Archive for Logistics Trends

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.

droneEarlier this year, my colleague Ralph Rio wrote an insightful and very popular article about Amazon’s interest in drones for home delivery. Amazon is continuing to push forward with their drone research and testing. One major obstacle, however, is rules that are in place by the Federal Aviation Authority (FAA). In a letter to the FAA, Amazon has warned that if the FAA does not relax its attitude towards drone regulations, the company will be forced to move all of its drone testing overseas. This is not too surprising, as Amazon is already testing drones in the UK. Additionally, sources have said in the past that India will be the launchpad for Amazon’s drone delivery service. But Amazon certainly sees potential in the US market, despite FAA regulation that make commercial use of drones illegal. In fact, the FAA struck down beer delivery drones to ice fishermen earlier this year.

In his letter to the FAA, Amazon’s vice president of global public policy Paul Misener wrote:

“Without the ability to test outdoors in the United States soon, we will have no choice but to divert even more of our [drone] research and development resources abroad. I fear the FAA may be questioning the fundamental benefits of keeping [drone] technology innovation in the United States.”

I asked Ralph Rio for his take on Misener’s letter and whether it could make an impact on the FAA’s current laws. Additionally, with more companies looking to introduce drone deliveries to control the last mile of the customer experience, would there be any changes to planned overhauls that could become more restrictive in 2015 and beyond.

“In my honest opinion, segment the administrative FAA from the elected politicians. The FAA is a bureaucracy. People in a bureaucracy do not want to be blamed for a mistake; they are highly cautious. The FAA is already under high pressure to act, but they haven’t. The additional pressure from Amazon will have little or no effect.
The politicians are highly motivated for votes to get re-elected. If Amazon identifies a specific set of employees who will lose their jobs, this will engage the corresponding congressman and/or senator. To date, the FAA has been the primary participant.  If a senator applies pressure, then there could be an effect.  Otherwise, no.”

bike-messenger-new-rulesSo it appears that Amazon may need to push more drone research resources overseas, at least for the foreseeable future. Looking at the complete opposite end of the spectrum, Amazon is also experimenting with some low tech initiatives for faster delivery time frames. Currently, the company is looking at the use of bicycles for one hour deliveries in Manhattan. Amazon has run several time trials with bike messengers from various bike courier companies. The winner of the time trials, according to reports, will win the right to run packages for Amazon. The time trials consider both speed and safety – the quickest and most careful will win.

With a large New York City home base, this move is a way to bolster local deliveries in one of their prime markets. With crowdsourcing same day delivery options such as Deliv, as well as local retailers increasing their use of same day deliveries, this move could prove to be beneficial to Amazon. The use of bike messengers could be especially convenient during heavy traffic times. The service will clearly be used for delivering small items; using bicycles rather than trucks will allow Amazon to push out more orders and pack their private fleet trucks more efficiently or avoid the use of other carriers. It will be interesting to see how this service translates to other metropolitan areas.

Black-Friday-ShoppersAccording to the National Retail Federation (NRF), Black Friday fizzled compared to last year, as sales tumbled 11%. An estimated 6 million+ shoppers that were expected to hit the stores on Black Friday never showed up. There are a few reasons why sales tumbled. First, more consumers appear to not be in a rush to hit stores and deal with massive crowds. With Cyber Monday right around the corner, many consumers are more comfortable with waiting a few days and shopping from the comforts of their homes (I certainly received an amazing number of promotional emails throughout the day on Monday). Secondly, retailer were targeted by protesters who called on consumers to boycott Black Friday. The plan was to make a statement about recent police violence. The third reason is that consumers simply were not moved enough by the discounts retailers were offering. The big draw for Black Friday is the massive discounts. Consumers apparently did not find the discounts enticing enough to venture out to the malls. Whatever the reason, NRF is still confident that this will be a busy holiday season. According to NRF Chief Executive Officer Matthew Shay (via a conference call), “the holiday season and the weekend are a marathon, not a sprint. This is going to continue to be a very competitive season.”

And with that, on to this week’s news.

C.H Robinson, a logistics service provider, announced that it has reached a deal to acquire for $365 million in cash. Freightquote is a privately-held freight broker providing services throughout North America. The acquisition plays well for C.H. Robinson’s freight services. C.H. Robinson is focused on mid-size and large customers, where Freightquote has a focus on the SMB. This will allow C.H. Robinson to expand its target market. The acquisition also aids the company’s advances in the e-commerce market. According to John Wiehoff, C.H. Robinson chairman and chief executive officer:

“E-commerce is going to be a bigger part of future supply chain services and Freightquote brings us a leading solution in our industry. Along with their track record of success, Freightquote has an established brand, a talented management team, excellent people, and a performance-based company culture.”

Speaking of acquisitions, Trucking Unlimited has acquired for $800,000. This acquisition is partly aimed at helping to relieve the ongoing shortage of truck driver in the United States. Trucking Unlimited was established in 2012 as a specialty job site for recruiting truck drivers to available vacancies in every state. By acquiring a niche site focused on more specialized and higher paying opportunities, the new Trucking Unlimited can reach a larger pool of applicants, as it is significantly more targeted than general job boards. It also helps to reach the newer demographic of truck drivers which are more tech and web savvy.

death ringCyber criminals have been attacking retailers and banking establishments, stealing credit card numbers, account information, and pin numbers. Now there is a new area of attack: the smartphone supply chain. A new mobile Trojan dubbed “DeathRing” is being pre-loaded on to smartphones somewhere in the supply chain, warn researchers at mobile security firm Lookout. DeathRing is a Trojan believed to be of Chinese origin that masquerades as a ringtone app, but can download SMS and browser content from its command and control server to the victim’s phone. DeathRing could use SMS content to phish a victim’s personal information, for example, using fake text messages requesting the data. Lookout researchers say the malicious app is impossible to remove because it is pre-installed in the system directory. Researchers said this signals a potential shift in cyber-criminal strategy towards distributing mobile malware through the supply chain.

The US West Coast port congestion has caused lots of headaches for shippers and retailers alike. And we have certainly followed the coverage here quite a bit. With fears of a complete shutdown looming, and accusations of a work slowdowns, the congestion has continued to get worse. Just how much worse? Recently it drove Asian shippers to abandon ocean shipping and resort to air freight. This ensured that shippers would have their goods on store shelves for the holiday season. The only problem: it was the worst possible time to ship via air freight. Air freight rates rose 17% during the month of October. Just another reason the shipping world as a whole would like to see a deal reached in the West Coast ports.

Pizza-DeliveryAmazon has quietly entered the food delivery game. While this may not sound like something new, we’re not talking about Amazon Fresh and grocery delivery. Instead, Amazon has launched a takeout and delivery feature to rival GrubHub. The still-unnamed service rolled out in Seattle with around 20 restaurants for delivery and around 110 for takeout orders that you pick up yourself. As with other Amazon services, the takeout and delivery service lets you charge everything to your existing Amazon account.

That’s all for this week. Enjoy the weekend and the song of the week (in honor of my son’s newfound obsession with the song), Get Lucky by Daft Punk.

My earlier blog (What is Hadoop and Why Should a Supply Chain Professional Care?) generated a lot of attention and I was asked to write a follow up.  While Hadoop has a future in supply chain management, because of the massive amounts of data generated, so do plenty of other big data technologies.

Think about big data in terms of the classic three V’s – volume, velocity and variety.  Each of these facets of big data challenges conventional relational database management (RDBMS) technologies that lie at the heart of supply chain management applications:

  • Volume: Relational databases were designed in the day when a server was a processor, some memory and a disk or two, all in a single box.  If you needed to support more users, a bigger workload, or more data, that was easy – up to a point.  Just upgrade the CPU, add memory, or disk as appropriate.  But only within the box (known as vertical scaling in the trade).  Scaling performance beyond the physical boundaries of an individual computer (horizontal scaling) was much harder. Relational databases just weren’t designed to work that way. Although most vendors do provide a solution, these are often complex and typically do not provide anything close to linear scalability in practice.  Managing extreme volumes of data with relational technologies remains a challenge.
  • Velocity: In a supply chain that is increasingly connected by the industrial Internet of things, sensors are generating updates at ever-increasing rates. To take full advantage of this, organizations need to be able to act faster on these updates when necessary. While relational databases can ingest data rapidly, traditional business intelligence solutions aren’t architected to rapidly turn that data into information and flow it through to business managers. In situations where a rapid response to emerging business events is required, a different solution is needed.
  • Variety: Relational databases deal with highly structured numerical information – credits/debits to financial accounts, sales orders, inventory levels, fleet capacity – and so on. They were never intended to handle text, images, or other data types that have little or no structure to provide context. Increasingly though, unstructured or semi-structured data (such as XML) is on the rise.  Although relational database systems have been extended to contain large unstructured data objects, they often don’t do it particularly well.

With the three V’s stretching conventional data management approaches to the limit, a number of alternatives have emerged – including Hadoop.  Two categories that are likely to find their way into supply chain applications include:

  • NoSQL (“Not-only SQL”) databases use a more flexible approach to data structures than the row-column schema used by relational databases. That in itself helps to address the problem posed by managing an increasing variety of data types.  In addition, NoSQL databases are typically designed to be distributed out-of-the-box.  In practice this means they are both horizontally scalable, and highly available – both very important attributes when data volumes become truly massive.  This class of database has already started to appear in supply chain management.  For example, SCM startup vendor Elementum has adopted MongoDB, a NoSQL database that I reviewed here.  Likewise, Apex Supply Chain Technologies uses a commercial version of Apache Cassandra provided by DataStax.
  • Complex event processing (CEP) technologies can help to tame data velocity. (Sal Spada and I have written about the role of this technology in manufacturing).   CEP (also called stream processing) engines enable organizations to make decisions based on real-time analysis of many incoming data streams. Crucially, decisions may be made on values sampled from across streams, not just a single stream. Decisions are based on rules that are either configured or programmed, depending on the particular solution used. During operation, the defined rules are applied to the events that stream into the engine, and the resulting actions taken automatically, without human intervention.  Such is the ability to react fast to complex events that the early markets for CEP have been in financial services – both facilitating high speed trading, and detecting fraudulent behavior.  Now though, early applications are being seen in the supply chain.  For example, Royal Dirkzwager use Software AG’s Apama to track shipping.

Many supply chain applications based on relational databases will chug along just fine for some time to come.  However, as supply chains get bigger, more complex, and demand faster responses times, expect to see NoSQL databases and complex event processing gaining more than a foothold too.