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How To Avoid A Personal And Supply Chain Massacre This Valentine’s Day

Richard Howells

Female clerk in a flower shopThe Saint Valentine’s Day Massacre is the name given to the 1929 murder of seven mob associates as part of a Prohibition-era conflict between two powerful criminal gangs in Chicago led by Al Capone and Bugs Moran.

While no mistake I could possibly make this upcoming holiday would result in such bloodshed, I’m willing to go to great lengths to avoid my very own Valentine’s Day massacre this year.

Here is a simple checklist I plan to follow to ensure a happy Valentine’s Day – with a look at the not-so-simple, behind-the-scenes supply chain workings required to avoid a massacre.

Say “I love you” with a card

Valentine’s Day is big business. In fact, around 190 million Valentine’s Day cards are sent annually, making it the second largest card-sending occasion, behind Christmas, according to figures from the Greeting Card Association.

When I go to my local pharmacy or specialty card shop, I am always amazed at the selection of cards available for the holiday, and I constantly have to wonder how the manufacturers ensure on-shelf availability across the hundreds of thousands of outlets spread across the U.S.

More and more, however, customers are seeking a more personalized approach to Valentine’s Day cards. Hallmark is a great example of a card company that is keeping up with this trend, introducing its specialty retail concept store HMK.

At HMK stores, shoppers can create unique, personalized gifts that reflect an individual’s sense of style, and these products carry a unique artistry coupled with the emotion typically found in a Hallmark-brand item. But with customized products, inventory planning is not that simple. These items call for a more demand-driven supply chain, requiring HMK to go from make-to-stock to engineer-to-order, with some of the engineer-to-order processes even taking place onsite.

In addition to physical cards, an estimated 15 million e-Valentines will be sent this year. After all, the card business is now an omnichannel one, and numerous sites exist that offer customers the ability to personalize a card and send it to a loved one.

Show love with a bouquet of flowers

I – like 75% of men, according to a survey conducted by Luth Research – plan to give flowers this Valentine’s Day. Along with Mother’s Day, Valentine’s Day is the most popular holiday for giving flowers, generating an estimated $100 billion worldwide for the industry. Approximately 180 million roses – the majority red – will be sold and delivered within a three-day period.

So how exactly do our roses get to our loved ones on the big day? The cold-chain logistics of transporting short shelf-life products such as flowers across a global network from a farm in Ecuador, for example, to a happy spouse or significant other in Massachusetts, let’s say, is not easy. It requires a lot of planning, collaboration, and execution. Humidity-controlled shipping containers, refrigerated cooling facilities, and other equipment are required to minimize delivery delays and ensure freshness.

Flowers have a shelf life of about 10 days. A day lost in the supply chain is 10% lost in shelf life, which can cost the wholesaler big bucks and result in an unsatisfied customer, her Valentine’s Day dream left drooping right in front of her!

Appeal to the sweet tooth with chocolates

Candies and chocolates have long been a Valentine’s Day tradition. In fact, Valentine’s Day is fourth on the list of holidays with the most candy sales – behind Halloween, Easter, and Christmas. The National Confectioners Association estimates that more than 36 million heart-shaped boxes of chocolate will be sold for Valentine’s Day. (Fun fact about chocolate.)

The modern chocolate supply chain is a global affair. It all starts with the cocoa, which is predominantly grown in equatorial countries, with Ghana and the Ivory Coast responsible for 50% of the global supply. Imagine if there was a natural disaster or other break in that supply. Can you picture the panic late in the evening of February 13 – when most men shop – if there was no chocolate left on the shelf? It would definitely highlight the need for the global supply chain to be more robust and explain why supplier backup is so critical.

To establish resiliency against supply shocks such as the cocoa-bean shortage, companies need to combine risk-management strategies with a balanced supply network, a multi-tier understanding of inventory positioning, and the visibility and responsiveness to re-plan supply interruptions.

Another rising challenge to this global supply is the spotlight around the sustainability of the supply in West Africa and the prevalence of child labor, human trafficking, and forced labor. This certainly doesn’t jibe with the “hearts and roses” image typically associated with Valentine’s Day. Partially as a result of this, we are now seeing a number of chocolate companies around the world sourcing Fair Trade Certified cocoa. Many are also increasingly sourcing cocoa beans that have been certified by independent organizations to meet various labor, social, and environmental standards.

So with those little pointers, and a “tip of the cap” to the business processes that make it all happen, here’s to a happy Valentine’s Day.

For more on protecting your supply chain, take a look at our research infographic on Supply Chain Fraud: Where Has All the Money Gone?

Join me on Twitter: @howellsrichard.

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About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

How Integrated Project Delivery Contracts Are Changing Construction

Dustin Anderson

In the next 14 years, the construction market will nearly double, growing from $8 trillion to $15 trillion by 2030. Rapid infrastructure expansion is fueling this growth. In fact, an astounding 75% of the infrastructure that will exist by 2050 has yet to be built.

“Construction is likely to be one of the most dynamic industrial sectors in the next 15 years and is utterly crucial to the evolution of prosperous societies around the world,” says Fernando A. González, chief executive of global building materials company CEMEX.

But it’s not all good news for the construction industry. The industry is also facing serious challenges. Projects are more complex than ever before. Inefficient, wasteful practices are reducing already razor-thin profit margins. As long as companies persist with the ineffective design-bid-build delivery method, they will continue to face these problems.

The digitization of intercompany collaboration creates a unique opportunity window for construction companies to improve efficiency, optimize performance, and increase profits. To do so successfully, construction companies must move from a design-bid-build delivery method to an integrated project delivery contract system with outcome-based success measurements.

From design-bid-build to integrated project delivery

The move from design-bid-build delivery method to integrated project delivery contracts and outcome-based success measurements will help overcome historic productivity challenges in construction.

Much of the poor productivity in the construction industry can be traced to the design-bid-build (DBB) delivery method. Traditionally, an owner contracts directly with a designer and a contractor. The design firms delivers 100% complete design documents. The owner then solicits price bids from contractors to perform the work. Designers and contractors have no contractual obligation to one another for the project’s success. The owner, in turn, bears all risk associated with the completeness of the design documents and their successful execution.

Rather than fostering collaboration, the DBB method drives an adversarial relationship that causes information to be “siloed.” Each party keeps vital information to themselves in an effort to protect against litigation. The result: projects are expensive, experience cost overruns, and are rarely completed within the original time frame.

Integrated project delivery, also known as design/build (DB), is different. Under this collaborative arrangement, design and construction contractually work together in the best interest of the project. DB teams have the greatest potential for achieving goals in schedule maintenance, construction speed, and intensity. Rather than pitting teams against each other, integrated project delivery creates a single team with a sole purpose: achieving what’s best for the project. Participants are evaluated based on the outcome of the project, rather than just their particular piece.

How integrated product delivery is changing construction

Re-imagined business models fundamentally change how contractors perform, work together and retain their workforce. This shift is good for productivity and the bottom line. A study from the University of Texas at Austin comparing DB and DBB projects found that DB projects “take less time, had less cost growth, and were less expensive to build in comparison to DBB projects.” A study by Penn State found a similar positive outcome for DB projects. Compared to DBB, DB projects had a six percent reduction in change orders, were delivered 33% faster, and cost six percent less.

Beyond design build: New contract models and extensive verticalization driving change

Extensive verticalization and new contract models are forcing construction companies, contractors, and architects to reimagine their working relationships. This is an extension of the DB concept that allows contractors to reduce overall project risk and, also importantly, the owner’s perception of construction risk.

As use of integrated project delivery contracts accelerate and collaboration technology is adopted, true vertical integration of projects will expand. In turn, customer-perceived risk will diminish. The implications for supply chain simplification and cost reduction are significant, with a single entity controlling all aspects of the project from design to prefabrication and construction.

Integrated project delivery contracts are also reshaping the end delivery process. Traditionally, contractors have delivered their end product to an owner to operate and maintain. Now, to improve margins in this low-margin industry, some contractors are financing and operating what they construct. This allows construction companies to deliver facilities- and assets-as-a-service. One of the earliest examples of this model are the public-private partnerships for transportation.

It is increasingly common for transportation departments to employ public-private methodologies to construct new roads or bridges. The contractor provides the financing and construction of the asset, performs maintenance on it for 20 to 30 years, and receives payment over time, often via collection of tolls. For example, Fluor is not just building the new Tappan Zee Bridge over the Hudson River in New York, but will also operate the bridge.

Together with integrated project delivery, expect this new construction business model to make inroads in commercial, industrial, and residential construction.

Next steps: Digital solutions for new business models

As construction companies adapt to new business models like integrated project delivery, they must do so in conjunction with new digital strategies. Construction companies must digitize to grow profits and simplify operations to reduce risk. This starts with bringing together business processes, project controls, visualization, and analytics in real time to work smarter, faster, and simpler. SAP is powering this transition with digital solutions for enhanced workforce engagement, supplier optimization, and project optimization.

To find out more about digital transformation in construction, see Building a Sustainable World, How to Survive and Thrive in a Digital Construction Economy.

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Dustin Anderson

About Dustin Anderson

Dustin Anderson is a Global Industry Solutions Director for the Engineering, Construction, & Operations Industry Business Unit at SAP representing North America and Latin America. Prior to this role, Dustin worked at an SAP partner company implementing SAP Solutions. Dustin helps clients deliver value through SAP solutions.

Digital Compliance: Only Superheroes Need Apply

John Bertrand

Compliance in banking and finance is big business. If you’re wondering what I mean, consider that the four big UK banks have paid $75 billion in penalties (as of a year ago) and 20 global banks have racked up $235 billion in fines since the financial crash.

Compliance officers are in great demand, but the responsibilities and requirements for the job are so daunting that even Superman would have a difficult time filling the role.

The high need for compliance superheroes may just be starting. Two new regulations, the UK’s Senior Managers Regime (monitored by the UK’s Financial Conduct Authority, or FCA) and the EU’s Market Abuse Regulation, will test compliance officers’ ability to govern. There’s also Basel IV, which is looking like global regulation, and the FCA, which says its “enforcement division supports our objectives by making it clear there are real and meaningful consequences for firms or individuals who don’t follow the rules.”

Why should compliance be so hard that we need to find superheroes to do the job?

Let’s make digital technology the superhero instead

Given that banking worldwide is going digital, compliance should also go digital. It will take time for compliance functions to be built directly into the technology, but adding a layer of digital technology operating across the enterprise could be the short-term answer.

Incorporating digital technology into the compliance function could identify anomalous – and potentially non-compliant – actions in near-real-time. Every anomaly has a sequence of events, digital fingerprints if you like. Digital compliance picks up on those deviations from the norm and enables supervisors to quickly examine them in order to forestall malicious behavior.

Automated supervision can test trades against certain rules and levels of exposure; if the rules are breached, the system will trigger texts, emails to the management team, or other alerts for immediate action, before or after a trade.

For example, human resources data can be coupled with trading systems to show a trader’s past behavior against the house rules and regulations. In addition, predictive analytics can show where the trader is moving along the “risk for misbehavior” scale. With digital compliance monitoring the market, the trader, and the bank’s policy, anomalies are illuminated and the probability of non-compliant activity is dramatically reduced.

Like any other superhero, the compliance supervisor must address the biggest risk, the most important regulations, first. Digital technology allows these superheroes to act faster than a speeding bullet to prevent non-compliant activity, focusing first on the most pressing business issue, then repeating until they have established a penalty-proof level of compliance.

Digital compliance, built in stages, can become a liaison between the stakeholders in the business, even including the official regulators. It not only installs a permanent digital superhero on your team, it may also prevent prison terms for “Persons Discharging Managerial Responsibilities” – even if the CEO does look good in stripes.

For more on how digitization can strengthen your business, see Algorithms: The New Means of Production.

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The Robotics Race

Stephanie Overby

As robotic technologies continue to advance, along with related technologies such as speech and image recognition, memory and analytics, and virtual and augmented reality, better, faster, and cheaper robots will emerge. These machines – sophisticated, discerning, and increasingly autonomous – are certain to have an impact on business and society. But will they bring job displacement and danger or create new categories of employment and protect humankind?

We talked to SAP’s Kai Goerlich, along with Doug Stephen of the Institute for Human and Machine Cognition and Brett Kennedy from NASA’s Jet Propulsion Laboratory, about the advances we can expect in robotics, robots’ limitations, and their likely impact on the world.

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qa_qWhat are the biggest drivers of the robot future?

Kai Goerlich: Several trends will come together to drive the robotics market in the next 15 to 20 years. The number of connected things and sensors will grow to the billions and the data universe will likewise explode. We think the speed of analytics will increase, with queries answered in milliseconds. Image and voice recognition – already quite good – will surpass human capabilities. And the virtual and augmented reality businesses will take off. These technologies are all building blocks for a new form of robotics that will vastly expand today’s capabilities in a diversity of forms and applications.

Brett Kennedy: When I was getting out of school, there weren’t that many people working in robotics. Now kids in grade school are exposed to a lot of things that I had to learn on the job, so they come into the workplace with a lot more knowledge and fewer preconceptions about what robots can or can’t do based on their experiences in different industries. That results in a much better-trained workforce in robotics, which I think is the most important thing.

In addition, many of the parts that we need for more sophisticated robots are coming out of other fields. We could never create enough critical mass to develop these technologies specifically for robotics. But we’re getting them from other places. Improvements in battery technology, which enable a robot to function without being plugged in, are being driven by industries such as mobile electronics and automotive, for example. Our RoboSimian has a battery drive originally designed for an electric motorcycle.

qa_qDo you anticipate a limit to the tasks robots will be able to master as these core technologies evolve?

Goerlich: Robots will take over more and more complex functions, but I think the ultimate result will be that new forms of human-machine interactions will emerge. Robots have advantages in crunching numbers, lifting heavy objects, working in dangerous environments, moving with precision, and performing repetitive tasks. However, humans still have advantages in areas such as abstraction, curiosity, creativity, dexterity, fast and multidimensional feedback, self-motivation, goal setting, and empathy. We’re also comparatively lightweight and efficient.

Doug Stephen: We’re moving toward a human-machine collaboration approach, which I think will become the norm for more complex tasks for a very long time. Even when we get to the point of creating more-complex and general-purpose robots, they won’t be autonomous. They’ll have a great deal of interaction with some sort of human teammate or operator.

qa_qHow about the Mars Rover? It’s relatively autonomous already.

Kennedy: The Mars Rover is autonomous to a certain degree. It is capable of supervised autonomy because there’s no way to control it at that distance with a joystick. But it’s really just executing the intent of the operator here on the ground.

In 2010, DARPA launched its four-year Autonomous Robotic Manipulator Challenge to create machines capable of carrying out complex tasks with only high-level human involvement. Some robots completed the challenge, but they were incredibly slow. We may get to a point where robots can do these sorts of things on their own. But they’re just not as good as people at this point. I don’t think we’re all going to be coming home to robot butlers anytime soon.

Stephen: It’s extremely difficult to program robots to behave as humans do. When we trip over something, we can recover quickly, but a robot will topple over and damage itself. The problem is that our understanding of our human abilities is limited. We have to figure out how to formally define the processes that human beings or any legged animals use to maintain balance or to walk and then tell a robot how to do it.

You have to be really explicit in the instructions that you give to these machines. Amazon has been working on these problems for a while with its “picking challenge”: How do you teach a robot to pick and pack boxes the way a human does? Right now, it’s a challenge for robots to identify what each item is.

qa_qSo if I’m not coming home to a robot butler in 20 years, what am I coming home to?

Goerlich: We naturally tend to imagine humanoid robots, but I think the emphasis will be on human-controlled robots, not necessarily humanshaped units. Independent robots will make sense in some niches, but they are more complex and expensive. The symbiosis of human and machine is more logical. It will be the most efficient way forward. Robotic suits, exoskeletons, and robotic limbs with all kinds of human support functions will be the norm. The future will be more Iron Man than Terminator.

qa_qWhat will be the impact on the job market as robots become more advanced?

SAP_Robotics_QA_images2400x16004Goerlich: The default fear is of a labor-light economy where robots do most of the work and humans take what’s left over. But that’s lastcentury thinking. Robots won’t simply replace workers on the assembly line. In fact, we may not have centralized factories anymore; 3D printing and the maker movement could change all that. And it is probably not the Terminator scenario either, where humanoid robots take over the world and threaten humankind. The indicators instead point to human-machine coevolution.

There’s no denying that advances in robotics and artificial intelligence will displace some jobs performed by humans today. But for every repetitive job that is lost to automation, it’s possible that a more interesting, creative job will take its place. This will require humans to focus on the skills that robots can’t replicate – and, of course, rethink how we do things and how the economy works.

qa_qWhat can businesses do today to embrace the projected benefits of advanced robotics?

Kennedy: Experiment. The very best things that we’ve been able to produce have come from people having the tools an d then figuring out how they can be used. I don’t think we understand the future well enough to be able to predict exactly how robots are going to be used, but I think we can say that they certainly will be used. Stephanie Overby is an independent writer and editor focused on the intersection of business and technology.

Stephanie Overby  is an independent writer and editor focused on the intersection of business and technology

To learn more about how humans and robots will co-evolve, read the in-depth report Bring Your Robot to Work.

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What Is The Key To Rapid Innovation In Healthcare?

Paul Clark

Healthcare technology has already made incredible advancements, but digital transformation of the healthcare industry is still considered in its infancy. According to the SAP eBook, Connected Care: The Digital Pulse of Global Healthcare, the possibilities and opportunities that lie ahead for the Internet of Healthcare Things (IoHT) are astounding.

Many health organizations recognize the importance of going digital and have already deployed programs involving IoT, cloud, Big Data, analytics, and mobile technologies. However, over the last decade, investments in many e-health programs have delivered only modest returns, so the progress of healthcare technology has been slow out of the gate.

What’s slowing the pace of healthcare innovation?

In the past, attempts at rapid innovation in healthcare have been bogged down by a slew of stakeholders, legacy systems, and regulations that are inherent to the industry. This presents some Big Data challenges with connected healthcare, such as gathering data from disparate silos of medical information. Secrecy is also an ongoing challenge, as healthcare providers, researchers, pharmaceutical companies, and academic institutions tend to protect personal and proprietary data. These issues have caused enormous complexity and have delayed or deterred attempts to build fully integrated digital healthcare systems.

So what is the key to rapid innovation?

According to the Connected Care eBook, healthcare organizations can overcome these challenges by using new technologies and collaborating with other players in the healthcare industry, as well as partners outside of the industry, to get the most benefit out of digital technology.

To move forward with digital transformation in healthcare, there is a need for digital architectures and platforms where a number of different technologies can work together from both a technical and a business perspective.

The secret to healthcare innovation: connected health platforms

New platforms are emerging that foster collaboration between different technologies and healthcare organizations to solve complex medical system challenges. These platforms can support a broad ecosystem of partners, including developers, researchers, and healthcare organizations. Healthcare networks that are connected through this type of technology will be able to accelerate the development and delivery of innovative, patient-centered solutions.

Platforms and other digital advancements present exciting new business opportunities for numerous healthcare stakeholders striving to meet the increasing expectations of tech-savvy patients.

The digital evolution of the healthcare industry may still be in its infancy, but it is growing up fast as new advancements in technology quickly develop. Are you ready for the next phase of digital transformation in the global healthcare industry?

For an in-depth look at how technology is changing the face of healthcare, download the SAP eBook Connected Care: The Digital Pulse of Global Healthcare.

See how the digital era is affecting the business environment in the SAP eBook The Digital Economy: Reinventing the Business World.

Discover the driving forces behind digital transformation in the SAP eBook Digital Disruption: How Digital Technology is Transforming Our World.

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About Paul Clark

Paul Clark is the Senior Director of Technology Partner Marketing at SAP. He is responsible for developing and executing partner marketing strategies, activities, and programs in joint go-to-market plans with global technology partners. The goal is to increase opportunities, pipeline, and revenue through demand generation via SAP's global and local partner ecosystems.