2014-2015-calendar-heroIt’s hard to believe another year is coming to an end. There have been many highs and many lows this year, and an awful lot of newsworthy items to keep you abreast of. We wrote about numerous mergers and acquisitions, new technologies and innovations, customer success stories, drones, overnight delivery, port congestion, drones, 3PL’s, robots, shale oil, drones, omni-channel, warehouse management, transportation management, and, of course, drones (did I mention drones?). As much fun as I’ve had writing some of these stories, I’ve also enjoyed reading the articles of my colleagues and customers. I truly feel that this has been a year of learning. And for that, I am thankful.

With the holiday season upon us, there are vacations to be had, family and friends to be enjoyed, and hopefully, some well deserved rest. For these reasons, this will be the final Logistics Viewpoints column of the year. We are going to spend the next two weeks re-energizing ourselves to make sure we continue to bring you the most insightful supply chain and logistics news and stories. Happy holidays from all of us here at Logistics Viewpoints.

And with that, on to this week’s news.

FedEx GencoFedEx has agreed to buy third party logistics provider Genco for an undisclosed sale price. According to FedEx, the impetus behind the deal is to expand their retail and e-commerce markets. The biggest (and most obvious) opportunity area for FedEx in the deal is the robust reverse logistics capabilities of Genco; the company processes more than 600 million returns annually from the world’s leading retailers and consumers good companies. A secondary opportunity is the addition of millions of square feet of managed warehouse space, which is not dedicated to reverse logistics. This aspect helps to broaden FedEx’s reach, and will certainly be an advantage during the 2015 holiday season.

What started out as discussions about a prisoner swap has escalated between the United States and Cuba. Thankfully, it has escalated in a positive way. On Wednesday, President Obama announced plans to normalize the relationship between the two countries, re-establishing diplomatic relations for the first time in over 50 years. Cuban president Raúl Castro tempered expectations, saying, “This in no way means that the heart of the matter has been solved.” The “heart of the matter” being the trade embargo. But a historic shift in overall relations between the two countries can be a step in the right direction toward an eventual larger commercial relationship.

ikeaIkea is opening a string of stores across Canada. However, unlike its normal store set-up, with dozens of showrooms and seemingly miles of warehouse space to walk through, the new stores will be approximately 1/10th the size of a normal store. The Swedish company plans to open these stores as e-commerce pick-up location. Unlike the normal stores, Ikea workers would retrieve items for customers who ordered online. This is quite the difference for those Ikea fans who are used to walking the warehouse looking for the tag to retrieve their merchandise. And with the influx of customers who have grown tired of a standard store experience, Ikea is making what looks like the right move at the right time.

Amazon primeWhile my Christmas shopping is done, there are scores of people who are waiting until the absolute last minute to order gifts. And this year, the last minute is even later. Amazon has extended its free shipping deadline for Christmas Eve delivery. Customers who order online by 11:59 pm EST today, will have their items delivered by Christmas Eve. For those customers who are Prime members, the deadline for free two day shipping is December 22. While many procrastinators will rejoice at this news, let’s not forget about last year’s late-delivery debacle. A huge influx of online orders could backlog Amazon and delivery partners, leading to another disastrous season. Hopefully Amazon has learned its lesson and will be ready for the shopping onslaught.

portsTo make things more difficult for retailers, holiday shipments are said to be at risk due to the West Coast port labor disagreement. Protracted labor talks at the busiest U.S. container ports are leading to delayed deliveries to some retailers. The backlog has already caused FedEx to shift resources and limit shipments from some customers to avoid a last-minute pre-Christmas surge, the company said. The National Retail Federation (NRF) estimates that a strike or lock-out could cost the US economy more than $2 billion a day. The current dispute affects 29 ports including Los Angeles and Long Beach. Many retailers are reporting up to a week’s lag time getting merchandise on the shelves. With so many companies at the make or break part of their year, the port slowdown could be disastrous. It also means there could be a lot of gift cards under the tree.

That’s all for this week and for the year. We hope everyone has a happy and prosperous new year and we look forward to bringing you more logistics news in January. Enjoy the weekend and the song of the week Pharrell’s Happy.

With the Christmas holiday just a week away, retailers and shippers are scrambling to make sure that their supply chain networks are firing on all cylinders for seamless deliveries. And if things couldn’t get more hectic, today is Free Shipping Day. To date, nearly 1,200 merchants are participating in the event, from big box retailers to niche consumer goods companies. With the busiest shipping day just around the corner (Monday, December 22), let’s take a quick look at the holiday forecasts from the big 3.

UPSUPS is predicting an 11% increase in the number of packages that it will handle during this year’s holiday season. That equates to 585 million packages delivered between Thanksgiving and Christmas. Additionally, the company is spending a reported $500 million on improvements for the holiday season.

uspsThe US Postal Service is predicting a 14% surge in its holiday deliveries this year. That brings its total estimated number of packages delivered to 475 million. With the addition of Sunday deliveries through Christmas, this helps to alleviate some of the pains associated with delivering 475 million packages.

FedEx_Logo_WallpaperFedEx is forecasting a record breaking year as well, with an 8.8% increase in shipments over the holiday season. That brings the company’s total up to 290 million deliveries. To help get the job done, FedEx is looking to invest $1.2 billion in its ground-shipping network in its current fiscal year.

These numbers are impressive. In fact, between these three companies, an estimated 1.35 billion packages are delivered between Thanksgiving and Christmas. But none of them can touch the true master of Route Optimization Excellence – Santa Claus.

santaSanta delivers upwards of 4 billion packages* in just one night. Sure, Santa gets to take advantage of time zones to get it done, but it is still 4+ billion deliveries in one night. Now that is a lesson in efficiency. Happy holidays.

*rough estimate based on the number of children he needs to deliver gifts to and the number of gifts each child gets – please contact me for additional information on my math.

Categories Just for Fun, Logistics Trends
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LV Top 10The Logistics Viewpoints team thought our readers would be interested in seeing what 2014 posts obtained the most views over the year. The posts from the beginning of the year often obtain the most views because they’ve been visible for a longer period of time. However, this year’s most popular article was posted less than one month ago! Bobby Miller, an executive from Ortec, authored “How to Avoid Dimensional Weight Pricing Cost Spike.”  This article is timely, broadly relevant, and highly educational. Congratulations Bobby! Below is a list of this year’s ten most popular articles with a brief introduction to each.

1. How to Avoid Dimensional Weight Pricing Cost Spike by Bobby Miller
This past June, the largest overnight delivery carriers (FedEx and UPS) announced that they would apply dimensional weight pricing to all shipments, effective January 2015. It is expected that shipping costs will increase 20 to 30 percent and affect over 70 percent of all shipments…

2. The Internet of Things will Change the Face of Supply Chain Management, but it will require a Revolution in Analytics First by Steve Banker
The Internet of Things (IoT) will make our operations more efficient by combining smart sensors, cameras, software, databases/business intelligence, and the Internet (primarily in the form of private clouds) together in diverse ways…

3. The Truth about the Omni-Channel Customer Experience by Chris Cunnane
The big focus at the NRF show in New York this year, much like in years past, was the focus on improving the omni-channel customer experience. As I wrote, customers do NOT expect a similar experience across channels…

4. The Worst Supply Chain in North America by Steve Banker
I’ve been doing some research on the unconventional oil supply chain. Unconventional oil includes crude oil from shale and oil sands. I’ve talked to over 20 oil executives and experts about the inbound supply chain…

5. Supply Chain Visibility: 7 Strategies for Success by Chris Jones
Supply Chain Visibility systems are tough to describe and even tougher to implement. Companies with complex and multi-channel supply chains often struggle because they failed to harness the true complexity of the supply chain. Our experience shows…

6. A Critical Fulfillment Metric: The Perfect Order by Steve Banker
The perfect order metric (POM) is one of the most critical metrics in fulfillment. The Warehouse Education and Research Council’s (WERC) definition of the perfect order metric is that a perfect order is delivered: Complete; On time…

7. Turkey Logistics: The Thanksgiving Supply Chain by Chris Cunnane
Thanksgiving is a time for family, friends, and turkey. Lots of turkey. Just how much turkey? According to the National Turkey Federation, over 730 million pounds of turkey will be consumed in the United States during Thanksgiving. Given that the average weight …

8. Amazon Takes One Step Forward, Two Steps Back by Steve Banker
After Amazon reported its year end revenues, their stock tumbled despite comparable quarter revenue growth of 20 percent. The company did end the year with a narrow profit, something they did not accomplish last year, but investors…

9. The Internet of Things Changes the Equipment Manufacturer’s Spare Parts Supply Chain by Ralph Rio
Suppose you’re in logistics for an equipment manufacturer or a maintenance manager in an operating plant, and a geek in your office keeps talking about the Internet of Things (IoT). Here is why you should listen: The underlying technologies are available with…

10. Supply Chain Inefficiencies: The Cost of Over-Packaging by Chris Cunnane
Today’s consumer is more informed than ever about the products they are buying. This includes product attributes and information, advantages, limitations, and competitive pricing, among others. The notion of the informed consumer…

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Hope FedererGrowing freight volumes may be welcome news for brokers, third-party logistics (3PL) operations and carriers, but with the driver shortage holding back industry expansion, finding freight carrying capacity remains an ever present and larger challenge.

“Freight volumes are growing nicely on a year-over-year basis for most trucking sectors as economic growth remains solid,” said Bob Costello, chief economist at American Trucking Associations during the annual ATA Management Conference & Exhibition. “However, the industry is having a difficult time adding trucks due to the driver shortage, which is as bad as ever and is expected to get worse in the near term.”

Finding capacity to meet shipper needs requires a combination of tools to gather and manage information, along with an understanding of the market at any given point in time. Expertise in costs, the freight transportation process, and the ebb and flow of capacity based on economic and seasonal trends are valuable. It’s also essential for freight brokers and 3PLs to know the transportation spending plans of shippers to be able to gauge their respective buying power for transportation services.

Data on carrier management and operational practices is invaluable. Fundamental information should include fleet sizes, equipment types, and tractor-trailer ratios. As a further gauge of availability, knowledge of the amount of equipment that is dedicated to long haul, contract, and regional operations can be very helpful.  Equally important for freight brokers and 3PLs, is a relationship with carriers that shares advance knowledge of freight needs.  This not only helps address capacity requirements, it can also help carriers eliminate costly empty miles.

Armed with this data, brokers and 3PLs can make the most effective decisions and capture equipment before it is assigned elsewhere during times of capacity shortage. As a starting point, performing a comprehensive review of the systems already in place will help ensure the ability to take advantage of every opportunity to find and secure capacity. This includes access to truckload and LTL, intermodal, and freight handling and consolidation service offerings.

Successful freight brokerages and 3PLs understand that they require information management solutions that provide the ability to rapidly add new customers and enter loads using a pre-configured workflow process, and quickly locate capacity for their clients by using a variety of internal and external sources, including both public and private load boards.

If finding trucks to cover loads is the first challenge for brokers, 3PLs and shippers; making sure they’re finding the best available carrier at the best available rate runs a close second. Effective systems deliver access to all known negotiated rates with carriers. They do so by providing real-time access to current and historical rate data based on what was paid in the past and what others in the industry now pay for similar loads on similar lanes.

While these solutions deliver information that helps ensure rates that provide acceptable margins, there is also the challenge of making sure each carrier meets the shipper’s requirements. Access to information that verifies the credentials of every carrier prior to offering a load is critical. This should include insurance coverage, credentials, and safety ratings.

Solutions should allow users to easily and accurately manage the vast amount of information that is shared in a successful relationship between a broker, 3PL, shipper, and carrier.  This is especially true in operations that handle large volumes of freight. Lost information or miscommunication that results in dissatisfied customers is simply not acceptable.

Robust data warehouse capabilities that gather and maintain transactional and user interaction data and make these available for analytics applications are essential. These systems must also facilitate collaboration using the methods preferred by each carrier and shipper, including EDI, email, or web portals.

Finding available capacity for shippers is just part of the solution that makes top- producing brokers and 3PLs more successful. The real keys are tools that gather and seamlessly integrate and manage data and provide visibility into the information that can be used to make smarter, more effective decisions.  Here are five tips to successfully secure carrier capacity:

  1. Understand the freight transportation process and shipper/customer capacity needs based on economic trends and transportation spending plans.
  2. Facilitate collaboration using methods preferred by all parties.
  3. Have information gathering and management tools that include a workflow process for adding new customers, entering loads, and accessing rates to ensure acceptable margins.
  4. Maintain data for analytics applications and information on carrier management and operational practices to gauge capacity availability and verify carrier credentials.
  5. Routinely perform a review of the current systems and their effectiveness in helping you take advantage of every opportunity to locate capacity.

 

Hope Federer is the Vertical Lead for Brokers at MercuryGate International.   With over 14 years of transportation experience, she leads technology implementation, post-implementation customer support, and works with product development to drive product enhancements. She has held a variety of senior management positions in the areas of transportation management, corporate and systems education, strategic carrier procurement, and corporate pricing. 

Over a decade ago, trade journals were talking about smart grocery carts.  These grocery carts would have a computer attached to it that could assist consumers in shopping by providing coupons, the location of an item the shopper wants to buy, and even an accelerated check out process if the shopper scanned the items into the cart.  Meanwhile, the smart cart would allow the retailer to generate detailed data on their shoppers buying behavior, details of how customers moved through the store, and other useful information that could be used to increase store sales.

For the purpose of segmenting shoppers, grocery is the ideal retail vertical.  We are almost all prodigious consumers of grocery items.  A year’s worth of shopping data can lead to intelligent segmentations of customers.  In contrast, most of us buy cars or washing machines only rarely.  A year’s worth of data would be meaningless.

Smart carts were experimented with by various grocery chains, but have never come into general usage.  Perhaps computers in carts was never realistic in an industry with such thin margins.

But the increased prevalence of smart phone usage gives retailers an opportunity to develop smart phone applets that do all the same things that smart carts were supposed to make possible.  According to Digitas’ Connected Commerce, 92 million adult Americans use smartphone apps while shopping in store.

The in-store applet receiving the most attention was developed by inMarket.  For retailers, the functionality supports shopping lists, loyalty-driven offers, and the promise of increased strategic marketing budget from consumer goods companies.  Brand owners have done pilots where they have experienced 300 percent purchase intent lift when this technology is used to promote an offer as a shopper rolls their cart toward that SKU in an aisle.

inMarket app

Marketing folks, of course, are intrigued.  But what the marketing department promises, the supply chain has to deliver, or at least try to deliver.  In this article I want to explore that issue.

First, promotions need to be linked to shopper segmentation buckets.  With a year’s worth of data, a retail chain should understand whether a shopper is on a budget and even calculate the spending limit of the budget.  They can understand which shoppers are on a diet, either permanently or temporarily.  Brand loyalty can be calculated.

The combination of more targeted promotions and contextual inventory data offers intriguing possibilities.  The result could be that for a smaller expenditure of money, a consumer good’s marketing department achieves their goals at a lower total supply chain cost.  Let’s say a brand owner of salsa has excess inventory in a particular region.  Traditionally, this excess inventory sat in a warehouse, took up space, and negatively impacted working capital.  Or, the consumer goods company might offer an ad hoc trade promotion; a discount that would apply to all shoppers at particular stores.  This is the shotgun approach to clearing inventory.

With smart in-store applications the inventory can be cleared, while the marketing department achieves better bang for their trade promotion spend.  Let’s say in addition to clearing inventory the marketing department also wants to convert 5000 shoppers to their brand.  The retailer would be able to provide good data on how many shoppers at the stores in that region buy their brand versus competing brands.  Perhaps there are 10,000 shoppers that buy competing brands.  But 25 percent of those shoppers are brand loyalists, it would take big discounts to pry them loose.

Another 25 percent will readily buy the cheapest salsa.  But their buying history indicates that they will not become brand loyalists.  They will continue to buy whatever is cheapest.  It makes no sense to target them.

Finally, there may be 20 percent of the shoppers who are on a budget and their shopping history indicates they only occasionally buy salsa.  And finally there are the budget shoppers.  They need to be approached thoughtfully to insure that the sale does not cannibalize the sales of other items in the store.  Out of those 10,000 shoppers, perhaps only 3000 should be targeted.

Historically, promotions often caused real pain to the supply chain organization.  Improved sales and operations planning processes has helped to fix that.  Now better segmentation data creates the possibility of better demand planning at the store level; thus brand owners would be less likely to end up in excess inventory positions in the first place.  Secondly, when excess inventory situations do arise, there will be better ways to rectify the situation.

Recently, omni-channel has been all the rage.  But for grocery chains and the brand owners that supply them, the demand driven supply chain for traditional in-store shopping may continue to offer the larger opportunity.