewer op-portunities for logistics suppliers to be involved in companies’ upstream supply chains.”
Downstream logistics would also be im-pacted Ti said, with build-to-order produc-tion strategies could fundamentally im-pact the manufacturer-wholesaler-retailer relationship. In the future the shopping experience could also be vastly differ-ent resulting in the case of some sectors, retailers either ceasing to exist, or become simply becoming ‘shop windows’ for man-ufacturers, keeping no stock of their own. In this case orders are fulfilled directly by the manufacturer and delivered to the home of the consumer.
Commenting on the issue Brandon Fried, the executive director of the US Airfor-warders Association has said: “3D printing will not put an end to supply chains but will definitely redefine where goods come from, maybe negating the need for sourc-ing shipments from far away. Globalisation of manufactured products may fall out of favour, preferring those within the im-mediate region. This will certainly have a
[ 3D printing in the foreseeable future will require specialised equipment and experienced staff, he adds, suggesting that 3D printing clusters might evolve. ]
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long-term impact on airfreight, as smaller, more profitable express consignments become a scarcity. If ignored, 3D printing could relegate air cargo to a support role, delivering the consumable resins and ma-chinery used to feed the beast.”
FIRST POINT OF IMPACTIf there is agreement on one thing amongst the experts and industry participants on both the technology and logistics sides, it is that the Service Parts Logistics sector is going to be the first to feel the impact. The Ti white paper states plainly that the sector, “will be either transformed or deci-mated by 3D manufacturing – or perhaps both!”. Billions of dollars are now spent on holding stock to supply products as diverse as cars, aircraft, printing presses to X-ray and CT-scan equipment. This of-ten includes a large amount of redundancy built into supply chains to enable parts to be dispatched in a very short time period to get machines up and running again as fast as possible.
“It doesn’t take much imagination to un-derstand the benefits for a service parts engineer of being able to download a part design from an online library, 3D print it and then fit it within a very short time window,” said the white paper. This would make not only the global and national parts warehouses, forward stock loca-tions unnecessary, but also the specialised express and courier companies that cur-rently rush these parts to customers across the globe. As Fried noted: “Manufacturing has long chased ‘Just in Time’ parts, but may soon emphasise a shift to ‘Print as needed’.”
“No longer will there be a need to rapidly airfreight time sensitive parts to the oppo-site sides of the globe. Although with all this change, a new supply chain has been born, one that will replenish time sensi-tive consumables to drive the 3D print-ing nodes across the world,” said Dominic Rego, director of business development at Toll Global Logistics, who added that Toll has already plotted out its future by aggressively targeting the polymer based supply base that acts as the consumable in driving this printing phenomenon.
Noting the significant impact on how 3PLs operate in this field, Mei Yee Pang, head of inhouse consulting Asia Pacific, strategic logistics consulting at DHL, cited the ex-ample of one company in the optical indus-try which is already testing 3D printing for service parts in Africa, given challenges of importing goods into the continent. “What the implications are for logistics players, I think the jury is still out. If we think far out, we could be manufacturing parts for our customers, or we could be commoditised
and ship the raw materials. But I think there are big changes ahead.”
LOGISTICS IN A 3D WORLDBut for Wegner, while he feels 3D print-ing will evolve and market share will grow, “existing manufacturing technologies will not go away.” There will be a “significant impact” on logistics, he adds with more decentralised production, closer to where consumers and customers are, resulting in a potential “shift from intercontinental/ line haul to more local distribution. At the same time, supply chains will get more complex due to higher individualisation of products and shorter lifetime of products.”
For industrial parts, 3D printing in the foreseeable future will require specialised equipment and experienced staff, he adds, suggesting that 3D printing clusters might evolve, orchestrated by logistics service providers.
Indeed for the authors of the white paper, they see the changing supply chain dynam-ics leading to the evolution of a new type of logistics company resembling a ‘4PL’, as Product Life Cycle Management service providers. Essentially orchestrating the various assets involved in managing sup-ply chains, Lyon says these companies won’t own many assets, but instead will essentially be custodians of the process.
Their businesses will comprise a mix of software development, delivery services, partner relationship management, contract and intellectual property management and brainpower. These companies will also de-sign solutions comprising demand plan-ning, manufacturing, market monitoring, service parts management and return and recycling services.
While it is still early days for this technol-ogy and most experts feel it is difficult to see manufacturing undergoing complete transformation for many years – perhaps decades – to come, some sectors like the manufacture of spare parts will be im-pacted much earlier. “In this case,” the Ti report notes, “the most enlightened logis-tics companies could even become early adopters of the technologies – investing in the 3D printers and providing facilities for engineers – rather than kicking against the progress.
“It is clear that if the larger logistics com-panies delay or ignore the implications of this trend, they are vulnerable to new kinds of organisations or associations that will match or leap ahead of their capabili-ties for very little outlay.”
Donald Urquhart is the editor for Payload Asia
[ While it is still early days for this technology and most experts feel it is difficult to see manufacturing undergoing complete transformation for many years – perhaps decades – to come, some sectors like the manufacture of spare parts will be impacted much earlier. ]
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MANAGING SUPPLY CHAIN COMPLEXITIES
Supply chains are complex, and are becoming increasingly challenging with additional stresses from globalisation, in-creased trade compliance pressures and customer demands. This is a sentiment that is echoed across many industries, and conversations often centre around this complexity.
The problem of managing complexity with-in supply chains is one that is evidenced by business performance and results. Customer surveys and feedback can show spikes of dissatisfaction, which direct a manager’s focus on specific incidents but distract from analysis of trends that can point to causes of problems, rather than management of crises.
This is the first article in a series which will look at managing supply chains holisti-cally. We start this by first identifying that some business leaders find it difficult to manage their supply chains effectively. Is it really due to the complexity of the supply chain or is there something more funda-mental within the organisation?
READING THE SIGNALSThe pleasant hum of what we think is an efficient organisational machine can be shattered by a strong complaint from a customer. Poor service performance or failure to meet a crucial KPI can cause us to start down the path of a fix to the imme-diate problem at hand, where the problem must be addressed, assurances must be made and the blame game begins.
Signals are the first alert that attention is needed, and many supply chain manager’s primarily daily focus is dealing with these signals - lurching from one crisis to an-other. These signals can encourage a silo mentality, reducing the organisation’s abil-ity to recognise the internal and external signals that give an indication of a problem in the works.
Must we wait for that external signal before
Business leaders fi nd it diffi cult to manage their supply chains eff ectively. Is it really due to the complexity of the supply chain or is there something more fundamental within the organisation that needs to be addressed? STEPHANIE KRISHNAN, JOE LOMBARDO and RAYMON KRISHNAN look into this.
we realise there is an issue? Having our dai-ly routines prioritised by customer com-plaints is not only draining to morale, but highly inefficient and ineffective use of a true supply chain manager’s time. Reduc-ing impact on external customers is usu-ally the result of an increase in awareness of the internal signals from our systems – the key is being able to read them.
The internal signals are the most obvious and yet they are the ones so frequently missed or dismissed as they may not be attributed to logistics functions or supply chain issues. We see the internal signals all the time – increasing staff turnover, open disagreements and squabbles amongst de-partment managers, controversial and uni-lateral decisions at the expense of others, poor communications and even imposing spontaneous decisions by senior or high ranking directors.
Supply chains are systems – interrelated parts that function together to achieve a common goal. Continual failures in the form of complaints from customers of-ten stem not from a function of the sup-ply chain, but rather from the dysfunction of the system. Rather than focusing on the relationships between components of the system and the working of the sup-ply chain system as a whole, we focus on the parts. Usually these parts are easier to understand and address – the warehouse,
[ Supply chains are systems – interrelated parts that function together to achieve a common goal. ]
or the customer service department – and quicker “solutions” often propose them-selves. If we continue to apply similar solu-tions, how can we but fail to get similar, disappointing results?
WHERE IS THE PROBLEM?Internal signals are often pointed to and identified as the cause of the problem. Taken alone they may appear as causes, however independent signals considered one-by-one can mask much larger issues. If we take a wider view of the system as a whole, then ultimately we must attribute the reasons for a dysfunctional or under-optimised supply chain to the key deci-sion-makers of the organisation, as they ultimately should have enterprise-span-ning (or supply chain-spanning) perspec-tives that should allow for patterns to be spotted. Are customer complaints related to high staff turnover? Are poor internal communications related to declining sales?
Systemic problems may only become ap-parent when some distance is given be-tween the signal and the solution, and when multiple signals from a variety of sources are able to be evaluated with a true systems thinking approach.
Operational personnel who are responsi-ble for logistics and other functions within supply chains must continue to support the business, ensure continued operations and put out fires as they occur. It is the responsibility of business leaders to en-sure that a control-tower approach is tak-en, operational activities are aligned with the overall business strategy, and signals are monitored collectively to ensure that systemic problems can be identified and solved.
Failure to align activities and ensure that a control-tower is effectively in place to monitor performance and identify issues will result in a wider divergence between company objectives and supply chain func-tionality and performance.
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CAN WE IDENTIFY THESE DIVERGENCES IN THE SUPPLY CHAIN?There are several factors that can con-tribute to a divergence. Some of the more common causes can be attributed to:
1. Organisational changes
2. Changes in adequacy of skills and com-petency
3. Economic and financial changes
4. Changes in suppliers and procurement policies, resulting in changes in supplier service & quality performance
5. Transformation in delivery models – in-house versus outsourced and/or moved to low cost area
6. Customer-differentiated requests, re-sulting in changes to demand levels, per-formance and reaction times
It will be evident that not only have there been new imbalances introduced in the supply chain, but also different expecta-tions from participants within the supply chain. Changes could also see a new de-mand for fast and aggressive KPIs. These may in-turn be in conflict or collision with the existing ones, resulting in departments with conflicting objectives. These conflicts can be a key indicator of divergence in the supply chain, and a signal that participants need to be brought together to re-estab-lish common objectives in order to ensure supply chain continuity and growth.
CAN WE FIX THE PROBLEM QUICKLY?Managing the corrective factors to re-align the divergence will require major effort by the organisation and solid management leadership.
How many organisations are willing to this, is however the question. A lack of under-standing of what Supply Chain really is, other commercial pressures and a slew of other distractions often result in little or insufficient effort and resources being given to this crucial area.
As a supply chain can touch many depart-ments, functions and people in the organi-sation, managing changes needs to be a structured process. If done haphazardly it could result in even more difficulties in managing corrective actions. The peo-ple factor is still a high influencer in the effective management equation.
In a supply chain we can expect to see many clusters of operations, people, processes, systems and resources. If all
of these areas are experiencing some difficulties and internal turbulence, then we can only expect to see problems rid-dled throughout the entire supply chain.
Managers often resort to “quick fix” solutions to fix problems. This can lead to a weakened culture of problem solving and the opportunity to better understand and address the root cause of issues.
The result of “quick-fix” or “fire-fighting” due to business pressures or in some cases the lack of know-how or empow-erment of managers in supply chains is detrimental in the long run.
Adding more resources to fix the individ-ual issues or to immediately cut a process or resource to avoid any potential crisis is simply reacting. Reactive solutions do not usually add any effective long term value to supply chain deliverables nor the enter-prises performance goals.
So why is supply chain management, something that has been around for more than a decade, so complex and difficult to manage effectively?
The contributing factors to this question are many. Often, as alluded to earlier is the there is simply a lack of understanding of what a supply chain is, and how it is intend-ed to work in and between organisations.
The ability of business process owners to understand the big picture is weakened when there is no alignment to the manage-ment strategy. If the link between the busi-ness strategy and the supply chain are not clear within the organisation, it likely that this is also not clear to the management. Consequently the leadership and priorities to making the supply chain work effectively, are neither visible nor seen as relevant to the business strategy and therefore success of the organisation.
It is a reality that business models change and evolve to suit the conditions in their market environment. If these dynamics are not effectively coordinated across the
entire organisation, the natural tendency will be to see departmental or functional silos grow and independent “sub-organi-sations” emerge. This is where we will see performing results optimised at depart-mental levels but under-performing at the overall company level.
THE SUPPLY CHAIN MANAGEMENT CHALLENGEAs we analyse more closely the organisa-tional dynamics, functional structures and management roles, we will identify where the problems and difficulties arise in man-aging the supply chain.
The problems and difficulties to effec-tive management lie fundamentally in the misalignment of key business processes, and the imbalances in the performance capabilities of the organisation.
These misalignments and imbalances are the direct consequence of both the lack of focused management leadership, and in the various independent changes made by stakeholders in the supply chain. Attention to these key elements, will immediately transform the organisation’s performance capabilities.
It may be surprising to read that these basic conceptual failings are being experi-enced in many companies, large and small. Left unaddressed for too long (as is often the case) realignment to restore the correct balance at later stages of strategic devel-opment will be costly and time-consuming.
All is not lost however. If every CEO or senior executive decision maker take a direct inter-est and commitment to working with the supply chain professionals in their organisa-tion this backbone of any organisation can be made to perfume at its optimal level.
At the end of the day, business decision makers and supply chain professionals will better understand the value of a supply chain structure that supports the business goals of the organisation.
[ If the link between the business strategy and the supply chain are not clear within the organisation, it likely that this is also not clear to the management. ]
The article is the first of a six part series on optimising supply chain performance is written by the Logistics & Supply Chain Management Society. Stephanie Krishnan is an Honorary Fellow and lectures for the University of Wollongong. Joe Lombardo is the founder of ESP Consult. Raymon Krishnan is the President of The Logistics & Supply Chain Management Society.
Part 2 of 6 in next issue: Principles Of Managing Supply Chains.
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The Internet of Things (IoT) is a buz-zword that is gaining popularity these days. According to Cisco, an estimated 50 billion devices and objects will be connect-ed to the Internet by 2020. At this point though, over 99 percent of things in our physical world are still unconnected. In an article published by Electronics Pur-chasing Strategies on April 11, 2014, cer-tain organisations are indicating the types of actions that are needed for the global community to benefit from IoT products. There are now calls to bring key players to-gether to explore opportunities and chal-lenges in the manufacturing and delivery of these products. As companies prepare themselves to jump the bandwagon, the big question is how their supply chains are going to evolve in the upcoming years.
CURRENT NEEDSWhile the answer is still waiting to unfold, many companies are currently focusing en-ergies on providing greater visibility into their supply chains today. In the past, a company operating in the oil & gas indus-try manually recorded information such as lot numbers, heat numbers, quality control measurements and other information in a spreadsheet. This turned out to be an ex-tremely time-consuming and tedious task that required about four hours for each product. Furthermore, this manual proce-dure was susceptible to mistakes, such as data entry errors. This is why the process was only carried out when necessary.
As a result, the company went on to con-sider a number of different options for improving traceability. The first option was to use labels with standard line bar codes. However, these are likely to come off during assembly and would negate the advantages of serialisation. The second possibility was to adopt Radio Frequency Identification (RFID) tags. Unfortunately, the problem with this option is that RFID tags do not work well with the various met-al parts due to the interference with read-ing and writing onto the tags.
While laser marking overcomes all of these problems, the machines for performing such tasks are costly, typically starting at $50,000. Besides, they also have to be en-closed, which causes problems when mark-ing large pieces. In addition, they cannot be easily moved from one place to another.
GETTING THE CLEAR PICTURE Greater visibility into supply chains is possible with the use of image-based code readers. DIDIER LACROIX explains.
[ One option is to use labels with standard line bar codes. ]
[ Reading of marked parts can be difficult because of curved surfaces. ]
An alternative was found in a dot peen marking system because the marks are permanent and do not rely on fragile RF transmissions. Besides, such a machine costs only about $10,000 and is available in fixed or mobile models.
VERSATILE USEA mobile unit can easily moved around the facility; and can it mark components of any size and in a variety of different orienta-tions. With dot peen marking, a carbide or diamond-tipped stylus strikes the material surface either pneumatically or electrome-chanically.
Another challenge however, is that of reading the marked parts. This is due to the fact that many of the produced parts have curved surfaces. The components are also made from many different materials and have various coating combinations. Cognex’s DataMan handheld readers were eventually selected for this task because they adjust the lighting to match the part that is being inspected. They also use ad-vanced algorithms for differentiating the 2-D Data Matrix code from its background.
With the technology in place, dot peened codes are now easily read on a variety of parts – ensuring traceability throughout the latter’s useful life. Traceability delivers two important benefits. First, it reduces rework costs by providing better manufac-turing process control while ensuring that
the right parts are used at every stage of production. Second, it enables the com-pany to quickly retrieve information on 100 percent of the parts in every system that has been shipped out. This includes production history and quality control information.
FIGHTING FAKES Visibility into the supply chain is espe-cially important for the pharmaceuticals industry. Since counterfeit drugs are still a major problem that plagues supply chains,
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manufacturers have to take the necessary steps to ensure their security. Recently, there were news reports that said the French authorities had seized fake aspirin, erectile dysfunction and diarrhea drugs to the amount of 10 tons. The drugs origi-nated from China and were stashed away in two containers. According to Yahoo News, some of the drugs did not contain any active ingredient, while others had dif-ferent levels of active ingredient compared to the authentic versions. The discovery is also considered to be the largest seizure of counterfeit medication within the Euro-pean Union. Clearly, the damage caused by counterfeits is not merely financial. Deicer has been discovered in cough syrups and cement powder used as a filler for pills – both of which pose a major threat to the lives of unsuspecting patients. Needless to say, fake drugs can deal a big blow to the repu-tations of legitimate producers of pharma-ceuticals products.
With the use of i-D barcodes and 2-D codes however, manufacturers can effectively put a roadblock to the flow of counterfeits. Pro-vided that readers are in place at each stage, manufacturers can effectively have better knowledge of their supply chains. They can determine where and when a product
has changed hands, and thereby keep track of the path that a product has tak-en within the distribution channels.
For this to be possible, the manufacturers need to en-sure that all their products carry the right Data Matrix codes. In addition, they need to ensure that printed text labels are correctly at-tached to each item. One manufacturer has effec-tively put a stop to coun-terfeiting. It uses a label-ling system that incorporates an In-Sight vision system and a DataMan ID reader to check the codes and printed text labels.
TECHNOLOGY MATTERSThe labelling system verifies and checks the identification imprints that are applied to the side flaps of the product packag-ing. The ID reader ensures that the label is applied in the first step. This scanner can autofocus and its liquid lens ensures fast and highly accurate focus settings – all performed without any mechanical moving parts. To ensure optimal lighting condi-tions, it is equipped with integrated illumi-nation with laser alignment.
[ Provided that readers are in place at each stage, manufacturers can effectively have better knowledge of their supply chains. ]
The image-based system performs qual-ity testing at the next station. This high-speed system with an ID reader has a resolution of 1,600x1,200. It checks the product-specific Data Matrix code and its associated variable Optical Character Recognition (OCR) data. With its extensive library of vision tools, it also simplifies the implementation into existing systems, accelerates deployment, and eases prod-uct changeover.
With the help of image-based technology, the labelling system exceeds the require-ment of performing checks on 200-250 packages per minute. In fact, it can achieve
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cycle times of up to 400 identified and controlled drug packages.
In the unfortunate event of a product recall, the supply chain may come under tremen-dous stress in terms of administration and logistics. Part of the pain comes from hav-ing to locate where the product has been distributed and putting out the necessary public information for the operation. In the absence of track-and-trace capabilities, a complete recall of both good and affected products may have to be made.
With the help of serialisation and the use of 1-D or 2-D codes however, the com-plexity of managing such an event can be reduced. Since there is greater visibility in the chain, the manufacturer can quickly identify the batches of tainted product and also determine where they have been distributed. This makes it possible for a surgical recall to be carried out, and in the geographical locations that have been affected.
Furthermore, the manufacturer can easily keep track of products that have already been successfully recovered and those that are still outstanding. In this manner, the recall is better organised and more orderly, facilitating the retrieval of con-taminated products within a shorter time-frame. All these help to reduce the over-heads for the expensive operation and to mitigate the damage to the reputation of the brand name.
PRODUCTION REQUIREMENTSAt a fibreglass manufacturing facility, a roll rotator machine is responsible for ori-enting rolls of fibreglass on skids, so that barcodes can be visible for shipping. A fibreglass mat is first wound onto rolls. The finished rolls are then transported down a series of conveyors to get weighed, la-belled and wrapped with stretch film. Near the end of this packaging process, a roll rotator machine spins each roll until each barcode faces upwards for easy reading.
After this, the operator uses a lift machine and places the rolls on a skid where the customer then reads the barcodes and takes delivery. Reading the code on the rolls presents several challenges. The first is that the rolls range from 9 to 22 inches (23 to 56 centimetres) in diameter. This means that the focal length of the reader is continually changing, thereby reducing camera performance. The second chal-lenge is that the code is covered with a transparent shrink-wrap material that produces glare – which makes it difficult for readers to detect the code.
In the past, the facility used a barcode reader and a vision system in conjunction.
The barcode reader looked for the code from the top while the vision system viewed it from the side. The two systems however, only had a combined read rate of just 75 percent. The rejected rolls had to be re-ori-ented to achieve a correct read, which need-ed significant physical effort. Precious time, money and effort were wasted as a result. Furthermore, as the company increased its production rate, manually orienting the rolls became an increasing burden on the operators.
Due to such inefficiencies, there was an urgent need to look for better alternatives of production. A decision was then made to adopt readers that make use of liquid lens technology to automatically adjust the camera’s focus. The liquid lens mod-ule is an electronically controllable variable focus system that uses two liquids with the same density: oil, which is an insulator, and water, which is a conductor.
The variation of voltage leads to a change of curvature of the liquid-liquid interface, which then alters the focal length of the lens. The key advantages of the liquid lens are its size, high optical quality, low power consumption, and its extremely fast response times compared to other auto-focus mechanisms. Since the liquid lens is rugged and does not have moving parts, installation is simplified. Setup and maintenance are also easier as there is no need to touch the lens. The technology also makes it suited for applications where reading distances vary between each in-spected part or during part changeover.
AUTOMATION EFFICIENCYAs a result of the implementation at the facility, a near 100 percent read rate is now achieved, allowing operators to perform other tasks that require greater human
intuition. The reader also includes Internet connectivity, which makes it easy to con-nect with a computer so that reader images can be displayed. This provides real-time feedback for a quick setup and allows fine-tuning to be carried out easily.
Initial fine-tuning of the setup was achieved by adjusting the contrast and brightness to compensate for the glare that is generated by the shrink-wrapping. At the same time, the position of the reader was adjusted in relation to the rolls. The engineers also de-veloped the idea of mounting the reader near the bottom of the rolls instead of in-stalling it at the top. This has the advantage of reducing the variation in the focal length, due to the fluctuating roll diameters.
Mounting the reader near the bottom, however, created another issue. It was no longer possible to simply halt the rotator when the barcode is detected, because the code ended up at the bottom of the roll. The workaround was found in reading the code twice and calculating the time gap be-tween the two readings to determine how fast the roll is rotating. After the code has been read the second time, the roll is al-lowed to rotate for one half revolution to advance the code to the top of the roll. This solution has been implemented via the communication between the Program-mable Logic Controller (PLC) that operates the conveyor, the rotator machine, and the code reader. The reader offers two discrete inputs and outputs. When a roll moves into position on the rotator, the PLC issues an output to the reader to start looking for the code. Once the reader locates the code, it sends an output signal back to the PLC. The latter then performs the calculations that determine the speed of rotation and issues the command to the rotator to stop when the code is at the top. Another reason for the near perfect read rate comes from the use of the code-read-ing algorithms. This makes it possible to find codes despite changes in angle, size and shading. The technology learns an object’s geometry using a set of bound-ary curves that are not tied to a pixel grid, and then searches for similar shapes in the image without relying on specific gray levels. The result is an improvement in the ability to accurately find objects.
The algorithms can manage a wide range of changes to code appearance that result from degradations in DPM code quality. The degradations are due to differ-ences in material types and surfaces. This application is unique as it involves reading a barcode just to identify the position of the code – without making use of the code after reading.
[ The key advantages of the liquid lens are its size, high optical quality, low power consumption, and its extremely fast response times compared to other auto-focus mechanisms. ]
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VEHICLE FOR QUALITYCar parts manufacturers today are no longer satisfied with just producing first-rate precision components. Many manu-factured components must be tracked in order to ensure complete reliability in the traceability process. At one such facility, a fully automated disc brake finishing and testing process has been developed. The disc brakes typically weigh between 12 and 20 kg (26.5 and 44 lbs).
Integrated machine vision provides the handling process with ‘eyes’. It reliably reads alphanumeric characters using Op-tical Character Recognition (OCR). Two vi-sion systems read the alphanumeric codes found on rotating discs brakes. This raises the safety bar in the process and also re-lieves employees from having to perform the strenuous manual task.
Before machine vision technology was implemented however, employees had to repeatedly lift the heavy discs out of a stainless steel box and place them on dif-ferent stations. Performing this heavy work
TECHNOLOGY AT WORK
Using Optical Character Recogni-tion (OCR) and Optical Character Veri-fication (OCV) technology, machines – in the retail, manufacturing, pharmaceu-ticals, and food and beverage industries – can monitor supply chains in real time. Activities range from receiving raw materials to shipping product. The ben-efits include allowing smaller inventories and waste reduction, while driving pro-ductivity.
But with any technology, the results are only as good as the tool. Most OCR/OCV tools on the market today are proficient at reading black OCR A and B fonts. The fonts are printed in a sterile envi-ronment on a clean white background. Under such circumstances read rates of 93 percent or better can be achieved. The problem however, is that such ideal con-ditions do not exist in most industries.
For example, the pharmaceutical indus-try is heavily regulated by many govern-ments, necessitating standardised solu-tions across all production and packaging. The issue here is that most customers do not use standardised fonts, software or hardware. The industry therefore needs to depend on technologies like OCR/OCV to meet the stringent demands. OCR/OCV tools need to effectively:• Learn and read any printed font;• Read text even when there is little
contrast between type and background;• Read text even when there is significant
variation in width and height;• Read text when letters are touching,
skewed, and distorted; and• Differentiate between similar shapes (eg,
the letter “O” and the number ”0”)
With these considerations in mind, engineers have come up with OCRMax. The technology is a font-trainable OCR and OCV tool and helps improve over-all read rates from the industry-standard level of 93-95 percent to 99 percent and
beyond. It works with both vision sys-tems and software and achieves the re-quired read rates even under challenging conditions. At the same time, it gives the customer the flexibility to optimise its system for speed, read rate or a combi-nation of both. The Graphic User Inter-face (GUI) keeps programming simple, while providing the ability to perform OCR/OCV effectively.
posed safety risks to the operators on the production line.
Today, this is no longer a problem as the turning and milling processes of down-stream finishing and inspection work have been fully automated – with the installa-tion of a robot. An In-Sight vision system was implemented directly on the gripper’s head. With its automatic focus, quick im-age acquisition and built-in lighting, the fully-integrated smart camera recognises the location of disc brakes delivered onto a conveyor belt. The camera aligns itself to the inside diameter. After this, image data is transmitted to the robot control within fractions of a second, allowing high-performing magnets to quickly grip the discs.
PRECISE PLACEMENTAfter picking up the disc brake, the first step is to read the alphanumeric charac-ters. To do this, the robot puts the disc brake on a rotary disc before a second vi-sion system reads the alphanumeric char-acters. It is aided by its integrated red
Light-Emitting Diode (LED) lights to put the characters into focus. The high-speed 1K In-Sight line scan imager captures the pixelated embossed characters as the disc brake makes two rotations.
Being able to reliably read different em-bossed characters is one of the most chal-lenging tasks. This is because the type of embossing can differ from one product to the next. The issue was resolved by using a step-by-step ‘teach-in’ proce-dure of all possible variants. The process is also made easier with the use of the OCRMax image processing tool for OCR applications and user-friendly Explorer software.
After reading the alphanumeric charac-ters, the finishing and inspection pro-cesses are carried out, including balanc-ing and sound testing. Finally, the robot creates stacks of six discs each in a stain-less steel box before it places a wooden cover on top. The robot’s In-Sight camera locates the exact position with the help of a simple black cross.
[ Being able to reliably read different embossed characters is one of the most challenging tasks. ]
Didier Lacroix is the Senior VP, International Sales & Services of Cognex.
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Having had the privilege of a long love affair with ports dating back to my child-hood, it seems only appropriate that I scribe some observations and thoughts on where this lover appears to be head-ing. This affair has taken me to the heart of more than 60 ports and dozens more ter-minals from Argentina to Alaska, Auckland and Ahmedabad.
In this article, I seek to address the driving forces for change in both port and port-related infrastructure as well as the key processes that support the different, and changing business models of port opera-tors and how they can mature into “intelli-gent ports”. I shall focus more on container ports whose traffic comprises a significant number of containers, due to their relative size and complexity. Many of the com-ments and observations will also apply to the development of smaller and bulk cargo and multi-purpose ports.
First, I shall tackle the infrastructure co-nundrum. Approximately 90 percent of all exported cargo moves by sea. It will not have escaped your attention that container ships are getting bigger. When I started out in this business, vessel sizes had risen quickly to a capacity of more than 4,000 TEU. We now see container vessels that are nearly 400 metres in length, 58 metres wide that draw 14.5 metres of water and hold 18,000 TEU, the pinnacle of efficiency per TEU and currently the longest cargo vessels afloat.
These numbers may be too big to compre-hend but a fully laden vessel would hold cargo valued around US$1.8 billion or what would be more than the GDP of each of the smallest 20 countries. It may be hard also to fathom the infrastructure needed to sup-port these behemoths. Channels dredged, elongated berths, more cranes and cranes with 23 container reach.
Worse still are the effects of concentrations of cargo and infrastructure at the large
THE ADVENT OF INTELLIGENT PORTSDEREK MAGGS discusses about the changing business models of port operators and their inevitable road towards becoming “intelligent ports”.
ports. Most of us will remember the trage-dy of the destruction of large parts of Kobe in 1995 where more than 6,000 lost their lives and the cost to Japan was around 2.5 percent of its GDP at the time.
All this means that today only eight ports in Asia (of which five are in China) and five in Europe can handle them. The world’s largest container port – Shanghai – has grown nearly 400 percent since the turn of the century to handle nearly 33 million TEU in 2012.
That there is not one port in the Ameri-cas and is beyond the current dimensions of the Panama Canal locks indicates that these new vessels are clearly designed for Asia-Europe trade. Such large container ports have the ability to drive a competitive advantage for these two large trading blocs through supply chain, inventory costs will rise as a result of the slower transit times of these vessels.
Sri Lanka could become a bigger winner as a transhipment hub for Indian cargo and will vindicate the vision of those that pushed through the expansion plans in 2008 for this artificial harbour. Those ports setting themselves up to compete as transshipment hubs need to continue to offer rapid berth-ing; rapid vessel turn-around; increased capability to handle larger vessels; on-dock storage; great links to nearby terminals and free trade zones; operational visibility as well as excellent customer service. Will oth-ers follow suit?
With these concentrations in vessels and ports, one can see a “more eggs in fewer baskets” scenario developing. This increases supply chain and inventory risk in a number of ways. Partial or total damage to a vessel or port will have proportionately larger impact. More visibility into the value of cargoes and the routes on which they are carried will be needed to help mitigate the risks.
Since November 2001 and the creation of Customs-Trade Partnership Against
Terrorism (C-TPAT), following the tragic terrorist events in New York, ports have been increasingly cast into the front line of defence against terrorism. This has required investment in new infrastructure – such as scanners as well as improved processes, collaboration with border protection agen-cies and thus the IT systems that support them. We will cover more of this later.
The increased size of vessels, however, is significant but perhaps little more than a side show to the great phenomenon of the rapidly changing patterns of global exports. In little over 20 years, exports as a percent-age of GDP have grown four-fold with ex-ports now representing around one in every four dollars of GDP produced on the planet. This then is a major growth story.
We saw a blip in 2009 as the global financial crisis (GFC) hit most of the developed econ-omies like a sledgehammer. Manufacturing and thus supply chain inventories inevita-bly slowed. Along came fiscal stimuli, with inventory restocking causing an equally dramatic rebound. Over the same 20 year period, however, there has been a slow but considerable change in the world trading patterns. North America, Europe and Japan have become slightly less important as trad-ing partners and faster growing economies catch up. IMF/PwC estimate that by 2030, more than half of the fastest growing trade lanes will be connected with China. India, In-donesia, Nigeria, UAE and Saudi Arabia are some of the fastest-growing of all. Are these countries investing fast enough to support the sustainable growth of this trade?
The last pillar of infrastructure relates to the hinterland development. For whilst special-ist transhipment ports will handle sea to sea throughput capacity, even that will be fraught with challenges. Cargo moving to the port by land, feeder and barge will rep-resent another set of challenges altogether.
The biggest challenge will be how the growth in road and rail traffic will be
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hundreds of years. Initially and uni-direc-tionally bringing luxury goods such as tea, spices and slaves, the global market sup-ports a complex network of raw materials, work in progress and finished goods flow-ing in all directions. The ships, their total capacities and their empty space carried; all these are a sound indicator of global trade growth or shrinkage.
As my final point in this industry dynamics section, I turn to how infrastructure sup-ports the revenue streams in smarter ways. Ports make their money from a variety of sources. Every port’s business model is slightly different from even its near neigh-bours. Whilst it is obvious that most ports obtain the bulk of their revenues from han-dling the vessels and their cargoes, what is less intuitive is that the mix of services offered and the revenues obtained is changing.
Many ports have been established close to major urban densities. This means that the value of the real estate continues to rise as the pressure for housing and office accommodation increases. It also means that people are closer to ports than ever before. People have increasingly more dis-posable income than ever before. This has seen the development of accommodation, retail outlets, restaurants and the like on land owned by or on long term lease to the port. San Diego port’s change in revenue mix is a classic example being repeated in Australia, Northern Europe and elsewhere.
Thirdly, I seek to address how smarter port management becomes more critical than ever. You will have understood from the above that this is a dynamic industry. Whether a port aspires to be the regional transshipment hub or a significant gate-way for the country or hinterland, it will
[ In little over 20 years, exports as a percentage of GDP have grown four-fold. ]
handled. Even large, well-established ports were rarely established with the vision of the volumes that will likely be handled in the next 10 to 15 years. Wholesale change of road and rail infrastructure to feed these ports can rarely be added optimally after the fact.
When one adds the development of free trade zones; terminal to terminal transfers and the increased urbanisation of major cities, this will act as a growth limiter for many ports, especially where the demo-cratic process of consultation with the people will take many years to reach the necessary compromises.
One example of a major port starting to make this adjustment is Singapore. Trans-port Minister, Lui Tuck Yew, announced in October 2012 a S$3.6 billion investment in a radical shift of the five existing terminals into one terminal at Tuas in the West of the island state will nearly double the cur-rent 35 million TEU capacity whilst freeing up the current sites which are closer to the main business district. The current operat-ing leases expire in 2027.
All of the above points to substantial capi-tal investment programmes with multi-year paybacks. The decisions made by govern-ments, private companies and public-pri-vate partnerships can literally allow the life-blood of world trade to fuel a country’s economy, and often that of its neighbours, or leave it at a competitive disadvantage. Guessing and market making is thus made with the use of substantial analysis yet the risks remain real. Secondly, we focus on the dynamics of the shipping industry as it relates to ports. Shipping has been a bellwether guide to the health of the global economy for
need some or all of the following focus areas to achieve that strategy.
Given the dynamics of the challenges men-tioned above, there are 10 broad areas of opportunity where ports can be smarter.
1. Collaboration The value of ports in the supply chains of its users has been established. Many larger ports have established portal-based com-munities to help link the various users and stakeholders, namely: shippers; forward-ers; consignees; truckers; cargo brokers; customs; shipping lines; maritime and har-bour authorities; border protection.
All parties can benefit from increased vis-ibility of the transactions in order to im-prove the efficiency of their planning, document lodgement; cargo clearance, cargo collection and payment processing. The evidence where this is not a joined up process is often all too easy to see. Lines of trucks jammed on their way to a port or empty trucks awaiting pick-up are tell-tale signs. In the past, ports had to build their own, proprietary infrastructure.
Now, there are standard building blocks available to bring this type of community within reach of mid-tier ports. Indeed, re-cent technological advances are helping the collaboration. Ports are implementing solutions where communication is moving to mobile applications, since many of the above stakeholders are naturally mobile. Some are going a step further and using Machine to Machine communications (M2M) to help schedule truck and vessel arrivals.
2. Talent management The second area where smarter is needed is in the utilisation of labour where and when it is needed. This needs constant planning and re-planning and should be integrated with vessel arrivals, departures and the re-lated cargo activity. Today, this area offers scope for cost reduction or at least cost minimisation as volumes increase, espe-cially where union practices permit.
3. Increased and enhanced services and products The third area offers scope for smarter revenue growth by offering new services (cross-sell) to existing port users as well as new port users. Such services might include preferred berthing (sequence and location), preferred storage, value-added cargo ser-vices; leases as well as advertising.
In order to provide these at an attractive but profitable price a good understanding of the underlying activity-based costs is required. So important is the provision of some of these products in some locations that the shipping companies themselves
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have invested to establish their own termi-nals. This then needs a good platform to support the end-to-end port value chain.
4. Real Estate managementMany port users pay little or nothing for conducting their business in the port. Such parties include: agents, brokers and customs. New users such as restaurants, shops, mobile telephone towers, cruise terminals and the like offer opportuni-ties for charging for real estate on various bases such as land area, revenue percent-age and so on. Maintaining contracts and reconfiguring the real estate assets over time needs smart software to reduce the administrative burden, reduce errors and ensure that billing is affected.
5. Increased asset availability and utili-sationThe wharves, berths, cranes and stackers represent considerable capital investment. It makes sense to ensure they are opti-mally operational. Vessel scheduling, which requires effective collaboration (see [1]) with the vessel masters and marine port authorities, could improve throughput and thus revenue by a few percentage points.
Still more value can come from the accu-rate maintenance of the wharves, handling equipment, cranes and other vehicles. By “accurate”, I refer to the right amount of maintenance with links to the supply chain for big ticket items – such as rubber tyres for gantries (RTGs) – in order to improve availability at the lowest total cost. Over-maintenance, under-maintenance and late ordering of key spare parts can prove costly, especially in 24x7 ports running close to capacity at a peak season.
6. Increased operational automationThe key focus for ports is crane opera-tions. Ports have shifted to one operator for multiple cranes and latterly for full automation. Rubber-tyred gantries and rail guided stackers still have room for further automation. The entry timing and documentation, exit and queuing of vehi-cles for pick up and drop off offers further room for automation at most ports in Asia. Systems have been around for quite a while to ensure the most efficient planning, stor-age, sequencing of loads and discharges in order to increase throughput efficiency and reduce errors.
7. Increased back office automationThe back office activities related to opera-tions offer another area for smarter work-ing. Those ports that offer and insist upon, or incentivise, the electronic payments, document filing, receipt issuance and self-service have enjoyed better customer service, lower costs as well as reducing opportunities for fraud.
8. Better quality and advanced decision-makingThe word ‘smarter’ would most be associ-ated with this topic. How to decide on tac-tical planning (operational staff especially), pricing, which areas of cost reduction to focus upon, modelling expansion opportu-nities, offer substantial opportunities for smarter working and margin improvement.
9. Enhanced security and safetyPorts are very concerned about safety. Safety of the people working in the port, safety in the port environs and the envi-ronmental impact of the vessels, cargo and other materials. Incident management software combined with analytics can help smarter ports drill down into the root caus-es of such incidents and tackle them holis-tically. This is a proven way of improving safety in the freight logistics industry.
10. Multi-port business models One trend in recent years has been the willingness of port groups, such as DPW, HPH, APM and PSA, to purchase other ports around the globe and to instil their best practices, processes and systems. There are two implications of such acquisitions. First, that financial planning and consoli-dation becomes more onerous. Charts of accounts are not always aligned and the impact of currency makes for a need to have responsive decision-making, espe-cially with regard to asset acquisitions and replacements.
As systems and telecommunications in-frastructure continues to develop, it will soon make economic sense to run the back-office systems on a central, hosted model whether on premises or in the cloud.
Secondly is that metrics for port compari-sons are tough due to the many differences mentioned above. However, comparisons do make sense.
For example, ‘why does one port have rev-enue per tonne or TEU 30 percent lower than another port?’ Or, ‘how can con-tracts with shipping lines, across multiple ports, be adjusted to help drive improved margins and behaviour?’ The important things, however, are to look at the trends for improvement against the strategies employed and to ensure that better prac-tices are shared amongst ports in the group to help drive efficiency and the stra-tegic drivers that matter most to the own-ers or operators.
We have looked at how the emerging world of smarter ports may appear through the three lenses of infrastructure, port trends and port management systems. It can be seen that port owners and managers need to consider their investments in infrastruc-ture and supporting systems carefully if they are to compete as the 21st century unfolds. This matter is rarely one just for port profitability and development but of-ten has a significant impact on the health of the country’s economy which the port serves.
So like any good marriage, the lover has changed, blossomed and continues to ma-ture but this industry remains as exciting and enchanting as ever.
Derek Maggs is the Vice President for Services Industries, Asia-Pacific & Japan, SAP.
[ The entry timing and documentation, exit and queuing of vehicles for pick up and drop off offers further room for automation at most ports in Asia. ]
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As companies look for ways to reduce costs and improve productivity, supply chain managers are under increasing pres-sure to find smarter ways to do things. Which is easier said than done as manu-facturers move production further away to enjoy cheaper labour, or closer to home to get lower energy and transport costs.
Companies that get the supply chain equation right gain considerable benefits especially to a company’s bottom line. According to PricewaterhouseCoopers, companies with the best supply chains enjoy EBIT margins that are eight per cent higher than companies with poor supply chain management.
While there are savings to be made the real question is how to achieve them. The way companies are now looking to create effi-ciency is through the introduction of global control towers.
Global control towers are like the nerve-centres of a modern supply chain. They are a place where every piece of data on every product, shipment, document and cost is captured and analysed. Once estab-lished, a global control tower gives a com-pany unparalleled visibility of all aspects of their supply chain so opportunities can be seized faster and dangers avoided.
The concept and application of global control towers are particularly relevant in Asia. This region has its own unique issues such as poor road and port infrastructure, overly complex regulatory requirements and more commonly skills and language problems. But with Asia being the main manufacturing base for the world, and with a growing number of middle class consumers demanding more and higher quality finished goods, the supply chain challenges in Asia are likely to get worse before they get better.
WHAT IS A CONTROL TOWER?So how does a global control tower work? First, a global control tower centralises and
THE RISE OF GLOBAL CONTROL TOWERS RICHARD STROLLO gives the facts to how these high tech nerve centres are redefi ning supply chains in Asia.
standardises a com-pany’s processes while using state-of-the-art technology to cap-ture the data elements needed to provide the company with visibil-ity along the length of their supply chain.
This centralisation and standardisation is criti-cal to the success of a control tower. Having five or six different regions all collating data in different format is the logistics equiva-lent of the tower of Babel with no-one able to work out what is really going on.
Once a common set of processes is in place a company will enjoy improved speed in the decision making process, while central-ized and uniform data collection allows for better-quality information and better-in-formed decisions.
Properly executed and run, a global control tower can take the risk out managing a sup-ply chain in Asia. While there will always be exceptional circumstances that disrupt an operation – Asia is all sadly too familiar with natural disasters – the real savings come from being able to respond to an incident, correct or redirect a course of action and put in place remedial measures.
WHAT BENEFITS DO CONTROL TOWERS DELIVER?While the obvious answer is visibility, this does not explain the many ways a business will benefit from a supply chain control tower. The real benefit comes in the form of savings and efficiencies that can save a company millions each year.
With an integrated supply chain running from a control tower, the key supply chain decision-makers have enormously power-ful information at their fingertips leading
to better, quicker and more informed busi-ness choices.
Companies will benefit from a reduction in trade and compliance penalties as the information they have allows problems in the supply chain to be avoided
The reputation of the firm will increase as customers experience improved adher-ence to their schedules and requirements, as well as greater certainty as to cost. The overall level of customer satisfaction with the company is likely to rise.
With better understanding of the entire supply chain and how it works, decisions can be made as to the optimal level of in-ventory and buffer stock required to keep the company operating smoothly. Effective control towers identify improvement in its demand planning, scheduling and cycle times.
A control tower will be able to identify synergies with transportation providers, leading to reductions in transportation expense and total landed costs.
With powerful data analytics available, logistics experts have the flexibility to make decisions about better sourcing strategies such as shifting the allocations required
[ Global control towers can help a company achieve operational excellence and substantial cost savings. ]
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different regions or units having different goals and objectives as there is no clear central policy or direction.
It is likely that proponents of a control tow-er will meet resistance from both manag-ers and employees. Each country will have its own culture and structure and those doing well within that structure are hardly likely to be advocates for change. Employ-ees may just respond by seeing more work for themselves, or even worse, no work for themselves as their functions are reallocat-ed to a more efficient place of execution.
These issues have been faced by every manager that has ever had to make wide-spread changes to an organisation. Smart managers will pay attention to the way they communicate the goals, explain the changes and advocate the benefits of the control tower model.
CONTROL TOWER CASE STUDYA diverse European power technology and industrial automation company recently implemented a global control tower to drive efficiency into its operations which span 100 countries. In just two years of operations, the control towers delivered nearly US$15 million in savings.
Historically, the organisation was running a business-centric supply chain manage-ment model that was failing to deliver the best on-time delivery performance and shareholder value.
Working with BDP’s knowledge venture Centrx, a solution was developed and implemented for the company that estab-lished multiple supply chain control towers in strategic business locations around the world.
The company re-engineered both its international and domestic transporta-tion processes, along with their functional responsibilities and corresponding pro-cess flows. New state-of-the-art configur-able software was introduced to augment the company’s existing ERP platform capa-bilities. Armed with this new technology, the control towers could now deliver effec-tive logistics, transportation, and inven-tory optimisation and benchmarking.
The results enjoyed by the client as a result of its new control towers include: • An automated order-to-cash business
process; • Effective single-source decision-making
capabilities;• Inventory, warehousing, and distribu-
tion optimisation;• Elimination of process redundancies
and labour intensive functional prac-tices;
from each supplier. The data can tell the supply chain manager if they need to reen-gineer a particular logistics process or even substitute one logistics partner for another.
In some cases, the control tower will be pivotal in optimising the output of differ-ent manufacturing plants within a compa-ny, as well as deciding where to locate new manufacturing plants.
WHERE TO LOCATE A CONTROL TOWERA strategic decision needs to be made about the location of the control tower. Truly global companies may need several to allow for their 24 hour multi-continent business. Other companies may only need one located in the region where most of their logistics activity takes place.
Singapore, Kuala Lumpur, and Hong Kong could all be good locations for a com-pany’s control tower. All three locations provide access to highly skilled logistics professionals and have the technologi-cal capability to establish and maintain a control tower.
However, the operations need to be com-panywide, and will often require experts from different countries to be brought together in the one place. This is a natural reflection of a modern global company, and just as goods are moved across bor-ders, skilled personnel may need to be moved to the location where they can make the greatest contribution.
The final decision on location will come down to what works best for each com-pany. The important thing to remember is that control towers are less of a physical location on a map and more of a location where the company’s data and intelligence and decision-makers reside. The charac-teristics and patterns of a firm’s supply chain may also influence a control tower location, however, this varies based on the specific strategic and tactical objectives.
WHAT ARE THE ISSUES IN SETTING ONE UP? The biggest challenges come from the need for standardisation and the resist-ance of some people to change.
The process of establishing a control tower will often reveal a company has inadequate or incomplete information on its supply chain functions – a revelation that will not be welcomed by some people administer-ing the old system.
It is common to find the use of poor or conflicting measurements of performance as well as diverse processes within a large company. This is often the result of
• Improved decision-making through enhanced supply chain visibility and event management;
• Refined SAP data practices, education, and training-related programs; and
• Implementation of multiple Six Sigma improvement sub-projects.
THE FUTUREIn one sense, supply chain problems are a nice problem to have. They mean the com-pany has developed to a point of sophis-tication where the need to take a global or regional approach is now needed. And that approach may well require the crea-tion of a control tower.
Understanding how a control tower can benefit your business is critical for modern logistics experts. CEOs are increasingly looking at the logistics func-tion of their business as a source of savings and improved profitability. So logistics managers need to be prepared to explain what options a company has to increase its efficiency.
And when executed properly, the sav-ings can be enormous. The most profit-able companies in the world know this. And that’s why control towers are appear-ing across ever major region. The ben-efits a control tower can deliver are a key reason why the operations of the supply chain have now moved up the food chain to become a priority for many organisations.
[ Companies with the best supply chains are more than twice profitable as industry laggards. ]
Richard Strollo is the Managing Director of BDP South Asia.
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