Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Sneak Peak: Driving Omni-Channel Efficiencies

Inventory Management | By •

omniCSCMP is only a week away. Clint Reiser and I will be presenting our findings from an omni-channel fulfillment survey we conducted in partnership with James Cooke and DC Velocity. Omni-channel is all about the convergence of channels to provide a unified brand experience for the customer. Each channel has its own experiences, advantages, and challenges. The key is to connect the business processes and technology to create a holistic experience.

One of the main issues with the omni-channel customer experience is where to start. An omni-channel strategy is not easily laid out. It involves elements of supply chain, marketing, sales, communications, operations, and a variety of other things. At our session, Clint and I will touch upon these challenges and take a look at the supply chain and fulfillment aspect of the customer experience. Here is a sneak peak of some of our findings:

  • Sharing inventory across channels is not as commonplace as you might think. Just over 50% of respondents are sharing inventory across channels. I find this surprising as inventory availability is at the heart of the customer experience. If your customer cannot get the product they want through their desired channel, they will find it somewhere else. Sharing inventory across channels alleviates some of the concerns about lots sales. However, it does require accurate inventory counts at all locations, and the ability to centrally manage the flow of inventory.
  • Of those respondents that do share inventory across channels, 62% share across all channels and an additional 34% share between brick and mortar locations and online. There is not a big push to share call center and catalog inventory with brick and mortar or the online channel. This is not too surprising as these channels are only generating about 10% of total revenues from our respondent base, and that number will only decline over the next five years.
  • About 80% of respondents indicated that their e-commerce fulfillment is at the same facility as their traditional fulfillment. Combining these into one physical location requires the establishment of channel-specific processes. Nearly 60% of respondents segregate e-commerce fulfillment from traditional fulfillment. The most common way is to segregate the facilities by physical layout. This method allows for specific areas to pick orders for store fulfillment, direct-to-consumer fulfillment, and distribution center transfers. Not as popular is to segregate by labor management and inventory availability.

That’s all for today’s sneak peak. If you are in San Antonio for CSCMP next week, we will be presenting our results on Monday morning in the Omni-Channel track. If not, please keep an eye out for the summary article in DC Velocity this November.

Robotic Mobility with Human Assist: Transforming E-Commerce Fulfillment

Logistics Outsourcing | By •

Last week, I attended my first ARC Industry Forum in Orlando, FL. There were a lot of fascinating sessions that examined 3D printing, cyber security, the Internet of Things (IoT), predictive analytics, and a host of challenges and changing conditions in the discreet and process manufacturing industries. However, the session that stood out most to me was an early afternoon session on Tuesday Feb 11: Robotic Mobility and Human Assist Push the Outer Limits of Manufacturing.

This session did not speak to me so much from a pure manufacturing standpoint. Instead, the presentation by Bruce Welty, CEO of Quiet Logistics, looked at how robots are helping to transform e-commerce fulfillment. A few weeks ago, I wrote a column titled The Truth about the Omni-Channel Customer Experience. The article discussed how there were significant technology and customer empowerment gaps that are derailing the customer experience. At the heart of the customer experience is order fulfillment. If customers are unable to get the product they want, when they want it, they will simply go someplace else. Quiet Logistics is helping e-commerce retailers ensure they can fulfill orders accurately and on-time to improve the customer experience.

To give you some background, Quiet Logistics uses proprietary technology and Kiva Systems material handling robots in warehouses to drive order fulfillment accuracy and speed. The key to this system is not to use robots to replace workers. Instead, according to Welty “robots are enhancing humans, not replacing them. We use the robots to do the things humans are bad at.” So what does this mean for order fulfillment?

There has been a lot of talk about moving towards more automated processes to reduce labor costs. And for some aspects (OK, lots) of the business makes sense. As Sandy Vasser, Facilities Electrical and Instrumentation Manager, ExxonMobile indicated in his keynote, “You can’t do it wrong if you don’t have to do it.” This speaks loudly to the virtues of automation. But not everything can be automated. The Robotic Mobility track looked at this from both sides: robots replacing humans and automating processes as well as robots and humans acting as complementary pieces of the puzzle. Order fulfillment is one of these areas that cannot be fully automated.

Welty stated that “Fulfillment is crucial for e-commerce.” In the changing retail landscape, there are myriad shopping options for customers, and expectations have grown. E-commerce sales are up and continuing to grow. Many retailers are downsizing physical store footprints to expand e-commerce operations. But at the end of the day, if the order cannot be fulfilled on-time and accurately, it is a moot point. The consumer will go elsewhere that can fulfill the order. So how does Quiet Logistics provide fulfillment services for retailers?

The Kiva Systems robots do not bring individual items to be packed. Instead, these robots quickly bring the entire shelf to their human counterparts. This allows the human to pick the items that are needed for an order. If there are multiple items that need to be picked, and they are in separate shelves or bins, another robot can retrieve the next shelf while the human is picking the first part of an order. This combination allows the human to make sure they are picking the right components (in case the products are not in the right order on the shelf) while eliminating wasted time and movement of searching the warehouse floor.

Kiva Robot
The Robot

From a fulfillment standpoint, Quiet Logistics’ services include inbound processing, inventory control, outbound processing, and returns processing. E-commerce fulfillment customers include Bonobos, Zara, Gilt Groupe, and Topps. Kiva Systems LLC is a wholly owned subsidiary of Amazon.com.

For more information on the presentation, please look for ARC Advisory Group’s post Forum review.

Guest Commentary: 3PLs are the Secret Weapons in the e-Fulfillment Arms Race

Guest Commentary | By •

In his 1997 book The Innovator’s Dilemma, Harvard Business Professor Clayton Christensen introduced the term “Disruptive Innovation,” which describes how certain novel products or technologies can enter a market sector, defy market norms, and ultimately unseat well-established market leaders.

Today, third-party logistics providers (3PLs) are participating in the disruptive innovation of a whole category: the one-stop shop. In the ‘90s and early 2000s, one popular big-box retailer took a strong hold of this market sector by using cutting-edge logistics to gain an advantage in selection and pricing; however, the only place they didn’t apply their logistical prowess was their online division. With a bricks-and-mortar presence in virtually every U.S. zip code, it didn’t seem necessary. And in the early days of online shopping, consumers were wary of using credit card numbers online, web stores were skeletal, and shipping took forever.

But now, secure sites are the norm, product lines are endless, and delivery times are faster than ever. As a result, online-only retailers are now vying to become the ultimate one-stop shops — and the bricks-and-mortar mainstays have taken notice. As this particular retailer and others struggle to catch up, the veterans of the e-fulfillment space are focused on leading in a few areas they know to be crucial: speed of product to market, on-time delivery to the customer, reliability, and scalability. Their secret weapon: the 3PL.

Speed to Market

When an e-fulfillment retailer needs to launch a new product intended for a fleeting trend or a season, delays translate to lost opportunity and lower profit margins. Relying solely on in-house resources, it can take an e-fulfillment retailer nine, ten, or even twelve months to procure space, implement systems and technology, staff a new warehouse, receive product, and begin servicing a new product line.

A 3PL, on the other hand, can help an e-fulfillment retailer fully stand up an operation or logistics center and begin shipping product in a fraction of that time — often in as few as 60 days. Because 3PLs bring on-demand access to sophisticated logistical systems and technology, scalable warehouse space, and the guidance of the leading experts in worldwide logistics, e-fulfillment retailers who choose to partner with a 3PL can launch a product months ahead of the competition, gaining access to valuable untapped pools of potential consumers.

Speed to the Customer

Today, e-fulfillment storefronts compete heavily with their bricks-and-mortar counterparts for the sale of ordinary, everyday goods. For example, while a consumer has the option of driving to their local store to pick up, say, dog food or a rake, they may have little interest in making the drive or battling the weekend crowds at their nearest shopping center. So if an e-fulfillment company can promise that shopper a package on their doorstep within 48 hours, they might be willing to say, “Okay, that’s not too big of a deal — I can wait a couple of days.” However, if the delivery time is two weeks, they’ll probably get in the car.

Unless the product can’t be found elsewhere, that one- to two-day delivery window tips the scale like no other factor. For an e-fulfillment retailer, it makes sense to partner with a 3PL, gaining access to their operational resources and the physical assets necessary to promise a two-day turnaround.

Scalability, Agility, and Leadership — the Keys to Long-term Success

Since reliable delivery times are at the core of an e-fulfillment company’s value proposition, a lot rides on the ability of any 3PL entering this space to deliver both with scale and dependability, and without eroding service or quality.

So before entering this space, it is crucial for a 3PL to have the management and operational depth to ensure a flawless implementation and ongoing operations solution. To achieve this, they need to bring the right technology, assets, and people. The 3PL’s capability to scale material handling equipment, IT infrastructure, warehouse space, and other operational assets is critical to the enablement of a successful operation. Coupled with temporary labor provider relationships, the 3PL can bring a fully staffed and operational DC quickly into the fold.

Most importantly, 3PLs in this space need to bring a strong consultative influence, including the introduction of proven infrastructures, operational resources, and Lean principles. It’s not warehouses or trucks, but rather the ability to replicate processes across an entire network — and quickly — that singularly qualify 3PLs to smoothly scale these operations up or down. And when they do it well, they cement their place alongside the e-fulfillment customer, pivoting to outpace each new shift in the ever-changing marketplace.

Lonny E. Warner, is Vice President of Operations, Technology and Electronics Logistics Services, at Menlo Worldwide Logistics. Warner has been with Menlo Worldwide Logistics and its parent company Con-way Inc. for more than 20 years in both operations and sales capacities. In his current position, Warner is responsible for the continuing growth and management of Menlo as a leader in managing hi-tech company supply chains. He previously served as vice president of sales and marketing responsible for all aspects of the company’s sales and marketing activities. He had served as director of global business development since 1997.

Guest Commentary: Logistics Management Challenges for SMBs

Guest Commentary | By •

With Memorial Day only a few weeks away, and summer fast approaching, many companies will begin finalizing plans for enhancements or changes to their supply chain to better prepare for the holiday season. The current supply chain challenges aren’t limited to large enterprise organizations – small and midsize businesses (SMBs) are also feeling the pressure to ensure they can manage inventory and ship product in a way that meets customer expectations and satisfaction, while keeping costs at bay.

But in a recent survey of SMBs, only about 25 percent are using some type of transportation management solution to help with their parcel or freight process. Many believe the solutions currently available are only for larger enterprises looking to enhance their supply chain with integration to WMS and OMS; many believe their carrier provided system is giving them all they need; and others just don’t have the time to look for new solutions that may require a change in process. But to remain competitive in the market, incorporating a shipping management solution isn’t just a “nice to have” – it could be the deciding factor for growth and success in 2013.

We work with many SMB companies, but one retailer in particular is a great example in how to tackle supply chain challenges. This retailer has five locations and it wanted to grow its online presence while optimizing its inventory and in-store sales. The retailer implemented a multi-carrier shipping management solution in 2011 and the results can serve as a blueprint of best practices and questions to ask for optimizing logistics management for all SMBs.

1. Is my company “growing as one?”
Growth is a great thing for small and midsize companies, but you need to make sure the logistics management for all of your departments, locations or stores are growing together, not apart. While it’s always best to identify and plan for this early, most times you don’t realize it until you’re in the middle of some costly, confusing process. Our retail customer, for example, was manually shipping from each of its stores to customers – each store doing it separately with no defined process or centralized visibility, and working only with the inventory available in that store. Realizing the costs incurred by this huge process gap, the retailer invested in a shipping management solution that allowed it to fulfill orders from any store, optimizing the inventory and reducing carrying costs.

2. Can I take automation to the next level?
You may be currently using a carrier provided system to print shipping labels, or an inventory management system to give you visibility to your product availability. That’s a great start with automation, but can you take it to the next level? Can you integrate your systems to remove a manual entry step? Can you automate address corrections to save up to $10 per shipment for incorrect addresses? Our successful retailer improved reporting, automated label generation and integrated all the shipping data from its operations into a single database for easy tracking and history review – with an unplanned benefit of more happy customers. Which leads to the next question….

3. What are my customers’ biggest pain points?
Many SMBs in the retail space rely solely on e-commerce and online orders, while others may have a brick and mortar operation as well. It’s critical that you understand the key pain points for your customers based on your business and your position in the market – and balance addressing those pain points with the cost of doing so. For our retail client, many customers were looking for products that weren’t carried in the local store and would be frustrated by the amount of time it took for the product to get to them. The shipping management solution it employed not only helped optimize the inventory it carried, but also allowed for quick and easy shipping from store to customer, along with tracking information to keep the customer informed on shipment status.

4. Am I really shipping the most cost-effective way possible?
Parcel shipping can be a confusing and complex operation. With the changes in rates, numerous accessorials, and varying service levels, it’s no wonder many SMB’s stick to one way of doing things – either one carrier or service – and ship from there. But there’s significant money to be saved by going the extra step. Multi-carrier shipping management solutions can present carrier and service options for choosing the best option and flag accessorials prior to shipment. Our retail client, for example, went from using a single carrier for all shipments, to a multi-carrier solution that allowed it to choose the right carrier for the service level required – and saw an ROI within the first six months.

These questions may seem pretty simple, but we all know that in our day-to-day operations, SMBs often don’t have the time to step back and really look at these shipping management opportunities. But as evidenced above, an SMB can realize significant benefits — in cost reduction and revenue increase — by  taking some action. It’s worth the time.

Karen D’Andrea is the Director of Marketing, Logistics Solutions and Services for Pitney Bowes. Karen has been with Pitney Bowes for 16 years in various product management and product marketing roles. She is currently responsible for the SendSuite™ portfolio of outbound shipping management and inbound tracking solutions, including SendSuiteLive™ Global Logistics Management Solution.

Vignettes from JDA FOCUS 2013

Logistics Software Vendors | By •

Last week, I attended JDA’s user conference, JDA FOCUS 2013. There were more than 2,600 attendees there — a bigger event than last year because of the JDA/RedPrairie acquisition. One of the things I value about this conference is not only the opportunity to listen to smart customers talk, but also having conversations with some of JDA’s sharp executives who test my thinking.

Here were some interesting tidbits:

  • A top executive from Walmart gave a keynote presentation the first day. Walmart is famous for building RetailLink and providing manufacturers with point-of-sale (POS) and other forms of downstream data. This executive said this was no longer good enough. Walmart needs to work toward providing its manufacturing partners order forecasts that go out 30, 60, and 90 days. There is a great opportunity, which he called “the great unlock,” to do much better joint promotion planning if they can do this.

  • In the past, we’ve written about the need to include the transportation team in the Sales & Operations Planning (S&OP) process. That is starting to occur. A large equipment manufacturer talked about how it is using JDA Transportation Modeler to support this process. One goal of a S&OP process is to help a company forecast how it will do in relation to its financial targets. If the S&OP process is showing that order volume will go up 20 percent over the next three months, for example, it would be foolish to assume transportation costs will also go up 20 percent. Those costs might actually go up much more — or much less — than 20 percent depending on the network and transportation capacity.

  • A large retailer that had never done demand planning is now carrying 20 percent less inventory in its distribution centers (DCs). The factoid that caught my attention was that it costs the retailer 5 to 6 cents per case per day to hold inventory in its DC. Assuming the retailer stores tens of thousands of cases per DC on any given day, my back of the envelope math shows the retailer is saving tens of millions of dollars per year from implementing demand management. Yet the retailer admits it is still fairly immature in this area; there are more savings to be had as it gets better at this.

In the “test my thinking” category, I’ve changed my mind in two areas:

  • I told JDA’s CTO that I knew software vendors had to invest in mobility, but it did not excite me. So, you can show an application screen on an iPhone or tablet computer — big deal. The CTO pointed out that the real opportunity from investing in mobility is based on creating more efficient workflows and business processes. Their first big area of investment is using mobility to make store operations more efficient. In an omni-channel world, where goods might be ordered online but delivered from the local store, some of those workflows may have a supply chain flavor.

  • I’d always presumed that e-fulfillment is best done from a dedicated dot-com warehouse. JDA is signing WMS deals where both e-fulfillment and store replenishment are done in the same warehouse. My longtime WMS product manager/marketing buddy tells me they have 11 retail customers doing store replenishment and dot-com out of the same warehouse. His point is that segregating the case-pick part of a warehouse (store fulfillment) from the each-pick portion (dot-com fulfillment) is not that hard. It is also probably much less expensive to expand an existing DC than build a dedicated greenfield dot-com warehouse.

Finally, one of the things I appreciate about the JDA conference, in contrast to other supply chain events I attend, is that many of the speakers are from operations instead of IT; operations/business folks are much better speakers.

Amazon and the e-Fulfillment Journey

Logistics Trends | By •

According to Fortune magazine, Amazon (the largest online retailer) is now the 100th largest company in America. The company was founded in 1994 with the intention of leveraging the Internet to create a new sales and fulfillment model. Amazon has gone from zero revenues to over $24 billion in little more than 15 years.

I remember writing about e-fulfillment in the 90s. Much of what I and others wrote about back then has come to pass, but the adoption of e-fulfillment technologies has been slower than expected.

Further, some of the language that was bandied about at that time was naive. There was much talk, for example, about how e-commerce and e-fulfillment would “disintermediate” the middle man, that distributors would go away. Although the Internet has adversely affected some companies, such as “brick and mortar” book stores and movie/game rental chains, distributors and wholesalers are not in danger of disappearing.

Part of Amazon’s attraction to Wall Street in the 90s, besides the company’s incredibly quick growth, was its talk about not needing to invest in stores and distribution centers (DCs). That turned out to be half true. Amazon doesn’t have any brick and mortar stores, but the company came to realize that providing fast and reliable fulfillment was going to be a key competitive differentiator. Consequently, Amazon ended up investing in and operating DCs. In fact, one of the risks the company highlights in its 10-K report is “If We Do Not Successfully Optimize and Operate Our Fulfillment Centers, Our Business Could Be Harmed.” In 2010, Amazon had 17.5 million square feet of DC space around the world.

But while I was wrong about the pace of change in logistics brought about by the Internet, its impact today is obvious. Virtually all retailers have an Internet sales channel, as do the majority of manufacturers and distributors. The Internet fulfillment channel is often the most challenging part of a company’s logistics operations. Many companies find that they can’t efficiently operate this channel without Distributed Order Management, Product Information Management, and enhanced each-picking and reverse logistics technologies. The increase in each-picking, in turn, has contributed to the vast improvement in goods-to-man material handling systems.

E-fulfillment and multi-channel logistics are no longer a pipe dream; they are standard operating procedure. And while the adoption of multi-channel fulfillment software has been slower than expected, the growth of e-fulfillment has been relentless. The fact that Amazon is now the 100th largest US company proves that. And Amazon itself has evolved based on its proprietary logistics and e-commerce technologies and its investments in advanced warehouses. Today, Amazon fulfills orders not only for its customers, but it has also become a 3PL specializing in e-commerce (see “Amazon: A Customer-Centric 3PL”).

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