Though Latin America is still playing catch-up when it comes to supply chain technology, it will progress quickly over the next few years if vendors can avoid some potential roadblocks.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Ask someone in Latin America about the state of supply chain technology, and he or she will probably tell you that the region is a decade behind the United States.
Why the 10-year lag? It's not because of Latin America's vine-filled jungles, mile-wide rivers, or forbidding mountain ranges—although these topographical features have made it tough to build reliable infrastructure. Rather, it's a result of decades of instability in this diverse region, which stretches more than 7,000 miles from the United States-Mexico border to the islands of Tierra del Fuego at South America's southern tip. Given the region's long history of economic volatility, governments and the private sector have had little incentive to invest in costly new technologies.
But that situation is quickly changing. As Latin America's economies stabilize, the region is becoming a competitive exporter. Consumer demand is rising, and that has drawn retailers and manufacturers from North America, Europe, and Asia to its fast-growing cities and industrial centers. Multinationals like Wal-Mart, Coca-Cola, and Sony have forced competition on these markets. They've also brought along some high expectations: They want the same data quality and supply chain visibility they enjoy in more developed parts of the world. All of these factors make for an upbeat forecast for supply chain technology south of the border, though vendors will still find there are hurdles to clear.
Different priorities
In at least one respect, the supply chain technology market in Latin America is similar to that in North America: Warehouse management systems (WMS) and transportation management systems (TMS) are the most frequently used types of software, says Francisco Giral, CEO of NetLogistik, a Mexico City-based consulting firm and systems integrator that represents several U.S. technology providers, including RedPrairie and Vocollect. Other types of software, automated material handling systems, and voice-directed solutions are less common, but sales are nonetheless growing, Giral says.
Despite that similarity, the factors driving demand for supply chain technologies in Latin America are quite different than in the United States, says John Price, president of InfoAmericas, a Miami-based business intelligence firm with offices in Mexico and Brazil. In the U.S. market, he says, the most important drivers are the costs of labor, space, real estate, and financing inventory, in that order. In Latin America, labor, space, and real estate costs generally are not major considerations. Instead, the top priorities are minimizing both security risks and financing costs.
InfoAmericas classifies Latin American countries in four tiers relative to their usage of supply chain technologies:
Tier 1: Mexico's export economy, dominated by large exporters, multinationals, and their suppliers. Assembly operations that moved to northern Mexico in search of cheaper labor adopted sophisticated logistics practices and technologies to compensate for higher transportation costs and greater distances from suppliers and customers.
Tier 2: Mexico's domestic economy, Brazil, Puerto Rico, and Panama. Multinational retailers and third-party logistics service companies (3PLs) are leaders in implementing supply chain technologies here.
Tier 3: Chile, Argentina, Colombia, Uruguay, Costa Rica, and Venezuela, which Price calls "the next frontier" for logistics. These countries need world-class logistics capabilities to help them compete internationally.
Tier 4: The rest of Latin America, where multinationals have a minimal presence and technology investments focus on cargo security.
Top priority: security
Who are the technology leaders in the region? Price says companies that handle high-value, high-volume products like pharmaceuticals and electronics—where security and integrity of product handling are top priorities—"spend pretty lavishly on logistics technology."
In Mexico, adds Giral, retailers and grocery chains are leading the way—in part because of competitive pressures from multinationals like Wal-Mart. When it comes to material handling systems, however, the pharmaceutical industry, with its specialized handling requirements, is in the vanguard. Still, it's a small universe: Probably fewer than twodozen companies in Mexico have such sophisticated systems as pick-to-light and automated storage and retrieval, he says.
Large exporters also have incentives to invest in technology. For instance, Chile's produce and seafood exporters, which compete in North America, Europe, and Asia, want software that will help them understand their lead times, optimize inventories, and reduce costs, says Michael Schetman, director of international business development for the Americas for technology provider Savi Networks.
When you look at businesses in general, however, the number-one reason for investing in technology remains security—and in Latin America, "security" means preventing cargo theft and drug smuggling, not terrorism. "Cargo insurance costs are astronomical, as are the claims for theft and other losses, so [companies] have to make every effort to mitigate those costs," says Price. "If a technology can do that, customers will buy it."
The traditional approach has been to hire guards to ride shotgun with trucks and containers, notes Neil Smith, acting CEO of Savi Networks. But companies in fast-growing economies like Colombia and Brazil have been receptive to the use of RFID, global positioning system (GPS) devices, and cell-phone-based systems to track and monitor assets.
In Colombia, Savi has teamed up with the technology firm Emprevi Ltda. This locally owned company has more than 20 years of experience managing logistics risks for clients like Johnson & Johnson, Pfizer, and Gillette. The two partners operate an RFID-based system that tracks the location and security status of shipments between Colombian factories and seaports. A network of readers captures data that has been transmitted from electronic container seals and routes the information to transportation security software, Schetman explains. In addition to reporting location and security status, the software also sends alerts about security breaches and other exceptions to users' e-mail accounts, cell phones, or personal digital assistants (PDAs).
But wait a minute—RFID and cell phones in the jungle? It's true. Although many rural areas have no access to telecom networks, basic services are now available in most population centers. In regions where utilities and telecom infrastructure are unreliable, satellite-based solutions are popular. Savi and Emprevi are a little more creative: They're successfully using solar-powered RFID readers in some parts of Colombia.
Buy globally, implement locally
Sales channels for software and automated systems in Latin America differ considerably from those in the U.S. market. In a culture where personal relationships still matter, few technology firms sell directly to end users, says Price. Instead, they may partner with logistics service providers, which offer software to clients as a value-add. That system has made third-party logistics companies and freight forwarders "incredibly important" in introducing technology to the mostly family-owned companies in this region, he says.
The Latin American market is not yet lucrative enough for companies to develop technology specifically for that region, so products designed for the United States and Europe dominate the marketplace, says Schetman. In some countries, foreign software has a virtual lock on the market because users can get more mature, proven products for roughly the same price they'd pay for homegrown solutions. One exception is Colombia, where political unrest and security worries have kept most foreign logistics companies and technology vendors away. According to Price, Colombian companies have developed about half a dozen competitive logistics applications.
Foreign products may dominate sales, but when it comes time for implementation, Latin American buyers prefer to work with local firms. Many of the locals started out as developers, Price says, but their inability to invest in second- and third-generation technology, together with the lack of legal protections for intellectual property, pushed most of them to become service companies allied with foreign vendors.
Buyers' preference for local partners is based as much on cost as it is on shared language and culture, says Giral. Similarly, demand for product customization has more to do with corporate customs than with cultural differences. But language can still influence buying decisions. Brazilian companies, for instance, prefer to buy from and work with Portuguese-speakers, and communication problems can arise even in Spanish. For instance, when Mexico-based NetLogistik develops a "dictionary" of templates in a service-oriented architecture application for RedPrairie in Argentina, it must change about 30 percent of the terms to reflect differences in vocabulary.
Filling the knowledge gap
Despite a bright outlook for supply chain technologies in Latin America, one problem threatens to strangle future growth: a severe shortage of technical experts.
"Latin Americans are extremely well educated, but they are untrained," says Price. That is, higher education is very traditional and classical; the university system does not turn out enough scientists, engineers, and technicians, and there is nothing like the technical colleges that fill that role in Europe.What's missing from the labor pool, he says, is the competent, mid-level technician. As a result, companies find that they have to spend a lot more on technical training than they expected.
For Giral's company, the solution to that problem has been to hire young engineers from Mexico's top universities and teach them what they need to know. Similarly, Savi takes a "train the trainer" approach, with the goal of creating a pool of experts who can manage operations and customization in Colombia, says Schetman.
Interestingly, technology itself may help to mitigate the effects of Latin America's knowledge gap, Schetman notes. Hosted on-demand solutions that are now beginning to take hold in the region require comparatively little in the way of implementation time and expense; more important, perhaps, is that they can be upgraded and supported over the Internet by the application service provider.
For now, depending on outsiders to develop and support supply chain technologies may indeed be the most sensible course for a region that is still finding its economic way. Latin America's "watch and wait" approach to technology adoption has served it well in the past, says Giral, who points to Mexico's communication infrastructure as an example. Because conservative Mexican buyers waited for U.S. companies to work out all the bugs, he says, the country was able to leapfrog over intermediate telecom systems and go directly to fiber-optic communications—and do so at a speed unmatched in most of the United States.
success south of the border
Latin American companies may be conservative when it comes to buying technology, but an expanding array of logistics and transportation trade shows offers testament to the region's appetite for supply chain solutions. U.S., European, and Asian vendors of supply chain software and automated material handling systems represent a hefty percentage of exhibitors at events like Expo Logisti-K Argentina, Salon de la Logística Latinoamericana in Chile, Intermodal Brasil, Colombia's Sala Logística de las Américas, Congreso de Logística in Costa Rica, and Mexico's Expologística (the granddaddy of logistics events in the region), to name a few.
They wouldn't exhibit if they didn't see sales opportunities—and a number of these vendors have already struck gold in this market. Here are just a few success stories from the last few months:
INTTRA, a provider of e-commerce solutions to ocean carriers and their customers, experienced more than 200-percent sales growth in Mexico, Peru, and Venezuela in the 12-month period ending in June 2007.
Infor expects to rack up 20-percent sales growth in Argentina for 2007. The company now has some 800 active clients in that country.
FKI Logistex has added several sales executives in Mexico to handle increased demand for automated material handling systems.
JDA Software announced that Colombian grocery chain Almacenes Éxito increased inventory turnover by 10 percent, reduced overstocks by 60 percent, and cut out-of-stocks by 12 percent with JDA's E3 allocation and replenishment solutions.
Epicor Software formed strategic alliances with Technology Coast Partners (TCP) in Chile and Ability Data in Colombia, to offer integrated enterprise resource planning (ERP), customer relationship management (CRM), supply chain management (SCM), and professional services automation (PSA) software.
Editor's note: A useful source of information about the technology capabilities of third-party logistics service companies is Who's Who in Latin American Logistics and Supply Chain Management, published by Armstrong & Associates Inc. in partnership with InfoAmericas. Profiles of 88 global and local companies include details of their services, facilities, information technology capabilities, major customers, and more. For information, go to www.3PLogistics.com.
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
“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.
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.
While many companies are launching artificial intelligence (AI) products for use as generic “co-pilots” or consumer-focused gadgets, the Swedish enterprise resource planning (ERP) software vendor IFS says its “Industrial AI” version supports industry-specific processes in “hardcore” sectors based on assets such as power grids, cell phone networks, aircraft maintenance, elevator operation, and construction management.
“Industrial AI is at the very core the solutions we are powering for customers. They are pushing us for ready-to-use AI that they can adopt quickly to solve real industrial challenges like labor shortages, supply chain disruption, [and] stagnated productivity," IFS's Chief Customer Officer, Cathie Hall, said in a release.
In presentations at its user conference in Orlando today, known as "IFS Unleashed," the company said that its latest IFS Cloud 24R2 release supports more than 60 in-depth Industrial AI scenarios. They span generative AI examples like: content generation for training and reports; recommendations for sourcing and suppliers; and contextual knowledge for assembly instruction. The tools also include predictive AI applications like event forecasting; optimization of resources and capacity; and anomaly detection for proactive quality control.
In remarks from the keynote stage, new IFS CEO Mark Moffat—who was appointed to the top office in January—said the company may be less well known than ERP vendors such as SAP, IBM, Oracle, and Infor, but it benefits from a tighter focus on its core users. Instead of selling software across dozens of industries, IFS serves just six industries: aerospace and defense, construction and engineering, energy and utilities, manufacturing, service, and telecommunications.
Thanks to that tight approach, he said the company has earned top Gartner rankings for its software products in field service management (FSM), enterprise asset management (EAM), enterprise resource planning (ERP), and enterprise service management (ESM). And to compound that advantage, Moffat said IFS continues to grow swiftly through acquisition, having bought up a handful of companies in recent months: Assyst, Ultimo, Boka, empowermx, Bolo, Tobin, Merrick, and Copperleaf.
“You need an AI business plan” Moffat told the room. “If you have an AI business plan, that’s terrific, but you can improve it. This area is just moving so fast.”
“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.”