Durable Goods Archives

Supply chain organizations are like any other part of a business – they’re always moving, changing, and trying to produce and deliver outcomes faster, more efficiently, and to everyone’s satisfaction. But even the most high-performing supply chains have process, infrastructure, and technology gaps that can become problematic if not addressed early.

According to Gartner¹, fewer than 10% of companies have mastered a balance between cost management, customer service, risk mitigation, and growth investment. The reason is apparent: keeping pace with every shift requires more than implementing a new application or technology to an already growing patchwork of digital assets.

To get out of this rut, businesses must let go of their traditional assumptions, processes, and decision-making behaviors and start restructuring their operations at the foundation and upward with a digital supply chain platform that provides network optimization.

The Core of Today’s Supply Chain Challenges

After nearly three years of unprecedented supply chain turbulence, businesses and their extended partner networks are still encountering risks posed by an abundance of economic, social and environmental challenges. Labor strikes, geopolitical conflicts, capacity and supply shortages, and an increase in natural disasters – these disruptive events and more are magnifying how woefully unprepared organizations are to handle dramatic shifts.

Common struggles include:

Data to build the supply chain network model is distributed over many systems and not normalized for immediate use
Some necessary data is unknown, such as freight rates and labor costs
Current tools for network design are not agile enough to offer multiple solutions to a challenge and allow decision makers to embed their own knowledge
Current methods for network design are not easily repeatable, not fast, and not optimized

Poor modeling and the inability to act on decisions can result in a loss in cost efficiencies whenever the supply chain is updated – whether adding to the original design or unintentionally adopting a new practice. That is a large chunk of money being left on the table by anyone’s standards.

Your business can take ownership of these savings by treating every change as an opportunity to evolve your supply chain design. Even small changes such as identifying an alternative supplier is a great moment to determine how to optimize your entire supply network’s synergy by evaluating the total landed cost and net service impacts to the system and placing the decision in the context of a dynamic plan.

The Solution: Continuous, Repeatable Supply Chain Network Design and Optimization

The solution is not to tear down the supply chain and rebuild it whenever you want to transform. It’s just too complex and time consuming to do a project on a monthly, quarterly, or semi-annual basis that is usually undertaken every 3.7 years, on average. Instead, supply chain leaders need to view supply chain redesign as a continuous initiative with no beginning or end date.

This is where a supply chain network design and optimization solution is tremendously relevant. The technology allows you to automatically analyze and measure failures and inefficiencies to drive actions that modify or improve the network’s design. The integration of machine learning, predictive analytics, data visualization, and interactive dashboards also empowers you to rethink your operations on a more granular level.

You can reach decisions that drive continuous network design and optimization – not short-term gains at the expense of the future – for example:

Scenario evaluation and simulation to adjust the network-wide master schedules and distribution plans in response to curtailment of production in regions heavily impacted by labor and capacity shortages
Smooth transition to new ways of working remotely, enabled by shared visibility, messaging, and remote collaboration within a single version of the operating schedule
Scheduling of operations in labor-intensive factories that accommodate new government regulations and industry requirements

By supporting a comprehensive approach to continuous, repeatable network design and optimization, a network optimization solution as part of a digital supply chain platform helps realign organizational goals by reframing decision-making as an opportunity to fulfill demand more profitably. This dramatic shift in decision-making helps avoid the traps and limitations of functional approaches to cost reduction and efficiency gains. Now, supply chain leaders like you can develop network operating diagnostics for awareness and systemic analysis of major sources of monetary, resource, and inventory waste and risk.

From Everyday Decisions to Long-Term Optimization

For every supply chain leader, recent disruptions have reinforced the reality that no decision is too small. Yet, organizations that adopted supply chain network optimization have realized rapid payback from their choices as they continuously optimize their network’s balance between supply and demand for the long term.

Learn more about repeatable network design and optimization, and how Logility’s digital supply chain platform can help, by following this link.

¹ Gartner Research, “Network Diagnostics and Planning Excellence Are at the Heart of Supply Chain Cost Optimization’; June 2020

Respond quickly, maximize benefits, and identify supply chain opportunities and threats.

Key Takeaways:

Supply chains need technology, but putting that technology to best use is the province of humans
AI and ML are tools, not solutions
It’s human judgment and ingenuity that will save the day, but the right data is vital
Technology provides transparency and visibility across the entire supply chain, something humans cannot get on their own
Balance between humans and technology is essential to anticipate and solve the supply chain disruptions that are all too common today, and who knows what’s coming next?

Supply chain disruptions. They grab daily headlines, and the question always on the table is how to get the visibility and agility needed to respond in time. Things can’t go on as they did pre-pandemic. No matter how good it all looked on paper, the pandemic made weak links obvious: supplier shortages and backed-up transportation networks, among other things. It also exposed worker exploitation in lower-tier vendors that shed light on serious ESG miscalculations.

Smart organizations have embraced supply chain management platforms that provide complete transparency. The best solutions that address supply chain opportunities and threats leverage artificial intelligence (AI) and machine learning (ML) to provide the data and analytics necessary to manage the modern supply chain.

But technology alone is not the answer. The real path forward combines AI with human intelligence to maximize benefits as well as identify opportunities and threats. AI can provide the essential data component; it’s useless when it comes to collaboration, negotiation, and forming relationships with suppliers. While AI mimics human thought, it’s no replacement for the human judgment that’s vital to successfully implementing your digital supply chain platform. In this article, we’ll explore how to leverage humans and technology to best advantage.

The Human Component of Digital Supply Chains

Technology is flashy and captures attention in the boardroom. A vision of a completely automated and seamlessly integrated supply chain may be presented, where machines use AI and ML to adapt, solve problems, and respond to supply and demand changes. There’s usually no mention of humans in these discussions unless it’s about how they won’t (someday) be needed any longer.

Will this sort of supply chain ever become a reality? Maybe. But algorithms won’t solve every problem, and a sophisticated demand forecasting system isn’t much use if humans ignore its outputs. The value of a digital supply chain platform depends on the ability and willingness of the people in an organization to take action in response to the data.

It’s the symbiosis between digitization and humans that creates the real chance to identify supply chain threats and opportunities. Designed to repair complex and fractured processes, algorithms can only provide information – it takes a human with logistics expertise to handle any exceptions and provide a quick response to changing circumstances.

In short, AI can increase speed and accuracy in number crunching, data handling, and supplier vetting. It can help optimize transportation routes, warehousing, and stock management and handle other specialized but mundane tasks. It can also increase customer satisfaction by improving ease of use, reducing work steps, and offering new solutions for customers to improve their own supply chain visibility.

Your supply chain platform and its associated technology is a tool. To be fully effective, the unique cognitive skills of supply chain management professionals are essential. So, how do you achieve the right balance?

How to Leverage People with Technology

There’s no doubt modern technological solutions are revolutionizing and improving supply chain performance. AI and ML are vital to gather data, crunch it, and learn from it. Automation is great, but it only takes you so far. It’s humans who use this data to make the rapid decisions today’s supply chain disruptions demand.

A recent study asked supply chain industry professionals what they thought was the right balance between humans and technology. Their opinion in 2019 was that 60% technology and 40% human expertise provided the optimum balance. That didn’t, however, discount the role of humans – it’s that their tasks are changing as technology takes on manual processes. Humans still are the best solution when strategic thinking and decision-making are needed.

In 2021, the new ideal balance was 57% technology and 43% humans. This isn’t a huge shift, but it marks an awareness that technology cannot solve all problems, no matter how advanced. Human ingenuity is a major factor in handling supply chain disruptions successfully.

The pandemic was a major factor increasing the need for technology to support humans. AI was a valuable tool in decision-making, providing usable data, helping optimize carrier networks, and identifying ways to increase operational efficiency. But it was humans who had to decide which recommendations would best serve their organization.

Technology, People, and ESG

Through the use of AI and ML that search and track patterns, organizations can keep a closer eye on and better meet their commitments to environmental, social, and corporate governance. While many companies tout their sustainability initiatives, without the data to back it up, it’s nothing more than a greenwashing exercise.

It’s about visibility and the transparency that it provides. Opaque procurement methods and multi-tier supplier networks mean it is impossible for a human to do the data analysis needed, much less make sense of it. This is where a digital supply chain platform proves invaluable.

Successfully Merging People and Technology in the Supply Chain

Here’s the bottom line: Every organization needs a robust digital supply chain platform. Every organization also needs human expertise. They both provide value, and one cannot be successful without the other.

Even without supply chain disruptions, the frailties that emerged with the pandemic need solving. The data insights provided via AI and ML are invaluable to accelerate decision-making, reduce costs, increase agility, and gain deeper insight across the supply chain. This results in improved forecast accuracy, planning confidence, and a way to continuously monitor supply chain performance.

A supply chain management platform also provides a way to visualize, evaluate, and optimize planning, sense demand, and plan out life cycles. On the supply side, you gain the ability to plan and optimize manufacturing, manage vendors, control quality, and meet compliance and ESG commitments.

With all of the data and the tools to use it effectively, humans can make faster, better decisions based on a completely transparent supply chain. At their very core, supply chains are about human connections – partnerships, collaborations, and even competition. These are all vital to a successful supply chain.

In short, technology should empower people. It’s the balance between human expertise and the information and automation provided by technology that will mark the agile, resilient, and successful supply chain.

The Technology You Need to Support Your Human Capital

Logility’s digital supply chain platform allows you to trace your supply chain end to end. That gives your supply chain experts the visibility and data they need to optimize every part of the supply chain, preserve and increase revenue, and deepen customer and supplier relationships. Our digital supply chain platform utilizes AI, machine learning, and automation to help you easily track and analyze your supply chain, so you always have optimal performance and key insights.

Make better decisions and deliver better outcomes. Contact us today.

Why do we build logistics models?

This is obviously a rhetorical question. But I ask it because modeling often takes a detour into the land of debilitating detail. And by debilitating, I mean an enormous analytical time sink — think months. I am often asking clients whether they wish to:

A) Model the precise general ledger costs for logistics?

B) Make a well-researched decision?

If you chose “A” you can stop reading because the rest of this blog post is about why that will lead you down the wrong path.

At the surface “A” and “B” seem to follow one another. If I am making a good model, am I not accurately modeling my future logistics spend? Yes, with a big BUT… the precision required to make a perfect model of your financial spend can often lead you to a create a model that is erratic. Let us look at this a little deeper and see where the “precise” and the “good” deviate in a classic logistics model.

What is a Good Logistics Model?

A good logistics model is designed to predict the future. Yet a modeler will always start with a calibrated baseline. And the “calibrated” part of this refers to accounting costs — those costs found in an organization’s financial database. The theory goes that if a model shows the same costs as the current state, then we can trust that it will show appropriate differences when changes are modeled.

A logistics model can be as complex or simple as a modeler wishes, however it always needs to be believable and grounded in the actual costs of a system. This blog post should make one thing clear to the modeler: the search for “accounting” level accuracy can stand in opposition to your actual goal — making a supply chain decision. It will not only cost you time to build this “perfect” supply chain model, but it will also imbed imperfections into the very mechanism of the model.

What Makes Fiscal Accounting Accuracy Popular?

People gravitate to their accounting numbers because of comfort — pure and simple comfort. General ledgers do not need to be explained. They reflect actual expenditures — they are immovable facts of history. They are also safe. Executives and managers alike believe their general ledgers. No one gets sent out of a conference room for repeating known accounting numbers to a group. But the actual spend last year has lots of little aberrations.

How Can Accounting Costs Lead You Astray?

Accounting costs can look very detailed and accurate; take an entry for an individual shipment of your product, for example. You can see the units, weights, and most importantly, the costs. These costs go directly into the accounting system. These show exactly what was paid net of discounts, accessorial, and anything else that might be tacked on.

This means that for every origin and destination that has shipment activity, we should have a highly accurate cost for the organization’s shipment down that lane… right?

Let me share experience from hundreds of modeling exercises. If we treat a shipment table as the definitive cost for each lane, we run into three problems with our model:

1. Lack of statistical significance

2. Heterogeneous data

3. GAAP accounting methods

Let’s delve into each one of these.

1. Statistical Significance — If I have a number, how can it be wrong?

Let’s say you have data on hundreds, or even thousands, of trucks you paid for last year. How could this vast amount of real data go wrong? When you break them down by lane, season, and method of purchase, thousands of data points might turn into five to ten data points for a given lane — or sometimes only one shipment. As a reminder from that long-forgotten statistics class, statistical significance for a single variable starts at seven data points — just to be roughly correct.

Now go further and ask yourself:

– Does your shipment data have a mix of spot and contract shipments?

– Are there data points for every season? Note: trucking in some regions has significant seasonality.

– Is there selection bias? Your buyers or your 3PL might be taking advantage of opportunistic contracts— trucks that were cheap for a single event, but do not reflect the market price next year.

You may have a wealth of data in aggregate but not at the level you need. Here is a way to test its value to a model — take a sample set of data for a given region and given season. Find the average and standard deviation by individual origin and destination. The variation will probably be large — I base this on my experience. The danger is that this variation is dropped from analysis once the average is found. Do some statistical sniff tests, you will probably be very disappointed in the value of this data in predicting your future spend on a lane-by-lane basis.

Figure 1 below visually displays what historic data looks like in an actual model. The total cost of the network exactly matched the accounting cost of $6.97MM. You can see three warehouses and almost every warehouse shipped to each destination city. We should have lots of real historical date, no need to fill in the blanks.

Here is where it goes wrong, Figure 2 is the same data set but optimized for the lowest cost supplier. Great, see how I saved $948K? Now look closely, find all the crisscrossed lines. Find the case where a customer node is right near the Alabama warehouse but is shipped from the Nevada warehouse.

actual historic shipments logistics model — Figure 1 – Actual Historic Shipments

lowest cost logistics model — Figure 2 – Optimized to lowest cost lanes based on historical data

If it was not obvious before, you should now realize that optimization software acts like a passive aggressive child. If it can follow your instructions exactly and return nonsense, it will. In this case the analyst could go to each lane that did not make sense and exactly match it to actual average truck costs. Our wealth of data falls apart because lack of statistical significance throws off our model — we cannot rely on hundreds of records that present a solid average and we have not even started to add lanes that do not have any historical data.

2. Heterogeneous Data — how do you fill in the blanks?

The purpose of a logistical model is to answer “what-if” questions. This means something is going to change — a new port, new warehouse location, new route to the customer. Inevitably, key transportation lanes will not be found in the historical data. Modelers generally use three methods: quotes from carriers, regression analysis, and benchmark (market) data. Each of these methods will create three very different sets of data.

Carriers can provide quotes on contract and spot rates for a defined set of lanes. These will not match your historical costs because the carrier is predicting the future costs at the same time they are trying to secure your business. Many things might not match your past discount rates and accessorial charges. But with effort and enough quotes, you can get these to be “OK.” It will take time and you will have to do it every time you make a change in the model.

Regression analysis will turn a pile of data into a statistically significant formula. But it will also have inherent errors. Truckload rates are not uniform across any geography. An extreme example would be a port city like Los Angeles; more loaded trucks go out of Los Angeles than in. You will find that the cost from Phoenix to downtown LA is 42.5% the cost of a truck from LA to Phoenix. This is an extreme example, but you get the idea – regression formulas average out a lot of market subtleties.

Figure 3 is an example of regression data input into the model. It makes the pretty picture you want to see — every customer is served out of its nearest warehouse. You can see the purple line showing the smooth lines of demarcation between service areas. This is easy to explain but is not correct.

The third data set is benchmark or market data which is really another measure of historic data, but it has the advantage of being historic data across hundreds of companies and millions of shipments. It will not match a company’s historic data precisely. But if everyone is buying from the same market you can assume that everyone’s rates will regress to the same market average.

In Figure 4, you will see the customer-to-warehouse assignments are not as clean as the regression. But this is the real world and reflects the optimum use of the freight market. For example, trucks from Illinois going south are cheaper per mile than Alabama going north and east. This may be harder to explain to someone with this picture, but it has the advantage of being the most right.

Benchmark data also has the advantage of being the same set of data for known and unknown lanes You do not have to create a Frankenstein-like data model of mixed sources to fill in all the data you need.

regression-based costs logistics model — Figure 3 – Optimized to regression-based costs

market-based costs logistics model — Figure 4 – Optimized to market-based costs

See the table below to describe the usefulness of different data sources.

Combining two or more sets of heterogeneous data across thousands of lanes requires a miracle of analysis to get them coordinated to the point that they do not mislead your analysis.

3. Cost Accounting — How can my numbers be wrong when they match my P&L?

Accounting is for accountants. Their objective is to balance all account totals at the end of each period. There are a lot of ways that transportation invoices are reconciled to their actual costs inside this time frame. These include corrections that might be taken at different times than the actual shipment or include discounts either ascribed to a shipment or again taken at a different point in the period.

Manipulating all the costs, corrections, and discounts to match each shipment can be an enormous task. If you total all the truckload, LTL, and Parcel shipments into a subtotal by mode, you can believe that summed number. However, if you want each of thousands of individual shipments to be properly costed, you have a lot of work to do and might need to get your accounting department to spend some quality time on your project.

What Should I Be Doing Instead?

The way to build a good supply chain model is to rely on long-term market figures and averages. You can buy them from any number of rate boards or Logility provides its own proprietary data set with its SaaS subscriptions. All you need do is calibrate these numbers to your business by “benchmarking” them against what you do know. Scale the market rates up or down and proceed to answering your question.

The true value of a logistics model will be that it trades off high-cost modes like LTL against low-cost modes like FTL. Or that inventory will be traded off against transportation. As long as your ratios are calibrated, you will get the right answer.  And a good supply chain leader will value the right and defensible answer over detailed accounting precision — and they will appreciate that you answer the question sooner rather than later.

Additional reading:

Answering the One-Day Service Challenge
“True Greenfield” – Answering the Distribution Service Time Challenge
Three Ways Center-of-Gravity Analysis Studies Lead You Astray

It’s a complex problem, but you can successfully optimize inventory levels with the right approach and technology.

With all of today’s supply chain disruptions, and new ones no doubt lurking around the corner, companies without optimized inventory are risking overpaying and underperforming. During the normal course of business, inventory managers face the challenge of managing potentially thousands of items. All of these have their own characteristics with their own complex calculations. The key to meeting today’s challenges is proactive, strategic inventory management.

Proactive inventory management is not possible without insight across the entire supply chain. You need not only a sound methodology but also a transparent look into the end-to-end supply chain. Otherwise, you risk not only quickly rising inventory levels but a shortage of spare parts.

Supply chain disruption is a complex issue. The big events – COVID, weather and climate events, and Russia’s invasion of Ukraine – dominate the news cycle. What’s under the surface is under-reported, including transportation bottlenecks, labor shortages, and vendors going out of business. These events have become more common, and to react to new disruptions, real-time adjustments are needed. Let’s look at how to optimize inventory levels in a time of seemingly never-ending supply chain disruption.

Start With the Customer Experience

There’s no doubt that the customer is king, whether it’s a company or a consumer. From raw materials to manufactured parts to final products, everything throughout the supply chain must be managed to get the customer what they want when they want it, and they often demand real-time tracking information.

What happens if there is no stock? Stock-outs don’t only damage your relationship with your customers, they damage your brand and label it unreliable. Not to mention that you’ve potentially just sent business to your competition.

This costs you, not the least when it comes to opportunity. You’ve lost not just one transaction but future transactions with that customer. An inventory management system that prevents stock-outs takes a lot of the uncertainty from inventory planning and helps you keep a healthier cash flow – it ensures you have the products in stock that have high customer demand.

Disruptions and other uncertainties in your supply chain will always present issues. How will your company manage the tradeoff between large inventory investment and controlling costs?

Inventory Optimization Challenges

The overarching challenge is to optimize inventory levels while at the same time improving and maintaining a great customer experience and reducing variable costs. Making the right decisions depends on your answers to these questions:

To cushion against disruption, how do you set safety stock levels?
Have you assessed the risk of your inventory turning out to be too expensive to carry or rendered obsolete?
Are you willing to make trade-offs between service levels and safety stock, and what are they?
Do you have enough demand predictability to make service level trade-offs? Do you want to fill orders regardless of your inventory costs?

To meet inventory optimization challenges, setting appropriate levels to absorb disruptions requires some tradeoffs.

Managing Safety Stock

In the last couple of years, you’ve likely noticed that demand can drastically change in the blink of an eye. This makes safety stock management incredibly important as a proactive approach to inventory management. It establishes the minimum amount of on-hand inventory that acts as a buffer for demand surges or shortages in supply.

Safety stock is a simple way to prevent lost orders, which reduces the risk of stock-outs and guarantees you can fulfill orders. But having too much inventory poses a financial risk, and reducing inventory is tricky – it requires a deep understanding of which drivers have the most effect on your supply chain, and then removing them in a way that improves overall efficiency.

It’s more important than ever to have enough stock for orders and to establish accurate levels for automated reordering.

The Value of Multi-Echelon Inventory Optimization

Multi-echelon inventory optimization (MEIO) goes beyond ordinary inventory optimization to optimize stock locations and amounts across all sites and nodes in your supply chain. The right MEIO approach automates stocking and replenishment and enables rich “what-if” scenario analysis to analyze tradeoffs between costs and service levels. Using machine learning, it also identifies stocking patterns for seasonal products or new product introductions. Through robust visualizations, MEIO dashboards and event-driven notifications help improve usability, user adoption, and user efficiency.

MEIO uses time-tested advanced mathematical algorithms to accurately model inventory flows through the interdependent stages and locations of a supply chain, and it analyzes historical behavior under all conditions. The model helps create an optimal configuration of inventory buffers and locations adequate to handle any degree of demand and supply uncertainty, seasonality, etc. while achieving desired service levels for minimum cost.

With MEIO and the right digital supply chain platform, you can realize the benefits of lower working capital, a reduction in the burden of logistical cost, savings from decreased obsolescence, and increased revenue because you’ll have fewer permanently lost sales orders. But how do you get there?

It Takes Real-Time Visibility to Optimize Inventory Levels

It doesn’t matter what industry you are in, real-time visibility over your inventory is more critical than ever. A robust inventory planning and optimization solution within your supply chain platform will give you the visibility you need across your entire supply chain, including facilities and goods in transit. You’ll get a crystal-clear picture of just how much stock you have and where it’s located, so you can make sound decisions about material movements and meet demand.

Combined with demand planning and supply planning systems, you’ll have better insight into both demand spikes and your ability to fulfill orders. With the right platform, you’ll get robust analytics that provide visibility into inbound inventory shipments and customer order status. If you’re a manufacturer, that means visibility into supplier orders, goods in transit, and if they will meet your production schedules. You’ll know in real time if you must source materials from a different supplier or reroute a shipment.

Building and maintaining a competitive advantage requires embracing innovation and technology. Without modern digital solutions and best practices, what’s left? Inefficient manual processes, standard ERP system functionality that doesn’t give you what you want, and spreadsheets. This isn’t going to get you where you need to go. The modern enterprise requires a modern solution. Inventory optimization is just good business. Wondering how to optimize inventory levels? It takes the right digital solutions.

Inventory Optimization Solutions That Meet Business Goals

Logility provides a digital platform with supply chain management solutions that allow you to trace your supply chain end to end. You get the visibility and data you need to optimize your inventory in a way that preserves and increases revenue and allows you to protect and deepen customer relationships. Our platform utilizes artificial intelligence, machine learning, and automation to help you easily track and analyze your supply chain, so you always have optimal performance and key insights. To make better decisions and more profits, contact us today.

Your ship’s come in! That’s a good thing, right?

Much of the merchandise languishing aboard cargo ships stuck in ports around the world during the pandemic-fueled supply chain crisis has made it to store shelves. No doubt this brings some mirth and merriment in an otherwise bleak stretch for consumers, but it also brings a massive migraine for retailers.

Not that all shelves are overflowing, mind you. About 31% of grocery products consumers looked for were out of stock in the first week of April, according to Datasembly, a research firm that monitors grocery and retail pricing. That’s up from 11% at the end of November 2021. What’s worse, Americans are paying more for many of their staple goods. One example: egg prices are up 56%, according to the Department of Agriculture, driven up by drought, a bird flu epidemic and the war in Ukraine.

Nonetheless, there are deep discounts in stores across the U.S. Burt Flickinger, managing director for Strategic Resource Group, told CBS News he’d seen the biggest discounts across “consumer electronics, sporting goods, apparel, clothes, and accessories.”

Want the latest Gartner Critical Capabilities for Supply Chain Planning?

Get the report here.

Big Box Blues

Retailers including Walmart, Target, Macy’s, Amazon and Best Buy are dealing with a combined $45 billion in excess inventory from orders placed during the height of the pandemic, according to Bloomberg. With much of the inventory suddenly arriving, retailers are realizing that the macro economy and Americans’ buying habits have changed while the goods were adrift. Target, for instance, said it ordered way too many televisions and home appliances. To move out the misfit merchandise, it will ramp up discounts. It’s a bit like dinner guests who show up two years late, hungry, and wearing the wrong clothes.

Not unlike Target, Walmart said it will have to offer discounts to get rid of general merchandise, reducing its profit margins. “The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” said Walmart CEO Doug McMillon in a recent statement. “We’re now anticipating more pressure on general merchandise in the back half; however, we’re encouraged by the start we’re seeing on school supplies in Walmart U.S.”

Unexpected Outcomes

So, what happens when you have the wrong product mix priced too high during a period of high inflation? Some of the extra goods often get sold to liquidators like Bargain Hunt, which sells items at up to 70% off retail. But this time, Bargain Hunt executive Norm Rankin is seeing something different. “The condition of the product — it’s never left the case, it didn’t make it to the stores, it’s not dog-eared or wrinkled or ruffled having been on a shelf.”

Inventory shortages have downside implications of their own, but they typically do allow retailers to sell more at full price and avoid aggressive promotions designed to quickly clear out overstock. The pendulum has swung back, and it’s easy to understand the thought process in hindsight. In an attempt to mitigate the recent chaos in the shipping industry, many retailers ordered even more aggressively to meet expected (strong) consumer demand. Then, as port problems eased, a glut of inventory – a phenomenon known as the “bullwhip effect.”

Understanding the Impact of Pricing and Promotion on Inventory

To make the best of a less-than-ideal situation – i.e. to protect margins – it’s important for retailers to bridge the gap between promotional activity and inventory management with a better understanding of the impact of pricing and promotion on inventory.

An optimal pricing and promotion analysis solution uses machine learning algorithms and price elasticity models to create promotion-influenced forecasts. In other words, your planners will have a mechanism to perform granular what-if analyses in the face of frequent price changes, to better understand the extent of discounts needed to generate enough demand to move excess product. Users can leverage the technology to understand the impact of pricing and promotion on demand (the ‘lift’) and take action to ensure inventory positions are sufficient.

A pricing and promotion analysis solution (PPA) will benefit your business if you:

Have a basic forecasting discipline in place but no systematic way to model price change outcomes and account for differences in important segments (location, region, etc.)
Have outgrown manual tools and are (often) mired in multiple spreadsheets from multiple sources
Need a strong promotion lift solution to complement your demand planning capabilities and generate a price-adjusted forecast to align inventory decisions with marketing campaigns
Have sufficient price and sales data at the product category and SKU level.

In other words, this type of solution shouldn’t be viewed as a “break-glass-in-case-of-fire” option. It offers continual benefits to any company that wants to better model the relationship between price, sales and inventory positions. But it tends to get talked about during a period of massive discounting.

To get the most out of PPA, your company must ensure that data is accurate and complete, and that confounding events have not strongly biased the data and obscured important nuances, such as seasonality, business changes, market changes or a combination of these.

Are you interested in learning about more ways a pricing and promotion analysis solution can help with supply chain planning? Read more here.

Reach corporate social responsibility goals while improving your economic sustainability.

Key Takeaways:

You make important decisions daily that affect both your own corporate responsibility goals and external ESG demands from consumers and investors
Vendors can make or break your broad supply chain goals, which makes real-time, AI-analyzed data essential for supply chain decision-making
Self-reporting and a cumbersome audit process present dangerous challenges that can be overcome with an integrated platform
To supply the detailed reporting required by all stakeholders, complete transparency into your entire supply chain is needed
One bad vendor decision can damage your brand beyond repair, so constant vigilance and swift action are necessary

Supply chain executives make vital decisions daily. Disruptions – from wars to COVID-19 lockdowns to a lack of containers – just add to what is already a complex undertaking. A holistic approach using reliable, properly analyzed data is required to achieve both your business and corporate responsibility goals.

Data is useless if it’s not actionable. True corporate social responsibility (CSR) requires vigilance and compliance throughout the entire supply chain, and this takes properly analyzed data. This is especially important in vendor management. Your vendors can be your greatest strength or a source of serious liability. When it comes to supply chain decision-making, you need a digital corporate responsibility solution.

Ethics and sustainability affect brand value, and corporate responsibility in the supply chain is a huge part of this. Supply chain leaders who understand public concerns about the environment, health, and safety know that nothing affects this equation as much as their vendors.

Do your vendors present environmental, regulatory, or other risks to your company values? Can you trust their self-reporting? What about a vendor’s location or other factors that might affect their performance? With so many unknowns plaguing your supply chain decisions, this is one area where the right data and AI-supported analysis means you can move forward with confidence.

Socially Responsible and Economically Sound

A sustainable supply chain is no longer an option, as both consumers and investors clamor ever louder for brands to up their game when it comes to environmental, social, and corporate governance (ESG). They want to know where everything comes from, its environmental impact, and that it was produced by people who are treated fairly and humanely.

You want all of this, too, but you might not be sure how to get there, especially in an era of such profound uncertainty. You must be sure that the decisions you make don’t just work for today but will continue to work in the future to meet your economic goals. The economic sustainability of your company is at stake as much as anything else.

Uncertainty aside, even in times of relatively smooth supply chain operation, you never know what’s coming up next. But you can probably guess that new compliance standards and regulations are likely. Consumer demand is sure to rise. Trade embargoes will follow political turmoil. Not only do those factors put your reputation on the line, but they can also damage the viability of your enterprise.

Fortunately, there are powerful digital solutions that can give you the actionable information you need to both accelerate and improve your supply chain decision-making.

Enhance Financial Performance, Boost Reputation, Strengthen your Supply Network

Data confidence is everything as ESG demands become an integral and inescapable part of supply chain decision-making. It is imperative that companies build stronger and more sustainable supply chain networks. This can only be done via better management of governance assessments and audits, which then fuel better, sustained collaboration with your entire vendor network.

Audits are vital but time-consuming, incredibly inefficient, and error-prone – often facilitated by an exchange of emails. Self-reporting has its own unique set of issues. What’s required is a digital solution that offers easy integration, storage, and the analytics you need to achieve transparency, sustainability, and better supply chain decision-making.

Your corporate responsibility solution should:

Surface variants between audit findings and self-reported scores and analyze the results
Issue corrective action plans and adjust your sourcing plans in real time with consideration of a supplier’s progress toward sustainability objectives
Offer reports that allow you to publicize practices and findings to all stakeholders with full transparency and confidence.

The right platform will give you a single source of supplier data you can use to assess vendor compliance. Because form numbers and identifiers vary, seamless mapping of data is required to ensure you’re viewing the same information without having to cross-reference multiple systems.

You’ll want to be able to collect factory certifications as well as manage all ESG-related assessments. As CSR has become subject to more mandatory regulations, self-regulation is no longer possible, which makes data-driven supply chain decision-making mandatory.

It is incumbent on organizations today to make sure they have the information they need to plan, schedule, and perform multiple assessments. Further, you want to be able to capture and evaluate the results so you can generate improvement plans. This allows you to remediate issues, assist supplier-users with training, and craft an exit plan to shift non-compliant suppliers out.

All of this results in stronger supply chain partners who will appreciate a fair and efficient system that motivates them to adopt best practices, knowing that compliance is the key to retaining your business.

It’s a Matter of Long-Term Value

A digital solution to corporate responsibility has a positive impact on the world, but it also supports your long-term business growth. Compliance standards must be met, consumer demands fulfilled, and investors satisfied. Greenwashing is unacceptable. Transparent, verifiable reporting is essential.

A non-sustainable supply chain exposes your company to avoidable business risks, including damage to your brand reputation and foreseeable supply chain disruptions. The data gleaned from a transparent supply chain will optimize your business planning as well as streamline product movement and balance supply and demand for inventory.

Ultimately, sound supply chain decision-making that supports all the requirements of the ESG enterprise requires data and AI analysis supplied by the right digital supply chain platform.

Sound, Sustainable, and Profitable Supply Chain Decisions Start with Logility

Logility provides the supply chain platform that allows you to trace sustainability through all tiers of your sourcing. Our platform utilizes AI, machine learning, and automation to help easily track and analyze your supply chain, so you always have optimal performance and key insights. Make better decisions and make more profits. Contact us today.

Use a two-pronged approach that couples new recruitment approaches with technology to provide transparent operational insight.

Key Takeaways:

Supply chain disruptions and labor shortages provide separate yet connected challenges
Labor shortages are a global problem – contraction has already happened in Germany, Poland, Russia, and Japan and is expected to quicken
From the top floor to the shop floor, workers are quitting their jobs at a rapid rate
Supply chain executives must look at new sources for workers and provide the technology that allows the supply chain visibility they need to recruit and retain top talent
It’s a time of crisis, but out of ashes often comes opportunity; get ready!

Today’s supply chain is challenged by the impact of what would appear to be two disparate challenges: constant supply chain disruptions, and what’s been dubbed “The Great Resignation.” Organizations must use every means at their disposal to keep goods moving while at the same time preventing their most important resource – their talent – from jumping ship at an alarming pace.

Roughly 25% of workers plan to change jobs in 2022. In February alone, 22,000 people in the U.S. resigned from their jobs in durable goods manufacturing. Food supply chains already heavily damaged by the effects of COVID-19 have received yet another blow from labor shortages. The trucking industry was down 80,000 drivers in 2021, and that shortage is anticipated to balloon to 160,000 by 2030.

ease labor shortages and increase supply chain resiliency

It’s a global problem. The labor supply is shrinking in Germany, Poland, Russia, and Japan, and contraction is expected to quicken. China, which had a worker surplus of 55.2 million to 75.3 million in 2020, could have a worker shortage of up to 24.5 million by 2030. The overall outlook for supply chains is bleak, leaving executives racking their brains for the key to supply chain resiliency.

It’s time for decisive action. Let’s look at how labor and talent shortages wreak havoc on a supply chain, and the steps leaders can take to solve problems now and protect their organizations in the future.

How Labor and Talent Shortages Affect Supply Chains

There are labor shortages affecting all aspects of the supply chain, from raw materials to final product delivery. The Bureau of Labor Statistics says that, while the manufacturing sector as a whole is projected to have some pandemic recovery employment growth, it also contains 11 of the 20 industries that are predicted to have the most rapid employment declines. These include transportation and material moving, warehouse and fulfillment center workers, truck drivers, call center agents, delivery services, and manufacturing workers.

It’s not just skilled, semi-skilled, and manual labor that’s lacking. Supply chain managers are also leaving, with more mulling over their part in the great resignation. This is all happening while the proliferation of eCommerce has driven up demand for supply chain labor. Then, there’s the Infrastructure Investment and Jobs Act – the construction industry is expected to pull workers from the supply chain since both logistics and construction attract similar worker pools.

Of course, all of this has obvious effects on the supply chain, including:

A lack of longshoremen and dock workers to unload ships
Not enough drayage drivers, which means shipping containers sit in ports instead of moving down the chain
A shortage of long-haul truckers – so shippers can’t move inventory quickly from ports to distribution centers
Warehouses are understaffed and distribution centers can’t work at full capacity. This results in delays that cause material or inventory shortages that affect both manufacturers and retailers
Fulfillment centers that are short of workers can’t keep pace with order fulfillment volumes fueled by eCommerce.

And so it goes on, and on, and on. Labor shortages in any of these instances cause issues up and down the supply chain, but combined they have a crippling effect. You’re likely aware of these issues, so let’s move on to what you can do to minimize the effects of labor shortages on supply chain resiliency.

Supply Chain Resiliency in the Face of Labor Shortages: A Two-Pronged Approach

Supply chain executives have two problems here. You have the seemingly uncontrollable supply chain disruptions along with a labor and talent shortage. The remedy is far from simple, but you can greatly reduce the impact of these challenges with advanced technology coupled with talent management strategies.

To ensure you have the workers you need now and in the future, approach your talent pipeline the same way you approach your supply chain:

Make sure you have complete visibility into your supplier base. Implement a supply chain management platform that easily allows you to find suppliers with large labor forces who can ensure operational viability and find and connect with alternative vendors that can lower first- and second-tier risk.
Look beyond wages. Competitive wages and attractive benefit packages go far, but take time to examine why workers are leaving your organization and implement fixes. Automate what you can to reduce repetitive work.
Identify stresses in your supply chain and adjust labor flows. Shift the flow in your supplier network away from those who are labor-stressed. Reroute orders to other warehouses and manufacturing locations. If necessary, change product design or formulations to reduce the need for components and ingredients from labor-strained areas.
Take a look at your product and services portfolios so you have a deep understanding of each offering and its trade-offs, both operationally and commercially. The goal is to reduce complexity in a way that has a limited impact on sales.

Solving the labor crunch also means exploring new sources of supply. Transition programs for prisoners and veterans’ programs can be good sources of labor. Also, look for workers in industries where employment is declining and reskill them. Connect with local community colleges and technical schools.

Returning to the issue of visibility – because how can you fix something you can’t see? – demand planners play a big role here. A digital supply chain platform can give planners the insight they need to account for different scenarios and facilitate collaboration across the organization to solve current problems and plan for the future.

And for supply chain resiliency even during labor shortages, you need a platform that offers a user-friendly interface along with deep analytics that can attract and retain top planning talent. stichd, a Netherlands-based product licensing company and division of PUMA, recently selected the Logility® Digital Supply Chain Platform to support its ambitious growth strategy and demonstrate investment in its workforce. “Growth is our top priority. To continue achieving our goals, it was critical to find a planning platform with more sophisticated forecasting and clear visibility capabilities, but that is also easy for our employees to use,” said Rogier Wijnhoven, COO at stichd.

Today’s challenges require informed decision-making. You need transparency: real-time data along with artificial intelligence, machine learning, and automation that continually senses, analyzes, and updates activity throughout your entire supply chain. You need granular detail to reach peak operational performance and to prepare for unexpected supply chain events – labor shortages and otherwise.

As John F. Kennedy said, “When written in Chinese, the word ‘crisis’ is composed of two characters – one represents danger and the other represents opportunity.” Be sure you have all the tools you need, both human and digital, to overcome today’s dangers and be poised for tomorrow’s opportunities.

Get the Solutions You Need for True Resiliency with Logility

Logility helps companies accelerate their digital, sustainable supply chain by providing solutions that don’t just present and model data – they drive actionable insights that deliver real and measurable value, so companies can respond to changing market dynamics and more profitably manage their complex global business.

The Logility® Digital Supply Chain Platform leverages an innovative blend of artificial intelligence (AI) and advanced analytics to automate planning, accelerate cycle times, increase precision, improve operating performance, break down business silos, and deliver greater visibility. We help you make smarter decisions faster – reach out to our team to discuss our supply chain solutions.

Look deeper than ever before. Reduce risk. Increase profits. Make your customers happier.

Key Takeaways:

Supply chain visibility offers the means to manage your supply chain efficiently as well as help you meet ESG and corporate responsibility goals
The transparency gained through complete supply chain visibility increases supply chain efficiency, increases profit margins, and strengthens customer and supplier relationships
End-to-end supply chain visibility allows you to massage and control every piece of your supply chain for optimized results for both you and your customers
Modern supply chains need modern technology — you can’t get visibility with emails, phone calls, and spreadsheets
A digital supply chain management platform gives you the data you need along with the analysis required for informed decision-making and complete visibility

Today’s supply chains are messy, tangled beasts. Even in the best of times, they can be unwieldy, and keeping track of your suppliers, your suppliers’ suppliers, and… You know the drill. Insights can be hard to come by as investors, consumers, and boards of directors are upping their environmental, social and governance (ESG) criteria and demanding greater corporate responsibility. A transparent view of the supply chain is required.

It’s not just about meeting ESG goals. Supply chain visibility offers the means to manage your supply chain efficiently by offering previously unseen opportunities. In days of yore, you didn’t need such in-depth visibility, but today, as supply chains grow more complex and stretch further across the globe, you need a 360-degree view, from raw material sourcing to final product delivery.

As procurement and supply leaders examine their supply chains, they often turn to things like spreadsheets or try to hack their current software to create a DIY solution. What they end up with is an unresponsive, inflexible system and no visibility at all into the supplier data they need. Supply chain visibility has become critical, so we’ll look at what good supply chain visibility really means, why it’s important, and why you need a unified digital supply chain platform.

What Is End-to-End Supply Chain Visibility?

End-to-end supply chain visibility is the ability to track individual components – beginning with raw materials, sub-assemblies, and finished products – as they travel from supplier to manufacturer to the final destination. It’s enabled through technology that provides real-time data about all aspects of your supply chain, gathering usable data that gives your company the agility to work around inventory shortages, sidestep bottlenecks, and meet any compliance requirements.

It’s visibility inside and out – into your internal business operations and all external partners. The transparency gained through complete supply chain visibility increases supply chain efficiency, increases profit margins, and strengthens customer and supplier relationships.

Why Is Supply Chain Visibility Important?

Supply chain visibility is essentially about control. As time has marched on, companies have outsourced more and more pieces of their supply chains, making them difficult to control, and this is where supply chain visibility comes in. The transparency gained can alter your organization’s operations as interactions and relationships with both suppliers and customers improve.

A digital supply chain management platform means you can pull data not only internally but directly from suppliers, providing detailed insight into each component you use or sell. Risk is reduced as visibility into upstream partners means you’re notified immediately of any disruptions, so problems can either be solved or circumvented.

At this level of visibility, you can track movement throughout the supply chain. There would be documentation for the use of raw materials, components used in the production process, and, upon completion, you can see the exact location of finished goods. Once goods leave the plant, they can be tracked on ships, trucks, or planes as they travel through customs and other checkpoints.

Your digital supply chain platform should also include a corporate responsibility solution to track social compliance and environmental status that allows you to initiate, review, monitor, and submit corrective action plans. You also need a view into the environmental status of all suppliers to ensure compliance with your corporate responsibility practices.

Supply chain visibility also offers the benefits of:

Simplifying complexities: By providing insights across your diverse supplier network, you not only anticipate and solve logistical issues that can hurt customer relationships and decrease profits but also add a level of trust and transparency.

Increasing customer satisfaction: By making sure the right products are at the right locations at the correct time, you offer the ability for customers to track their orders from the factory to their loading dock.

Easier compliance: Your international supply chains have intense regulatory requirements, and these are changing all the time. Decrease the risk to your reputation, too, by ensuring that the behavior of all your supply chain partners is ethical.

Boosted competitiveness: Your supply chain is costly, and likely is one of your largest budget line items.

Visibility Takes a Digital Supply Chain Platform

Visibility doesn’t just happen, and it will never happen using phone calls, emails, and spreadsheets. It doesn’t matter if you’re monitoring supplies and products at a batch or individual item level. Monitoring safety, legal, and material certifications; order and vendor information; status and location of suppliers; and manufacturing dates – all are integral parts of the highly visible supply chain.

Supply chain visibility first and foremost relies on data. Relevant, real-time data across the supply chain. Then, this data must be analyzed and acted upon. To achieve this requires a robust digital supply chain platform that utilizes advanced, intelligent technologies with a focus on process improvements that drive efficiency and monitor corporate responsibility.

A modern digital supply chain platform also enables resilience with end-to-end visibility and capabilities for supplier management combined with contingency planning, crisis management plans, and incident response strategies. It’s important to note that end-to-end today doesn’t mean a linear progression. The circular supply chain concept is gaining traction, as manufacturers seek to meet sustainability goals by recycling and reusing stock. You want to be able to capitalize on reverse logistics, as well, to be sure you’re capturing the value of or properly disposing of excess goods, whether from returns or because they were unsold.

You want artificial intelligence (AI) and machine learning (ML) to inform and improve decision-making, forecasting, and planning, as well as to perform the advanced calculations that turn visibility into actionable information.

Supply chain visibility is essential to business success. You need insights into every nook and cranny of your supply chain to achieve efficiencies that deliver the profits necessary to flourish. In addition, you need the means to both validate and transparently report on progress toward your ESG goals, not to mention keeping on top of the ever-changing regulatory environment.

Get Vital Supply Chain Visibility with Logility

The Logility® Digital Supply Chain Platform supports you to drive a visible, sustainable digital supply chain. It leverages data-driven tools such as advanced analytics and AI that empower your business to meet today’s supply chain complexities head on. You get the supplier data and other analytics you need to meet your transparency goals as well as your revenue goals.

We help organizations sense and respond to changing market dynamics and more profitably manage their global businesses and become resilient, sustainable enterprises. It’s time for a digital, sustainable supply chain. Reach out to our specialists today to discuss our supply chain solutions.

While the supply chain talent wars continue, it’s incumbent upon today’s business owners to consider whether the technology they use day to day has any ‘wow’ factor. Demand parameter optimization has that ‘wow’ factor.

In this post we look beyond the more conspicuous and well-documented benefits of advanced supply chain technologies, such as increased speed to market, more efficient operations, improved customer satisfaction and the ability to thrive during ecosystem shocks large and small. This post considers the human element, the brains that use the technology to derive insights and take action.

As you’ve no doubt heard and perhaps experienced, the recruitment and retention of tech talent is a matter of great urgency. Many business leaders around the world are happy the pandemic is waning, but wondering where all the people have gone. More than 19 million U.S. workers have quit their jobs since April 2021, disrupting businesses everywhere.

The brain drain would rightly be viewed as critical even if the goal were to simply replace lost headcount. But it’s more dire than that; many companies have embarked on aggressive plans for incremental hiring in the coming years. Consider these statistics from McKinsey:

Facebook plans to hire 10,000 people in Europe to build out its “metaverse”
Amazon announced plans to add more than 55,000 people in the U.S. for corporate and technology jobs
In Germany, 780,000 additional technology specialists are needed by 2026 to meet the estimated demand
Globally, more than three million cybersecurity positions were open as of 2020.

Business leaders are feeling pressure. According to a McKinsey survey of more than 1,500 senior executives globally, 87% say their companies “are not adequately prepared to address the skill gap.”

Now let’s circle back and pose the question hinted at above: can commitment to and adoption of modern supply chain technology help recruit and retain top talent? The short answer is that talented knowledge-workers want to use the latest and greatest tools. McKinsey quotes a stack overflow survey that shows “the… technologies I’d be working with” is much more important than, for example, “the industry that I’d be working in” when making a job choice.

Beyond Excel

Of course, winning the supply chain talent war requires much more than committing to “an Excel-free work environment,” but continual access to modern solutions and capabilities is an aspect that businesses shouldn’t ignore. One such capability among many in the Logility® Digital Supply Chain Platform portfolio is demand parameter optimization (DPO), a machine learning application that automatically fine-tunes a subset of forecast parameters in order to improve forecast accuracy. DPO can process thousands of items simultaneously, selected by filter (such as inventory classification) or by alert (such as forecast error threshold). The result: a significant reduction in the amount of time spent manually tuning plus better quality forecasts.

And with improved forecast accuracy comes reductions in inventories, lost sales, expediting costs and obsolescence costs. Moreover, demand parameter optimization enables autonomous planning, reducing the hours spent by planners manually manipulating parameters. This in turn increases the time available for other planning tasks, such as exception analysis triggered by workflow alerts.

As one Logility customer put it: “Not one of my planners goes home at night and brags that they got to use a spreadsheet at work. But when they’re using modern planning tools like DPO to evaluate scenarios and reduce planning error, and they’re really in the zone, I see the joy of learning on their faces, and the joy that comes with knowing they are making a difference. They benefit, and so does the business.”

More Tech Doesn’t Equal More Value to the Customer

Logility’s Kevin McInturff, EVP of R&D, says: “At Logility, we offer the perfect blend of foundational strength and the desire to innovate. Our product visionaries never lose their footing. Companies that are overly enamored with their own technology often focus their efforts on the pursuit of the next shiny toy. The reality is more technology just for the sake of it does not always equal value for the client. While others give in to the temptation to be led by their technology, we will always allow the voice of the customer to guide us toward solving real supply chain problems.”

Read about how stichd – a division of PUMA – chose the Logility platform for its “sophisticated forecasting and clear visibility capabilities” in this recent press release.

Industry: Durable Goods