Supply chain visibility and social responsibility

A new study from MIT Sloan School has found that consumers are willing to pay a premium for supply chain visibility.
Companies from Patagonia to Nike to Levi’s are leading the charge on social responsibility and supply chain transparency and they’ve encouraged their competitors to follow suit. But getting better visibility into a supply chain is an expensive and time-consuming endeavour for apparel makers. What’s more, its benefits are not entirely clear. Do customers really care? And if they do, are they willing to reward a company for its efforts?
A new study, led by two MIT Sloan School of Management professors, provides answers. The research finds that customers do indeed value information related to a company’s supply chain, and many are prepared to pay a premium for greater supply chain visibility. The study, published in Manufacturing & Service Operations Management, has implications for companies debating how transparent to make their supply chains and also how best to convey their social responsibility efforts to customers.
“Historically, many companies kept their supply chains as a closely guarded secret,” said Tim Kraft, visiting assistant professor of operations management, one of the study’s authors. “But recent events, such as the Foxconn suicides in Shenzhen in 2010 and the Rana Plaza factory collapse in 2013, have shifted the paradigm. Now, many companies realise an expectation is being set that they need to put this information out there for consumers to see. But even as they’ve increased their transparency, most weren’t sure that it made a difference to customers. Our study demonstrates that it does make a difference: Customers want to know more about where and how the products they purchase are made.”
Professor Kraft and his co-authors — Yanchong Zheng, the Sloan School Career Development Professor, associate professor of operations management at MIT Sloan, and León Valdés, assistant professor at the University of Pittsburgh’s Katz Graduate School of Business — conducted a series of laboratory experiments that mimicked the dynamics of a supply chain with a three-player game where participants played the roles of a consumer, a seller, or a worker. The experiment examined whether and how visibility into the outcome of the seller’s effort to improve the treatment of the worker impacts the price premium that consumers are willing to pay to the seller. All players’ decisions were incentivised, i.e. their actions directly impacted their payments from the experiment.
The researchers varied the extent to which the company’s social responsibility efforts were known to participants. Sometimes both the company and the consumer could see the outcome of the company’s effort to increase the worker’s pay. Other times, even the company was uncertain of the outcome of its effort. (In practice, although companies have full knowledge about their own efforts, they do not necessarily have the same level of knowledge about their suppliers’ practices.)
“Our results show that social responsibility matters to customers,” said Professor Zheng. “Yes, gaining supply chain visibility requires massive time and financial commitments. Many companies have hundreds of suppliers and those suppliers, in turn, have tens of hundreds of suppliers of their own. It is a massive undertaking to verify that everything is being done properly. And yet, our findings show that it can be worthwhile — not only for the social good, but also for a company’s market position.”
The study also highlights how a company’s messaging about its social responsibility initiatives resonates with different target customers. For instance, the researchers found that if consumers naturally care about others’ wellbeing, then they tend to be less interested in learning about the amount of effort that a company exerts and more interested in observing greater visibility into the outcomes of such effort. If instead, consumers are more driven by self-interests, then under high levels of supply chain visibility, they may be willing to reward a company for its social responsibility efforts. However, under lower levels of visibility, these same consumers may punish a company for low effort or even justify a lower willingness to pay by further shifting responsibility for the workers’ well-being onto the company.
“For companies that are trying to figure out how best to communicate their social responsibility efforts, the lesson is clear: know your customers,” said Professor Kraft. “Understanding their needs, values, attitudes, and personality traits will help companies send the right messages to the right people.”
 

DB Schenker and DPWA blockchain partnership to restore supply chain security

Logistic and supply chain company DP World Australia, the Australian branch of DB Schenker and a major carrier company have partnered on a consortium backed by blockchain technology from blockchain start-up TBSx3.
The participants intend to use blockchain architecture developed by Australia-based TBSx3 to combat the global counterfeit goods industry, protect global supply chains and help companies restore consumer trust in supply chains.
The alliance tested and utilised technology developed by TBSx3 in Q2 2017 to complete a large global blockchain trial, which tracked the distribution of wines from Coonawarra, South Australia to the port of Qingdao in northeastern China and was verified by professional services firm KPMG.
The trial used TBSx3’s blockchain logistics platform, which aims to defeat the threats of counterfeits through three layers of protection: cryptographic certainty, logistics tracking backed by artificial intelligence and the immutability of blockchain technology.
“Blockchain technology opens new possibilities for industry co-operation,” said Pieter Vandevelde, Chief Revenue Officer, TBSx3. “Our aim with forming this alliance is to reignite trust in every link in the supply chain and create a more transparent, ethical ecosystem of international trade.
“We are willing to do business with anyone serious about ridding the world of fake products and protecting consumer trust.”
Paul Scurrah, CEO of DP World Australia, noted: “I knew it was a great opportunity for DP World to become engaged in a new era of industry collaboration. The scale of the fake goods problem is staggering and our company is eager to work with TBSx3 and our industry partners to provide a lasting solution.”
Charlie Mcdonald, Chief Information Officer, DB Schenker, added, “Data security is the core to modern business risk management and we are excited by blockchain’s potential in this area. The concept of protecting that data through a distributed ledger system holds great promise.”

Eyes on the prize

This feature appeared in the January/February 2018 issue of Logistics & Materials Handling.

In the increasingly complex world of supply-chain logistics, ensuring end-to-end visibility of product movements is no longer just a possibility – it’s becoming a necessity. 

Real-time traceability of transport services offers consumers a sense of control in order deliveries – it’s now possible to see precisely where a purchase is located, at any time.

The increase in visibility through tracking technology has already been one of the most prominent changes to the transport and logistics industry in recent decades, explains industry expert, Naval Sabharwal. Naval, who has spent 35 years in various roles in the logistics sector, now holds the position of Global Head – Supply Chain and Logistics at business software provider Ramco and has experienced the technological shift first-hand.

Naval Sabharwal, Global Head – Supply Chain and Logistics, Ramco.
Naval Sabharwal, Global Head – Supply Chain and Logistics, Ramco.

 

“Visibility is the biggest change to the logistics industry, and technology is a huge enabler,” he says. “Gone are the days of working on pen and paper, using carbon sheets to make copies and waiting a week or more to get the status of a delivery. Now, you can see the status within milliseconds by using tailor-made software solutions.”

Yet, according to the latest State of Logistics report produced by global consultancy AT Kearney, the rising demand for greater transparency and reliability is becoming more complicated to deliver, as e-commerce adds complexity to supply chains. The report finds that rapid technological change and new business models are driving logistics towards fully digital, connected and flexible supply chains, optimised to meet rising consumer expectations of immediacy, personalisation and convenience.

Ramco has been in the logistics market for 10 years. Two years ago, the company made the strategic decision to address these new demands, developing an integrated suite of cloud-based software services for logistics companies to use to track cargo and provide transparency to customers.

“E-commerce recognises no borders,” says Naval. “With the likes of Amazon expanding globally, the need for integrated logistics software became apparent. While the biggest external challenge facing the customer is being able to provide end-to-end visibility of orders, we also found that by increasing traceability internally in a business, there is a real opportunity to maximise profitability.”

That profitability comes through increasing capacity utilisation, he explains, adding that the average logistics company’s capacity utilisation is only at 27 per cent – meaning 73 per cent of capacity created is not earning revenue. Simply reorganising assets using an integrated optimisation engine can bring that up to 42 per cent, he says. “That’s a 15 per cent jump, which directly impacts revenue margins,” Naval adds. “More important – once you improve capacity utilisation, suppliers become more engaged, and it becomes easy to build and create more capacity and improve the yields from capacity, driving the growth engine.”

Ramco’s software can match all of the data on available capacities to demand on a weekly basis, do the scheduling and also allow logistics service providers to draw on external assets as required. “What we did was use Uber as the base model,” he explains. “Uber’s strength is in how it manages capacity for its suppliers, and we built a model tailored to the logistics industry.

“Just like Uber, the focus is not just on its features, which include automatic data capture, scheduling, GPS, data management, billing and routing. The focus is also on ease of use – there have been many great logistics optimisation software tools that have failed because they are too hard for customers to use effectively.”

To ensure end-users are able to get the most from the Ramco Logistics suite, a member of its advisory board meets with its customers once every six months or so to get direct feedback, Naval explains. “We ask all our customers what they want the software to be able to do, collate the responses, analyse them, then add the features,” he says. “We implement around 93 per cent of the input we receive from customers and are constantly upgrading the software to meet the logistics industry’s evolving needs.”

Ramco’s findings on changing consumer demands are in line with that of the State of Logistics report, which advises that the industry is shifting from a transactional business model focused on discrete services toward an integrated model of ‘one-stop shops’ for end-to-end logistics services. “Ninety per cent of our customers use the complete end-to-end suite that covers transport, hubs and warehousing points,” says Naval. “The real value of the suite is its integrated nature. By covering every step of the transaction, we’re able to minimise revenue leakages.”

Naval notes that the average logistics company is subjected to revenue leakage of between one and three per cent, month-on-month, adding that it can be reduced to less than 0.1 per cent through the use of an all-encompassing suite of software. Utilising blockchain technology (see breakout box) will be an important next step to increasing visibility in the global logistics industry, he says.

“The way we see it, the global supply chain – including shipping, air, rail and road – has no option but to go to blockchain,” says Naval. “Consumers are bound to get more conscious of health and safety areas, for example. They want to know the food they eat wasn’t sourced with child labour or subjected to pesticides. That information is lying around, and the only way to provide end-to-end visibility to a consumer is with Blockchain.”

Though visibility in the global supply chain has evolved significantly since the early days of pen, paper and carbon sheet copies, according to Naval there is still a long way to go. The State of Logistics report echoes those sentiments, adding that as demand for e-commerce reshapes networks and relationships, technology uptake must follow suit.

Maersk and IBM joint venture to apply blockchain to global supply chains

Logistics company and container shipping giant A.P. Moller – Maersk and technology company IBM have announced their intent to establish a joint venture to provide efficient and secure methods for conducting global trade using blockchain technology.
The new company is to be built on open standards, offering a global trade digitisation platform designed for use in the movement of goods across borders and trading zones to provide more transparency and simplicity.
A distributed ledger technology, blockchain establishes a shared, unalterable record of all transactions that take place within a network and then enables permissioned parties access to trusted data in real time.
Maersk and IBM will use blockchain technology to power the new platform, as well as employ other cloud-based open source technologies including artificial intelligence (AI), Internet of Things (IoT) and analytics to help companies move and track goods digitally across international borders.
“This new company marks a milestone in our strategic efforts to drive the digitisation of global trade,” said Vincent Clerc, Chief Commercial Officer, Maersk, and future Chairman of the board of the new joint venture. “The potential from offering a neutral, open digital platform for safe and easy ways of exchanging information is huge, and all players across the supply chain stand to benefit.
“By joining our knowledge of trade with IBM’s capabilities in blockchain and enterprise technology, we are confident this new company can make a real difference in shaping the future of global trade.”
Bridget van Kralingen, Senior Vice President, IBM Global Industries, Solutions and Blockchain, added: “The major advances IBM has made in blockchain have shown that the technology can foster new business models and play an important role in how the world works by building smarter businesses.
“Our joint venture with Maersk means we can now speed adoption of this exciting technology with the millions of organisations who play vital roles in one of the most complex and important networks in the world, the global supply chain. We believe blockchain will now emerge in this market as the leading way companies seize new untapped economic opportunities.”
IBM and Maersk began a collaboration in June 2016 to build new blockchain- and cloud-based technologies. Since then, several companies have piloted the platform, including DuPont, Dow Chemical, Tetra Pak, Port Houston, Rotterdam Port Community System Portbase, the Customs Administration of the Netherlands and the US Customs and Border Protection.
The joint venture will now enable IBM and Maersk to commercialise and scale their solutions to a broader group of global corporations. General Motors and Procter and Gamble and Agility Logistics have already reportedly expressed their interest.
 
 

SmartFreight shipping software on show at MEGATRANS2018

As a provider of cutting-edge shipping management software, SmartFreight is an ideal fit for the inaugural logistics and supply chain event, MEGATRANS2018.
The company’s comprehensive software solution provides versatility, transparency, accountability and efficiency for its users within the supply chain – complementing MEGATRANS218’s own aim to provide a vital link between the industries comprising Australia’s supply chain.
Connecting the Australian and international supply chain, the trade show will bring together those who plan, implement and control the efficient and effective forward flow and storage of goods, services and related information between the point of origin and point of consumption.
MEGATRANS2018 takes over the Melbourne Convention and Exhibition Centre 10–12 May 2018 and will play host to an array of delegates involved in the wider national and international supply chain industries.

SmartFreight announces shipping software acquisitions

Australian and global shipping software provider SmartFreight –part of the Interactive Freight Systems (IFS) group of companies – has announced two acquisitions – Compdata Technology Services (Supplymaster), and the shipping software arm of transport and logistics business tdX (The Data Exchange).
The acquisitions form part of SmartFreight’s global growth strategy, driving continued investment in multi-carrier shipping solutions, optimising control over operating cost structures, maintaining competitive price strategies and reinforcing relationships within the transport sector and other associated alliance partners.
Commenting on the business deal, Ken Aitken, CEO, SmartFreight, said: “This is a huge win for all stakeholders in the Australian supply chain industry and global e-commerce arena, with customers, transport providers, software partners and freight management partners alike all set to benefit.
“Today marks the convergence of some 50 years of combined technology experience in the shipping software industry. We are extremely pleased to have been able to achieve this with two such respected industry players.
“We’d also like to take this opportunity to welcome the Compdata team into the IFS Group. Compdata will help to expand our team’s existing skillset and build on the exceptional business they have created over the years.
“We also look forward to collaborating with tdX on key projects in the future, growing the reach of our solutions to assist customers with extended workflow processes in their supply chain, which is tdX’s core strength.”
SmartFreight’s enlarged team complements its objective to remain nimble and responsive to all customer needs, the company said in a statement.
Service enhancements will include an increased multi-lingual customer facing team across all facets of the business, and an increased human IP resource pool to ensure a positive customer experience.
Guyren Smith, Director, Compdata Technology Services, said: “I am extremely proud of what the Compdata team has achieved over the last 20 years, and confident that the combined Compdata and SmartFreight teams will deliver positive outcomes for all our valued customers.”
Echoing Smith’s sentiments, Grahame Williams, Managing Director, tdX, said: “There’s great alignment with SmartFreight and tdX. We share the same ethical values and customer service ethos – so this was a natural fit. While my decision to step away from the divested part of the business to concentrate on our core competencies in customised solutions is one I’m personally excited about, Ken’s leadership will undoubtedly see SmartFreight continue to be upheld as the pre-eminent shipping solution provider in Australia and across all territories in which they operate globally.”
Later this year SmartFreight plans to launch a new technology platform that will encapsulating the best features of all companies into one single global platform.
It will allow customers to ship their customers’ orders globally with real-time diagnostics and information and full visibility of shipment delivery status.

QLD boosts safety on road-freight network

Queensland will roll out of three new automatic number plate recognition (ANPR) cameras across the state’s road freight network.
Federal Infrastructure and Transport Minister Darren Chester said the new cameras would monitor heavy vehicles, boosting heavy-vehicle safety and providing another step towards a national heavy-vehicle compliance network.
“The high-tech monitoring cameras will be used to encourage safer driving practices on our major heavy vehicle routes and freight network,” Chester said.
“The first of three new cameras has been installed at Goodna, with further cameras to be installed over the next 12 months at Barcaldine and near Morven in regional Queensland. The new cameras are being delivered in conjunction with the National Heavy Vehicle Regulator (NHVR) and will continue to target safety on key freight corridors and black spots.”
Federal Member for Maranoa David Littleproud welcomed the introduction of cameras near Morven and Barcaldine.
“Trucks and heavy vehicles are the lifeblood of our transport network in the bush,” he said. “The Coalition is heavily investing in upgrading key freight corridors throughout regional Queensland to not only make sure transportation happens efficiently, but also to keep our roads safe.
“Near Morven is a junction between the Warrego and Landsborough Highways and near Barcaldine is where the Capricorn and Landsborough Highways meet. These two areas represent very important transportation connections in my electorate so it makes sense safety is a priority.
“These cameras will be a part of the National Heavy Vehicle Regulator’s National Compliance Information System, which will amalgamate compliance and camera data from states and territories to provide a national set of heavy vehicle–related compliance and monitoring data.”
NHVR CEO Sal Petroccitto said putting more cameras on the ground was a critical step towards better data sharing across borders and would reinforce efforts to make Australia’s major freight networks safer.
“As we bring these cameras online, authorities can better detect risky behaviour and unsafe practices by heavy vehicles on our roads, which helps narrow our focus for compliance and enforcement efforts,” he said. “National visibility of vehicle movements will allow the NHVR and other enforcement agencies to identify drivers and operators who systematically flout fatigue laws.”
The NHVR is currently working with other state road transport authorities to identify additional camera sites along the busiest freight routes to maximise heavy vehicle monitoring capability.
In April, five sites along major Australian freight routes were identified and fitted with ANPR cameras, on the Hume Freeway at Wallan, Calder Freeway at Gisbourne, Western Freeway at Ballan, Goulburn Valley Freeway at Murchison and the Princess Freeway at Yarragon.
Each camera site costs between $200,000 and $800,000 to establish, depending on what infrastructure, power, communications and security facilities are already in place.

Data management top tech priority for global supply chain

A new survey carried out by supply chain operator Geodis has found that the top five technology supply chain priorities globally are all related to data management, they are data analysis, Internet of Things, cloud computing, info security and predictive analytics.
“In the wake of globalisation and rampant digitalisation, commercial trade flows have evolved dramatically,” the company said in a statement. “Both the volume and the scope of services managed within supply chain have reached unprecedented levels.”
Seventy per cent of respondents of the 2017 Supply Chain Worldwide survey stated that they consider their supply chain to be either ‘very’ or ‘extremely’ complex, and they also emphasise the strategic position it has reached in their overall organisation.
The majority – 57 per cent – of firms surveyed said that they consider their supply chain to be a competitive advantage, and 66 per cent dedicate 5–15 per cent of their turnover to supply chain spends.
Three quarters of the firms Geodis spoke to reported that they use four or five different transportation modes in their supply chain, with road (full truckload) and airfreight the two most common.
Focus on achieving full visibility over the supply chain – from suppliers of suppliers to clients of clients – has increased in recent years – it is now the third most important priority reported, while it came in sixth place in the 2015 survey. Only six per cent of firms succeeded in reaching this target, however.
“[The] supply chain has become more customer focused and mostly considered as a lever to win competitive advantage,” the statement concluded.
 

DHL partners with Amazon’s Alexa for parcel tracking

DHL Parcel is expanding its customer service to include a new voice-activated information service. DHL customers can now query Amazon’s digital smart speaker ‘Alexa’ for information on their parcel’s current whereabouts.
By activating Alexa’s DHL Parcel ‘skill’ via the Alexa app, users can ask their Amazon Echo or Echo Dot smart speaker to provide information on their shipment status, for example: “Alexa, ask DHL where my parcel is.” The voice-controlled interaction with Alexa is part of a DHL Parcel’s service strategy to improve customer experience. “The goal here is to make it quick and easy for every customer to receive an answer to his or her question at any time,” DHL said in a statement.
Michaela Lukas, head of DHL Parcel’s customer service for private customers said, “We want to continually expand and improve service levels for our customers, so of course we’re going to take a close look at any new and innovative technologies available.
“As an innovation leader in the industry, this is the standard we set for ourselves. Voice-enabled technologies, including hands-free interaction with online apps, will become more and more prevalent in the future.”
DHL will use user feedback to update the service later in the year.
 
 

DB Schenker wins freight forwarding and customs clearance contract

DB Schenker has announced that it has been awarded a contract to provide international freight forwarding and customs clearance services to Chevron Australia.
The three-year contract covers freight logistics movements as well as customs clearance requirements for Chevron’s interests in Western Australia.
To support the contract, DB Schenker will utilise its global network of oil and gas offices. The operations team in Perth will be supported by the DB Schenker iTeams software solution that allows for full visibility and tracking through all stages of the logistics cycle.
“We are proud to continue our relationship with Chevron. With our dedicated people around the world we have a strong record of operating safely and efficiently even on the most remote sites,” said Frank Vogel, Director Projects/Oil & Gas, AU/NZ. “The contract will support our goal to become the market leader in the industry by 2020.”

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