How supply chain management affects a company’s risk management strategy

External volatilities and natural disasters such as hurricanes, extreme weather, and political unrest can cause significant disruption to businesses, often with devastating impact.
Consider environmental change as a factor: natural disasters have already caused major economic losses in vulnerable, developing regions such as Southeast Asia and Sub-Saharan Africa, and we estimate that by 2030 the annual global economic cost of natural disasters could be as much as AUD$479 billion.*
Terrorism, conflict, and political instability are other potential causes of supply chain disruption. The character of conflict is changing and is often unexpected, resulting in increased disruption. According to the DHL Resilience360 risk management platform, civil unrest is a major risk in more than 30 percent of all countries, while the number of incidents related to terrorism have increased by 59 percent (even outside the Middle East) compared to the first half of 2015.
Incidences of digital risk are also on the rise. While the world benefits from technological innovation and advancements, the by-product of this progress is cyber risk, which can come in the form of data breaches and hacker attacks.
So what role does the supply chain play in helping to manage these risks? Research from the World Economic Forum reveals that large disruption to the supply chain is likely to impact a company’s share price by 7 percent on average. Not only are there explicit financial losses caused as a direct result of supply chain disruption, but supply chain disruption also affects a company’s reputation, as confidence in the business is likely to decrease. There are a number of functions that must play a role in the development of a company’s risk management strategy, from enterprise risk management to cyber risk management. However, the supportive backbone in an overall risk management strategy will always be an effective, resilient and well-managed supply chain.
Getting ready to face disruption
For many large-scale engineering and manufacturing businesses, the supply chain plays a central role throughout operations. It must be protected, and each company should also prepare for the external factors that could negatively impact the supply chain. The current design paradigm of a longer, leaner supply chain could prove to be a burden in the future. Therefore, from the planning stage of any project, it is important to assess risks and prepare for them by implementing contingency plans. Equally important is the insistence that suppliers have appropriate contingency plans in place. Increasing supply chain visibility is a core element of this – visibility makes it easier to understand where products are, how shipments could be disrupted, and what must be done to mitigate for this.
Understanding and predicting supply chain risks
Supply chain risk management works best when companies have the earliest possible notice of potentially disruptive incidents. Data analysis is a key element. By analysing past data, E&M businesses can develop a better understanding of what risks they might face at any given time, and ensure they are protected in the future. Communication across business functions means that data can be centralised and analysed most effectively, helping companies to predict risk. Collaboration across business functions should always be encouraged. E&M companies should run simulations on their supply chain processes as well so they can identify pressure points and predict how these might have an impact in future.
Managing a crisis
Despite a company’s best efforts, sometimes it is inevitable that disruption will impact the supply chain. What is important now is that businesses put their planning into action. Employees need to react quickly but carefully, and the business must communicate clearly both internally and externally with its partners. If the business has prepared well and used robust data to predict the potential of risks in the supply chain, overall impact on operations will likely be reduced.
Ultimately, businesses will never completely avoid disruption but if they prepare they can potentially reap rewards. Companies that get supply chain risk management right have a strong foundation on which to develop their overall risk management strategy. With it, they can often gain advantage by filling the gaps left by their less-agile competitors. By investing in more resilient supply chains, E&M businesses will not only reduce the impact of disruptive events, they will also have the potential to boost overall business performance.
*DHL Engineering and Manufacturing 2025+): http://www.dhl.com/en/logistics/industry_sector_solutions/industrial_engineering_manufacturing_logistics/engineering_and_manufacturing_whitepaper_2025/white_paper_contact_form.html
 

Why Hanjin's ships are stranded around the globe

The collapse of South Korean company Hanjin Shipping has left ships, cargo and crews stranded around the globe. It highlights the complex consequences of a shipping company going bankrupt, with Hanjin’s creditors and customers waiting to see whether the business can be saved.
Hanjin Shipping Co is one of the world’s top ten container carriers, operating some 70 liner and tramper services, transporting more than 100 million tons of cargo annually. Its fleet consists of some 150 container ships and bulk carriers.
Increased competition and Hanjin’s own high debt levels have led to its demise, as it struggled to adapt to changes in the market. Demand for shipping has fallen since the global financial crisis, at the same time as technology has started to produce larger mega-ships. Over capacity is one major problem.
Container operators are also increasingly constrained by competition laws in the US, the EU, Japan and more recently, China. It is a scenario playing out among other shipping companies in what appears to be a major readjustment of the size and operations of the world’s shipping fleet.
The company’s financial woes have caused it to seek protection from its creditors through Korea’s corporate “rehabilitation” laws. This is similar to Chapter 11 bankruptcy in the United States. This is where the insolvent debtor restructures the debts it owes to creditors, according to a rehabilitation plan, while the company continues its operations.
Under South Korean law, the plan must be approved by the creditors and the court and it is then implemented by a nominated receiver. The receiver is now in charge of Hanjin’s operations, and its ships, worldwide.
In the meantime the chairman of Hanjin Group has transferred 40 billion South Korean won to the company to help unload cargo stranded on the its vessels, but regulators have warned securing further funds could take “considerable time.”
Ideally, the plan will give Hanjin sufficient breathing space while the receiver restructures its business into perhaps a leaner operation, or one in which others, including creditors, may take a financial interest.
Ships are unusual assets for a receiver or liquidator to deal with. A shipping enterprise can be extensive geographically – with ships at all points of the world, and difficult logistically – with those ships at various stages of cargo handling. A range of other players – the owners of vessels chartered to Hanjin, and bunker (fuel) suppliers and port agents in many different countries – all add to the complexity.
Typically, a liquidator takes possession of the fixed assets of a failed business – land, plant and machinery – assets that stay put and can be located and secured. While some of those assets may be overseas, shipping collapses invariably involve the application of cross-border insolvency laws.
Ships travel from place to place and can be hard to find and secure. Maritime law is unique for that reason; for example, the ship’s crew have a direct claim on the ship itself for their unpaid wages – a maritime “lien”. They can have a court marshal board the ship, to arrest and secure it under a court order.
Arrest involves the marshal attaching an arrest warrant to the ship’s cabin or mast, and taking steps to prevent the ship leaving its mooring. This right of a crew dates back to the days when unwanted and unpaid sailors might find that while on shore leave at a distant port, their employer, the ship owner, sails off.
Others also have rights to arrest a ship at various ports around the world, this is happening right now with Hanjin. The South Korean receiver will be resisting these arrests of Hanjin’s ships.
However one of the fundamentals of bankruptcy is that ordinary unsecured creditors owed money have to wait in line for the receiver to decide how best to deal with the insolvent business. This includes realising assets to pay and what can be paid in way of dividends to those creditors – in many cases only 10 cents in the dollar, if they are lucky. Some maritime liens and other claims give the relevant creditor a “secured” claim, one that is paid out first before the ordinary creditors.
It appears that the South Korean receiver Mr Tae-Su Seok is applying to various courts around the world for orders to challenge what may be secured claims. Well developed international cross-border insolvency laws will help him access to foreign courts to obtain orders protecting the ships in that jurisdiction. At the same time, he will be looking for funds to try to keep any profitable parts of the business going.
The shipping world is waiting to see how and whether the Hanjin rehabilitation succeeds. Other major collapses, for example in Korea with Pan Ocean and Korea Line Corporation, have resulted in creditors’ claims being considerably compromised. In these cases only a certain percentage of debts were repaid and over a period of time, or creditors took equity in the shipping company.
Given the state of world shipping, that outcome may occur here. The shipping industry suffers from an inherent inflexibility in responding to changing economic conditions. There may be a decline in demand for certain goods, leading to a drop in shipping rates.
A shipper taking delivery of a new vessel some long time after it was first commissioned may be left high and dry in finding that there is a much reduced demand for its services. On the other hand, a shipping company’s leaner world fleet may find that it does not have sufficient capacity when trade conditions quickly change.
While ships will always be needed, shipping is finding increased competition from air freight services, transporting many goods – food for one, and technology consumables – unsuitable for longer shipping delivery times. Demand for the latest iPhone 7s, or fresh fruit, would call for overnight air freight, rather than weeks. Pirate incursions are another current risk.
Still, the huge capacity of ships will never be offered by flight and this remains a major advantage. Ship design and technology is also improving – computer guided “crewless” ships are on the horizon. But shipping remains a business subject to the vagaries of international trade and economic conditions.


Mr Ryan Eagle, Partner, Ferrier Hodgson, Sydney, provided assistance in writing this article.
The Conversation
Michael Murray, Fellow, Queensland University of Technology
This article was originally published on The Conversation. Read the original article.

Examining Lagging Friction

Does your lagging optimise your convey’s performance?
Flexco chief engineering 
Brett DeVries explains: 
Conveyor lagging has long been used to both protect conveyor pulleys and to increase the available friction for driving the conveyor belt. A primary consideration in the choice of lagging is the coefficient of friction.  Designers use the friction coefficient in the pulley wrap factor equation to calculate the drive capacity of the conveyor, so the behavior of lagging friction under real world conditions is of extreme interest. 
 Through advancements in research and testing, lagging is available in various designs with differing stated capabilities and strengths. As belt technology innovates with increasing tensions and more power delivered through the drive pulleys, a correct understanding of the source of friction – a primary consideration in the choice of lagging – is necessary.
Pulley lagging is available in a myriad of styles and materials.  The most common types are autoclave rubber, sheet rubber, strip rubber, and ceramic imbedded in rubber (CIR).  All exhibit different coefficients of friction by nature of their design, creating a confusing choice for the conveyor designer.  Some established design charts for friction exist like those contained in CEMA’s Belt Conveyors for Bulk Materials 7th Ed., and the DIN 22101 standard, but they are generalised, come from best practices, and assume a constant coefficient of friction.
In contrast, values published by lagging manufacturers may vary significantly from the charts.  Additionally, there is no standardised test for determining the lagging friction coefficient or an industry standard for applying a safety factor against slippage. So how does one decide which is the best choice of lagging for their conveyors?
Testing, testing, testing
The engineering team at Flexco, as part of their continuous efforts to improve not only their lagging solutions, but the lagging’s performance with other belt conveyor components, developed a test apparatus for measuring lagging friction in which friction coefficients are measured under uniform pressurised loading using a tensile test machine.  Applied pressures range from 5 to 100 psi, including some measurements to 120 psi for various lagging types.
Five different types of cold bond strip lagging were measured to find the coefficient of friction versus increasing pressure. Test conditions were also varied.  Each lagging type was measured under conditions termed “Clean & Dry”, “Wet”, or “Muddy”.
Determine a way to measure the friction 
The test fixture was designed to be used with a standard 50kN tensile test apparatus.  The test fixture used floating pressure plates that are guided by track rails along the bottom edge.  Belt samples are secured to the pressure plates such that the bottom covers of the belts face inwardly towards each other.  Between the pressure plates is the steel shear plate with lagging samples bonded to it.
The design of the fixture uses Newton’s principle of equal and opposite force reactions to assure the load is equivalent on each side.  The pressure plates are substantially thick to prevent flexure.  There is a load cell located between the large airbag and the first pressure plate to measure the applied load.
The tensile tester has a load cell attached to the shear plate via pin connection on the protruding tab. The effective area of the steel shear plate is 64 square inches.  The airbag is capable of applying loads in excess of 6400 pounds, allowing for measurements to 100 psi if the entire area is used.
The test procedure consisted of placing the shear plate between the pressure plates.  Air pressure was then applied and allowed to stabilise to the proper reading.  Next, the crosshead translated vertically upward at 50.8 millimetres per minute for a distance of 6.35 millimetres, while data was recorded regarding the position of the crosshead and the vertical load measured.  While the data from the pressure load cell was not dynamically recorded, it was observed from the digital display that it did not vary during the test.  Each test set was a unique combination of conditions (clean & dry, wet, or muddy), lagging type, and pressure and was repeated five times. Compressed air was used to blow off debris or dust generated during testing.
Analyse Stage 1 results 
The classical representation of the friction force between two solid objects is that there exists a static coefficient until the start of motion, which then quickly drops to a lesser value know as kinematic friction.
The lagging in these tests behaved differently.  The measured extraction force vs. displacement curves do not contain a local maximum force with a rapid decay to a lower value as would occur in classical friction.  Upon visual inspection, it was clear that there had been movement between the lagging and the belt samples, so the absence of a transition was not due to insufficient applied force or displacement. This indicated non-classical friction behavior.
This led to the question of how to measure a friction coefficient at all, since the pull force had not yet stabilised even though slip had clearly been observed. <Insert Figure 3: Pull force vs. Displacement, 60 psi, plain rubber lagging, clean & dry conditions.>
Another aspect observed was that a doubling in the pressure was not resulting in a doubling of the extraction force.  See Figures 2 & 3.  This violated classical friction theory which states there is a constant coefficient of friction, which is independent of pressure.
After additional research was done regarding the dynamics of a belt traversing a pulley with a 180° wrap, 6.35 millimetres of crosshead movement was selected as the measurement point for the lagging friction coefficient.
Analyse Stage 2 results
Using 6.35 millimetres of crosshead movement as the threshold for developing friction, the coefficient of friction vs. pressure test results of each combination of lagging type and conditions were graphed.  Exponential curves were fit to the data to allow for automated calculation of the coefficient of friction.
The curves showed a general downward trend in coefficient of friction as the pressure increased, except for the medium and full ceramic lagging samples.  For these, it was observed that the coefficient of friction peaked at 30 psi.  It is inferred that this is the requisite pressure for the 1mm tall surface nubs to fully engage with the belt.  After the peak, the ceramic plots all trended downward like the other samples.
Using the fitted exponential curves, it was possible to consolidate several of the lagging types onto one graph to illustrate the relative friction performance.

  • Clean & Dry – conditions were as optimal as possible. The lagging and belt were in new condition.
  • Wet – conditions are dew-like. Water was sprayed onto the lagging with a trigger sprayer until water dripped from the lagging.  This data does not represent lagging that is hydroplaning or immersed in water. 
  • Muddy – samples were painted with an Illinois basin coal fines slurry. The slurry was a mixture of clay and coal particles of unknown distribution. Ratio by weight was 3:2 coal fines to water. 

Discuss the results
These results showed a strong dependence of lagging friction on pressure.  In practice, pressure arises from the belt tension wrapped around the pulley.  Where p = 2 x T/(BW x D), we see that wrap pressure is a function of belt tension.  Since drive pulleys remove tension and thereby, pressure, from the belt, the results show that the coefficient of friction is changing as the belt traverses.
Applying the results
So what should a conveyor designer do? The new data suggests the reason the pulley wrap factor equation has worked is because of generous safety factors in the assumed friction coefficient, especially at pressures below 70 psi.  However, since available friction is pressure dependent, it is difficult to know the actual safety factor and correct results are not assured using this equation when pressures increase.
Ideally, the equation would be modified to include pressure-dependent friction. However, an analysis shows it cannot be solved by conventional means.  An approximation method must be employed.
Utilise an approximation method
Friction force is usually expressed as coefficient of friction multiplied by a normal force.  Normal force is distributed over the apparent area of contact and could be expressed as a pressure. So, pressure multiplied by the coefficient of friction is the friction force per unit area between the two apparent areas, otherwise known as shear stress.  Conceptually, this could be considered the grip or traction that the lagging has on the belt.
Graphs (Figures 7-9) were made showing the theoretically available driving shear stress.  Curves were created from multiplying pressure by the measured coefficient of friction equations.
 
As the pressure increases, the available shear stress increases, but at a diminishing rate.  The graphs suggest maximum grip for each of the different lagging styles. This is predicted by the origin of the friction force. Friction force arises from adhesion in the areas of true contact between surfaces. True contact area is much less than the apparent contact area for most substances and can linearly increase with increasing pressure. But not rubber. Since it is homogenous and soft, true contact quickly approach apparent contact area. If the true contact area is approaching the apparent contact area, and friction is the result of adhesion forces between the surfaces, then there will be a limit at the maximum shear stress value those adhesion forces can sustain.
From a practical standpoint, the goal of the conveyor designer is to assure the belt will be driven under all foreseeable conditions.  One method to achieve this is to use a safety factor.  Once the effective shear stress required to drive the belt is known, it can be compared against a theoretical maximum available value and a design safety factor calculated.
It should be noted that there are three ways to increase the safety factor.

  • Increase the T2 This can be an inefficient way to improve safety factor in some cases since the available shear stress increases slowly at higher tensions.
  • Change the lagging type. Full ceramic lagging showed the best performance for pressures exceeding 50 psi.
  • Increase the pulley diameter or wrap angle to increase the contact area. Pulley diameter plays a pivotal role in driving the belt as compared to the pulley wrap factor equation.  With the new method, traction is being increased by placing more lagging area in shear due to the extra circumference generated by a larger diameter.

This improved method for calculating conveyor drive capacity is based on the induced shear stress at the interface of the belt and lagging.  It originates from measured coefficient of friction data and a modern understanding concerning the origin of rubber friction.  It provides the designer with improved accuracy and confidence.  Gone are the assumed coefficients of friction that do not match measured data.  The improved method also captures and quantifies two intuitive concepts: there is an upper bound for frictional adhesion and larger pulley diameters have more traction.
A consequence of this approach is the potential for the designer to avoid excessive T1 tension by increasing the pulley diameter or adjusting the lagging type.  Since T1 tension commonly guides the selection of the belt minimum tension rating, reducing it may save on belting costs.  Depending on the length of conveyor, large savings may be possible by selecting a lower tension rated (and less expensive) belt and choosing instead to invest in a larger diameter pulley and ceramic lagging.

The Rise and Rise of Terminal Operating Systems

It’s no secret vessels are getting larger, cargo is becoming more varied and complex, and throughput at ports and terminals is increasing. At the same time, competition is becoming more fierce and customers are demanding more. All of these factors are putting intense pressure on terminal operators to do more, more accurately and more efficiently.

The situation has led an increasing number of operators to seek more control over their business by deploying a terminal operating system (TOS).  A TOS sits at the operational core, allowing a port's complex mix of cargo movements to be handled and controlled more efficiently. It gives the business a competitive edge by providing increased agility along with a boost in productivity across the operator's entire organisation.

In-house or commercial solution?

Any organisation considering deployment of a TOS has two options: develop a solution in-house or purchase a specialised commercial system. 

One of the problems of in-house developments is the exposure to risk.  TOS solutions are often developed by just one or two individuals within the IT department.  If either individual leaves, there is a high risk that essential knowledge about the system – information necessary for its maintenance and further development – will be lost. In these circumstances, how will you deal with the need for system improvement, modifications or interfaces to future applications?

In contrast, commercial TOS vendors continually develop their products to keep pace with changes in technology, legislation and the industry, for without constant improvement, their offerings soon become uncompetitive.

What to consider when selecting a TOS

Just as every terminal has its own requirements, every TOS deployment is different.  The areas you give precedence to will depend on your individual situation. However, one of the best places for any organisation to start is by understanding your current landscape, particularly your business model, people and processes, as well as the part you play in the wider supply chain community.  

Understand your Business Model

If you want a more efficient port and a TOS is key to achieving that, you need to find a solution that really fits your business, rather than attempting to “make do” with a generic TOS.

Major considerations are likely to include the type and volume of cargo you currently handle, the type and size of ships your port can accommodate and your vision and plans for future growth.

Look for flexibility to adapt to changing circumstances. While you may be comfortable with your current situation, market and industry changes could force you to re-evaluate your goals and objectives, causing your business model to adjust accordingly.

Determine functional requirements

Having addressed macro-level business needs, it is time to think about the more functional aspects of your operation.  Consider whether other areas of the business, such as a depot or warehouse within the terminal, could benefit from the functionality provided by a TOS.  Think about the potential for any current or planned use of mobile applications, optical character recognition (OCR) and radio frequency identification (RFID). 

Understanding your business model allows to you to build a clearer picture of your organisation’s current landscape, your vision for the future, and the tools and processes required for success.

Supply Chain

A TOS is not just about your own organisation – it is your entry ticket for involvement in the wider supply chain. There are a variety of stakeholders and areas of interaction where your TOS needs to be the hub of activity and co-ordination. Shipping lines, transport hauliers and customs are just a few examples of the agencies and organisations reliant on clear communications and interactions with your terminal.

Therefore it is essential to check in advance that your TOS is capable of connecting to partner systems and can make the appropriate data available to the relevant decision-makers within the supply chain.

People and Processes

When it comes to processes, don't just think about your current situation.  Be clear about how they may change in the future.

The TOS vendor should be able to assist you with this, as well as provide guidance on the flexibility of the TOS with respect to meeting your requirements. Your aim is to strike the right balance between making changes to the process itself, or customisation of the product, whichever makes the most sense to your organisation.

Never forget that while processes are necessary to drive the business, people are the keys to your success. Any form of change can be unsettling for staff. They need to adapt to new ways of working and deal with uncertainty and disruption to ‘business as they know it’. Involving users as early as possible and providing clear communication about changes will help to mitigate any resistance and increase the likelihood of successful adoption.

Knowledge makes for more successful decisions

Addressing the key elements of business model, people and processes, and your supply chain in advance allows you to build a picture of your current positioning, to pinpoint where you would like to be in the future, and identify the changes you need to make to get there. Armed with this information, you'll be well-equipped to select a system that is scalable enough to grow with your business and the wider supply chain community.

Kaustubh Dalvi is the director of sales for Jade Logistics.

Freight Needs Equal Consideration

Much has been written and said since Malcolm Turnbull’s rise to power, about the Federal Government’s role in our cities. There is universal agreement that unless there is a renewed focus by all levels of government to improve our cities’ transport infrastructure, our economic prospects will inexorably suffer.

Chief amongst these is Infrastructure Australia, which warns in its National Infrastructure Audit that growing congestion threatens to cost Australians $53 billion by 2031 as the population increases to 30.5 million.  Infrastructure Australia also reminds us that the economic contribution of our major cities will increase by 90 percent to an input of $1.6 trillion in 2031.

From the perspective of the logistics industry, greater Federal Government focus on the workability of our cities is a positive step.  It has the financial muscle that many state and territory governments simply don’t have to invest in projects to improve the economic efficiency and liveability of our capitals.  Similarly, the development of policies that pave the way for greater private sector investment in infrastructure projects is strongly encouraged by industry.

But in the rush to extol the virtues of government investment in trams, buses and rail links in our cities, the need to invest wisely in key logistics projects to improve supply chain efficiency has been somewhat overlooked in the national debate. As attention turns to the crafting of the next budget, it is essential that the Government gives equal consideration to the movement of freight as it does to the movement of people.  In short, any new federal approach to moving people should not be at the expense of supporting supply chain projects to move freight.

Too often, freight is seen as an inhibitor, rather than a creator of wealth, prosperity and opportunity in Australia. But the fact is the health of our cities and our lifestyles are inextricably linked with national supply chain efficiency.

There needs to be greater integration between urban planning and freight planning to avoid repeating the mistakes of the past that restrict supply chain efficiency.  In practice,  urban encroachment, a lack of buffer zones, and a tangle of passenger and freight rail on the same lines are all symptoms of a lack of attention to the needs of freight.

Ensuring there is a strong approach by governments to freight is imperative for three key reasons.

The first, Australia’s rising freight task. The Bureau of Infrastructure, Transport and Regional Economics predicts Australia’s freight task will double between 2010 and 2030, and likely to triple by 2050.  Unless there is targeted investment focussed on connecting our sources of wealth with our domestic markets and international gateways, our cities will inevitably suffer.

The second is the economic windfall from improving the efficiency of our national supply chains.  A report by ACIL Allen and ALC found a one per cent improvement in efficiency of our national supply chains will yield a $2 billion-a-year benefit.  It provides the evidence, if it were ever needed, that inefficiencies in the industry will cost Australia dearly unless all governments continue to focus on improving the efficiency of our supply chains.

The third is to maximise the economic benefits that can be achieved through recent trade deals, such as the Trans Pacific Partnership.  Maintaining and enhancing efficient national and international supply chains is a fundamental component of any international trade deal, such as the TPP, and will help to ensure Australian businesses receive the full benefits of this and other important international agreements.

These economic realities underscores why ALC is encouraging Government to ensure there is clear responsibility for supply chain efficiency and freight in the new ministerial arrangements. It is critical there not be duplication or overlap between these ministerial responsibilities, particularly as they relate to major freight projects.   Freight cannot fall between the cracks, particularly when it comes to responsibility for major infrastructure projects.

The logistics industry looks forward to Infrastructure Australia’s 15-year Infrastructure Plan, due later this year, to provide this high level infrastructure blueprint, and to deliver the framework Australia needs to facilitate the more efficient movement of freight across our national supply chains. 

Michael Kigariff is the managing director of the Australian Logistics Council.

2015: When Tier 1 tools become accessible to all and level the playing field

Robert Frandsen, Managing Director of InfoMotion explains how the barriers between market players are coming down as traditional tier one vendor tools become more accessible to all types and sizes of logistics businesses.

Several technology trends are impacting the way logistics companies manage their business. Mobile devices such as PDAs, smartphones and tablets have become more affordable, making the hardware accessible to all sizes of organisations. With developers building ever-more mobile functionality into their software, the gap between tier one and tier two software has narrowed down to such an extent that leading functionality has become available to all at an affordable price.

A third trend noticed is the push for efficiency. Given productivity, competitive and financial pressures, it's not surprising that logistics companies are particularly focusing on software tools that will help achieve efficiencies by streamlining workflows and reducing operational costs.

These three trends have combined over the last 12 months to encourage a more holistic approach to mobility. Logistics companies are moving well beyond simple bar code scanning and are introducing a wide range of mobile-based processes and systems across the business, from electronic manifesting, sign-on-glass delivery systems, and item level inter-company traceability to depot audits, pallet management and fatigue management. The idea of capturing data at the source of activity is extremely appealing, especially as a way to speed up processes by reducing the need to re-enter data, and removing time lags affecting the flow of information.

Integration for full ROI

Recently, the mobility focus has shifted slightly to concentrate on the value of mobility as part of an integrated whole-of-business or ERP system. When all software works together as an integrated whole, data only needs to be captured once for it to become immediately available to all users, across all systems as required. This is where the real ROI of mobility lies and is likely to be the subject of continuing investment in 2015.

One good example is the flow of data from logistics to in-cabin telematics and GPS systems with the three systems working together to automatically optimise delivery routes while also accounting for fatigue management.

Mobility is also changing the logistics business by redesigning processes. Mobilisation is forcing companies to rethink their process flows, review how things are done and find ways to use technology to make improvements. Traditional backend tasks such as building the manifest, for example, are being shifted to the warehouse floor to reduce costs and improve timeliness.

The second coming of EDI

EDI has been around for so long that it has effectively become commoditised. Once only feasible for large operators, it is now a commonplace tool among businesses of all sizes. However, this gives rise to a new set of expectations, especially from smaller organisations that seek more from their software investments but can't afford to rely on a consultant every time they need to make a change. This has encouraged software vendors to introduce new tools that give customers more control over their EDI experience.

The cloud slowdown

In comparison with EDI, the market for cloud ERP systems appears to be slowing. The potential of the cloud was a much-discussed subject in 2010 and 2011; however, concerns over data integrity, data security and data ownership have proven to be major hurdles, resulting in resurgence in demand for on-premise systems. Business conservatism around the cloud is unlikely to dissipate until these issues are fully resolved.

Technology is driving greater equality

Changes in technology are helping to create a far more level playing field for logistics organisations. With the same technologies and functionalities becoming available to all, and the same opportunities for efficiency through automation, competition within the industry is about to heat up even more.

Given the level playing field when it comes to technology, it wouldn’t be surprising if smaller operators begin to successfully bid for contracts with large retailers. In some instances, their greater agility may prove to be a decisive advantage.

For more information visit www.infomotion.com.au

2015: Disruptive innovation hits process improvement

Although mentioned on the edges of business for years, the word “disruption” really came into its own in 2015, used by everyone from the CEOs of digital businesses, to Quality Managers of manufacturing companies, and even the newly-minted Australian Prime Minister.  But what exactly do these people mean when they talk about “digital disruption”, “creative disruption” or “disruptive innovation”?

When applied to businesses, industries or markets, “disruption” refers to the radical change introduced by new ideas, strategies or products.  In the last few years technology has completely changed the way several markets operate. Satellite TV services disrupted TV networks, and now digital distributors like Netflix are turning that market on its head again.

A significant disruption for organisations across all industries is occurring in the way that business processes are developed, managed, and improved.

Farewell to the encyclopaedia approach to processes

Since the 90’s the standard for sharing process knowledge and know-how hasn’t really shifted – a mixture of text and flow chart documents. New techniques for improvement have come and gone, new terms and notation styles, but process documents survived them all.

Like the volumes of encyclopaedias of old, these documents were at their most useful the moment they were printed.  Thereafter, they rapidly lose currency.  Static in nature, they failed to engage or resonate with teams. After being placed on the g:drive bookshelf, it was likely that only a few looked at them again, and certainly nobody truly owned them.  Over time processes change – but the documents that describe them, not being relevant, remained on the shelf.  Eventually, new change programmes come along to test the currency of this information, and lo and behold, it’s considered obsolete – and the process documents are rebuilt and shared… using a different document.

Process improvement goes online

Since the internet became an everyday part of business life, online tools have forced a rethink of the procedures encyclopaedia.  In fact the cloud, new collaboration tools and mobile technologies have completely disrupted old ways of sharing knowledge. Organisations have introduced company-wide intranets, and deployed dedicated online process management solutions that provide access to staff at any location, across a wide variety of mobile devices.

In terms of the technology adoption lifecycle, process management software has well and truly entered the late majority stage. Innovators and early adopters paved the way for this new approach to process management. Their successes have convinced the early majority and now the late majority to embark upon their own shift. Now, in 2015, online process management tools form the mainstream.

Why care about process knowledge?

Poor process management is a sign that knowledge is not being properly shared within the organisation. There is little collaboration within or between teams, and without a structured knowledge asset, individuals each develop their own approach to solving the same problem, time and again.

Not only is employee engagement and morale lower at organisations like this – it is widely agreed that process management directly impacts customer experience and customer satisfaction. The success or otherwise of process management flows directly through to customer retention and the bottom line.

Perhaps the greatest danger of weak process management lies in the crippling effect on efforts to rectify problems and introduce positive change. The failure rates of technology and process improvement initiatives increase significantly when built upon a shaky platform of process know-how.

How to spot a process encyclopaedia

On the surface, it’s not always immediately clear whether an organisation has embraced disruption to process management, or whether it is a laggard, clinging to old ways.

If you identify with any of the following five signs, there’s a good chance your business is being left behind.

1. You live in hope that teams will one day start reading the process encyclopaedia.

2. You’ve taken your encyclopaedia documents online, but they still seem suspiciously like the same static documents in search of an audience. Refer point (1).

3.  You hope that one or two authors will decide to maintain the encyclopaedia, heroically updating processes, keeping the document alive.

4. Every change project or technology implementation is free to write their own encyclopaedia of know-how in the format they choose.  Their work may not look the same as other process documents within the organisation, but they end up being ignored in the same way.

5.  You know that processes are changing, but none of the changes are reflected in the encyclopaedia.  Teams also know this, and don’t trust the encyclopaedia as a reflection of the way business is actually being done.

Disrupt or be disrupted  

The same disruption cycle has played out in other disciplines – it displaced the spreadsheets of customer information that were used every day by sales teams. Those documents made way for CRM (customer relationship management) solutions that offer significant advantages over the old spreadsheets for creating, sharing and managing customer contact information.

The shift occurred because the new tools are easier to use, easier to manage, and they provide far more powerful analysis. They provide a centralised source of information that protects the organisation’s process knowledge, while making that knowledge accessible and usable for teams.  The tools encourage interaction and foster improvement.

Sound familiar?

Is it any wonder that a recent study by TNS, a global market research company, found that seven in ten organisations plan to maintain or increase their level of investment in business process management over the next 3 years? The same study points to the problems experienced by laggards. Just over four in ten organisations admit that few or none of their processes are accessible or easy to find.

The old ways of managing processes were limiting and therefore ripe for disruption.  In 2015 it’s no longer acceptable to document processes and simply hope that someone will read them, or that they will meaningfully help process improvement.

Ivan Seselj is the CEO of Promapp.

Injecting data science and big data into the wireless supply chain

Data Science and machine learning algorithms are transforming the big data community. The growth in big data is well known, across all industries and business functions, in particular telecommunications. However, one of the biggest complaints from telcos is they are drowning in customer rich data and are struggling with effectively using the insights to improve day-to-day operations and their supply chains.

 

Unlike general FMCG supply chains, telco supply chains have rich datasets about customer preferences and behaviours. This means there is a huge opportunity for operators to use data science to gather, aggregate, store and analyse these trillions of bytes of customer likes and dislikes. According to IDC, improved customer experience and customer service are ranked as top business priorities in Australia. Telcos are under mounting pressure to improve their data analytics expertise and processes and actually use these insights to deliver a wireless supply chain that enhances loyalty and provides the truly tailored brand experience customers are demanding.

 

Dr Gregory Hill, Head of Business Analytics at Brightstar Australia, explores the top industry trends in big data in Australia and provides some top tips for operators to embrace the power of data science to improve their supply chains. How can they best gather business insights from the big data behemoth to enhance their operations and wireless supply chains, and most importantly their consumers’ loyalty?

 

  •         Recognise big data

Operators are a major step ahead of other retailers or FMCG companies, because they have such close relationships with their customers. They have access to some very powerful insights that are gold dust and can be used to offer a truly personalised customer service approach. Improved technology makes it possible to collect, retain and analyse data that otherwise would have been discarded. Plus, new advancements in data science allow professionals to use more sophisticated techniques to integrate big data to a level unseen before.

 

  •         Upskill in data science

According to LinkedIn, in 2014, statistical analysis and data mining was the no 1 hottest skill that got people hired. And the Harvard Business Review claimed that data scientist will be the sexiest job of the 21st century. A new approach to business management and data analysis is being seen across Australian businesses, which is based on science, mathematics and statistics. There is a growing emphasis on hypotheses, algorithms, cause and effect, and experiments to extract knowledge from large data volumes, and this is set to keep growing. These data mining techniques are used by a new breed of data scientist to interpret rich data, investigate problems and provide exact solutions. Data science is used by many retailers, for example, to pinpoint what customers want, how they buy, and what they might be interested in buying in the future. These skills are hot property and data analysts with business know-how are in such high demand and low supply that they are earning almost three times Australia’s average salary. To capitalise on this opportunity, most Australian universities are now offering graduate degrees in data science and analytics.

 

  •         Use insightful algorithms

Another hot topic is the growth in automation, and using algorithms to classify, predict and optimise customer interactions. For example, if an algorithm is being used at a retailer to predict which stores were going to run out of a popular item, it could automatically send a signal to the supply chain to push more stock to those locations. Doing this manually for all stores and products would be very time-consuming. This is fuelling much debate around the best way of combining automation and human judgement to create optimum results. For operators, automating small-scale decisions based on structured data can be a sure fire way of improving costs, quality and timeliness – and delivering a great customer experience.

 

  •         Visualise the data

Communicating all of this information clearly and efficiently is another discipline we’re seeing a big growth in. This involves building compelling visual representations of complex data. Using graphics, maps, tables, diagrams, graphs and charts are all ways of making big data more accessible and usable to non-mathematicians and non-scientists in an organisation. Well-crafted data visualisation helps uncover trends, develop insights and explore scenarios. Underpinning all of this is story-telling – working across teams to uncover the story behind all of this data and communicating it in an engaging and simple way.

 

From a business perspective, data science is an integral part of analytics that encompasses data mining and business intelligence. But what do these emerging trends and science mean for the wireless supply chain?

 

  •         Streamline omni-channel

All of this data and scientific analysis is geared to achieving the Holy Grail: a seamlessly positive customer experience. Allowing customers to interact across multiple channels is an expectation that must be met by retailers. Better knowledge of competitor pricing, demand trends and customer buying preferences (online and in-store) can initiate sales and promotions that help avoid losing business and retain customers. This also impacts customer service and enables telcos to provide a more tailored interaction, while improving supply chain efficiency and creating a “smart supply chain”. Using analytics tools, such as cloud-based platforms, enables a real-time optimised experience, which is crucial to achieving this.

 

  •         Supply chain demand

With such close relationships with customers, telcos can use rich transactional data to accurately predict supply and demand and ensure optimum supply chain efficiency. Supply chains need to move away from being product forecast driven to become customer demand driven. For example, when a new smartphone is launched, businesses can use data on who is using a similar product, what stage they are at in their contract, how much data they use, what accessories they’ve bought, and other preferences to predict peaks of demand and ensure adequate supply. So, ordering the right product, sending it to the right place, at the right time and with the right price point will help improve speed, accuracy and scalability of order fulfilment. The essence of demand shaping is knowing about your most profitable customers and products, and protecting and promoting them. Consumers will not be disappointed by an “out of stock” notice and retailers won’t have excess product piled up in their store rooms, so it’s win-win for everyone involved.

 

  •         Design a winning portfolio

Data scientists can also help with product design and ensure a portfolio meets customer requirements. For example, a retail phone store in a small country town is likely to stock different products to one in a CBD location, because customer demand will differ – features like enhanced network connectivity and being ruggedised may be more important in a rural or remote setting than colour variety. Knowing the trends and predicting behaviours based on insights means the right phones, accessories, bundles and services are all available across all channels, when the customer demands them. It’s important to use data science algorithms in customer segmentation and clustering. They can tell which customers are the lowest cost to serve and which are likely to buy the highest profit products. Creating a balanced menu of bundled offers based on data to address customer needs across brand, price, function, accessories and value-added services (e.g. insurance and upgrade programs) is key to success.

 

  •         Integrate internally

Most telcos have their own large analytics departments, working across Customer Relationship Management (CRM), Marketing, Business Intelligence and Reporting. Ensure they are feeding into the right people on the supply chain, so the company is working together end-to-end. Use data and modelling on the customer and how they are using products to tailor offerings. By working with the relevant teams, this insight can be used to drive the supply chain and ensure customers are at the heart of everything the business does. The current crop of big data and analytics tools provide a way to integrate data from sales, marketing, action of customers, product reviews, competitor information, warranty data and supplier status in real-time to make demand-driven supply chains a reality.

 

Big data is transforming all industries and business functions, including telco and supply chain, and data science is the next wave of innovation set to hit the industry. For telecommunications, harnessing this new approach will position them at the forefront. Unlike general FMCG supply chain, telco supply chain has rich datasets about customer preferences and behaviours. Harnessing this is a big opportunity and ensuring telcos are using the right technologies and platforms to manage and drive it into the supply chain to improve the telco's customer experience is imperative.

 

Dr Gregory Hill is Head of Business Analytics at Brightstar Australia and a member of the Industry Advisory Board at Melbourne Business School’s Centre for Business Analytics. Brightstar, a SoftBank Group Corp. subsidiary, is the world’s largest specialised wireless distributor and a leading provider of diversified services focussed on enhancing the performance and results of the key participants in the wireless device value chain: manufacturers, operators and retailers. In 2014, Brightstar reported global net revenues of more than US$10 billion and employs about 9,000 people on six continents. 

Pickering Transport Group and the Mobicon TF2

Roger Pickering understands that a business needs to change with the times.

With a loan of 500 pounds from his grandfather, Roger’s father and uncle, Ted and George, started the family transport business back in 1950 with a single, secondhand, fire engine-red 1942 army Dodge that they used to run local cartage around the Swan Hill region during the winter months when the family pumpkin farm was quiet. The business grew from there. They joined a local group of owner-operators at Lake Boga and started to carry produce from that region into Melbourne. Over the years, the other owner-operators dropped off and eventually Ted and George owned the business outright.

In 1977 they acquired their second transport business and, in 1979, their third.

They slowly increased their fleet, eventually handing day-to-day control over the to next generation of Pickerings.

Roger got involved in the business when he was “just a kid”.

“It was what you did back in the 1960s. I went to work with my father and just grew up in the business. By the age of thirteen I was out loading and unloading trucks. By fifteen I left home and came to work in Melbourne, having achieved all I was going to achieve in school,” he says with a sly grin.

He worked his way up through the business and today, as General Manager, he has his hands full managing a fleet of over 115 line haul truck and B-Doubles, 60 rigid traybodies doing local work and about 360 staff across 11 branches.

“We first got in touch with Mobicon because we have a growing trend in export and containers and we had to find a better method of lifting them on and off,” he explains.

“Everything you do is about reducing costs and labour costs are a very large portion of our business. In Melbourne we were lifting all our containers with a side loader which was a 24 minute process. The first Mobicon that we bought a couple of years ago halved that time. The new one has halved it again, down to a 6 minute process.”

He says they looked closely at getting a large forklift “but the footprint on the ground of a big fork is exceptionally heavy comparative to a Mobicon. The pavement we have wouldn’t be suitable to a big fork. It would have broken up very quickly.”

“The Mobicon will also work in much tighter areas – just a safer, more seamless operation,” he says.

“One of the other things I liked about the Mobicon is the entry. When you straddle the container, there are very few, if any, objects that can be hit as the driver bumps the container – and they obviously inadvertently do do that. The Mobicon to me is quite a solid, sturdy piece of equipment.”

Roger liked his original Mobicon so much that he was the first customer in Australia to purchase their latest model – the Mobicon ECO Top Lift Two High. The third Mini Straddle Carrier model in their ECO series has a top spreader that can stack containers one over one (or two high).

“The beauty of this new Mobicon, for our branch in Melbourne, is that we’re in a confined space and, if you get 25 or 30 full containers, our yard is quite congested. Now we can double stack them, which doubles the number that we can store, and reduce the space that we need. Melbourne land values are quite high and, you know, to be able to utilise it better with the double stacking is absolutely paramount.”

Tom Schults, the inventor of the Mobicon and Managing Director of Brisbane-based Mobicon Systems, says the introduction of the new model was the result of customer feedback.

“In the past we have received quite a few requests for a stacking Mini Straddle Carrier and the new model has already generated a lot of interest from around the globe,” says Tom.

He claims the Mobicon ECO Top Lift Two High Straddle Carrier Model is perfect for companies that require speed in their operation and where yard conditions may not allow the operator to exit the cabin and where space is at a premium.

The paperless supply chain is becoming a reality

Logistics and warehousing operators are constantly on the hunt for ways to make their operations more efficient. Staff, facilities, IT and transport vehicles are always being examined to ensure they're operating at optimal levels. When you're shifting thousands of items a week, even minor changes can have a big overall impact.

One area in which many operators find they can make improvements is workflow. Often systems that were put in place years ago are still at the heart of the supply chain. They might have done the job admirably, but they're now well past their use-by date. By critically evaluating and improving each process in a workflow, massive improvements can be made both to customer service and the bottom line.

The end of paper

Just as it's been in many areas of business, paper has been part of supply chains since their inception. From customer orders and pick sheets to invoices and delivery dockets, paper has been part of every step.

But the end of paper has arrived. Technology has reached the point where 'bits' can replace 'ball points' at every point in the supply chain. As well as removing cumbersome manual processes, this shift also allows the automation (or semi-automation) of both internal and external workflows.

Until now, many supply chain operators have been hesitant to invest in the technology needed to support such automation and changes in work practices. They highlight two key reasons: initial cost and the potential for business disruption during implementation.
 

Thankfully, both these reasons are now redundant. Companies of all sizes within Australia's supply chain and logistics industry have access to mature, sector-specific software solutions at a highly cost-effective price. Where once creating such a system would have involved bolting together components from a range of vendors, a full suite can now meet requirements from end to end.

Implementation has also improved. Rather than having to awkwardly jump from existing paper-based workflows to an unfamiliar new electronic system, companies can shift gradually, thereby giving staff time to adapt and become comfortable with new ways of working. By employing industry experts who use tried-and-proven implementation methods, a project's impact on daily operations will be minimal.

Big business benefits

Once a supply chain and logistics company has shifted from paper-based to electronic workflows, the business benefits will be immediate. The new systems will remove all need for double-entry and paper-based processes, freeing up staff to focus on more value-added activities such as customer service.

Having highly automated and configurable workflow processes in place will also streamline company operations, quickly and significantly reducing costs, boosting service levels and raising customer satisfaction levels.  
 

When you consider the day-to-day processes within a supply chain and logistics company, shifting away from paper to electronic systems touches them all. As soon as a customer order is received via EDI (Electronic Data Interchange), it can be viewed and processed on screen. In the warehouse, ordered items can be picked and packed using automated systems. Rather than relying on paper pick sheets, staff can use tablet devices to check the order and match it with outgoing shipments. The time taken to get an order out the door can be slashed and errors significantly reduced.

The paperless revolution can go even further. The addition of RFID (Radio Frequency ID) chips and readers can allow the automatic tracking of cartons and pallets as they move through the supply chain. At each point, the location of the order can automatically be communicated to the customer, keeping them fully informed of its status and estimated delivery time. Indeed, throughout the entire workflow around the customer order, the only manual effort involved is the physical movement of the goods themselves.

For the supply chain operator, paperless workflows mean lower administrative overheads and reduced operating costs in the warehouse. Everything from initial order entry to delivery can be smoothly handled with only the minimal amount of manual human intervention.

There are also big benefits on the logistics front. Automated systems can significantly streamline the loading of trucks and delivery vehicles. Routes can be optimised to ensure the maximum volume of goods is delivered with the minimal amount of driving. Loads can be automatically tracked between warehouses, split and delivered in the shortest period of time possible. Upon delivery, customers can sign on screen and receive electronic delivery dockets for their internal processing.  
 

Cost-effective solutions

Just a few years ago, the costs associated with such integrated paperless supply chain and logistics systems put them well out of reach of all but the largest operators. However, constant software development and a reduction in hardware costs now put them well within the reach of all mid-sized operators.
 

Implementation is also much easier. Careful selection of a technology partner who has intimate knowledge of the supply chain and logistics industry can ensure any impact of making the shift will be minimal. Portions of the existing supply chain can be shifted to paperless operation over time, allowing staff and customers to become comfortable with the new way of operating.
 

By making the move to an automated, paperless supply chain, operators can significantly reduce their costs, boost their efficiency and provide first-class customer service. A paperless future is very enticing.

Robert Frandsen is the managing director of InfoMotion.

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