Archive for Logistics Trends

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.

Very often any predictions you can make for a one year period are not about a brand new thing that will occur, the prediction is really part of a larger megatrend that has not only been going on for some time but will also continue for many years to come.

Some of the megatrends affecting supply chain management include:

What I will do is make some one year predictions that fall within the confines of the larger megatrends.

Omni-channel – Omni-channel investments by retailers have been all over the news. ARC’s research shows that distributed order management (DOM) is one of two key technologies that retailers need, but don’t have, to ramp up their omni-channel capabilities. However, in all my years as an analyst, I have heard only one speech by a retailer on how their omni-channel implementation improved their multi-channel capabilities, and this speech talked about the implementation at a very high level.

I predict that this is the year I finally see a good presentation by a retailer that goes into depth on the costs, benefits, and difficulties associated with a DOM implementation.

Relentless Competition – The most brutal competition is currently occurring in the shale oil patch where the cost of a barrel of oil has plummeted by over 50 percent in one year. And yet, from a supply chain perspective, this is among the worst supply chains in North America. Further, shale oil producer’s key partners, the oilfield service companies, also run terrible supply chains. In neither industry are you likely to find practitioners talking about their Sales & Operations Planning processes. Now that times are tough, and cost reduction is critical,

I predict that we will finally see Shale Oil companies and Oilfield Services companies explaining to Wall Street how they are implementing a Sales & Operations Planning to improve operations.

RoboticsRobotics in the supply chain actually took a step backward, as Amazon, the owner of Kiva Systems robots for the warehouse, stopped selling these robots and soaked up all the production. But because of relentless competition,

I predict that this is the year we will see new types of mobile robots for the warehouse emerge from other suppliers.

The Industrial Internet of Things (IIoT) – While the Industrial Internet of Things clearly has great potential, it is also clear is that these technologies are not fully mature. An evolution is continuing to occur and new applications for IIoT continue to emerge. Therefore,

I predict we will continue to hear of new IIoT applications emerging, ways to use remote sensor data to improve supply chain business processes, that never occurred to us.

Big Data – I’m actually stealing this prediction from my colleague David White. It is inevitable that based partially on IIoT and partially on the growing volume of data captured by enterprise applications, big data volumes are going to continue to grow exponentially. Solutions are needed to handle not just the growing volume of data, but also the velocity and variety of data. Complex event processing (CEP) technologies can help to tame data velocity. CEP technologies have been traditionally associated with financial trading.

I predict that this is the year we will hear of good applications for CEP in the supply chain.

wise owl

big showHappy New Year. It’s hard to believe our little break is over and we are a week back into work. With so much to look back on, I prefer to look ahead. But just to next week. Clint Reiser and I will be off to the National Retail Federation’s (NRF) Big Show on Monday in New York. This will be my seventh straight year attending the show. And much like every other year, I am expecting a whirlwind. There are meetings to attend, new technologies to see, and hopefully, some sessions to witness. In the past, NRF’s Big Show has highlighted many cutting edge technologies that focus on the user experience – mobility, touchscreens, wearables, etc. I am hoping to see some interesting supply chain technologies that can truly usher in the omni-channel era. Clint and I will be reporting back on our trip, so look for some NRF notes soon.

And with that, let’s get to this week’s news.

Bengaluru-based Flipkart is evaluating how it can get products to its customer’s doors in just three hours. There are a few key components to figure out, including pricing and technology. In the era of “free shipping”, many consumers are actually willing to pay a premium to get their goods as soon as possible. Just look at the number of people willing to shell out $99 to Amazon annually for the promise of free two-day shipping. At the core is figuring out which products and which cities this is even a viable option for. With same day delivery already available in big cities, and offered by not just Flipkart, but Amazon India and Snapdeal already, this new time table could be a game changer. And it could certainly force their competitors to up their service levels as well.

Photo by Mike Koozmin - sf.Pier80For months we’ve been covering the port congestion issues plaguing Southern California. Well for one port, the congestion may finally be the boon it needs. The California car culture could soon boost cargo traffic in San Francisco. Pier 80 in the Port of San Francisco was once one of the busiest cargo hubs on the West Coast.  But a decade of dropping cargo traffic has left it operating at limited capacity. But now, with ports in Southern California at capacity, Port 80 in San Francisco is ready to rise again. It is in line to become the newest hub for the import and export of automobiles — including cars built at factories in Mexico as well as locally produced Tesla electric cars shipped to emerging markets in Asia.

LalamoveCrowd-sourced services have been growing by leaps and bounds across a number of industries. Uber is giving traditional taxi’s a run for their money. Airbnb is an alternative to traditional hotels. Deliv is another option for home delivery. Lalamove is now making a name for itself in the logistics business. The company, which began life in Hong Kong in December 2013, and has expanded to Bangkok, offers smartphone apps that allow customers to move items across a city using its network of drivers. Anyone with a valid license and car can sign up to be a driver. The company recently raised $10 million in funding. According to Executive Blake Larson, “the money will be used to strengthen its position in its existing markets: Hong Kong, Singapore, Bangkok, Taipei and — as of last week — Guangzhou and Shenzhen. The capital will also be used to ‘further penetrate’ China and enter more parts in Southeast Asia.”

UPS and FedEx rate increases are now in effect. At the same time, fuel prices are at nearly six year lows. So what gives? According to the large carriers, fuel prices are only one consideration when it comes to setting prices. Trucks are no longer idle; the shipping industry is booming. At the same time, there is a trucker shortage which means that there is more demand to fill the pallets that are actually going on trucks. With less truckers, capacity is down, making things even more complicated. And now, enter the age of e-commerce, and most notably, the Amazon effect. Online sales, with the promise of free shipping, have jammed trucks full of small items, wrapped in loads of bubble wrap and crammed into boxes. While these boxes take up room on a truck, the truck may be carrying around mostly air. So the days of charging simply by weight are over. We’ll closely monitor the impact of new shipping rates.

Nic CanalFor 100 years, the Panama Canal has been the only shipping route through the land mass of the Americas. The canal allows ships to navigate between Pacific and Atlantic oceans without having to sail all the way to the tip of South America, through the infamous Magellan Strait, making it one of the world’s most important economic arteries. Nicaragua has plans to enter history (after nearly 200 years of discussions). On December 22, work began on the Interoceanic Grand Canal of Nicaragua. The new canal will take five years to build over some 278 miles, at an expected cost of $50 billion. The project resulted from the Nicaraguan national assembly agreeing a 50-year concession with the Chinese company Hong Kong Nicaragua Development. The canal will allow the passage of the world’s largest ships, some of which will be too big for the Panama Canal even after its current expansion project has completed. Even though work has officially begun on the canal, there is plenty of speculation that the project will never be completed.

And finally, the amount of freight moved between the U.S. and its North American Free Trade Agreement partners of Canada and Mexico increased in October compared to the same time a year ago. This increase made it the highest level on record. Truck freight led the way, with a 7.2% increase, followed by air at 4.9%. Trucks account for 60% of US-NAFTA freight, while rail is the second largest mode at 15%. Vessel, even with a 7.6% decline in shipments, is still the third largest mode at 7.7%

That’s all for this week. Enjoy the weekend and the song of the week, Sweet Child O’ Mine, by Guns N’ Roses.

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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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.