Author Archive for Adrian Gonzalez

With the holidays around the corner, this was a relatively quiet week for news. And I suspect many of you are already in vacation mode, so I’ll keep it brief today.

A couple of interesting articles in the Wall Street Journal this week. First, an article about the rising importance of regional parcel carriers, driven by online retailers and their push for faster (and less expensive) deliveries. Here’s an excerpt:

While the regional shippers’ total market share is only about 3%—total estimated revenues are expected to reach $1 billion in 2013, compared with a total ground package market of about $32 billion—their revenues have more than doubled since 2009, according to SJ Consulting Group, Inc. These companies separately now serve approximately 90% of all U.S. ZIP Codes, buoyed by the increase in parcel volumes from big customers like Amazon.

One of my predictions for 2014 is that “last mile” logistics will become a competitive weapon for retailers and other companies next year, and couriers and local delivery companies will play a more critical role in transportation networks. It’s important to note, however, that this is a very fragmented segment of the transportation market, and many of these local delivery companies lack the technology to effectively scale their operations and provide customers, both retailers and consumers, with shipment visibility (something the article fails to mention). As a result, I also predict that last mile logistics will be a hot area of the transportation management systems (TMS) market next year.

Side note: I’ve noticed that mainstream publications, when they publish stories about companies like FedEx and UPS, refer to them as “shippers.” The subtitle of this article, for example, is “Networks of ‘Super Regional’ Shippers Handle More Packages for E-Retailers.” It’s time to get the terminology right. “Shippers” are manufacturers, retailers, distributors, and others that ship goods using “carriers” like FedEx, UPS, and others to deliver them.

The other WSJ article talks about Whirlpool moving some of its washing-machine production from a plant in Monterrey, Mexico to one in Clyde, Ohio. Here’s the excerpt that caught my attention:

Wages for production workers in Clyde, typically around $18 to $19 an hour, are roughly five times higher than in Monterrey. But [Jeff Durham, a vice president in charge of U.S. manufacturing at Whirlpool] said the shift should lower costs overall. The Clyde plant is more automated and electricity costs are much lower [emphasis mine] than in Monterrey, he said. Whirlpool also expects to save on transportation because the products won’t have to be shipped across a border before going into the company’s North American distribution network.

This story underscores two more of my predictions for 2014: First, that robots and automation technology will continue to play a growing role in supply chain and logistics operations (both warehousing and transportation). And second, that energy considerations will play a bigger role in supply chain strategies and decisions — a major driving force in reshoring, as Whirlpool’s decision illustrates.

Finally, U.S., European, and Chinese regulators met this week in Washington, DC, at the request of the Federal Maritime Commission, to discuss the proposed P3 Network alliance between Maersk, Mediterranean Shipping Company, and CMA CGM. According to the article, a spokesman for Joaquin Almunia, the European Competition Commissioner, said the following:

“We are assessing whether the creation of P3 may raise antitrust concerns. We are looking both at shipping transport services, which is the core business of P3, and at neighbouring markets, like port terminal services, notably in light of the vertical integration of the parties to the P3 consortium.”

As I wrote about last month in What’s Going On in Ocean Transportation?, although trucking gets the lion share of press coverage, it’s important for supply chain executives to keep an eye on the big picture and understand what’s happening across all modes — and there’s a lot going on in ocean transportation.

And with that, I wish you all Happy Holidays and continued health, happiness, and success in 2014, and in the immortal words of Douglas Adams and dolphins everywhere, so long, and thanks for all the fish.

Song of the Week: “Video Killed the Radio Star” by the The Buggles (the first video ever played on MTV, although this version was recorded at a live performance 25 years later).

Categories : This Week in News
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Last week on Talking Logistics, I had a great conversation with Professor Robert Lieb from Northeastern University about the challenges 3PLs face attracting and retaining talent. Of course, the “talent shortage” problem is not only an issue for 3PLs, but also for manufacturers, retailers, and others. But is the challenge the same for everyone, or do 3PLs face unique challenges in terms of attracting and retaining talent?

For example, we all know that, generally speaking, third party logistics is a low margin business, so when it comes to offering attractive salaries, 3PLs are at a disadvantage compared to other industries with deeper pockets. But as Prof. Lieb pointed out, it’s not all about the money:

The research we did this past summer that focused on some of the competitive difficulties [3PLs] have were not just focused on compensation; they were also focused on benefit levels, career opportunities, workload expectations, and so I think the industry has to look at the whole package they’re offering to people coming out of schools and younger, lower-level managers.

I think the expectations of students today are very different than they might have been 10 years ago, 20 years ago and I think there is more emphasis on work-life balance…so I think if you are “light” with respect to salary and benefits, you have to be “heavy” someplace else, you have to convince the students that there are better career options here, or you’ll have [better work-life balance] here, so you have to look at the whole package you’re putting in the marketplace, and that’s going to determine how hard it is for you to find and keep people.

Since I had just written a posting about Millennials in the workplace (A Millennial Walks into a Baby Boomer’s Office), I also asked Prof. Lieb if he thought 3PLs have an image problem with Millennials, especially since 3PLs have a reputation, rightly or wrongly, for being an “old school” industry. Put differently, are the management practices of 3PLs misaligned with the expectations of Millennials? Check out this short clip for his response.

But the image problem goes beyond Millennials, as Prof. Lieb explains:

We’ve talked about this issue before..what do people really know about the third-party logistics industry? It’s an industry that, generally speaking, people don’t understand very well. When you focus on national efforts to try to bring attention to this [industry], the only national campaign that typically gets a lot of coverage is UPS’ [“I Love Logistics”] efforts that you see on the Super Bowl and things like that, but generally speaking, a lot of [3PLs], despite the fact they’re large and very successful, sort of fly under the radar.

I encourage you to watch the rest of the episode, where I share my perspective on the questions above, and Prof. Lieb and I discuss the importance of training and development programs (and whether 3PLs are investing enough in this area, and in the right types of programs), and some best practices 3PLs are employing to address the talent problem.

The bottom line is that 3PLs, in my opinion, face bigger hurdles than manufacturers and retailers when it comes to attracting and retaining supply chain and logistics talent. I also believe the image problem is real — but it’s less about being viewed as an “old school” industry and more about having no image at all (everyday people not having a clue about what 3PLs are and do).

Considering that talent development and retention is one of the four important factors companies must consider when evaluating 3PL partners, I wonder if 3PLs plan to invest more in this area, and be more innovative in their efforts, in the coming year. Post a comment and let me know.

Same-day delivery (or is it shipping?) and global trade dominated the news this week, so let’s take a look.

Home Depot grabbed the headlines on Wednesday when the WSJ reported that the company is spending “at least $300 million on supply chain, technology and online improvements in the fiscal year that begins in February, including building new fulfillment centers and overhauling its warehouse technology systems” to enable same-day shipping and delivery of orders. I shared my takeaways from this announcement yesterday, so I won’t repeat myself here. I’m guessing, however, that many supply chain and logistics software vendors (and probably many 3PLs too) rushed to their phones yesterday to call Home Depot’s SVP of Supply Chain Management in hopes of getting a piece of that $300 million pie.

Side note: I received a comment yesterday about my Home Depot posting because the title referenced same-day delivery but I also mentioned same-day shipping in the writeup. The reader was confused by what exactly Home Depot was focusing on. His comment raised an excellent point: There is a huge difference between same-day shipping (getting an order out the same day it’s received) and same-day delivery (getting a product to a customer the same day they order it). Therefore, it’s important to get the words right. In Home Depot’s case, as discussed in more detail in the WSJ article, the company is working to enable both same-day shipping and same-day delivery.

The WSJ also published an article this week highlighting how Sears and many other retailers are ramping up their “ship from store” capabilities. The article states that “about a third of all retailers use brick-and-mortar stores as fulfillment centers for online orders; another 26% plan to do so soon.” And who are among the biggest beneficiaries of this trend? UPS and FedEx. According to the article:

UPS and FedEx…are now eager to help traditional retailers deal with [ship-from-store]. They have engineered new strategies for jockeying inventory across the country to avoid overstocks and markdowns and to keep customers from defecting to Amazon, a big problem last year.

 

UPS says it is working with about 40 retailers on implementing these strategies — about double the number a year ago. FedEx said these partnerships helped boost revenue in its ground delivery business 11% in its fiscal first quarter.

Historically, when it came to “IT transformation” projects, companies reached out to the big consulting firms like IBM and Accenture for help. Are UPS and FedEx becoming the equivalent of IBM and Accenture for “logistics transformation” projects like same-day delivery and ship-from-store?

Moving on to global trade, there were two important developments this week. First, the World Trade Organization  announced that it reached its first global trade agreement. It only took 18 years. After more than a decade of failed “Doha Round” negotiations, the 159 members scaled back their ambitions and settled on a more limited agreement called the “Bali Package.” Trade facilitation was a key piece of the agreement. Here’s an excerpt from the press release:

The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.

 

The benefits to the world economy are calculated to be between $400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.

The WTO is aiming for the General Council to formally adopt the Bali agreement by July 31, 2014. This all sounds good on paper, but realizing the objectives will take many, many years — if ever. Just look at how many years and dollars have been spent here in the U.S. on the Automated Commercial Environment (ACE), which began in 2001, and it’s still not completed. Just saying. Also, whatever gains are achieved via trade facilitation will be reduced or wiped away if countries continue to adopt protectionist measures, which the former head of the WTO warned about earlier this year:

“As long as global economic weakness persists, protectionist pressure will build and could eventually become overwhelming. The threat of protectionism may be greater now than at any time since the start of the crisis, since other polices to restore growth have been tried and found wanting.”

The other global trade development this week was that the Trans-Pacific Partnership (TPP) negotiations have stalled, due in large part to disagreements between the United States and Japan over agriculture and automobiles. The talks are set to resume in late January. In many ways, the TPP is vastly more important to the U.S. than the Bali agreement. Simply put, the countries in the TPP (which includes Canada, Japan, Vietnam, Australia, Singapore, and six other Asian countries) account for 40 percent of U.S. imports and exports. And for every proponent of the deal there’s an opponent, not only here in the U.S. but in the other countries too. Which is why trade agreements take so long to negotiate, and so long to fully enact. Nonetheless, if you’re involved in trans-Pacific trade, you have to stay informed of what’s happening with TPP.

And with that, have a happy weekend!

Song of the Week: “Lost That Easy” by Cold War Kids

Categories : Global Trade, Retail, This Week in News
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I’m always on the lookout for companies that are using social networking technologies to enable business processes other than marketing and customer service. Yesterday, I came across a Financial Times article that mentioned two examples: Red Robin and GE. Here are the excerpts:

Red Robin, the US fast-food chain, used to take 18 months to create a burger [emphasis mine], waiting for sales figures to come in from small trials, [Adam Pisoni, co-founder and chief technology officer at Yammer] said. But by putting the servers in a Yammer group with the people who developed the burger, they could quickly share customer responses in the restaurant, cutting the gestation period to four weeks.

Peter Coffee, vice-president of platform research at [Salesforce.com’s] Chatter, said General Electric was using the service to cut the time spent responding to machine errors. “A machine doesn’t need to turn on a red light, it just updates the right conversation,” he said. “This takes it from a one week response time in a case surrounding a jet engine to bringing it down to single minutes as Chatter could swarm the appropriate expertise immediately.”

These examples point to a key metric that’s emerging for quantifying the value of social networking: Time-to-Resolution.

In other words, by enabling people (across functional groups and organizations) to communicate and collaborate more effectively, and in a more scalable way, companies are able to resolve problems faster, develop products more quickly, and make smarter decisions faster — all of which are imperative in a fast-changing business environment.

What’s the potential value in dollar terms? According to a McKinsey & Company report from July 2012, “[social networking technologies], which create value by improving productivity across the value chain, could potentially contribute $900 billion to $1.3 trillion in annual value across [consumer packaged goods, retail financial services, advanced manufacturing, and professional services]…Two-thirds of this potential value lies in improving collaboration and communication within and across enterprises.”

(For related commentary, see The Perfect Answer to “What’s the ROI of Social Networking?”, A Pulse on Social Networking for Supply Chain Management, and Social Networking and Companies of Tomorrow.)

Also this week, I came across some interesting survey results from the Pew Research Center published in August 2013. It turns out that the use of social networking technologies by Baby Boomers and seniors is growing very rapidly. Back in April 2009, only about 25 percent of 50-64 year olds were using social networking technologies, compared to about 78 percent of 18-29 year olds. Four years later, the gap has significantly closed, with 60 percent of 50-64 year olds now using social networking technologies, compared to 89 percent of 18-29 year olds.

Pew_SocialNetworkingUse

These results coincide with my own experience. Four years ago, when I started conducting executive workshops on social networking, very few supply chain executives (who tend to fall in the Baby Boomer generation) reported using social networking technologies. At most, they had a LinkedIn profile and that’s it. Today, however, many more hands go up when I ask the question, and executives are not only using LinkedIn in more diverse ways, such as participating in group discussions and to search for new career opportunities, they are also using Facebook, Twitter (although still in the minority), and enterprise social networking tools like Yammer and Chatter.

The bottom line is that Baby Boomers are no longer Luddites when it comes to social networking — or at least they are much less so today than they were just a few years ago. And as their experience with social networking increases, both at home and at work, I expect their skepticism and resistance to change will decrease, which will lead to greater adoption of social networking technology across business processes.

That’s my bet, anyway. What’s yours?

Categories : Social Media
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There are huge piles of leaves in my backyard that I need to bag before Tuesday, the last day the city will pick them up, so let’s go straight to the news because I have a date with a rake this afternoon.

Last Sunday on the television program 60 Minutes, Amazon unveiled a new delivery system the company’s R&D team has been developing called Amazon Prime Air; the goal of the system is to get packages into customers’ hands in 30 minutes or less using unmanned aerial vehicles (aka “drones”). In the days that followed, reports came out that UPS and Google are also experimenting with drones.

My initial reaction was to think back to the posting I wrote back in February (Drones – The Birth of a New Transportation Mode), where I highlighted Matternet and its mission to create “the next paradigm for transportation” using a network of drones, ground stations, and an operating system. “We’re witnessing the birth of a new transportation mode, one that will take many years to develop and mature (but will probably happen sooner than we think),” is what I wrote back then, and Amazon’s demonstration this week– despite all the technical, regulatory, and legal issues associated with it — is another step, however small and trivial, toward the future of transportation.

Back to the present, GrandJunction, which provides a software-as-a-service (SaaS) platform for the local delivery industry, announced yesterday that it has managed more than 60 million deliveries to date, and is currently managing a local delivery every two seconds. GrandJunction is a new company, but the technology and people behind it have more than a decade experience in the local delivery industry. Rob Howard, GrandJunction’s CEO and founder, also founded Ensenda Inc. in 2000, a third-party logistics provider specializing in local delivery. GrandJunction’s technology was built and proven at Ensenda, and since quietly spinning off more than a year ago, GrandJunction has (according to the press release) “closed deals with a wide range of companies, including FORTUNE 500s, large technology companies rolling out local delivery programs using local carriers for the first time, and smaller businesses looking to offer scheduled delivery.”

Considering all of the buzz generated this year by Amazon, Google, eBay and others with their same-day delivery efforts — and all the press omni-channel fulfillment is getting — GrandJunction is coming out at the right time. In many ways, local delivery remains a “white space” in the TMS market. Local delivery is a very fragmented segment of the transportation market, with thousands of local carriers (couriers) that don’t have the technology to effectively manage their operations and provide customers with the information they need. Like other network-centric business processes, bringing all of the local delivery stakeholders (shippers, couriers, and drivers) onto a common cloud-based platform is the right strategy. How shippers will ultimately integrate local delivery with the rest of their transportation operations, and integrate their transportation solutions, remains to be seen.

Another software vendor benefiting from “last mile” logistics is Descartes, which announced record revenues for its Q3FY14 quarter ($38.8 million, up 19 percent from Q3FY13). In the financial analyst call, the company mentioned that omni-channel fulfillment and home deliveries are contributing to its growth, with retailers like Sears Holdings and Restoration Hardware adopting its home delivery solution.

Shifting from land to sea, what’s going on in ocean transportation? There was another development this week, with reports that Germany’s Hapag-Lloyd and Chile’s CSAV are in merger talks. Like I mentioned in my posting last month, ocean carriers are hurting financially (twenty-three out of the top thirty carriers were unprofitable last year), so ocean carriers will continue to explore new ways to save money or become more productive. The bottom line: if you’re an ocean shipper, you need to keep a close eye on what’s going on.

Finally, Steve Banker came across a very informative video series on NPR tracing the end-to-end supply chain of a t-shirt. Most of my friends and family do not know what “supply chain management” or “logistics” mean. These types of videos help educate the general public on what we do for a living, and sheds light on the role supply chain management plays in our daily lives, and why it’s a promising career choice for students and young professionals.

And with that, have a happy weekend!

Song of the Week: “That Was Yesterday” by Foreigner

Note: Descartes is a Logistics Viewpoints sponsor.

Categories : This Week in News
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