Agilent Technologies' "control tower"—an information hub linking the instrument maker with its suppliers to provide inventory visibility—has helped the company deftly model parts availability, manage order promising, and counteract parts shortages during a natural disaster.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
In 2011, when the worst flooding in decades swamped Thailand, many of the manufacturing plants that produce electronic parts and components in that country were forced to suspend operations. That left many of their customers—mostly large international manufacturers—without critical parts needed to fill orders. But not Agilent Technologies Inc. Although Agilent's contract manufacturer in Thailand was out of commission, the testing-equipment maker was able to fill most of the orders that normally would have included items produced by that supplier. That's because Agilent had a resource its competitors didn't have: a "control tower" it had installed a year earlier for its Electronic Measurement Group (EMG).
The control tower is an information hub that links Agilent with its suppliers to provide visibility of the inventory in its supply chain, at both the company's own locations and at the sites of its contract manufacturers and their suppliers. The control tower's staff uses simulation software to model the impact of parts shortages on production and devise a plan to solve any problems. In the case of the Thai floods, the company used that software to rapidly identify shortages so that alternative sources for parts could be quickly found, or in some cases to permit the redesign of parts. "The control tower helps us to be able to capture all components during a shortage so we can come up with risk-mitigation actions," says Michael Tan, Agilent's EMG Supply Chain Operations Director.
Inventory unknowns
Agilent Technologies was created in 1999 when Hewlett-Packard spun off its test and measurement instrument business from its computer business. Headquartered in Santa Clara, California, Agilent Technologies reported US $6.9 billion in revenue in 2012. The Electronic Measurement Group (EMG) is one of four groups within the company, and it's the most profitable one, with US $3.3 billion in revenue in 2012. EMG sells products like oscilloscopes, spectrum analyzers, and network analyzers that are used in such industries as aerospace, defense, communications, and computers. The group has 9,000 customers worldwide. (In September 2013, Agilent Technologies announced plans to make the Electronic Measurement Group a separate, publicly traded company.)
To make 5,000 different types of electronic instruments, EMG works with 1,100 suppliers, 52 percent of which are based in Asia. Although the measurement group operates some of its own factories, it relies on strategic contract manufacturers to make 70 percent of its products. On average EMG ships 70,000 units each month to customers.
Agilent's inbound supply chain spans the globe and requires the coordination of parts flows between its own factories and those of its contract manufacturers. For example, Agilent technology centers in the United States and Germany make integrated circuits. Contract manufacturers in Asia incorporate those components into what Tan refers to as printed-circuit assembly boxes. But Agilent's main manufacturing plant, in Penang, Malaysia, also incorporates the integrated circuits into microcircuit assemblies found in electronic instruments.
All of those factories, both in-house and contract, keep their own inventories of parts to support production. Each plant also has its own suppliers, which keep their own stockpiles of inventory.
The whereabouts and availability of inventory in Agilent's extended global supply chain became a concern in 2009. That's when the economic downturn subsided and business began to pick up again. Cutbacks in production and the demise of some suppliers during the recession had led to parts shortages throughout the electronics industry. As a result, when Agilent needed to ramp up production, it "had some challenges" in locating parts that were in short supply, Tan says.
Compounding the problem was the fact that Agilent needed accurate information about parts availability from its suppliers in order to make delivery commitments to key customers and win business, yet it had no way to get that critical information quickly. One reason was that Agilent, its contract manufacturers, and their suppliers were using different information systems. While Agilent relies on Oracle's technology to keep tabs on production, many of its contract manufacturers and suppliers use enterprise resource planning software from SAP. Because the different information systems in the supply chain were not linked, if Agilent wanted to determine whether it had all the necessary inventory to make an order delivery-time commitment to a customer, it could take three to four weeks to get an answer from all the parties involved.
Simulation saves the day
To solve this problem, Agilent decided to construct a control tower that would give the instrument maker visibility into inventory holdings down to the supplier level in as many nodes in its supply chain as possible. For this vertical supply chain integration project, it bought RapidResponse software from Kinaxis, a vendor of enterprise supply chain software solutions. Besides facilitating supply chain visibility, the software handles demand, supply, and inventory planning as well as what-if analyses, among other functions.
In 2011, Agilent got the control tower up and running with three contract manufacturers and two of its own technology center facilities. Since that time, the control tower's scope has expanded in stages. Currently, it extends to five contract manufacturers and five Agilent-owned sites. Three of the contract manufacturers are in Malaysia, one is in Thailand, and one is in California. Agilent's own facilities linked to the tower include its plants in Penang, Malaysia, and in Santa Clara, California. The tower is also linked to technology centers located in California and Colorado in the United States, and one in Germany.
Staff members who oversee the control tower's operation work out of Agilent's main facility in Penang. There are two teams involved: one conducts the analysis, while the other manages data governance to ensure that all linked locations provide correct, high-quality information.
The suppliers transmit information to the tower on a daily basis. As of this writing, the control tower has visibility of more than 94 percent of all parts used in the EMG supply chain. The tower uses this information to create a complete picture of Agilent's supply chain, which the company employs to manage both daily operations and crisis situations. The information is displayed on computer screens formatted in customized worksheets that show purchase orders, plan, and supply allocation. Tan says the customized worksheets allow Agilent to monitor part-by-part shortages throughout different levels of the supply chain via weekly projected balances based on demand.
The control tower is routinely used to simulate the impact of a major sales event on production. "Our sales engineers want to be able within a half day to come back to a customer and say whether we can support them and get the product in a four-week shipment time," Tan explains.
Whenever a major customer deal is in the offing, the control tower helps Agilent to determine an accurate commitment date for product delivery. It does so by simulating the parts requirements. The simulation allows Agilent to check with its manufacturers and suppliers to determine parts availability, including whether production would encounter any parts shortages. If the simulation reveals possible problems with the availability of components, Agilent can then work with its suppliers to source the part on the open market or obtain it from other distributors. In some cases, the company has re-engineered the product to use an alternative part when the original version was unavailable.
Tan says that the control tower can very quickly predict the revenue impact from any possible deal as well as the company's ability to meet a delivery date before promising it to a customer. "Because of the wide range of products, it was quite a challenge to do this manually in the past within a short time," he says. "The control tower lets you know how much you have on hand and how fast you can get these parts into the factory that produces the product for the final customer."
Since setting up the control tower, Agilent has speeded up its response time for customer order promises. In the past, turnaround time for demand propagation took three to four weeks, as the instrument maker had to contact manufacturers and suppliers involved in a particular order and wait for their responses to determine parts availability for production. Now turnaround time is a week or less.
The control tower also helps Agilent with crisis management, such as when the floods in Thailand affected its contract manufacturer there. The tower simulates the constraints facing a manufacturer or supplier when an unforeseen event disrupts the supply chain. It enables a bottoms-up modeling through the supplier levels to identify the total impact of a disruption on sales orders, forecasts, and safety stock for the various products. It also lets Agilent prioritize the allocation of constrained materials to meet critical demand on the basis of the greatest business benefit. "Because of this tool we are able to quickly simulate gaps [in supply]," said Tan.
As a result of this capability, Agilent was able to minimize disruption for its customers during and after the floods. In some cases it found other sources for parts that it normally would buy from its Thai supplier. In other cases, it redesigned the product or engaged in "value engineering," a technique that involves identifying acceptable substitute parts.
A winning concept
For the control tower to provide inventory visibility, Agilent's supply chain partners must furnish clean, accurate data. The original owner of the data—whether it's Agilent's procurement team or a supplier—is responsible for accuracy and timely updates. "When new products are introduced, the bill of materials needs to be set up correctly at each level," Tan says. "That's why governance is important. Any change needs to be communicated throughout all levels of the supply chain."
Because the control tower needs accurate data for its parts calculations, Tan says, the company must work closely with contract manufacturers and their suppliers. For any data-sharing effort to succeed, he adds, all parties involved must benefit. "It is very important to collaborate to ensure that the data sharing will help [manufacturers and suppliers] as well," he says. "They have to realize that they are linking to systems to let them know their shortages. Then they can see the benefits of linking to the control tower."
Given Agilent's positive experience, would Tan recommend that other companies with complex supply chains consider the use of a control tower to manage inbound supply? He's a firm believer in the concept. For one thing, he says, end-to-end supply chain visibility on a single platform will give companies the ability to manage their supply chains across regions and across time zones. "This will help the company to perform proactive and effective collaboration with suppliers and also enable speed in decision making in the shortest turnaround time," he says. That's key for avoiding unnecessary inventory and expediting costs. But just as importantly, he adds, "it will enable the company to win deals as well as provide customers the best customer experience in terms of delivery responsiveness."
This story first appeared in the Quarter 4/2013 edition of CSCMP's Supply Chain Quarterly, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media's DC Velocity. Readers can obtain a subscription by joining the Council of Supply Chain Management Professionals (whose membership dues include the Quarterly's subscription fee). Subscriptions are also available to nonmembers for $34.95 (digital) or $89 a year (print). For more information, visit www.SupplyChainQuarterly.com.
“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.
Chinese supply chain service provider JD Logistics today announced plans to double its overseas warehouse space by the end of 2025 as part of the company’s broader global supply chain strategy to meet the growing demand for cross-border logistics solutions.
As part of that effort, the company will also expand its network of bonded and direct-mail warehouses. That would mark a significant expansion since JD Logistics—which is the logistics arm of JD.com and is also known as “JingDong Logistics”—currently operates nearly 100 bonded, direct mail, and overseas warehouses. Those facilities total about 10 million square feet in markets such as the U.S., Germany, the Netherlands, France, the U.K., Vietnam, the UAE, Australia, and Malaysia.
Specifically, JD Logistics said it is focused on expanding its presence in Europe and the U.S., establishing collaborative supply chain networks capable of delivering fulfillment services within 24 hours in several regions. In support of that, the company plans to increase its international cargo flights from China to destinations such as Malaysia, South Korea, Vietnam, the U.S., and Europe to enhance cross-border transportation services. It will also explore the development of self-operated transportation and delivery capabilities overseas.
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.
The clean energy transition continuing to sweep the globe will give companies in every sector the choice to either be disrupted or to capitalize on new opportunities, a sustainability expert from Deloitte said in a session today at a conference in Orlando held by the enterprise resource planning (ERP) firm IFS.
While corporate chief sustainability officers (CSOs) are likely already tracking those impacts, the truth is that they will actually affect every aspect of operations regardless of people’s role in a business, said John O’Brien, managing director of Deloitte’s sustainability and climate practice.
For example, regulatory requirements on carbon emissions are expanding in every region, which means that even if a specific company doesn’t have to change its own practices, it will almost definitely need to flex to accommodate its partners and suppliers as they track scope 3 emissions or supply chain practices.
Likewise, companies are starting to challenge the classic concept of “force majeure” events than can cancel service providers’ contractual duties due to unforeseeable weather events. As the new argument goes, extreme weather patterns increasingly occur in accordance with climate scientists’ forecasts, so those hurricanes and wildfires are in fact foreseeable after all.
But one strategy for coping with the cost of those changes is to mine the power of the data that most companies will soon need to collect as part of their evolution. Instead of simply tracking its trucks to trim their routes and emissions, a transportation company could use the same data to manage their maintenance and fuel consumption.
“The climate management transition is going to be a massive disruption, but with that comes massive opportunity,” O’Brien said from the keynote stage at the “IFS Unleashed” show. “Don’t waste compliance efforts just on compliance, use it to create new value. You’re collecting all that new data, so use it!”
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.