Modex day 1: Technology is king, but you've got to talk to your customers too

November 30, -0001 John Kingston, executive editor

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Technological imperatives abound, but supply chains aren't going to significantly improve unless there's also communication up and down them. And maybe that communication is going to be produced by sharing vital data on a distributed ledger.

Through numerous presentations at both the first day's keynote at the annual Modex meeting for the supply chain industry in Atlanta, that was the message that could be extracted. A speaker would within minutes of each other note that technology is disrupting every player in the supply chain, but that to stay with the changes, you needed to communicate with your counterparties.

Juan Perez, the CIO and chief engineering officer of local company UPS, kicked that theme off at the start of the day, when he declared that the brown-and-yellow is "more than ever before, a technology company." And that didn't apply just to UPS, he said; "whatever you do" in the supply chain, "you work for a technology company."

So what has UPS done to meet those goals? What Perez talked about was far more than just implementing new technology. "We had to disrupt ourselves," he said in his address. But much of what he discussed involved focusing on customers, with some alliteration thrown in: "enhanced mobility...empower consumers...evolving technologies" were described as the company's "innovative initiatives."

Perez described the "flexible shopper" as somebody who wanted to go "from one channel to the next channel and to the next channel. At the end of the day, we need to make sure that technology is easy, pleasant and efficient to use. Customers are defining these experiences. They want control of their delivery experience.”

Perez talked about the latest developments in UPS’ ORION system, which he said is the company’s “best example” of its “robust technology.” ORION stands for On-Road Integration, Optimization and Navigation. When first introduced, it would provide a driver with a plan for the day that kept mileage down to a minimum and saved the company millions of miles driven, millions of gallons of fuel consumed, and significant reductions in CO2 emissions, Perez said.

But more recently, ORION’s technology has been updated so that it isn’t just a one-and-done plan for the day. Rather, according to Perez, it can be updated over the course of the day to further improve the driver’s performance.

But every time Perez laid out a technological change, he kept coming back to management. “We had to create a culture of innovation,” he said. “We had to create a rewards system and the discipline to support innovation.”

And that might mean emphasizing “strategy over governance,” avoiding where the latter trumps the innovation inherent in the former. Companies need to be, Perez said, “constructively dissatisfied.” And to do that, he said the views of everybody right down the line, including the drivers, need to be taken into account. A company needs to “free your geniuses.” Perez joked that if he wanted the best and most honest feedback about the company’s technological innovations, “go talk to the drivers.”

Among the other topics that were featured in the dozens of seminars through the day:

3PLs:  Bryan Jensen, the chairman and executive vice president of St. Onge Company, a supply chain consulting firm, said the relationship between a shipper and its contracted third-party logistics company is going to be troubled “if you don’t treat each other like a partner.” And it’s particularly important where the product being shipped is subject to significant regulation.

For example, a company using a 3PL to ship Styrofoam cups is going to have a significantly different set of needs that one shipping pharmaceuticals regulated by any number of governments, Jensen said. In his accompanying slides, Jensen talked about the “increased emphases on rules and regulations…cosmetics and drugs are particularly challenging.” And the slides drove home the message of necessary cooperation: “3PLs are often viewed as another vendor, not as a partner by the shipper.”

Jensen provided data on the types of operations outsourced to 3PLs. In a survey from the company’s 2018 Third Party Logistics study, 83% of the respondents said they outsources domestic transportation, and 66% outsourced warehousing. Just under that at 63% was international transportation, with a surprisingly large drop to customs brokerage at 46%, showing no clear correlation with the amount of international transportation outsourcing.

Jensen did show numbers that were positive for the industry. Quoting a report by Armstrong & Associates, it showed logistics costs rising 57.6% between 2010 and a projected total of $11.2 billion 2021. But 3PL revenue is shown rising even more, up 68% to $1.149 billion from $681 million.

Jensen said one of the trends in the industry has been acquisitions and consolidation, joking that he thought XPO Logistics was going to buy everybody. But his accompanying slide asked a more existential question: “Will Amazon or Home Depot acquire a 3PL?”

Blockchain: Data shown by Jensen from the 3PL study showed 3PL wariness over blockchain, interesting since supply chains have long been seen as a part of the economy that can most benefit from the sharing of data on a public or permissioned ledger. In the survey results, 67% of the shippers said they “don’t know enough (about blockchain) at this time to rate,” while 62% of 3PLs gave the same answer. In another question though, a far greater number of 3PLs than shippers did say that they could “see a potential application but not yet engaged.” Still, the largest percentage answer in that question was “not yet talking about blockchain.”

A more optimistic view of the potential of distributed ledger technology was provided by Yvan Caceres of Deloitte Consulting in an address titled “Successfully Navigating the Last Mile.” That address was part of a series about Smart Cities, and cutting down congestion is a necessary part of any sort of Smart Cities initiatives.

It would involve far more use of dropping parcels off at collection centers or so-called “lockers.” Just-in-time delivery gets more important; the delivery of materials needs to be able to “land that unit on any operation,” Caceres said. And the best solution to that would be a distributed ledger, Caceres said.

Labor: It isn’t just trucking companies looking for employees. Jensen opened up his remarks on 3PLs with “Finding New Talent” at the top of his first slide. Peter Schnorbach, senior director of product management at Manhattan Associates, said rising minimum wage laws in many states pose a significant employee issue for many companies involved in a supply chain. A company with 500 workers seeing their hourly wage workers get a $1 per hour kick as a result of a rising minimum wage will see its labor bill rise $1 million per year.”

Schnorbach also bucked conventional wisdom by pushing against the oft-heard complaints about millennials in the work force. They are oriented toward mobile technology, they “thrive on recognition,” they “work hard and we can learn a lot from them.”

ELDs: It wouldn’t be a full day without some reference to ELDs. On the enormous convention floor, a representative from one airline that shall rename unidentified said his freight business in the last month or two had risen about 5%. He said he believed that reduced trucking capacity as a result of the ELD implementation was a reason, though he conceded he had nothing to base that on, raising yet another possibility of ELDs becoming the catch-all rationale for anything in the market that breaks with previous trends.

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