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January 29, 2009 - Supply Chain Digest Newsletter

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Here Soon, Technology that will Dramatically Impact Supply Chains

One of the most compelling presentations I heard in 2008 was by former government official, now a futurist of sorts, Jack Uldrich, who was the luncheon speaker on the final day at the CSCMP conference in Denver last October.

The presentation was on how rapidly many areas of technology are advancing, often still below the radar for most of us, and the wide ranging impacts these changes will have on our lives, our supply chains and our businesses. It was fascinating – and scary (in a good sort of way).

As I wrote at the time, “The message – get on top of what is going to happen in these [technology] areas right now, or you may go the way of the dinosaur in just a few years.”

Gilmore Says:  

The potential for robotics in manufacturing and logistics is immense. Not only as a cost reducer, but potentially allowing more affordable customization, more on-demand production, or changing the cost dynamics of outsourcing."

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I also promised then more details soon – and here they are.

Uldrich was kind enough to have the publisher send me a copy of his book on all this, called Jump the Curve. It makes for powerful and compelling reading.

In the opening, Uldrich himself says that the idea for the book came from an interview he read with a Microsoft exec who predicted that the technology revolutions in this century would come from the areas that will enjoy exponential growth – just as basic computing power did over the last few decades.

It turns out there are more of those areas than we might realize, zooming along at a rapid pace and likely to soon gain real critical mass. Most have the potential to improve or change how we manage supply chains, and also to have profound impacts on our businesses. These technology changes, almost breathtaking in potential, will put many companies out of business while spawning hundreds of new ones that create or embrace these new technologies.

First, a short lesson about the unique attributes of exponential growth. Uldrich notes in the book an example using a water lily. Lets say you have a single water lily in a pond that will grow to cover the entire pond in 30 days. Guess how much of the pond would be covered in 20 days? Much, much less than most people guess – just .01%! In fact, at day 25, just over 3% of the pond would be covered. The growth in the last five days is astounding.

The point is that rapidly growing technologies (or trends) can stay small for a long time when starting from a tiny base, but then suddenly explode – leaving many companies unprepared.

Let’s look at just a few examples of what Uldrich sees as the game-changing technologies.

Robots: Uldrich says that an “extraordinary amount of progress is being made in the field of robots.”  When hearing about robots, many of us think about the failed, hugely expensive mistake GM made in trying to go robotic in the 1980s. But we would be making a mistake. Here at SCDigest/Distribution Digest, we have been commenting, for example, on the clear rise of robotic-related technology in distribution for more than a year now.

From surgery to military operations to even the home, “I, Robot” has already come or will be here soon. Stanford students, Uldrich said, have built a robot that can assemble an Ikea bookshelf; the number of personal robots, still in their infancy, really, employed to do vacuuming, scrubbing and other household or industrial chores, is expected to grow from 2 million worldwide in 2007 to 9 million this year – now that’s exponential growth.

The ramifications are huge, and certainly for the supply chain. The potential for robotics in manufacturing and logistics is immense. Not only as a cost reducer, but potentially allowing more affordable customization, more on-demand production, or changing the cost dynamics of outsourcing. Seegrid, for example, last year released an AGV-like robot for materials handling that uses an optical system for navigation. Given rapid advances in computing power, sensors, etc., these types of innovations in robotics will continue rapidly.

Computing Power: We have plenty of powerful computers already, but we are still just scratching the surface. Uldrich says that an entry level Cray Supercomputer – incredibly powerful machines – can now be purchased for as little as $25,000, and are heading further south.

This kind of affordable computing power, for example, now enables one retailer to complete a complex, store-level, replenishment optimization run in just a handful of seconds, a process that used to take almost a full shift in the past.

This power and speed comes right at the time that we are facing the need for ever-real time supply chain management. In Denver, Uldrich said that this will make it possible for manufacturers, for example, to continually re-optimize production schedules in a way that simply isn’t possible today. This raw computing horsepower will be enabled by a new generation of software that is being developed using such techniques as “genetic algorithms” that can take advantage of this power and solve problems that machines simply couldn’t handle before.

Nanotechnology: This is the most incredible area of all.

In short, nanotechnology is the science of being able to manipulate atoms – something we have only fairly recently learned how to do, but the ramifications of that capability are endless and profound.

At CSCMP, Uldrich took a can of Coke and poured it on his tie, then held it up – dry and fresh looking as the day he bought it, the result of a nano-based coating on the fabric. And who would have thought dry cleaners might be a victim of nanotechnology? But they could be, as might apparel makers, as customers find clothes stay new looking for a lot longer and don’t need to be replaced as often. In fact, the maker of this treatment, Nano-Tex, has already coated more than 100 million garments.

Scientists have the ability right now to make actual, real diamonds using nanotechnology – what is a diamond but a string of carbon atoms, after all? Will they be able to do so affordably and in volume? Not only does this possibility have the big diamond miners and brokers like DeBeers very worried, but it could change the whole perception of diamonds. What if everyone can have a two carat, perfectly clear engagement ring for $99 or something? Will something emerge to take the place of diamonds for someone who wants status?

Dupont has developed a new nano-based coating for automobiles that it calls a “liquid solid.”  Uldrich says that “Because the coating can be applied so thinly and so quickly, it is expected to cut the materials and energy usage by 75% and 25% respectively.”

The potential of nanotechnology to change our lives and business is incredible. Right now, it is just at day 5 or 10 of the lily pad curve and, hence, largely below the radar for most of us. But the pond could be getting full very soon, which is Uldrich’s point.

Uldrich even expects RFID to hit this kind of exponential growth curve soon, and by some measures, though still relatively insignificant in the total scheme of things, RFID is already seeing that kind of growth now.

So what to do?

Again, the main message is to be vigilantly aware of these technologies, and to understand the threats and opportunities they provide.

Uldrich offers a host of more specific ideas on how to “jump the curve,” – 50 of them in fact – but as we are out of space, you will have to either get the book or wait a few weeks for our interview with Uldrich to hear some of them.

Do you agree that there are a number of technologies being developed/applied right now that could be real game changers? What do you see as the most dramatic or powerful, for businesses, supply chains or consumers? Are too many companies behind the curve on what is happening, to their potential peril? Let us know your thoughts at the Feedback button below.

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Despite the inauguration of a new president last week, the story on Wall Street was the same. In general, the continuing slide affected both the broader market as well as our Supply Chain and Logistics stock index.

In the software group, Logility fell 11.2%, JDA slipped 8%, and SAP was down 5.1%.  In the hardware group, both Intermec and Zebra were down last week (-5.4% and 6.4%, respectively).  In the transportation and logistics group, Prologis plummeted 12.7%, Norfolk Southern slid 9.7%, and FedEx was down 7.6%.

See full stock report.

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January 27, 2009 Edition

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>> Top Story: Is There Such a Thing as a Hybrid Gravity Conveyor?
>> Tedford: Cartonization Software Can Reduce Shipping and DC Labor Costs

What did the Uniform Code Council,  EAN International (now combined to be GS1), Procter & Gamble and Gillette (later acquired by P&G) do in 1999 that has had a big impact on the supply chain industry?

A. Click to find the answer below


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We received more than two dozen responses to our piece on CEO Fred Smith’s position that the US needs to return to more of a “product economy,” making points we had made ourselves a short time before that. (FedEx’s Fred Smith Agrees US Needs to Return to a “Product Economy”.)

Most letters to us were of the short and sweet variety, and most agreed with Smith. That basically includes Rene Jones of Total Logistics Solutions, who gets our Feedback of the Week for saying manufacturers and distributors could also learn a few lessons from the problems of the financial sector.

David Mitchell, however, says Smith’s comments in support of the blue collar worker are a ruse – he really only cares about the corporate bottom line.

You will find all these and more below.

Feedback of the Week - On Fred Smith and the Product Economy:

I like his thought process, but what happened in the financial sector is also happening in the manufacturing and distribution sector. Instead of being top heavy, most distributors are bottom heavy. That is why every downturn in our economy, there are massive layoffs in the warehouse and manufacturing plants. Most organizations put very little strategy and thought into hiring new employees, so we end up with underpaid, untrained, unmotivated masses. That is why so few individuals want to work in the plant or distribution center. It is because they know the organization will not support them and they will be setup to fail.

30% of the American workforce is disengaged, which costs our corporations over 300 billion dollars annually. 30% of all shipments are shipped incorrectly, and only 30% of warehouses and distribution facilities are considered to be efficient. Would I want to tackle those odds coming out of school? Of course not. Providing more equipment will not solve the problem for most organizations, because the lack of training on how to utilize that equipment efficiently will ultimately end up being sold off like: Enron, Builders Plumbing, Nike, ToysRUs, WebVan and many others.

Look at all the organizations that spent millions on Supply Chain software only to ultimately stop their projects and several have seen a dramatic decline in their stock price.

We need to have Fred Smith and others like him educate our middle managers. There is a reason our workforce is disengaged and it is not because of the Fred Smith’s of the world, but because of the: Bob’s, Jane’s and Mary’s that our blue collar workers report to.

Rene' Jones
Total Logistics Solutions, Inc.

More on Fred Smith and the Product Economy:

Fred Smith for President!

In American business, we have for too long allowed “the street” to influence, distract and intimidate the way public companies are managed. There are too many CEO’s and boards that concern themselves more with the street’s analysts’ and, in turn, end up managing each quarter by reaction, opposed to a long-term view, steady hand on the tiller. A few have defiantly refused to publish earnings forecasts. Will these outcasts now show the way?

Kerry Loudenback
Vice President, Sales
TransportGistics Inc.

Fred Smith's company FedEx is involved in a class action lawsuit all around the country.

I believe that Mr. Smith does not care about the blue coller worker, he only cares about his company and it's bottom line!

David Mitchell

Making products that people will buy is the clearest way to add value. We as an economy NEED to add value, not just push it around. Our economy has gotten too influenced by financial engineers who just move the value around vs. really add or create value. Current Wall Street activity is the proverbial lowering of the water in the stream to see where the rocks are. The rocks in this case are not enough value-add creation, production, manufacturing as per Fred’s position.

So, Fred is right and the real question is what and how do we turn the ship!

We suggest all US business leaders, supply chain designers and, in particular, government policy leaders take a hard look at establishing and incenting the creation of postponed final assembly operations in the US. This activity provides a wonderful and profitable transition activity that can help turn the ship.

Jon Kirkegaard

Fred Smith is exactly right….every business tends to delay investment in IT system upgrades and facilities that will improve productivity and enhance employee morale.

The US business strategy is to not invest in our IT systems or facilities; we’d rather send the jobs to other countries and reap the benefit that way vs. taking the investment approach. Unfortunately, our recent Presidential election results will not support this thinking going forward!

Brian M. Thomas
Region Director
Cardinal Health

I agree 100%.

Jim Foley
Logistics Coordinator
Disc Makers


Q. What did the Uniform Code Council,  EAN International (now combined to be GS1), Procter & Gamble and Gillette (later acquired by P&G) do in 1999 that has had a big impact on the supply chain industry?

A. Those four groups provided the funding to start up the Auto ID Labs at MIT, which ultimately resulted in the Electronic Product Code (EPC) standards and ignited the interest in RFID.

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