A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
With ecommerce becoming a new trend for companies around the
world to manage their supply networks and delivery products to their target
customers, retail stores now face the possibility of being gradually replaced
in the process. Compared to normal retailing, ecommerce generally offers customers
more convenience and better prices. At the same time, companies are able to
reach more customers and produce and sell their products at lower costs.
However, for every one of these aforementioned advantage, there is at least one
disadvantage accompanying it, and companies should seriously consider both when
deciding whether or not ecommerce is a good strategy.
Limitation vs. Product Selection Limitation
With the absence of a physical location, ecommerce allows
companies to sell goods to practically anywhere around the world and greatly
expands its reach to customers. In addition, it can help attract customers by
eliminating the need for them to travel to a store, thus making shopping easier
and more convenient. However, these advantages of online stores also place
limitations on what companies can sell online. For instance, the fact that
anyone can access an online store does not mean that a company can sell and
ship its products in a feasible way. Many products can be damaged during
shipping, and perishable items will spoil if delivery takes too long over too
much distance. Furthermore, the convenience of not having to leave one’s home
when ordering a product can also be offset by the time it takes for that product
to be delivered.Even with the fastest
delivery speed available, many products very often take longer to arrive via
ecommerce when compared to shopping at a physical store.
Information Transparency vs. Increased Competition
Ecommerce gives customers easier access to a lot of
information for the products they are interesting in buying. Compared to
regular stores, where the amount of information one can obtain pertaining to a
product is often limited to the availability of sales representatives in these
stores, online stores can provide much wider range of product information in
the forms of customer reviews and price comparisons. Because of this, customers
become much more informed when making purchasing decisions. However, this
empowerment of knowledge can also result in much tougher competition in ecommerce
as compared regular retail. Product information transparency means that
companies must offer more competitive prices and higher quality than the competition
in order to be able to sell their products at profit and stay in business. Product
reviews by customers also means less control in product marketing for
companies; some negative reviews may seriously affect sales.
Less Need for
Labor vs. Lack of Human Touch
Online stores can stay open all the time, and accept and
process orders automatically with less need for human labor. This, when
combined with the fact that no physical store is needed, can save a company a
lot of operating expenses and increase margin. However, this cost-saving feature
of ecommerce can also become a weakness in some situations. For example, many
customers actually value the services that they get when shopping at a store
just as much as – if not more than – the price and quality of a product. To
these people, the act of adding products to the shopping cart and proceeding to
checkout in an online store lacks personal touch and is therefore less
appealing. Companies need to seriously consider their target customers when
deciding whether or not more automation is a good strategy.
As show above, each advantage of ecommerce is accompanied by
at least one disadvantage. Yet, some companies have managed to successfully leverage
the former and avoid the latter, while others have had less success. Can you
think of a few companies that overcame the disadvantages? How did they
Deloitte recently conducted a survey
of 600 executives at manufacturing and retail companies to understand their
perception of the risks and challenges they are facing and the strategies they are
deploying. The survey was collected from various large and small companies in a
variety of industries, and from countries around the globe, with the majority
located in North America, Europe and China.
“The survey’s key findings include:
Supply chain risk is a strategic issue.
Margin erosion and sudden demand changes often cause
Concern about extended value chain.
Supply chain risk management not normally considered
One of the major challenges for
executives is to understand the nuances of the industries. What works for
Amazon may not work for Amazon Fresh, there is huge difference between the
inventory management for perishables versus managing other goods in the market.
Even the markets where we are trading has a large impact on the profits and
trends of supply chain. Executives have to keep a close watch on what the competitors
in the same industry are doing and see how they can improve their processes and
stay ahead of the competition. 
It is said culture eats strategy for
lunch, it would appropriate to say policies and regulations each innovations
for lunch. No matter how far ahead of competition technological innovations can
take us, government policies and regulations restrict a lot of these.
A classic example of this is the
Amazon drones for delivery. 
The Federal Aviation Administration grounded Amazon and did not allow them to
test drones for delivery of products in a faster and efficient manner. Although
Amazon has the infrastructure and capability to support the Prime Air services that
would ensure higher customer satisfaction, it is going to be a few years before
this can become reality due to the air safety regulations that are to be
considered. There are several considerations that need to analysed before we can see this in reality.
Despite the advancements we can
clearly see that, industry specific challenges and government regulations pose
a great challenge to the executives to formulate strategies. Evidently, there
is no one size fits all formula for success in supply chain. It takes the
experience and keen eye for application of latest innovations to obtain these
small edge over competitors and make them reflect as wins in profit.
If the world is shifting towards
becoming better at supply chain and expanding horizons to serve global
audience, it is only logical to assume we will see more innovations in supply
chain logistics that reduce wait time, reduce delivery time and ensure bigger gains
for consumer and manufacturer.
Amazon has unveiled the PrimeAir. The goal of this new delivery system is to get packages into customers' hands in 30 minutes or less using unmanned aerial vehicles like drones and mini helicopters. We believe that It is the next big thing in delivery technologies.
How it works
After a customer places an order on Amazon's site and selects Prime Air as the delivery method, which promises 30-minute service, the PrimeAir begins.
From there, that order gets a special mark indicating PrimeAir treatment, moving down a special conveyor line at the end of which sits a small drone, maybe 2-feet wide plus some wing span that carriers helicopter-type blades on each side. The drone holds a special small container into which the picked product had been placed, and off it flies, arriving some minutes later at the back patio of a consumer.
The drone drops off the package, and quickly heads back to its DC base. It does not appear to be interested in a tip, nor require a signature.
Here is a live demo of drone delivery network.
The FAA is actively working on rules and an approach for unmanned aerial vehicles like drons and helicopters that will prioritize public safety. Safety will be the top priority, and all drones will be built with multiple redundancies and designed to commercial aviation standards.
Suppose the drone delivery technology will be ubiquitous in the near future and nearly every supplier can easily deploy it in delivery, is building its own drone delivery network better than outsourcing it to a specialized drone delivery service company?
printing has come a long way in an extremely short span of time. Initially built
by Charles Hull in the 1980s as a tool for making basic polymer objects .
Today, the technology has made impact on several manufacturing areas; from
building aircraft and race car components, to human organs and prostheses.
Now, the world
is beginning to understand the potential of 3D printing for cost-effective,
efficient and environmentally-friendly manufacturing. It is little wonder that
analyst firm, Canalys see the global market for 3D printers
reaching $16.2bn (£10.3bn) by 2018 . With increasing adoption, the
technology will revolutionize manufacturing as well as the supply chain and
logistics processes which surrounds it.
manufacturing in certain locations, for example in China and India, can be
low-cost, managing a global supply chain network isn’t, especially considering the
transportation costs involved. 3D printing can
reduce these costs by enabling businesses to station local manufacturing centers
closer to every regional markets, reducing the length of the supply chain and
helping towards a green world. Regional manufacturing centers can also improve inventory
problems, especially for the industrial spare parts and consumer sectors
selling highly-customized products. 3D printing technology will enable manufacturers
to easily produce goods to order, helping save money and minimize waste.
cost of 3D printing decreases, we will see a lot of manufacturing businesses
emerge, responsible for providing cheap products such as small replacement
parts. 3D printing will eventually replace traditional manufacturers to only
producing highly technical and specialist products. Less specialist products
will be manufactured by 3D shops, while cheap one-off manufacturing will
eventually be printed by consumers themselves. In the future, simple spare
parts, plastic toys or cases for smartphones for example, will primarily be
sold globally by downloading a 3D printing file.
In a world
where consumers want products fast, 3D printing will make it possible for
businesses to consistently deliver goods in tighter timescales. It will also
help to meet customers’ growing demands for personalized products. Personalization
is already happening in the clothing and footwear market; consumers can walk
into a store, for example Nike, customize items and take them home on the same
day. In the future, 3D printing might even be used to build personalized
furniture or complex goods like vehicles for same-day collection too.
what’s been outlined is still some time away but it’s clear that the potential
increased pace of trade brought on by 3D printing and the new industry models
that are created will require businesses to re-evaluate their supply chain processes.
Manufacturers will need to make their supply chains far more agile and able to
operate in real-time to cope with faster product design and production cycles.
There is a
concern that this form of manufacturing, in particular with regards to consumer
goods, will fuel greater consumption and waste. But the materials used for
3D-printing these goods are mostly heat processed recyclable plastics, making
it possible to create a reverse supply chain approach. Customers can recycle
used, damaged or unwanted goods by taking them back to their local 3D print
shops, so that they can be melted back down and made into something new and
useable once more.
My question about 3D printer is that is this techniques would be restricted to only customized product? Because batch manufacturing will still be more effective and low-cost. How to balance the reducedtransportation cost by regional manufacturing and the increased cost of goods by 3D printer?
Management in the 21st century is inclusive of increasing exposure
to innovation and manufacturing processes. This exposure is to be given to
children and communities who are not likely to gain this experience otherwise. Kitchen-Table
Industrialists (The New York Times, 2011) explains how various technological
companies maintain this idea and work towards making exposure to technology a
As the title
states, taken from a popular Whitney Houston song, “I believe the children are
the future, teach them well and let them lead the way.” Investing in exposing
children to technology and innovation will give America a jump-start on keeping
up with manufacturing trends. Currently, children in low-income families do not
have access to Internet. Specifically, only 33% of children in homes with an
income of $15,000 own computers.
The National Center for Children in Poverty states that 22% of ALL children live in families
with incomes below the federal poverty level ($23,550).
As we become a much more technological integrated society, stemming from our
workforce, many children are at risk of being left behind.
Today, one of
the biggest priorities for America is remaining on top of the manufacturing
industry through innovative means. However, it is noted that Germany and China
tend to have more supportive environments for incubating manufacturing
companies at every stage.
In 2009, the White House began to remedy this with the creation of the Office
of Social Innovation and Civic Participation. The stated approach of this
department is, “The Office of Social Innovation and Civic
Participation is focused on developing policies and programs to accelerate
economic recovery and create stronger communities. We do this by harnessing
human capital and facilitating financial capital.”
I believe harnessing human capital begins with youth education and exposure.
I will profile a
variety of technology-based companies whose sole intention is to get technology
into the hands of children and those who may be technologically challenged.
Here goes. . .
Electronics provides kits that enable individuals to prototype and learn with
electronics. “It’s an ever-growing library of electronic modules that snap
together with magnets so you can invent anything.”
The stated mission
is to create innovative products that put smiles
on the faces of children while providing a quality business opportunity for our
customers, team and partners. To achieve this Tech4Kids infuses classic
play with exciting brands and fresh innovation.
Black Girls CODE is a non-profit organization
with a focus on introducing girls (ages 7-17) of color to technology and
creating the next generation of tech leaders and creators. Currently there
are over 2,500 students with 7 domestic chapters and 1 international chapter in
Johannesburg, South Africa.
improve low-income youth’s computer and learning skills through caring
mentorship, structured training, a vibrant learning environment, and access to
a computer at home. The program uses computers as a catalyst for youth to
challenge themselves, become engages in their own learning, and realized
greater possibilities academically, professionally, and for their community.
for schools to bring interactive technology into the classroom. So far Best Buy
has donated over $13 Million through the Best Buy Teach Awards
program called 1 to 1 that works with grades K-12 to provide each student with
access to wireless laptop for school and home.
billion to philanthropic programs supporting education: community development;
the arts, health and human services, and technology access in communities
across the country.
Finally, I wish these organizations much success. Additionally, I hope my
classmates take the time to invest in these organizations or develop human
capital centered firms of their own. With the understanding of the importance
of technology and America’s desire for innovative improvement for supply chain
networks, how can we create more incentives, policy based or otherwise, for
larger companies to invest in youth education and technological exposure?
The Internet of Things (IoT) is a fast growing field that
could become the one thing to revolutionize the world of business operations,
including supply chain management. Imagine how much more efficient and
profitable a company would be if it had technological capabilities to do such
things as: track demand and supply in real-time, make more accurate forecasts,
reduce lead times, manage inventory in a more just-in-time fashion, and achieve
greater production efficiency and customer satisfaction. This may not be a
dream anymore, as rapid advances in technology have enabled companies around
the globe to achieve greater operational efficiency than ever before. But
despite the promises that such technologies bring, there still exist challenges
that must be overcome first. Below is a brief list and description of four main
issues that are holding IoT back from achieving its true potential.
Data quality and integration
Some of the biggest challenges facing data collection
include ensuring that enough good data is collected as well as having the
ability to integrate data from multiple sources. Data collection devices such
as sensors cost companies but just the devices themselves, but also expenses
associated with installation, maintenance, connectivity, and power. With the
total costs quickly adding up, implementing good data collection systems can become
a huge financial barrier for many companies. Additionally, some data are just
out of the reach due to existing technologies’ limitations and environmental
constraints. Furthermore, many companies still use legacy systems that do not
have Internet connectivity, making it difficult for data integration.
GE Power & Water is one example of a company that is
facing data quality issues. It is investing heavily into monitoring and
alerting systems that use data collected from various sources and in different
forms, such as those generated from customers’ operational data and their
inventories. Although these data are enough for operational improvements, GE is
not satisfied yet with their level of timeliness, completeness, and accuracy.
In order to improve this issue, GE is looking for ways to automate the data
collection processes that are currently still being done manually, and to offer
management better visibility of company data through the use of a data quality
portal that tracks the most pressing problems that the company needs to solve.
Most data are collected, transmitted, and stored via
cellular networks that continue to expand an ever increasing coverage area over
the years. However, these networks are mostly still concentrated in and near
big metropolitan areas. There are still many places where networks – and data –
cannot reach. As a result of this, companies are limited in their ability to
gather data from areas not covered by these networks.
Moreover, network capacity also plays a limiting role on what
a company can achieve operationally regardless of its technology. For instance,
ConocoPhillips spread its radio towers across Texas to transmit sensor data for
the purpose of optimizing gas and oil well production. However, the issue is that
the network transmitting all this data cannot handle the amount of data needed
for the company to conduct real-time analysis. As a result, this lack of
supporting infrastructure impedes the implementation of newer technologies.
Another issue that many companies need to face, when
attempting to incorporate the Internet of Things into their product designs, is
that the network becomes a crucial part of the customer experience and
perception of these products. Yet, networks are outside of these companies’
controls, effectively turning this into an issue of outsourcing of company
brand from the customer perspective. Unsuccessful use of network can cost a
company more than just the network expenses as a result.
Data integration versus analysis
Data analysis certainly does require expertise from
data-savvy people in order to generate useful insights for decision making
support. However, all of these analyzed data generate limited value if they are
isolated and stored in silos, instead of being integrated to provide a bigger
picture for an organization to use. This situation is exactly what a lot of healthcare
organizations are struggling with and trying to fix. For instance, hospitals
often use different types of data in different departments, but when these are
not used together to provide a complete picture of patients’ health, a lot of
resources are wasted in healthcare delivery inefficiencies such as duplicate
tests and medical errors.
Data security inadequacy
Although the information technology (IT) industry has had
nearly two decades of experience in data security, this experience does not
translate as well to the Internet of Things world of operational technology
(OT). Simply adding more IT security does not solve OT problems. Compared to IT
datacenter security, OT involves much more frequent physical maintenance and
repairs of machines, which necessitate that the amount and type of security
measures needed be different. An example of this is the monitoring system used
on large power plant turbines that can continuously keep track of the
activities of maintenance crews and decide whether or not these activities pose
Questions: Do you feel that the Internet of Things has
enough potential to generate good ROI for companies despite all of the existing
challenges mentioned above? If not, how long do you feel it will take for all of the
necessary supporting infrastructures to be in place before IoT can start showing
its true promise?
One of the course readings for this week was proclaiming the virtues and business advantages of the internet of things. How more and more devices are going to be connected to the internet, giving manufacturers more information to design and produce better products. While there certainly are some advantages to be had (for both producers and consumers) there are also some potential issues, specifically privacy. What if I dont want my brand new Blendtec blender to message Blendtec headquarters to tell them about how I use my blender? Sure they could use that information to learn that I never use anything besides the pulse buttons which is something they could then incorporate into future designs, but at what cost?
The article gave the notion of privacy mere lip service before going on about all the advantages the internet of things provides. One sentence in a whole article that said something to the effect of (paraphrased) "while there would be privacy implications its no big deal". To some it might not be, but to others it certainly is. During Thanksgiving I was presented the opportunity to ask my very opinionated family what they thought. For the example I used the blender telling Blendtec headquarters about your blending usage/habits. This is probably one of the least intrusive privacy violations out here, especially compared to communicating toilets, communicating pill dispensers, or communicating bathroom scale.
My mother had the strongest opinions about the blender. She simply did not want a blender knowing anything about her, and used the word "creepy" atleast six different times as she explained why she didn't want her blender on the internet. In her view that is totally private (whether important or not). Even though she acknowledged it would help Blendtec design better blenders at less cost, should would rather pay slightly more and have them find some other way to determine customer preferences for blender usage.
Conversely my cousins really didn't care at all. This could partially be a generational thing, as me and my cousins my age have all grown up with connected technology. Our definition of privacy may be totally different, as noted by my aunt who cited the stuff we post to Facebook. It would seem we want privacy in our lives, but we also want the ability to share whatever we want via un-private channels, even if that concept seems entirely foreign to our parents. I would rather have a better blender (higher quality at the same price) than a private blender. Personally I don't care who knows about my blending habits.
As companies go forward they should do more than just brush off privacy concerns. While there are certainly advantages for producers, manufacturers, and suppliers, these should be weighed with the value of privacy to consumers. It is clear there are many out there that consider their privacy a priority, and the will let companies know that by how they spend their money.
My question to you is what devices in your home or that you use frequently would you be comfortable having connected to the internet? Where would you draw the privacy line? Is it with communicating blenders? Communicating lamps? Communicating toilets? Communicating chairs? Would it bother you if companies knew how much time you spent sitting around or how many times you flushed during your last visit to the loo? As we go forward we may have to actually answer these questions as we look to purchase products, so start thinking about it now!
In case you haven't seen it yet, check out Blendtec's "Will it blend" series. His grin at 1:56 is just about the most perfect thing ever:
Global supply chains move goods all across the globe many times over. A truly global supply chain will likely incorporate various modes of transportation: plane, train, ship, truck, and car. Transportation costs are often times a massive cost for organizations running global supply chains. Therefore, innovation in cheaper transportation methods will be a necessary future step for all supply chains interested in cutting costs.
With new services like Uber and Lyft looking into the delivery space, and Amazon's Drone delivery service, we see various stakeholders stepping up to meet the demand for cheaper delivery. Companies like Tesla and SpaceX are pushing other boundaries - one leading the charge into alternative fuels for mass market automobiles and the other toying with outer atmospheric travel for a quicker delivery method around the globe. One interesting source of data to support this claim is the trend of vehicle miles per gallon.
As seen above, MPG from 1975 - 1979 (5yrs) improved 2.8 MPG's. MPG from 2009 - 2013 (5yrs) improved only 1.6 MPG's. This data seems to show that transportation efficiency improvement is slowing in its traditional form. For truly innovative supply chain approaches to change transportation costs must be reduced via alternative and creative means, such as using services like Uber, drone delivery, or outer space travel.
Last weekend, I went to San Francisco for a small conference organized by my German scholarship organization. As many of us (including myself) had traveled across the whole continent for this purpose, we were given some time to explore the city and its surrounding areas. My group had decided to hike on Land's End trail, but in order to do so, we first had to get to "Lands End Lookout", the starting point of our tour.
The only possible way of transportation was by car - neither subway nor bus would have brought us there. As taking a cab was considered too expensive, some local students suggested to use Uber instead. This was the first time I did not only read about this new business model, but actually saw it operate in real life.
For those of you who are not familiar with Uber, I will briefly describe the idea behind this company.
Key concept: connect P2P (people to people) for a ride via a smartphone app, i.e. a driver and a passenger
First P2P search engine in the world
Drivers use their own cars
Automatic payment via app (and no tip necessary)
A person wants to get from A to B and opens the Uber smartphone app
Optional: rough calculation (range) of trip costs with "Fare Quote" (integrated in the app)
She chooses the appropriate car service (a capital "U" indicates a relatively more expensive service)
uberX = low cost Uber (e.g. Toyota Camry)
UberBLACK = original (expensive) Uber (e.g. limo)
uberXL = low cost Uber for groups (e.g. Toyota Highlander)
UberSUV = premium Uber for groups (e.g. Cadillac Escalade)
uberT = normal taxi (mainly in NYC) - grab a cab via the Uber app, but pay the taxi driver without the Uber app
Then, she sets her pickup location (thanks to GPS and GoogleMaps, this is very easy).
According to the type of service she has chosen, the closest (unoccupied) car will be matched and confirmed; the respective number plate and the driver's name pop up on her smartphone screen along with the estimated time of arrival and the most efficient (and therefore most likely) route.
The car arrives. She gets in and tells the driver where to go.
As soon as the car reaches the desired destination, the passenger's credit card will be automatically charged and the receipt sent to her via e-mail.
As the topic of this week's class is supply chain management in the 21st century, my intention was to write about something new and innovative, something that probably most of us do not even think of in this context. When I reflected on my Uber experience, I realized out of a sudden that the Uber concept actually could be interpreted as a new kind of supply chain. Let us go back to the definition of supply chain management we were provided with in class:
Supply chain management is the profitable
organization of the flow and storage of
materials, in-process inventory, finished goods,
financial resources, and related information
from point of origin to point of consumption and
disposal to satisfy customer requirements.
Obviously, we do not have a tangible product but a service, which is the car ride (and maybe a nice chat with the driver, a cool bottle of water and some sweet snacks). Inventory management is not even necessary anymore - as the service is available at any time and in any place (of course only in the cities where Uber operates) thanks to the real-time matching performed by the smartphone app. The same is true for forecasting (the emphasis here is on the "real-time" aspect).
Information about the estimated price of the product can be accessed by the potential passenger using "Fare Quote", and the information on the actual price of the ride is delivered via e-mail after its completion. And, what is more, the implied financial transaction (payment) is fully automated.
Here, we have a great example for a supply chain network - extremely complex in its entirety, but astonishingly simple due to its direct connections between two points - the driver and the passenger.
This leads to another interesting feature - the company itself. So far, I have been talking about the drivers and passengers only. The question is - how does Uber come into play, apart from the fact that it provides the technology required for the operation of these numerous individual services? Well, there is a commission drivers have to pay to the company. Usually, it is 20% (for San Francisco it was just raised to 25%). This means that you might not even make money as a driver. The reason why still so many people drive for Uber is the following: When they offer their services during peak times, the price for a ride is a little higher and therefore, at least a small incentive exists.
It is now time to summarize what we have discovered so far: the P2P business concept (and presumably not only in the realm of services) offers a new understanding and way of supply chains and SCM. By integrating individuals into the business strategy (if the company is big enough), a market is being created that basically regulates itself (and generates money).
The concept reminds me of Adam Smith's theory of the invisible hand - only that in this case the hand is not invisible but visibly collects the profits (parts of the aforementioned generated money).
As always, there are several questions that still need to be answered.
A company's most important goal is usually to grow. Uber, however, does not seem to follow this simple rule. While its competitor "Lyft" (only operating in the U.S.) incentivizes its drivers to work rather more than less by reducing commission the longer they offer their services, Uber sends the opposite signal to its drivers: as the commission is 20% no matter how long they work, it is inefficient for them to drive outside of peak times. Why does Uber NOT change the incentive system as the whole strategy relies on a sufficient amount of people who are willing to sign up as drivers? As soon as the Uber hype comes to an end, the company will face serious "inventory" and "delivery" problems.
Apart from the commission the drivers have to pay to Uber - how does the interaction work? My research tells me that the company uses mainly automatically generated to answer questions or to deal with concerns/problems of its "direct customers" (the drivers). Apparently, this is not a good idea, as many issues cannot be solved in an automated way. Here, the mainly technological approach results in the dissatisfaction of Uber drivers. In SCM terms the question would be: why does information not flow smoothly in this context between the "producer" and the customer? Are there limits to the use of technology in SCM? Does customer service - or should it - always imply human interaction?
And finally - who actually is, in such a complex supply chain network, the customer? At first, I thought the passengers are. But after having written this blog entry, I am convinced that I better revise this initial evaluation of the system. The drivers are customers as well - customers of the company with the (in)visible hand... The less an institution or company is visible, the less accessible and approachable it is. This feels a bit like the set up for a psychological experiment where people you never see let you figure out how to deal with a new system in your habitat without intervention. Only that they claim money from you if you decide to become part of it...
To end on a more positive note, let me show you a picture I took during our Land's End tour. I am so glad we made it there - thank you, Uber! :-)