Navigating through supply chain chaos

By Cameron Wilson | Akolade Blog

As the world’s financial markets continue to provide sleepless nights for businesses, with every sign of growth seeming to be undermined by news of a softening jobs market and weaker demand, many logistics operators and warehouse managers are scratching their heads about how to best manage their operations for the future.

Throughout the economic downturn, logistics companies looked to streamline their distribution centre operations and cut back on investing in equipment and infrastructure.

However, now many are realising that to actually improve their processes and efficiencies to encourage business growth, they need to rebalance operations metrics from one traditionally focused on tight inventory and cost controls, back towards customer satisfaction.


Rebalancing the warehouse

The trend towards a “rebalancing” of key operations metrics is expected to become more prevalent across many industrial, manufacturing and retail supply chains. As many businesses realise it is no longer enough to just operate in survival mode, and commit to more consistent and accurate demand forecasting, they will be more confident to pursue higher levels of customer service.

But having the inventory and labour available to capture more revenue and market share in spite of the wider economic uncertainty will take more than confidence in demand planning. Being poised to grab their competitive share as the economy improves; many companies will have to re-double their focus on creating the truly agile distribution centre.


Keeping afloat 

When the global economy began to slow down, almost all companies – large and small – were thrown into some form of planning chaos. The primary impact was adjusting to the radical drop in general demand.

The loss of visibility through the supply chain impacted most all of the participants. And while the downturn affected some more than others, a majority of companies lost the forecasting capabilities they were accustomed to. Nothing looked similar to past practices. Consequently inventory positions were reduced as fast as possible and orders dried up. The ripple effect hit every aspect of operations including knowing when products would be ordered to ship and having the right mix of labour to fill orders and maintain an effective operation.

Unfortunately, the companies that fared the worst were those that had not taken advantage of past success by making continued investments in solutions to make them more agile, flexible and capable on the floor of the distribution centre. They simply didn’t have systems in place to help them adjust to the impact of the downturn or manage their way out of the situation. Stuck with poor planning tools, less than flexible mobile computing equipment and a workforce that was not fully cross-trained in multiple disciplines; these companies had a lot working against them.

Those companies that fared the best had previously invested in the kinds of business process improvements and technology solutions necessary to negotiate the perils of the recession. From improved WMS planning and labour management tools, to having flexible tools on the floor with multi-modal equipment that can do everything from voice picking, to near/far range scanning in put-away and inventory applications, to signature capture at the receiving doc, many companies were able to react quickly, manage their labour costs, and retain their best associates.

Especially in areas where labour became the critical cost and capability for creating efficiency and performance, those companies that had seen the future and made the investments found themselves on top of the competition and ready to thrive. And, while they may not have had the optimal inventory availability as before, they were still able to tell their customers what they could expect and when, with timeliness and accuracy, therefore positively managing their customer service in a proactive way. These are the companies that will have the tools and leadership in place to take full advantage of the upturn in the economy and win more revenues and market share.


The new normal

It is fair to say the jury is still out as to whether the entire manufacturing and retail supply chain will see a return to the pre-recession days, or whether conditions are set to soften again, or whether we will crawl back toward something that may be called the ‘new normal’. But for those who made investments that saw them through the difficult days, there are a few things these leaders can do to take advantage of their current position and protect against future downturns.

Firstly, always be looking out for new solutions to old or nagging issues, large or small. The term ‘death by a thousand cuts’ can define many small problems, each one bleeding an operation of precious resource. By themselves they don’t reach the level of severity that would cause the problem to jump off the metrics report and demand a solution. But taken together, particularly if they are linked and impacting a major financial KPI, they must be addressed.

Secondly, remember the people on the floor are a very expensive part of virtually every operation and at the same time are a key to unlocking optimal efficiency and productivity. Look to upgrade aging equipment to the latest form factors and system interfaces, especially for companies that are pushing the historical upper limit of their KPI’s.

Even a small improvement in user ergonomics, in the motion tolerance of an imager for fast paced scanning operations, or an improvement in accuracy and safety from a voice to WMS interface can create an advantage. For most best-in-class operations, there is typically no silver bullet. Maybe it’s planning ahead for new application upgrades, or examining existing data for streamlining best practices. Maybe it’s calculating the ROI of replacing current equipment with a new purchasing or services model.

Regardless, viewing the distribution centre as a highly interdependent system where all the workflows must serve the other, even with the slightest improvement in one process, can have a strong ripple effect. And the added satisfaction for the associates on the floor, from management’s investment in their personal success, often yields unexpected and real bottom line benefits.

It is these combined benefits that will deliver the competitive edge required to regain the optimal operational balance and tilt the table back toward superior customer satisfaction metrics to keep and win new business. But the most important thing for warehouse operators to do today is not to imagine what things will be like at some point in the future, but to ask and decide “what can we do now?” and get on with it.

How Mercedes-Benz turned research into reality

By Mustafa Bayülgen | Supply Chain QuarterlyQuarter 2 2012 issue

By adopting proven practices from the supply chain literature, a Mercedes-Benz bus factory in Turkey avoided “reinventing the supply chain wheel” while making big gains in production and efficiency.

As the year 2008 came to a close, the global economy was struggling. Even so, we at the Mercedes-Benz bus plant where I work in Hosdere, near Istanbul, Turkey, were determined that we would not simply weather the economic downturn but would also increase production capacity by 30 percent. We knew it would be a huge challenge because of economic conditions and the increasingly complex nature of supply chains. Nevertheless, we went ahead with the project, which ultimately proved successful.

Thanks to the efforts of a logistics task-force team that Mercedes-Benz Türk A.Ş. (MBT) formed to tackle that challenge, the plant was able to meet its goal. The team achieved success by aligning all logistics operations with production operations through a project called “Hosdere 2010—New Logistics Concept.” This project applied a concept that can best be described as “evidence-based supply chain practice” (EBSCP).

Simply put, EBSCP is the incorporation of proven practical or research findings into daily supply chain management practices. It involves taking what has already been discovered—examining best-practice examples and current research—and then implementing it and enhancing it in actual practice. This concept facilitates both everyday operational decisions and long-term strategic plans.

By drawing on established knowledge, EBSCP lets supply chain managers succeed in today’s challenging business environment, and it prevents mistakes stemming from inexperience or individual preferences. Critical to its success is employing people with appropriate skills and knowledge.

EBSCP allows supply chain managers to avoid the kind of “crash tests” companies often undergo when implementing new initiatives in complex, intertwined supply chains. Rather than innovate without guidance, they can take advantage of widely available information. For example, they can learn from journal articles and books published by supply chain researchers around the world who are rigorously working to establish principles and find solutions for problems. They can also learn from practitioners who share their experiences through case studies in journals and business publications, as well as through other means, such as professional associations and professional networking sites on the Internet.

In short, with so many complex challenges facing supply chain practitioners today, it makes sense to learn from and take advantage of already published, tested information and solutions to problems. By doing so, companies will strengthen their supply chains, and that will eventually lead to greater profitability and an improved quality of life around the world as products and services arrive where and when needed.


The logistics team begins its work

Mercedes-Benz Türk A.Ş. was founded in 1967 under the name Otomarsan A.Ş. in Istanbul, Turkey, by Daimler-Benz AG and its Turkish partners, Mengerler T. A.Ş. and Has Otomotiv A.Ş. The company’s initial production in Hosdere was 0.6 buses per day. By 1970, it was already exporting buses, mostly to the Middle East and North Africa. In 1986, the company added a truck production plant to its portfolio, in Aksaray, Turkey, and changed its name to Mercedes-Benz Türk A.Ş. in 1990.

Over the years, MBT, now a subsidiary of Daimler AG, evolved into a manufacturer of complete buses and trucks. An increase in export activities led MBT in 1995 to add a second bus plant in Hosdere and to convert the first plant to manufacture bus chassis and bodies for the new facility. A few years later, the new plant was expanded to include chassis and body operations, and the original plant was shut down. Today the Hosdere factory produces four basic bus models: Travego, Tourismo, Intouro, and Conecto. It has a production capacity of 14 buses per day, and it exports vehicles to Europe, Asia, and Africa. MBT also markets and sells Mercedes-Benz automobiles and light commercial vehicles in Turkey.

In 2008, in order to boost efficiency and to get the bus plant ready for a potential capacity increase, project “Hosdere 2010″ was launched. The first thing the management decided to do was to bring highly qualified and talented individuals together to form a logistics project team. (For more about the human resources considerations involved in EBSCP, see the sidebar “Invest in talent to make EBSCP a success.”)

The logistics team found that the plant was facing such problems as material shortages, excessive inventory, and high transportation costs. Previous attempts to solve them had not been entirely successful, and sometimes the outcomes of those attempts were not what managers had expected. Clearly more information was needed. Recognizing that practitioners and researchers around the world have confronted similar issues, the team decided to adopt an “evidence-based” approach, making use of published research findings to help it address those problems.

Since then, Mercedes-Benz Türk A.Ş. has implemented several supply chain practices that the logistics team developed while consulting research findings, case studies, and other published best practices. (The notes throughout this article refer to the published information sources that provided some of the ideas we incorporated into our solutions.) The following are just two examples of how we applied evidence-based supply chain practices to achieve significant cost and efficiency improvements that we might not have been able to achieve otherwise.

1. Matching material flow with production
One area where the logistics team applied EBSCP was in adapting the assembly parts warehouse and in-plant material-flow operations to the increased rate of production. As part of that effort, the team set out to devise a new process in the warehouse, since the existing process limited how quickly the warehouse could perform such tasks as picking, sorting, kitting, staging, and delivery to the assembly line. An associated problem was that the on-time availability of components at the assembly line was 99.38 percent. Although this might seem good at first glance, it’s actually on the poor side for an assembly plant and has considerable cost implications.

The team began by brainstorming several ideas, looking for ways to increase not only throughput but also parts availability and overall efficiency. The questions then were, which of the ideas would work, and what would be the best way to implement them? To answer those questions, the members consulted some books, articles, and other documents, and then combined that information with their past experiences and the theoretical knowledge provided by their formal educations. Using all of those resources, the team developed the following solution.

Approximately 20,000 components and raw materials were being stored in the warehouse. But only 0.5 percent of those items were delivered just-in-time to the assembly line after having been picked from a dedicated storage zone. For the rest, a pull system was used, where assembly workers issued internal orders in the MRP (materials resource planning) system in batches (usually in full pallets); warehouse workers picked those materials from their storage locations and then delivered them to the line. This practice resulted in a significant amount of inventory positioned in the assembly area but provided little protection from stock-outs.

The master production schedule was fixed for three days out. The logistics team hypothesized that if the data in the MRP system was 100-percent correct, then it was theoretically possible to pick materials in single pieces from the warehouse, sort them in the right order, place them on trolleys in kits, and deliver them to the corresponding assembly station just-in-time and in perfect synch with the three-day, fixed master production schedule. This would greatly reduce, if not eliminate altogether, the inventory of components located next to the production line. The strategy would also provide more space for production-related activities and reduce the non-value-added time that production workers spent walking back and forth between assembly stations and material storage locations, some of which were not optimally positioned. In addition, since almost all of the inventory would be in the warehouse area at any given time, it would be much easier to anticipate a probable stock-out a few days in advance just by looking at the current stock level in the warehouse and in-transit from the supplier. If there should be a high probability of a stock-out for a critical assembly item used in, say, the Conecto bus model, then the scheduled assembly date for Conecto buses could be pushed back a few days before it entered the three-day “frozen” zone, and other bus models for which materials were available could be brought forward.

Taking the above arguments into consideration, the team decided to increase the number of parts picked from the dedicated just-in-time zone in the warehouse. This basically meant that the team would have to balance the trade-off between the cost of adding some more warehouse space and the benefits of improved speed of delivery to the line. Since this proposed system would allow for almost no margin of error in the MRP data, critical parameters entered into the MRP system, such as pallet capacities, batch sizes, and delivery frequencies, were carefully checked and corrected when necessary.

After implementing this plan, the percentage of materials picked from the dedicated zone and delivered just-in-time to the assembly line increased from 0.5 percent to nearly 15 percent. Because we learned from our reading that a reduction in the time to pick and deliver was a direct function of warehouse configuration,4 we made some modifications to the configuration of the warehouse that helped to increase picking and delivery speed. Another renovation was the conversion of the small-parts storage area to an automated storage and retrieval (AS/RS) system.

2. Supply base localization
As we approached the year 2008, MBT became interested in acquiring more parts from local Turkish suppliers. In 2008 we established a group within our logistics department that was assigned to deal with localization of supplies. One of our aims was to decrease the company’s total costs by reducing logistics-related costs. (Our thinking was similar to the total-cost-of-ownership approach described in the article “Time to come home?” in CSCMP’s Supply Chain Quarterly.5) Over the last four years, the division has successfully localized more than 5 percent of the components that originally had been imported from suppliers located outside Turkey.

Using more local suppliers was also a way to perform risk management by addressing both supply side risks and catastrophic risks, two of the five main risk categories outlined in an article on that subject by Stephan and Bode (2008).6 We also put forward a hypothesis that we needed to balance both prevention programs and response preparedness in our risk management practices.7 Proof that this hypothesis was correct came a couple of years later, when many firms that were stronger in prevention programs had difficult times during such disruptions as the massive earthquake and tsunami in Japan and the eruption of the Eyjafjallajökull volcano in Iceland. No manager would have thought to include such unusual, extreme events in a prevention program or to develop contingency plans for them.8

Meanwhile, many companies that were stronger in response preparedness continued spending time, effort, and money on response activities due to the disruptions, even though at least some of those efforts could have been avoidable if they had paid more attention to prevention. It should also be noted that the volcano eruption and the earthquake led managers around the world to realize that diversifying their supplier base might be beneficial. However, managers should not have needed those supply chain disruptions to come to that realization, since the principle that diversifying the supplier base by splitting orders among multiple suppliers could indeed be beneficial (depending on certain factors) was already widely evidenced in literature.9, 10 As discussed in those articles, the expected reduction in shortage costs could make order-splitting worthwhile for some very critical components.

With those thoughts in mind, we decided to perform cost-benefit analyses for new components. If risks were high, then we would source the components dually, from one foreign and one local supplier. This would diversify the supply base in terms of both alternative suppliers and geographical locations.

Thanks to our decision to implement the dual or multiple sourcing strategy wherever possible, we avoided supply disruptions during such events as the eruption of the Icelandic volcano and the earthquake and tsunami in Japan. We also had some experiences closer to home. For example, in 2011 a very trusted local supplier of ours had a fire that incapacitated its plant for more than a month. Despite that disruption we kept the material flowing in, with one portion coming from the foreign supplier and the other portion from another local supplier. And in January 2012 we faced another potential disruption when a foreign supplier of a critical assembly part was unable to deliver it because of the extreme winter conditions in Europe. Trucks could not move, railways were covered with ice, ships couldn’t leave ports due to extremely high winds, and rivers flooded very near the Turkish border. We were able to manage despite those weather conditions because we had already split the order between a local and a foreign supplier. The local supplier, located just two hours away from our plant, sent its quota of parts just-in-time, and that quantity was enough to keep production going until the shipment from the other supplier arrived. Looking back at those situations, it is clear that the costs we would have incurred if we had experienced disruptions would have far outweighed the costs associated with placing orders with the second, local supplier.


Proof positive

Thanks to the two implementations above, as well as to many others that are outside of the scope of this article, MBT saw a steep rise in efficiency indicators. As shown in Figure 1, the on-time-delivery service level of parts to the assembly line rose from 99.38 percent in 2008 to 99.81 percent in 2011. Although this 0.43-percent increase may seem like a small nuance, it actually represents a significant cost reduction. That’s because when parts are available where and when needed, there is less overtime work and no penalties for late deliveries of buses to customers. As of February 2012, the on-time rate had reached 99.85 percent.

[Figure 1] Service level of deliveries from warehouse to assembly
Figure 1 – Service level of deliveries from warehouse to assembly

The drop in raw material and component inventories is also a strong indicator of how EBSCP has contributed to the cost savings Mercedes Benz Türk A.Ş. has achieved so far. Figure 2 compares each year’s average raw material and component inventory levels with that of 2008. We are aiming to continue the trendline shown in the chart in the coming years.

[Figure 2] Raw material and component inventories held as a percentage of the 2008 level per each bus produced
Figure 2 – Raw material and component inventories held as a percentage of the 2008 level per each bus


Figure 3 shows late deliveries of buses as a percentage of the daily production rate, from the assembly line to the respective sales organizations that deliver the buses to the end customers. The abrupt fall from the year 2008 to 2009 was mostly attributable to the impact of the economic crisis. During that time we had more production capacity then demand, which meant we could deliver buses with more ease than in a normal year. As the demand gradually increased in 2010, the backlog also increased as expected in 2010 through 2011. The rate of the backlog increase in 2011 was less than that of 2010 because the effects of the EBSCP implementations had started to kick in. We have recently begun to see the full impact of the implementations, as demonstrated by a backlog of just 0.29 percent as of February 2012—despite a record-high demand and daily production rate.


[Figure 3] Average daily backlog as a percentage of annual sales

Enlarge image

 Figure 3 – Average daily backlog as a percentage of annual sales  

As a result of the implementations described above and other Hosdere 2010 projects, MBT has achieved a significant drop in costs and has sustained profitability despite the global economic downturn. This success has attracted the attention of upper-level management at Daimler AG. As a result, the bus plant has hosted several visits and received recognition from the parent company’s management. In fact, Daimler AG’s top-level management meeting was held in Turkey in July 2011, and during the event executives had a chance to see the implementations’ results firsthand.

Top management has been so impressed with our accomplishments that it is considering implementing some of our ideas elsewhere in the company. For example, an extension of the just-in-time delivery to the line strategy, better known by the German term Spezialgutabwicklung (or the Turkish term set sevkiyat among MBT employees), is now being considered for incorporation into an ongoing process-harmonization initiative for other bus plants in Europe. The lean in-plant logistics system we developed is about to become a companywide benchmark and, with minor local variations, has the potential to be implemented in any of Daimler’s bus plants.

We believe it is important to share our knowledge and ideas with others. Accordingly, our plant has hosted visits by many logistics- and manufacturing-related groups and logistics specialists from all over Europe, as well as by faculty and students from local universities.

The MBT logistics team can point to many achievements. Yet even while we work on current projects, the fast-changing nature of business means that already there are new challenges that must be addressed. As we deal with them, the evidence-based supply chain practices concept that has proven so successful in the past will continue to be our guide.

Invest in talent to make EBSCP a success

Getting the full benefit from evidence-based supply chain practices (EBSCP) takes more than simply reading academic and other literature, or sharing information with peers. It also requires having the right people on staff—supply chain and logistics professionals who have the knowledge, skills, and abilities that are necessary to understand, develop, and carry out complex ideas.

The supply chain discipline calls for quick decision making. This allows supply chains to become lean and agile. When employees have to get approval from their superiors for every little deviation from the norm, the company loses flexibility. By employing the right supply chain talent, managers will not have to think twice before delegating responsibility to subordinates who have the skills to make the best decisions. Furthermore, companies need individuals who are proficient in converting intangible supply chain concepts to tangible cost and profit figures. That way they can induce the right supply chain alignment for the organization by speaking the chief executive officer’s language, eventually leading to lower total costs and higher profitability.The logistics team members who made the implementations described in this article and many others possible for Mercedes-Benz Türk A.Ş. (MBT) were selected from among the company’s existing employees. Since MBT had done a good job of attracting, continuously educating, and encouraging talent as well as of providing individuals with the necessary tools, management did not have to look elsewhere for team members.

At MBT, we have found that the following talent-centered principles laid the groundwork for establishing EBSCP and getting the greatest benefits from what we learn. Here are recommendations based on our experience:

1. Attract talented people with relevant educational backgrounds. Imagine asking a very talented and well-educated engineer to perform brain surgery on a patient. As odd as it may sound, this is analogous to assigning an individual with an irrelevant educational background to perform a supply chain-related task. Academics at times complain about the conceptual difficulties that many managers in the field have with statistical reasoning11 and say that this hinders practitioners’ ability to use models to solve problems. A lack of ability by managers and front-line personnel to understand and apply analytical models is a factor that stands in the way of good decisions.12 Therefore, it makes sense to pick supply chain team members who have relevant educational backgrounds. The right formal education provides individuals with the necessary skills, tools, methodological knowledge, and statistical reasoning ability. Furthermore, it has been shown that supply chain education and training increases supply resiliency.13

A well-planned, formal education with a strong technical component provides individuals with the knowledge of the most up-to-date optimization methods. For example, plenty of mathematical optimization methods exist in the supply chain literature. Many of them are fairly easy to implement on spreadsheets and offer strong support for supply chain managers’ decision making. However, failure to attract people with the right technical knowledge means that these optimization methods may not be fully put into practice, which means lost opportunities for the supply chain organization.

It should also be noted that today’s competitive environment requires that supply chain professionals not only be experts in their own field but also have an idea about what’s happening elsewhere. A sound supply chain education, preferably supplemented with a background in another discipline, such as engineering, finance, accounting, marketing, and so forth, will enrich the field. Since attracting and retaining talent is not an easy task, supply chain executives should not fail to consider retention incentives to keep talent in the profession. The fast-paced and challenging—not to mention exciting and fulfilling—nature of the supply chain profession should be marketed among younger generations to attract them to the discipline.

2. Provide opportunities for continuous learning. Due to the ever-changing nature of the discipline, it is of utmost importance for supply chain professionals to be dedicated learners.14 In addition to formal education, regular exposure to what is happening in the supply chain field through attending events such as conferences, seminars, and workshops (both within and outside of their industry) is a must.

Supply chain managers also must work with their subordinates in order to prepare annual education plans for them and collaborate with universities to ensure continuous education opportunities for their employees. Managers can, in turn, cooperate with academics to co-instruct undergraduate and/or graduate courses as a way to help develop new talent for the supply chain field. (Thanks to collaborative efforts and activities between MBT and several local universities, for example, the author of this article had the privilege of serving as a co-instructor for an undergraduate course at a local college.)

3. Encourage team members to conduct research and contribute ideas. When they encounter complicated situations, supply chain executives must make the most of their team’s knowledge by eliciting subordinates’ ideas and making them a part of the decision process. Encouraging them to provide evidence for their ideas will directly lead them to evaluate research findings and best-practice examples.

4. Provide team members with the necessary tools. It is intuitive that even the best talent cannot achieve top-level performance without up-to-date decision-support tools. It is the supply chain executives’ responsibility to make sure that individuals have access to the right tools, such as appropriate software. This should be a high priority.

1. Marcia MacLeod, “Making the Warehouse Visible,” Automotive Logistics, July-September (2011).
2. A. E. Ellinger, M. Natarajarathiram, G. A. Frank, J. B. Gray, D. Hofman, and K. O’Marah, “Supply Chain Management Competency and Firm Financial Success,” Journal of Business Logistics 32.3 (2011): 214-226.
3. C. Eroglu and C. Hofer, “Inventory Types and Firm Performance: Vector Autoregressive and Vector Error Correction Models,” Journal of Business Logistics 32.3 (2011): 227-239.
4. G. Ghiani, G. Laporte, and R. Musmanno, Introduction to Logistics Systems Planning and Control, John Wiley & Sons (2004).
5. Harry Moser, “Time to Come Home?,” CSCMP’s Supply Chain Quarterly, Q4 (2011).
6. M. W. Stephan and C. Bode, “An Empirical Examination of Supply Chain Performance Along Several Dimensions of Risk,” Journal of Business Logistics 29.1 (2008): 307-325.
7. Bruce Arntzen, “Global Supply Chain Risk Management Part 1: Differences in Attitudes,” Massachusetts Institute of Technology Center for Transportation and Logistics White Paper (2010).
8. James A. Cooke, “Supply Chain versus the Volcano,” CSCMP’s Supply Chain Quarterly Q2 (2010).
9. D. J. Thomas and J. E. Tyworth, “Pooling Lead-Time Risk by Order Splitting: A Critical Review,” Transportation Research Part E 42.4 (2006): 245-257.
10. P. D. Berger, A. Gerstenfeld, and A. Z. Zeng, “How many suppliers are best? A decision analysis approach,” The International Journal of Management Science 32.1 (2004): 9-15.
11. E. A. Silver, D. F. Pyke, and R. Peterson, Inventory Management and Production Planning and Scheduling, John Wiley & Sons (1998): 50.
12. Thomas H. Davenport and Jerry O’Dwyer, “Tap into the Power of Analytics,” CSCMP’s Supply Chain Quarterly Q4 (2011).
13. J. Blackhurst, K. S. Dunn, and C. W. Craighead. “An Empirically Derived Framework of Global Supply Resiliency,” **italic{Journal of Business Logistics} 32.4 (2011): 374-391.
14. Tim M. Stratman, “Why You Should Never “Graduate’, “ CSCMP’s Supply Chain Quarterly Q4 (2011).

Big Data Technology in Manufacturing? It’s On Its Way

By Kimberly Knickle | IDC Manufacturing Insights community

Big Data – “Nothing new”.  That’s how I’d summarize the reaction of (hopefully) a minority of the consumer goods manufacturers that attended Consumer Goods Technology (CGT)’s Sales and Marketing conference in June.   Yes, I admit, I was surprised by that comment.  But if I can judge interest in the topic based on how many attendees came to the Big Data panel session, then I can tell you it wasn’t the opinion of all attendees.  I don’t think we should dismiss the “nothing new” reaction without considering why it does or doesn’t make sense.  I’d also like to share some of the Big Data-related discussions that took place at the CGT event and some of our research on how manufacturers will use big data technology in general.

We expect companies to spend a tremendous amount of money on big data technologies.  In fact, IDC forecasts the Big Data technology and services market will grow to $16.9 billion in 2015 across the technology stack including infrastructure, software, and services.   In our current forecasts, the growth rate for this market is about seven times that of the overall information and communication technology (ICT) market.  Spending those funds wisely is going to be very important to manufacturers, starting with identifying the right use cases for those investments.

Almost every manufacturer will tell you they have too much data, or at least a large quantity of data that doesn’t deliver a sufficient quantity of value; from that perspective big data is nothing new.  (Of course, most also want better and more data, too).  Unfortunately, most people that are skeptical of big data technology focus in too much on the word “big”.  The way we’re using the term Big Data today does represent something new, at least following the Four V’s” definition, as we define each of the references by the following:

  • Volume – Large quantities of data that could reach up to petabytes (and more), but again, size is not the only thing that matters.
  • Variety – Multiple types of data, from structured to unstructured or semi-structured data, in combination, meaning companies could analyze a mix of data from web logs with customer information stored in a database with sensor data that provides real-time information on inventory or shipments.
  • Velocity – The speed that data arrives and the speed of analysis, ranging from batch to streaming data, and keeping in mind the speed of both business processes and users’ decision requirements.
  • Value – More affordable technology than ever before, including open source software and decreasing hardware prices, as well as increasing business value that manufacturers can generate from the use and analysis of Big Data.

Given this definition, big data tools and technology are for more than just analyzing a large volume of data.   A manufacturer could also be analyzing data from a variety of sources, delivering analysis at a greater velocity.  This combination of the V’s can enable manufacturers to use data as a means of making decisions faster or driving analysis that was too complex to do affordably in the past.   We also make note of the fact that not all applications of Big Data technologies are for analysis of data; they also include operational workloads and information access applications.

At the CGT Sales & Marketing conference in June, I participated in a Big Data panel led by Michael Forhez from TCS, and I was joined by CIOs from Energizer and Conair. Given the conference’s emphasis on sales and marketing challenges for consumer products manufacturers, many of the use cases we discussed focused on understanding the consumer better and customer service.  Specific examples include trade promotion optimization, SKU optimization, and modeling marketing campaigns; more use cases in this industry segment include sentiment analysis based on behavior in ecommerce websites or comments on social media forums (blogs, Facebook, twitter, etc).

We also raised examples that were related to the supply chain as well, such as knowing when product shipments could be delayed based on ocean carrier data or other information sources for inventory in-transit.  Ultimately, the value would come from knowing in advance if the current supply chain performance would impact customer orders.  Our recent IDC Manufacturing Insights supply chain survey of U.S. manufacturers shows a significant interest in applying big data; 52.7% of all manufacturers (not just consumer products) consider big data tools to be important or very important to their supply chain.   That number increases to 62.2% among those with supply chain titles.  On a broader scale, we’ve identified additional use cases in manufacturing as warranty analytics, enterprise asset management, and monitoring equipment performance.

Although we see evidence that manufacturers are taking the first step to creating value from big data technology by identifying the best fit use cases, manufacturers will stay in learning mode for some time.  Challenges will relate to managing data quality and data governance, selecting technology options and IT partners, and finding people with the right skills or “an appetite for analytics” as one of the CGT panel CIOs commented.   We also suggest that manufacturers explore options such as big data appliances and outsourcing big data skills or even technology through the cloud.   Today our research shows that each use case requires a different combination of software, hardware, and services to be most effective, but we believe that manufacturers will find that the investment in big data tools for volume, variety, and velocity is ultimately worth the “4th V” – value.

Biodegradable foam protects electronics shipments

By Anne Marie Mohan | Greener Package

Echo360, a provider of blended learning and lecture-capture solutions for the higher education market, recently launched the EchoSystem SafeCapture HD recording unit, a product designed to extend the boundaries of higher-education learning by digitally capturing, managing, and publishing classroom content in audio, video, and multimedia formats. Students can access recorded course content from their computers, iPads, and mobile devices at any time and from anywhere.

The high-performance capabilities of the EchoSystem called for equally high-performance packaging that could deliver protection, cost-effectiveness, and sustainability.

Echo360 turned to Plexus, a global company based in Neenah, WI, with expertise in the electronics manufacturing services industry to manufacture the product, as well as specify packaging for the unit. Plexus enlisted the expertise of packaging partner Great Northern Corp. to design and manufacture a package for shipping the EchoSystem. Located in nearby Appleton, WI, Great Northern had worked successfully with Plexus on other projects, using its background in designing, manufacturing, and distributing packaging solutions and point-of-sale display programs for industrial, commercial, and retail products.

“Plexus presented us with the challenge and opportunity to develop packaging that would not only protect the sensitive digital equipment but also do so in a cost-effective manner and with a positive environmental footprint,” says Great Northern Custom Packaging sales manager Dan Stubing.

Great Northern’s solution: A custom package that combines the recyclability of Green Cell Foam® cornstarch-based protective packaging from KTM Industries,with the strength and sustainability of heavy-duty corrugate that is both recycled and recyclable. The end result is a packaging option that meets the biodegradability standards of ASTM D 6400-04, and delivers the anti-static, shock, and vibration protection required by the product.


Shipping global and green

Echo360 SafeCapture HD units are shipped around the world via standard carrier (UPS and FedEx) in either single-pack cartons or in overpack cartons that hold three to five primary packs.

The units are cushioned inside the boxes by custom-cut lengths of Green Cell Foam. Included with each unit is an AC power cord, mounting brackets, adapters, and an instruction pamphlet. The single-unit weight is 11.5 lb, with a total pack-out weight of 15 lb.

The combination of Great Northern’s sturdy corrugated combined with custom-cut Green Cell Foam delivers the kind of multiple-impact resistance that is needed to protect shipments throughout not only the U.S. and Canada, but also to Europe, Australia, and New Zealand. Great Northern ensures performance capabilities in its certified ISTA testing facilities.

“The Green Cell Foam packaging from Great Northern provides Echo360 with a biodegradable, compostable package that is price-competitive and meets our protection requirements,” says Kevin Mayo, Echo360’s director of product management. “The packaging successfully protects our sensitive electronic products, and we have shipped hundreds of units worldwide with no failure of the packaging material.”

The use of Green Cell Foam also avoids the tariffs some countries charge on packaging with materials such as expanded polystyrene and polyethylene foam. Among the other advantages of the material are the following:

• Anti-static and a natural desiccant, making it a perfect fit for electronics

• Made from non-GMO cornstarch and certified as bio-based product by the USDA

• Appeals to the green initiatives and requirements that are common among the target market of colleges and universities

• Passes the Class A surface abrasion test, ensuring it will not scratch or mar the unit surface

“Developing green packaging is something that is becoming desired in today’s packaging industry, but doing so in a cost-effective manner and without sacrificing high performance takes expertise,” says Stubing. “The packaging we developed for Echo360 shows Great Northern’s ability to meet all three requirements: price, planet, and performance.”