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2016

Late last month, Boston Dynamics posted a video showing a humanoid robot walking in the snowy woods without stumbling, standing back up after being knocked down by a human handler, and bending down to pick up boxes and then putting each package on a shelf. Tens of millions of people watched the videos and began talking about how far advanced robotic technology has come, as well as speculating about the implications for the human manual labor workforce.

 

The company, which had been acquired by Google in 2013, had previously secured millions of dollars of funding from the Defense Advanced Research Projects Agency (DARPA) and the U.S. Marine Corps, for example, to create a four-legged agile robot that could haul cargo over rough terrain. Those creations include the quadrupedal “Big Dog” robotic mule and a smaller and quieter version called “Spot.” A third robot is the five-foot-nine, 180-pound biped shown in the YouTube videos last month, known as “Atlas.”

 

While the robots are promising, it now seems Boston Dynamics has failed to live up to aspirations. The first setback came when the U.S. Marine Corps rejected the Big Dog robot, saying it was too noisy for practical use. Now, Google executives have decided to sell Boston Dynamics after concluding that it’s unlikely the company can produce any marketable robot in the next few years, according to people familiar with the company who spoke to Bloomberg News.

 

The problem might be the type of robot. Use of service robots—lightweight machines that milk cows, for example—is growing, but the most valuable market for robots is clearly still the industrial sector, such as applications where large, robotic arms are used behind a safety barrier in factories. The industrial robot industry generated about $13 billion in revenue 2015 and a further $25 billion in software, controllers and systems engineering, according to Morgan Stanley, Bloomberg reports. In contrast, the market for domestic service robots was worth about $2.2 billion in 2014, according to the International Federation of Robotics.

 

Robotic arms aren’t the only robots used in manufacturing. The use of lightweight, collaborative robots that work side-by-side with humans on production lines, rather than behind safety cages, is growing considerably as well. Barclays estimates the collaborative robot market could be worth $3 billion by 2020 and more than $10 billion by 2025.

 

The problem with Boston Dynamics’s robots, say some industry observers, is that they need technology that doesn’t exist yet. Indeed, the software necessary to give them autonomy and purposeful intent is still being developed. While it’s unknown for sure just how long it will take to develop such software, there is speculation the Google execs think it may take a decade to develop Boston Dynamics’s technology into a commercial product.

 

It’s also worth noting that not everybody viewed the Atlas videos favorably, and there was some backlash from viewers that clearly was noticed by Google. After Boston Dynamics posted the videos on YouTube, Google’s public-relations team expressed concern that Alphabet would be associated with a push into humanoid robotics. Their subsequent e-mails were also published to the internal online forum and became visible to all Google employees.

 

“There’s excitement from the tech press, but we’re also starting to see some negative threads about it being terrifying, ready to take humans’ jobs,” wrote Courtney Hohne, a director of communications at Google and the spokeswoman for Google X.

 

Feedback about robots that seem “creepy” and concerns about possible loss of jobs for humans may well be valid concerns. However, the larger issue—for any tech company—is to determine which new jobs robots may be capable of performing as well as whether or not research and development should be continued to develop robots capable of performing such tasks.

 

What are your thoughts on new robot technology? Do you believe we will see autonomous robots in 10 years?

Contractors building new locks for the Panama Canal Expansion project will finish work on May 3, and the canal will open on June 26, Canal Authority Administrator Jorge Quijano said last week. There are concerns, however, about the readiness of U.S. ports for larger post-Panamax vessels.

 

The $5.3 billion expansion of the 50-mile Panama Canal connecting the Atlantic Ocean to the Pacific Ocean was initially scheduled to be concluded in October 2014. Although a string of work stoppages and disputes with the Italian conglomerate behind the expansion over-cost overruns has led to repeated delays, the Panama Canal Authority has since resolved problems associated with contractors and seepage from the new locks discovered during testing, Jose Ramon Arango, senior international trade specialist at the agency, recently said at a shipping conference.

 

Contractors building the new locks, which will allow bigger ships to pass through the 102-year-old waterway, will complete works on May 31. The authority is planning a test of the new locks with a tanker in May.

 

“The date is very close and there is still a lot of work to do,” Canal Authority Administrator Quijano said last week. “We can’t lose face.”

 

As part of the expansion project, wider locks with mechanical gates will reduce congestion and be able to accommodate post-Panamex vessels, which are as long as three football fields and have the capacity to carry almost three times the number of containers held by ships currently using the canal. The expansion to accommodate larger ships may ultimately shift international trade routes because ships could reach Asia from the U.S. Gulf Coast more than two weeks faster than if they traveled east through the Suez Canal.

 

The expansion has also been a driving force behind a series of port and infrastructure upgrades throughout the Caribbean and the U.S. East Coast, as ports make changes so they too can accommodate larger vessels. The problem with those projects is that those ports are years away from being ready for extra business, says Gerry Wang, head of Seaspan, which owns large container ships it leases on long-term contracts to big shipping companies.

 

“The infrastructure’s just not there,” Seaspan Corp. Chief Executive Gerry Wang told Reuters in a telephone interview. “At the end of the day, you want the volume to come, you want big ships to come, but you just don’t have the infrastructure to handle them.”

 

Deepening of the harbor at Charleston, for instance, is not expected to be completed until 2020, Wang notes. Also, the raising of the Bayonne Bridge linking New York and New Jersey to allow larger, new ships to pass under it is a choke point for carriers because the project is years behind schedule, Wang told Reuters. Furthermore, rail, highway and warehousing infrastructure is also inadequate—and if containers cannot move inland, a port shuts down, he said.

 

“The first two, three years [after the expanded canal opens] the U.S. East Coast has to learn to adapt to the new traffic coming,” Wang said. “Then it will take years more to settle down the distribution system. Right now, the efficiency’s just not there.”

 

What are your thoughts on the readiness of U.S. ports and infrastructure in preparation for larger ships? Even if bays are deeper, what do you think the implications will be for supply chains if rail, highway and warehousing infrastructure cannot manage the larger loads?

By some estimates, international shipping transports approximately 80 percent of global trade by volume and more than 70 percent of global trade by value. With those numbers in mind, it’s always interesting to review evolving risks in global shipping. Chief among them, according to a new report, are cyber-risk, “superstorm” weather patterns and salvage issues for so-called “mega ships.”

 

The shipping industry’s reliance on interconnected technology brings significant benefits, as well as risks. For instance, cyber-risk may result from improper integration and interaction of cyber-systems/updates or attacks from external sources—and are not always detected, reports global insurance firm Allianz Global Corporate & Specialty (AGCS) in its maritime 2016 Safety and Shipping Review. There have already been a number of notable marine-related cyber-incidents, and given the growing technological advances including the “Internet of Things” (IoT) and electronic navigation, the industry may only have a few years to prepare for the risk of a vessel loss, the authors explain.

 

Piracy also continues to be a risk, and there was, indeed, an increase in the number of piracy attacks (246) during 2015. The good news is that progress  continues in Africa where the number of incidents was down in Nigeria and Somalia, although the risk remains high. South East Asia is another matter. Piracy there accounted for 60 percent of global incidents—and Vietnam is a new hotspot, Allianz reports.

 

“Pirates are already abusing holes in cyber-security to target the theft of specific cargoes,” says Captain Andrew Kinsey, Senior Marine Risk Consultant, AGCS. “The cyber-risk impact cannot be overstated. The simple fact is you can’t hack a sextant.”

 

The report also notes that exceptional weather events are becoming more commonplace, which introduces additional risk and potential disruptions to supply chains. This year, the effect of a “super” El Niño is expected to lead to more extreme weather conditions. Meanwhile, bad weather was a factor for three of the five largest vessels lost last year, including the El Faro, one of the worst U.S. commercial maritime disasters in decades.

 

“The fact that superstorms are causing ships to sink is concerning,” says Sven Gerhard, Global Product Leader Hull & Marine Liabilities, AGCS. “We are seeing more and heavier natural catastrophe events. Weather routing will continue to be a critical component to the safe navigation of vessels.”

 

Finally, in response to demand for ever-larger container ships, the industry has seen cargo-carrying capacity of the largest vessels increase by 70 percent over 10 years to 19,000+ containers. That increase in size does present new problems, however. Two “mega ships”, the CSCL Indian Ocean and APL Vanda were grounded in February 2016, raising questions about a more serious incident. There are concerns, for example, that commercial pressures in the salvage business have reduced easy access to the salvors required for recovery work on this scale. The consequence is that the industry may need to prepare for a $1bn+ total loss scenario, according to the review.

 

Still, the good news in the review is that shipping losses continued their long-term declining trend, with 85 total losses reported worldwide in 2015. That number is down by three percent from 2014, making 2015 the safest year in shipping for a decade. What’s more, losses have declined by 45 percent since 2006, driven, the review notes, by an increasingly robust safety environment and self-regulation.

 

Identifying risks such as cyber-threats, consequences of using larger ships and an increase in significant storms is the easy part. The challenge for shippers, is to take those risks into consideration, and determine how to mitigate them. It will be interesting to see how the industry responds.

I was interested to recently read that while Amazon warehouse workers at some locations are waiting to clock in, they see a steady stream of company-provided announcements on TVs. Rather than reminders to be safe or the local weather, they instead see stories of co-workers who were fired for theft.

 

In a new effort to discourage stealing, Amazon has put up flatscreen TVs that display examples of alleged on-the-job theft, according to current and former warehouse workers and anti-theft staff in a Bloomberg article. The alleged offenders aren’t identified by name, but are represented by a black silhouette stamped with the word “terminated,” and accompanied by details such as when they allegedly stole, what they stole, how much it was worth and how they got caught. Some of the silhouettes are marked “arrested.”

 

Theft is a persistent concern for Amazon, since its warehouses are full of small but valuable items and its workforce has high turnover and low pay. Workers interviewed for the article say the range of thefts posted on the screens is as varied as the company’s catalog: DVDs, an iPad, jewelry, a lighter, makeup, a microwave, phone cases and video games.

 

To be fair, there are other announcements on the TVs too, such as updates on incentive bonuses or a message about Black History Month. Nonetheless, in some warehouses that don’t have flatscreens, workers say paper notices detailing the firings are tacked to bulletin boards or taped to the wall, Bloomberg reports.

 

Some security experts say Amazon’s anecdotal warnings are simply a natural extension of older corporate loss-prevention tactics, such as frisking employees as they leave a store. Then again, that practice isn’t viewed favorably by employees.

 

In 2014, the U.S. Supreme Court agreed to hear a class-action lawsuit filed against Amazon by former employees at the company’s security contractor Integrated Security Systems. In their complaint, the employees said they were “required to wait at least 10 to 15 minutes each day, and often more than a half hour, at the beginning and end of each shift without compensation whatsoever in order to undergo a search for contraband and/or pilferage of inventory.” The Supreme Court later ruled that the workers did not have their fair labor rights violated by engaging in those activities.

 

Amazon isn’t alone in that practice, and its employees aren’t alone in resenting it either. For instance, Apple was hit in 2013 with a class-action lawsuit filed by thousands of employees who complained about the company’s policy of searching their bags and iDevices before they left work each day. A U.S. court later ruled in Apple’s favor, finding that Apple had made it clear that it would inspect those items as part of its theft-prevention activities. The court added that employees were not forced to bring those items to work and could therefore sidestep those searches.

 

None of this really comes as a surprise. By some estimates, cargo and warehouse-related theft amounts to well into the tens of billions of dollars worldwide. Furthermore, given Amazon’s growing inventory of products, its sprawling warehouses are potential targets.

 

On the other hand, while Amazon—and other companies—cannot allow theft in facilities, there is a question about just how far theft detection efforts should go. Is there a line that shouldn’t be crossed? James McCracken, who used to work at Amazon’s warehouse in San Bernardino, Calif., thinks there is such a line, which Amazon has now crossed.

 

“That’s a weird way to go about scaring people,” McCracken says in the Bloomberg article. “I think that’s offensive.”

 

What are your thoughts on theft prevention? It may be legal for an employer to check employee’s bags when a shift is over, but should the employees be compensated for that waiting time? Secondly, is showing “news” about former employees terminated for stealing appropriate?

There continue to be developments concerning Takata’s exploding automotive airbag inflators, and it doesn’t appear they will end anytime soon. As would be expected in a recall this large, there are implications for Takata and automakers, as well as numerous other companies in the automotive industry.

 

Reuters reported late last month that the National Highway Traffic Safety Administration (NHTSA) continues to investigate whether the recalls of nearly 29 million defective Takata airbag inflators in the U.S. should be expanded to include another 70 million to 90 million inflators with ammonium nitrate, citing evidence that Takata manipulated data to cover up problems with its products. The next day, U.S. Senator Bill Nelson cited the Reuters report on the Senate floor, and said it was “puzzling” that NHTSA has allowed Takata to continue production of ammonium nitrate-based inflators indefinitely.

 

“Why aren’t they taking a more aggressive approach? And what’s going on after all of these inflators, based on what we see with ammonium nitrate, have been exploding?” Nelson asked, Reuters reports. The current recall may have to be redone, Nelson said, “because auto manufacturers are installing new live grenades into people’s cars as replacements for the old live grenades.”

 

The airbag inflators in question can rupture with deadly force, spraying shrapnel at vehicle occupants. Orbital ATK, on behalf of a coalition of 10 automakers, recently completed detailed testing on the inflators. It determined that the ruptures were caused by a combination of three factors: ammonium nitrate propellant without moisture-absorbing desiccant, long-term exposure to repeated high-temperature cycling in the presence of moisture, and an inflator assembly that does not adequately prevent the intrusion of moisture.

 

One consequence of the recall is that due to the sheer volume, Takata simply cannot quickly meet demand for millions of replacement airbags. This presents an opportunity for other companies, which has not gone unnoticed. Indeed, Sweden’s Autoliv Inc., Japan’s Daicel Corp., Germany’s ZF Friedrichshafen AG and U.S.-based Key Safety Systems have all ramped up production to supply automakers that need to replace Takata inflators, as well as equip future vehicle models with airbags with which safety regulators are confident.

 

Chinese company Ningbo Joyson Electronic has seized on the global airbag crisis as an opportunity to enter the market, a Bloomberg article reports. The company has grown into one of China’s largest suppliers of automotive components, counting General Motors and Volkswagen AG among its major customers. The company recently acquired Key Safety Systems for $920 million in cash from private-equity firms in February.

 

“It’s very difficult for Takata to recover from this, and the company may be facing a bankruptcy crisis,” Joyson CEO Tang Yuxin said in a phone interview with Bloomberg. “All of this has given us a heaven-sent opportunity to enter the industry.”

 

Furthermore, by integrating its existing drive-control systems with Key Safety’s safety technology, Joyson aims to minimize injuries and deaths by detecting possible collisions and automatically triggering brakes and deploying airbags, Tang said. Key Safety, which was already ramping up inflator capacity two years earlier than scheduled before Joyson’s acquisition, probably will boost revenue this year by 25 percent to more than $2.5 billion—half of which will come from the airbag business, according to Tang.

 

As consumers demand replacement airbags, it leaves automakers in a predicament because Takata cannot meet such demand. As other companies ramp up production, it does help meet demand, as well as their bottom lines. That said, there is still more demand than supply.

 

Do you think other companies will in turn bring new products to market so they too may seize opportunity? Also, what will the long-term consequences for Takata be?

Americans’ interest in Internet-connected cars continues to grow quickly. According to Kelley Blue Book, 42 percent of the Americans responding to a recent survey support efforts to make cars even more connected. Furthermore, 60 percent of Millennials responding to the survey are in favor of cars being even more connected. At the same time, 62 percent of the respondents fear cars in the future will be easily hacked.

 

I found the answer to a follow-up question surprising, and yet, considering consumers’ attitude toward protecting their phones and computers from cyber hackers, perhaps it shouldn’t be unexpected. That response is that only 13 percent of the respondents said they would never use an app if it increases the potential for their vehicle to be hacked.

 

In a recent panel discussion about vehicle cyber vulnerabilities, Karl Brauer, a senior director with Kelley Blue Book, further explained that soon, all new cars will be connected, a USA Today article reports. The bad news, he continued, is that if a car has GPS or Bluetooth access or a WiFi hotspot in your car, which is coming soon, then the car is vulnerable to a wide range of hacks.

 

On the other hand, that fact doesn’t seem to bother U.S. consumers. Indeed, more than 33 percent of the people buying cars have already decided that if a car doesn’t feature the technology they want, they’ll buy a different car, Brauer says. Millennials in particular don’t want to go anywhere without being connected, so auto manufacturers are delivering to that expectation, he says.

 

Given the growing number of possible entry points for hackers to gain remote access to a connected car, such as through in-car entertainment, navigation and advanced driver assistance systems, I was also intrigued by news of how one auto manufacturer is addressing the growing potential for vehicle hacks. It was widely reported earlier this year that General Motors launched a program to connect the company with white hat hackers. It encourages hackers who find security bugs or vulnerabilities to inform GM through a secure website portal hosted by HackerOne, a venture-backed security startup devoted to helping companies coordinate security vulnerability disclosure with independent researchers.

 

“If you have information related to security vulnerabilities of General Motors products and services, we want to hear from you,” the page on HackerOne’s website reads. “We value the positive impact of your work and thank you in advance for your contribution.”

 

According to its terms, GM promises not to sue researchers who submit security-flaw reports as long as they’ve followed some basic rules in their car hacking—such as to not endanger GM customers, violate their privacy or break any laws. Unlike big tech companies such as Google and Facebook, however, GM won’t pay any monetary rewards for those reports, so-called “bug bounties.” Be that as it may, even welcoming outside security research on GM vehicles puts the company one step ahead of its competitors.

 

“We’re thrilled that a major automotive manufacturer is stepping up to the plate in terms of providing a way for hackers to get in touch with them if they find a security vulnerability,” says Katie Moussouris, HackerOne’s chief policy officer, in a Wired article. “The first step in any vulnerability-handling program is to open the front door.”

 

The results of the Kelley Blue Book survey and the GM initiative leave me with two questions. The first is, do you have fears about connected cars being hacked? Secondly, what are your thoughts on GM encouraging white hat hackers to search for and report cyber vulnerabilities of new cars?

Capacity and resource availability, talent and complexity are among the business challenges supply chain managers most worry about, according to a new report, titled “Supply Chain Issues: What’s Keeping Supply Chain Managers Awake at Night?” Based on the results of a survey to investigate business practices of supply chain organizations and identify critical issues, the paper is part of Supply Chain Management: Beyond the Horizon, a multi-year research project conducted by Michigan State University’s Eli Broad School of Business and supported by the APICS Supply Chain Council and the John H. McConnell Chair in Business Administration at MSU.

 

This stage of the project investigates the current business practices of more than 50 firms through surveys and interviews with executives to determine which critical issues executives are “wrestling with.” Specifically, they were asked, “What keeps you awake at night?”

 

Capacity and resource availability was the issue foremost on the executives’ minds. For instance, most of them are concerned with a broad range of activities aimed at maximizing the firm’s facility capacity, such as replacing old equipment with state-of-the-art higher-capacity machinery. However, when dealing with innovative products and growing sales, managers say they are most worried by potential strain on the supply chain. Capacity planning and resource availability were also cited as concerns for companies entering new and emerging markets.

 

Talent issues are another significant concern for the respondents. Many of them noted that talent competition is intense for supply chain jobs, and even if the company has successful hiring cycles, executives are still concerned about retaining new hires and properly developing and utilizing their talent. Retention also is a challenge because the executives worry about how to best engage and motivate workers in the Millennial generation.

 

Complexity also weighs heavy on supply chain managers’ minds. In many instances, firms face situations where their products are becoming more complex and the amount of stock keeping units grows quickly. The most common cause cited by respondents is building different types of products while growing existing offerings. Common approaches to managing complexity, as cited by the survey participants, include greater standardization, simplifying processes and acting with speed.

 

Many executives also expressed growing concern regarding supply chain risks ranging from natural disasters to troubled suppliers, and the need for continuity planning. In particular, they are focused on the need to build business continuity considerations into new product development, how to decide when to invest in resiliency, and the additional challenges involved with continuity planning when lean operations are involved.

 

Next, although the executives mentioned a range of compliance components, primary compliance challenges include product regulation, trade controls and continually changing regulations. Mandates related to trade compliance, anti-dumping and customs, are being supplemented by mandates from regulatory bodies such as the U.S. Environmental Protection Agency, U.S. Food and Drug Administration and U.S. Department of Agriculture. As a result, compliance with these rules and regulations adds considerable complexity to the supply chain.

 

Finally, cost and purchasing issues are another topic for worry. Although price pressures are a concern in all industries, healthcare and pharmaceutical firms were noted as the industries that see the most impact. Restrictions instilled by the Affordable Care Act, as well as Medicare and Medicaid have altered these industries and will continue to do so in the future, the respondents note. To overcome cost and purchasing pressures, some executives say their organizations are focusing on improving efficiency.

 

What are your thoughts on the challenges most cited by the survey respondents? Are these the same concerns you worry about? Are there other supply chain concerns keeping you awake at night?

It’s always remarkable to learn someone was responsible for delivering more than $10 million in cost savings, spearheading a new global distribution model or driving a startup’s exponential growth. It’s even more notable when you learn those are the achievements of some young professionals named winners in the Thomasnet and Institute for Supply Chain Management (ISM) 30 Under 30 Rising Supply Chain Stars Recognition Program.

 

“These young professionals are leading by example for a new generation in the procurement field by demonstrating the huge accomplishments possible,” says Mark Holst-Knudsen, president, Thomasnet. “They are true role models for how Millennials are paving a new path in supply chain management.”

 

Founded in 2014, the 30 under 30 Rising Supply Chain Stars program recognizes individuals whose leadership and achievements are particularly noteworthy. ThomasNet and ISM strive to reach other Millennials who would thrive in supply chain management and procurement careers by honoring outstanding professionals who are 30 and younger, and who not only lead successful careers, but also are passionate, innovative and demonstrate leadership qualities.

 

The organizations hope that the honorees will serve as role models and inspire other Millennials to build supply chain management careers. This becomes increasingly important as Baby Boomers who dominate the industry retire and leave more jobs open than can be readily filled. Millennials are expected to comprise 75 percent of global employees by 2025, so it is imperative to recruit them and promote the industry.

 

“Our new best and brightest stars are ahead of the curve in recognizing supply chain as a natural fit for their expertise and values,” says ISM Chief Executive Officer Tom Derry. “Applying their leadership skills, technical know-how and passion for making a difference, they are helping revitalize the industry in tangible, far-reaching ways.”

 

This year’s Megawatt Winner is Amy Georgi, 30, a program manager in supply chain acquisitions and integrations with Fluke Electronics, a Danaher Company, based in York, Pennsylvania. Among her prominent achievements was the recent re-sourcing of 91 percent of the components to Fluke’s preferred suppliers within 90 days without causing disruptions to manufacturing, which is a new company record.

 

With an average age of 27, the 2016 supply chain superstars span industries such as manufacturing, medical devices, information technology, oil and gas, and government. Many are driving improvement in areas that matter to them and benefit society, such as sustainability. Some of their accomplishments include identifying opportunities to automate processes to help shippers move products more effectively, improving supply chain inefficiencies through better data analysis, reducing transportation costs by offering greater transparency of global volumes and costs, and introducing new processes for improving inventory management.

 

I also find it interesting that the common denominator among the group is a professed passion for the profession and commitment to making a difference in their companies and communities. For instance, all of this year’s winners volunteer for causes outside of work. Mentoring is also popular—program winners are involved in mentoring peers both inside and outside their companies.

 

What are your thoughts on the 30 Under 30 program? Do you have some superstar Millennials where you work who are passionate about their job and display a commitment to making a difference both at work and in the community?