Chuck FuerstDo you have a March Madness bracket filled out for the NCAA basketball finals? Whether you do lots of research on each team or pick randomly, it’s a fun time of year to watch the highs, lows and upsets during the culmination of the college basketball season.

As I filled out my bracket and prepared to dominate my coworkers in the office pool, I realized how much March Madness and the supply chain have in common, especially around in-store fulfillment. In-store fulfillment is an area that many of our retail customers are considering, as it gives them the ability to fulfill an order – no matter its origin – from a brick-and-mortar store. In an omni-channel market, this is critical for ensuring that your orders are fulfilled quickly using whatever means are best for consumers and business objectives. As we work with our retail customers that are considering in-store order fulfillment, there are a few key areas that they – and teams on the road to the NCAA championship – should focus on if they want to succeed.

Master the basics
Sure, a team can have lots of trick plays or high-flying dunks, but they’re not going to advance if they can’t master the basics of the game. The same goes for retailers: while many are exploring new ways to fulfill online orders, they’re also struggling with operationalizing the foundations of order fulfillment, like store pick-up or cross-channel inventory visibility, or fast pick and pack processes. By not having mastery and automation in these areas, they will likely increase their error rate as they scale up to fulfill a growing online order base.

Before implementing an in-store order fulfillment or omni-channel strategy, make sure you have the basics covered so that you can fulfill consumers’ demands for a buy anywhere, deliver anywhere and return anywhere experience. This will also help your systems adapt to an omni-channel environment more smoothly and ultimately provide a better experience for your fans.

Accuracy, accuracy, accuracy
All the plans in the world are worthless if you can’t make the shot. Likewise, your supply chain’s inventory systems and processes – whether in your store or at your warehouse – have to be accurate to justify the investment in in-store fulfillment technology.

Getting all of your systems integrated and acting like a team are the most important steps: Implement a single pool of inventory to which all channels have access, and introduce fulfillment prioritization rules among online, home delivery, store requirements and wholesale orders. In addition, integrate order management, store replenishment, supply chain planning, POS, planogram and ERP systems to give your customers better service and efficiency. Customer experience is critical in the omni-channel world, you might not get a second chance if you don’t execute on that first experience. The ability to communicate among various store and warehouse systems will help you manage your inventory more profitably and give your customers a winning experience.

An upset is inevitable
Just like the 12th seed that beats the 5th seed, you’ll likely have surprises and upsets as you implement in-store order fulfillment technology and processes. Your response will need to be flexible and adaptable during these times.

This starts by recognizing the importance of standardized processes for your in-store teams: labor is much more fluid in a store than in a warehouse, with a wider variety of skillsets and seasonality considerations, so standardization will be extremely important to ensure continuity. Support unique picking requirements, such as variable weights and product image displays, to assist with product locating in stores. Move distribution points closer to buyers for faster lead times and eliminate the frustration of out-of-stock scenarios so that you can build brand equity by connecting customers with the products they want – wherever the product is located.

Build your processes and strategies on a supply chain technology that can adapt to unforeseen situations and continue to support your company’s growth. New challenges, like a changing business model or customer demands, don’t always have to require new solutions. Ensuring you have the right technology foundation to adapt to these changes will make you more successful and profitable in the long run.

Come out ahead
Navigating changes in an omni-channel retail environment requires a mastery of order fulfillment basics, accurate visibility into your inventory, and the ability to flexibly respond to any challenges thrown your way. With a solid foundation and an eye toward the changes that the omni-channel market is bringing, your company can increase the odds that it will come out ahead.

 

Chuck Fuerst is the director of product strategy at HighJump Software. He has more than 15 years of experience in the technology market, working for supply chain and ERP software companies to deliver innovative solutions. Chuck is responsible for monitoring supply chain industry and technology trends and identifying ways to enhance the value of products for HighJump’s customers. He holds a bachelor’s degree in marketing management and innovation from Concordia University.

Six years ago, Del Papa Distributing, a third generation family-owned beer distribution company that delivers more than 10 million cases of beer annually, decided that Galveston, Texas was not the ideal location for their operations.  Galveston seems to be unusually prone to hurricane damage.  The 1900 Galveston hurricane was famous for the devastation it wrought.  But in 2009, Hurricane Ike flooded more than 17,000 homes and businesses and also left one to three feet of water in Del Papa’s warehouse and offices.

Not surprisingly, not long after Ike, the leadership of Del Papa decided it was time to look at an inland location for their administrative offices and warehouse.  Because this was a green field opportunity, Steve Holtsclaw, the Director of Information Systems, thought this was a perfect opportunity to update their IT networking capabilities.  Today we call this an Industrial Internet of Things implementation, at the time this was referred to as a unified network for voice, data, and video.

Steve’s arguments prevailed.  Part of the decision on the new location, in Texas City, Texas was based upon the ability of Internet Service Providers to provide a high bandwidth mainline connection and a different ISP to be able to provide a backup connection that connected to a different part of the building.

At the same time they were implementing the integrated networking solution, they were re-implementing a warehouse management system, route accounting, and delivery services solution from Softeon.  The new 26-acre site combines a 126,000 square foot warehouse with corporate offices and parking for their truck fleet of 18 trucks.  The site went live in the fall of 2012, with the IIoT and software implementations taking about a year; starting about 6 months before the building was occupied, and finishing up 6 months after the company was in the building.

The IIoT implementation, led by Cisco partner Zones, included a Cisco IP platform connecting a WIFI network for the RF guns in the warehouse, video surveillance cameras, physical access controls for gates and doors, wired and wireless IP phones, smart phones with cameras and a telepresence system, digital signage for employee communications, and temperature sensors in the warehouse and keg vaults.

Employees have a single sign on that gives them access to all the capabilities offered by both Cisco and Softeon that they have the proper permission to access.

For Del Papa, the implementation improved warehouse operations, increased daily shipping capacity, and improved customer service.  It also helped to reassure important suppliers that their brand would be protected, reduced energy requirements, and streamlined safety and security.

Warehouse productivity rose by 18 percent.  I told Steve that seemed like a lot.  Steve explained that the reasons for that degree of improvement were first of all, the new warehouse allowed them to improve their layout and reduced floor workers’ travel times; secondly, the old site had dead spots where RF gun and Voice Recognition coverage was spotty or nonexistent.  In the new warehouse the RF guns and Voice Recognition system – they use Vocollect – can be used throughout the entire warehouse.

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Del Papa Warehouse

The customer experience also got better.  In the past, sales reps would call the warehouse with a rush order. However, warehouse employees are rarely at their desks.  They often did not receive a voicemail in time to rush a late afternoon order that same day. Now, using IP Phones, a sales rep with a last-minute order can reach staff anywhere in the warehouse.  Further, during the deliveries the Softeon delivery services module allows the drivers to print invoices on the spot.  These are dynamic invoices; the drivers may have been asked by the customer not to take cases they had ordered, or they may be asked to add cases that were not ordered.

Del Papa also wants to keep their suppliers happy.  Their largest supplier is Anheuser-Busch. Anheuser-Busch wants to insure that their beverages are kept at the proper temperature.  The new warehouse measures the temperature in several zones with sensors located at a height of both 30 feet and at the five foot level.  If the temperature is beginning to trend out of the desired range, at either height, a warehouse manager, even one working remotely, can access the temperature controller and turn down the chillers.  This means the manager does not have to interrupt busy warehouse supervisors.

Not too surprisingly, the new unified infrastructure was more energy efficient.  By connecting lighting, HVAC systems, keg vaults, etc. to a centralized system that can be monitored, analyzed and controlled remotely, Del Papa has reduced energy usage nearly 27 percent over the past 3 years.  The payback on the energy efficiency has substantially surpassed what they had planned for in their business case.

Steve says that as a family owned business with long term employees, theft and safety were not as big an issue for them.  Nevertheless, they have connected video surveillance and physical access controls to help prevent theft.  If someone without the proper clearance opens a door to a restricted area, the Director of Safety or other key managers can be instantly alerted and link to a video from a nearby camera they can play over their smart phones.

My largest take away from this story is not amazement at what Del Papa achieved, but rather the idea that a company moving to a green field site would be crazy not to implement a unified network.  When I mentioned this to Steve, he agreed.  “In a green field situation, this is what everybody should be moving to.  Not implementing technology that is not integrated and collaborative would be insane!”

Aurora Oval on Tuesday (NOAA)

Aurora Oval on Tuesday (NOAA)

Happy Vernal Equinox to all! After effects from late winter storms are still imposing their presence on many of us on this first day of spring (fall to our Aussie friends). The most expansive storm of the week is undoubtedly the solar storm that hit earth on Tuesday. The storm was triggered by the impact of a coronal mass ejection (CME) hitting the Earth’s magnetosphere. According to Discovery.com, “CMEs consist of huge bubbles of energized gas from the sun’s superheated corona (the solar atmosphere). “ I must admit, I did not know that CMEs consisted of gases. That’s one powerful belch. These types of storms are known for their disruptive impacts on satellite communications and power grids. NOAA stated that global positioning system (GPS) glitches were possible from this latest event. Hopefully none of you missed that left turn at Alberquerque.

And now, on to the news:

On the lighter side…

 

2014  US-NAFTA Trade by Mode

2014 US-NAFTA Trade by Mode

US-NAFTA freight trade value increased 4.5 percent in 2014, with trucks carrying 59.9 percent of freight during the year. Freight’s share of share of trade remained stable from 2013 but the longer term trend from 2004 shows a 3.7 percent decline in share. This decline in share is a result of increased trade movements by pipeline and vessel.  The most notable 2013-2014 model shares changes were a 1.1 percent increase in pipeline imports from Canada, a 3.3 percent decrease in truck exports to Canada, and a 1.9 percent increase in truck imports from Mexico. Let’s hope that 2015 NAFTA trade remains resilient in the face of weakening economies overseas.

John Kemp penned a nice piece appearing on bakken.com. He lays out the premise that the transportation sector accounts for a larger percentage of overall oil demand than in the past. As a result, its use has a strong effect on overall demand. The article notes the market pressures and trade-offs that affect oil consumption levels. Lower oil prices are decreasing the relative importance of vessel fuel savings, while increasing the value of reduced journey times. Logistics firms are now more willing to make fast deliveries with lower consideration to fuel costs. And discretionary travel is also increasing. I agree with John’s premise about the role of transportation and oil, and the effects of its price on transportation activities. – He certainly cited the facts to support it. However, for this to remain true, overall economic demand must remain high. Put differently, the low oil prices must not be a reflection of lower demand. If so, supply must remain high enough to keep prices low for an extended period.

Amazon, the leading cause of America’s growing instant gratification disorder, has expanded its Prime Now service Baltimore and Miami. The residents of these cities will join New York City as potential customers for two-hour free delivery and one-hour delivery for $7.99.

US Manufacturing output fell in February. This was the third straight month of declines. Total industrial production was 3.5 percent below its level a year earlier. As I stated above in response to John Kemp’s article, lower oil prices provide benefits to the consumer and will have stimulating effects on demand, all else equal. I’m just concerned that all else may not be equal. Hopefully the decline in manufacturing is a short-term trend resulting from weather, a transiently strong dollar, or some other transient factor.

The World Bank released a research paper titled “Customer Driven Rail Intermodal Logistics…” The paper discusses the benefits that container shipping by rail could have on the Chinese economy if they adopt similar reforms to those in the US that have propelled the development of the US rail network. These changes could be provide particularly positive logistical impacts due to the strong growth of freight container traffic in China.

Lastly, be sure to check out this week’s global trade customs and compliance article. Italian customs officers seized a giant egg from an extinct elephant bird that used to live on the island of Madagascar. The declared value was $550, but reportedly the its real value is about $100,000. The customs officers proceeded to use the egg to make an omelet the fed the entire customs staff (just kidding).

 

This Week’s Video, Today’s Solar Eclipse

 

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Mike ChallmanFor chemical manufacturers, knowing what you don’t know about your transportation process can be your greatest asset. But many logistics customers are reluctant to admit their shortcomings. One of the biggest weaknesses we see in new clients is a lack of control over the shipping process, the data and the decision points.

That’s why it’s critical for chemical companies to work with third-party logistics providers that are able to develop customized programs tailored to their industry. Following are the key practices we’ve identified for chemical logistics success.

5 best practices for chemical logistics

  1. Supply Chain Visibility – Chemical companies need to know how their products are being handled at every stage of the shipping process.
  1. Effective Information Management – A robust reporting system is essential, but too much raw data can be overwhelming. Information should be communicated in a meaningful and engaging way.
  1. Active Participation in Supply Chain Issues by Multiple Shipper Departments – To do the best work, everyone from production to customer services to sales needs to be plugged into discussions.
  1. Current Market Intelligence – An effective two-pronged approach involves staying abreast of both the overall transportation market (e.g., knowing carrier rates and who the players are in your areas) and the chemical-specific market (e.g., knowing the current rules for shipping hazardous materials).
  1. Strong Carrier Relationships – Transparency and regular, planned communication is key to strengthening relationships among all parties.

4 Tips for implementing these practices

While it’s essential to identify best practices, you won’t benefit from them unless you formulate a plan to implement and stick to them. These four tactics can help:

  1. Find the right technology. While technology such as transportation management systems, benchmarking tools and reporting tools may be abundant, not all of it is suited to the chemical shipper. And it’s especially dangerous to rely on a manual system of spreadsheets, sticky notes and email. If you’re putting your faith in tribal supply chain knowledge, your first priority should be capturing that information using the appropriate technology for chemical logistics.
  1. Implement a structured and disciplined engagement strategy between your key departments and your 3PL. Groups such as production, customer service, sales, marketing and executives often work in silos so it’s important to get them talking not only to your 3PL, but also to one another to help them understand how they’re connected. The 3PL should take the initiative to create a schedule and agenda for key meetings with you and your departments.

We recommend three types of meetings between stakeholders:

-  Monthly operations conference calls to talk about tactical issues like what’s happening this month, whether there are any campaigns coming up, and how to approach an upcoming season of bad weather.

-  Quarterly business reviews to discuss the programs being worked on together to improve the process and what the metrics that have been gathered tell us. These strategic meetings should be held in person and be rotated from the 3PL headquarters to your headquarters to regional offices. This gives the stakeholders a chance to hear from individuals who might not speak up on conference calls.

-  Semi-annual or annual meetings to address the overall program and find out whether it’s meeting your expectations and if you have additional needs.

When we began working with Pilot Chemical, the company’s various departments were isolated and unharmonious. Actively participating in supply chain meetings helped create a culture of collaboration where every department understands the impact their decisions have on the company as a whole. This engagement strategy paved the way for Pilot to implement all five of the best practices outlined above.

  1. Create a robust and active information management program. Determine which key performance measures need to be tracked. There’s lots of stuff you can measure, but not everything you can measure is meaningful.
  1. Utilize a flexible engagement strategy. A canned solution may be adequate when you’re shipping boxes of nontoxic goods, but when you’re dealing with chemicals, you need a customized solution that meets your requirements.

This tactic is key for creating supply chain visibility — both outbound and inbound. In fact, gaining control of inbound transportation is a huge opportunity but also an enormous challenge. Not all manufacturers are willing or able to do so, but Emerald Performance Materials is bravely taking the step this year, something that wouldn’t be possible if the company didn’t already have visibility with its outbound program.

When it comes to shipping hazardous chemicals, off-the-shelf logistics solutions just won’t do. Chemical manufacturers evaluating a 3PL should look for those that offer proprietary solutions for chemical logistics. And together you can build those customized solutions by starting with these five best practices.

 

Mike Challman leads all of ChemLogix (a division of CLX Logistics) Managed Services in North America, including freight management operations; benchmarks & bids; carrier programs; dedicated truck & rail fleet operations; and brokerage services. His multifaceted background includes operations, customer service, solution development, project management and continuous improvement programs.

Prior to joining CLX Logistics, Challman spent nearly 25 years in the transportation industry.  He has held leadership positions with several motor carriers and third party logistics companies.  A decorated Air Force veteran, Challman earned his Bachelor of Science degree at the U.S. Air Force Academy and holds a Master’s of Business Administration from Oklahoma City University.

 

learningOne of my favorite parts of being an analyst and a columnist for Logistics Viewpoints, aside from expounding on omni-channel retail and supply chain logistics trends and technologies, is the opportunity to learn. As much as I may know about supply chain logistics, there is always room to learn. I learn from my peers, and co-authors, Steve Banker and Clint Reiser, and the rest of the analysts at ARC Advisory Group. I learn from software suppliers when I take a deep dive into one of their offerings or debate where they stand in the market.  I learn from end users who take my surveys and present at conferences I attend. And I learn from my peers in the supply chain industry. One such person is James Cooke, former editor at DC Velocity, and a co-presenter with me at last year’s CSCMP annual conference in San Antonio. Steve Banker recently gave me a copy of James’ book Protean Supply Chain: Ten Dynamics of Supply and Demand Alignment.

As I started to read the book, the first chapter brought up a subject I hadn’t really thought too much about: supply chain synchronization. According to Cooke, supply chain synchronization “means that companies would make only the exact number of goods necessary to meet actual customer demand.” While it’s a term I recognize, it’s not something that I’ve written about before. The key piece of this definition is “actual customer demand.” Traditionally, most companies have used historical purchase data to develop a forecast for the replenishment of goods. And while many companies were quite good at producing a forecast, it is still an educated guess at best. It does not account for market disturbances that can significantly disrupt both consumer demand as well as the overall supply chain. Two of the technologies that Cooke mentions that play a significant role in moving closer to actual supply chain synchronization are inventory optimization and workforce management. These are two technologies that I know well from my recent omni-channel fulfillment survey, completed in conjunction with James and DC Velocity.

Inventory optimization technology enables companies to balance their inventory levels with customer demand. Market conditions, such as economic factors, supplier relations, and fluctuating and seasonal demand for products, impact inventory management. However, the use of multi echelon inventory optimization software can help companies to identify the appropriate amount of stock needed at stores, warehouses, and distribution centers. By carrying less physical, companies can reduce their inventory carrying costs and become more profitable. By matching supply with demand, the customer is able to find the product they need / want, and the organization can fulfill it through the appropriate channel. This is how companies get closer to matching manufacturing output to actual demand. Unfortunately, this is a technology that is under-utilized by too many organizations.

The workforce management application ensures that the proper staffing levels are in place at all points of the organization. Some of the key components of a workforce management application include time and attendance, talent management, scheduling, and labor management. By using this technology, companies can ensure they have the right employees performing the appropriate tasks every day. It also ensures that the company will have the right amount of people to get the job done. This is especially important for balancing supply and demand when it comes to manufacturing. Companies can use this software to make sure they can produce, package, and ship all the goods they need to without an excess or shortage of labor, resulting in increased costs. Workforce management software is one of the most used technologies when it comes to omni-channel fulfillment practices.

The use of advanced demand management tools have already begin to move the needle towards supply chain synchronization for many companies. According to research from the book, nine leading CPG companies in the US were able to reduce forecast errors by 40% or more in a two year period. While that sounds like an amazing performance turnaround, it shows the unreliability of developing forecasts the old fashioned way. Companies need to leverage the massive amount of customer data on hand to get the big picture on what they actually need from an inventory standpoint. Especially given today’s global economy, companies need ensure a seamless flow of goods from manufacturers to the end consumer, without carrying excessive (and expensive) amounts of inventory. This one statistic shows that while the process is by no means a fast one, using real data to bridge the gap between supply and actual demand, and realistically synchronizing the supply chain, is becoming more of a reality.