Blog Week 6 - Security in IT

Applying information technology to supply chains is a growing field, and there is no question that IT has significantly improved supply chain management practices.  RFID tags are alloying managers unprecedented levels of control, and communications up and down supply chains allow for virtual instantaneous connections.  These are clearly good things, but one aspect of the rapid deployment of IT that is sometimes overlooked is, security.  

Many supply chains are vulnerable to IT attacks.  The prevention of IT attacks is traditionally left to the IT departments.  However, the complexity of modern supply chains requires a security conscious people at all levels.  "From a defensive standpoint, few supply chain managers or supply chain risk managers have aligned their mission with their computer security center, and they're not commissioned to conduct joint operations" (http://www.informationweek.com/government/security/securing-the-cyber-supply-chain/221600499)

As supply chains get more and more complicated how much attention should be paid to security?    

IT Cost Transparency

Intro
In one of my previous blog posts I outlined Virginia Mason Medical Center's (VMMC) supply chain innovations, including their Total Cost approach to inventory. Total Cost inventory management encourages efficiency by pricing inventory transparently on its real itemized process and delivery costs [1].

This week, our articles discuss, in part, the intimidating complexity and cost of IT systems. MIT's "Trouble With Enterprise Software," explains how difficult it can be to assess the true implementation and operation costs of large scale ERP systems [2]. Based on those problems, "Information Technology in a Supply Chain," recommends that businesses be conservative ad only implement as much IT as absolutely necessary.

I chose to look further into how the cost of IT can be evaluated. For my conclusions, I use two McKinsey Quarterly reports, "Managing IT in a Downturn: Beyond Cost Cutting," by James Kaplan, Roger Roberts, and Johnson Sikes and "Unraveling the Mystery of IT costs," by Andrew Appel, Neeru Arora, and Raymond Zenkich. Ultimately, those reports recommend using a form of Total Cost pricing to evaluate and implement major IT systems. As with VMMC, Total Cost IT pricing encourages efficiency and cost effectiveness in any IT implication   

Financial Savings Through IT
Initially, I appreciated Kaplan's article for its explanations of why, given tight corporate budgets, improving IT systems (as opposed to cutting IT) can be a good investment. The chart below (from Kaplan) suggests that while cutting IT by 15% may increase earnings by up to .5%, using IT to improve merchandising  the supply chain, and pricing, can improve earnings by as much as 2%, 4% and 5% respectively [4].

These savings are considered to be "short term" saving, as in the savings can be achieved quickly through basic process optimizations. Larger "long term" savings will also be recorded [4].

What to Consider 
Appel is concerned that many business executives do not fully consider the itemized cost and cost effectiveness of new IT systems. His solution, a practice similar to VMMC's Total Cost methodology, is "cost transparency [5]."  Cost Transparency seeks out, through detailed bills and management reports, all projected and real itemized costs of potential and used IT systems [5].

The goals of such transparency are twofold. First, an executive can use those documents to optimize the usage and quantity of IT services. If an IT system is not cost effective or if other solutions are more cost effective, it should be scrapped or replaced. Second,  IT staff can use those reports to optimize the IT system itself. Products can be evaluated by performance and systems can be adjusted to better control for variables or set more precises process improvements [5].

The chart below (form Appel) is an example of how an itemized bill can be evaluated.

By breaking IT costs down, managers and IT should have a better understanding of their system's performance, how their system is being used, and what potential future costs might be.

Conclusions/Questions
Whether ERP or Cloud based systems, any IT solution MUST be analyzed thoroughly before implementation and evaluated thoroughly during and after the process. Failure to do so may result in unplanned costs and sub-optimal system performance. Nonetheless, these articles do not address why such analysis is not often used. Is the problem just that executives are inexperienced with IT implementations or do some companies just not have the financial or human resources to meet those needs? I presume that cost transparency will be cost effective but, in practice, has that been the case?

Sources:

[1] Hansa, L. "The Evolution of the Toyota Production System." IBS Case Development Centre, No. 604-032-1, 2004.

[2] Rettig, Cynthia. "The Trouble With Enterprise Software." MIT Sloan Management Review, Fall 2007

[3] Chopra and Meindl. "Information Technology in a Supply Chain."  Supply Chain Management (4th Edition, Chapter 16), pgs. 452-464.

[4] Kaplan, James, and Roger Roberts and Johnson Sikes. ""Managing IT in a Downturn: Beyond Cost Cutting." McKinsey Quarterly, September 2008. Internet; Available from https://www.mckinseyquarterly.com/Managing_IT_in_a_downturn_Beyond_cost_cutting_2196

[5]  Appel, Andrew and Neeru Arora, and Raymond Zenkich. "Unraveling the Mystery of IT costs." McKinsey Quarterly, August 2005. Internet; Available from https://www.mckinseyquarterly.com/Unraveling_the_mystery_of_IT_costs_1651

Mobile Apps and In-Store Shopping

This week's theme is technology. From cloud computing to mobile shopping and online marketplaces, the internet has permanently changed the way we do business. I started wondering if brick-and-mortar stores were going to fade away (the bookstore being the classic example) but that does not appear to be the case.

In the United States, about 45-50% of smartphone owners shop use shopping apps.[1] Consequently, mobile shopping as become a $20 billion business.[2] Mary Monahan of Javelin Strategy and Research recently explained that "apps engage consumers to make purchases. With the upcoming holidays, retailers must prepare for the mobile shopping trend or lose out on the opportunity to convert browsers into buyers."[3] These points all seem to argue against in-store shopping, but Don Kellogg from Nielsen thinks differently: "retailers are finding that consumers are willing to use smartphone apps to enhance their shopping experience, and this data shows usage of shopping apps is growing."[4] Retailers around the world are catching on to the possibilities of targeting consumers more directly, even as they enter the store, through the use of mobile technology and analysis.[5]

Do you use mobile apps to shop frequently? Do you prefer mobile or online shopping to in-store shopping, or do you use mobile apps while in the store itself?


Sources:
[1] King, Rachel. "Nielsen: Mobile shopping apps can help in-store sales." Accessed October 2, 2012. http://www.zdnet.com/nielsen-mobile-shopping-apps-can-help-in-store-sales-7000002218/
[2] Tam, Donna. "Mobile shopping bringing in $20 billion annually--study." Accessed October 2, 2012. http://news.cnet.com/8301-1023_3-57521023-93/mobile-shopping-bringing-in-$20-billion-annually-study/
[3] Ibid. 
[4] "Nielsen: Mobile shopping apps can help in-store sales."
[5] "Mobile shopping apps enhance in-store experience." The Times of India. Accessed October 2, 2012. http://articles.timesofindia.indiatimes.com/2012-07-17/software-services/32713036_1_mobile-shopping-mobile-devices-applications

Harley the new lean machine

Harely Davidson has embraced lean manufacturing techniques. It has consolidated its production buildings into fewer buildings where robots do most of the heavy lifting. The hourly workforce has been reduced to half and many of its workers are now “flexible” workers. Flexible workers come and go as needed. The company does not have to pay severance costs when these workers are let go during slow periods.

These measures have raised the operating profit of the company by a staggering 16%.

Harley has also started cross training its workers which creates a more productive work environment.  As per article in Wall street Journal [1]

“Kim Avila, 49 years old, who has worked here for more than 17 years, said she saw the concessions as the only chance to preserve jobs. The pace of work is faster now, but she said managers and workers have more mutual respect and work together more smoothly. In the paint department, where she works, people used to do the same chore all day but now rotate through several tasks to avoid body strain and boredom. They are encouraged to fix some minor flaws in the finish themselves rather than kicking them to another department.”

Also, the company has started outsourcing the production of some parts such as brackets and screws.  This implies that the company does not have to stock up ahead of peak selling periods and/or forecast popular models and colors.

All of this restructuring will allow Harley to cut costs by $275 million this year(2012-2013) alone.

Apple going Vertical with its Robot army

I found the session on robots and supply chain quite intriguing and I immediately started surfing the net to analyze the current market of robots in supply chain. One of the most significant findings was Foxconn’s  goal of adding 1 million robots to its manufacturing workforce.

Refer to a quote in Time magazine:

“the company recently announced it was building a $223 million “robot kingdom” in the Central Taiwan Science Park in the Taiwanese city of Taichung. The research and development center and manufacturing hub is part of chairman Terry Gou’s ambitious plan to build one million industrial robots [1].”

As per ‘Focus Taiwan’

“Foxconn is building a quarter billion dollar ($223m) robot R&D center [4].”

To put this number in perspective, there would be approximately 1.3 million robots by 2014 and Foxconn alone aims to double this number to 2.3 million robots. Foxconn, for youreference, is a is a Taiwanese multinational electronics manufacturing company [2]. It manufactures products like iPhone, iPad, Playstation, Xbox, Kindle etc.

So why is Foxconn investing heavily in “robot kingdom” when it currently deploys cheap labor in China for the same job. The reason are the same as we studied in the article “Time to rethink offshoring”. The labor costs are rising in China. Also, there is labor shortage expected in China in future because of poor working conditions.

This ties in perfectly with Apple’s long term strategic plan of going Vertical. As per report in ‘Seeking Alpha’, Apple is about to become world’s biggest buyers in industrial robots [3].  Apple plans to buy computerized machine tools and robots from companies like Fanuc and deploy in the plants of its leading manufacturers such as Hon Hai and Foxconn. Since, Apple will own the robots deployed in this manufacturing facilities, they cannot be used for other companies’ products. Therefore giving Apple a competitive advantage, much like Amazon’s acquisition of Kiva, as discussed in class. 

Also, Apple iPhone’s display glass manufacturer, Corning, already uses robots for a host of its manufacturing processes.

[1] http://techland.time.com/2011/11/09/how-foxconns-million-machine-robot-kingdom-will-change-the-face-of-manufacturing/#ixzz280NY1q3M

[2] http://en.wikipedia.org/wiki/Foxconn

[3] http://seekingalpha.com/article/658711-apple-s-revolutionary-move-into-robotic-manufacturing

 [4] http://blogs.computerworld.com/macintosh/20523/wwdc-2012-apples-iphone-and-irobot-supply-chain

 Question:

With robots taking over the manufacturing, what will the skilled labor do for employement?

Supply Chain and Health IT

One of the articles for this week discussed the usage and importance of IT and supply chain.  Health IT is a booming industry as many hospitals and providers are switching over from pen and paper to using the latest technology, such as electronic medical records EMRs.  These EMRs provide crucial patient data that assists a practitioner with making a diagnosis or proceeding with a treatment plan.  I'd like to view healthcare services as a supply chain because there are so many different players, equipment, and resources that go into treating one patient.  For example, let's say that a patient comes in for a scheduled surgery for his left leg.  The nurses will look at the EMR to determine when the patient will be having the surgery to put it on the schedule.  Another nurse will take that information plus information about the surgery to prepare the operating room with the right equipment for the surgery.  A receptionist needs to look at the patient information and scheduling information to determine which room to send the patient has he arrives.  The anesthesiologist needs to read the vitals taken by the nurse to make sure that he is administering the correct amount of medication.  Finally, the surgeon needs to look at all of the information on the EMR to make sure he is performing the right surgery, at the right time, in the right room, with the correct equipment on the correct leg.  As you can see, accuracy is extremely important at all stages of this surgery as each part contributes to the supply chain of the surgery.  The usage of Health IT and EMRs increases the accuracy of the patient information because it prevents the misreading of sloppy handwriting and difficulty locating any sections of the patient charts.  Because it is also an electronic record, there can be multiple practitioners viewing the patient record at the same time, which would allow the scrub nurse to prep the operating room with the correct equipment while the receptionist is directing the patient to the right room.  The accuracy of these records is crucial in providing high quality of care to patients from all individuals involved in the supply chain.  Health IT is constantly changing and improving and it is interesting to stop and wonder, how can we further improve healthcare and the supply chain of care provided with further developments in Health IT?  Will healthcare in the future be solely relient on technology?  Many people are trying to figure that out and has been the a constant competition of who can develop a better supply chain with the newest Health IT tools.  Regardless of what happens in the future, it is reassuring to know that there are efforts being made to improve healthcare delivery through the development and implementation of new processes.

Voice Technology in Warehouses

After watching the video on Kiva's automated bots moving around Gilt's Warehouse made me start thinking about other solutions that have been invented. Long before Siri became famous manufacturers and suppliers were already investing in Voice Technology to maintain and manage their warehouses. Voice technology utilizes speech recognition algorithms to automate the interaction between workers and the Inventory or Warehouse Management System. This technology works over the warehouses existing wireless or radio frequency network. Each worker is given a headset and a small device that can be worn along the waist. The system gives the worker spoken instructions and also confirms and keeps a track of the actions. This has been widely adopted for Order Picking purposes but can also be used for Stock Checking, Receiving Goods etc.

The Problem:

Managing and maintaining a warehouse requires heavy investment in space, resources and energy in handling and managing items. Multiple series of complex processes and procedures go behind the scenes of running a warehouse. Since a lot of the work is still done manually there is a large dependency on efficiency of the workforce.

Before:

Traditionally speaking the order picking routine involves a worker manually picking up orders. The list of orders is usually given to the worker on a sheet of paper with instructions of what products to pick and what location to place them at. Each worker would manually locate the item and then place it on the appropriate. While this seems like a rather simple procedure it is bound to be erroneous if the picker reads a number wrong and picks up a wrong item or places the right item in the wrong location. These mistakes can reduce payoffs and increase delays and inefficiencies in the system.

After:

Voice Technology has revolutionized the way order picking is done currently. It reduces error rates by reducing time and eliminating the hand eye co-ordination required in a paper based method. It has been noticed that using voice synthesis reduced error to 99%. This is a dramatic difference from what is usually observed in a paper-based technique. Using a system like this allows workers to pay more attention in picking up the items as opposed to focusing on maintaining a checklist of products. This voice picking system also collects user response on the item status such as a simple “Check”. Apart from the benefits mentioned above, the voice picking systems also allows warehouse managers to know what the pickers are doing and whether they are using the system. This way the managers can keep track of their progress in real time. Voice technology is being adapted in ways to get trained by the worker in order to match the workers accent and language.

The Future of Voice Technology:

After learning more about this technique my mind wandered to think of the future of voice technology. I'm inquisitive to know if any of these could be viable ways for the technology to progress

• Could we calculate most efficient routes and accordingly order lists to minimize time spent in picking?
• Could Voice Technology in combination with smart algorithms benefit warehouse management by giving instructions to workers based on their location? For example, using real time notification systems could it alert a worker when it passed an order that needed to be picked?
• With advancement in warehouse automation and warehouse bots what will be the future of voice technology? Could the two be combined to offer services that revolutionize the way things are done currently?

 References:

1) http://www.voicepicking.com/

2) http://www.bcpsoftware.com/solutions/voice-technology-solutions/

3) Photo: http://blog.bciincorporated.com/2011/12/discussion-on-voice-picking-software.html

Farm-to-Fork Challenges in the Produce Industry

We all love to grab a quick bite between classes from Maximum Flavors pizza restaurant, but I have never thought much about the logistics that go behind acquiring the ingredients to prepare the pizza. Restaurant businesses face several challenges while trying to procure the raw materials to prepare dishes. From the consumer side, the dishes being served need to be tasty, fresh, and full of flavor. All the aforementioned criteria can be met providing the vegetables and meat that are highly perishable in nature are used before their shelf life expires. Perishable goods however must go through several stages in a supply chain from the farmer to the consumer which is a great challenge for suppliers. The following picture very clearly highlights these challenges.

From the above picture[1], we can tell that the challenges span sourcing the ingredients from various locations, packaging them and transporting them by their usability date. In addition, there are licensing, pricing, transportation, etc that also add a significant burden of delivery to suppliers. Several innovative technology solutions have been implemented to overcome the challenges.

FoodLink[2] provides a platform for suppliers to connect with the market to accelerate the buying and selling process of perishable goods. It provides a transparent way in which retailers such as Giant Eagle, Marianos, Costco, etc can connect with Doles, Driscoll's etc. to buy perishable goods. From a retailers perspective, it gives them access to various suppliers with price information that allows the retailers to make smart decisions in a fast manner. It also reduces the error rates since FoodLink ensures the quality of the product being bought along with any additional auditory regulations that the company may have. FoodLink smartly uses data to help reduce waste by warning about out-of-stock inventory status ahead of time.
From a suppliers perspective, the suppliers are able to save time and money since the order management process is now automated requires no IT investment as such from the supplier. FoodLink tracks orders closely ensuring payments happen on time thus helping the suppliers build strong relationships with the retailers by providing quality products and receiving payments on time.

Intelleflex[3] is another company that uses RFID tags to measure the quality of the product being delivered to the consumer. The tags constantly measure the temperature of the produce on-demand during the transportation phase of the supply chain to ensure that when the produce is finally delivered, its shelf life can be appropriately determined to manage inventory, ensure the quality regulations are being met and the safety of customers is ensured. This solution goes a long way in handling the transportation challenge and providing greater visibility into the quality of the produce.


The next time you go to Giant Eagle or buy a pizza slice, think about how the logistics of the perishable goods industry is managed from the farmer to the consumer. What makes organic produce different from the rest? It is common knowledge that perishable produce suppliers come up with different techniques to artificially increase the shelf life of the produce thus compromising the quality of the product. Would you be willing to pay more if you knew that your groceries were not being tampered with and went through careful quality inspection before getting on the shelf at the grocery store?


[1]: Food For Thought: Part One - Challenges in the Produce Supply Chain
http://www.clresearch.com/research/detail.cfm?guid=8976A13F-3048-79ED-9954-522011C89378
[2]: FoodLink
http://www.foodlink.net/about/
[3]: Intelleflex
http://www.intelleflex.com/Solutions.FoodIndustry.asp
 

The Customer is Always...on Twitter

 
In the article discussing increased technology spending by J.C. Penney, the company's Chief Executive was quoted as saying, "[p]eople who are going to survive are working on this" [1]. He is referring to the giant retailer's increased attention on enhancing the technological nature of its systems. It is obvious that information technology has become and will remain a huge focus for supply chain managers, but with all this talk of the increasing importance of IT in supply chains, how are companies tying this to the customer? 

As a 109 year old retailer, J.C. Penney must know a thing or two about customers and where their loyalties lie; and J.C. Penney must also know that customers need to feel special. So it might be a problem when this increase in technology spending is largely not "that visible to the customer" [2]. How does J.C. Penney let its customers know how hard it is working for them? The answer could be social media. 

Companies have quickly taken advantage of the wonders of social media but mostly in terms of improving their marketing and advertising. Social media can also become a great channel to communicate with key suppliers, transporters and also to maintain real-time inventory records. 

In order to ensure the customer is aware of new value, components of a social media savvy supply chain can be visible to the customer (with other, privacy sensitive components not made public). The company benefits from enhanced supply chain systems as well as enhanced value creation visibility that customers can more quickly see. Thus, the customer is assured that they are still number one.

Yet social media in supply chains is not being adopted very quickly. A recent survey found that only 40% of respondents were using social media to connect to supply chain partners [3]. However, some reports are more encouraging than others; another survey found that 47% of third party logistics providers had facebook accounts [4]. Social media seems to be a great for connecting disparate parts of a supply chain when used smartly. 

While it inevitably takes time for new technologies to be universally adopted, why have skeptics stayed away, as of yet?

[1] Dodes, Rachel. "J.C. Penney Spends to Get Ahead on Mobile Shoppers, Other Trends, Other Trends." The Wall Street Journal [New York] 4 May 2010, sec. Business Technology. Print.

[2] Ibid.

[3] Bowman, Robert. "Social Media for the Supply Chain: Help or Hype?" Supply Chain Management - SupplyChainBrain.com. N.p., 4 June 2012. Web. 1 Oct. 2012. <http://www.supplychainbrain.com/content/general-scm/supply-chain-mgmt-for-marketing/single-article-page/article/social-media-for-the-supply-chain-help-or-hype/>.

[4] Ibid. 

Indian apparel exporters going Lean

Indian apparel exporters are forced to adopt to lean manufacturing model due to the demands of European importers. European apparel importers have reduced their order-to-delivery time from 12-15 weeks to 7-8 weeks in order to reduce inventory on their end.

What is Lean Manufacturing? Lean Manufacturing is a production practice derived from Toyota Production System. The principle of lean manufacturing is that; spending of resources for anything other than value creation for the customers is a waste and has to be eliminated. Value creation depends on whether customer is willing to pay for a particular action or process.

Lean Manufacturing has two main concepts; Just-in-Time(JIT) and automation. Toyota approach ensures less or no inventory; effort is more concentrated on what customer values the most. Automation is achieved by human touch; where humans wouldn’t participate in the normal production but focus on abnormalities or faults.

Lean Manufacturing principle improved efficiency, increased profit, reduced time and cost and there always is room for improvement. Owing to its tremendous success many organizations and industries had adopted Toyota philosophy.

To meet the deadlines kept by European buyers and retailers; Indian apparel producers have adapted to ‘Lean Manufacturing’.  This led to reduce in waste, increase efficiency and margins.

Mr Amit Gugnani- Senior Vice-President at Technopak, a consultancy that guides the textile industries in adopting these principles says, “In the Indian apparel sector, the gradual increase in operating and material costs is putting strains on profits. In this situation, application of lean could be a greatest weapon to make breakthrough towards maintaining the profitability and sustainability ” ^[1]

Implementing the Lean Principle alone wouldn’t be enough. There should be an established organization that supports continuous improvement. A Kaizen team has to be created. Mr Gautama Chakravarti – Chairman of one of the biggest clothing exporter from India reveals that “A ‘Kaizen Promotion’ team was created and trained to address business problem solving using ‘Kaizen’ methodology across different units of the company.”^[1]

Lean Implementation is followed across industries as well. Food service operators are applying the approach to their operations. Due to adopting this principle; a particular operator eliminated waste by 40%; labor cost by 15%, service times improved by one-thrid and sales increased by 5%. This led to employees spending time influencing customers.

Can you think of a small business/ industry that could benefit from Lean Manufacturing?

Do you know any industry that has impacted from adopting to Lean Production process?

REFERENCES:

 [1] http://www.fibre2fashion.com/news/apparelnews/newsdetails.aspx?news_id=115320

 [2] http://www.mckinseyquarterly.com/Lean_cuisine_1570

 [3] http://en.wikipedia.org/wiki/Lean_manufacturing