Let's Get Physical
Digital Supply Chains Can Drive Transformation-But Only If They Accurately Model The Physical World
22 May, 2019 // The social supply chain was a-twitter at last week’s big conference thinking about how future physical and digital supply chains can merge.
Their idea is that technology can model what’s actually going on inside warehouses and factories, as well as in the transportation links between facilities. That’s a powerful insight, and we’re all for it. Better data means better decision making and more efficient processes.
Yet, so much of the current conversation misses an obvious problem: Many physical processes aren’t digitized accurately—or at all. So, good for you if you wire together all your partners’ enterprise resource planning (ERP) systems. Be careful, though, that you’re not creating a very expensive, state-of-the-art tool for fooling yourself.
What if the system says an item shipped on Friday afternoon when it’s still waiting for pickup at the dock until Monday morning? Or, how about the order that arrives at a distribution center but can’t be fulfilled for days because the software hasn’t processed it as received and put away?
At Morgan, we have witnessed these exact scenarios in otherwise large and sophisticated supply chains. We also regularly see transactions at the edges and in the seams of the supply chain that aren’t captured at all. They’re invisible to the digital supply chain because a supplier—say, a subcontractor or an overseas transportation provider—is working offline or unseen by the enterprise.
What makes matters worse is that many of the greatest opportunities for efficiency gains come from physical events with missing or unconnected data.
In our practice, we believe that any digital supply chain system must have methods for connecting these unconnected nodes. Those methods begin with people who understand the physical supply chain, not tech products from a trade show.
Results come from the grand sum total of expertise, analysis, data and execution. Don’t get us wrong: We love the promise of technology, and we’re excited that smart people are exploring that potential and funding new ideas.
Just keep in mind that “merge” is a verb. Bringing the digital and physical worlds together takes active and informed effort. When you’re looking for your next digital transformation, make sure your supplier has real expertise, not just exhibition space.
While You Were Shipping…
More Recent Stories You May Have Missed That Caught Our Eye
The Big Challenges Behind One-Day Shipping (Wall Street Journal; subscription access). As retailers make plans to match Amazon’s forthcoming one-day delivery for Prime customers, supply chain and inventory considerations become critical. Fast fulfillment promises depend on inventory accuracy, according to Jim Barnes, CEO of enVista, a software and consulting. He notes that many companies struggle with the “fundamental issues around where inventory is sitting in the supply chain.”
In our own practice, we have found that visibility in transit is key to flawless execution. Morgan also specializes in creative solutions for inventory, including Inventory On Demand™, a first-of-its-kind outsourced ownership service.
More Flexible Hours of Service for Truckers (Fleet Owner). The introduction of electronic logging devices (ELDs) to track driver hours has brought both improved oversight and some unnecessarily rigid rules enforcement. Now, truckers may get some relief with the Department of Transportation’s first set of regulatory revisions, due in June. Small changes to duty hours and rest breaks may help to ease driver restrictions in a still-tight labor market.
Out Of The Box Thinking For Container Lines (Lloyd’s List; tiered subscription access) At the Global Liner Shipping Conference in Hamburg, Lancaster Analytics Chief Scientist John Lancaster told attendees that new thinking is the only way to escape box carriers’ recent cycle of cost-cutting and quality-of-service erosion. “How many container lines want to be the Ryanair of shipping, he asked.
“The way pricing is done rates as medieval,” Lancaster said. “Carriers need to find which customers want different services and which will be willing to pay more. And for those that can’t pay at today’s rates, it may be possible to offer a degraded service to them that they can afford.”
At a separate Global Liner Shipping Conference session, SeaIntelligence CEO Alan Murphy agreed. 75% of shipments on the top 15 ocean carriers arrived at least a day late in 2018, he reported. That creates, what Murphy said is a “huge opportunity for an alliance that can go and try to be the top performer.”
Where Supply Meets Demand (Journal of Commerce; tiered subscription access) Truckers are getting a rough lesson in basic economics. Truck and driver capacity grew in last year’s tight market but overshot current needs. Combine that with softer demand, and the new equilibrium point is at lower prices. “Year over year, we’re seeing contract rate differences in the low single digit percentages, and we’re starting to see some of them even go negative,” Chainalytics VP of Transportation Kevin Zweier told JOC.com.
Zweier says t’s not a surprising trend after two boffo years of price hikes. But what feels like a headache for truckers may be sweet relief to shippers.