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Using tech to drive supply chain
UNTIL recently, supply chain management was not important or central to a company's main business. Only big brands with international distribution chains used to have well-oiled global supply chains.
All that has changed dramatically over the past decade and a half with the global economy becoming inter-connected and digitalised. Managing the supply chain today has become a vital component of a company's business irrespective of size and reach. As a result, most companies call in experts such as DHL Supply Chain, part of the DHL group, to help out.
Steve Walker, chief information officer, Asia-Pacific, DHL Supply Chain, notes that technologies are evolving at an unprecedented pace and have the potential to disrupt the status quo. "Digital business is a good example as it promises to usher in an unprecedented convergence between billions of people, businesses and at least 35 billion devices, all communicating, transacting and negotiating with each other."
Mr Walker notes that in the face of disruptions, businesses need to stay agile, flexible and responsive to changes. "Since organisations cannot control rapid technology changes, they need to sense, recognise and quickly respond to them."
The convergence of cloud, social, mobile and big data - collectively often referred to as SoMoClo - can equip companies with the capability to monitor and predict trends and hence respond quickly to changes.
DHL Supply Chain is the largest contract logistics provider globally and has a market share of 8 per cent of the global contract logistics market. The company has had a presence in Asia-Pacific for nearly 20 years and is one of the leading players in the region. It has more than 600 facilities totalling 3.3 million square metres of warehouse space across 14 countries in the region and owns a fleet of 8,500 vehicles. It also partners many sub-contractors.
A majority of DHL Supply Chain's customers are multinationals operating in various industry verticals, including life sciences and healthcare, consumer, automotive and technology among others.
The official notes that supply chains have become longer and more complex while, at the same time, the severity and frequency of disruptions have been increasing and causing a bigger impact on business continuity. "Therefore, ensuring long-term stability and resilience of IT systems is essential for business continuation in the event of a disruption," Mr Walker says.
He observes that technology is a critical enabler for DHL Supply Chain's differentiation in the marketplace. The company provides systems that directly interface with customers and make a difference in the services DHL Supply Chain offers. "We believe in a customer-centric approach when developing our IT solutions. Every IT solution or product we design needs to be purposeful and address customer pain points."
The CIO notes that in order to manage a supply chain effectively there is a need to first manage the data that is being captured for analysis.
A study commissioned by DHL shows that the digital universe is expanding at a rate that doubles the data volume every two years. "This growth comprises data from a huge number of autonomous sources such as smart connected devices in addition to a much larger variety of data types, such as camera images, video and surveillance footage, blog entries, forum discussions and e-commerce catalogues. Data analytics tools must be able to process these unstructured data sources."
Sophisticated data analytics, adds Mr Walker, can consolidate the logistics sector, which has traditionally been fragmented. The ability to leverage big data to glean actionable intelligence can give logistics providers a competitive edge.
"In the past, data analytics was used to confirm decisions that had already been taken. Companies now need to transition towards a forward-looking style of data analysis that generates new insight and better answers.
"This shift in mindset also implies a new quality of experimentation, cooperation, and transparency across the company. Another prerequisite to becoming an information-driven business is to establish a specific set of data science skills."
Many businesses are only just scratching the surface when it comes to leveraging the expanding volume of data to understand trends and identify ways to optimise the supply chain, Mr Walker notes. Some organisations are also feeding the data and insights back into the analytics systems to drive predictive analytics.
"An example is how DHL worked with a leading passenger airline company to use their beverage consumption data across key flight routes for forward-planning on their F&B (food and beverages) inventories. This enabled the airline to optimise their in-flight beverage inventory as a correlation to the outbound passengers' consumption habits, accounting for factors such as point of origin and destination, time of travel and other seasonal factors," he said.
As an organisation, DHL Supply Chain is building up its big data analytics capabilities in stages to take advantage of the competitive differentiation such capabilities can offer. It is very much like a quest for oil - with big data, it takes educated drilling to reveal a well of valuable information, Mr Walker says.
"As we evolve our information-driven business, DHL Supply Chain is constantly equipping its employees with data science skills so that it can continue to derive benefits and value-added insights from the big data analytics capabilities that it now has in place to drive greater operational efficiency, customer experience and explore new business models."
He observes that DHL has already begun applying big data analytics to increase operational efficiency by optimising last-mile deliveries to drive down product cost. "Our DHL SmartTrucks, which make last-mile deliveries for our Express business, have seen the benefits of real-time route optimisation."
Explaining further, he notes that when the delivery vehicle is loaded and unloaded, a dynamic calculation of the optimal delivery sequence based on sensor-based detection of shipment items frees the staff from manual sequencing.
He adds: "On the road, telematics databases are tapped into, to automatically change delivery routes according to current traffic conditions. And routing intelligence considers the availability and location information posted by recipients in order to avoid unsuccessful delivery attempts. All this requires the execution of combinatorial optimisation procedures, fed from correlated streams of real-time events to dynamically re-route vehicles on the go. DHL Supply Chain is leveraging this same technology to optimise its transport operations across the region."
The official adds that on a more macro scale, big data has helped the company to improve the reliability of planning and the level of detail achieved, "enabling us to more closely match demand and available resources".
When it comes to network planning at a strategic level, the topology and capacity of the distribution network are adapted according to anticipated future demand. The results from this stage of planning usually drive investments with long requisition and amortisation cycles such as investments in warehouses, distribution centres, and vehicles. More precise capacity demand forecasts therefore increase efficiency and lower the risks in investing in storage and fleet capacity, he adds.
"Big data analytics has also helped us in our support network planning optimisation by analysing comprehensive historical capacity and utilisation data of transit points and transportation routes.
"We have also considered seasonal factors and emerging freight flow trends by learning algorithms that are fed with extensive statistical series. Our analyses also incorporate external economic information (such as industry-specific and regional growth forecasts) for more accurate predictions of specific transportation capacity demand," the DHL official notes.
For DHL, big data analytics is essential in producing an integrated view of customer interactions and operational performance, ensuring satisfaction on both ends of the transaction between the sender and recipient, Mr Walker says. "Organisations embarking on data analytics programmes are required to have an implementation strategy to make sure that the analytics process works."
Mr Walker adds that there are five aspects to this. They are:
- Business and IT alignment: For an organisation to transform itself into an information-driven company, it is essential to demonstrate and align both a business case and an IT case for using big data (including objectives, benefits, and risks).
- Data transparency and governance: In order to locate data that is already available in the company, there has to be full transparency of information assets and ownership. Also, in order to prevent ambiguous data mapping, data attributes must be clearly structured and explicitly defined across multiple databases. Finally, strong governance on data quality must be maintained. It is of utmost importance to assure high overall data quality of individual data sources.
- Data privacy: Personal data is often revealed when exploiting information assets, especially when attempting to gain customer insight. It is essential to consider data protection and privacy issues. Legislation aside, protecting data privacy is important for corporate reputation and brand value.
- Data science skills: A key to successful data analytics implementation is mastery of the many data analysis and manipulation techniques that turn vast raw data into valuable information.
- Appropriate technology usage: IT departments should have a thorough evaluation of established and new technology components. Currently, there are a number of systems available in the marketplace that can provide seamless integration of data, storage and analytics. For DHL, how it chooses the right system is based on a couple of considerations, including what values it is looking to achieve with it and how it plans to leverage and use the system to generate insights and actionable intelligence.
Mr Walker notes that for high level data analytics, systems like Watson, which uses programmatic computing, combined with the capabilities of natural language processing, hypothesis generation and evaluation, and dynamic learning offer interesting capabilities. "They (that is systems like Watson) are believed to have the intelligence to analyse unstructured data from multiple sources, make connections between the data sets, identify relationships, patterns and correlations, and make predictions for businesses, and do it with speed and efficiency."
The DHL official observes that technology trends will continue to support consumers' digital lifestyle. According to DHL's Global E-Tailing 2025 report, e-commerce around the globe could comprise 40 per cent of overall trading volume in developed countries and up to 30 per cent in emerging markets by 2025. In Asia-Pacific, e-commerce sales were expected to reach US$525 billion, with sales in Singapore expected to hit US$3 billion by the end of last year.
"A global phenomena with the potential for enormous growth, e-commerce has been one of the driving forces of international trade. This development has not only translated into greater shipping volume, but also created a need for logistics operations to cater to low quantity but high frequency shipping patterns of these online consumers."
Mr Walker adds that while logistics is the biggest challenge in e-commerce, it is also the key differentiator if it is done right. "There will be a growing demand among online shoppers for more flexibility to select their preferred time and place for delivery, especially for the younger generation who usually lead an on-the-move lifestyle. In addition, same-day delivery has the potential to become a significant differentiator for retailers and also raise the barriers to entry to the e-commerce industry," he notes.
The DHL official makes an important point. He says that no matter how fast technology evolves or how smart it becomes, it is without purpose unless it can bring value to businesses. "Technology does not create value; at least not by itself. Technology is, however, an enabler to create value."
He adds that IT departments need to transform and think of themselves as business organisations that drive value rather than be simply a deliverer of technology.
This series is brought to you by IBM