I had the opportunity to speak to Miguel Ramirez, Logistics Cost Implementation Lead, from Sisamex at the Oracle Value Chain Summit.  Sisamex has had an interesting journey with the Oracle Transportation Management (OTM) solution.  Sisamex, headquartered in Mexico, is a joint venture between Meritor, a Tier 1 supplier of automotive components, and Grupo Quimmco, a Mexican industrial consortium.  Sisamex manufactures axles, brakes, related components and assemblies in Mexico and supplies Meritor plants mainly located in the US Midwestern states.

Miguel Ramirez

Miguel Ramirez (Click to Expand)

Sisamex has had an interesting journey.  Originally, Meritor was using their OTM implementation to control all inbound and outbound loads to their plants located around the world.  Inbound to Meritor, meant Sisamex’s outbound loads were being planned by Meritor.  Because Meritor is controlling the inbound shipments of their key suppliers, they have a better ability to control service levels while garnering savings from consolidated loads.

Because this was a joint venture, Meritor planners were also planning all Sisamex’s inbound loads according to the established corporate parameters.  In this case, inbound to Sisamex meant shipments from component suppliers, located mainly in the US Midwest, to Mexico.  But the Meritor planners did not seem to be as diligent at optimizing transportation spend for Sisamex as they were when they planned shipments coming into Meritor.  In particular, too many higher cost spot bids were being used.

Miguel was given the mission of correcting this problem.  He visited Meritor’s headquarters in Troy, Michigan and spent three days learning the basic functions of OTM.  At the conclusion of this trip, Meritor agreed to let Sisamex use the Meritor instance of OTM to plan their own inbound loads given that the freight was actually being paid by Sisamex.

Sisamex put their lanes out to bid, and developed five carrier options per lane with the carriers prioritized such that a tender first went to the preferred carrier, then the second rated carrier on that lane, etc.  In the first year, their US freight costs fell by 30 percent thanks to the elimination of spot bids and the negotiation of full-truckload (FTL) rates.

Based on Meritor TMS experience, Sisamex, decided to buy their own server-based OTM solution in 2012 with the chief advantage being that the system could be parameterized according to Sisamex requirements. The system was officially launched in July of 2013.

After the company’s successful implementation, Grupo Quimmco, the holding company of Sisamex decided to roll it out across 8 other companies in the group. The strategic objective for this year is that the logistics operations of all the companies of Grupo Quimmco will be managed through OTM and there will be on-site control tower screens so that the users in the plants can have immediate visibility of shipments statuses.

After using this solution for a year, Sisamex was able to mine the data and detect additional opportunities for savings.  For example, at one origin point they saw that a supplier was sending their company four to five less-than-truckload (LTL) shipments per week.  They got that supplier to only send them truckload (TL) shipments.  Last year, they saved a quarter of a million of dollars from just one supplier by gaining more LTL to TL conversions. Similarly, they mandated that their suppliers only send them shipments if the trailers were at least 90 percent full.

Another project involved setting up a consolidation center in Jeffersonville, Indiana where LTL loads could be sent and then consolidated into TLs by a 3PL partner.  This saved money by reducing their inbound LTL shipments from 30 percent of the total to 20 percent.

Finally, the visibility to carrier moves means that Sisamex loads can clear customs faster.  If critical parts are inbound, they have visibility to those loads and can prioritize the hot shipment.  This involves sending the required documentation to customs before the actual arrival of the shipments.

In conclusion, in addition to thanking Miguel for taking the time to talk to me. I’d also like to thank Oracle for setting up this conversation.  Of all ARC’s supply chain clients, Oracle does the best job of scheduling conversations with interesting clients at their events.

 

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!

truck dayAnother week, another winter storm in the Northeast. It is a seemingly endless onslaught of snow, with another potential blizzard on the horizon. Last week I wrote about e-commerce grinding to a halt with the back-to-back storms, and Clint Reiser wrote about the weather’s impact on the supply chain (and his pursuit of a roof rake). Well, things are just going to get worse. I have nowhere to put the snow anymore, nor do any of my neighbors, surrounding towns, or major cities. Aside from the visibility issues of 10 foot tall snowbanks, delivery trucks have nowhere to park. I’ve seen countless delivery trucks “parked” in the middle of the road, blocking the flow of traffic. While this is something that would normally irritate me, these drivers have nowhere else to go, and no other alternatives. The result is traffic congestion, delayed deliveries, and a sense of longing for spring. Luckily, yesterday was truck day for the Red Sox. Only 52 days until opening day.

And now, on to the news.

west coast portAs of yesterday, West Coast ports are shutting down for four days as a result of the ongoing labor standoff. The ports on the West Coast run from Seattle to Los Angeles, and account for half of the imports into the United States. Previously, there had been worker slowdowns which resulted in massive gridlock and a slow flow of goods from the ports. But this shutdown could be devastating. According to National Retail Federation and National Association of Manufacturers, a shutdown of ports in cities like Los Angeles, San Francisco, Portland and Seattle would cost the U.S. economy almost $2 billion per day.

“The last prolonged port shutdown of the West Coast ports was the 10-day lockout in 2002 which some estimate cost the U.S. economy close to $1 billion a day and took months to recover from. The NRF-NAM estimates that a five-day stoppage would reduce GDP by $1.9 billion a day. This would increase exponentially with a 20-day stoppage resulting in a loss of $2.5 billion a day.”

walmart workerWalmart is jumping into grocery pick-up service. The retail giant is testing the service at three Arizona stores, as well as one in Bentonville, AR and Denver, CO. The retailer is offering thousands of items, from fresh produce and dairy to electronics and toys. Unlike other online services, which typically include a $10+ delivery fee, Walmart’s pick-up service is free to customers provided they place a $30 order. Customers choose a delivery timeframe at check-out and receive a call when their order is complete. Upon arriving at the store, they call a designated telephone number and a store associate will load the groceries into their car. This service could have a big impact on working parents, as they can place an order in the morning and pick up the groceries on their way home from work. Depending on how successful it is, there could certainly be labor implications of picking and running groceries all day.

sidecarSidecar, a ride-hailing start-up in competition with the likes of Uber and Lyft, announced plans to use its fleet of cars to introduce a package delivery service, delivering items like food and groceries for partner companies. The program will use drivers that are already picking up and dropping off customers. This move will put Sidecar into same day delivery category, competing with the likes of Amazon and Google, as well as other smaller companies like Deliv and GrubHub. This is an interesting move by Sidecar, as it is combining two increasingly popular services – same day delivery and crowdsourced delivery. It is probably an easier transition for an established company than for a new start-up to just compete in the delivery market.

Another winter storm as brought the e-commerce world to a halt. Monday’s storm in Boston dropped another twenty inches of snow on an already snow covered world. As a result, UPS canceled all pick-ups and deliveries in Boston. FedEx also warned of significant delays across the region. With so many e-tailers dependent upon their delivery network, since they do not have their own private fleets, this news was devastating. E-tailers are warning shoppers that their orders will most likely be delayed, costing them both money and customer satisfaction points. Just how costly has the winter been? According to Adobe, a storm on January 27 cost retailers an estimated $35 million in sales.

The Cass Freight Index report points to continued growth in 2015. The report noted that the economy was “much stronger” in 2014, with the year representing the best year for the supply chain sector since the recession. But even with a strong performance, strong GDP seen during the second and third quarters tailed off in the fourth quarter in the form of more modest growth, coupled with the ongoing issues at West Coast ports centered around labor and capacity issues and also negatively impacting late December shipment volumes. January freight shipments—at 1.027—were up 2.7 percent annually and down 4.7 percent compared to December.

And finally, steady job gains in the trucking industry have brought employment levels back to pre-recession levels. For-hire trucking companies added about 2,400 jobs in January, which is a 3.5% growth over last year. The for-hire trucking industry nearly doubled its hiring rate in 2014, expanding payroll by 46,000 jobs, compared with 24,900 in 2013. But even with the continued growth, the driver shortage is still a concern, as driver demand cannot be met. Many trucking companies are looking at cost-effective incentives to bring in new drivers, but there is still a long road ahead.

That’s all for this week. Enjoy the weekend and the song of the, California Dreamin’ by the Mamas and the Papas.

DanDershem_WebWith Valentine’s Day around the corner, relationships of all kinds are celebrated (or scrutinized) this month. For us in the transportation technology world, that means examining the importance of network connections and the value of collaborating with all members of the supply chain when it comes to evaluating a transportation solution. More importantly, why is it important to have a technology partner that fosters a collaborative relationship?

Today’s transportation management systems (TMS), much like relationships, come with many different ways of being connected. The most popular platforms fall into one of these categories:

On-premise or Installed: Technology is installed and runs on customer’s hardware, requiring administrative resources and additional cost for databases, infrastructure, and upgrades.

Hosted: Technology is access on-demand, but requires separate implementations for each user, and integrations for each carrier.

True SaaS: Technology runs on a single platform and the user accesses it via “the cloud”. This model allows multiple business partners to collaborate on the same platform.

As the supply chain industry moves towards a digital marketplace environment, the growing preference of industry experts is toward true SaaS TMS platforms. This emerging technology is accelerating the growth of transportation and logistics solutions. This centrally located software is highly secure and offers significant benefits over on-premise software or hosted systems.

What really makes a SaaS TMS platform unique are the intangible benefits that exist by being part of a community as opposed to simply working in silos within the four walls of an organization. With on-premise or hosted applications, the carrier has to integrate with each user separately. However, with a SaaS platform, once a carrier or supplier is in the network, it is connected to all appropriate partners. This intuitive connectivity creates competitive advantage in a number of ways, enabling a stronger and more collaborative relationship between companies and TMS providers.

Visibility
All transactions flow through this central transportation command center, which allows the monitoring of critical activities in your supply chain. Because partners are all in the same environment, visibility is that much greater. Real-time communication is enhanced – every party knows what is happening, when, and why. Additionally, data and information within one system enables real-time analytics and performance metrics that are significantly more accurate and robust. Does your current TMS relationship provide unbiased transparency that propels your business forward?

Benchmarking With Better Data
True SaaS TMS solutions — with a large community of users — create a transportation network that processes millions of transactions across a single platform. As a result of this, transportation network data —such as rates, carrier performance, and transit times— provides comparable data sets to create market level indices. SaaS TMS solutions help improve performance by providing an industry frame of reference, beyond historical only company data, allowing unparalleled visibility to industry network data. SaaS transportation network members utilize quantitative benchmarking to identify ‘what’ can be improved, ‘why’ differences exist and ‘how’ to improve performance. By connecting with a supply chain partner that offers access to network data, companies are able to make smarter decisions for continuous improvement.

Collaboration
Network collaboration is considered to be one of the most significant benefits of a SaaS platform. All members of the network have the opportunity to connect with other network members for additional capacity and collaborative transportation opportunities. With greater visibility, businesses can share information faster and more efficiently. This facilitates collaborating with other vendors, carriers, and shippers to work across each other’s networks, sharing transportation assets and creating economies of scale. Shippers can leverage SaaS TMS to unleash rapid and significant change throughout the organization. Access to this type of collaboration within a transportation network is only available with a true SaaS platform.

Before committing to a relationship with a TMS provider for your business, ask the tough questions – “Is your SaaS TMS on a single instance, multi-tenant platform?” and “Do I gain access to the entire transportation network with unfiltered, unbiased data?” Supply chain visibility, business intelligence, as well as network connectivity and collaboration are key reasons why true SaaS technology is becoming the preferred TMS solution – and the best relationship in order to build a better a supply chain together.

 

Dan Dershem, President and CEO of LeanLogistics, is responsible for the overall business strategy and corporate leadership of LeanLogistics. Dan oversees the day-to-day operations of LeanLogistics as well as develops the executive strategy for business growth to drive maximum value for LeanLogistics’ clients. In addition, Dan Dershem, holds responsibility as Senior Vice President of Global Logistics, CHEP. Within the CHEP organization, Dan is responsible for the development and implementation of the global logistics strategy for CHEP, including global technology roll-out along with cost and service performance.