PumpkinsHappy All Hallows’ Eve (Halloween). Did you know that Halloween is believed to be an offshoot of an ancient a Celtic/Gaelic festival known as Samhain? Samhain marked the end of the harvest season and the beginning of the darker half of the year (Those of you in the US, excluding Arizona, don’t forget to turn back your clocks Saturday night!). Speaking of harvests, check out the picture of the pumkins I helped carve (Ok, I just carried them from the car to the table). The one on the right is a depiction of me when I wake up in the morning.

Now on to this week’s logistics news:

Shipping container delays at the Los Angeles-Long Beach port is becoming a nascent threat to retailers’ busy holiday season. The LA port is the nations busiest, measured at 40 percent of total traffic. Trucking shortages and labor negotiations are considered to be the cause of the bottle neck. The referenced Reuters article reports that retailers affected from the delays include JC Penney, Macy’s, Kohl’s, Nordstrom, American Eagle, Ralph Lauren, and Carter’s. The causes of the delays are disputed. Some claim a shortage of container chassis. However, I don’t believe this perspective explains why trucks wait in mile long queues while stacks of containers wait for pickup. That sounds more like a scheduling or execution problem to me.

Continuing with the topic of shipment delays, rail delays are negatively impacting feed stock deliveries to east coast oil refiners, according to E&E Publishing. Monroe Energy stated that it experienced a million barrel shortage of crude by rail deliveries in August and September. Rail is supposed to supply 65,000 barrels a day to the company’s jet fuel refinery in Pennsylvania. East coast refineries are relying more and more on rail to deliver crude as production of shale oil in remote areas such as North Dakota has expanded. This exponential increase in shale oil production has impacted rail capacity across the county and displaced other commodities such as agricultural crops. As an example of the growth rate in rail-bound crude shipments, the article states that shipments of rail-bound crude are likely to be more than 450,000 carloads this year, up from 10,000 in 2008. This represents a compound annual growth rate of 88 percent.

Admittedly, I just learned about a new logistics confidence index. The UK Logistics Confidence Index, based on a semi-annual survey and commissioned by Barclays and Moore Stevens, shows that almost three quarters of logistics operators are planning significant capital expenditures over the coming months. Concerns for the industry include attracting and retaining skilled workers and dealing with increasing pressures on margins.

I’m currently conducting research on the warehouse automation and control market. As such, this article on the use of machine learning in robotic unstructured depalletizing caught my attention.The vendor claims that the use of machine learning in conjunction with the robots opens up the opportunity for robotics use in unconventional functions such as bin picking, kitting, and random and unstructured depalletizing. On a related note, I also came across an article on fastcoexist.com that references Boston Consulting Group diagrams depicting the evolution of  robotics and its applications. Warehouse automation and picking, packing, and sorting are noted as early applications for robotics.

International Business Systems (IBS) announced earlier today its release of IBS Business Suite 2015, a second generation supply chain platform. The suite is geared toward mid-market distribution companies with complex operations and includes IBS Dynaman (Warehouse Management), IBS Sales & Operations Planning, and IBS Netstore (eCommerce) along with other applications including ERP and mobility solutions. The solution also delivers best-of-breed TMS and labor management capabilities through partnerships. (note: IBS is a Logistics Viewpoints sponsor)

That’s all for this week. Have a great weekend. This week’s video, a flash mob at San Diego State University dancing to Thriller on the school’s baseball field.

 

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omniOver the last few months, Clint Reiser and I have been working on an extensive omni-channel data set. We presented our findings at last month’s CSCMP Global Conference in San Antonio, TX. We are planning to release a comprehensive strategic report in the next few weeks that will highlight the key trends, business strategies, and technologies currently in use for an omni-channel environment. I am also working on a new market study that will examine the omni-channel fulfillment landscape, with a deeper look into market penetration of Transportation Management Systems (TMS), Warehouse Management Systems (WMS), Distributed Order Management Systems (DOM), Inventory Optimization, and Demand Planning applications. From the research we have done, I can certainly say that there is a wide technology gap in the current omni-channel environment.

From our research, there are two technologies in particular that jump at me as both vital and under-utilized. The first is distributed order management (DOM). According to our data, only 58% of our omni-channel survey respondents have a distributed order management system in place. Distributed order management systems allow an organization to capture all information in the order management process across all relevant channels. This includes the entry of the order, sourcing, payments, and fulfillment. It also spans all channels of sales operations. The benefit is that it doesn’t matter where an order originates. All fulfillment channels have access to the information and the organization can appropriately allocate the inventory depending on stock levels, demand requirements, and timing of fulfillment. To the consumer, this is all a seamless experience, and that is all they expect. The customer wants to be able to order a product online and pick it up in the store. Or, if they are in the store, and the store is out of stock, they want it shipped to the house. The reality, however, is that too many organizations do not possess these capabilities right now. This is a major deficiency of the current state of omni-channel operations.

The second technology that is underutilized is inventory optimization. This technology enables companies to balance their inventory levels with customer demand. Clearly this is easier said than done. There are a variety of market conditions that impact inventory management, including economic factors, supplier relations, and fluctuating and seasonal demand for products. However, the use of multi echelon inventory optimization software can help organizations identify the appropriate amount of stock needed at stores, warehouses, and distribution centers. By carrying less physical, organizations can reduce their inventory carrying costs and become more profitable. By matching supply with demand, the customer is able to find the product they need / want, and the organization can fulfill it through the appropriate channel. But again, this is a technology that is under-utilized by too many organizations.

Our upcoming strategic report will highlight some of the other areas which are lacking and those that are more robust (WMS, for example). But for now, I’ll leave you with our 5 key takeaways from our omni-channel research.

  1. Omni-channel is a marathon, not a sprint. There is still a long way to go and a lot of work to be done. You cannot try to rush the process; improper planning will make omni-channel initiatives fail.
  2. Put the product first. Inventory availability and fulfillment is at the heart of omni-channel. Once the foundation has been set, then bring in the customer facing technology to enhance the customer experience.
  3. The customer must be empowered. There is not a need to try to replicate experiences across channels. Instead, focusing on connecting the channels for a fluid experience.
  4. Enhance e-commerce. With 47% growth over the last five years, and 40% projected growth over the next five years, our respondent base is showing that e-commerce is showing no sign of slowing down.
  5. Bridge the technology gap. We see two technologies in particular as pillars of the future of omni-channel: distributed order management and inventory optimization. But these technologies are not commonplace enough for the majority of companies to truly be omni-channel. Accurate inventory levels and the ability to pull it from any location need to be at the forefront of an omni-channel strategy.
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Mitch Weseley - white brThe logistics service provider (LSP) market landscape is undergoing a titanic shift. The traditional boundaries between brokers, carriers and 3PLs are blurring, particularly in the small- to mid-sized LSP market. Many of these companies are experiencing a blending of the time-honored functions that once separated these distinct service providers. Many of the larger companies, due to their size and complexity, still keep to the traditional functional spectrum.

The move toward hybridization in our evolving industry is becoming more and more apparent. For instance, some carriers are asked to manage all freight, TL and LTL. Often they can’t handle the order and employ an in-house brokerage unit to cover it. Increasingly, brokerage companies are handling LTL shipments, multi-stop truckloads and other complicated orders in addition to simple loads. Asset-based carriers were often dogmatic in separating themselves from their 3PL arm, but that’s often not the case anymore. These are just a few examples of a potential sea change developing in our industry, which begs a compelling question: “Do these companies have the requisite technology to support their new multi-faceted role?”

The blending of services and the integration between different operations can be viewed as an advantage for the LSP.  It not only creates additional revenue streams, it also satisfies customers with more comprehensive service offerings as a one-stop shop. Dramatic change such as this is not surprising. It occurs on a regular basis in all industries. The big question is whether TMS technology is keeping up with the metamorphosis.

Today, most TMSs are built on platforms that are 10-15 years old. The central design of these systems was developed at a time when logistics problems were very different than today. These systems were originally designed to handle shippers or LSPs performing a single function – as that was how their businesses were set up. The previous generation of products focused on the shipper because there were no 3PLs at the time. In fact, designing a TMS to fundamentally address the issues of a 3PL (in addition to those of a shipper) was a key driver of the second generation of TMSs. The shift to hybridization, managing brokerage along with 3PL functions and fleets along with common carriers, creates a compelling need for a contemporary TMS designed to accommodate these new types of operations. Functionally it must be able to address any mix of services these organizations choose to offer, today and in the future.

Many software providers have responded to this needed shift in TMS design by layering new systems onto their older, original platforms to perform new functions. This layering usually impacts ease of use, installation speed, onboarding of new customers and adds to integration complexity. More fundamentally, since TMSs address real-time execution, multiple systems and data bases do not permit these older systems to access current and dynamic data as they run their algorithms and execute their moves.

Historically, all software ages, often to a point where the fundamental data model and design becomes outdated. The evolution of technology, design, and functional needs led to the creation of the first, second, and now the third generation of TMS solutions. Older TMS software was designed to handle the world the way it was, not the way it is now or will be in the future.

The new generation TMSs, encompass today’s needs, and are designed to be flexible enough to scale to tomorrow’s challenges. “Tomorrow” only puts older systems further behind with no chance to catch up, let alone innovate.

Requirements for a TMS in “The Blended LSP Age”
Ideally, a TMS should be built on a single platform with one application, one database, and one user-interface. This creates an optimal flow of information using common data when creating and executing shipments, while also providing a consistent user experience. The algorithm should also be integrated into the system rather than existing on an outside layer. This is the only way it can manage everything from simple routing through the most complicated shipment execution. Whereas in the past a broker might not need the planning power of an algorithm, in a hybrid world there’s a mix of simple and complex orders. You need a system with decision support that can manage answers to the full breadth of planning questions that usually occur.

The Age of Empowerment
We are also seeing an important trend toward empowerment in the LSP world. Ideally, no matter where you sit in the supply chain, it’s good to have a TMS that allows you to onboard new customers, carriers and trading partners on your own schedule without having to hire a consulting firm or have the TMS company provide this at additional cost.

Additional self-service opportunities arise from a system that has pre-established integration mapping as part of its core platform. This enables the LSP to integrate to outside solutions, easily and quickly. It also empowers them with a solution that pulls all systems together, without added expense and delays.

Today’s TMSs; Built to Manage Future Needs
These are just some examples of today’s TMS system requirements that are central to managing in a blended logistics world. This is an exciting time of rapid change in our industry. New opportunities are developing every day. These opportunities often create new issues that require new approaches. LSPs who are embracing or contemplating the move to hybrid solutions need to consider these factors as they evaluate their current and future TMS solution.

 

Mitch Weseley is the TMS Pioneer, Founder & CEO of 3Gtms. With 30 years in the industry, Mitch is widely regarded as the “father of the TMS industry” having created six successful companies in the technology and logistics industry, including Weseley Software and G-Log.

When companies decide that their present warehousing operations are not what they should be, and that they need to either implement a warehouse management system (WMS) or outsource their warehousing operations to a 3PL, they need to work toward putting together a request for proposal (RFP).

If that pre-work for putting together a RFP includes a very detailed and granular AS IS/TO BE Process Map, in my view the company is going about this selection process in the wrong way.  The “AS IS” represents documenting the warehouse processes as they exist. The “TO BE” represents the process that the company decides they want to move to.  The TO BE is too granular if it becomes a step by step definition of the process – first an associate will do this, then they will do this.  In summary, if you are mapping TO BE processes at a recipe level of detail – pour in half a cup of sugar, one quarter cup of diced apples – you are going too deep.

Fundamentally, I disagree with a deeply granular AS IS/TO BE methodology when it comes to fulfillment in manual facilities.  I believe that objectives should be developed and instantiated in measurable metrics.  Solution providers should not be told what their processes should be, but asked to prove that they can attain target objectives.  Solution providers should be allowed to use their expertise to develop process flows that attain the target objectives.

Specifying process flows too granularly just increases the odds that WMS customization will be required.  Customization drives up implementation and maintenance costs, and increases the likelihood for the need of a brand new implementation within five years.  The goal should always be a vanilla WMS implementation.

While I believe AS IS/TO BE methodology is the wrong approach, I do believe that warehouse audits are worth doing to build intelligent objectives.  For the purposes of avoiding the internal politics, it can make sense to have an outside consultant involved in this process.  If ARC was asked to do a warehouse audit, here is how we would go about it.  The company we were working for would be asked to subscribe to the Warehouse Education Resource Council (WERC) in order to attain their benchmark data on warehouse performance.  The next step is to make sure the team understands the WERC metric definitions, and pull data from their IT systems to calculate how they are doing on these metrics.

Checks and balances need to be in place to assure metric integrity.  Line managers need to be reassured that although “benchmark” data is being collected, management understands the difficulty in comparing warehouse performance from facilities operating in different industries, with differing amounts of material handling equipment, and operating with very different volumes.  Nevertheless, these metrics are very important in developing and weighting criteria that will be used in supplier selection.

There is a less granular form of AS IS/TO BE, which does not get down in the weeds, which can be very helpful.  CSCMP sells a document they call Deliver Processes:  Supply Chain Management Process Standards.  While it could be referred to as a high level AS IS/TO BE mapping solution, I think it is fairer to call this a tool for conducting a warehouse audit.

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This booklet has what it calls “Suggested Minimum Process Standards” and typical “Best-Practice Processes.”  So for example around slotting, minimum process standards would be to employ a slotting strategy where products are assigned to locations based on product velocity and physical characteristics, slotting assignments are static, and so forth.  While the best-practice process states that “slotting assignments are reviewed monthly, and are also adjusted in advance for seasonality,” and goes on to list another four factors to look at.  Actually, when ARC uses the CSCMP booklet, that is just a starting point, we have additional things we are looking for.  But it is a good starting point.

Additionally, doing this audit allows an outside consultant to see every part of a warehouse, talk to a wide variety of associates, and this process inevitably improves the resulting RFP.

 

The one place where a heavy duty, granular AS IS/TO BE process makes sense, is for a company considering moving to a highly automated warehouse – i.e. miles of conveyors, AS/RS, etc.  In this case, a simulation tool is employed.  The AS IS process is quantitatively – by “quantitative” I mean thinks like pick rates by zone – mapped into the simulation tool, and then various material handling scenarios are mapped into the tool, and the resulting throughputs of different material handling scenarios are compared to AS IS throughputs.

Retailers are gearing up for the upcoming holiday season. While most stores are currently decked out in Halloween gear, come November 1, that will all change. Cue the Christmas trees, lights, and music, because the holiday season is fast approaching. I can’t say that I’m looking forward to it. But the retailers sure seem ready. Macy’s recently announced that they will open stores at 6 pm on Thanksgiving, two full hours earlier than last year. And stores will stay open until 8 pm on Black Friday. That is 26 full hours of Black Friday shopping. This week’s news is dominated by more holiday logistics, so enjoy!

Amazon is planning to increase its seasonal workforce by 14% this coming holiday season. That equates to 80,000 workers. The employees will have temporary jobs at Amazon’s more than 50 U.S. warehouses. The company will also place some seasonal hires at its newly created “sortation” centers, where Amazon collects parcels from the fulfillment centers to sort them by ZIP codes for delivery to local post offices. The seasonal hiring spree comes a week after the National Retail Federation forecast $617 billion in holiday spending this year, a 4.1 percent jump from last year. Major rivals including Wal-Mart and Target are also planning to up their seasonal workforce.

Target has a three-pronged approach to improving its holiday season: free shipping, more advertising, and 35,000 new items. Currently, Target offers free shipping for customers who use its branded payment cards. As of today, that offer has been extended to all purchases through Dec. 20. With Amazon and other competitors offering free shipping for price threshold purchases, it is not surprising that Target is adding free shipping as well. The big question is whether the free shipping on holiday items can drive enough volume to offset the logistics costs.

FedExTo say that last year’s holiday season was a disappointment from a logistics standpoint is an understatement. Last year, a combination of last minute shopping and bad weather led to an estimated 2 million packages arriving late for Christmas. This year, FedEx and UPS are planning ahead to make sure this doesn’t happen again. FedEx plans to hire 50,000 seasonal workers, up from 40,000 last year. United Parcel Service Inc. says it will add up to 95,000 people, up from 85,000. Last year, both companies wound up scrambling to hire more seasonal employees than they had planned, which increased costs and cut into profits. FedEx also expects to invest $1.2 billion in its ground-shipping network in its current fiscal year, with most of that going to increase capacity and automation. The company said that the improvements have sped up ground delivery by a day or more in more than two-thirds of the U.S. UPS has also invested to boost shipping capacity during the holidays, said the company’s chief commercial officer, Alan Gershenhorn. He said that UPS had improved it forecasting and package tracking.

Vessels are still backed up off the ports of Los Angeles and Long Beach as gridlock at the Southern California ports continues. Container ship traffic and volume at the LA-Long Beach port complex has been relatively high, contributing to the terminals’ congestion. Other reasons for the gridlock include the increasing sizes of ships in the trans-Pacific trade lane, which require longer times as berth, as well as a shortage of chassis and drayage drivers, and more recently, slowdowns by members of the International Longshore and Warehouse Union.

ApicsBASF and GE Oil & Gas were honored today at the APICS 2014 conference in New Orleans, LA, with APICS Corporate Awards of Excellence in recognition of their commitment to continuing education and innovation in the field of supply chain and operations management. BASF received the 2014 APICS Award of Excellence in Education for its commitment to worker education and training. By paying for employee membership, seminars, meetings, classes, and exams, BASF is emphasizing the importance of continued education and certification. GE Oil & Gas was honored for its multi-year supply chain improvement and innovation project that included establishing a materials management organization based on APICS principles, making significant changes in their organizational structure, and shifting from ‘product supplier’ to ‘solutions-oriented’ partner.

That’s all for this week. Enjoy the weekend and the song of the week, The Trans-Siberian Orchestra’s Christmas Eve / Sarajevo.