Archive for Logistics Trends

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?

Logistics Viewpoints’ owner is ARC Advisory Group. ARC’s 19th Annual Industry Forum ended last Thursday February 12th.

Key themes were the Industrial Internet of Things (IIoT) and cybersecurity.  These are interrelated themes because cybersecurity tops the list when it comes to challenges for IIoT. When one thinks of a hacker getting into a system and shutting down a utility, for example, it is obvious that the consequences of an Industrial Internet of Things security breach could be dire.  And the IIoT makes this problem so much greater.  Hackers need only a tiny tear in the security fabric and they can get in and cause harm.  And as those connected devices grow exponentially, so do the entry points.

MIT has active research in the area of cybersecurity.  Michael Siegel, a Principal Research Scientist at the MIT Sloan School of Management shared some alarming statistics:  Over 80 percent of breaches involved systems where security patches had been available for at least one year; 75 percent of breaches go undiscovered for weeks or months; 67 percent of breaches were aided by significant errors from employees of the victimized firm.

But Michael made the point that these statistics represent averages.  “Distributed” software – software that resides on site at a company – is far more vulnerable than “platform” software (public or private clouds).  That is because Cloud software providers can do security patching on an ongoing basis.  And yet, the perception is that Cloud software is less secure than traditional software.

There were several IT folks in charge of security at the conference.  They mostly felt they needed greater resources to improve cybersecurity.  But not all supply chain attendees agreed. One executive in this camp is in charge of implementing supply chain applications for a large company that wants to become demand driven.  At the same time this company is endeavoring to use consumption data to drive production that is better matched to the actual demand, they are asking their key partners to monitor their inventory levels and build and supply raw materials to them on a Just in Time basis.  They don’t want to pay for raw materials until they need them.  Some of the systems they want to use to facilitate this VMI collaboration are Cloud based.  This executive feels that his company’s cyber security team has put in place measures surrounding these Cloud applications that will make collaboration onerous for their key partners.

I ran a track on the Industrial Internet of Things in the Supply Chain.  One of my speakers was Jeff Tazelaar, the Global Leader for Auto ID, RFID, GPS and Telemetry, from Dow Chemical.  When it comes to end to end supply chain visibility built on an IIoT infrastructure, I have not across anything superior to what Dow is doing.  I’ve written about this in the past, so all I will say here is that the program continues to advance.

Jeff Tazelaar

Jeff Tazelaar

My other speaker was James Fairweather – VP of Architecture, Technology and Experience – from Pitney Bowes.  Here my speaker talked about how Pitney Bowes used sensor data, Big Data and analytics to build a cross-border e-commerce service offering.  But I found the what – the service that Pitney Bowes built – more interesting than the how – how this solution was built.
James Fairweather

James Fairweather

We’ve done a lot of writing about omni-channel in Logistics Viewpoints.  Omni-channel represents some novel ways of servicing customers via new delivery paths.  But one path to the customer we have not talked about is cross border e-commerce.  For example, a customer in Brazil buying a product online that is shipped from the U.S.  The Brazilian consumer may feel like they are getting a good price, until they pay the duties and shipping.  When the total landed costs are understood, the retailer may have abandoned shopping carts, or worse a disappointed customer that feels like they were deceived.

What Pitney Bowes is doing is providing an instant landed cost calculation for cross border customers inclusive of shipping costs, duties, taxes, customs, and brokerage fees. There is a lot of complexity here.  For example if shipping to Brazil you need to know what imports are prohibited – pre-owned merchandise, antiques and precious stones.  You need to know what import duties apply – the Industrialized Product Tax, the Merchandise and Service Circulation Tax and other tariffs.  And you need to know how to comply with country-specific forms, product coding, and shipping rules.

What Pitney Bowes does is use fancy machine learning algorithms to calculate the tariffs in real time and provide a quote.  They then later do a full classification to make sure their real time quote was accurate and that import rules will not be violated.  But the kicker is that they guaranty what they quote!

BTonn3I saw a news report the other day that said truck driving is the easiest, most available type of job you can get today—and the least attractive job there is. Detention is one big reason. Shippers and receivers know already that detention at their facilities impact a driver’s Hours of Service, but they may not know how to correct it. I’ve done more work recently with companies to assess dock congestion, obtain transportation tools to support a solution, and turn shippers into the kind that carriers want to work with. Here’s how we collaborated with one customer on a project like this.

A dock congestion assessment had been proposed for this particular shipper as part of an outsourcing engagement. The assessment answers questions like these:

  • How many carriers come to the dock every day?
  • What are the parameters and limitations of what is being done at the dock today?
  • How quickly are trucks loaded and unloaded?

The assessment showed challenges that were having a direct impact on the shipper’s total landed cost of product. It revealed that most of the company’s 6 dock doors were tied up with drop trailers, leaving only a few doors open for the 28 carriers that arrived every day. The company controls only 30 percent of the freight, with the rest being vendor-routed without standardized delivery practices. Carriers arrive on a first come, first served basis to be unloaded. Employees work overtime and on Saturdays to unload trucks. Some unlucky carriers wait for five hours before they are turned away and told to return the following day. Overtime and detention costs were significant.

We reduced the number of carriers from 28 to 7 to make the dock less congested. Then, we implemented our Yard and Dock Management tool. The tool gives carrier processes and technology to set their own delivery appointments during a specific window of time, eliminating most of the detention. Much of the product that formerly loaded into drop trailers was moved offsite to a crossdock to free up 2 to 3 dock doors, and freight is swept from the dock several times a day and staged for customer deliveries. Live loading and stronger dock management practices have reduced overtime for employees and overall dock management costs, and are more respectful of the carrier’s time, providing more efficient use of their Hours of Service.

This shipper is ahead of the curve in making its freight more attractive to carriers. This is a trend you can expect to continue for the foreseeable future as capacity shrinks. As more shippers vie for less equipment, carriers can be choosier about who they will work with. When carriers can choose between two shippers who pay the same rate—one who makes them wait for hours to unload and one who unloads them within 30 minutes of arrival—they will choose the more efficient shipper every time.

Brian Tonn is an Executive Director, Global Sales for C.H. Robinson where he is responsible for optimizing C.H. Robinson’s largest clients’ global supply chains and providing world-class business intelligence. He has been with C.H. Robinson for 13 years and primarily focusing on supporting consumer products, specialty retailers, utilities and the automotive industries — Brian brings best practices from around the globe and applies them to each client relationships. 

 

Chris_Jones-executive-headshot-photography-0008When I heard this saying, I thought it so profoundly related to one of the core challenges to supply chain excellence, an inflexible mindset. Too often in supply chain management we are bounded by our approach to supply chain problems, not the problems themselves.

For example, one of the greatest challenges in supply chain management is to get beyond a focus on cost reduction as opposed to revenue generation. If you are a supply chain executive, you struggle to have that discussion with the rest of the executive team. One retailer I know took a different approach to describing their metrics to get their point across.

The challenge that the retailer had was to be able to justify the value-added services it wanted to offer because they would reduce the number of deliveries it made on any given route. The general thinking was that the fleet productivity would be dramatically impacted and there was no way to relate that to the incremental revenue from the value added services. The problem the retailer had was that it was applying traditional metrics and “attitude” to a new business opportunity. Metrics like cost per mile and deliveries per route were built to address delivery operations as a cost, not a revenue generator. Fleet productivity is only one point of the overall financial picture.

This retailer had an “attitude” adjustment about its approach to metrics and changed to a “cost per minute” calculation for its delivery resources. That way it could compare the incremental revenue for the value added services against the time-based cost it took to deliver the services. In this case, the retailer was able to determine that depending upon the mix of products and value added services, it could make more money with fewer stops on a route as opposed to a lot of stops that contained no value added services and lower margin products. Once they understood this relationship, they started to understand how their delivery operations could help drive revenue and profit.

Another interesting example of attitude change is a retailer, Sleepy’s, who implemented tighter time window bookings to benefit it as well as customers. The traditional thinking for delivery windows is the wider the better in terms of delivery operations productivity. However, this retailer found out that it was experiencing a high number of failed deliveries because its customers were not at home. Failed deliveries can be a margin killer. Think about this for a minute. If you give someone an all day window, there is a high likelihood that at some point they won’t be home during that day and Murphy’s law would clearly predict that’s when your driver arrives. A tighter time window provides more certainty to the customer and allows them to better manage their day. Sleepy’s also dynamically allocates delivery capacity to make the delivery when the customer buys the mattress to make sure it can make the delivery. Since moving to this approach, Sleepy’s has been able to improve its delivery success rate by 4.5% and reduce product damage due to excess handling.

I am sure we have all seen examples where bad supply chain “attitudes” kept a company or project from being all it could be.  It’s not easy to get beyond what we know from past experience to best frame solutions to supply chain problems. However, supply chain strategies, tactics, and technology are constantly evolving and if there were ever a place to change attitude, it is here.

*The saying “The problem is not the problem. The problem is your attitude about the problem.” has been mysteriously attributed to Captain Jack Sparrow in “The Pirates of the Caribbean” movie series.

Chris Jones is Vice President, Marketing and Services at Descartes. As Executive Vice President, Marketing and Services, Chris Jones is primarily responsible for Descartes marketing activities and professional services for Descartes’ solutions. With over 20 years of experience in the supply chain market, Chris has held 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 and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group.

AFCOn Sunday night, I dealt with a logistical nightmare. I was fortunate enough to have tickets to the Patriots – Colts AFC Championship game. As a lifelong Pats fan, it was a treat to witness the victory. As a man with a decent amount of common sense, it was a difficult night. First, the rain. I don’t think I’ve spent that much time in sustained downpours before in my life. Luckily I had on many layers and our tent for tailgating had portable heaters. They certainly helped me dry off after the game. Second, the traffic. With 30,000 (give or take) cars leaving the parking lots at the same time, it became a logistical nightmare. We decided to fire the grill back up and wait out the traffic. At one point, we watched a car move 10 feet in a half an hour. By the time we finally got on the road, traffic had let up a bit, but it was still slow going. In all, it took me about 3 ½ hours from the final whistle to get back home; and I live just north of Boston. From a logistical standpoint, I’ll be searching for alternatives for the next game.

Now that the Colts game is over, we’re on to the news.

According to the American Trucking Association (ATA), the amount of freight moved by truck increased 3.5 percent in 2014 over 2013. The seasonally adjusted For-Hire Truck Tonnage Index was unchanged in December, following a jump of 3.5 percent during the previous month. In December, the index equaled 136.8 (2000=100), which tied November as the all-time high. Compared with December 2013, the index increased 5.2 percent, which was the largest year-over-year gain in 2014. Additionally, the ATA announced a strong outlook for 2015. According to ATA Chief Economist Bob Costello, “Overall, 2014 was a good year for truck tonnage with significant gains throughout the year after falling 4.5 percent in January alone. Freight volumes look good going into 2015. Expect an acceleration in consumer spending and factory output to offset the weakness in hydraulic fracking this year.”

BezosAmazon has reported that its Sunday deliveries in the UK have quadrupled compared to the last year. The online retail giant points to the accelerated nature of online shopping. The launch of Sunday deliveries on Amazon products, which is available in most major cities in the UK, has been driven by the company’s Amazon Logistics business. This arm of the company provides the facilities for local and national delivery companies to deliver products on a Sunday. The service is free of charge for Amazon Prime members. In the UK, the Royal Mail is feeling the pressure from Amazon’s Sunday deliveries. However, in the US, Sunday deliveries in the US run through a partnership between Amazon and the Postal Service. It will be interesting to see if things change in the US based on the success of Amazon’s logistics business in the UK.

Of the 6.8 million square feet of warehouse space across Mumbai, Chennai, Bengaluru and Delhi-NCR, about 1.7 million (or 25%) are accounted for by online retailers. The e-tail space is growing significantly, with more money invested across a number of areas. For example, e-tailers raised more $2.2 billion in 2014 for the purpose of building warehouses. Additionally, about 3.5 million square feet of office space had either been leased or was in various stages of negotiation by e-commerce firms across the country, which is about 400 percent year-over-year growth. These stats point to the continued expansion of online commerce in a global economy.

The Postal Service has proposed raising postage rates this spring to adjust for inflation. Under the plan, prices across all classes of mail would increase by an average of 1.966 percent on April 26. The cost of a single-piece stamp would remain at 49 cents, but the rate for letters weighing more than 1 ounce would increase from 21 cents to 22 cents per additional ounce. The Postal Service has estimated that its plan would bring in an estimated $900 million per year for the agency, which still does not account for $5.5 billion it lost last year. These price increases should come as no surprise, considering that even with fuel prices dropping, both FedEx and UPS are raising rates as well.

FEDEX UPSAnd finally, on the lighter side of the news, UPS declined to deliver a package to rival FedEx. Sue Szuch, of Lima, OH, sent a package via UPS to her daughter, who happens to be a FedEx employee in Cincinnati. The package, however, was stuck in delivery limbo. A supervisor said that the driver reserves the right to refuse delivery to a competitor. After a few phone calls, the matter was cleared up and the package was delivered. UPS even refunded her shipping costs.

That’s all for this week. Enjoy the weekend and the song of the week, Won’t Get Fooled Again, by The Who.