13.12.2017  |  Branchenyt

The digitized supply chain is coming

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Artikel fra Effektivitet nr. 3, 2017 med temaet Supply Chain

Information visibility is the key

Ericsson procures from - and delivers to - hundreds of different countries over thousands of transport lanes. Traditionally we had a high ratio of air shipments, and made from 2011 to 2015 substantial savings by transferring a great part of the cargo to road, boat and rail. Of course we had to reengineer the distribution strategy, set up regional distribution centers and make other internal changes to our supply chains, but we realized our savings. We now continue to push for savings and efficiency while supporting increasing service-level expectations.

While looking for further improvements, we realized that the visibility for cargo in transit is very poor and that it has hardly improved during the last decennium. This is in sharp contrast to our private lives where we pay our parking fee through an app, we know where our dog is in the forest, and we can select, buy and get delivered, with a couple of clicks items we would like to purchase on the internet. And in sharp contrast also to our internal company IT situation, where we with a click of a mouse know, in which batch a component has been made, on what board it resides and on which site, in which country and with which customer it has been installed. But in our logistics department we don’t know how many trucks will arrive at the gate today, we are still receiving faxes, we are re-typing information that others already have entered in IT systems and we are spending lots of time tracing down deliveries that people are urgently waiting for. Talking to colleagues and logistics partners in the industry we soon realized we were not unique. Logistics is still for most companies an inter-company information black hole.

If we want to improve substantially, we need to have better visibility both for inbound operations and for outbound flows to customers. Pressing prices with forwarders is not the solution. Tools that analyze, monitor and visualize our supply chains end to end, in near real-time, supporting our planning and logistics operations are far more valuable. We would like to truly "integrate and manage business processes across the supply chain" to use the words of Douglas M Lambert. It is about connectivity, information and communication, an area where Ericsson has been active as a solution provider for centuries in adjacent industries. To get help with our supply chain challenges, we reached out to colleagues on the solution side of our company and Ericsson decided to enter the logistics market now wearing two hats: Being shippers as well a technology company, providing solutions to shippers and logistics service providers.

Industry is now speeding up

When starting the journey as a solution provider 3-4 years ago, forwarders and carriers were mostly protective regarding the electronic information flow across full supply chains and across many players. We now see a shifting attitude. Technology is moving forward, markets are evolving and most companies understand that it is better to be part of this "new future" and new opportunities and sources of revenue, rather than trying to fight against. Disruptive solutions have been suc-
cessfully introduced during the last couple of years in many markets, such as Amazon and Uber, just to mention a couple. It is a matter of time before someone moves in with something that might change the whole market and leave the conservative players on a very tough spot. The logistics and transportation market is both growing and changing with for example the increase of E-commerce, the demand for sustainable solutions and the introduction of self-driving vehicles. Forwarders and Carriers are not yet moving fast, but they are accelerating. Most have "digitization" in their strategy and they realize that there can be a "first mover advantage" but few have fully translated what this means in detail and some are worried about what the consequences might be.

Easy wins, also at Ericsson

Ericsson is a technology company. Many have shown us how they have replaced fax with a pdf, or how documents now are received electronically but still print it on paper to make the logistics process work properly. Fully automated warehouses or harbors are viewed by external parties as information blackholes not knowing what will come out of them. To get a better understanding of the opportunities we analyzed our own supply chain. We did some tests, as a Proof of Concept, with 2 major companies in the Forwarding and Air-carriers segment, sending equipment by air from own origin to destinations in Europe. We monitored every step in the process, both the physical flow and the information flow, and both paper based and electronic documents, and we analyzed the flow. Then we digitized the full chain and looked at the improvement potential. The results were astonishing. The physical flow has certainly an improvement potential but it was working reasonably well. The document and information flow however created the biggest issues and showed the largest improvement potential, impacting many areas. Lots of deadtime in the supply chain was created by information deficiencies and paperwork not being available at the right time, correct or complete. In general, the lack of information availability, with paper based information, moving at the same speed as the freight, lead to low proactivity. In addition, a lot of re-work and re-typing was done, leading to unnecessary mistakes and delays. When looking at the impact, digitizing would have on the same deliveries we could, even within the existing processes, save a large part of the costs for all players and improve the lead time substantially. In a digitized world, information can be available to all players from the moment, it his created. This makes it possible to re-engineer the processes, taking away unnecessary steps, putting activities in parallel instead of sequential, and making all participants much more pro-active.

Improvements for all parties

The impact of digitization goes far beyond the logistics departments and the logistics service providers. In all the companies we visit, we find small and large examples of value that can be created with digitized supply chains. The factory manager does not have to stop production, because wrong deliveries were prioritized, the freight handler can be ready with a special crane, when a truck arrives etc.

If you ship with an integrator you get door-to-door much faster than traditional forwarding services (mainly when using air-cargo). So the question is why does it take double the time with a freight forwarder? The answer is quite simple. The parcel service providers or integrators own or control the assets used, and the forwarders generally does not. The integrators have a better control over the information end to end. It is a more expensive solution that is sold as a premium, generally using air cargo and used for small parcels. With a better information flow, end to end through the supply chain, the forwarding industry could drastically narrow down the service gap to the integrators while maintaining a more diversified offering.

From EDI connections to the Internet

We believe that the SCM information flow in the future will be open, distributed, easy to integrate with, and providing information in near real-time. We see such an information flow is technically possible and economically viable already today. In a way very similar to Ericsson’s core business market, mobile telecom and Internet. Thanks to global standards and cooperation it is possible to use (mobile) devices all over the world and exchange information with anyone in the world without integration efforts or the need to have a prior established relation with each other.

The information flow of the future should be open to all players in supply chains like internet is accessible for anyone today. Information will flow instantaneously to relevant partners and IT systems in a controlled way. Internet based technologies will be used for information exchange rather than EDI connections. Today Ericsson maintains around 500 EDI connections and data integrations with partners. To effectively exchange information with all our supply chain partners we calculated that we would need at least 10,000 connections. We also realized that most current connections have a limited scope and that we would like to hook on new partners faster, than we are technically capable to build EDI connections. In addition we see a need to connect new data sources, such as Internet of Things (IoT), 3rd party fleet and work force management systems. This situation is not unique for Ericsson. To be able to communicate and to improve our supply chains the key word is collaboration with at least two modes of transport involved each time. We also need to collaborate with many more players once you add in ground handlers, trucking companies and so on. We simply can not keep on connecting in a peer-to-peer fashion because the number of needed connections is growing exponentially and we are already behind. We need a new technology that integrates and collaborates around data and we believe the suitable technology is the internet. In the SCM information flow of the future, integration will be a similar experience as browsing on the internet where URL’s give access to data, systems or people. A kind of internet for logistics. Using internet based technology will allow us to connect to an infinite number of partners and data sources instantly at low costs.

The new SCM can be implemented stepwise

In a well-functioning SCM information flow, information does not need to be re-entered into computer systems and built-in logic checks will support getting input right the first time. In a first phase companies tend to digitize the existing (paper based) internal processes. Often already a good business case, a road to quick wins. Then processes are being re-engineered across the organization and maybe also across the full supply chain with partners. Logical steps with increasing complexity and increasing benefits to be gained. In a digitized integrated SCM world there is no need to wait for a document to be completely ready to exchange some of its information. A forwarder can start the planning process, having a destination address and a rough idea about what will be transported, making the planning process more pro-active and interactive.

Looking through the documentation, used in our own supply chain, we noticed that many documents existed in many shapes and forms but most of the information was repeated across the documents. We also saw that the differences between the modes of transport were much less than most had anticipated. When the information is available digitally, documents can be created and printed on demand, and when adapting to a digital world, you rather display the information where needed than print it on paper.

At Ericsson, working with telecommunication, we see technologies such as Bluetooth, Narrowband, Low Power Radio and future 5G combined with IoT enabling totally new ways of working in many industries. People and many vehicles in the supply chains are already today connected to the internet, as well as some of the freight also. This is only the beginning of a trend towards every item shipped being directly or indirectly connected

In a digitized SCM, information from different sources will be correlated and made available for relevant parties. Information on the journey of a box can be enriched for example with temperature information from the truck’s, GPS information from an IoT device on the pallet and scanning events from any of the handlers on its journey. Information will be exchanged between parties who have no contractual relation with each-other and who even does not know each other. Current vertical information stovepipes will be migrated to horizontal information exchanges across all players in the supply chain.

Open information flow versus the need for protection

An open information flow between relevant parties in supply chains is essential to realize the latent value of digitization but in the SCM information flow data owners want to control what they share with other parties. Some data will be open and accessible to anyone in the world, but most SCM data will have access limitations and has to be shared in a controlled matter for multiple reasons: Competitive sensitivity, security, privacy concerns and the sales value of information, just to mention a few. Information has to be protected from illegitimate usage, manipulation or leakage. This is important for the data owner but also for all information consumers such as customs authorities, carriers and consignees. Technologies such as block chain, already used in other industries such as Banking, will play an important role here. Other technologies, used already in other markets, will support implementation of data sharing rules and financial settlements related to information exchange.

Although integration of information from different data sources and sharing among many participants might suggest a centralized storage with only one powerful player or authority, we believe that the SCM information flow of the future will be open and distributed. Based on cooperation and open standards multiple data brokers or logistics backbones will facilitate the information exchange between parties. Larger players may choose to own their own backbone functionality, others will choose to buy services from external parties. In addition there will be a vibrant market of application providers that offer additional functionality and services such as price comparisons, logistics analytics, search & book and customs & compliance services. An eco-system of companies and solutions, creating an efficient, innovative market in all corners of the digitized supply chains.

Industry cooperation to close the gaps

We see clear similarities between mobile phone roaming over multiple networks, operators and countries to cargo, moving across multiple modes of transport, logistics services providers and countries. And as in telecom the industry needs to work together across modes of transport and regions to create an open market and global interoperability. Who or what organization could support the industry to create such interoperability? When scanning the landscape of existing organizations you see unfortunately clear gaps between modes of transport and regions. Together with a group of industry players Ericsson is now filling some of the gaps and speeding up the creation of the needed standards and an open market. For this purpose the Trade Cargo Facilitation Association (TCF) was created.

TCF brings together the different stakeholder groups in the supply chain to fill the gaps and to strengthen the existing regulatory and standardization initiatives (such as EU’s DTLF) often led by research and academic institutes. The TCF participants concluded that we shall support existing initiatives, but we also want to speed up the creation of global multi-mode digitization standards and markets. The technologies exist, the business case is clear and solid and a big part of the industry is willing to digitize and cooperate. The participating Industry players choose to focus on creating momentum through implementing user case pilots under the observation and guidance of the TCF showing the technical and commercial validity of different aspects of digitized supply chains. They can be used as a basis for standardization proposals as well as large scale implementations.

User case pilots as guides

As part of the user case pilots proposals have been put forward to create a uniform resource identifier (Global unique identifier), linked to a "home" internet address. Such a solution requires connectivity between all parties through Internet technology with an object identifier that enables the correlation and linking of relevant information to logistics objects, such as boxes, pallets, trucks and shipping orders. Using these identifiers across full supply chains will enable (automatic) linking of information from different sources, owned by different players. The information exchanged can be logistic related, such as destination address, planned route, a transport document or a shipping event. The information can also be freight related such as product classification or volume or IoT related, such as position temperature, shock or tilt as well as any other data. Objects are also correlated to each other. If we for example know which boxes are on which truck, information can be exchanged between the trucks. A truck’s position or ETA can be communicated to the consignee or to a route planner.

Other user case pilots focus on the integrity and security of digitized information, acceptance of digital information by for example regulators and custom authorities and on integration to legacy systems and standards. All-important prerequisites for a fast and smooth introduction of digitized end to end supply chains. Technologies successfully used in other industries are re-used such as blockchain to secure integrity of data and semantic data for easier data integration. Many supply chain players are under a financial pressure putting demands on solutions to respect legacy IT systems and standards as well as to have low financial entry barriers to join the digitized SCM information flow. Ericsson believes that technologies such as semantics data, blockchain and internet connectivity make it possible to handle complexity and cater for multiple standards in a flexible way. As one TCF attendee expressed it,

"…semantics gives us the possibility to agree upon what we disagree…".

Open collaboration environment as end goal

The TCF organization is focusing on filling gaps and creating momentum and speed in the digitization process, already ongoing in supply chains all over the world. We try to work in close cooperation with authorities and industry organizations. We at Ericsson believe in industry cooperation to achieve an open interoperable market as the best way forward to realize the SCM information flow of the future. Our shared goal with TCF is to create an open collaborative environment to drive change more effectively in a multi-modal environment. We welcome all companies that would like to contribute to join us on the endeavor to realize an open and effective digitized SCM information flow.

Læs her flere artikler fra Effektivitet nr. 3, 2017.

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