Sure they're cheaper than you are, capable of working 24/7 and getting smarter all the time. But there's no need to dust off your resume. "Intelligent" software programs still have a long way to go.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Remember that famous scene from 2001: A Space Odyssey when the supercomputer HAL seizes control of the spacecraft, systematically murdering crew members and engaging in a malicious game of cat and mouse with the sole survivor? That same theme's been explored more recently in the Matrix movies, where "thinking" machines running "intelligent" software wield power over what's left of the world with bone-chilling results. Memorable as those images may be, they're hardly an accurate depiction of the state of intelligent software. In the warehouse environment, at least, the machines are still under the control of their human overseers, and visions of a fully automated, hyper-networked supply chain remain just that—a vision.
That's not to say software developers haven't made significant strides toward creating supply chain software that mimics human intelligence. Systems already exist that monitor conditions within a distribution facility or transportation network and report on any abnormalities, or "exceptions," encountered. Someday, they may be able to provide a list of recommendations for humans to act on ... or even take corrective actions on their own.
"It's a brave new world as far as technology is concerned," says Alison Smith, senior research analyst for AMR Research. "[M]ore and more intelligence is being put into devices. We are seeing more intelligent software being embedded into sensors and controls."
Right now, however, the day when thinking machines will be able to make supply chain decisions and reduce the human workload remains far off. At this point, "intelligence" is still largely limited to sensors and controls that monitor and report two key types of information: an item's location and its status. The advantages are obvious: With access to information on an item's location within a DC (and eventually anywhere in the supply chain), a manager has a good idea of whether the product can be expected to ship on time or will be delayed. Some companies are also using transportation management systems (TMS) that can issue status alerts to a computer, pager or cell phone when an order does not make the truck. Information on an order's status provides similar advantages. If a manager is alerted that some of the components in a shipment have failed to come together at a pack station or that there's not enough inventory in a pick face to complete the next wave of orders, he or she can take steps to solve a minor problem before it escalates into a full-blown and costly crisis.
"Intelligence will help us reduce those things in the supply chain that now have more expensive fixes," says Larry Lapide, research director at the Massachusetts Institute of Technology's Center for Transportation and Logistics. Most supply chain managers currently don't have enough information to act quickly, he explains. As a form of insurance, they build up buffer inventories. And when faced with delays, they have little choice but to throw money at the problem, scheduling employees to work overtime or air freighting a shipment at considerable added expense. With good intelligence, problems can be detected earlier, and cheaper fixes made.
This type of monitoring capability has already paid off for a lucky few. Procter & Gamble, for example, recently watched its on-time performance climb after installing a TMS from LeanLogistics that's now being rolled out across its enterprise. LeanLogistics says that before the pilot, P&G, which was looking to bolster its 94-percent on-time delivery rate, chose six "events" within its delivery process to monitor for possible corrective action: Did the carrier accept the assignment? Was the trailer available on time? Did loading begin on time? Did loading complete on time? Did the trailer leave the gate on time? Did the carrier report any delays en route?
In the end, Procter & Gamble discovered that about half the delays could be traced to internal problems and the other half to its carriers, and it used what it learned to fix the problems. In short order, the company, which had gone into the pilot hoping to increase its on-time performance by 1 percentage point, actually upped performance by 3 percentage points—to 97 percent.
Is data fact?
But before software developers can get to the next level— that is, creating software that goes beyond simple monitoring—they face an enormous hurdle: gathering, sifting, correlating and analyzing mountains of data that eventually must be distributed to decision makers. As daunting as that task may sound, some experts believe programmers will receive a giant leg up from recent advances in visibility software and radio-frequency identification (RFID) technology.
RFID tags, in fact, have the potential to automate the entire data-gathering process. Even the simplest tags, the read-only models, can report on the status of products as they make their way through the supply chain—announcing to anyone with a reader when and where the item was manufactured, for example. The more sophisticated tags, those with read/write capabilities, allow users to update their information as they move through the chain, providing such valuable tracking data as where each item has been, who touched it, what value-added services have been performed and when each step in the process occurred.
Initially, the tags' information will be used inside the DC, processed through intelligent modules within warehouse and transportation management software suites. With those data, managers will be able to confirm at a glance that, say, replenishment tasks have been completed, orders picked properly, labor deployed where needed and orders shipped on time. Eventually, data from other parts of the supply chain can also be written to the tags, and then reported back to these software systems. This information will allow managers to determine the exact whereabouts of items in transit and even share the data with trading partners.
But that brings us to the next problem, what do you do with the flood of data that RFID can potentially provide? Work on that question is already under way. "Researchers are now studying ways to employ RFID," says Richard Pibernik, professor of supply chain management at the Massachusetts Institute of Technology-Zaragoza International Logistics Program in Spain. For example, Pibernik and his colleagues are looking at ways in which new technologies can provide real-time visibility into order fulfillment. This will give managers, suppliers and customers continuous access to status information throughout the order cycle. A customer who orders a plasma TV, for example, would automatically be advised at the time he places the order whether the item is in stock and if so, when he can expect it on his doorstep.
Still, even if RFID someday goes mainstream, there's no guarantee that the age of the thinking machine will follow close on its heels. The real problem has never been data gathering—Pibernik notes that the basic infrastructure for gathering location and status data already exists with bar codes. The true challenge is the analysis. "[W]e don't have the technology to process the data and filter the important information to make decisions," he says. "We lack the intelligent modules needed to extract and evaluate the data. Most companies are not ready to spend time and resources on it yet."
AMR's Smith adds that a logical next step is an integration of information gathered from sensors and controls into warehousing management and enterprise resource planning systems. But it won't happen tomorrow. "We are looking to 2008 before we see much integration with those systems," she says. "It's a very new market."
Thinking systems
Will we ever see a true "lights out" facility where machines take total charge of the distribution operation? Most experts don't think so.
First of all, machines simply still have a lot to "learn." "You need a full history to ëpopulate' the learning. Not enough companies have this history yet," says MIT's Lapide.
But even when they've learned all they need to, the machines still must be programmed to respond in a certain way whenever they encounter a situation that can be tied to their history—much the way a so-called self-regulating thermostat is programmed to signal the furnace to kick in once it detects a drop in temperature. That very simple example of a self-regulating response, however, is a far cry from actual machine "thinking," which would require millions of bits of data to be analyzed and compared to its history before determining a precise resolution.
"Once self regulation is proved to work, then we can create adapting systems with learning capabilities, but that's a long way off," says Zaragoza's Pibernik. He says it would mean developing programs that would cover every conceivable situation that could arise in the supply chain.
And it's not at all clear that such an effort would pay off. "You would not get enough value out of the system to replace human intelligence," Pibernik says. There are other obstacles as well, he adds, citing a lack of industry standards, a dearth of corporate resources, and the absence of a clear picture as to what results logisticians want to achieve through intelligence.
For those reasons, most researchers expect breakthroughs in intelligent software to be limited to specific areas and functions. "We will have supply chains that are more automated," says MIT's Lapide. "Computers will [make] some of the routine decisions, but humans will still be handling the exceptions. The software can't know everything. It can support, but not replace."
"With enough time and money, all things are possible," adds AMR's Smith. "But I don't think there will be a financial incentive to have that much automation within the next 10 years."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”