Happy New Year to all, I hope that your 2016 is already off to a great start. Looking forward to this year there are some exiting changes as well and continued progress in other areas. Here are some trends we are focusing on for 2016:
- Retailers will continue to seek new solutions and services to empower their stores: in 2015 we started seeing greater efforts and emphasis on the role of brick and mortar stores. Written off as irrelevant, even a burden a few years ago, retailers’ views of their real estate assets has taken a turn. Brick and mortar stores’ role in the retail supply chain will continue to grow in importance. This momentum is due to the evolution of how stores are being leveraged by retailers. Embracing show rooming, leveraging stores as distribution centers, creating contextual experiences within the store to drive traffic to name a few trends, are all making stores matter again. Most significantly the redefinition of the store’s role allows traditional retail to tackle the pure eCommerce players. 2016 will continue to see this evolution of the store. Gaining improved inventory visibility, empowering store associates with greater information, enhanced operational data to allow more business processes to be tested and adopted are all areas where retailers will be seeking appropriate solutions. Look for retailers to lean on their solution and service providers to bring them the necessary technology and business processes that can allow retailers to continue to transform their physical assets. Solution and service providers must work with their retail clients to not only provide technology or business process solutions, but to also offer strategic insights and ideas. Technology is not the panacea but the enabler for new ideas and processes.
- Logistics continues to feel the strain: Your supply chain is only as strong as your ability to minimize the friction associated with moving inventory and products throughout your supply chain. This burden falls on logistics – rail, ocean, air, trucks even bicycles and donkeys are all part of our logistical network. This past holiday season witnessed another situation where the strain on the logistics network can rear its ugly head. eCommerce retailer Jet.com had to apologize to some of their clients for falling short on being able to deliver products in time for Christmas. Logistic giants FedEx and UPS had to jump through some hoops to meet the delivery crush. Coincidentally, over the holidays, eCommerce giant Amazon announced it is exploring adding an air cargo arm to their distribution assets. While eCommerce is growing at a steady 1o-15% year over year since 2012, the strain it is placing on logistics is disproportionate – due in large part to seasonal aspect of certain package delivery. The strain is also starting to pop up in places such as college campus mail rooms where they are being overwhelmed by services such as Amazon Prime. This trend is not going to disappear once the calendar flips to 2016. Transportation and warehousing will continue to feel the strain of keeping up with the accelerated evolution of supply chain in 2016. Look for continued efforts from service and solution providers to work with their customers to continue to find innovate manners to handle the crush of logistics.
- Explosion of disruptive technologies continue to grow: Whether it is IoT (internet of things), robotics, drones, 3d printing or virtual reality to name a few, these disruptive technologies will continue to grow in importance within supply chains. IoT is already well entrenched within manufacturing and logistics, in 2016 look for this technology to grow in importance with regards to the retail supply chain. Robotics are also well know within manufacturing, but look for this technology to play a greater role in places such as customer service and inventory management in retail. Drones are getting much attention, somewhat negative, post holidays as those who unwrapped them as gifts are wondering if they need to register with the FAA, there was even a near disaster during a World Cup skiing race when a drone literally fell from the sky, click here for video. Reality is drones have a role to play in our supply chains – the genie is out of the bottle and properly leveraged they can reduce friction from our supply chains. As technology giants Amazon and Google continue to push on how to leverage these machines to address last mile delivery. Additive manufacturing will continue to play a role in the manufacturing process, but will also create new business models. Companies such as Lowes are already experimenting with 3D printers in their stores, allowing customers to have custom products manufactured on site. 3D printing is already playing a significant role with manufacturers such as Airbus and Boeing, but we are only at the cusp of how this disruptive technology will play in our supply chains. Finally virtual reality will continue to play a role in places such as retail – allowing customers to experience product as well as in supply chain design and CAD software. As mentioned above, we see warehousing and other logistics being strained as more companies look to add more of these assets, leveraging virtual reality allows for better testing and understanding of how these capex projects will turn out. Imagine being able to test and try out a full scaled model of a plant or warehouse via virtual reality. Look for these technologies and others continue to grow in importance within our supply chains.
Every year at this time it is always interesting to look back and see what the prior year held for us and more fun to look forward to the coming year. As I have become more of an optimist as I have grown older (is that normal?) I am looking forward to 2016 and some of continued evolution of these technologies and trends.
Happy New Year to you and your loved ones!
Last week the FAA (Federal Aviation Administration) published their rules and regulations for the oversight of drone usage within the United States. Many will and have argued that these rules are too restrictive for companies such as Amazon or Google to truly take advantage of the technology. The basic parameters of the guidelines set by the FAA:
- Drones must be less than 55 lbs in weight
- Can only fly during the day in good weather
- Must not fly close to airports
- Cannot fly faster than 100mph
- And must be within visible site of the operator
On the surface these restrictions severely limit the dreams of the likes of Jeff Bezos. One of the great opportunities for drones within the supply chain and particularly with the delivery side – is the ability to enhance the last mile portion. The last mile is always a challenge since you have to break down the orders to the individual level. Drones seem to offer a affordable and flexible solution – but not necessarily if the FAA rules are in place. This does not mean there are not some use cases that supply chains can take advantage of immediately:
- Asset monitoring – this is already taking place in agriculture, oil & gas, mining to name a few. Drones provide the flexibility for activities such as survey work, monitoring of assets, determining crop growth etc. In countries such as Australia, mining companies are already leaning heavily on the pilot-less aircrafts to assist with the activity on the ground. By some estimates the usage can save close to 90% of the $2000 an hour cost for a helicopter.
- Remote delivery: Logistics firms such as DHL have been able to expand their reach via drones. The ability to connect remote German islands in the North Sea has enhanced the remote locations with a more regular delivery service. Of course these drones are clearly flying outside of site lines of the operator.
These use cases are not necessarily replicable under the FAA rules. However I have to believe that as the technology continues to evolve the FAA will loosen their grip on the regulations. So what could we expect from more open drone rules? If and when the drone rules become more open here are some opportunities that supply chains might enjoy:
- Smaller window of delivery for certain items. Think of Kozmo.com with drones rather than people on bicycles. Companies from Amazon to CVS to Giant Eagle to Five Guys will be able to deliver a whole host of items to your door at the drop of a hat. Well maybe not that fast. But why couldn’t books or other items from Amazon be delivered within the hour? Or CVS deliver your prescriptions. Giant Eagle your groceries and Five Guys your cheeseburger. Once drones become a more viable delivery extension of the supply chain, look for businesses to take advantage of the new reach this provides into the home.
- Untethering the consumer from a physical address. Drones, coupled with the explosion of mobile, will allow delivery systems to ignore the limitations of roads and physical addresses. Today deliveries rely on infrastructure such as roads, as well as fixed addresses in order to manage delivery of goods. What happens when you have a drone that has far fewer restrictions? Couple this with a mobile device that is provides the digital location of the recipient. Your mobile can send the drone the exact coordinates, GPS, and the drone can then fly its way to your location. We will not longer have to worry about having a package delivered to our home or office…we can just tell it what time to deliver it to us as it hones in on your GPS coordinates.
I realize these changes are a ways off. But these are examples of how the supply chain will be expanded beyond the traditional links – loading dock, retail store to name a few. These types of digital disruptions will begin to turn our homes into an extension of our supply chains.
Now I wonder where I should build my drone landing pad…
Hardware has been pushed to the back pages a lot of times – what is cool is the software that sits on the hardware. We don’t want to be bothered with thinking of servers, smartphones, computers, tablets, touch screens, televisions, appliances etc etc…we just want our apps! But hardware is making a come back, at least in the cool category. There are some changes coming to your supply chain…that being powered by changing hardware.
- Robotics – okay okay, I know that automated factories is nothing new…but we are seeing a new surge in how robots are being leveraged within the factory and warehouse. It is nothing new to see robots on assembly lines. However companies like Kiva Systems have pushed robotics deeper into the supply
Coming to a supply chain near you.
chain. Their orange robots gained fame by being integral in Zappos’ warehousing. The robots did the majority of pick and pack for the online shoe company. The joke was if you saw a light in the Zappos distribution center it was bad – a human was most likely fixing a robot! The horror…otherwise the robots did not need light…or a lunch break. But the robot influence is not limited at the warehouse or factory floor, companies like iRobot – best known for their Roomba robotic vacuum – offer a number of robotics for areas such as telemedicine and video collaboration. Think about the possibilities of this platform for such areas as after sales servicing. A technician could also have a telepresence robot that is tied back a veteran technician who could be located in one place but bring their expertise to numerous robots at once. Robots will also help do the 3D jobs – Dirty, Dangerous and Dull. Being able to off load these jobs to robots will free up the human for more valuable roles within the supply chain.
- Drones – one could argue that drones are a subsection of robots…and you would have grounds for an argument, but I think they deserve to be discussed separately. What makes them unique is that the drones I am speaking of are the robots that fly. Drones became a part of our vocabulary through their usage by the US military. From a commercial usage we got our first taste of the possibilities when Jeff Bezos of Amazon went on 60 Minutes a year ago and suggested that some day in the near future we might be getting our Amazon packages delivered by drones. While Bezos has since tempered his Amazon
Don’t expect this to deliver your packages…but its little brother and sister.
deliver via drone, we are starting to see actual usage of the technology to solve some logistics’ issues. DHL has started employing delivery drones to make deliveries to remote areas in Germany. Our supply chains have really only scratched the surface when it comes to using drones. We will continue to see them being leveraged for logistics but also to assist with tasks otherwise challenging to address. Companies are looking to use drones to go “look” at potential maintenance issues in places that are difficult for humans to reach – for example, drones could inspect parts of oil facilities or factories that are difficult to access. Drones will play a greater role in our society and our supply chains. This time next year Santa Claus might very well be using drones to help him deliver his presents.
- 3d Printers – Last week I took my son to a 3d printer store, and it was great to see how a 7 year old reacted to seeing the printers making a wide array of “things.” Dinosaurs, building models, snow men and other shapes. What I saw was the ability to change how we manufacture, how we deal with spare parts inventory and even impact logistics. Bringing 3d printers to the manufacturing floor will offer new methods but can also expand the factory floor. Manufacturers could place 3d printers closer to the final customer for products that might require some customization or assembly. One can imagine mobile 3d printing capabilities – allowing for true delaying of production and JIT (just in time). Companies like Nike are already experimenting with using 3d printers to make their sneakers. A customer could walk into a Nike retailer, customize a shoe and have it printed on site. True customization. With regards to spare parts, companies such as Airbus are looking to leverage 3d printers to keep certain plane models in service longer. Their vision is to leverage 3d printers to produce specific spare parts that would otherwise not be cost effective to continue to manufacture. When it comes to logistics – we are always trying to solve our last mile issue with regards to delivery. What if your local Staples or OfficeMax had a 3d printer and you could have some of our deliveries sent to the store and printed? Between drones and 3d printers we might have competing hardware solutions for the last mile delivery challenge!
- Wearables – Mobility has had a deep impact on our supply chains already. This should come as no surprise as the BYOD (bring your own device) wave has swept over businesses in general. But I am not just speaking of greater usage of smartphones and tablets in our supply chains. Wearables are the next evolution – dedicated, connected items that we wear. The most common wearable is Google glass. While the jury remains out as to whether or not it will catch on, the genie is out of the bottle when it comes to growing usage of wearables. We are seeing the usage of Google glass in the factory, companies like Plex Systems are demonstrating how they are integrating the hardware with their solutions to add efficiencies on the factory floor.
Other solution providers like Unvired are leveraging Google glass into their warehouse solutions – bringing greater efficiencies to the pick – pack process. Warehouse workers, using the Google glass hardware coupled with the Unvired solution have hands free access to vital data that makes their job more efficient. Look for wearables to impact a growing number of other parts of our supply chains such as logistics, maintenance and service, POS (point of sale) to name a few. Wearables offer greater mobile intelligence, think of them as adding this enhanced connectivity at the edges of the supply chain network. Look for this added capability to open new business models and capabilities.
- Sensors – The internet of things (IoT) has permeated many of today’s headlines. Pundits speak of all the wonderful things that will come from being able to connect an every growing part of our infrastructure and supply chain. But what is one of the underlying technologies to make this possible? That’s right, the inexpensive and smart sensors – the hardware – needed to make this connectivity possible. Companies like GE are working to infuse a greater number of sensors into their products from locomotives to wind turbines to airplane engines. The sensors throw off a wide array of data allowing for better monitoring of the assets, usage and network optimization. As these sensors continue to drop in price – look for their usability to be expanded to a greater number of assets and products. Sensors and IoT hold tremendous potential for driving greater network optimization for supply chains – providing the necessary solutions and hardware to achieve greater network visibility. And much like wearables – pushing control and intelligence to the edges of the network.
These hardware evolutions have and will continue to drive innovations in our supply chains. Of course these are all tied into software and intelligence that make the hardware “smart” and useful. Reality is the line between hardware and software has blurred over the past few years and will continue to do so. But companies need to think about reinvesting in hardware to take advantage of these new innovative tools.
The past few weeks, or really the past few years, have given us plenty of examples of Amazon slowly but surely cranking up their disruptive aspect when it comes to supply chains. Of course, when we think of Amazon we think of the giant of eCommerce. A company that has not physical retail channel but one that can sell us anything from a copy of the Iliad to furniture to baby’s diapers. For me Amazon is the biggest winner from the crazy dot com days of the late 1990s. The giants associated with that era – Yahoo, AOL, WebVan, eBay, Geocities, Lycos – to name a few. Yes Google was around then, but I would argue their real rise to prominence came after the bubble.
But the one name that weather that storm and is a massive player – Amazon. The reality is that Amazon is that they are not only the 800lb gorilla in eCommerce and retail but also for supply chains. Here are some areas where Amazon is a disruptive supply chain force:
- Delivery – Anyone who watched or read about the coming of Amazon drones is probably expecting to get their copy of “50 Shades of Grey” or their latest set of Dr Dre Beat headphones dropped off by an unmanned flying machine. There is also the buzz that Amazon will look to have same day delivery, could be empowered by the rise of the drones. The eCommerce giant is also looking to conquer the enigma that is grocery delivery. Combine all these projects and you quickly realize that Amazon is bringing a whole
Coming to your personal airspace.
new perspective to delivery. The reality is that they might not be able to achieve all these lofty goals…but the fact they are pushing these ideas out there and that they are driving the conversation is disruptive enough. The fact that same day delivery is being mentioned will drive how our expectations are set as consumers. If I believe I can get fresh produce delivered to my door, do I accept getting anything that isn’t similar from the likes of Shaws, Whole Foods, Tesco, Giant Eagle, Safeway or any of the other grocery chain?
- Warehousing – Amazon has mastered this for a long time, ever since they started selling CDs and Books via the internet. In order to fulfill these massive online catalog and to do so in a timely fashion, they have become masters of how to manage a warehouse and more importantly how to run an efficient pick and pack, inventory and distribution from geographically placed warehouses. Their acquisition of Kiva demonstrates that they see how
The rise of the machines.
robotics and the rise of the machines will disrupt how we run our warehouses. There has been some rumbling about how they drive their warehouse work force to ensure they can meet their tighter and tighter fulfillment windows. This might become more disruptive from a negative perspective. However, overall look for Amazon to change the way warehousing is approached.
- Demand management – In the supply chain space, the holy grail is around better understanding and anticipation of what true demand is. A whole host of companies ranging from the likes of Orchestro, RSi, IRI, JDA, Steelwedge, SAP, Oracle, Kinaxis, Terra Technology to name a few, are all offering solutions that profess can better determine or predict what actual demand will be. But what about Amazon? They are already savvy when it comes to understanding what our buying habits on their web site – what else can or would we want to buy? Now comes word that Amazon has patent to provide “anticipatory delivery.” They are looking to better anticipate our demand! Wow. They will be able to put inventory on trucks before we even a)know we want the product b)order the product…talk about getting ahead of the demand curve. This goes beyond what some are tagging as demand sensing and moves into true demand anticipation. Again, will they be able to pull this off? Who cares. The fact they are speaking of being able to do so will create a disruptive mental wave that will have consumers wondering…”hey why can’t you anticipate what I want!”
- Mobility – The Kindle is a quiet mobile supply chain device. How? It allows Amazon to place mobile ordering kiosks in consumers hands. Giving Amazon another point where they can check on demand and buying patterns. Add to this the Amazon app that is available on iOS or Android and you have a mobile powerhouse. One that allows the company to get as close
A cash register and inventory system in your pocket!
as you can when it comes to POS information. With the app one could argue that Amazon have found a way to get into the four walls of the brick and mortar stores. Consumers have been trained to use the app as a mobile cash register and inventory system. Your daughter wants the latest American Girl doll? Scan a bar code or snap a picture and see what Amazon has…and if you want click “Buy Now” with your Prime account and boom, it gets delivered to your door.
So Amazon is the quiet supply chain disruptor. Whether or not they can pull off some of the projects they are tackling is inconsequential (well maybe not that inconsequential…). The fact that Amazon is driving the discussion around some of these hot button topics means all players within the supply chain cannot ignore some of the game changers that are on the table.
Amazon at the end of the is all about pushing more inventory through their system. But in doing so they are creating some mega changes when it comes to how supply chains think about and tackle a host of issues. Next time you get a box from Amazon remember – they are shaking up the supply chains as we know them.