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Profitably Delivering eCommerce with Consumer-Centric Priorities

Logistics Technologies | By Terence Leung • 05/27/2021

Five Forces Reshaping Logistics as We Know it

Because warehousing and transportation represent significant cost centers, intelligent logistics decisions are critical. And, more than ever, these decisions have to be made on the fly, in real-time. As logistics managers grapple with their own challenges, including labor shortages and emerging commodity marketplaces, the logistics function has never been under more pressure to deliver.

Forget what you knew about logistics. Even before the emergence of COVID-19, next-day and same-day delivery promises from mega retailers, as well as new delivery models such as store pick-up, were driving increasing customer expectations — not just in retail, but in every industry. Every day, retailers and manufacturers are challenged to balance ambitious customer service promises with profit margin protection.

In my Logistics Viewpoints article in April 2021, Building Profitability with Agility while Digitally Transforming the Supply Chain, I mentioned that we will continue to explore here the concrete steps in the digital journey and examples of determination from the top in addition to logistics operations.

Uberization: Exploring On-Demand Transportation, Labor and Warehousing

In the consumer sector, few recent trends have been as disruptive as the new on-demand marketplace for commodities like transportation and lodging, driven by Uber and VRBO. In fact, the on-demand industry was estimated to account for $75 billion in 2018.[1] Now that same concept is poised to similarly disrupt the world of distribution.

While the need to keep up with the delivery promises of mega-retailers has made many companies blind to the true costs of their transportation, labor and warehousing activities, digitalization is opening their eyes. Today the concept of on-demand distribution is increasing companies’ ability to gain a marketplace perspective on these capabilities, treat them as commodities and compare the financial contributions of various options. This is foundational to achieving profitable agility as demand and supply remain volatile.

IoT capabilities have long helped to track the location of transportation assets, communicate with employees and support real-time collaboration in the warehouse. But the real financial value of advanced technology resides in its ability to sense real-time demand and monitor supply availability ― then secure on-demand transportation, warehousing and labor assets dynamically, re-planning flexibly as conditions change.

Today’s expanded transportation, warehousing and labor networks provide companies with many more options, which means greater bargaining power. Transportation assets, warehousing space and human workers can be optimally scheduled, and rescheduled, based on real-time or near-term demand signals. Extending visibility of available capacities in the market enables a more effective result, often delivering win-wins for collaborative trading partners.

How great can the impact be? Consider warehousing space. Historically, companies needing greater warehouse capacity would have invested in new construction ― a large capital expense that typically requires five years of operation to achieve a full return on investment. Or they might have leased space, which traditionally requires a long-term commitment and involves a one- to three-year payback on the investment.¹

In today’s fast-moving, on-demand marketplace, the warehousing capacity commitment can be made on a monthly basis, via short-term outsourcing. This means that not only is the financial investment low ― making a fast return on investment (ROI) fairly likely ― but that the supply chain has maximum flexibility as conditions change. Capacity can be easily ramped up or down due to product seasonality, holidays and of course global events such as the COVID-19 pandemic.

But the on-demand concept does not end with transportation, labor and warehousing. Extended offerings around value-added services, co-packing, co-manufacturing and even 3D printing will continue to deliver options that allow agility and scale in supply chain operations, with third-party logistics providers coordinating much of this capacity as they morph into super-grid logistics services providers.

As the supply chain becomes increasingly digital and collaborative, new partnerships may be formed by retailers, distributors and manufacturers to collectively source services and capitalize on economies of scale. This will help drive agility, optimize the customer experience, and ensure profits for all trading partners.

A Top-Level Vision Is Key to Enabling Agility

While the advanced technologies are widely available to support the extreme level of agility required for an uncertain world, often the barrier to successful adoption is cultural. At both the executive and lower levels, there may be resistance to adopting AI, ML, automation, analytics and other concepts that threaten to replace “the way we’ve always done things.”

In a McKinsey surveyed, 59% of participants stated that a lack of executive vision was a significant obstacle to the digital transformation of their organization.[2] In the “average” and “below average” companies in a CSCMP publication, 20% of respondents said a lack of management support, funding and resources was hindering supply chain innovation ― double the rate of the most innovative companies, where only 10% called this a significant challenge.[3]

When DHL Supply Chain determined that automation and robotics could play a critical role in increasing customer value and workforce productivity, CEO Oscar de Bok announced a $2.2 billion commitment to advanced robotics implementations. The company also created a digitalization plan, stretching to 2025, which was shared with customers and employees. In an interview with Supply Chain, de Bok said, “We believe to be truly innovative, an idea has to be rolled out throughout the entire organization…we are not going to wait for customers to tell us what will happen tomorrow, we will tell our customers.”[4]

Supply chain technology investments were once delegated to a specific function such as procurement or logistics. But in the extremely unpredictable post COVID-19 business environment, these investments are critical in delivering the essential capability of agility. As such, they must be a priority for every supply chain stakeholder, from the shop floor to the C-suite ― and beyond the walls of the enterprise. The payoff is well worth it. A recent survey by PWC demonstrated that the most innovative supply chain leaders ― called “Digital Supply Chain Champions” ― fully recoup their financial investments in digitalization in just 1.8 years.[5]

Today, every supply chain has the ability to adopt the advanced technologies needed to drive agility. Those who act quickly will seize a powerful advantage in identifying and capturing opportunities via supply chain digitalization. Those who hang onto traditional ways of doing business ― including manual processes, siloed functions, fixed assets and best guesses ― will fall behind as the world around them continues to be completely transformed.

Enabling Agility via Advanced Technologies.

The five advanced technologies highlighted below are emerging as competitive imperatives in establishing agility and resiliency across the logistics organization. Whether they’re retailers, manufacturers, or third-party logistics providers, companies must adopt and master these five technologies in order to:

Identify and manage disruptions
Deliver ecommerce-caliber service levels
Implement successful omnichannel strategies and business models
Achieve end-to-end visibility and control
Make optimal decisions that protect profit margins

Fortunately, the world’s leading logistics teams are already implementing these advanced technologies, creating a wealth of expertise and best practices that other companies can draw upon. The innovations helping this crucial change include:

Human + Machine: Robotics, cobots, drones, and warehouse automation improve productivity and reduce human errors
IoT and Telematics: Detection and monitoring tools increase real-time visibility, improve quality, and support optimal decisions
Autonomous vehicles: Driverless trucks, forklifts and drones deliver enhanced efficiency and safety
Collaboration and connectivity: Digital partnerships increase visibility and responsiveness across the logistics network
Intelligent problem solving: Advanced algorithms, AI, and ML detect and manage issues autonomously

Now, logistics providers and shippers are accelerating the pace to adopt new technologies to serve customer-first and eCommerce expectations. The logistics landscape has been completely transformed with consumer expectations driving next day and same-day delivery across industries. For the hyper-connected supply chain to come to satisfying these expectations, unifying logistics and advanced technologies will accelerate the journey to improve. Learn more about acceleration of the journey here.

The acceleration of technology is enough to give anyone pause. The opportunity these advancements present are unprecedented but also forces us to really understand what data is there across the supply chain and how we can use it to drive profitability and growth. In the next article, we will discuss the lessons learned from the customer sessions at our Blue Yonder ICON event this year and on June 8^th the 3PL Execution Forum on Delivering eCommerce with Consumer-Centric Era, moderated by Steve Banker of ARC Advisory.

[1] “On the Unique Features and Benefits of On-Demand Distribution Models”, Pazour, Jennifer A. and Unnu, Kaan

[2] “The Next Horizon For Industrial Manufacturing: Adopting Disruptive Digital Technologies in Making and Delivering,” McKinsey Digital (November 15, 2018)

[3] “Focus on Customer Experience Research on Supply Chain Priorities and Investments,” The Council of Supply Chain Management Professionals (2019)

[4] “DHL: Driving Global Standardisation of Operations with Robotics,” by Georgia Wilson, Supply Chain, January 16, 2020

[5] “Connected and Autonomous Supply Chain Ecosystems 2025,” PWC Global

Terence Leung is Senior Director, Solutions Marketing at Blue Yonder. He has a keen interest in digitalization and the value it generates throughout the supply chain. In this role, he leads his organization to drive thought leadership and go-to-market strategy for supply chain execution and logistics solutions. In addition, he works with customers to understand requirements and drive best practices in the digital journey.

Prior to joining Blue Yonder, Terence was the leader in product marketing and value engineering at One Network. Previously, he was in leadership positions in industry management at Savi Technology and solutions and management consulting at i2 and Deloitte Consulting respectively. Terence holds an MBA from the University of Texas, Austin and an Electrical Engineering degree at MIT.

Manhattan Associates CEO Calls for a Sustainable Approach to Ecommerce

Sustainability | By Steve Banker • 05/27/2019

In the late 90’s and early 2000’s there was a supply chain solutions company that was one of the hottest software companies in the world. The CEO at that time used to speak with pride at their user conferences about the good that supply chain software and their customers were doing to make the world a more sustainable place. By intelligently linking supply to demand, for example, companies were making what needed to be made using fewer resources.

Supply chain practitioners realize that supply chain software can help companies attain sustainability goals while providing a good ROI. Transportation management software is a good example. By loading trucks more fully and routing them cleverly, goods are delivered at lower cost and with lower CO2 emissions. Inventory optimization allows inventory to be intelligently located across a network to attain targeted service levels, while reducing the amount of inventory held and the distance it ends up being shipped.

But despite this, there is not quite the same pride in the profession when it comes to sustainability that there used to be. Supply chain practitioners recognize that there is not the same opportunity to fully engage in optimization and consolidation.

The culprit? Ecommerce.

Transportation produces large amounts of greenhouse gases. Ecommerce is inherently less green than traditional bricks and mortar retail supply chains; it contributes to larger transportation emissions than traditional retailing. That is because instead of having pallets of goods delivered in truckload size shipments to stores, small parcels are sent directly to consumers. And often one leg of the journey is by Air. Full truckload shipments are greener than van deliveries, and Air is the least sustainable of all transportation modes. Amazon has done more to grow e-commerce than any company in the world.

Eddie Capel, the CEO of Manhattan Associates, spoke to this at their user convention, Manhattan 2019, last week in Phoenix. Manhattan is a leading provider of warehouse management, omnichannel, and other supply chain solutions. Mr. Capel pointed out in the conference keynote that ecommerce creates just in time shipments that affects us all. It reduces the ability of planning systems to efficiently combine loads.

Interestingly, if any supply chain software company has benefited from ecommerce it is Manhattan Associates. They saw the disruption being caused by Amazon very early. Manhattan worked to develop innovative omnichannel solutions to help bricks and mortar retailers better compete with the ecommerce behemoth.

My colleague Clint Reiser and I had an opportunity to speak to Eddie Mr. Capel privately later in the conference. He brought up sustainability again. He pointed out that younger folks are more committed to sustainability. And yet this digitally native generation are leading consumers of ecommerce. What if a company like Amazon, “gave consumers choices? You can have this delivered in one day, and this is will be the estimated carbon footprint. Or you could have it delivered in three days, with this lower impact. Or you could have it delivered in seven days, and the opportunities for consolidation would create the lowest impacts. I think Millennials will often choose seven days if they were educated on the consequences and given a choice.”

And if a company like Amazon did this, then Manhattan Associates’ retail customers would also have more consolidation opportunities. It would be an industry wide win.

Mr. Capel did not suggest exactly how Amazon could be induced to offer a strategy that prioritizes consumer convenience over the environment. But I think he believes that there are clear technology solutions and if the supply chain community starts discussing this, that would be a good starting point.

Who knows what could happen if these ideas get into the public arena? We do have presidential primaries coming up. If a candidate started to talk sustainable ecommece, that could be meaningful.

Ecommerce Retailer Reaps Big Rewards Following a Supply Chain Planning Implementation

Supply Chain Planning | By Steve Banker • 02/11/2019

I’ve just completed a global market study on supply chain planning. That gave me a chance to talk to all sorts of interesting people. For example, I talked to a member of the Executive Board of an ecommerce retailer in an emerging market. The executive did not want his company named because he did not want his direct competitors to copy what they were doing. But he did agree to talk because he wanted to support Solvoyo, the supplier of the supply chain planning solution his company implemented. As intriguing as the benefits this ecommerce retailer achieved from the planning solution, is the ongoing journey they are on to leverage artificial intelligence to deliver even greater competitive differentiation.

The company itself has a business model much like Amazon’s. They sell goods they buy and stock in their warehouses. They also sell items from third parties stocked at their partners’ warehouses. They sell across many product categories and have millions of stock keeping units (SKUs). Finally, they are the leading ecommerce retailer in their region.

This executive explained to me that emerging markets have their own nuances. Culture influences how things get done. Further, supply chains in emerging markets can be unreliable. Lead times are longer and more variable, and the difference between the delivery times for inventory they stock versus what can be delivered by third party partners can vary greatly.

The goal of working with Solvoyo was to achieve better service through better replenishment. But they did not want to achieve improved service at the expense of carrying too much inventory. “Cash flow in ecommerce is extremely important, the more free cash we generate, the better we operate. It is extremely important for this type of business.”

The Solvoyo platform is integrated with their internal enterprise system, their point of sale data, and has access to the inventory committed by their partners to support their sales.

Solvoyo’s solution provides multi-echelon inventory optimization (MEIO). In other words, it provides prescriptive optimization techniques for adjusting inventory levels at different points in the supply chain. Using MEIO, the company has achieved 95% in stock for the SKUs being managed by the platform. This includes the great majority of the items they stock, as we as some of the high velocity SKUs offered by their partners.

But improvement in their in-stock position has not come at the expense of high inventory levels. They improved their inventory turns by roughly 35%. In cases where Solvoyo is used to manage replenishment and procurement, 95% of the time it has led to improved cash flow based on having the right inventory at the right location at the right time. This has allowed the company to improve cash flow by 35-40%. “The savings run into the tens of millions of dollars.” In contrast, “when we buy outside the system, our free cash flow gets worse.”

When I mentioned that many companies offer MEIO solutions and asked whey they chose to work with Solvoyo, the executive mentioned a few different things. “The solution offers deeper analysis.” Not just traditional calculations based on lead times, but it also identifies lost sales by identifying those sales that were lost because the company did not have the right inventory in stock. They also use the system to look at SKUs offered by third party vendors which it would make financial sense for the retailer to stock. “Items with sales spikes are not worth holding, but if there is a long-term sales trend, we should hold it.” Based on the sales analysis, the platform drives procurement decisions.

This retailer got great results from the Solvoyo supply chain planning solution, but that is not the whole story. About 9 months ago they started a new project with Solvoyo to leverage a wider variety of data sources and test whether these data sets improve demand forecasting and replenishment. Those new sources of data include searches on their web site, searches on third party sites like Google, syndicated data from vendors like Nielsen, and social media data related to the comments made about products they carry. This data will be analyzed using a form of artificial intelligence – neural networks. Then the forecasts come back into the platform and their accuracy measured. This feedback loop supports improved forecasting through machine learning.

Much of the social and search data is analyzed by humans before it is put in the platform. They are not using algorithmic sentiment analysis for this. And they are using the 20/80 rule in determining what gets analyzed. Not all categories will be analyzed initially. And comments that are hard to interpret will be excluded. Finally, the human analysis is initially focused on whether the comments are positive or negative, with no finer nuances being coded.

The goal of this project is to support their procurement teams by doing forecasts on what inventory to hold 6 to 12 months out. These forecasts will also help them do better budgeting on their inventory spend. Further, the company does buy many products from China. The longer forecast horizons also help to plan around the longer lead times associated with global trade. And this helps to improve customer service.

While they have been at it for 9 months, it is still a “little early to talk results.” There were some external economic factors that skewed the demand trend lines. They believe they need another 3 to 6 months of data and active use of the platform to discover how much the solution will improve their category planning.

Even though it is preliminary, I asked if any of the new data sources were particularly promising. The executive answered, “I cannot say that any one source is more important than another but putting them all together adds predictive value.”

I asked the Board member if he had any final thoughts. “It is very simple, I’m doing this and you (my competitor) are not.” They have already used the existing supply chain planning system to improve predictions. “But we still have a lot to learn. We still have lots of changes that we must make.” The AI project is teaching the company how to use new data sets, and how add more data over time. “We believe we will have better optimization with AI than without it.”

Finally, “data is king. We aim to understand the data that underlies customer behavior better than our competition does. We can start small, but over time that can lead to a big competitive difference.”

Robots for eCommerce Fulfillment

Logistics Technologies | By Steve Banker • 07/09/2018

What we refer to as autonomous mobile robots (AMRs) aren’t; they are not fully “autonomous” that is. Autonomy suggests some level of independence by a human, or a robot, in picking which tasks to work on and how they are completed. But the ROI from robots for eCommerce fulfillment is based on the centralized intelligence that choreographs the movement of human associates and the fleet of robots that support them in in a manner that minimizes travel for the associates.

Both Jerome Dubois, the Co-CEO at 6 River Systems, and Bruce Welty, the Chairman at Locus Robotics made a similar point during different presentations referred at eft’s 3PL & Supply Chain Summit in Atlanta in early June: yes, their bots had a variety of sensors that allowed them to navigate through a warehouse and avoid obstacles, but the true ROI of these solutions came from centralized intelligence to support a fleet of bots working together with people to support optimized warehouse processes. Both Locus and 6 River Systems are using artificial intelligence to improve the centralized process optimization logic.

eCommerce Fulfillment — @ *6 River Systems “Chuck” in Action*

For ecommerce bots, last year was the year of pilots. Several suppliers talked to ARC privately about pilots with some of the largest 3PLs in the world, in some cases with the same 3PLs. But the eft show was a coming out party for the cobot (collaborative robot)/AMR suppliers. In addition to Locus and 6 River Systems, the CEOs of inVia Robotics, Fetch Robotics, and NextShift Robotics were speakers. More importantly, customers were willing to publicly speak about the benefits they got from eCommerce robots.

Mike Honious, Chief Operating Officer Americas at Geodis and Erik Caldwell, Chief Operating Officer of XPO Logistics agreed that AMRs more than doubled the productivity of associates that use to work in a pick to cart environment. Geodis is using Locus, XPO works with 6 River Systems.

At a 139,000 square foot warehouse in the Indianapolis area that Geodis was using to serve an apparel retail client with 28,000 stock keeping units, 30 Locus AMRs helped 7 workers achieve greater productivity that they used to achieve with 18 associates. “The productivity gains and implementation were faster than we expected,” Mr. Honious said.

Mr. Dubois presented statistics that showed that in a pick to cart environment, you can expect to pick 90 units per hour. With AMRs, the rate was 200 units per hour (UPH). His customer, Mr. Caldwell, did not disagree with those statistics and in fact said they had increased UPH by almost three times. XPO is using 50 cobots at three different sites, including one site where Disney is the named client.

In effect, AMRs allow what would be a pick to cart methodology – used for slow moving inventory – which involves lots of travel time, to something that more closely resembles zone picking used in warehouses with fast moving inventory, and where associates don’t need to travel nearly as much. Because the Locus bot has room for 20 containers for orders to be picked into, the bots can be interleaved between different workers such that one associate picks some of the items needed to fulfill an order and then the bot moves to a different worker in a different zone who helps complete more of the orders, and the AMR continues to move to different zones served by different associates until all the orders are complete.

The 6 River methodology is somewhat different (see the process explained here), but travel time is further reduced with these AMRs because the bots are designed to move at a slightly faster rate than most people walk. In short, workers walk fewer miles during a shift, but when they are walking they are walking faster. They are enhancing their process capabilities by introducing the interleaving of picks with put-aways.

Productivity is not achieved at the cost of errors. Errors were down at both 3PLs. Nor is the productivity achieved with systems that have a long payback period. Mr. Dubois asserted they have “on average a one-year payback.”

XPO and Geodis agreed on several things:

It is getting to find people willing to work in a warehouse in an environment where there are more open jobs than unemployed workers. Geodis had twenty wage increases last year and has already approved five more this year.
Seasonal spikes, that can raise order volumes by 2 to as much as 20 times over what they are the rest of the year, exacerbate this problem. AMRs help warehouse “scale at peak.” Further, it is easier to train new workers and get them up to speed when they are working with cobots. Mr. Caldwell of XPO said new workers could be trained in 15 minutes on how to work with a AMR.
The systems are flexible. You can add new robots, take them away, or even move them to another warehouse if a contract ends. At XPO, adding a new cobot into the system takes less than two hours.
Associates enjoy working with the AMRs.
Both Geodis and XPO integrated the robotic system with their warehouse management system.
Both Geodis and XPO want more bots at more sites. Both Locus and 6 River Systems are growing quickly.

There were some other interesting points made. Mr. Welty said these do not have to be risky “big bang” implementations. You can add cobots as workers and managers get comfortable with them. At XPO, a gradual approach to adding cobots was used to overcome cultural resistance.

AMRs can create new problems, but the kind of problems you want. At XPO, picking went from being the constraint to the pack stations being the choke point. They had to change the layout of the pack stations and add workers there to keep up with the volume of picks generated by associates working with cobots.

In conclusion, we are now at a point where some of the AMR suppliers have customers willing to talk publicly and validate the benefits of these systems. And the benefits are very real when it comes to unit picking! That is one of the reasons that we are forecasting the global AMR market to grow very quickly.

What’s New in Last Mile Routing?

Omni-channel logistics | By Steve Banker • 02/26/2018

Last Thursday, UPS announced its plans to deploy 50 plug-in electric delivery trucks supplied by the Workhorse Group. What increased UPS’s willingness to invest in these vans is innovative “smart charging” software that has implications for last mile routing. There are other interesting developments in last mile routing as well.

UPS is collaborating with Workhorse to design delivery vehicles with zero tailpipe emissions. UPS will test the vehicles in urban areas across the U.S., including Atlanta, Dallas and Los Angeles. The vehicles will be delivered this year.

last mile routing — Artist Rendition of New UPS Electric Delivery Vans

Ecommerce is causing a boom in last mile deliveries. But as consumers place smaller, spur of the moment orders, and forego shopping expeditions where they buy larger quantities of goods, ecommerce ends up contributing to air pollution. Delivery companies are under pressure from large cities to reduce pollution. The use of electric vans certainly mitigates air pollution and these trucks are also quieter.

Reuters reported on this deal. One paragraph in the story caught my attention. They reported that UPS recently rolled out “smart charging” software at a central London facility that allowed the company to nearly triple its local electric delivery fleet to 170 vans. This smart charging technology allows UPS to improve its last mile routing of these vehicles. “The smart charging technology determines when and how fast to charge vehicles. If vehicles are not scheduled for a full route the next day, the system can opt not to fully charge them and charge other vehicles more. Without the software, UPS would have had to install enough infrastructure to charge all the vehicles at the same time – the equivalent of powering an office building or hospital – at a cost of millions of dollars for electric grid hardware.”

Robust routing plays a critical role in last mile deliveries. Optimizing deliveries involves understanding the constraints and then intelligently grouping orders for delivery. In this case, there needs to be a feedback loop between the routing system and the charging software. The smart charging system needs inputs from the routing solution on planned deliveries, but the routing system also needs to know how fully charged vehicles are – and thus how far they can travel before recharging – as well as the location of the charged vehicles.

As opposed to a Google maps type application that efficiently routes an individual vehicle from an origin to a single destination, routing applications drive extra savings by intelligently dropping orders to a larger group of vehicles, all of which are typically making multiple stops. The intelligent grouping of orders on trucks, and multi-stop scheduling, saves money, reduces pollution, and improves service.

Ecommerce has made dynamic routing critical. Leading last mile routing solutions providers like Descartes Systems Group and Omnitracs have done this for some time. The way this works is that a group of orders comes in and is grouped for efficient delivery. Orders received at night, might be planned for dispatch from a depot by 10 am at the latest. Meanwhile new orders come in from 8 am and 10 am, and these orders are consolidated and optimized for dispatch by noon at the latest. The software recognizes constraints that allow for better routing. Examples of constraints would include things like, “on this road there is a bridge and the truck must be shorter than 12 feet tall,” or “this driver has detailed knowledge of these neighborhoods and orders in that zone should be dispatched to that driver” or “this order requires a truck with an attached lift truck.”

Dynamic optimization allows for the rerouting of a fleet of trucks if traffic congestion pops up in one part of the city, can allow for a dynamically added stop to pick up a returned item that just became visible in the system, and for other kinds of occurrences that could not be planned beforehand. These routes use historical data on traffic speeds by time of day and day of week to plan the routes. Then GPS tracking from complementary visibility solutions like MacroPoint – recently acquired by Descartes – helps to track whether shipments are proceeding on schedule and even provide dynamic estimated times of delivery to customers.

Christian Mähler, a Principal Software Engineer at PTV Group, pointed out that PTV Group offers not just routing software but also traffic management software. There are synergies between these solutions. For example, their traffic management software not only tracks congestion and traffic speeds, but can also forecast where congestion is likely to occur within 15 or 30 or even 45 minutes! For example, if there is an accident, the software can predict which roads will become congested as vehicles move into adjoining neighborhoods. Their routing software can access this information to create better dynamic routing.

Routing will continue to get more detailed. Sharad Oberoi, a Director of IT & Software Engineering at Sanborn, predicts that within five years Google maps will provide not just maps of roads, but will be able to provide detailed maps of the inside of public buildings. Sanborn is a provider of geospatial solutions. Once this occurs, deliveries will be efficiently routed not just to a building, but to the correct cubicle in a crowded room filled with cubicles.

Routing software, and transportation management systems in general, continues to advance. The modeling is becoming more granular – able to handle increasing numbers of constraints and able to access outside data on things like traffic congestion – to improve both the speed and the quality of the planning.

Explosion in eCommerce Leads to New Shipping Solutions

Cloud/Software-as-a-Service | By Steve Banker • 09/19/2016

While robust parcel solutions offer workflow designed to prevent paying too much for a particular shipment, the workflows in the retail multicarrier solutions can be both more extensive and much more interesting.

The Descartes Systems Group acquired a company called Oz DEVELOPMENT that is designed for small and medium sized retailers. Ken Wood, the Executive Vice President of Product Management at Descartes, explained that small and medium sized business may need to “touch multiple ecommerce sites, and order information also has to flow into accounting.” Despite being a smaller shipper, their “volumes are big enough that they need some sort of automation and workflow.” This solution can route the order to a backend accounting system and then to a warehouse or a shipper’s 3PL fulfillment partner. “The workflows for the warehouse include light pick/pack/scan capability using smart phones.” Then the solution offers a degree of compliance. “This is not deep compliance like for our parcel solution, but more for retailers that standardize on one carrier like UPS.”

For large retail shippers, important functionality includes an understanding the total landed costs of different flow paths. Carl Hartmann, the CEO of Temando, says that “undifferentiated free shipping is coming to an end.” The Temando fulfillment optimization engine has order allocation logic that understands that the parcel shipping cost to deliver an order from the closest store to a customer is $10, another store in the same metro area is $8, and regional distribution center is $12. But this is not full distributed order management (DOM) logic. “As opposed to a DOM, we have deeper understanding of delivery costs. However a DOM understands inventory availability and can understand other costs – like the labor costs of picking in a store versus a distribution center. When deployed together these solutions provide new levels of efficiency, and enable new experiences for consumers, which ultimately are very powerful for retailers.”

Mr. Wood of Descartes mentioned that Descartes has also acquired pixi* Software, a German company currently focused on serving the European market. The focus of this solution, like Descartes’ Oz solution, is also small and medium sized businesses. This solution also has some integration and orchestration capabilities, but unlike many parcel fulfillment solutions, it does include some basic channel and inventory management capabilities, for example, understanding that certain pools of inventory are allocated to particular ecommerce sites.

Temando’s solution also includes a customer rules engine. This is the logic that gives potential customers delivery options at checkout. For example, a rule might say that if a customer in San Francisco has an order that includes a $200 product, and they are a VIP customer, then offer that customer free two day delivery. In summary, from Temando’s perspective, a multicarrier solution for larger retailers needs to both understand landed costs by flow path, have a logic engine that allows for offering different services to different classes of customers, and then tracks the delivery through the fulfillment process to ensure the customer is satisfied with every delivery experience.

Frank Poore, the CEO of CommerceHub, described a different type of rules engine, a rules engine for enabling drop shipping. In drop shipping, a retailer does not actually hold the inventory. Instead, when an order comes in over the Internet to the retailer, the CommerceHub platform reaches out to the supplier and requests that they drop ship the product to the retailer’s customer. “This allows our retail customers to radically expand the number of SKUs (stock keeping units) they carry on their site without any inventory risk.” The CommerceHub platform has business rules that help ensure delivery time promises are met while minimizing the cost to ship each customer order. The rules can vary based on the product being shipped, where it ships from, what carrier and service is used, and by the type of value added services (like engraving or giftwrapping) the customer requests. Meanwhile, the platform provides the supplier with branded pack slips and shipping labels that ensure the order looks like it came from the retailer, preserving the retailer’s brand identity.

Kees de Vos, the Chief Product and Marketing Officer at MetaPack, described a customer rules engine that was in many ways similar to Temando’s. But their rules engine also encompasses functionality that supports an economically justifiable returns processes. “In retail, the returns process has been underinvested in. It is often not efficient. Retailers don’t know what is coming back, they don’t know if the product is a fast or slow mover, whether it is a commodity or has a large margin.” They usually don’t even know if it was even worthwhile to have the customer send the product back.

“Returns plays a role in sales conversions. Our research shows that 40-50% of shoppers look at returns policies before purchasing. Many customers are willing to contribute to the cost of returns. But it is important for retailers to understand the break point around returns.” So, for a premium customer who purchased a high priced item, paying for a carrier to pick the product from their home might be justifiable. But for a low value item, you might require the customer to pay for the pick-up or, if they don’t want to pay, be given choice to drop the item off at a local store or third party pick up location. “Third party pick up locations, where items can be consolidated, are often the cheapest in terms of transportation costs.”

The MetaPack returns module is made possible by the label. The label contains stock keeping unit (SKU), order line, and other information than can help the reverse logistics department at the warehouse make the proper decisions. For example, a high priced, time sensitive product (fast moving fashion, for instance) should be prioritized for returns processing over lower priced items.

Mr. de Vos also explained that because delivery is a key differentiator in ecommerce, retailers need to “focus closely on getting the service level right.” This helps explain why retailers tend to use so many more carriers than B2B shippers. So a service oriented retailer in the UK might have a set of rules that say: in London, use Carrier A; in the North of the country, carrier B; if this is a 2 man delivery, use this carrier. Or there can be time based carrier rules: if the cutoff pick up time is 4 pm, use this carrier; but from 4 till 8 this one, and finally from 8 pm until midnight use this one. There can also be carrier options based on same day, next day, 3-5 day, or free deliveries. “Clearly, a retailer needs a rules engine that allows them to develop a complex hierarchy of carrier shipping rules.”

There are other ways in which new solutions offer more extended workflows than traditional parcel solutions. Mr. Wood from Descartes mentioned that click and collect programs are particularly popular in Europe. Descartes has had numerous discussions with retailers on how to best enable this. It is becoming clear that retail solutions will need to have a proof of delivery workflow for consumers that have selected this option; a clerk will scan the customer’s package before handing it to the customer so that the retailer has proof that the transaction was completed. Since click and collect may be at locations not owned by the retailer, such as convenience stores or UPS stores, the extended workflows may need to include multiple types of partners – carriers, third party store clerks, and so forth.

I also talked to Keith McCall, VP and General Manager, Pitney Bowes Enroute Solutions. Enroute also offers a robust rules engine that supports omnichannel flow paths. In addition they offer, and this surprised me, a public cloud architecture that supports inline printing in the warehouse at a label application rate of one package per half second. I would have thought that kind of speed impossible without an on premise solution. Keith talked about the importance of visibility to the order fulfillment process for eCommerce retailers and showed the ARC team some well-designed visibility portals for the store or the warehouse.

But for me the most interesting part of the conversation was how some of their customers were using their solution. He described one well know retail customer that fulfills eCommerce orders from stores. One key problem with store fulfillment is that the inventory accuracy at stores is often far from accurate. This retailer solves the problem by dropping an order to be fulfilled to 3 stores that their system shows, often erroneously, have the inventory to fulfill the order. In this auction format, the first store to verify they have the inventory and can fulfill the order wins the auction, and gets to claim the revenue.

Robust multicarrier solutions, no matter what industry they serve, have an analytics module whose main focus has traditionally been on carrier performance, how carriers are performing in relationship to their service level agreements, and cost. But Mr. de Vos points out that retailers can use the analytics data in more sophisticated ways. For example, to see the density of deliveries in different regions to help them decide where to put new stores or ecommerce warehouses. For international shipments, MetaPack is looking to develop predictive analytics surrounding multi-leg shipments – for example a shipment that starts at a U.S. distribution center and proceeds to an airport, and from the airport in the U.S. to an airport in Asia, and from there through a regional warehouse, and from that warehouse out to the customer. Analytics need to be able to track the shipment across all legs and if anything goes wrong to be able to notify the customer. “But sometimes, if one leg is delayed, it may be possible to make up the time by choosing a premium service level for a subsequent leg.” This is where predictive analytics need to be enhanced to give customer service personnel the tools to make the right selection in a timely manner.

Multicarrier solutions changed very little for many years, but the explosion in ecommerce shipping has led to some very interesting new features and functions to support ecommerce. ARC has recently published a market study covering parcel software solutions: Transportation Execution Marketplaces & Systems. We have also published a supplier selection guide on this topic to help companies make informed decisions when going through the selection process.

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