Amazon Innovation: Grocery Stores. Amazon’s first big venture into brick-and-mortal is revolutionary: a grocery store with no cashiers or checkout lines. In the new store, shoppers will scan their Amazon Go app, and the technology will keep track of what you are picking up and add them to your virtual shopping cart. (Read: Omnichannel Takes on Food Industry & Gains Consumer Support)
Elaine Chao to Lead Department of Transportation. President-elect Trump has chosen Chao, who has had experience in the White House under President George W. Bush, for Secretary of Transportation. Chao said that given the nation’s need to improve infrastructure, it’s important to find ways to expedite the process of making repairs and building new constructions and decreasing regulatory burdens.
Post-Election Hope for Alaska Mines, Toll Supporters and Consumer Confidence. Miners expect the EPA to announce in Q1 that it will let the application process for a copper and gold mine in Alaska to proceed. The EPA has been blocking the mine project for nearly 3 years. (Source) If President-elect Trump taps private investors to build infrastructure projects over the next 10 years is adopted by Congress, new tolling facilities are likely to take off along busy freight corridors, tolling proponents and several transportation groups said in an interview with Transport Topics. (Read: Will Trump Secure Infrastructure Spend?) Since the election, consumer confidence jumped to the highest level since 2004. The final index of sentiment for the year rose to 98.2 from 93.8. (Source)
Will Driver Pay Increase Next Year? Driver pay grew at its lowest levels in 7 years as fleets continue to battle soft demand. On a YOY percentage basis, pay increased on average 0.66% in Q3 for drivers with 3 years’ experience. Transport Topics reports that 2 major truckload carriers have announced raises effective January 1, 2017.
Apps Benefiting Carriers, Dispatchers and Shippers. PLS released Live Track and Carrier Connect, mobile apps, in order to provide its network with real-time visibility, while improving productivity and profitability. Live Track, used by client-shippers, has status notifications, reporting capabilities, search and filter options. Carrier Connect allows drivers to share their location, receive dispatch information and upload photos of scale tickets, PODs and freight. Learn more here.
LTL carriers saw all-time high revenues in 2014, then due to a decrease in fuel prices, revenue dropped in 2015. Balanced supply and demand kept LTL prices from dropping in 2016, and JOC.com reports that LTL carriers are looking forward to 2017 as freight volumes are predicted to be higher. Next year, the LTL sector could see a capacity crunch due to the ELD mandate, a slow economy and pricing models. LTL pricing is expected to increase in 2017 and fuel costs aren’t likely to see change. In order to cut LTL freight shipping costs, shippers need to be exact with freight’s weight and dimensions, package and pallet the freight properly, consider consolidation, and utilize transportation management systems.
LTL rates aren’t straightforward; shippers find that accessorial fees and surcharges increase the total spend. uShip says that about 30% of freight invoices have some type of correction for weight, dimensions, class, or cubic feet. Shippers must be completely accurate in the measurements and weights of the freight pallet being shipped, otherwise they will be charged for the inaccuracy.
When packaging LTL freight, pallets make shipments easier for carriers to move. With regular LTL freight, shippers palletizing their freight need to use a slip sheet, put boxes into a stable position, stack the pallets in columns (not pyramids), strap them for extra safety, and use stretch wrap to avoid shifting. Most shippers are more concerned with freight arriving undamaged at the destination; unsuitable palletizing can lead to 50% of boxes’ compression strength loss. Learn more about the Do’s and Don’ts of Palletizing here.
Optimizing Freight with Consolidation
Freight consolidation supports shippers who want to cut down costs and emissions. Consolidating LTL shipments into full truckloads helps companies decrease transportation costs, drives consistency and reduces inventory. Load consolidation saves moneys by improving truckload utilization and taking advantage of the less expensive truckload rates. According to Inbound Logistics, companies can reduce transportation costs from 20-35% by converting LTL shipments to truckload shipments.
Transportation management software simplifies the LTL shipment process. Technology helps shippers with carrier selection, rates, invoicing, and other details. PLS PRO 2.0, for example, has standout benefits for LTL shippers: automatic density class estimator, data integrity, auto GL coding, accessorial data with calculated fees, and real-time shipment visibility. For shippers, a TMS reduces inbound and outbound freight expenses, reduces administrative costs through automation and highlights available carriers with an estimated rate, transit time, lane and billing information.
(#11 Most Read in 2016) Seasonal Freight Surge and Consumer Forecast -Fuel prices, weather, capacity, and e-commerce are a few factors that determine truckload demand during the holiday season. Before Thanksgiving, reefer volumes increased and as December’s holiday shoppers start buying, more dry van loads were posted. UPS is expected Monday, December 19 to be the busiest shipping day, and for this year to have 14% more shipping volume than last year. (See the NRF predictions here.)
(#10.) How to Use Big Data in Freight Transportation -Transportation metrics matter and can’t be overlooked. The 5 basic metrics that shippers should track to gain visibility are the average time-in-transit, inbound freight costs as percent of purchase, outbound freight costs as percent of purchase, mode selection, and on-time pickup performance. (Tips to apply data in transportation.)
(#9.) LTL Volume Down, Prices Stay Firm -LTL carriers have been able to maintain or increase rates even though volumes are declining. Unlike the truckload sector, LTL carriers are not experiencing over capacity. Most shippers (55%) think LTL capacity is balanced and LTL companies are holding firm on prices despite a sluggish economy. (Read more here.)
(#8.) Shipper Strategy: ELD Mandate -About half of the trucking industry has already installed ELDs, but the half that hasn’t is made up almost entirely of small carriers. If these carriers don’t comply to the mandate, they will likely leave the industry, resulting in 3-5% less capacity. As freight tonnage is predicted to increase, shippers should think about creating a transportation management plan. (What are the broader effects of ELDs?)
(#7.) How Virtual Inventory Works -Virtual inventory is an all-inclusive list of a company’s products that can be sold to a consumer – the products might be in a retail store, stock room or warehouse. Effective virtual inventory optimizes retail fulfillment by locating the product closest to the consumer and choosing the best routing option, determined by time and cost. (What are the benefits and risks?)
(#6.) SCM Best Practices: Resilience -A good SCM strategy invests in resilience. Resilience refers to the time it takes supply chains to predict, avoid, respond and/or recover from disruptions. A resilient supply chain requires the capacity for resistance and the capacity for recovery in order to limit the impact of disruption and to resume to normal after a disruption.
(#5.) SCM Best Practices: Reliability -Supply chain reliability refers to the degree to which a supply chain yields consistent performance. Supply chain reliability is essential in implementing an operative SCM strategy since it enhances productivity and reduces costs. Companies are increasing reliability by turning to TMS software to determine carrier connectivity.
(#4.) Case Study: Project Cargo -PLS’ team of experts was able to move a client’s equipment that weighed more than 252,000 pounds. The trailer used to move the equipment had 72 tires and two additional tractors to pull and push the equipment. (Learn more about project cargo logistics here.)
(#3.) State of Reshoring -Many companies are bringing production back to the US – 54% of US manufacturers with more than $1 billion in revenue are considering reshoring some or all of their manufacturing. Keeping operations in the US lessens common challenges of offshoring like long, costly transportation routes, delivery issues, language barriers and inconsistent product quality. (Read: 5 Well-Known Companies Reshoring)
(#2.) Transportation Outlook: More Challenges Ahead -In 2015, total US logistics costs rose to $1.48 trillion, a 2.6% increase from 2014. Gaps in infrastructure and accelerating trends for speed will add pressure to the transportation system that wasn’t designed for e-commerce’s demand. (Learn more about what to expect here.)
(#1 Most Read in 2016) Shocking Statistics about Cargo Theft -28% of all cargo stolen in 2015 were food and drink items. A 2016 report shows cargo theft is still a problem – food and beverages are still the number one stolen category, and even though theft is down 17% year-over-year, it still had a $3.81 million loss. (Read the here.)
The supply chain is affected by the globalization of business, and those who work with international suppliers don’t have the same competitive advantage they once had. More markets are emerging in the global economy, and traditional supply and demand is changing. Industry Week reports that by 2025, global companies will have procurement managers based in China to source materials and services not only for their operations in that country, but for their entire organization. Brazil, Russia and India are predicted to become sources of supply and demand for global companies. Companies will have to be transparent in supply chain expansion strategies and offer suppliers visibility.
Life Cycles (Shorter, More Complex)
Companies are developing innovative products, faster. Speed-to-market is significant to supply chains, plus consumers are looking for more features and cheaper prices. With more collaboration in the supply chain, suppliers, solution providers and distributors can work together to accelerate a product’s life cycle. Shortening a product life cycle causes challenges to the supply chain; reverse logistics, inventory management, and shipping strategies are all affected. To quickly get products to the end-user, logistics service providers have to understand transportation regulations and market developments to avoid disruptions and additional costs.
The growing use of the Internet of Things, support to robotics in the supply chain, use of autonomous vehicles for shipping, and the rise of cloud technology software are supporting company’s goals of streamlining data, gaining visibility and automating processes in real-time. But, with technology comes risks, especially cyber security vulnerabilities. Cyber-attacks are increasing in supply chains, and since analyzing big data has become such a priority, hackers have targeted vulnerable system’s sensitive information. In 2015, the number of records exposed in data breaches rose to 97%. (Read more here.)
Like other areas in the supply chain, once procurement’s manual processes changed to digital, companies found cost and time savings. Now, businesses should exploit digital processes in the supply chain. Logistics providers have to keep up with the demand and offer seamless software integration, which gives the company better supply chain visibility, operational productivity, reduced costs and less chance of disruption.
Understanding costs is as important as reducing them. With a cost analyses, it is easier to analyze proficiencies, charges, volumes, and loads. Supply chain decisions cannot be made strictly on purchase price or discounts, as multiple processes (inventory, logistics, transportation) drive optimization. It’s important for supply chains to look beyond logistics to cut costs: renegotiate vendor contracts, check for chargebacks, and move to digital processes for less administrative error. (Read more here.)
Increasing regulations in transportation and customer expectations has put pressure on companies to become environmentally responsible. Organizations (around the globe) are looking into integrating sustainable processes and strategies. Going paperless, noting fuel consumption, administrative efficiency all correlated to a company’s ability to be sustainable. Working with a 3PL, the supply chain can assess its sustainability efforts with technology and emissions measurement, reviewing route and mode choices, consolidating shipments and monitoring compliance.
The first week of December 2016 had the highest week of volumes on the spot market in the past 2 years. DAT reports that the increase of available loads is because of e-commerce shopping. Denver and Memphis in particular saw load availability soar because those markets are distribution hubs for e-commerce.
This year, Black Friday and Cyber Monday sales were bigger than ever. SupplyChainBrain reports that even though in-store sales figures were down 5% on Black Friday, online sales hit a new record of $3.34 billion. Then, Cyber Monday topped that number with $3.45 billion in online activity. Fierce Retail says 73% of respondents plan to shop online this holiday season and 1/3 will shop on mobile.
“Shipper volumes definitely have increased during this peak season,” Richard Stocking of Swift Transportation says. “Volumes have increased throughout the fourth quarter through Thanksgiving and remained strong thus far into December.”
Van Van rates have gone up in December for the past 3 years. Plus, the Midwest and Northeast have been hit with snowy, winter weather, leading to tighter capacity and higher rates. Inbound rates are higher in the Northeast’s popular distribution centers in Allentown, PA. Van rates from Columbus to Allentown averaged $2.96 per mile during the week of November 27 – December 3. Out West, the number of loads tripled on the lane from Denver to Los Angeles.
Reefer In November, the national reefer rate was 6 cents higher than October’s average. After Thanksgiving, more loads were posted, but rate trends varied widely.
Consumer expectations are growing. Why? Since companies have tested the same-day delivery option, consumers expect it as the standard. Coldwell Banker says about 53% of US customers are more likely to make an online purchase if they are offered same-day delivery.
According to a 2016 Deloitte survey, millennial shoppers are willing to pay an average of $5.50 per order to get same-day service, compared with $3.80 for all others. Business Insider defines the same-day delivery demographic as a millennial, urban male. 98% of millennials consider same-day delivery to be fast shipping, but the response rate drops to 88% when it comes to two-day delivery.
By 2045, freight volume will increase 45%. This puts a lot of pressure on carriers, drivers, logistics professionals, warehouse management, and technology to move goods to the right place and quickly. A Forbes article said FedEx confirmed most of the company’s nearly $5B in increased capital is going to the ground division, driven by the demand of e-commerce customers.
Amazon created services and offers that consumers didn’t even know they wanted – and now, they’re the expectation. Amazon offers free same-day delivery on some items to Prime members and also provides one-hour delivery for $7.99 on thousands of products in 29 US cities. 1 in 6 Americans, about 50 million, are Amazon Prime members. Amazon does not release its Prime membership numbers, so independent research was done by Cowen & Co., says SupplyChainBrain. Their latest research found that membership had risen by 23% YoY.
Amazon has definitely disrupted the logistics industry, and many 3PLs consider the company a competitor. 20 out of 25 CEOs surveyed by Supply Chain Quarterly think that Amazon has had a significant effect on supply chain management; mostly because of Amazon’s role in high-speed delivery programs. Respondents noted that Amazon’s delivery programs have impacted traditional logistics processes, since their quick fulfillment and delivery process reduce the need of expedited transportation.
According to Business Insider, 4 in 10 US shoppers say they would use same-day delivery if they didn’t have time to go to the store, and 1 in 4 shoppers said they would consider abandoning their online cart if same-day delivery wasn’t an option. PetSmart, Bloomingdales, Deliv, Foot Locker, Instacart, and The Container Store have added their names to the long list of companies now providing same-day delivery to select consumers.
Why Don’t More Companies Add Same-Day Service?
Recent surveys show more companies in all verticals are migrating to the internet and channel boundaries are blurred. Only 9% of North American retailers offer same-day delivery and feel it is working well, while 13% who offer same-day delivery thinks the program needs improved. For online businesses, same-day delivery makes sense and over 50% plan on providing same-day delivery services in the next 3-5 years, according to Bringg.
Logistically, same-day delivery isn’t a current reality for many organizations. But, technology is changing that. With 61% of consumers willing to pay more for same-day delivery, companies can no longer avoid the challenge. But, even with all the customer demand (and satisfaction) with companies offering same-day delivery, almost half (49%) of retailers have no plans to offer same-day delivery soon. Most organizations haven’t set up the supply chain to efficiently meet customer demand – DCs aren’t located in the most optimal locations for at home, same-day delivery promises. Supply chains have traditionally been optimized to feed merchandise into specific brick-and-mortar locations without crossing any channels. So, the first step to getting faster delivery options are to build up warehouse management systems and create an efficient and effective fulfillment and supply chain process.
Supply chains share common goals: increase productivity, reduce costs, mitigate risks. Common goals for reverse logistics are to improve customer satisfaction, cut costs, maximize return on assets. Reversing the supply chain means taking in returns, recalls, damaged goods and overstocked merchandise and recapturing its value or disposing of it. With the popularity of online shopping, the supply chain has become more multifaceted, increasing the importance of an organization’s reverse logistics strategy and inventory management practices.
Of all products sold, an average of 8%-12% are returned, and the cost to return those units is 2-3 times more than bringing them to market.
As Inbound Logistics notes, planning for product distribution failures or product rejection is off-putting; it’s a case where everyone loses – the unsatisfied customer who sends back the product, the supplier who gets parts back, and the manufacturer who wasted resources creating and distributing products that were unneeded or unwanted.
An average consumer goods retailer’s reverse logistics costs are equal to 8.1% of total sales. A manufacturer will spend 9%-15% of total revenue on returns. Improving reverse logistics can help a company increase revenue up to 5% of total sales.
Effectively managing reverse logistics means finding opportunities to make money out of returns. Inbound Logistics suggests companies find monetary opportunities by reestablishing returned merchandise into the selling stream, disposing it more resourcefully, labeling the root cause of the return, and ultimately reducing the number of returns.
Managing returns is as important to consumers as it is to an organization. According to RL Magazine, 82% of those surveyed are likely to complete a sale if the retailer offers a free return shipping label an in-store return policy and 66% of customers look at the return policy before making a purchase. Effectively managing the reverse logistics strategy has a positive impact on the bottom line and inventory management.
Returns and Inventory Management
Inventory management is accountable for planning and controlling the product life cycle – from raw materials to the end consumer. Inventory managers must establish an amount of merchandise that will balance the risk of running out of the product with storage costs.
Safety Stock: Buffer short-term uncertainty of supply and demand
Cycle Stock: Available inventory for normal demand.
Excess Stock: More inventory than what is allowed
Anticipation Stock: Inventory kept to meet seasonal demand or shortfall caused by erratic production
The number of returns directly impacts the amount of inventory. With too many returns, inventory can be built up, even freeze production, if the returned product can go back to market. Recoverable inventory is considered for remanufacturing, and remanufactured products are considered ‘like new’ items, which have the same quality and the same price as new merchandise.
Companies have recognized that their inventories are growing because of the return option, and are looking for inventory reductions that balance the company’s sales growth.
The Wal-Mart Example
Wal-Mart’s inventory comes from more than 70 countries and at any given time, the retailer operates more than 11,000 stores around the world, and manages an average of $32 billion in inventory. Tradegecko reports that Wal-Mart has become the world’s largest retailer with the highest sales per square foot, inventory turnover, and operating profit of any discount retailer. Wal-Mart has taken their supply chain seriously, using best practices like cross docking and vendor managed inventories. These strategies keep transportation costs down, reduce lead time and eliminates inefficiencies.
In 2016, The Wall Street Journal reported that Wal-Mart Stores clamped down on inventory growth and reduced shipping costs while putting more goods on the shelves in front of consumers. Wal-Mart’s overall inventories grew 0.9% in the fourth quarter of 2015 compared to the same period the year before, which was 25% of the rate of total sales growth, and inventory measured against comparable stores for the year before declined 2.9%. Wal-Mart’s efforts to restrain inventory growth have been complicated by the surging e-commerce sales. The company is trying to balance its current use of DCs and separate fulfillment centers. (Source)
Wal-Mart began its Inventory Deload program in 2006 after learning its total inventory levels had been rising at a much higher rate than the company’s sales growth. In 2004, inventory levels at Wal-Mart grew at almost 90% of sales growth and just under 90% in 2005. In 2007, the Wal-Mart Stores division reversed the inventory trend, with inventory growth just 0.7% versus a sales increase of 5.8%. (Source: Supply Chain Digest)
Transportation Management and Inventory
With an established inventory strategy and reverse logistics process, organization’s must also consider their transportation management. Shipment visibility that is cost effective is critical to an organization’s various inventory demands. TMS software reduces logistics costs with its real-time ability to assess transit time, determine the best mode and lane, reduce labor, be notified of risk or disruption, and monitor volumes, trends and performance.
Hazardous materials are substances that the Department of Transportation (DOT) has determined are capable of posing an unreasonable risk to health, safety or property when transported.
There is an assortment of items that can be listed as dangerous: batteries, lithium tanks, magnets, dry ice, bleach and perfume. There are 9 classes of dangerous materials:
Toxic and infectious substances
Hazardous materials regulations are in Subtitle B, Chapter 1 in the Code of Federal Regulations (CFR) Title 49, set by DOT. It lists more than 3,600 items as dangerous goods.
According to a DOT report, about 2.6 billion tons of hazardous materials were shipped in 2012. About 60% moved by truck, 24% by pipeline, 11% by water and 4% by rail.
To safely ship hazardous materials, employees need to understand effective processes and compliance rules. There are penalties for violating applicable regulations. Some of the major responsibilities of hazmat shippers include identifying the hazardous product, its class and division, creating a warning label, and packaging the product properly.
Inbound Logistics reports that more changes to battery shipping is coming, as the US must align with ICAO rules in early 2017. The ICAO will implement new lithium battery markings in 2017, and create new requirements to mark packages containing batteries in equipment, when more than two packages are in the shipment. (Read: Product Recalls Disrupting Your Supply Chain)
Drivers should be trained to carry hazardous materials. Transport Topics reports that a driver should understand the bill of lading when picking up a hazardous shipment, understand the type of hazard and the level of danger associated with the freight.
A product recall is the process of retrieving and replacing defective or unsafe consumer goods. When a company issues a recall, the company or manufacturer absorbs the cost of replacing and fixing those defective or unsafe products. Recalls create tension in the supply chain and test consumer relationships, affect sales, and can negatively affect a brand’s reputation.
Supply chain disruption, such as a product recall, is the fastest growing threat perceived by businesses, according to the annual Horizon Scan report. 49% of those polled identified increasing supply chain complexity as a trend, leaving their organization vulnerable to disruption from conflict or disaster.
No company or product is safe from a recall – they occur all over the world and distress manufacturers, distributors and retailers.
There have been numerous publicized recalls, like the infamous cases of the Ford Pinto and Extra-Strength Tylenol. These recalls are significant to highlight because they opened the eyes of consumers, plus exposed supply chains to potential threats and the importance of process monitoring. Recalls have happened in the automotive, electronics, food, and medical industries. According to the Food Marketing Institute and the Grocery Manufacturers’ Association, the average cost of a recall to a food company is $10M in direct costs, in addition to any brand damage and lost sales.
High Profile Recall: Samsung Galaxy Note 7
Samsung’s smartphone was famously recalled this year because the lithium-ion battery was spontaneously catching fire. The smartphone recall showed a hole in the company’s supply chain strategy; in addition to lacking a product recall management plan, Samsung allocated a majority of its battery orders to a single supplier, according to EPSNews. Initially, Samsung blamed its issue on a bad supplier, but even after removing that supplier, the brand still had serious issues.
“Most branded device vendors allocate their battery orders evenly between two or more suppliers. It is a rarity to have a vendor handling over 60% of its orders to one battery maker,” said Duff Lu, research manager of EnergyTrend. This recall affects not only Samsung, but also lithium battery technology supply chains. Today, most smartphone and notebooks use lithium batteries because they are lighter and thinner than other battery technologies.
“A design flaw should have been caught during the review and testing and this is much harder to do at a global scale with multiple suppliers and factories for the same part,” said Frank Gillet, a vice president and principal analyst at Forrester Research.
A recent poll, however, shows that regardless of the recall, Samsung’s customers are loyal to the brand; 91% of current Samsung users would likely purchase another Samsung smartphone. Some analysts forecast that this recall will cost Samsung nearly $5 billion in revenue this year.
Supply Chain Outlook
The biggest message from past recalls is that there had been inadequate monitoring of the long, complex supply chain process or over reliance on a single supplier. The WSJ reported that experts say problems in the supply chain can be exacerbated when different departments within a corporation, and their suppliers, fail to communicate or coordinate effectively.
When a material, part or product must be removed from the market, the company loses revenue – from the obvious lack of sales and from the additional costs of transportation and tracking. The reverse logistics costs involved in this process can be more than the original cost of shipping the product to its end location.
Professionals are working on developing technologies that will reduce the risk of supply chain failures.
PLS Logistics Services (PLS), a leading provider of technology-enabled transportation management and freight brokerage services, announced today it has released two mobile applications: PLS Live Track and PLS Carrier Connect. Live Track is used by client-shippers and Carrier Connect is used by dispatchers and drivers.
Live Track enhances the shipper experience with shipment status notifications, reporting capabilities, map-based tracking, search and filter options. Live Track enables shippers to view documents and photos captured by drivers using PLS Carrier Connect.
Carrier Connect allows drivers to instantly share their location, receive dispatch information, upload photos of scale tickets, PODs and freight. The app allows drivers to look for available shipments from the PLS network.
“Our new apps give carriers real-time network visibility and will significantly improve the productivity and profitability of our carrier partners. For our shipper partners, our new apps provide location services on all loads and real-time KPIs to enhance supply chain and shipment visibility,” said Greg Burns, CEO and President of PLS Logistics Services. He continues, “We are excited by the accomplishments of the PLS technology and product management teams in driving innovative, intuitive solutions for our shipper and carrier partners.”
The Live Track app is currently available to iPhone and iPad users in the Apple Store. The Carrier Connect app can be downloaded on Android devices in the Google Play Store. You can see a video demo of the Live Track and Carrier Connect apps on the PLS YouTube channel.
About PLS Logistics Services
PLS Logistics Services is a leading provider of logistics management, brokerage and technology services for shippers across all industries. PLS handles millions of loads annually across all major freight modes: flatbed, van, LTL, rail and barge, air and ocean. The PLS carrier network consists of over 61,000 trucking companies along with Class-1 railroads and major barge companies. PLS has been recognized as a top 25 freight brokerage firm. To learn more visit www.plslogistics.com.