Skip navigation

A warehouse is not a warehouse and a supply chain is not a supply chain. They come in various sizes, varieties and specifications. They vary by industry and product requirements. So, in short, it is hard to generalize.


They need to be designed and fit for purpose, but there is no question that they are growing more complex. As complexity increases, manufacturers and distributors are seeking new ways to optimize customer service requirements and stem rising labor costs.


One of these options is voice-directed warehousing. Voice-directed warehousing, where a warehouse worker is directed to perform tasks based on voice automation using a headset, is now over twenty years old. The processes are maturing and the technologies are increasing in capability. We have moved from early adopter, or early experimentation with the technology, to main market adoption where mainstream manufacturers and distributors are trying to rationalize the value proposition. To better understand the value proposition, we recently placed a quantitative study into the field. The study is complete. Here we share the early results. We will be following up with a detailed report next week.



Today’s warehouses are more complex than ten years ago. Products and channels have proliferated, late-stage customization requirements have increased, the number of temperature environments has multiplied (e.g., cold chain, frozen), and warehouse employee turnover is greater than ever before. Customer service requirements have increased and as a result, a greater percentage of products are picked by either the “each,” the “case,” or the “layer” in today’s warehouse


Today, there are higher demands for customer service in the organization. The cadence of customer requests and new requirements increases each year. Accurate transmission of these requests into action is problematic. The environment has grown more dynamic. Order cycle time is shrinking. There is continuous pressure to reduce costs and improve customer service. Demand volatility reigns. Product variants and master data issues abound. Voice-directed warehousing offers promise, but how do companies rationalize the capital costs?

Additionally, compliance regulations loom. How will the warehouse adapt to product serialization in pharmaceutical companies? What will field to fork legislation mean for food and beverage manufacturers? How will product tracking and customization for REACH impact flows? There are more questions than answers. The only thing that is known is the warehouse will be rife with change.


The Results

First let's start with some background on the study. We conducted a quantitative study during the period of December, 2012 through February of this year. We were fortunate to have 96 respondents complete the study from over 80 companies and the average use of voice-directed warehousing was five years among users. There were 58 respondents using voice-directed warehousing and 38 that were not. Among users of voice-directed warehousing, only 17% used voice alone. It was usually used in concert with barcode scanning.


In general, companies are happier with supply chain execution technologies (warehouse management and transportation management) than supply chain planning. The software application environment is heterogeneous. Based on a prior study of supply chain leaders by Supply Chain Insights, the average company has a large number of different applications, and 33% of respondents have three or more warehouse management solutions. As seen in figure 1, this study shows that warehouse management applications have the highest user satisfaction rates.


Figure 1. Line-of-business Leader Satisfaction Rates with Supply Chain Applications (from Prior Study)


However, based on ever-changing product requirements, the increases in expectations for unit-level picking and warehouse employee turnover, warehouse operations are struggling. As we see in the data in figure 2, voice-directed warehousing improves user satisfaction with warehousing systems. While we cannot directly compare the two studies to get an absolute improvement rate, we know from the prior research that user satisfaction with Warehouse Management Systems (WMS) is the highest among supply chain applications; and satisfaction among voice-directed warehousing users is higher than among non-users.


When companies use voice automation in the warehouse, their satisfaction with warehouse management increases even further. The reasons are improved labor efficiency and better order quality due to order accuracy. However, not all companies are ideal candidates for voice-directed warehousing. The ideal candidates are companies that want to reduce warehouse costs, improve flexibility and/or improve job satisfaction of warehouse employees. They typically have high pick rates, short order cycles, employee turnover or seasonal labor, and increasing complexity.


Figure 2. Satisfaction with Warehouse Operations with and without Voice-directed Warehouse Operations


As shown in figure 3, the primary value proposition is improved labor efficiency; but the secondary, and an important consideration, is improved order completion accuracy. In short, the value proposition hits two primary objectives of the supply chain leader: cost and improved quality in picking which improves customer service. For the warehouse growing in complexity, this is good news.


Figure 3. Value Proposition for Voice-directed Warehousing

The barriers are the capital expense and conflict with other projects. With the flattening of growth and the increase in commodity costs, supply chain costs are being squeezed. However, based on these results, we think that it makes sense to give voice-directed warehousing a good look.


What do you think? Do you agree? Does this represent your experience with voice-directed warehousing? We would love to hear from you.


Tales of the Shaman


After two weeks in Europe, I have made it to London for a good night's rest and a swim. I am tired. Tomorrow, I continue my trek home. For more on my European Bricks Matter tour, check out my Bricks Matter blog and let me know what you think.


This week, at Supply Chain Insights, we also launched two new surveys. I love doing supply chain research and sharing data like the charts in this blog post. Supply Chain Insights remains committed to providing the deepest research on supply chain excellence in the industry.


Our first survey is to understand supply chain organizational alignment for line of business and information technology (IT) leaders in the supply chain. We would love to hear your thoughts. The link for this study is:

The second looks at the extended healthcare value chain and is a survey of manufacturers, hospitals and consultants. If you are in the healthcare value chain, we would love to hear from you. Please use this link to answer this confidential survey:


As always, when you give to us, we give back to you. If you fill out our surveys, we not only share our reports openly and freely, but we also will share the data in a one-hour call with you and your team. We look forward to hearing from you!


Audit Safe?

Posted by lcecere Mar 17, 2013

It takes many shapes ... like the deaths of nine unknowing consumers. In 2008, 762 people became dangerously ill in 48 states from contaminated peanut butter in the United States. The recalls permeated the food industry. Over 3800 products from 361 companies were recalled.  It should not have happened. The PCA factory that manufactured the peanut butter was certified as safe by the American Institute of Baking (AIB).


Audit safe graphic


Fatal fires are also a grim reminder. 262 workers died in Pakistan in September 2012 in a factory fire. The factory had a SA8000 certificate of approval; but when the fire started, locked exit doors doomed factory workers to a fiery death.  Just two months later, more than 100 people died in a garment fire in Bangladesh in November 2012.  A Walmart garment order was on the cutting room table. Walmart has worked ******* ethical sourcing. It was an order being manufactured by a supplier of Walmart.  The factory had recently passed an ethical sourcing audit.


Over the last ten years, supply chains have become more complex.  Companies are more dependent on a network of suppliers and suppliers' suppliers.  Supply chain risks abound.  Supply chain leaders may have outsourced their supply chains, but they cannot outsource the risk. They are responsible. The management of this risk has grown in importance in boardroom discussions, but best practices remain elusive.  One thing that we do know is that audits do not work. A supply chain  cannot be made audit safe.


In a recent study, completed by Supply Chain Insights in cooperation with GreenBiz Group, we see that sustainability leaders and supply chain teams are not aligned on the effectiveness of supplier audits.  While both groups see that working with suppliers on ethical behavior and tying the behavior to contract terms is the most effective, supply chain leaders have more belief in supplier third-party audits than their sustainability counterparts.  What is clear is that expectations on sustainability behaviors require taking responsibility for the relationship.  In the words of one supply chain leader, "We have to do the hard work." This includes the setting of clear expectations and ensuring that there is compliance in contract terms and conditions.

What is a suitable alternative to an audit?  We believe that unstructured text mining is a potential answer, but only 3% of supply chain leaders are using unstructured text mining and supplier sensing to mitigate supplier risk.  In the use of unstructured text mining, publicly available documents are continuously scoured for information on factory performance. This includes local filings, social sentiment, and local news.


Contract management also offers promise. Companies need to put their money where their mouth is.  In the words of a presenter on this week's Sustainability webinar, "We tie desired supplier behavior to contract terms. We consider everything else as just communication."


For more on our work on corporate sustainability check out our recent report.


Also, for insights on the recent book tour of Bricks Matter, follow our progress on the Bricks Matter website.

“Supply chain sustainability” is the management of environmental, social and
economic impacts and the encouragement of good governance practices,
throughout the life cycles of goods and services.

Supply Chain Sustainability (definition)
United Nations Global Compact




The first corporate social responsibility statement was published by Dow Chemical in 1996. Since then, how have supply chain leaders and corporate sustainability leaders defined supply chain initiatives? What are the priorities? Where are the commonalities? Are they aligned? How has the focus on carbon reduction, water usage minimization, zero waste, conflict minerals, and labor practices changed supply chain? What has it meant to supplier development? We wanted to know, so we worked in concert with GreenBiz to get answers from 64 supply chain leaders and corporate sustainability officers.


Within an organization, it can be known by many names: the green supply chain; the good citizenship report; Corporate Social Responsibility (CSR) policy; or fair trade. The programs can have different names, but the goals are focused on creating a better balance between the corporation’s efforts to manage profit, people and planet. For many, this can be a stark contrast to the traditional supply chain goals of the right product at the right place at the right time.


To meet the stated corporate goals for sustainability programs, it is critical for supply chain and corporate sustainability teams to work well together. The success of one is dependent on the success of the other. Over the last ten years, corporate sustainability goals have transformed supply chain objectives causing companies to rethink their definitions of supply chain excellence. Much is in flux.


While the importance of these programs has grown over the last decade, in recent research, that will be presented this Friday during a Supply Chain Insights webinar, we find two disconnects. The first is the ability of the company to meet its stated goals based on the scope of activities. As shown in figure 1, 92% of companies surveyed have a public statement or declaration of goals and policies for corporate sustainability. It has also grown in importance to the definition of the brand promise. In fact, today, 74% of manufacturers connect their success in sustainability to their brand statements. For many, the goal is to use sustainability as a brand advantage.


Many companies are vulnerable. The greatest impact on corporate sustainability (often 60% to 65% of resources consumed) is outside the company’s four walls; yet, as shown in figure 1, only 20% of companies are focused on the entire value network (from the customer’s customer to the supplier’s supplier). While the most common focus is on the enterprise, the greatest corporate risk lies outside the four walls of the enterprise, and companies are staking both their corporate and brand reputations on their abilities to deliver.


The second disconnect is decision making. The two sets of processes lack common processes and definitions for governance. Many of the decisions are ad hoc. As a result, when given a choice between supply chain and corporate sustainability policies, as shown in figure 2, over 50% of companies will choose the supply chain priorities. The primary drivers of the decisions are profitability and customer service.




At first, progress is easy. The traditional supply chain and the sustainability objectives align closely in the beginning. As companies adopt CSR programs, initial results reduce costs and improve waste, and all is well between the two groups. However, as the programs become more systemic, especially in the area of supplier development, pressures on program alignment increase. For example, the most sustainable decision on a supplier may be higher cost. Companies are currently struggling with the right mechanisms to get balance and alignment between the two programs.


What do you think? We hope to have you join us for our webinar this Friday, March 15th at 10:00 AM eastern. Join the audience polling and listen to the joint discussion of the results. I will be joined by John Davies, Vice President and Senior Analyst of GreenBiz, and guest panelists Peter Murray, Supply Chain Development and Innovation Leader of DuPont, and David Lyons, Sr. Vice President, Operations & Supply Chain of Wells Dairy. All have great insights. A sneak preview of the results is available on slideshare.  To Register click this link:

I I have never been an athlete. At the age of 58, I buried my mother in November 2012. She died of complications from Alzheimer's disease. It was a long hard eight-year struggle that was tough on my family. One of the sad outcomes of the disease is that you don't know how to grieve. The victim of Alzheimer's slowly slips away. The person that you bury has very few resemblances to the person that you love. So, as I buried her, I became obsessed with learning how I could reduce my chance's of getting the disease. As a daughter of a mother with Alzheimer's, I have a high risk of getting the disease (35%). This landed me in an intense discussion with my trainer and my doctor about blood flow into the brain through endurance training, and how that might reduce the risk of me getting Alzheimer's.


My long-term blog readers may remember that two years ago, when I left AMR Research after the acquisition by Gartner Group, that I became more serious about my health. I started training six hours a week and lost 37 pounds. Those of you that know me personally also know my frustration with trying to drop another twenty pounds. It has been a goal for the past two years. While I have lost 22 inches through diet and exercise, and improved my Body Mass Index by 11%, I have not dropped weight.


So, with the death of my mom, and the discussions with my physician about fighting the probability of getting Alzheimer's, I started training with a new vengeance over the holidays. My goal is to live better for the rest of my life. It is hard. My trainer is unmerciful. He has set new targets for heart rate monitoring for me, and I have kept up the training. Last week, I ran and completed my first triathlon. Yes, it was ONLY a sprint triathlon (10 minute swim, 30 minute bike and 20 minute run), but I finished it. I never thought that I would do a triathlon. A year ago, I could not run to the mailbox; but I not only finished the event, I was at the middle of the overall rankings as an overweight 58-year-old woman. I finished despite cramps in my calves and a tough travel schedule getting to the event. So, why do I tell you the story?


I see a lot of parallels in the training that I did for the triathlon, and the work that I am doing on financial ratios with Abby Mayer on my team at Supply Chain Insights. Abby and I are writing an e-book on Supply Chain Metrics that Matter. It will publish in the early summer. To write the book, we have been analyzing twenty years of supply chain financial ratios and looking at the trends. We are also doing multi-variant analysis to build a formulaic representation of supply chain excellence based on public market valuations. We call this the Supply Chain Index. We will be launching this work at the Supply Chain Insights Global Summit on September 11th-12th in Scottsdale, AZ.


As I look at the preliminary analysis results for the e-book, I see many parallels to my triathlete experience. It has been fascinating for me to study the financial results of clients that I have worked with for the past twenty years and to see how their supply chain strategy documents translated (or did not translate) into financial results. I will be speaking more on this during my European Book Tour of Bricks Matter next week.


  • Balance. When I first started training, I got as stiff as a board. I lost flexibility and balance. I now spend an equal amount of time stretching to improve balance, as I spend on weights in the strength training. I am also focused on balance. I am amazed how strength training reduces balance. Similarly, in the evolution of supply chain practices in the past decade, I feel that we have not had a sufficient focus on balance and flexibility. The evolution of tightly integrated ERP solutions to BI and APS has created tight and inflexible links. As part of the training plan, for supply chain excellence, companies need to focus on balance and flexibility. Only 10% of companies today are happy with their "what-if" analyses and the ability to understand change. We need balance between front and back office activities and we need to understand the implications through "what-if" analysis to drive flexibility. It is about much more than short cycles. It needs to be deliberate. I think that we have taken tight integration of supply chain applications to ERP too far and lost balance and flexibility.
  • A Clear Plan.  I am a strong swimmer and a weak runner. While I can swim 75 minutes and enjoy the time in the pool, I have to force myself to run. To complete this event, I had to focus on what I did not like to do, and I had to learn how to balance my energy and body motions to finish the run. Likewise, in today's supply chain environment, I find that supply chain leaders favor a single function of logistics, manufacturing or sourcing. They have not forced themselves to learn all three. To complete the race for supply chain excellence, the company needs to be good at all three and have a strategy on how to reach balance between the functions in day-to-day operations. It requires a plan. Too few companies have a clear supply chain strategy. While the answers to quantitative surveys that we complete at Supply Chain Insights state that over 60% of companies are comfortable with their supply chain strategy, I find that only 5% of companies truly have an adequate plan that drives a clear road map to help the organization transition from business strategy to supply chain strategy. (And, for clarity this is not a strategy for the supply chain department. Instead, it is the design and implementation of a value chain strategy that gives a plan to create differentiation from the customer's customer to the supplier's supplier.)
  • Measurement. Over the last decade, the only metric that we have improved in the supply chain is revenue/employee, a measurement of productivity. Only the high-tech industry has been able to effectively make improvements on the effective frontier of supply chain management--the balance of growth, productivity, cycles and complexity--and drive resilience out of the Great Recession of 2007-2009. Companies that are not looking holistically at metrics are stuck. What do I mean? The process industries have mistakenly viewed Return on Assets (ROA) as the proxy metric for reducing operating costs. In many ways, it is like my focus on weight in my training for the triathlon versus the BMI or inches. The measurement of the BMI is harder. It is easy to hop on a scale and know your body weight. It is harder to understand lean body mass. Similarly, only 23% of manufacturers can easily measure profitability. And, in my research on profitability models for manufacturers, I cannot find a good packaged solution for companies to easily model profitability in building market-driven value networks. As a result, companies will be forced to build it themselves using technologies for "what-if" analysis on strategic modeling from i2 Strategist (now JDA), Insight or LLamasoft. However, it is worth it.
  • Need for a Coach, Leadership and Grit.  In the study of financial metrics, I find an inverse relationship between companies that have had a strong dependency on supply chain consultants and results. Instead, the companies that have done it the best, have driven supply chain excellence based on internal leadership. This does not mean that the organization does not need a coach; but, there is no substitute for internal leadership, discipline and true grit. In the words of a supply chain pioneer in the book Bricks Matter, "No true supply chain transformation can happen in less than three years" and "There is no substitute for leadership." The coach needs to be carefully selected based on the training needs, but is there to guide the plan, not to do the hard work.
  • Compelling Event.  I would not have done this without a compelling event. My mother's death and the probability of dying a similar death is a compelling event. I am trying to fight back. Likewise, in the history of supply chain management, over the course of the last twenty years, more success has happened through failure than success. Company transformation usually happens following a deleterious event.


Anyway, long story short, finishing my first triathlon was exhilarating. I had no idea that I could do it! l I am now in training for a longer and tougher event (1/2 mile swimming, 15 mile bike ride and a 5K run.) I have built a one year plan, and I am working hard with my coach. I am monitoring my heart rate, BMI and time. I am also focused on building strength, flexibility and balance. Each of these elements requires hard work for this gal that has never been an athlete, but I am trying hard to fight back the momentum of time. I think that there are insights here for the supply chain leader. What do you think?



Posted by lcecere Mar 3, 2013

epitaph n.  An inscription on a tombstone in memory of the one buried there. A brief literary piece commemorating the deceased. A final judgment on a person or thing.

Here lies EIEIO, EIO, MEIO, DIO, Powerchain and all of their descendants.


At the beginning of the third decade of supply chain management, a new class of applications was born. They were born from well-intentioned, bright professors from great schools --Boston College, Carnegie Mellon, and Massachusetts Institute of Technology (MIT)-- in operations research. Each had cool math and wanted to make a name for themselves… as well as a couple of bucks along the way.  They knew little about the software market.


Today, I write the epitaph for this market. It was called multi-enterprise inventory optimization. It is no more. The players have now been absorbed into the larger ecosystem.


In the beginning, the inventory management solutions of LogicTools, Optiant and SmartOps pushed to take operations research to a new level through supply chain optimization.  As the leaders in the Advanced Planning Solutions (APS) market consolidated, and innovation slowed, the new inventory management startups brought energy into a market that was losing its luster.


Last week, one of the last survivors from the software inventory optimization software market ceased to exist as a stand-alone software company. SmartOps was purchased by SAP. Like its predecessors, LogicTools and Optiant, the company stopped functioning as a stand-alone software provider due to acquisition. If you do a google search, you will find lots of accolades and positive press on the acquisition of SmartOps by SAP, but the Shaman is a skeptic.


SmartOps entered the supply chain optimization market in 2000 and became an SAP partner in 2006. The press release last week cited the reason for the acquisition, " part of the strategy to build a real-time optimization solution for S&OP on SAP HANA.  SAP released an S&OP solution using HANA in 2011. (For more on this announcement reference the Supply Chain Shaman blog post, Third Time the Charm?) However, the picture is not that rosy. For more, read on...



When I became an industry analyst at AMR Research, I was told that I needed to write about this “hot market”  of inventory optimization. I shrugged my shoulders and asked myself, “Why?” The market seemed ancillary to the larger supply chain planning market, and I expected it to be short-lived. I should have followed my intuition. Against my better judgement, I wrote two reports and many alerts over the course of five years on the multi-enterprise inventory optimization market. This market shone brightly for only five years before it was extinguished by its own flame.


The sales cycles were heavily contested. They were brutal and bloody. The solutions were expensive. Over the last decade, I helped many clients navigate what I termed the "holy math wars" that were brought to market by these well-intending professors.


Results stagnated. Over the course of the decade, the inventory optimization market stalled. Levels of inventory did not go down, and many companies began to question the value of the software.  Only one out of every ten customers, that I helped in sales cycles, were able to optimize and reduce inventory through the solution. They were the exceptions, not the rule.  Only companies like Stanley Black and Decker, Hewlett-Packard, and Procter & Gamble were able to realize the value proposition. The problem was seldom the math. The problem was larger and rooted in organizational issues. There were three common characteristics for failure:

  • Fit. The capabilities of the technologies were often more advanced than the processes of the manufacturers and retailer. As a result, the technologies were implemented, but they were not sustained. In fact, 25% of the companies actually installed multiple inventory optimization technologies with all projects suffering the same fate.
  • Focus. To use the software there needed to be a shift in understanding.  The processes were more mature. The focus needed to shift from looking at inventory levels versus the form and function of inventories.
  • Ownership.  In the organization, no one individual owned inventory in the organization. Instead, it became the outcome of multiple functional decisions and processes. It was a piece of a larger puzzle.

What Can We Learn?


At the end of the day, I wanted to use this as an opportunity for reflection. I think there are four things that we can learn:

1. Inventory Optimization Should Not Be a Stand-alone Market. Inventory decisions are more important, but they are not stand-alone.  Inventory is now the primary supply chain buffer. Why?  In the beginning, when manufacturing was insourced, there were two supply chain buffers: manufacturing and inventory. With the outsourcing of manufacturing, inventory became the buffer for both demand and supply volatility. As a result, inventory decisions became more important, and more intertwined with other supply chain processes. This advanced math needed to be a part of the next generation of supply chain decision support applications. It was not a stand-alone solution. While it was sold by SAP to overcome the deficiencies of SAP APO, it could not overcome the inherent limitations of APO.  Instead, the first generation of supply chain applications needed to be rewritten to encompass this higher level of planning. Perhaps, this will be the outcome of the acquisition, but the question is "have manufacturers lost so much faith in SAP to give it a chance?" Or will the story be written by new players?

2. Overhyped Markets Eventually Fail. To Be Sustainable There Must Be a Sustaining Value Proposition.  As analysts, we tend to fall in love with the newest thing and write about it. There needs to be more discipline to validate and write about actual results. It was only after the building of the database to understand financial ratios at Supply Chain Insights that I could actually track the progress of companies using the software.  It took me a year to analyze companies with and without the use of advanced inventory optimization software solutions. However, there is a problem. In the traditional analyst model, I would not be able to write about these results. In these more traditional models, it is easy to publish good news (posts that support the positioning of the technology vendor), and more difficult to publish the "bad news" (writing that does not support the positioning of the technology vendor). As I look at this history, it makes me believe more in the model of open, objective research. It is much easier to write this blog than the prior research studies that I wrote in previous analyst roles.

3. Software Acquisition Only Benefits the Founding Company. While press releases and articles tout that the purchase of software will yield great results, history shows that the only people who win in the acquisition of a software company are the founders of the company being acquired. The users of the software often find that the acquisition slows innovation and product delivery and causes employee turnover of key resources in the company being acquired. The software users of the SmartOps solutions need to be very diligent in protecting their solution investments through the acquisition.

4. Failure of the SAP Partnering Ecosystem. Originally, the gems of the SAP Ecosystem were the players in the inventory optimization market. On the original announcements, there were to be four partners, and SAP was committed to making them equally successful.  At the end of the day, SAP supported SmartOps and the rest of the partners floundered.  If the measurement of a successful partnership is the success of the partner,  it is hard for me to find any successful SAP partnerships in the supply chain management space.




So, as we gather together for the WAKE for the Inventory Optimization market, we can share lots of stories. The founders of this market were colorful and full of vision. The stories are rich. There are many tales to tell.


Tonight, I propose a toast. May this vision take shape in the next generation of solutions.  I just have my doubts that we should place our bets on SAP to deliver it.