I’m an ex-academic, but I’m not a fan of most of the research produced by supply chain or industrial engineering departments.  Most of it is just not relevant to supply chain professionals.  But there is an article that MIT published called Analysis of Truckload Prices and Rejection Rates that was an exception.

MITCenter for Transp

The researcher, Yoo Jin Kim, partnered with the TMC division of C.H. Robinson.  TMC provides managed transportation services and transportation management systems for shippers.  The author was able to look at tender and acceptance rates, and rates paid, of the TMC managed service customer base for the previous five years.  The dataset covered 40 TMC customers, some of whom were very large shippers.

Here are some of the takeaways from the literature review section:

  • For most shippers, most of their load volume occurs on relatively few lanes, while the majority of lanes have little volume. For low volume lanes, canny shippers tend to use a loose definition of lanes, like state to state, in order to aggregate lane volume and make the volumes more attractive to carriers.
  • When shippers have a longer tender lead time, in other words when they give carriers more advance warning of a shipment, they can reduce both price and the number of tender rejections.

Here are some takeaways from the research:

  • Shippers made 1.4 tenders on average for every tender accepted.
  • Tender rejections are linked to the length of the line haul. They bump up considerably at the 100 mile mark. Presumably, this is because carriers are willing to have empty backhauls for routes of up to 100 miles. Beyond that distance, the carrier is looking for a backhaul load, which can’t always be found.
  • When tenders are rejected, they pay on average 15 percent more to cover that load! The deeper shippers have to go in their route guide, the more they have to pay. If you have to go down to the third alternative to the primary carrier, on average you pay about 25 percent more.

While this research was published last year, it is becomingly increasingly pertinent.  The North American transportation market is also going through some cataclysmic changes. What is keeping transportation professionals up at night are capacity issues, particularly in the long haul truckload market. These capacity issues will take two to three years to resolve – driver shortages, equipment sell offs, and tougher regulation make this the toughest market many shippers have seen in their lifetimes.

Because of this tight market, shippers should expect their tender rejection rate to go up.  Most managers of transportation departments should expect that they will go over budget this year.  It is never fun to explain that to your boss!

 

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Arrr!! Courtesy of Talklikeapirate.com

Arrr!! Courtesy of Talklikeapirate.com

Ahoy!! Did ye land lubbers know that today is International Talk Like a Pirate Day? Here’s a quick primer – “Arrr!” is the official sound, and not, “Arrrgh!” There are talk-like-a-pirate parties all over the world, as this is more than just a provincial phenomenon. Go to the official Talk Like a Pirate website to find a local chapter near you.

Arrr! Now onto this weeks logistics news:

An article in WSJ discusses how ZARA has circumvented difficulties previously experienced by some of its competitors. JC Penney, for example, began using RFID tags in 2012 but learned that they interfered with security sensors. ZARA has created a process that cost effectively utilizes RFID to achieve substantial inventory management and visibility improvements. The company is embedding the RFID chips in the garment security tags, enabling the tag’s plastic case to protect the RFID chip and streamline the recycling of the RFID chips along with the security tags at the checkout. And the use of RFID on merchandise promises inventory visibility improvements. The article states the following regarding the in-store inventory-taking practices:

Before the chips were introduced, employees had to scan barcodes one at a time, Ms. Martín said, and these storewide inventories were performed once every six months. Because the chips save time, Zara carries out the inventories every six weeks, getting a more accurate picture of what fashions are selling well and any styles that are languishing.

ZARA is resolute in adopting RFID, as the article notes the company purchased 500 million RFID chips ahead of the rollout. Other companies are also embracing the technology, including Macy’s, French company Oxylane Groupe (Decathalon Sports), and U.K.-based Marks & Spencer.

Earlier this week, French container shipping company CMA CGM announced that it had agreed upon a route-sharing alliance with China Shipping Container Lines and United Arab Shipping. The alliance is to known as the Ocean Three, and will cover routes between Asia and Europe and Asia and North America. The alliance is expected to account for 20 percent market share of the Asia-Europe routes and 14 percent of the Asia-Pacific. This alliance comes on the heels of  a two-way partnership between Maersk and MSC that was formulated earlier this year. The Ocean Three alliance, formed to save costs on key container routes, will embody a total of 132 ships serving the Asia-Europe and Asia-Pacific routes.

UPS announced that it expects to hire up to 95,000 seasonal workers to assist with the increased volume during the busy holiday season. UPS noted that much of this year’s increase in package deliveries will come from the proliferation in e-commerce. Last year the company planned to hire 55,000 seasonal workers, but only ended up hiring around 30,000. This prefaced the highly publicized UPS performance debacle that occurred last year. Improper strategic planning was stated as the cause of the poor performance. But my own experiences indicate there were also issues at the execution level.

The Pew Research Center released results from its Global Attitudes Survey on international trade. The report, based on survey results of individuals from 44 nations, provides an analysis of perceptions toward the effect of international trade on job creation, wages,  and prices. It also discusses perceptions about the effects of direct foreign investment. The results are presented by country and by the economic categories of Advanced, Emerging, and Developing nations.

Finally, an interesting story about the reunion of man with his most prized possession. Ivan Schneider had his Jaguar stolen in 1968 when he was living in New York. Forty-five years later the car was found by Port of Los Angeles customs officials during an inspection of a shipping container destined for the Netherlands. The dailynews.com article quotes Schneider as saying “This is a just a miracle, a miracle. I was 26-years-old then and now I’m 82. It was my first good car – and favorite.” Check out the article for pictures of the car and Ivan Schneider viewing it on screen at the port.

Have a great weekend!

 

This week’s video is one your kids will like. Here it is, the Comfy Rabbit.

 

 

 

 

 

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Chris Jones CroppedThis past week, I had a chance to spend a few hours with the folks at a large global food manufacturer discussing the evolution of their mobile strategy. The company has been using GPS-enabled mobile technology with its thousands of sales and merchandising resources for over five years. What started as a strategy to track its field resources to automate the payroll process, has turned into a large-scale program to improve productivity and performance.  In my view, this manufacturer has reached the second wave of value in mobile technology – understanding what its resources are doing and using that information to recalibrate its planning processes and management strategies. The second wave returns have been as compelling, if not even more compelling, than the benefits achieved during the initial deployment.

Unless you are tracking your field resources with GPS-based activity statuses, you have no idea what they are really doing. Field workers are largely unsupervised and, unfortunately, there are a few “bad apples” in most organizations who aren’t entirely honest about reporting their activities.  “Stretching” is particularly prevalent, with hours worked and/or miles driven “rounded up” in an overly optimistic manner.  If you want to know where you are losing 2-3% of your productivity, it could be right there.  On the other side of the coin, without accurate tracking, it can be difficult to identify and reward high performers among those largely unsupervised field workers.

Which brings me to the second point – mobile data is big data. This manufacturer captures billions of data points every year. Every GPS ping tells a story; one that you wouldn’t get from doing the monthly ride with one of your field resources. A lot of mobile data is transactional (pickup, delivery, arrived, depart, etc.), but provides a wealth of operational performance information because GPS provides time and location context. “Slicing and dicing” that information over a period of time can paint the true picture of good and bad performance and allow you to break down field performance into its fundamental components. If that doesn’t sound like a job for big data, I don’t know what does.

Getting the fundamental view of what is happening in the field provides a tremendous opportunity to improve the planning processes, management strategies, and human resource policies. Planning without operation data is an open loop process that runs off too many assumptions. This particular manufacturer was able to use the operational data to determine which factors really impacted its planning processes. The company actually simplified its planning models and can now more effectively deploy it resources to drive sales. Management is now focused on exception management and spotting workforce trends.

An interesting and counterintuitive point that occurred over time was the simplification and streamlining of the company’s mobile application and data collection process. While the natural inclination is to capture as much data as possible, it became apparent that consistency was more important than breadth of data collected. It isn’t realistic to expect field resources to get it right every time without workflow management and automation. However, making the workflow convoluted to capture all possible cases makes field workers unproductive and requires a lot of support. With a fair amount of turnover and part-time employees, ease of understanding became as important as determining what data they wanted to capture.

There were two key takeaways for me from this conversation. First, if you aren’t using GPS-enabled mobile devices with your field resources your company is experiencing higher costs and inconsistent customer service – you just don’t know it. Second, all that transactional data you are collecting as part of your mobile strategy to go paperless or simply track your resources can be turned into a tremendously powerful continuous improvement program.

 

Chris Jones is the Executive Vice President for Marketing and Services at Descartes. He has over 30 years of experience in the supply chain market, holding a variety of senior management positions including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest, Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director, Kraft General Foods.

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omniCSCMP is only a week away. Clint Reiser and I will be presenting our findings from an omni-channel fulfillment survey we conducted in partnership with James Cooke and DC Velocity. Omni-channel is all about the convergence of channels to provide a unified brand experience for the customer. Each channel has its own experiences, advantages, and challenges. The key is to connect the business processes and technology to create a holistic experience.

One of the main issues with the omni-channel customer experience is where to start. An omni-channel strategy is not easily laid out. It involves elements of supply chain, marketing, sales, communications, operations, and a variety of other things. At our session, Clint and I will touch upon these challenges and take a look at the supply chain and fulfillment aspect of the customer experience. Here is a sneak peak of some of our findings:

  • Sharing inventory across channels is not as commonplace as you might think. Just over 50% of respondents are sharing inventory across channels. I find this surprising as inventory availability is at the heart of the customer experience. If your customer cannot get the product they want through their desired channel, they will find it somewhere else. Sharing inventory across channels alleviates some of the concerns about lots sales. However, it does require accurate inventory counts at all locations, and the ability to centrally manage the flow of inventory.
  • Of those respondents that do share inventory across channels, 62% share across all channels and an additional 34% share between brick and mortar locations and online. There is not a big push to share call center and catalog inventory with brick and mortar or the online channel. This is not too surprising as these channels are only generating about 10% of total revenues from our respondent base, and that number will only decline over the next five years.
  • About 80% of respondents indicated that their e-commerce fulfillment is at the same facility as their traditional fulfillment. Combining these into one physical location requires the establishment of channel-specific processes. Nearly 60% of respondents segregate e-commerce fulfillment from traditional fulfillment. The most common way is to segregate the facilities by physical layout. This method allows for specific areas to pick orders for store fulfillment, direct-to-consumer fulfillment, and distribution center transfers. Not as popular is to segregate by labor management and inventory availability.

That’s all for today’s sneak peak. If you are in San Antonio for CSCMP next week, we will be presenting our results on Monday morning in the Omni-Channel track. If not, please keep an eye out for the summary article in DC Velocity this November.

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Chuck FuerstThe growth of online shopping, direct-to-consumer shipping, and multi-channel distribution demands have led to big changes in the 3PL industry – to the point where many industry observers, such as Robert Bowman in a recent article for Forbes, noted that the number of 3PLs overall is shrinking due to a rising trend of mergers and acquisitions. And though the number of 3PLs is declining, the competition is fiercer than ever with greater pricing pressures and increased expectations to handle more complex services: In response to demands such as direct-to-consumer shipping and value-added services related to multi-channel needs, 3PLs must be able to support piece/picking/shipping rather than case-level picking and shipping. To stay ahead, you need to prove to customers that you are more than a commodity business, especially in the age of multi-channel operations.

Being everywhere and everything for a customer doesn’t even necessitate owning physical locations and infrastructure, as growth in 4PLs would suggest. For companies with well-developed logistics processes that have maximized their value in terms of control and scale, the 4PL model provides an opportunity to expand that value by playing on a much larger field, providing a customized solution that fits specific customer needs and can accommodate cultural or regional differences. Whether a 4PL or 3PL, successful companies are those that have a strong supply chain software infrastructure that allows them to be everywhere and everything to their customers.

Where do you start?
As a 3PL offering warehousing and distribution services, having a strong warehouse management system (WMS) can be a competitive advantage that helps you secure new customers and keep them long-term, with the ability to adapt to their needs and provide value-added services.

In addition to best practices for receiving, put-away/flow-through, inventory management, order processing, replenishment/ pick/pack, loading and shipping, and more, let’s look at specific ways a flexible WMS can deliver value to a 3PL’s omni-channel operations.

On-board new customers – fast
The process of taking on a new customer doesn’t need to be a hassle. Workflows can be very different for different industries and customers, but a flexible WMS can help you on-board a new customer in days, not months. A configuration wizard is one way that makes it easy to configure the data elements for your new customer by applying preset rules by industry, plus the rules unique to that particular customer, such as billing specifications. Now, you can manage even the most complex distribution requirements and enforce the exact supply chain processes your customers require.

Manage all types of customers – and keep your sanity
Getting fulfillment right is much more mission-critical in a multi-channel setting compared to a traditional brick and mortar setting because it represents significantly higher costs: up to 18-20 percent of online-order revenue, which is about four times the proportion for traditional channels.

These higher stakes mean you’re expected to perform different tasks based on specific industries and customers. For instance, your retail customer may want you to capture style, color and size item attributes. Your food customer may want to know lot number and “best before” dates. Ensuring the accurate tracking and handling of each demand can be a full-time job itself.

A WMS makes this process easier by allowing for dynamic item configuration on a client-by-client basis, giving you the ability to have any number of customers tracking multiple inventory attributes. It can even enforce the exact supply chain preferences that each of your customers require – down to their customer’s and supplier’s levels.

Just as important, a WMS can help accurately and efficiently track all billable activities in the warehouse, leading to easier invoicing and a real-time view of a customer’s account. And because labor is such a significant cost, a WMS can manage workforce efficiency by tracking productivity against industry standards. This gives you a better understanding of where your labor costs are, not only for developing employees but for billing customers more precisely to deliver better profitability.

Your services aren’t a commodity – so prove it
In today’s market, you know you can’t survive without distinguishing yourself and you need to prove it to your customers by providing extended services that require infrastructure to support the diversity of products, clients and needs. But the challenge becomes finding the most cost-effective technology infrastructure that can adapt to the expanded range of services you provide, tracking various types of inventory and item attributes.

With a WMS, you can create new offerings and workflows to provide value-added services relevant to a multi-channel market, including greater inventory visibility; the flexibility to dynamically schedule deliveries and select shipment methods; manage delivery directly to the customer along with back-end tracking and reporting; and seamless management of online orders and returns alongside existing retail channels. Instead of customizing a solution you have, a flexible WMS lets you meet customer needs for quality, safety and traceability/genealogy.

The future of 3PL services
3PL services will continue to evolve to meet clients’ needs and the shifting economics and politics of the marketplace. With the right investments in technology now and by keeping an eye on future needs, you can make business more attractive to current and potential clients by on-boarding them quickly, managing them accurately and by offering value-added services. This proactive response to the marketplace will help your 3PL stand out in the industry –without forgetting the importance of your bottom line.

 

Chuck Fuerst is the director of product strategy at HighJump Software. He has more than 15 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a bachelor’s degree in marketing management and innovation from Concordia University.

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