JToday I would like to take the opportunity to briefly discuss a financial economics concept and its effects on the real economy, including the logistics market. This concept is called the J Curve. In particular, I am referring to the recent loose monetary policies of the Euro Zone and Japan. They have caused a depreciation in those currencies with respect to the dollar. Initially, the volume of US exports will remain fairly constant, but the price (in Euros or Yen) will increase. This will (or is currently) make US produced goods more costly to Europe and Japan, leading them to reduce the volume of goods they purchase from US companies. These changes, both exchange rate movements, followed by trade volumes, can have notable effects on trade and logistics. It is also makes our job as analysts forecasting market growth that much more difficult.

Now on to this week’s news:

chinaChina’s logistics sector increased its revenue in 2014 by 6.9 percent.  Meanwhile, the total value of goods transported by the sector rose 7.9 percent. The increase in logistics revenue was attributed to the e-commerce boom. China’s online sales of consumer goods increased 49.7 percent from the prior year. Now that’s a growth rate worth mentioning.

The Federal Reserve reported that US manufacturing output increased 0.1 percent in March. Business equipment was the only major market group to post a gain, and this was primarily due to transit equipment. The Bloomberg article noted that the strong US dollar is hindering growth of the manufacturing sector (see my intro paragraph above). Also worth noting, oil and gas well drilling decreased 17.7 percent last quarter. Ouch!

Cass Freight Index (both shipments and expenditures) for March increased from February, but declined from March 2014. There was mention of the West Coast ports and the effects that issue on freight volumes. It’s that same old lingering port story, so I’ll spare you the details and link to the Cass Report if you desire the specifics.

INTTRA, the online ocean shipping electronic marketplace, announced that the ocean carrier NileDutch is being added to its platform. NileDutch services shipping lanes between West Africa and Europe, South Africa, South America, and Asia. ARC’s research on the global trade management market shows that INTTRA, a consortium of the world’s largest ocean carriers, is the largest ocean booking platform in operation.

Vuzix, a provider of smart glasses that my colleague Bob Gill referenced just yesterday in his article Picking With Vision about DHL’s augmented reality picking project, announced this week that it acquired two patents that complement its existing technology. One patent covers gesture controls of 3D virtual objects, and the other relates to ambient light management in see through wearable displays. Initially I was skeptical of augmented reality glasses and their use for warehouse tasks, but it appears that their usability is improving and may become a reality in the warehouse in the near future.

An Austrailian fulfillment software vendor named Temando recently raised $50 million of investment funding. I had never heard of the vendor prior to reading the related press release. However, the vendor’s focus is interesting and timely. The software helps increase cost efficiencies of e-commerce fulfillment. This is a large part of the topic I will be discussing at HighJump’s Elevate conference next week. The research that my colleague Chris Cunnane conducted on omni-channel fulfillment noted that retailers were practicing omni-channel primarily to increase revenues, with fulfillment cost and margins playing a secondary role. This software by Temando addresses margins and cost efficiencies. Here’s a quote from the press release:

(The software) lets an online retailer offer consumers options for delivery while taking into account the cost of each fulfillment option. For example, the retailer can decide whether it’s most cost-effective to deliver from an e-commerce distribution center, a store or to have a supplier ship the item directly to the consumer… The software takes into account how fast the consumer wants a product and the reliability of the shipper.

 

Have a great weekend. This week’s video is Centerfield by John Fogarty

www.youtube.com/watch?v=04KQydlJ-qc

 

 

Categories This Week in News
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Picking with Vision

An announcement from DHL a few weeks ago heralding the success of a pilot project in Europe  involving the use of augmented reality for order picking is yet more evidence that when it comes to high technology, the once humble warehouse is not being left behind.

For three weeks, 10 workers at a DHL customer (Ricoh) facility in Bergen op Zoom in the Netherlands were equipped with smart glasses (including Google Glass and VuzixM100) that provided necessary order picking information, such as aisle number, location, and product quantity, through an application developed by Ubimax, the wearable computing solutions company,

PICK1

A total 9,000 orders comprising 20,000 picks were fulfilled over that time. And the result? Faster picking leading to an overall 25 percent increase in productivity when compared to the warehouse’s usual pick practice of RF scanning. As well as enjoying their new hands-free world, staff also reported they were not encumbered by the wearables – “You barely feel it once you are wearing it.”

But just what is augmented reality (AR)? Whereas virtual reality (VR), its better known cousin, completely immerses the user in a computer-generated environment, augmented reality, as its name implies, maintains an existing physical reality but adds a digital element to create an environment that becomes a value-added mix of the real and the virtual.

PICK2

Augmented reality enhances the physical environment by superimposing pick instructions in the warehouse worker’s field of view

As a relatively nascent technology, commercial applications of augmented reality are still rare. One of the more well-known is the so-called smart fitting room, which is attracting interest from a number of fashion retailers. Here, the shopper stands in front of an interactive screen and “tries on” clothing items i.e. she sees herself (physical reality) wearing a digital image of the selected item (virtual reality).

In the DHL application, the warehouse worker sees the physical reality of the aisles and racks in front of him just as he could if he were not wearing a head-mounted display, but this is augmented by a superimposed AR code in the form of a graphical work instruction, which appears after he scans the bar code at the storage location with his smart glasses. This code tells him where to go, how many items to pick and even where to place in his trolley.

With the pilot project complete, DHL is evaluating the operational suitability and economic feasibility of adopting augmented-reality vision picking. Meanwhile, its Trends Research team has already identified other logistics activities that could be enhanced by a judicious dose of AR technology.

For instance, in transportation, AR could enable rapid, hand-free checking of pickup loads by a driver using a wearables to quickly scan items for collection, followed by instructions on where best to place the loads inside the vehicle, and once on the road, dynamic traffic support based on real-time traffic data to optimize routes (the information shown on smart glasses or a windshield display). Another potential applications is warehouse planning ­­– visualizing new equipment and modifications against the backdrop of the actual facility.

It is likely to be some time before AR based picking comes to a warehouse near you or is adopted extensively for other logistics processes. But with warehouse owners constantly looking to boost productivity and reduce error rates in an environment of high-frequency pick operations and temporary staff, this is definitely a technology worth keeping an eye on (pun intended).

Incidentally, anyone with a smartphone can get a useful appreciation of augmented reality technology through free iOS and Android apps such as Augment and Junaio. So go ahead and get a glimpse of the future.

ship from store 1As I mentioned in last week’s Friday News Roundup, I spent some time in Atlanta attending the Home Delivery World, Click & Collect Show USA, and ETail Show USA joint conference. I had the pleasure of catching Tom Barone, VP of North America Operations at eBay Enterprise present on the changing nature of commerce. Tom basically outlined three key strategies for omni-channel success: ship from store, in-store pickup, and in-store associate ordering. Each of these strategies has a distinct purpose in today’s retail environment, and each one can be aimed at specific groups or types of shoppers. All three strategies have tangible benefits as well as unique challenges. Tom used his time to offer some advice on how to become omni-channel ready. The key is to start with one strategy. Tom’s advice – prioritize, and start with ship from store. According to Tom, when analyzing these strategies, ship from store falls right in the sweet spot from a “business impact” and “Ease of implementation” standpoint. Although, I will share a case study in the coming weeks where an Indian retailer opted for click and collect first, as the logistics behind delivery was too big of a challenge.

Providing an omni-channel environment for customers is no longer an option, it’s a necessity. According to data from eBay Enterprise’s customers, it is also quite lucrative. On average, retailers that are shipping from the store can achieve a 20 – 40% increase in incremental e-commerce revenue and 30%+ margin increase on markdown items. How? By leveraging in-store inventory, retailers have more items available to their e-commerce customers. This puts them in the position to sell more. And when items are reaching end of season, or simply not moving in the store, they can be sold online at full price. These are the benefits of ship from store, but the big question remains – how do you execute on the strategy? Tom outlined four keys to executing ship from store.

  1. Inventory availability
  2. Order routing capability
  3. Store operations and training
  4. Compensation and sales credit

Inventory Availability

InventoryShip from store will only work if inventory is available. Tom outlined five principles for ensuring inventory availability. First, there has to be a single view of network inventory. This is where distributed order management can help. It gives a single view of all available inventory, and allows all fulfillment channels to access the order information and pull the appropriate inventory. Second, the company must select products and categories for ship from store. The categories need to be those items that make sense to ship, from a convenience and financial standpoint. There has to be accurate store level inventory. This is generally the toughest part of fulfilling e-commerce orders from the store. Misplaced items, especially apparel, can make inventory visibility nearly impossible. If the store associates cannot find the inventory, it cannot be sold or shipped. Fourth, safety stock levels need to be set. Unless it is a dark store, the brick and mortar location is there to serve the physical customer first. Safety stock levels need to be established to make sure that stores are not shipping items that could be sold in the store. And fifth, there need to be automatic adjustments of “available to purchase” inventory levels. This means that items sold in the store, and shipped from the store, need to be applied to the on-hand available to purchase level.

Order Routing Capability

When it comes to order routing, Tom outlined three keys for intelligent routing. First is the proximity to the delivery address. There are a few different ways to fulfill from the store. The store can ship the item through a parcel carrier, or the store can deliver the item using its own employees. The proximity to the store will certainly play a role in which method is chosen. For shipped items, location will affect the delivery timeframe and expectations need to be set with the customer. Second, the retailer needs to minimize split orders. Split orders occur when a location can only fulfill one part of an order. This leads to items arriving at separate times, which some customers are not happy with. It also increases overall shipping costs for the retailer. By using the entire store and warehouse network, retailers should try to fulfill orders in their entirety. And third, retailers need to use inventory optimization and set daily store limits. Setting daily limits is important to make sure that store associates can focus on the other work that they need to get done.

Store operations and training

store opsThere is a lot that goes into preparing a store to execute ship from store. Tom outlined some of the biggest challenges and requirements to move forward with ship from store. First, there are store set-up, protocols, and procedures that need to be put in place. This includes things like what area of the store is used for ship from store orders, who is responsible for picking orders, how do the orders get packaged and shipped, among others. Having these guidelines in place is the first step. Second, retailers need to have staffing strategies. If there are specific times when ship from store activities pick up, more associates need to be on the floor. Third, the staff needs ongoing training. Training is a key component to keeping employees engaged. Making sure each associate knows the proper procedure for picking, packing, and shipping for ship from store orders is crucial for making sure it is done efficiently. Fourth, the retailer needs to have reporting capabilities. This way the company can see the actual impact of establishing ship from store processes. It also enables the manager to make more informed decisions when it comes to staffing levels, ship from store timeframes, and ship from store inventory availability.

Compensation and sales credit

Tom indicated there are two key components from a compensation and sales credit standpoint for ship from store. The first is goals and incentive plans. Laying out goals for store associates gives them something to aim for, whether that is a dollar amount or a time goal for preparing ship from store orders. Incentive plans, besides paying store associates more money, give them a sense of buy-in, or the feeling that the company is investing in them. This can be a huge bonus when it comes to fulfilling e-commerce orders. The second piece is credit for sales. The fight for attribution has been a long battle between in-store and online teams. The key is to give credit for sales to the store that is fulfilling the order.

In conclusion, Tom Baron outlined three key strategies for doing omni-channel rights: ship from store, in-store pickup, and in-store associate ordering. According to Tom, ship from store is the best place to start on the omni-channel journey. It enables retailers to increase e-commerce revenue exponentially while improving margins on items nearing markdown. To achieve ship from store success, there are four keys to keep in mind: inventory availability, order routing capability, store operations and training, and compensation and sales credit.

Springtime always brings an uptick in freight volumes, particularly in produce and for all types of outdoor retail goods. Capacity was already tight before this year’s surge, and many shippers are transferring more freight to brokerage companies as a result.

What appears to be a favorable business environment has created a fair share of challenges for small and mid-size companies because of their limited working capital. To compete for capacity in this market, many brokers are offering accelerated payment terms to carriers long before their shippers pay on invoices.

Besides experiencing problems with cash flow, freight brokers and logistics providers may lack the visibility and speed to market to lock down capacity. Healthy cash flow and cutting-edge technology are both essential to take advantage of growth opportunities during the ebb and flow of seasonal demand.

Here are four strategies to remove the constraints on cash and more effectively compete for capacity in today’s market.

  1. Non-traditional financing. Accounts receivable-based financing and factoring arrangements are typically short-term, lifeline strategies for brokers rather than a sustainable platform for growth. New financing programs are available that give brokers instant access to low-cost capital to fund freight transactions from within their native transportation management software (TMS). This new integrated feature creates a fast, convenient method for brokers to drive growth without the hassles of traditional lending.
  1. Automated payment. Carriers will commit capacity to brokers that pay on time, every time. One way to strengthen relationships with carriers is by using a payment platform that automatically releases funds for a freight transaction, according to the agreed-upon terms, once delivery is confirmed. This automated payment process can be initiated by the same platform that brokers use to finance their freight transactions. In addition, brokers can improve their margins as carriers are willing to soften their rates in exchange for fast, guaranteed payment.
  1. Instant visibility. Besides the advantages of having integrated financing, brokers can use the latest transportation management software (TMS) to gain instant visibility of market conditions and have the resources they need to act quickly on opportunities. TMS systems can identify and prioritize carriers for load offers by specific lanes to accelerate transactions, and where capacity is not already available, loads can be instantly posted to numerous load boards.

Some TMS systems also have internal load boards that are visible to a trusted user community. This instant visibility lets brokers see adjoining freight movements for the lanes they are trying to fill with capacity. Brokers can use this single-screen functionality to match their own freight with complimentary backhauls from other brokers, thus enabling them to secure capacity commitments from carriers.

In addition, some TMS platforms allow carriers to login to the website of a trusted broker to post their capacity as well as post their capacity to a wider network of brokers using the common TMS platform.

  1. Speed to market. Another important factor to consider is the speed at which cash management strategies and TMS technology can be implemented. When in the middle of a growth opportunity, brokers do not have 30 days to wait for installation of a new TMS or financing arrangement. With all of the advancements in the software-as-a-service business model, it is possible to implement software within a few days of starting a new contract and turn on the cash financing tool within minutes of credit approval.

In summary, using a TMS to expand visibility to the market coupled with an efficient and affordable capital solution will help ensure small and mid-size brokers are able to solidify relationships with carriers to build capacity and take on more business.

 

Jennifer Saunders is the Director, Architects for MercuryGate where she oversees the Vertical Delivery ensuring quality solutions are delivered for all customers.  With over 16 years of transportation experience, she leads the Vertical Management and ensures quality product is delivered for MercuryBoost.  Prior to joining MercuryGate, She has held many positions in Customer Implementations, Operations, Sales, Project Management, and Technology at several key players in the industry such as MIQ Logistics, UPS-SCS, and Menlo Worldwide.

When it comes to procurement, a supplier that is socially responsible often has only a small advantage over other competitors.  The fact that they are socially responsible, or minority owned, often only helps them if they are ranked very closely with the other leading competitor; if two potential suppliers have similar capabilities, the tie breaker goes to the socially responsible company.

One of the few exceptions is the SmartWay Transport Partnership.  The SmartWay Program is a voluntary collaboration between the U.S. Environmental Protection Agency (EPA), Natural Resources Canada, and the freight industry.  It is intended to increase energy efficiency while trimming greenhouse gas emissions and air pollution.

There are roughly 250 SmartWay Shipper partners.  These include some of the largest shippers in North America.  Walmart, CocaCola Enterprises, Lowe’s and FritoLay are all SmartWay participants.   These companies have committed to using SmartWay carriers to haul some portion of their freight.

smartway

All 100 of the largest truck carriers, and over 2,000 medium and small carriers are certified.  SmartWay carriers now account for over 22 percent of all U.S. trucking miles.  In short, if you are a carrier in North America and you are not SmartWay certified, you are at a competitive disadvantage.

In addition to truck carriers, logistics companies, barge and rail operators, and multimodal companies participate in SmartWay.

Carriers who join use a SmartWay spreadsheet tool to report information about fuel consumption, miles driven, and the type of fleet the carrier has (drayage, flatbed, LTL, etc.) as well as what type of body the trucks have – dry van, reefer, flatbed, tanker, and so forth.  This produces a measure of their emissions for carbon dioxide (CO2), oxides of nitrogen (NOx), particulate matter, grams of emissions per mile, and grams of emissions per ton-mile.    Those data elements then enable shippers and logistics companies to calculate their carbon footprint.

Large shippers then use this data in their carbon disclosure reporting.

carbondisclosure

SmartWay ranks certified carriers into five categories – highest to lowest – based upon how fuel efficient they are in each category of pollutants based on emissions per mile and emissions per ton-mile.  Those rankings reflect the type of fleet – truckload, less than truckload, drayage, package delivery, or expedited.

Shippers who have made large public commitments on how much they intend to reduce their carbon footprint will be more likely to work with carriers that score in one of the top categories.  Further, the shipper does not have to ask a carrier whether they are SmartWay-registered and what efficiency category they fall into.  They can use the carrier’s registration number to look that information up.

The shipper who is using SmartWay data to document how they are doing on carbon emissions is not using exact data, but rather an estimate.  The EPA estimates are based on things like miles driven, how full the trucks are, the age of the fleet, what kind of fuel is burned, what kind of truck body the truck has, and so forth, to come up with estimated pollutants per mile.

Each of the five rankings – highest to lowest – represent a range of emissions per mile or ton mile.  The shipper is using the midpoint of that range and multiplying by the miles driven, to provide their estimate of what their emissions have been.

In the future, as the Industrial Internet of Things advances, sensors that can precisely measure the pollutants a truck is generating on a shipment may come into existence.  At that point we can imagine “smart invoices” that are printed at the delivery site which document the environmental performance on that trip.

We are not there yet.

In the meantime, the SmartWay is a very good program.  Many of us are used to thinking of Europe as being ahead of the U.S. on environmental issues.  But Europe lacks a transportation public/private partnership as robust as SmartWay.  That is a shame.  Global shippers are forced to estimate transportation emissions in different parts of the world using different tools and methodologies.  And this is much tougher outside of North America.

Categories Procurement, Sustainability
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