Archive for Logistics Trends

First-time visitors coming in to Singapore’s Changi Airport often remark on its salubrious surroundings and smooth, efficient processes – a main performance target is to have the first bag on the belt within 12 minutes of aircraft touchdown, for instance. But this is not just for show. Well beyond the airport, world-class infrastructure and high performance in logistics are key elements of Singapore’s efforts to attract people and businesses and build its position as a desired hub for Asia.

Allied with an open and business-friendly economy, it’s a strategy that appears to be working: Singapore ranks first out of 189 countries in ease of doing businesses (World Bank’s Doing Business survey); for the last several years it has topped the Economist Intelligence Unit’s Business Environment Index; and it is second only to Switzerland in the World Economic Forum’s Global Competitiveness Report.

More specifically for logistics,  the World Bank’s latest (2014) Logistics Performance Index – which measures aspects such as efficiency of customs and border clearance, quality of trade and transport infrastructure, and the frequency with which shipments reach consignees within scheduled delivery times – ranks Singapore top in Asia and fifth out of 160 countries globally.

Compared to the airport, the country’ main shipping port, operated by PSA Singapore Terminals, is likely a less familiar example of infrastructure and logistics excellence. But with 33.9 million 20-foot containers (TEU) handled in 2014, globally, it is second only to Shanghai (35.2 million TEUs) in terms of container traffic and is the world’s busiest in terms of transhipment cargo.

PSA pic 1

A successful transhipment hub requires not only high connectivity (Singapore is connected by 200 shipping lines to 600 ports in 123 countries) but also very efficient logistics ­– so that containers can quickly and correctly transfer from incoming to outgoing vessel. And as container volumes have grown over the years and port operations become more complex, PSA has been quick to apply technology – both the information and automation variety – to keep port productivity and efficiency high.

PSA pic 2

Probably most well-known is the world’s first collaborative port community solution, PORTNET, which connects shipping lines, hauliers, freight forwarders and government agencies, helping them to manage information and synchronize complex operational processes. Features of PORTNET include online ordering of port services to facilitate vessel berthing and container handling, and extensive track and trace capability for container status (arrival and discharge timings), vessel location, and reefer container temperature, among others.

Meanwhile, for planning and execution within the port, CITOS (Computer Integrated Terminal Operations System) coordinates and integrates the port’s multiple assets, from prime movers, yard cranes, quay cranes to containers and drivers. It automatically generates ship stowage and yard layout plans such that containers can be stacked in a logical rather than random manner, which maximizes asset utilization and optimizes retrievals.

More directly at the equipment level, innovations include the Flow-Through Gate, a fully automated system that identifies and security-clears incoming container trucks (average traffic flow of 700 trucks per peak hour) and provides drivers with drop-off location instructions – all within 25 seconds . And the ROCC (Remote Crane Operations & Control) system allows operators to be stationed in a control room, rather than on-crane, to remotely monitor and control crane movements.

According to PSA, automation will continue to play a “transformative role” in port operations in the future. As well as implementing a fully-automated yard crane at its newest terminal, automated guided vehicles (AGVs) for handling movement of containers between quay and container yard have been undergoing tests in a pilot project.

Kalmar, part of Cargotec, recently completed the on-board navigation application for PSA’s four prototype AGVs used in the project. Specifically, Kalmar’s software automatically controls the AGVs, guiding the vehicles along their given routes and measuring their positions using transponder navigation. And diagnostics tools provide a remote view of AGV operation of the equipment, as well as storage and call-up of AGV alarms.

AGVs operating 24/7 in this manner are set to be feature at PSA’s container terminals before too long, reducing the need for prime movers and drivers. It’s worth noting that companies operating in Singapore, which has full employment and relies extensively on foreign labor for many of the lower-level manufacturing and logistics tasks, does find automation relatively easy to justify. In fact, the government is currently on a major productivity drive and offering generous grants and tax incentives for appropriate technology investments.

Looking further ahead, consolidation of PSA’s current seven container terminals at four locations (Keppel, Brani, Tanjong Pagar, Pasir Panjang) to a single location in the form of a mega port at Tuas on the western end of the island is set to further boost efficiencies through eliminating inter-terminal haulage and enabling economies of scale.

The new mega port, which is scheduled to open in phases from 2025, has a planned capacity of 65 million TEUs annually – more than 50 percent up on present capacity – and will no doubt be even more highly automated and IT intensive, as Singapore looks to stay extend its long maritime history and remain in the very top tier of global shipping ports for many decades to come.

BuildDirectEarlier this month I attended the Home Delivery World, Click & Collect Show USA, and ETail Show USA joint conference in Atlanta. One of my favorite parts of these conferences is getting a new perspective on an existing problem. And more importantly, I get to learn from my peers who are implementing creative solutions. One such presentation at the conference was from Jim Hourigan, Chief Operating Officer at BuildDirect. BuildDirect is an online retailer where customers can review, sample, and purchase, heavy-weight home improvement products. This includes flooring, decking, building materials, outdoor furniture and landscapes, kitchen and bath accessories, and doors. One problem BuildDirect ran into was deliveries. While many customers enjoy deliveries since the products can be delivered directly to the job site, these deliveries are expensive. The company can generally only make one or two deliveries an hour, and most of the deliveries are a two-man job.

So BuildDirect looked at a new way to fulfill customer orders that is not as commonplace in the heavy-weight home improvement category: click and collect. According to Hourigan, by adding click and collect, the company would be able to adapt their supply chain, optimize warehouse and facility management, and reduce costs while ensuring high customer satisfaction. Many customers would be happy to pick up their orders, as it is something they have most likely done at other retailers (albeit, for an entirely different product category). BuildDirect knew that once they dug into the details that the difficulties would become apparent. For that reason, the first step in the process was a lengthy planning process.

Planning for click and collect is a little different at a warehouse than it is for a traditional brick and mortar retail location. The first consideration had to be a staging area. When designing a staging area, the company had to look at where is the most efficient area for the warehouse as well as the customers. The inside of a warehouse, especially for heavy-weight home improvement products, poses safety concerns for both employees and customers. The company had to make sure that employees could safely perform their tasks while servicing customers, and the customers had to remain safe while picking up their orders.

Next, BuildDirect had to develop time windows for pick-ups. This ensured that normal operations could continue, and that customers had clear expectations of when they could pick up orders. The company also developed standard operating procedures for rush and same day pick-ups. Finally, the company installed clear signage for customers as well as an FAQ on the website to answer any questions they may have about their click and collect order.

Once the processes were developed, BuildDirect developed a mantra for their click and collect processes: “make it easy for the customer.” Aside from ensuring that the warehouse has a standard operating procedure, the company outlined three key ways to make things easy for the customer and ensure a seamless shopping experience: over communicate, set the right expectations, and get feedback.

BuildDirect 1BuildDirect 2BuildDirect 3BuildDirect firmly believes in over communicating with their customers. It is one of the easiest ways to make things easy during the process. For BuildDirect, over communicating involves a lot of signs. When customers pull into the warehouse parking lot, there are signs alerting the customer to where they are and where they need to park. The company places signs on the appropriate door for customers to enter. There are signs inside the warehouse letting the customer know which window is for click and collect purchases. By using these signs, the company is making the experience as simple as possible for the customer.

BuildDirect’s strategy for making things easy for the customer is to set the right expectation with the customer ahead of time. This includes telling the customer exactly what is required when they show up at the warehouse (photo ID and order number). The company also gives a time window for when the order will be ready as well any specific vehicle needs to pick up the products. BuildDirect provides a detailed map from the nearest highway to the right door (which goes along with their over communication philosophy) and a contact phone number in case the customer has any questions.

Finally, BuildDirect solicits feedback from every customer about their click and collect experience. Every BuildDirect employee reads the customer feedback every morning as part of their job. The feedback is shared with the warehouse and used to make improvements. The company aspires to fix every error or bad experience a customer has.

In conclusion, Jim Hourigan, Chief Operating Officer at BuildDirect, outlined how his company is leveraging click and collect capabilities to provide a seamless experience for customers. While it is not the norm for heavy-weight home improvement products to fall into the click and collect category, BuildDirect has developed a strategy to ensure that they manage the process efficiently. By planning at the warehouse level, from staging areas to signage for customers, the company was able to establish firm standard operating procedures. Using its mantra of “make it easy for the customer,” BuildDirect over communicates with customers, sets the right expectations, and uses feedback to make continuous process improvements.

ecommerceDuring the second half of 2014, Clint Reiser and I worked on an extensive survey examining the omni-channel commerce landscape. One of the key findings from that research was on the growth of e-commerce. According to our research, the lion’s share of revenue is still driven by the store. Brick and mortar locations accounted for approximately 67% of all revenue for our survey respondents. However, when looking at revenue growth, our research tells us a different story. Over the last five years, survey respondents indicated revenue growth of 6% from the brick and mortar channel compared to 47% for e-commerce. Looking ahead, respondents forecasted flat growth for their brick and mortar channel compared to 40% growth for e-commerce. This is a pretty dramatic shift in the retail landscape. It shows that the convergence of channels will be more important as omni-channel operations continue to evolve. It also poses a significant problem for retailers: how to deal with the last mile.

Fedex_ups_uspsLast mile delivery is the final leg of the supply chain. It is the moment the customer finally receives their order. And it is generally the most expensive, least efficient, and most problematic part of the overall delivery process. In the US, last mile deliveries have their own unique set of challenges. Mostly they come down to cost issues, and a retailer’s desire to control the final moment of the brand interaction. There are a few main categories for last mile deliveries. First, is parcel delivery. UPS, FedEx, and the Postal Service are the three main players in this area. These companies are delivering thousands and thousands of packages daily from retailers around the globe to customers front doors and offices. The shipping rates have gone up recently, and these companies provide very little control over the last mile for retailers.

Amazon FreshAn alternative to typical parcel deliveries is in use by Amazon. To control the last mile, and to utilize its massive distribution centers, Amazon has rolled out its own private fleet of trucks to make deliveries. For Amazon, it creates more flexibility in delivery timeframes and reduces overall shipping costs (as Amazon is no longer paying UPS, FedEx, or the Postal Service for deliveries). This is not the first time Amazon has looked for creative ways to complete deliveries. As recently noted in Logistics Viewpoints, Amazon is one of a few companies testing drones for deliveries. The company has also experimented with bike messengers in New York City for small deliveries as well as delivery lockers for customers to pick up items at their convenience.

Another alternative to using the big parcel companies that has taken off is the use of crowdsourced delivery services. Deliv, for example, is a crowd sourced delivery option that stretches across multiple retail segments. This company uses a smartphone app to alert pre-qualified drivers of a pending delivery. The driver picks up the merchandise from the retailer and delivers it to the customer. Instacart is another example of crowdsourced delivery. Based in San Francisco, this company connects personal shoppers with customers to deliver local groceries. Both of these companies are proving that the crowdsourced model is growing. And all of these models show that while they may be expensive, they are doing a good job of satisfying the customer during the last mile.

last mile indiaBut outside of the US, it is another story. The growth of the e-commerce economy is great for retailers, and allows more people to shop for the goods they want, but it poses significant challenges to the last mile. The world’s two most populated countries, which bring an awful lot of buying power, face significant challenges. In India, for example, Morgan Stanley estimates that Indian online sales will hit $100 billion a year by 2020, up from $3 billion in 2013. The difficult part is figuring out the infrastructure to make home deliveries viable. Trucks have a difficult time navigating the crowded streets and the postal service is notoriously slow. One new option in India is the use of couriers to deliver goods purchased from Flipkart, Snapdeal, and Amazon India. But, in order to actually deliver these products, couriers are turning to smaller modes of transportation. In many places, delivery trucks are simply too big to navigate. Instead, couriers are using motorcycles and scooters to carry giant backpacks filled with 100 pounds+ of merchandise. These drivers navigate narrow streets, potholes, and erratic drivers to deliver everything from soda to laser printers. Most people agree that without the use of couriers to deliver these goods, the e-commerce market as a whole would grind to a halt in India.

china last mileChina faces its own set of challenges. The e-commerce market is growing exponentially in China and vast improvements have been made to establish more operations centers across the country. These improvements have made it possible for residents in rural China to shop online and receive orders in a timely fashion. But the last mile still remains an issue. One of the biggest roadblocks for Chinese retailers is the government policy banning freight vehicles and gas-fueled and electric tricycles in downtown areas. This poses a number of problems. First, delivery people can be detained, have their vehicles seized, and receive fines for violating regulations due to the pressure of making a delivery timeframe. Secondly, to combat the costs of tickets and seized vehicles, many companies are simply driving up their delivery costs. These costs can certainly be burdensome to the customer, but at the same time, they are necessary if they wish to receive their package. And third, if the last mile problem is not solved, and vehicles are seized or delivery personnel are detained, the packages may never be delivered. According to the operator of one such delivery service, “if the last mile problem is not solved, up to 1 million packages awaiting delivery could be stockpiled in cities around the country.” This shows just how serious the last mile problem, and the associated challenges are in China.

In conclusion, the global e-commerce market is growing. In fact, according to eMarketer, global B2C e-commerce will reach $2.3 trillion by 2017. This explosive growth brings about new opportunities, new customers, and new challenges. One of the biggest challenges will be controlling the last mile. Logistics infrastructure, economic and political regulations, and competition have proven to be roadblocks for many companies. But as the market grows, the solutions will too.

Paul McDonald

Paul McDonald

Mexico has become the destination of choice for many companies looking to benefit from its vastly improved infrastructure; increasingly skilled labor force; its proximity to the United States, as well as all Central and South American countries; and rapidly improving economic growth. Coinciding with Mexico’s rise as an attractive target for industrial opportunity are the problematic issues of escalating manufacturing costs and lengthy shipping lead times facing businesses located in many Asian countries. Recognizing Mexico’s vast potential as an industrial market, and discouraged by the increasing barriers to productivity they are experiencing in Asia, more and more companies are looking to reduce production costs and increase supply chain efficiencies by nearshoring.

An Advantageous Environment
The benefits of moving a business to Mexico extend beyond its geographical location and improving economy. Vast tracts of developable and affordable land are available in prime locations. Building in these strategically advantageous areas will serve to further shorten shipping lead times.

The Mexican government has invested significant amounts of money in improving the country’s railroads, seaports, roads and bridges, and has expanded its efforts to decrease crime, especially in major urban areas. Additionally, Mexico boasts an increasingly skilled and educated workforce, while at the same time offering labor costs that are substantially lower than competing countries.

Mexico also has a liberal trade agreement policy, and in an effort to boost foreign investment, it has created programs designed to reduce or eliminate a variety of taxes, including import, value-added and customs operation taxes.

To further Mexico’s emergence as a major player in the world market, and to make certain it experiences this potential growth effectively, it needs to ensure that it can deliver a reliable, responsive and resilient supply chain. It’s vital that both the businesses considering relocation to Mexico and the Mexican government remain cognizant of the nearshoring trends and the challenges that are going to be placed on the Mexican infrastructure over the next decade.

An experienced third-party logistics (3PL) provider has the ability to recognize the trends around nearshoring, understand the significant pressure it’s going to put on the country and mitigate the risks involved by implementing a solid plan driven by Lean.

Visibility and Compliance Cautions
When considering the end-to-end supply chain components, visibility becomes the key issue. 3PLs have the regional knowledge and expertise to prevent “black holes” along the supply chain. Focusing on the mantra “You can’t manage what you can’t see,” a 3PL that drives true Lean value through a Lean core foundation creates a supply chain strategy that addresses all visibility issues.

Areas of emphasis in the supply chain would include in-transit visibility for all inventories, from point of origin to final destination, information concerning production status, including projected inventory at destination distribution centers as well as accurate ETAs and data that would allow for easy comparison of expected performance to actual performance.

This visibility results in the elimination of the “black holes” and “blind spots” along the end-to-end supply chain. It also helps identify and eliminate delays and wasteful processes before they become problems, thereby increasing profitability.

Another serious issue facing businesses in Mexico concerns workforce culture and experience. How can a business ensure that the workforce it hires in Mexico to support its network can apply its strategies and procedures, and that all elements of this local team — drivers, warehouse workers, etc. — can handle the particular demands required by the company? As with managing any local workforce, a 3PL with regional knowledge, experience and expertise can effectively partner with the manufacturer to provide a workforce possessing the skills that meet the specific and unique needs of each business. A 3PL with Lean as its core foundation ensures that employees are accountable for process compliance, and is a critical component in driving a continuous improvement roadmap for these companies.

Liability Awareness
In Mexico, liability is a challenge. It’s difficult or impossible for a customer to get adequate liability coverage for theft or any kind of loss. An experienced 3PL will offer a proven network that includes transportation and a variety of services that help a customer with the risks associated with liability. A company that sources to a 3PL that offers this complete network of services will greatly reduce its risk of loss exposure from lack of coverage.

Ultimately, there is more work to do to make sure that Mexico is in a position to satisfy the ultimate customer in the end-to-end supply chain. Businesses that relocate in Mexico must be able to satisfy their customers, and they can’t do that if Mexico is unable to service these businesses.

As Mexico continues to grow as an attractive and enthusiastic destination for companies seeking alternatives to overseas locations, partnering with a regionally savvy and experienced 3PL will become an even more desirable option. The output of a 3PL that can drive true Lean value is process, rigor, continuous improvement, technology enhancement, visibility and the ability to respond with resilience at all points along the supply chain, all necessary components in achieving nearshoring success in Mexico.

 

Paul McDonald is Director of Business Development at Menlo Logistics. Named to his current position in 2008, McDonald is responsible for sales and marketing activities in Menlo’s Automotive and Heavy Industrial Group.

Rafael Solis is the Senior Regional Business Director for Menlo Logistics, specializing in design, execution and delivery of integrated customs and trade solutions that enhance supply chain management programs

Things are certainly changing in the trucking industry. Even though demand is rising, the industry is facing a monumental challenge in its shortage of qualified and licensed drivers. The driver shortage has been at the forefront of trucking news for some time, and we have certainly covered it here at Logistics Viewpoints. With the ongoing investments in research and development for driverless vehicles, could this be the solution to the driver shortage?

driverless trucksDriverless cars have been receiving the lion’s share of buzz lately. But they are not the only vehicles out there. In fact, driverless trucks are already operating at iron ore mines in Pilbara, Western Australia. The trucks were brought in to alleviate safety concerns for drivers, while increasing efficiency. These trucks are mostly operating on deserted dirt roads, not driving through crowded cities. But that could all change soon.

DriverlessTruck2Pretty much every car and truck company out there is testing driverless trucks, and it is only a matter of time before they hit the road. Not only could driverless trucks combat the driver shortage, there a number of other tangible benefits that can be felt. First, current regulations dictate the number of hours a driver can be behind the wheel. These regulations vary by country, but the bottom line is that each driver can only log so many hours a day or week. With driverless trucks, the trucks could drive 24 hours a day, while only stopping to re-fuel. There would be no mandated work stoppages or rest times. There would be no time lost to meals and snacks. There would be no time lost to sleep. The trucks can just keep going. This will cut down on the transit time to deliver goods, which will reduce overall costs.

Second, safety concerns of fatigued drivers will no longer exist. Driver fatigue is a serious issue in the trucking industry. For that reason, regulations exist to limit driving times. With smart trucks, there is no chance of human error on the road. In fact, there is not even human interaction. The trucks will not need to rest or reset themselves. Instead, they can continue to drive through the night.

Third, resources can be dedicated to other tasks. Freight turnover will increase due to shorter transit times. As a result, money can be invested in other areas of labor to speed up the loading / unloading process. The quicker trucks can be loaded and unloaded, the quicker they are back on the road. However, the increased use of automation could eventually lead to driverless trucks delivering goods to staff-less warehouses, with conveyors and scanners for unloading the trucks.

The looming question, however, is whether or not a driver needs to be in the driverless truck “just in case.” As driverless trucks become a reality, this will be a key question. If human drivers are needed in the trucks, the driver shortage will still be felt. However, drivers could use the time in the truck to complete other tasks for the company. This essentially gives the “driver” double duty, which will also save the company time, money, and resources. For example, drivers could complete invoices and send them out while the truck drives itself. Conversely, if human drivers are not needed in the truck, it can be the solution to the driver shortage. Then the question becomes, what about the drivers?