Recently, I was on a tour of the Chicago Tribune printing plant as a part of a conference I was attending for supply chain professionals, the 2018 APICS Conference. The tour and the conference revealed a lot about how companies adapt to disruptions in the supply chain, and how technology is impacting the way goods are tracked and sourced.
For me, touring the printing plant of one of the largest newspapers in the country, was the most interesting part of the entire conference. As a former paperboy and military journalist, I have news print under my skin. I was fascinated at how the 40-year-old presses still turned out 3,300 pages of news print per minute, and also choreographed the sections and inserts into one unit. The presses and warehouse occupy multiple floors taking-up 1.2 million square feet.
One of the interesting things I did not know is that they also print the newspapers for the City’s rival newspaper, the Chicago Sun Times, as well as local state copies of the Wall Street Journal and the New York Times. The newspaper industry, as everyone knows, has been in decline since the maturity of the Internet. In 2008, the leaders of the two newspapers decided it was more cost effective to combine their printing operations, distribution centers and delivery routes to save money. Previously, the Tribune and the Sun Times had run completely separate operations, but economics forced the players to find alternative business models, even if it meant turning over a portion to the completion. I was told the editorial staffs still maintain their autonomy.
The tour was setup by the conference sponsor, the American Production & Inventory Control Society (APICS), a national organization started in 1957 for supply chain professionals (it is currently being rebranded as the, ‘Association of Supply Chain Management’). The conference included such diverse company representatives from Coca-Cola, Caterpillar, Boeing Aircraft, and other major distributors and manufacturers. While I was there, I met people including material handlers, planners, procurement officers, operations managers and individuals from the whole spectrum of finance, sales and operations. They were there to collaborate on trends in the supply chain world, and how technology is driving change and innovation.
So, you may be asking, "What does a Supply Chain conference have to do with QuickBooks users?" The conference presenters were practitioners in the field running multi-million dollar supply chains around the world. Many of our QuickBooks clients (distributors and manufacturers) ‘feed’ into that supply chain. As the technological requirements grow, we have to keep up with the technology and integration demands from the bigger players so our clients can process the transactions accordingly. And much of what you hear about Artificial Intelligence (AI) and Blockchain technologies is already occurring in the supply chain profession.
The simple definition of a supply chain, as defined by APICS is: "The global network used to deliver products and services from raw material to end customers through an engineered flow of information, physical distribution and cash." The information flow includes purchase orders, sales order, Bills of Lading, etc. The movement of the goods is the distribution, and cash is the form of payment from one entity to another.
I thought the illustration below was a good graph showing the forward (and reverse) flow of the three parts (information, physical distribution, cash).
While I wasn't able to attend every session at the conference, I still wanted to give you a flavor of a few of the topics presented.
One of the concepts the supply chain profession is advocating (not surprisingly) is what’s called forward & backward integration among suppliers, manufacturers, distributors and even customers. The integration can be transactional, process sharing and/or financial.
Like the Tribune that shares its production process, companies are looking to work with others in the supply chain to contain costs and work tighter with others in the chain.
For example, a lot of talk is about VMI or Vendor Managed Inventory which has actually been around for a while. Here, the vendors or suppliers visit their customers’ locations to check on stock levels and take back unused or spoiled products instead of leaving it up to their customers. (Manufacturers visit the distribution centers; the DCs visit the retail outlets).
Similarly, some companies even share their inventory stock levels through their Enterprise Resource Planning (ERP) software to better manage available quantities. Transportation companies are sharing their Transportation Management Systems (TMS) with shippers to better grasp what freight methods are available. Walmart already shares Point-of-Sale information instantly with suppliers for replenishment.
One of the sessions focused on ‘outsourced suppliers,’ something a lot of our clients have experienced. The presenter gave three tips on managing those companies:
- Vet suppliers with a vengeance
- Know your products & your costs
- Trust but verify - i.e., know where your product is being produced and level of subcontracting involved in production
Outsourcing_Pros-cons_comparison-chart
Most of the sessions revolved around emerging technologies, and their use in the supply chain profession. Many of these have become familiar buzzwords in the accounting world as well:
‘Last mile’ delivery systems, these include:
- Drones – practical uses are being developed, such as the ‘DHL Parcelcopter’ for short-range deliveries where ground transportation is impractical or impossible.
- Bots – like programmed delivery wagons, these robots travel in bicycle lanes up to three MPH to deliver goods locally. One is currently produced by www.jd.com.
- Wireless Cars & Trucks – the technology and testing is developing rapidly to see more of these vehicles on the roads in just a few years.
Internet of Things – these include smartphones, sensors in cars, equipment, appliances, fitness monitors, smart watches and product tags. Over 201 billion devices are expected by 2020!
Artificial Intelligence – AI is being weaved into systems to better predict consumer behavior and inventory levels.
Blockchain Technology – Jack Shaw of the American Blockchain Council defined the term during his presentation as, 'Provides a permanent, immutable, signed and time-stamped record of identity, ownership, transactions or commitments. The records can be shared among two or more entities -- without an intermediary.' Imagine one day, products being made in Qingdao, China, shipped and going through brokers and transportation companies along the way to Oshkosh, Wisconsin, and all of the transactions and changes in ownership are permanently housed in just one online record.
A running theme of many of the sessions was the use of these ‘digital technologies’ for controlling products, production and transactions.
Roxanne_Shinn
My favorite session was on, ‘Digitalizing the Supply Chain.’ One of the speakers was Roxanne Shinn, the Supply Chain Director for Boeing Aircraft. To understand the scope of their operations, she presented these statistics in regard to Boeing:
- Average 777 aircraft has over 3 million parts
- Spend $43 billion on supply chain each year, including one billion parts
- About 3 million parts arrive at Boeing factories every day
- Employ 5,400 suppliers
In describing their use of the 'Digital Supply Chain Vision,' she stated, "We strive to increase velocity and reduce cost by leveraging lean processes, partnerships, innovation and technology, with a focus on continuous improvement."
To me, that perfectly sums up the Supply Chain mission of today for any size of company.