logisticsmgmt.

com
The temperature-controlled
supply chain 30
Mobile technology trends 36
Retail supply chain transformations 44
®
September 2017

26th Annual Study of Logistics

and Transportation Trends
®

Page 22

TOP 20 SOFTWARE SUPPLIERS

6 ways Big Data is enhancing the
global supply chain 64S
TOP 25 FREIGHT FORWARDERS
Digitization and e-commerce continue
to reshape marketplace 73S
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management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S

u C-TPAT reauthorization legislation is introduced. Quarterly revenue was up 2.2% to $3.76 billion and was a
A push to reauthorize The Customs Trade Partnership record high for the company, as was net income at $47.6
Against Terrorism (C-TPAT) for the first time in 11 years is million and earnings per share at $0.38, which were up annu-
underway in the form of legislation recently introduced by ally compared to $42.6 million and $0.35 a year ago. Both
U.S. Representative Martha McSally (R-AZ). C-TPAT was XPO’s North American LTL and last-mile units had strong
established under the SAFE Port Act of 2006. This global quarters, with LTL delivering its best operating ratio in more
supply chain security program is comprised of companies than 20 years at 84.6%, with an improvement of 90 basis
voluntarily partnering with U.S. Customs and Border Pro- points. Since XPO acquired the LTL business (from Con-way
tection (CBP) to enhance security throughout their supply in late 2015), it has nearly doubled the operating income from
chain, with CBP working with them to protect the supply $233 million in 2015 to $430 million in the trailing 12 months
chain, identify gaps and implement specific security mea- through June. LTL tonnage per day for the quarter was up
sures and best practices. After vetting applicants, CBP will 7.1%, which is up annually from 4.8%, and shipment volume
then visit their sites to perform validation implementation of is up 3.2%. According to XPO, the last mile segment con-
the security criteria. McSally’s office said that this legisla- tinues to see strong growth, with revenue up 14.8%, due to
tion ensures that the C-TPAT program is updated to meet higher volumes from e-commerce customers.
the dynamic threats facing the global supply chain, with
C-TPAT participants receiving “tangible benefits” for their u Aloha advance. TOTE recently announced its intention
partnership with CBP for a secure supply chain. to establish a new domestic shipping service to Hawaii. The
company is working with Philly Shipyard to construct four
u China e-com benchmark connection. APICS, the new environmentally advanced containerships, custom built
association for supply chain management, and JD.com, for the trade. Last month the carrier began conversations to
China’s largest retailer, signed a strategic memorandum of secure the new deep water Kapalama Container Terminal
understanding to introduce an omni-channel benchmark (KCT) in Honolulu, a critical step in making the new service
system that will advance best practices in the end-to-end a reality. For more than 40 years, TOTE and its operating
supply chain performance of the e-commerce industry. companies have provided dedicated service to Alaska and
Leveraging APICS’ Supply Chain Operations Reference Puerto Rico. As part of its commitment and stewardship
model (SCOR) and JD’s technology platform, the benchmark of the communities it serves, the company said that it’s
system will provide major suppliers of JD with real-time com- invested more than $600 million to convert its ships to run
parisons to their competitors and their respective industries on natural gas. Anthony Chiarello, president and CEO of
at both regional and global levels. In addition, APICS and TOTE, maintains that the liner’s presence on the islands “will
JD will establish a SCORmark omni-channel benchmarking provide market stability and introduce new environmentally
special interest group to develop best practices from their advanced vessels that will greatly benefit the islands.”
cooperation for global e-commerce supply chains. “Supply
chain management has become increasingly complex as u Transplace announces TPG as new equity
consumer demand has shaped omni-channel retail experi- partner. Non asset-based third-party logistics (3PL) ser-
ence expectations,” said Abe Eshkenazi, CEO of APICS. vices provider Transplace has selected TPG Capital (TPG),
“We have a unique opportunity to work with the largest the global private equity platform of alternative asset firm
retailer in China to set standards, identify best practices, TPG, as its new equity partner. TPG and management will
elevate supplier performance and then share the knowledge acquire Transplace from Greenbriar Equity Group, who
with supply chain organizations around the world.” joined with Transplace management to acquire the com-
pany in 2013. According to Frank McGuigan, president and
XPO reports record second quarter results. Freight COO of Transplace, with TPG serving as the company’s
transportation and logistics services provider XPO Logistics new equity partner, there will be increased investment and
reached the halfway point of 2017 in a position of strength. Continued, page 2

LOGISTICSMGMT.COM SEPTEMBER 2017 | LOGISTICS M A N A G E M E N T 1

Get your daily fix of industry news on logisticsmgmt.com

management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S

innovation. “TPG recognizes the tremendous growth and offering, which is part of Oracle Cloud Applications Release
innovation opportunities in the transportation industry, and 13. Oracle said that this new release is comprised of various
partnering with them will allow Transplace to increase its features, including: supplier collaboration; quality manage-
investment in enhancing its technology and services in ment; maintenance; sales and operations planning; demand
order to deliver even greater value to its customers.” management; and supply. According to Oracle, its SCM
Cloud is now comprised of six new applications and hun-
u UPS introduces online returns service for dreds of new capabilities that support data-driven business
e-commerce merchants. UPS introduced a new online models with modern end-to-end supply chain best practices.
offering that enables e-commerce merchants to custom-
ize return shipments according to their policy. Called UPS u Patent protection granted. Resilinc, a California-
Returns Manager, the service lets customers manage return based cloud provider of supply chain resilience and risk
shipments without having to integrate new technology into management intelligence and analytics, has announced
their own IT systems. And for consumers using the tool, that the U.S. Patent and Trademark Office granted their
UPS said that they can print a return shipping label from patent for analyzing supply chain vulnerability metrics
the UPS.com tracking website and e-mail alerts, or print off via interactive maps and dashboards that uses supplier
return labels for free from The UPS Store locations. Given intelligence collected via a networked platform. The pat-
the ongoing proliferation of e-commerce activity, UPS said ent and trademark office recognized Resilinc’s unique
that UPS Returns Manager “will provide merchants with a “publish once, share often” data collection methodology
valuable tool to manage returns in a market in which online where suppliers share part-level mapping once, and
shoppers return hundreds of billions of dollars in merchan- approved customers see the parts they buy without
dise per year, with some estimates putting the cost of online requiring the suppliers to replicate the effort. The patent
returns at around 10% to 15% of the costs of good sold.” also covers interactive charts and graphs and vulner-
ability maps where risk exposure is analyzed and shown.
u Target set to acquire Grand Junction. In an effort The inventors listed on the patent are Resilinc’s two
to improve and expand its delivery capabilities and boost founders, Bindiya Vakil and Sumit Vakil.
investments to augment its supply chain, Target said that
it plans to acquire San Francisco-based Grand Junction, u Digitized procurement leads to twice the ROI.
a provider of software used by retailers, distributors and Typical procurement organizations can substantially nar-
3PLs to manage local deliveries through a network of more row the gap between their cost levels and that of top per-
than 700 carriers. Grand Junction is currently collaborating formers—and top performers can become even better by
with Target on its same-day delivery pilot at the Target store leveraging digital transformation, according to new research
in New York’s Tribeca neighborhood. “Grand Junction’s from The Hackett Group. The report found that world-class
technology and algorithms will help Target deliver to guests procurement organizations now operate at 22% lower labor
faster and more efficiently,” said Arthur Valdez, executive costs than their peers and have 29% fewer staff while dem-
vice president, chief supply chain and logistics officer at onstrating improved effectiveness and better performance
Target. “This acquisition is part of Target’s ongoing efforts across a wide array of key metrics. For a typical company
to strengthen Target’s supply chain to provide greater with $10 billion in revenue, attaining world-class perfor-
speed, reliability and convenience for guests.” mance in procurement can represent as much as $6 million
in potential annual functional cost savings. The Hackett ana-
u Oracle introduces upgrades and new offerings lysts added that world-class procurement organizations also
for SCM Cloud. Taking steps to help shippers keep up with generate more than twice the ROI of typical procurement
changes in their businesses, Oracle recently rolled out expan- organizations, generating more than $10 in savings for every
sions it its Oracle Supply Chain Management (SCM) Cloud $1 of procurement operating cost. •

2 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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 September 2017 logisticsmgmt.com

CONTENTS
VOL. 56, NO. 9
Logistics Management

LM EXCLUSIVE: MASTERS OF LOGISTICS

Transportation @ digital speed

22 While a majority of companies strongly agree that transportation is
a strategically important function, a significant percentage of them
have not organizationally aligned transportation in a manner that supports
their goals. This is problematic for companies currently implementing an
omni-channel supply chain, as speed of order fulfillment and cost to serve
customers are some of the key challenges they face.

SUPPLY CHAIN & LOGISTICS

TECHNOLOGY
36 6 ways mobility is
shaping the supply chain
THE SAVINGS ARE trackREAL
Mobile technologies are changing
how we freight outside of the
In the first four walls, putting “real-time” logis-
year of
the collaborationtics management within the grasp
effort,
TRANSPORTATION GPN realized SAVINGS of many
of savvy shippers. However,
BEST PRACTICES/TRENDS
30 Food Logistics:
$ 100,000
analysts say that we have more work
to do on investment and integration
Diverse partners play into existing operations.
freight Glanbia is utilizing
key roles in domestic SAVINGS a more EFFICIENT
distribution is off mix of modes
34
GLOBAL LOGISTICS
Any way you slice it, the inte-
40 Glanbia adds % freight bills,
% 58
grated U.S. cold chain requires mostly on
optimized service from existing muscle to logistics OUTBOUND LTL
In an award-winning collaboration FREIGHT
ports, 3PLs, cold storage ware-
housing, transportation provid- effort with a 3PL and TL partner, this % 32
global performance nutrition company TL
ers, and high-value vendors.
has drastically reduced claims ratios,
transit times, and costs—all while im- 10%
proving service through an innovative Intermodal
DEPARTMENTS
“embedded” arrangement.
1 Management update
9 Viewpoint
SUPPLY CHAIN
10 Price trends
44 Why retail supply
13 News & analysis
chain transformations fail—
18 Newsroom notes and how to get it right
20 Moore on pricing Retailers committed to transforming
their supply chains need to step back
80 Pacific Rim report
and look at their business model through
a different lens.
CONTINUED

Logistics Management® (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Suite 200, Framingham, MA 01701. Annual
subscription rates for non-qualified subscribers: USA $139, Canada $219, Other International $269. Single copies are available for $20. Send all subscription inquiries to Logistics
Management, PO Box 677, Northbrook, IL 60065-0677. Periodicals postage paid at Framingham, MA and additional mailing offices. POSTMASTER: Send address changes to: Logistics Management, PO
Box 677 Northbrook, IL 60065-0677. Reproduction of this magazine in whole or part without written permission of the publisher is prohibited. All rights reserved. ©2017 Peerless Media, LLC.

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 5

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 CONTENTS
EDITORIAL STAFF WAREHOUSE/DC MANAGEMENT
Michael A. Levans Group Editorial Director
Francis J. Quinn Editorial Advisor
54 What’s at the heart of your system?
While automated equipment at today’s warehouses can be at
Patrick Burnson Executive Editor
the heart of their success, any single piece of automation needs
Sarah Petrie Executive Managing Editor
to be balanced with upstream and downstream processes, rais-
Jeff Berman Group News Editor
ing the importance of software to sync the flow of work.
John Kerr Contributing Editor,
Global Logistics

Bridget McCrea Editor at Large, WAREHOUSE/DC MANAGEMENT

Technology
58 DOM’s impact on customer experience
Roberto Michel Contributing Editor, Distributed order management suppliers and users tout its
Warehousing & DC
ability to strengthen the customer experience through better
John D. Schulz Contributing Editor, ties to store-level systems to improve buy-online/pickup-in-
Transportation
store efforts and to empower store associates.
Chris Lewis Creative Director SPECIAL REPORTS
Wendy DelCampo Art Director
Kelly Jones Print/Online Production SOFTWARE SPECIAL REPORT TOP 25 FREIGHT FORWARDERS
Manager
64S 6 ways Big Data 73S Digitization and
COLUMNISTS
is enhancing the e-commerce continues
Derik Andreoli Oil + Fuel
global supply chain to reshape marketplace
Elizabeth Baatz Price Trends
Kris Timmermans Excellence

ONLINE
Peter Moore Pricing

PEERLESS MEDIA, LLC

Brian Ceraolo President and LOGISTICSMGMT.COM
Group Publisher

Kenneth Moyes President and CEO MASTERS OF LOGISTICS WEBCAST

EH Publishing, Inc.
26th Annual Study of Logistics and Transportation Trends
EDITORIAL OFFICE
(Masters of Logistics)
111 Speen Street, Suite 200
Framingham, MA 01701-2000
Phone: 1-800-375-8015
TRANSPORTATION @ DIGITAL SPEED
Thursday, September 21, 2017, at 2:00 p.m. ET
MAGAZINE SUBSCRIPTIONS
Start, renew or update your magazine According to the findings of our “26th Annual Study of Logistics and Transportation
subscription Trends (Masters of Logistics),” a majority of responding companies “strongly agree”
WEB: logisticsmgmt.com/subscribe that transportation is a strategically important function in meeting service demands of
E-MAIL: logisticsmgmt@omeda.com digital commerce. However, a significant percentage of companies have not aligned
PHONE: 847-559-7581 transportation inside their organization in a manner that supports their goals.
MAIL: Logistics Management
P.O. Box 677 This year’s results prove that the time to commit to a digital transportation strategy
Northbrook, IL 60065-0677 is now—as waiting too long will only result in a competitive disadvantage that will be
ENEWSLETTER SUBSCRIPTIONS difficult to overcome in today’s fast-paced, global economy
Sign up or manage your FREE
Join Group Editorial Director Michael Levans, Mary Collins Holcomb, Ph.D., of the
eNewsletter subscriptions at
logisticsmgmt.com/enewsletters University of Tennessee, and Karl B. Manrodt, Ph.D., of Georgia College, as they reveal
all of the findings of our “26th Annual Study of Logistics and Transportation Trends
REPRINTS
For reprints and licensing please (Masters of Logistics).”
contact Brett Petillo, 877-652-5295 Shippers will better understand: PANELISTS:
ext 118, peerless@wrightsmedia.com
• the critical steps to making the transportation Michael Levans, Group Editorial
management, technology, and organizational Director, Supply Chain Group
structure decisions to improve e-commerce
efficiency; Mary Collins Holcomb, Ph.D.,
• how leading logistics operations are managing
University of Tennessee
omni-channel fulfillment; and Karl B. Manrodt, Ph.D., Georgia
• how spending across modes has shifted over College and State University
the past 12 months due to e-commerce.

CMYK GRAYSCALE B/W logisticsmgmt.com/2017masters

WHITE

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 7

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*Source: 2017 Third-Party Logistics Study, Dr. John Langley et al.

WAREHOUSING • OMNICHANNEL FULFILLMENT • TRANSPORTATION • PACKAGING

 VIEWPOINT

Masters of Logistics:
Transportation @ digital speed
This marks the 26th year that Logistics Management’s (LM) September
issue has featured the findings of the “Annual Study of Logistics and Trans-
portation Trends (Masters of Logistics),” the clearest picture available of
transportation spending and utilization across all the modes—and by far

the most comprehensive summary of how logistics pro- the full report and be able to ask questions directly to the
fessionals are currently managing their operations. research team. And of course, if you’re attending CSC-
LM has once again partnered with Mary Holcomb, MP’s Annual Conference (Sept 24-27), we’ll be delivering
Ph.D., of the University of Tennessee, and Karl Manrodt, the results live on Monday, Sept. 25, at 3:45 p.m. ET.
Ph.D. of Georgia College and State University, in the ongo- What themes emerged form this year’s findings? Well,
ing development of this study that has become a “must read” as we’ve been following over the last few years, the new
for more than a quarter century. I’ve had the pleasure of demands driven by our e-commerce expectations have per-
working with Holcomb and Manrodt on this project for the meated the nooks and crannies of every logistics operation.
past 13 years, and I have to say that their enthusiasm and Understanding this new reality, Holcomb and Manrodt
commitment to this study is nothing less than infectious. explored the relationship between a company’s strategy and
Over those many years they’ve been able to adjust the its structure to see how well we’re incorporating transporta-
questioning to mirror the evolving challenges facing logistics tion to meet the new speed of digital commerce. “While we
and supply chain managers. This relentless attention to found a majority of companies ‘strongly agree’ that trans-
detail has neatly defined current market realities, revealed portation is a strategically important function, a significant
new paths to meet these challenges, and as a result has percentage have not organizationally aligned transportation
helped countless logistics professionals re-engineer their in a manner that supports their goals,” says Holcomb.
supply chain operations to thrive no matter the situation. According to Manrodt, the research team expected to
It’s easy to say that the industry as a whole would be a see transportation better supported in the organizational
less-enlighten one without their insight and commitment structure considering the new service demands—such as
to the evolution of this study; however, it would have more emphasis on working directly with carriers and ser-
never gotten off the ground without the feedback of our vice providers to learn more about various aspects of their
devoted LM readership who has once again turned out mutual businesses. “If this fundamental disconnection
en mass to give us this insight. For the 2017 survey, 406 persists, it will most certainly be a problem for companies
logistics, transportation and supply chain professionals looking to be successful operating an omni-channel supply
participated—a group that accounted for an estimated chain,” he says, “as speed of order fulfillment and cost to
$21 billion in domestic transportation expenditures. serve customers are some of the key challenges companies
And as we have over the past 13 years, we’re offering will face for years to come.”
the results of the study through several platforms. As
always, you can turn to page 22 for the high-level find-
ings, and if you want to go a little deeper into the data,
Holcomb and Manrodt will be joining me in our “Annual
Study of Logistics and Transportation Trends (Masters of
Michael A. Levans, Group Editorial Director
Logistics)” Webcast on September 21st at 2 p.m. ET.
Comments? E-mail me at
During the Webcast, traditionally one of the best mlevans@peerlessmedia.com
attended events of the year, readers will have access to Follow me on Twitter: @MikeLeva

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 9

priceTRENDS
Pricing across the transportation modes

2 145
TRUCKING
1 143 Long-distance truckload prices declined at a 0.5% pace in the latest
0 141
12-month period ending July 2017. LTL rates, up 5%, traveled a differ-
ent road. For the entire U.S. trucking industry, prices are up 0.6%. That’s
-1 139
a reversal from the 1.7% average price cut registered over the same
-2 137
Forecast 12-month period in 2016. Meanwhile, the industry’s processing costs
-3 135
2015 2016 2017 2018 have increased 2.6%. Fuel costs have been registering increases, up 6%,
% change (left scale) Index 2001=100 (right scale) and hourly wage costs have also grown 1.1%. Parsing price/cost data,
we estimate that for every $100 worth of sales, the industry’s pre-tax
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago mark-up now stands at about $29, which is only 50 cents higher than a
General freight - local 0.0 0.3 0.8 year ago. Industry prices are forecast to fall 1.5% in 2017 and increase
TL 0.0 -0.1 1.2 1.1% in 2018.
LTL -0.2 0.6 3.8
Tanker & other specialized freight -0.5 0.7 -0.3

6 170
AIR
3 167 U.S.-owned airliners hauling cargo in the belly of planes on sched-
uled flights are still dealing with problems hiking prices. Over the latest
0 164
12-month period, prices declined at a 3.3% annual pace, which is slightly
-3 161
worse than the 2.3% price-cut pace seen in 2016. Air courier prices,
-6 158
Forecast meanwhile, have been enjoying 6% to 7% price hikes. Unlike last year,
-9 155
2015 2016 2017 2018 however, some underlying operating costs for airliners have been increas-
% change (left scale) Index 2001=100 (right scale) ing. Hourly worker wages are up 3.6% and non-production wages and
salaries are up 2.7%. While U.S. refiners have reported that jet fuel whole-
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
sale prices dropped 3.4% in July 2017 compared to a year ago, our cost
Air freight on scheduled flights -1.2 -2.3 -3.7
model has not yet seen this trickle down to airline operating costs.
Air freight on chartered flights 3.5 1.3 5.1
Domestic air courier -0.7 -0.5 4.3
International air courier -0.7 -0.4 5.5

6 185
WATER
3 181 The rate of deflation in the U.S. water transportation industry may
0 177
be moderating now. In the seven-month period ending July 2017, this
industry’s average transaction prices fell only 0.7% from a year ago. Deep-
-3 173
sea freight rates have been the big booster, with year-to-date average
-6 169
Forecast prices up 9.1%, but inland waterways price have continued to fall down
-9 165
2015 2016 2017 2018 2.9%. By comparison, industry-wide transaction prices declined 6.1% in
% change (left scale) Index 2001=100 (right scale) the seven months ending July 2016. With cost inflation still increasing, we
now estimate that the industry’s gross operating surplus has dropped to
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago $11.27 per $100 of sales. Looking ahead, we forecast average industry
Deep sea freight 0.4 3.3 11.1 prices will be down 0.8% this year and up 1.2% next year.
Coastal & intercoastal freight 0.0 -1.1 -4.0
Great Lakes - St. Lawrence Seaway -1.1 0.1 0.0
Inland water freight -0.9 -2.2 -5.0

4 175 RAIL
2 173 Price trends are now definitely favoring railroads and creating chal-
0 171 lenges for shippers. In the latest seven-month period compared to the
-2 169 same period a year ago, intermodal rail prices have increased 4.9%. That
-4 167 happened in spite of a 0.2% monthly price cut in June and a 0.7% price
Forecast drop in July. Carload tags, meanwhile, also increased 3.4% over the latest
-6 165
2015 2016 2017 2018 January-to-July period. That’s quite a turnaround from 2016 when intermo-
% change (left scale) Index 2001=100 (right scale) dal and carload transaction prices, respectively, were falling at a 5.6% and
a 3.5% pace. Looking at the industry’s expenses, our cost model reveals
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
few changes from a year ago. Rail industry prices are now expected to
Rail freight 0.0 1.3 3.2
Intermodal -0.7 -0.4 2.1
increase 3.1% in 2016 and 0.8% next year.
Carload 0.2 1.7 3.6

10 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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NEWS analysis
Also:
• New report says owner-operators ill-prepared for December ELD mandate, Page 14
• IANA reports decent Q2 annual intermodal growth, Page 16
• High hopes remain intact for 2017 U.S. import volumes, says “Port Tracker.” Page 16

Peak season planning is top

of mind for UPS and FedEx
The duopoly is busy adjusting pricing and network design to meet expected volume gains.

By Jeff Berman, Group News Editor

ON ITS RECENT SECOND quar- the additional cost that UPS incurs with 2017 fourth quarter earnings call. “We
ter earnings call, freight transportation volume increases and the temporary continue to work directly with a rela-
and logistics bellwether UPS touched capacity enhancements needed to meet tively small number of large customers
on many topics related to its differ- service levels. that drive the majority of the surge
ent business lines, including pricing, “And while these rate increases, and demand to ensure that we have
and shipping patterns, and how those even for a short time, are rarely wel- appropriate pricing related to volume
elements make an impact on various come, our customers really understand expectations and capacity needs.”
macroeconomic trends of its business. and appreciate the value of our network, When assessing peak season from
Second quarter earnings calls—not what we do to provide the service and a planning and preparation perspec-
just for UPS, but many other companies the capacity for them at peak and year tive, there are several considerations,
in the freight transportation and logistics around as well as the cost of doubling of according to Jerry Hempstead, presi-
space—tend to take a look at the defini- the network,” said Gershenhorn. dent of parcel consultancy Hempstead
tive, or what has happened so far through As for UPS’s biggest competitor, Consulting.
the mid-point of the year. And when it FedEx, preparation is well underway for “First and foremost is the interaction
comes to the future, especially in UPS’s the 2017 peak holiday shipping season. between the carriers and the handful of
case, that had to do with assessing “peak “The expectation is for another shippers that represent the majority of
season” prospects. record peak season, with multiple days shipment surge,” Hempstead explained.
One of the things made very clear that’ll set records for package pickup “The big customers are very defined now
by UPS leadership is that the company and delivery,” said Raj Subramaniam, and are key in the dialogue in terms of
needs to make sure it’s being properly executive vice president of global strat- shippers projecting anticipated volumes,
compensated for its services over the egy, marketing and communications, with the carriers subsequently planning
peak season, given that it’s typically the on the company’s recent fiscal year for equipment and staffing levels.”
most hectic time of the year.
“Last month, we announced peak
season surcharges, and we’re address-
ing the impact with customers as we
develop peak shipping forecasts for later
this year,” UPS CEO David Abney said
on the recent earnings call. “These sur-
charges are necessary to ensure UPS
continues to provide customers with
the best-in-class value and highly reli-
able service they’ve come to expect.”
Alan Gershenhorn, chief commer-
cial officer at UPS, added that the sur-
charge is designed to compensate for

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 13

NEWS analysis

As an example, he said UPS will add tional costs in different ways. costs. This will mean higher prices for
more than 100,000 seasonal employees, According to Hempstead, the FedEx businesses procuring trucking services.”
while FedEx will bring on more than approach is more “surgical” and aimed at The FMCSA is moving toward the
50,000 of their own. The recruiting pro- the few shippers that present the great- Dec. 18 implementation date in the face
cess will be kicking off right after Labor est challenge to serve, while UPS has of two pieces of legislation now before
Day in order to find and vet employees. decided to just impose a surcharge based Congress. One would delay implemen-
The next step, said Hempstead, is on service selected, date shipped and the tation two years, while the other would
focusing on network throughput capacity. residential attribute. order the Department of Transportation
“Both carriers have invested an extraordi- “The UPS approach has the poten- (DOT) to analyze whether a full or tar-
nary amount of capital in order to insure tial of affecting non-seasonal residen- geted delay in ELD implementation and
that there’s enough elasticity in the system tial shippers like Express Scripts and enforcement would be appropriate.
to prevent package bottlenecks and conse- CVS and other prescription benefit It’s certainly possible that Transporta-
quent backups,” he noted. “The network management firms, as well as firms tion Secretary Elaine Chao could order
is ready, and you will not hear the post like Dell that ship laptops year round a delay. Recently, the DOT squashed
holiday ‘kevtching’ from the shippers about to residences,” said Hempstead. “Like plans to require sleep apnea screening for
service as we heard a few years back.” everything in the world of parcel, acces- truck drivers and train engineers. Those
From a peak pricing perspective, sorial prices and rates are negotiable. rules were promulgated under the Obama
Hempstead said that at this point UPS Not everyone is going to be paying rack administration. The Trump administra-
and FedEx are addressing the addi- rates this holiday season.” • tion has been cutting or eliminating many
of those proposals when and where it can.
The ELD mandate was specifically
REGULATIONS exempt from an executive order for fed-
eral agencies to freeze new regulations.
New report says owner-operators ill-prepared In June, the Supreme Court declined to
for December ELD mandate hear OOIDA’s petition to strike down the
mandate on privacy grounds.
WITH THE DEC. 18 DEADLINE for On July 18, a new bill was introduced
mandatory electronic logging devices in the House of Representatives that would
(ELDs) fast approaching, there’s concern extend the deadline for compliance to
that a majority of the 3.5 million affected 2019. However, the bill has not yet made
trucks have yet to procure or install the it out of committee and is considered an
required devices. unlikely path to success for opponents of
While many large truckload (TL) and the mandate, especially before the existing
less-than-truckload (LTL) fleets have been deadline in December. The bill to automati-
using these devices for years, shippers cally delay the implementation two years
should be concerned that smaller fleets that was introduced by Rep. Brian Babin
and owner-operators are behind the curve bring owner-operators back into the fray. (R-Texas) has 38 co-sponsors.
on this. In fact, a new report finds that this In the short term, IBISWorld expects Another impediment to full imple-
delay in compliance is bound to cause a that shipping prices will rise moderately, mentation: IBIS World estimates that
shake-up, and a possible capacity crunch, but much of this increase is not expected 70% of the commercial motor vehicles
for the industry in the coming months. to occur until after peak shipping season that fall under the ELD rule are not yet
According to a new report by IBIS- (October through December). “In the equipped with ELDs.
World, a Los Angeles-based global long-term though, shipping prices will The FMCSA insists that ELDs will
industry research firm, the mandate revert to being primarily dictated by fuel save trucking companies a collective
is expected to have a “serious, though costs,” said Ashley Cruz, procurement $1.6 billion per year by limiting paper-
not devastating effect” on long-distance research analyst with IBISWorld. work costs and enhancing fuel efficien-
trucking and shippers. However, the ELD mandate will help cy. However, most carriers and indepen-
Although many independent operators reduce overhead and depreciation costs dent operators claim that the mandate
have threatened to strike or quit if the rule for carriers, added Cruz, tempering future will increase costs. IBISWorld says ELD
goes into effect, IBISWorld says that it price growth. “The Federal Motor Carrier provider Omnitracs estimates that new
doesn’t expect such serious action to pan Safety Administration [FMCSA] insists devices will cost carriers between $199
out, at least on a large scale. Large carriers that ELDs will save trucking companies a and $2,200 per truck, plus a monthly
rely on subcontracted sole proprietors to collective $1.6 billion per year by limiting service fee of $20 to $60 per truck. For a
help move freight, so IBISWorld predicts paperwork costs and enhancing fuel effi- carrier with a fleet of 10,000 trucks, the
that if drivers quit and the driver shortage ciency,” she said. “However, most carriers service fee alone amounts to between
grows, trucking companies will start pay- and independent operators claim that the $2.4 million and $7.2 million annually. •
ing more for subcontractors—which will mandate will increase their compliance —John D. Schulz, contributing editor
14 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM
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NEWS analysis

INTERMODAL
with import volumes,” she said. “That
IANA reports decent Q2 annual was one of the discrepancies of previ-
ous months. The telling sign of forward
intermodal growth momentum will be what occurs over the
next several months, the typical peak
INTERMODAL VOLUME in the second season for intermodal volumes.”
quarter turned in a very strong perfor- On the domestic side, Casey explained
mance, according to the most recent edi- that some positive economic indicators,
tion of the “Intermodal Market Trends and including low unemployment and mildly
Statistics” report issued by the Intermodal increasing consumer spending, serve as
Association of North America (IANA). definite positive signs for increasing gains
Intermodal volume headed up for the in domestic intermodal volumes.
third straight quarter, which was immedi- On a year-to-date basis, intermodal
ately preceded by annual declines during marketing companies (IMC) total loads
the second and third quarters of 2016. were essentially flat at 1,775,977 (946,687
Total second quarter volume movements for the quarter), with intermodal loads up
were up 4.5% annually, which IANA said with international down 9.3% during the 4.6% and highway loads down 3.9%. On a
marked its strongest growth rate in almost second quarter of 2016. In fact, the second sequential basis, total second quarter IMC
three years and far outpacing the first quarter of 2017 is 4.2% below the second revenue saw an 11.9% annual gain, with
quarter’s 1% annual growth rate. quarter of 2015. IANA said that this data intermodal revenue up 4.7% and highway
International (ISO) containers led the reflects the fact that international volumes revenue up 24.8%. Average revenue per
individual intermodal categories tracked are still not keeping pace with container intermodal load was down 1.3% at $2,570,
by IANA, with a 5.6% annual increase for import growth, adding that internation- and average revenue per highway load rose
its third consecutive annual increase fol- al data in the second quarter was largely 2.2% at $1,470.
lowing two quarters of declines. Domestic dependent on Canada, whose total second While IMC highway loads were down
containers headed up 3.2%, while trailers quarter loadings were up 13.2%. annually on a year-to-date basis, they
were up 3.9%, well ahead of the first quar- Joni Casey, president and CEO of were up 22% compared to the first quar-
ter’s 0.3% gain. IANA, is optimistic that international ter. IANA’s Casey attributed this to over-
While international was “the big driver growth will remain intact going forward. the-road capacity conditions and com-
of growth,” according to the report, it was “We certainly hope that international petitive pricing.
also up against a weak annual comparison, shipments continue to track more closely ––Jeff Berman, group news editor

OCEAN CARGO

High hopes remain intact for 2017 U.S.

import volumes, says “Port Tracker”
THE MOST RECENT EDITION of the which data is available, ports covered in
“Port Tracker” report, issued by the Nation- the report handled 1.69 million twenty-
al Retail Federation (NRF) and maritime foot equivalent units (TEU), which is total retail sales seeing annual increases
consultancy Hackett Associate, is calling down 2% compared to May. The report each month going back to November
for U.S.-bound retail container volumes to pegged July at 1.72 million TEU, which 2009. In the meantime, retail sales, as
hit an all-time high in August. would mark a 5.6% annual gain. calculated by NRF—minus autos, gaso-
“Retailers are selling more and that And should the projections for August line stations, and restaurants—have seen
means they need to import more,” said come to fruition, it would be up 2.1% to annual gains for all but three months
Jonathan Gold, vice president for supply 1.75 million TEU for its highest monthly going back to the start of 2010. NRF
chain and customs policy at NRF. “With volume since NRF first started track- expects 2017 retail sales to be up between
sales showing year-over-year increases ing imports in 2000—it would also top 3.7% to 4.2% compared to 2016.
almost every month for a long time now, March 2015’s 1.73 million. Port Tracker “Real GDP increased at an annual rate
retail supply chains are working hard expects total 2017 volumes to be up 4.9% of 2.6% in the second quarter this year,
to keep up. These latest numbers are annually at 19.7 million TEU, setting a according to the Commerce Department,
a good sign of what retailers expect in new annual record in the process. up from 1.2% in the first quarter,” wrote
terms of consumer demand over the next The report also pointed out that the Hackett Associates founder Ben Hackett
few months.” gains in import numbers are running in in the report.
For June, the most recent month for tandem with gains in increased sales, with ––Jeff Berman, group news editor
16 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM
100% of supply chain
execs think insurance is
a good risk mitigation tool.
Yet most think it’s not their job to buy it.
Risk from weather, theft and other unexpected disruptions is a fact of life in your supply chain.
Not planning for it is an even bigger risk. That’s why it’s surprising that in a survey of supply
chain executives, 100% said insurance was a very effective risk mitigation tool. But most
thought purchasing it wasn’t their job. At UPS Capital, mitigating supply chain risk is our job.
We offer insurance solutions for freight and small parcels, regardless of mode or carrier. If you’re
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through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies. UPS Capital Insurance Agency, Inc. and its licensed affiliates are
wholly owned subsidiaries of UPS Capital Corporation. Insurance coverage is not available in all jurisdictions. ©2017 United Parcel Service of America, Inc. UPS, UPS Capital, the UPS brandmark
and the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.
Newsroom Notes
Jeff Berman is group news editor for
the Supply Chain Group publications.
To contact Jeff with a news tip or
with Jeff Berman idea, please send an e-mail to
jberman@peerlessmedia.com.

ATA data points to continued

trucking growth
When it comes to data-driven facts in the freight how freight volumes are projected to grow 2.8% in
transportation sector, it’s very difficult to see trucking 2017, with 3.4% annual growth through 2023, fol-
as anything but a dominant mode. lowed by a 2.3% annual rate in subsequent years.
All you need to do is run your eyes over the Ameri- What’s more, the report is calling for 15.18 billion
can Trucking Associations’ (ATA) recently released tons of freight to be moved by all modes of freight
“American Trucking Trends 2017” report, the organiza- transportation in 2017, with the expectation that
tion’s annual compendium about the trucking industry. it will head up to 20.73 billion tons, an increase of
“The information in ‘Trends’ highlights exactly what I 36.6% in 2028. The 2.8% growth will be paced “by
tell elected officials, regulators and key decision-makers solid growth across all modes resulting from general
every day: trucking is literally the driving force behind economic growth as well as improved conditions in
our great economy,” said Chris Spear, president and the manufacturing sector,” the report stated.
CEO of the ATA. “Safe, reliable and efficient motor Some other key data points in this report note how
carriers enable businesses throughout the supply chain trucking’s share of freight tonnage will decline from
to maintain lean inventories, thereby saving the econo- 70.6% in 2016 to 67.9% in 2023 to 67.1% in 2028.
my billions of dollars each year.” Meanwhile, its share of total revenue in absolute
Indeed, this compendium outlines the sheer mag- terms will fall from 79.8% in 2016 to 77.7% in 2028
nitude of the trucking sector, starting with trucking while still increasing substantially more than other
industry revenues for 2016, which ATA said came in modes of freight transportation.
at $676.2 billion. This equates to 79.8%, or basically The report also observed that truckload volume will
four-fifths of total U.S. freight spend. But lofty as the increase 2.7% per year from 2017-2023 and then by
2016 tally was, it pales compared to preceding years. 2% per year through 2028. On the shorter hauls, LTL
Keep in mind that 2015 trucking revenue rang in at volume will increase 3.3% per year from 2017-2023 and
$726.4 billion while 2014 hit $700.4 billion. then by 2.9% per year through 2028, with tonnage grow-
Other key metrics in this year’s edition include: ing from 147.6 million in 2017 to 179.1 million in 2023.
• trucks moved 10.42 billion tons of freight—70.6% This report makes it clear that over the forecast
of all domestic freight tonnage; period, capacity shortfalls will develop, with some
• the nation’s commercial trucks paid $41.3 billion selected tightness in freight handling capacity starting
in state and federal highway user fees and taxes. to emerge—suggesting that capacity expansion will be
The average five-axle tractor-trailer pays more than required if the modes are going to be able to handle
$5,600 in taxes annually; anticipated growth.
• there were 33.8 million trucks registered for business Bob Costello, chief economist with the ATA, said
purposes, including 3.68 million Class 8 trucks; that this report takes a bottom up approach, first with
• those trucks burned 38.8 billion gallons of diesel a general economic forecast that is then fed through a
fuel and 15.5 billion gallons of gasoline and traveled transportation model.
450.4 billion miles; “It’s not just looking at the modes and saying ‘this is
• approximately 7.4 million Americans are employed by how much we think the modes will grow,’ especially
in trucking-related jobs, including 3.5 million as when it comes to a modal shift,” said Costello. “There
truck drivers; and is no assumption that one mode will grow over another
• trucking is an industry made up of small businesses: mode due to some specific factor like tightening truck or
91% of motor carriers operate six or fewer trucks rail capacity. It’s assumed that all the modes will haul all
and 97.3% operate less than 20. the freight they are asked to….that is a big assumption,
This year’s edition of “Trucking Trends” was issued but it’s a proper one as it is based on economic growth.”
on the heels of the ATA’s annual “Freight Transporta- And with that sentiment comes the ongoing, and
tion Forecast,” which was comprised of data from the ostensibly always correct thesis that economic growth
ATA and IHS Global Insight. drives freight transportation volumes. Given the slow
Like the “Trends” report, numbers and figures pace of the lengthy economic recovery, that thesis
issued in this publication painted a largely positive tends to be overlooked at times—even though it
picture for freight transportation overall, including remains as true as ever. •

18 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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Moore on Pricing
Peter Moore is adjunct professor
of Supply Chain at Georgia College
EMBA Program, Program Faculty at
the Center for Executive Education
at the University of Tennessee, and
adjunct professor at the University of
South Carolina Beaufort. Peter writes
from his home on Hilton Head Island,
S.C., and can be reached
at peter.moore@gcsu.edu.

Cold chain pharma logistics

is heating up
Most of us have seen the ads, while millions are with international efforts in safe pharma logistics. The
ordering fresh food delivered as ready-to-prepare WHO has issued good distribution practices (GDP)
ingredients to their homes—products that require for pharmaceutical products standards, and I would
control of exposure to extreme temperatures and consider becoming a temperature assurance packag-
extended last-mile transit times. ing (TAP) professional through courses offered by
This consumer-focused “cold chain”—temperature industry professionals.
controlled supply chain—is only a recent example of a Mastery of the subject means one can understand
decades-long push to perfect a global system of item- the fundamentals of temperature assurance packaging
level tracking in supply chain management. While the and be able to evaluate different solutions that best
food industry has been dealing with this issue for hun- meet the needs of their company; guide the imple-
dreds of years, the pharmaceutical (pharma) industry mentation of temperature assurance packaging solu-
is, by comparison, just getting warmed up. tions within your organization; and grasp the key pro-
Two major factors are driving the change in the cesses, protocols and techniques involved in designing
pharma supply chain. First is the critical need to temperature-controlled packaging.
eliminate counterfeit drugs. The
World Health Organization (WHO)
“When you boil it all down, digital communication and
”
is estimating that 10% of the drugs
that reach consumers are fake—that data collection are the true enablers for cold chain.
is to say “useless” or even contain-
ing harmful substitutes. To solve this challenge, the Under “collaborate,” shippers need to be become
industry is adopting technology to maintain a “pedi- even more transparent with their partners and work
gree,” or a chain of ownership from manufacturing jointly to model and build end-to-end supply chains
through retail distribution. with tracking. In fact, I recently had the honor of
The second factor is the increasing variety of drugs leading a joint industry team of shippers, third-party
that require temperature control while in transit. “The logistics providers and carriers in testing tracking
storage and distribution of controlled room tempera- capabilities using RFID hardware combined with
ture [CRT] life science products are a costly and com- tracking software shared by the participants.
plex process, and requires attention at every level from This was one of several labs developed to suc-
packaging to logistics and monitoring to data,” Lisa cessfully demonstrate pedigree logistics feasibility to
Forian, senior director of product quality management the U.S. Food and Drug Administration. The parties
at Johnson & Johnson recently wrote. “As we enter an openly shared internal processes and technologies in
age of biologically based medicines, the need to moni- order to achieve remarkable visibility to possession
tor and control temperature sensitivity is increasing.” and handling of the product.
To summarize Forian’s comments, reaching “Pilot” is the step where the parties actually move
patients in remote areas, perhaps by drone, with a pre- products through the supply chain, monitoring each
scription that is 2 degrees to 8 degrees centigrade is a step and critically evaluating their own and their
challenge worthy of our best supply chain engineers. partners’ performance. When you boil it all down,
Indeed, the temperature challenge is more diffi- digital communication and data collection are the
cult for pharma shippers, and requires both a moni- true enablers for cold chain.
toring tool and a symphony of coordinated actions While technologies are becoming available, the
all along the supply chain. The solution for shippers processes and people skills needed are still in develop-
and service providers in both areas is LCP—learn, ment. Shippers and carriers in the cold chain stream
collaborate and pilot. need to step up and learn, collaborate and pilot for
Under “learn,” I recommend becoming familiar safe, efficient service to customers. •

20 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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 EXCLUSIVE

26th Annual Study of Logistics

and Transportation Trends

@ Digital
Speed
While a majority
of companies
strongly agree
T oday’s marketplace rewards those
who dare to challenge convention.
Firms like Amazon are departing from tra-
that transportation
ditional business practices, using true sup-
is a strategically
important function, a ply chain management thinking to blur the
significant percentage boundary between today and tomorrow. In
of them have not the meantime, we find others standing by the
organizationally metaphorical shore, not daring to depart to
aligned transportation worlds unchartered. In failing to conquer the
in a manner that sea, they fail to see a brighter future.
supports their goals.
Fortunately, not all is lost. The findings
from the “26th Annual Study of Logistics and
Transportation Trends (Masters of Logistics)”
suggest that more companies are realizing that
new competitors and new business models are
shifting customer requirements.

BY MARY C. HOLCOMB, PH.D., PROFESSOR, UNIVERSITY

OF TENNESSEE; KARL B. MANRODT, PH.D., PROFESSOR,
GEORGIA COLLEGE AND STATE UNIVERSITY

Phil Foster

22 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017
MASTERS OF LOGISTICS WEBCAST
Full results of the “26th Annual Study of Logistics and Transportation Trends”
September 21, 2:00 p.m. ET • logisticsmgmt.com/2017masters
 EXCLUSIVE: Maters of Logistics

In fact, results from the 2017 study Private fleet and TL gain that transportation is strategically impor-
show that roughly 75% of respondents in transportation spend tant to them. However, there is not this
are using the mix strategy (be all things to (% of transportation budget) same level of strong agreement for ele-
all people) as the predominant approach Private fleet
12.5% ments that would provide the supporting
16.7%
for their companies compared to the 51% organizational structure, such as working
17.8%
who we reported utilizing a mix strategy in TL together with transportation service pro-
19.9%
our 2016 results. However, unlike 2016 8.3% viders to be successful or spending time
Dedicated
where many of these same companies 7.1% with those providers to learn more about
focused on reducing cost as a primary LTL 15.0% various aspects of their business.
14.9%
objective, respondents this year were In comparison, customer service
almost equally focused on increasing cus- focused companies are better aligned to
3.1%
tomer service or reducing costs—31.3% Intermodal support that objective. Firms using a cost
4.4%
and 30.9%, respectively. 3.3% leadership strategy tend to view transporta-
Rail
4.2%
In this year’s study, we examined the tion as strategically important, yet in many
9.1%
relationship between a company’s strategy Small package
4.7%
cases this is not backed up with action.
and its structure. Stated differently, if the Surface parcel 11.5%
That is, the organizational alignment to
(FedEx Ground,
strategic direction and the organization’s UPS)
10.3% support this strategic view is lacking.
primary objectives are aligned then it fol- Air freight
5.8% Two inferences can possibly be made.
3.7%
lows that the company will organize itself First, a successful cost strategy requires
in a way that enables the achievement of 2016 a deep understanding of the tradeoffs
Domestic ocean 0.06% 2017
those goals. The results indicate that, for (barge) 0.7% between cost and service. Second, as
a number of companies, there is a statisti- International 10.5% service—and particularly speed of deliv-
cally significant gap between their strate- ocean 6.0% ery—becomes more important in a digital
gic focus and organizational structure. 3.0% economy, companies along with their
Other
5.8%
For example, companies that reported transportation service providers must be
Source: 26th Annual Study of Logistics and
a cost leadership focus strongly agreed Transportation Trends (Masters of Logistics) able to quantify the cost/value of increas-
ing service levels.
Direct to consumer freight accounts “Understanding transportation pricing should rely heavily on
for an increasing amount of outbound data science,” says Tommy Barnes, president of project44, a spon-
transportation spend
sor of the survey. “Currently, there are a lot of decisions being
(% of outbound transportation spend)
made without a firm grasp and understanding of how they will
21.6%
Our DCs to customers’ DCs affect transportation costs—both in the short-term and long-term.”
10.8%
Our DC to internal customer 7.4% In most cases, Barnes contends that transportation provid-
(RDC to RDC or RDC to store) 4.4% ers do not have the right modern technology systems in place to
21.0% determine the true cost of delivering services to their customers.
Our plant direct to consumer
21.7%
“Without that, they can’t accurately convey the value associated
14.7%
Our DC to wholesaler/distributor with increasing service levels or capabilities, leaving their custom-
17.4%
9.9% ers to make decisions on a commodity price basis only,” he adds.
Our DC direct to consumer
18.5%
Why does this matter? Of the study participants that rep-
6.8%
Our supplier/vendor direct to consumer resented the retail sector, some 54.5% reported that they’re
7.0%

9.1%
currently working on implementing an omni-channel supply
Plant direct to customer's store
9.1% chain structure. While this industry sector is on the front
DC direct to customer's store 4.2%
2016 lines on this initiative, they are by no means the only affected
5.4%
2017 group, as the impact of an omni-channel supply chain is being
2.1%
Supplier/vendor direct to customer's store felt by multiple upstream supply chain partners.
5.7%

3.2%
The study results show that the top five challenges being
Other
faced by companies include (in rank order): 1) supply chain
Source: 26th Annual Study of Logistics and Transportation Trends
(Masters of Logistics) analytics to gain necessary insights; 2) lead time to customers

24 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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 EXCLUSIVE: Maters of Logistics
26th Annual Study of Logistics and
Transportation Trends (Masters of Logistics):
Mix strategy takes the lead By the numbers
Cost
leadership
15.4%
3.1%
3.3%
F or the the 2017 survey, 406 domestic and global logistics,
transportation, and supply chain professionals participated,
offering insights on trends and issues relevant to today’s busy
26.0% managers. Participants accounted for an estimated $21 billion in
Customer
service
15.0% 2016 domestic transportation expenditures.
15.7% 2017 Large companies with annual revenue of more than $3 bil-
Product/ 7.9% 2017 adjusted lion represented 15.6% of the study participants. Medium sized
market 4.7%
innovation 4.9% firms, with between $500 million and $3 billion in annual rev-
enue were 18.2% of respondents. The majority of respondents
Mix: be 50.7%
all things to 73.0% (66.3%) were smaller firms with reported annual revenue less
all people 76.1% than $500 million.
Source: 26th Annual Study of Logistics and Transportation Trends Respondent companies represent a broad and diverse set
(Masters of Logistics) of seventeen industry sectors ranging from pharmaceuticals to
food. Since the beginning of the study, the core group of par-
(speed of order fulfillment); tied for 3/4) system wide inven- ticipants has been in the manufacturing sector—this year they
made up 37.9% of the total.
tory management and control; 3/4) demand uncertainty
General manufacturing companies represent the largest sub-
across all distribution channels; and 5) cost to serve using an
sector of that group at 13.3% followed by industrial at 11.4%.
omni-channel approach. Transportation directly influences a Over the past several years we’ve strived to increase the partici-
company’s ability to meet several of these challenges—most pation of transportation providers in the study in order to more
notably the service and cost factors. fully understand this perspective. This year that sector com-
prised 22.2% of all participants, which enabled us to do some
Transportation @ digital speed comparative group analysis.
Some have suggested that what matters to customers will
change in a digital economy. The findings of our 2017 improvements in on time deliveries and correct invoices.
annual study suggest “what matters” has indeed shifted, as According to Barnes this improvement directly results from
reflected in the almost indistinguishable top two criteria: price the adoption of modern automation and visibility tools. “To
(P) of products and availability (A) of products. compete in a digital economy, a company must have real-time
This evolution in “order qualifier and order winner,” respec- visibility into the entire lifecycle of their freight—all the way
tively, is analogous to the merger of the on-time (OT) and in- from quote-to-invoice—in order to manage exceptions, and
full (IF) metrics that occurred a few years ago creating a much even prevent errors from happening all together,” he says.
tougher OTIF performance measure. For e-commerce and “The most efficient way to achieve this is through a multi-
omni-channel, P&A is quickly becoming the order qualifier, modal, multiservice connectivity platform, a single source that
and the order winner will be determined by speed of delivery. views and analyzes all inventory and transportation positions.”
Transportation can be a significant portion of the price of However, the results for other metrics were not as rosy.
a product through the cost of goods sold, just as it can also The tightening of capacity in the LTL sector is reflected in
make an impact on the speed of order fulfillment. Continuing
a trend that we reported in last year’s study, there’s a dramatic Serving customers gains in importance
shift in the percent of spend for outbound transportation flows 36.3%
direct to consumer from different points in the supply chain. Reducing costs
30.9%
In 2016, direct to consumer flows accounted for 37.7% of
Maximizing 13.6%
the transportation spend. For 2017 that percentage increased 2016
asset utilization 14.2%
to 46.2 %. We no longer have the option of staying with the 2017
current business norms. We have to be “headstrong” and Increasing customer 25.2%
satisfaction 31.3%
change the way we think about transportation in order to
deliver on both dimensions of service and cost. Maximizing 24.9%
There is some good news with regard to service. In general, profitability 23.6%

service has improved for over-the-road transportation. Both Source: 26th Annual Study of Logistics and Transportation Trends
truckload (TL) and less-than truckload (LTL) posted impressive (Masters of Logistics)

26 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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 EXCLUSIVE: Maters of Logistics

a slightly lower equipment availability spend for private fleet/dedicated (23.8% the transportation budget despite signifi-
year-over-year (YOY) as well as a much in 2017 versus 20.8% in 2016). This was cant pressure to reduce prices as capacity
higher turndown ratio. the largest shift in transportation modal outpaced demand.
All of this is happening at a time spend YOY. LTL remained essentially
when we’re also seeing some interesting unchanged despite healthy rate increases A headstrong approach
changes in the transportation spend by during the past 12 months. Surprisingly, A transformation in business has begun.
mode. There was a sizeable increase in TL showed a 2.1% increase in its share of Formerly, firms chose a company-wide
strategy based on the assumption that
a customer’s decision on whether to
purchase a product or service was based
primarily on cost. Customers willing to pay
more got better service, or more innovative
products. Yet, the advent and continual
evolution of technology has enabled them
to develop a platform where they can

HERE
deliver goods to the customer over a wider
range of costs, as well as service, options.
Customers willing to pay more can
get their Kingsford charcoal delivered to
their door overnight. If the price point is
too high, chose a slower delivery option. A
FOR PUERTO RICO firms’ supply chain capabilities are being
transformed by technology, enabling them
to serve a much wider set of customers on
the cost/service spectrum.
Amazon has approached supply chain
management—and transportation spe-
cifically—in ways that many competi-
tors would characterize as unfeasible.
Despite predictions that what the
company is attempting relative to order
fulfillment lead times is impossible from
a service and cost perspective, Amazon
continues to show the art of the pos-
sible. This headstrong approach is trans-
forming transportation practice.
Amazon is not the only company
adopting a headstrong attitude to develop-
ing and implementing service offerings to
compete in a digital economy. We believe
WITH RECOGNITION the future will belong to companies that
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We’re also dedicated to innovation and environmental
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28 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

The supply chain never sleeps.
And neither do we.
At Transplace, we are relentless in executing our customers’
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REST EASY. WE WONʼT.

Transportation Best Practices/Trends

Food Logistics:
Diverse partners play
key roles in domestic
distribution F or a temperature-controlled supply
chain to remain unbroken and unin-
terrupted, U.S. food shippers have
long relied chiefly upon traditional trans-
While Amazon’s recent bid to purchase portation partners for guidance and execu-
Whole Foods made mainstream headlines, tion. However, surging domestic demand
the e-commerce giant will still need to adhere has raised the ante, bringing the celebrated
to time-tested realities. Any way you slice food cold chain enterprise of Amazon and
it, the integrated U.S. cold chain requires Whole Foods into the picture.
optimized service from existing ports, 3PLs, Virtually every food company that com-
cold storage warehousing, transportation prises the cold chain—from suppliers
providers and high-value vendors. to manufacturers to cold chain logistics
providers to food retailers—is now operat-
BY PATRICK BURNSON,
ing in a complex, fast-changing system,
EXECUTIVE EDITOR observes Bill Luttrell, senior locations
strategist for the site selection consultancy
Werner Enterprises. The result: food busi-
nesses are affected by a new set of factors
from their supply chains.

30 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

 “For most companies, owning or product returns and back-hauling. It’s cold storage facility dedicated to perish-
leasing manufacturing, warehousing, not about to get any easier.” able cargoes at the Port of Savannah,”
transportation and retail facilities rep- says Kemmsies, “and there are a number
resents the largest fixed-cost element Enhanced infrastructure of much smaller U.S. ports attracting
of food businesses,” Luttrell says. Walter Kemmsies, managing director, private investment for cold chain food
“Despite this financial and competitive economist and chief strategist of JLL’s shipping. This is a trend we may expect
importance, too few companies in this Port, Airport and Global Infrastructure to gain traction.”
space have a strategy to continually (PAGI) group, insists that much of the According to Paul Weitzel, vice presi-
assess and optimize their supply chain nation’s existing infrastructure is ade- dent of Inmar Willard Bishop Analytics,
networks to ensure they’re meeting quate to meet the new demands placed a technology and retail consulting com-
their food distribution needs.” on domestic food logistics. pany, the advent of e-commerce makes
Luttrell adds that food companies “We’ve seen many examples of pri- site selection a more complex consider-
don’t usually design logistics networks; vate investment being used to solve ation for logistics managers working in
rather, they inherit them as a result new cold chain challenges without the the cold chain.
of earlier mergers or acquisitions, or help of any public monies or taxes,” “The entire food supply chain is reli-
simply evolve them piecemeal as opera- says Kemmsies. “In many cases, all ant on finding the right distribution
tions expand. shippers are asking the government to locations, retail locations and remote
“Cold chain logistics managers must do is to get out of the way.” pick-up points,” says Weitzel. “Multiple
analyze the entire network to maximize He points to Logistics Park Kan- fulfillment and inventory models such
competitiveness,” Luttrell insists. “This sas City, a 1,500-acre business park as home delivery, curbside and remote
includes not only the proposed manu- capable of handling 17 million square pickup will continue and make this a
facturing and warehouse distribution feet of warehousing with as much as more urgent part of the plan.”
location, but food shippers should also 3 million square feet of cold chain Furthermore, says Weitzel, food
examine supplier locations, distributor facilities. Furthermore, cold chain food logistics planning will become increas-
locations, and retail locations.” shippers can have direct access to a ingly important as a significant amount
And as the Amazon/Whole Foods deal 433-acre intermodal center operated of volume shifts to e-commerce. While
highlights, linking digital and physical by the Burlington Northern-Santa Fe the last mile is expensive, the demand
infrastructure is a growing challenge. railroad. In fact, Amazon now operates for home deliveries is growing, and one-
“This kind of super infrastructure will be a 822,104-square-foot warehouse at the hour, two-hour and four-hour routes will
more important to site selection in the Kansas City complex along with other have a significant impact on location,
future,” adds Luttrell. “Additionally, prominent food shippers, including Del fleet size and the need for route optimi-
analysis should not be limited to just Monte, Walmart and Tyson. zation, he says.
forward logistics, but should also “In the Southeast, PortFresh Logis- “The food companies on the front-
include reverse logistics analysis such as tics recently built a 100,000-square-foot end of site selection planning are locat-

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 31

Transportation Best Practices/Trends: Cold Chain

ing supply hubs to accommodate e-com- “It signals their commitment to figure out how to make online
merce growth over the next decade,” grocery shopping work. Amazon and Walmart will eventually
says Weitzel. “Part of this vision includes
be the two ‘bigs,’ and many mid-tier grocery chains will have
the support of B2B locations as well.
Meanwhile, logistics managers should to adjust or fight for their survival.”
plan on playing a commissary role or at —Paul Weitzel, vice president, Inmar Willard Bishop Analytics
minimum, support local commissary
and fresh deliveries.” storage providers to continually invest cubic feet of temperature-controlled
in their own operations to meet cold warehouse space to its existing facility.
Cold storage & transport chain shipper’s needs. Together with its Salt Lake City facil-
Transportation and logistics in the food One example of innovative devel- ity, this expansion significantly extends
supply chain—especially perishables— opments took place recently in Americold’s reach within the Greater
requires a commitment on the part of Clearfield, Utah, where Americold Salt Lake City Metro Area to more
third-party logistics (3PL) and cold expanded its site by adding 6.5 million than 50% of total available capac-

Cold Chain Ports: Small is beautiful when it comes to reefer ports

A s noted by industry analysts during the reporting of
this story, a number of domestic “niche ports” have
positioned themselves to support cold chain logistics in the
commodity, and top shipping lines for the port’s agricultural
exports include Sea Star Line and Naviera Interamerica.
The port is served by three Class I railroads—CSX, Norfolk
food sector. Chief among them are the following: Southern and Canadian Pacific—and is supported by nu-
• Delaware’s Port of Wilmington, which features the merous refrigeration, processing and packaging facilities.
largest dock-side cold storage facility in the U.S., com- • Florida’s Port Everglades’ top agriculture importers
prised of six separate warehouses aggregating approxi- include Chiquita and Dole Fresh Fruit, while Crowley and
mately 800,000 square feet of chilled and freezer storage Mediterranean Shipping Company (MSC) are among the
space and 16,000 square feet of controlled atmosphere ca- top carriers. Grocery items make up nearly half (48%) of the
pability. Wilmington is the top gateway for imports of fresh shipments, followed by poultry, non-alcoholic beverages
fruit, bananas, and juice concentrate. and fruit. Port Everglades Cold Storage provides nearly
Late last year, Dole Food Co. signed a 15-year agree- 100,000 square feet of variable temperature-controlled re-
ment to continue doing business there, becoming the ports frigerated storage.
largest shipper, importing bananas, pineapples and other • Primary cargoes at Florida’s Gulf Coast Port Mana-
fruit and exporting forest products and general cargo. The tee include tropical fruits and vegetables along with citrus
new cold storage facility at the port represents a bet that juices and beverages. Manatee offers 202,000 square
refrigeration, blast freezing and logistical support will help feet of refrigerated space, including 30,000 square feet of
convince an increasing number of commodities producers freezer space.
to step up their export activity in-state. • Dole Fresh Fruit is a key tenant at the Port of San
• Key cold chain shippers at the Port of Boston in- Diego, importing approximately two billion bananas annu-
clude Heineken, United Liquors, Anheuser Busch and BJs ally and operating a weekly service from Latin America to
Wholesale Club. Seafood processing operations generate San Diego to support consumers in the Western U.S. and
significant revenue for Boston’s economy, supporting hun- Canada. Port officials forecast continued growth in perish-
dreds of jobs at or near the port, including Boston Logan ables trade, particularly fresh fruit from Latin America, and
International Airport. have identified Peru as one of the biggest prospects.
The port’s close proximity to Logan Airport allows quick • The Port of San Francisco features five deep-water
distribution of fresh fish and seafood products such as had- berths, on-dock rail, a foreign trade zone and cold storage
dock and lobster. MSC, COSCO, K-Line, and Yang Ming are facilities to accommodate a variety of food cargo. Commer-
among the top ocean carriers bringing in reefer cargo. cial fishing operations are supported by the largest concen-
• Fresh fruits and vegetables as well as meats are among tration of commercial fish processors and distributors on
the top commodities imported/exported through the Port the U.S. West Coast.
of Philadelphia. Meat is the leading agricultural export – Patrick Burnson, executive editor

32 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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 Transportation Best Practices/Trends: Cold Chain

ity—triple that of its nearest local of Americold. The new building will 34°F dock and adjustable temperature
competitor. feature ammonia-free, self-contained, zones to -20°F.
“The new building should be opera- refrigeration units with no engine room While storage providers gear up
tional in time for our peak volumes requirement. The system offers signifi- with the latest technology inside the
during the fourth quarter of 2017,” cant energy efficiency gains, zero water four walls, food transportation is an
says Fred Boehler, president and CEO usage, is air cooled and will include a industry that has fully adapted to the
cold chain and can be considered the
most resilient, particularly since a large
majority of food products have a bet-
ter tolerance to temporary variations

THE BULK OF WHAT WE DO of transport temperatures, notes Dr.

Jean-Paul Rodrigue, a logistics profes-

Benefits You sor at Hofstra University in New York.

He adds that it’s the cold chain distri-
bution center that represents the most
efficient link.
“These facilities usually have several
storages areas with different tempera-
ture settings to handle regular grocery
goods at ambient temperature, including
produce, dairy, meat and frozen prod-
ucts,” Rodrigue says. “As a result, small
errors can be compounded without the
concern of irreversible damage.”
Meanwhile, Amazon’s acquisition
of Whole Foods is just the first step
in a transformational journey for cold
chain shippers, says Inmar executive
Weitzel. “It signals their commitment to
figure out how to make online grocery
shopping work,” he says. “Amazon and
Walmart will eventually be the two ‘bigs,’
and many mid-tier grocery chains will
have to adjust or fight for their survival.”
Furthermore, as Amazon becomes
Transportation & Management of Bulk Commodities a major force in the food space, we
should expect more direct buying
> Logistics Planning & Implementation
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(Barge, Truck, Rail, Pipeline)
now going to self-distributing retail
> Storage & Inventory Management
warehouses and food wholesalers,”
> Terminal Build/Own/Operate
& Acquisitions adds Weitzel. •

2605 Nicholson Road, Suite 5200 • Sewickley, PA 15143 • P: 412.489.0011 • F: 412.489.0007 Patrick Burnson is executive editor of
Logistics Management
www.arrowmaterialservices.com

34 L OGISTICS MA NA GEM ENT | SEPTEMBER 2017 LOGISTICSMGMT.COM

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Supply Chain & Logistics Technology

WAYS
MOBILITY
is SHAPING
BY BRIDGET McCREA,
CONTRIBUTING EDITOR the SUPPLY CHAIN
A
s mobile technologies continue to Mobile technologies are certainly changing how we
make their mark both inside and track freight outside of the four walls, putting “real-
outside of the four walls of the time” logistics management within the grasp of many
warehouse and distribution center (DC), savvy shippers. However, our analysts content that we
2017 appears to be the year when the
have more work to do in the areas of investment and
latter comes into especially clear focus.
integration into existing operations.
From real-time goods tracking to rout-
ing assistance to the Internet of Things ments) back to home base are fading 6 key mobility trends
(IoT), “cutting the wires” in the area that quickly,” says Bob Hood, a principal at Focused on improving processes, cutting
lies between the warehouse yard and the the consulting firm Capgemini. “Today, costs, and gaining efficiencies, a growing
customer’s front door is gaining ground all of that data is continuously fed into number of shippers have set their sights
as shippers grapple with fast order ful- dynamic optimization engines that on the area outside of the four walls.
fillment, smaller order sizes, and ever- not only help create the most efficient And much like what’s happening within
evolving customer expectations. routes, but also give the shipper insight the world’s DCs and warehouses—
In return for their tech investments, into vehicle and driver performance.” where “cutting the wires” remains a
shippers are gaining benefits like short- Mobile technologies are also help- top-of-mind imperative—mobile tech-
ened lead times, improved supply chain ing companies improve communica- nologies are playing a key role in this
visibility, error reductions, optimized tion within their transportation net- transition.
transportation networks and better works and more accurately measure Here are six ways mobility is shaping
inventory management. Combined, the productivity and efficiency within the supply chain:

1
these advantages are helping companies those networks. “Mobility is really Increasingly sophisticated—
work smarter and more efficiently in creating an entirely new paradigm for and sometimes costly—vehicle
today’s fast-paced business world. vehicle communications,” says Hood, communications: There was
“The days when drivers used radios or “and adding new levels of sophistica- a time when the only contact a driver
onboard terminals to communicate their tion to the area that lies outside of the had with home base was after an action
moves (i.e., pickups, drop offs, adjust- four walls of the warehouse.” took place (e.g., a load drop off) or

36 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

when there was a problem. Today, ship- American transportation industry. “On- an important role in transportation opti-
pers communicate with their drivers in demand freight mobility apps will bring mization, load planning, load manage-
real-time while also paying closer atten- in high asset utilization among smaller ment and other related functions.”
tion to vehicle operations, routing and fleets; help reduce logistics costs for More data means more mobile
scheduling, and other key performance
indicators (KPIs).
shippers due to lower brokerage fees;
ease capacity crunch, reduce empty
5 technology to generate and
support it: “There’s a lot of
In most cases, mobility is the key return miles that are currently about 20 hype around IoT and sensors in the sup-
driver behind these advancements. billion miles; and also help reduce emis- ply chain right now,” says Simon Ellis,
Hood says that he recently worked sions,” added Frost & Sullivan analysts. practice director at IDC Manufacturing
with a customer that implemented a It’s not just for the big guys Insights, “particularly when it comes to
real-time, intra-day optimization tool
that enables same-day pickup and
3 anymore: David Krebs,
president of enterprise mobil-
deploying sensors in the field to interact
with mobile devices.” Shippers who
delivery for its fleet. Concurrently, ity and connected devices at VDC handle perishable goods and refrigerated
the firm upgraded its onboard com- Research, remembers a time when fleet goods, for instance, are using sensors to
puting capability—a move that led to mobility solutions were reserved for detect trailer temperatures, dead bat-
enhanced transportation optimization larger entities that could afford them. teries, and other problems that would
across several dozen locations. As tech has advanced and become more impact their cargos.
“They’ve upgraded equipment in both mainstream and affordable, so have fleet “Using sensors—and the data that
the truck and in the cabin and are now mobility solutions. they generate—shippers can hope-
training drivers on its use,” says Hood, Whether a company wants proof of fully make better business decisions,”
who admits that while the initial cost for delivery, fleet management, workforce says Ellis. “This is just one trend
such a transition is high, the long-term management, or resource management that’s making the use cases for IoT
benefits will be substantial. “When you solutions, most are fully accessible to and mobile deployments more valu-
start talking about onboard computers a wide range of shippers. “Mobility is able as a whole.” With more real-time
and the software that supports them— becoming that much more accessible for information available, the opportunity
plus the integration across the supply any sized logistics operation or shipper,” to “consume the insights from the
chain—the costs can be fairly significant.” says Krebs. “As technology penetration analytics on that data” increases expo-

2
There’s a trucking app for that: continues to improve overall, adoption nentially, he adds. “As data becomes
By 2015, Frost & Sullivan says will likely increase exponentially.” more common and more available, the

4
that the size of the mobile Mobility helps pinpoint perfor- need for more mobile technology in
trucking app market will hit $35.4 bil- mance and productivity gaps: the field is also expanding.”

6
lion. Mobile apps are being launched, Knowing where everything is Customers want more informa-
targeting the trucking sector almost con- at any given time (i.e., “visibility”) is the tion and data—and they want it
stantly, the research firm states. “With Holy Grail for every logistics manager, now: Customers’ expectations
the launch of Uber Freight, the com- and mobility is putting that goal within for real-time shipment data that’s avail-
petition in the trucking app space has their reach. Armed with accurate infor- able at their fingertips without having to
only heated up, pressing the incumbents mation, shippers can quickly identify pick up the phone or make email con-
to innovate and move fast,” say Frost & and mitigate performance gaps, improve tact is growing.
Sullivan analysts, noting that just about their agility, address inventory problems, “They want to be able to do it
30 of the more than 100 currently avail- and make other business-critical moves. quickly online, and that requires some
able trucking apps in North America “It may sound obvious, but visibility level of mobile technology,” says Ellis.
will still be around in 2020. and inventory accuracy remain big chal- “This is another trend that continues to
The analyst firm also contends that lenges for many organizations,” says raise the bar on the mobile front, where
mobile-based freight mobility will be the Krebs. “In the retail supply chain, in shippers have to be able to provide this
biggest disrupter transforming the North particular, mobile technology is playing level of insight.”

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 37

 Supply Chain & Logistics Technology: Mobility

To get there, Ellis says that all links that drivers keep their eyes on the says Vernon, who points to applications
in the supply chain must be instru- road—and not on their devices. “There that track trailers, utilize GPS position-
mented—including human resources. are ways to ‘lock it down,’ so to speak,” ing, and take temperature measure-
“In the case of people, instrumenta- says Krebs, “and make sure that the use ments as three examples of this. “But
tion means a smartphone or a mobile of technology doesn’t lead to accidents.” as far as the whole ecosystem being
device,” he says. “This is yet another The many different legacy systems connected, we’re still very much in the
driver of the mobile movement outside that shippers rely on to run their busi- beginning stages.”
of the warehouse.” nesses also get in the way of the fully And it’s not for lack of equipment,
mobile supply chain. “Just because a Vernon notes, but more on shippers’
Locking it down shipper wants to be able to do some- reluctance to invest in and integrate the
Even as shippers push toward real- thing doesn’t necessarily mean it’s technology into their operations. “Some
time, end-to-end supply chain visibility, going to be feasible using today’s exist- companies have gone in very quickly,
there are a few barriers holding back ing infrastructure,” Krebs points out. like the ones that are using remote sens-
mobile adoption outside of the four “Legacy systems and the more intui- ing on their trailers and loads, while
walls of the warehouse and DC. Krebs tive, modern solutions don’t always go others have been holding back,” says
says that one particularly difficult chal- hand-in-hand.” Vernon. “At this point, adoption rates
lenge is worker safety, along with the Despite these and other challenges, really hinge on carriers and shippers
fact that mobile devices and applica- Hood and Vernon say the real-time supply making the decision to make the move
tions can be rather distracting. chain management ideal is coming within into this phase.” •
To overcome this issue, Krebs says the grasp of today’s shippers. However,
that more vendors are delving deeper there’s still more work to do in this area. Bridget McCrea is a contributing
into application design and ensuring
asi_halfpgLM_0917_final 8/23/17 8:34 AM
“In certain ways, we’re already there,”
Page 1
editor to Logistics Management

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Improving 3PL Management

GLANBIA
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LOGISTICS
In an award-winning collaboration effort with a 3PL and TL partner,
this global performance nutrition company has drastically reduced
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based in Dublin, Ireland, bills itself as the No. 1 global performance nutri-
tion brand in the world with products designed for the fast-growing fitness
market. Looking to trim some of its own fat, GPN’s U.S. subsidiary put itself on a
logistics fitness regimen three years ago—one that’s helped it reduce costs, transit
times and claims while increasing efficiency through a unique collaborative relation-
ship with its third-party logistics provider.
As a vital part of this regimen, Glanbia out- were greater than the industry average—a
sourced its freight management to third-party pain point that ended up being the starting
logistics provider (3PL) Transplace back in point to help reduce the company’s overall
May 2014 in order to develop innovative ways transportation costs. Transplace immedi-
to reduce its transportation cost and improve ately enacted processes to help reduce the
overall service. claims ratio, implementing its TransMATCH
As the 3PL partner dug into the data, load-sharing program that helped reduce the
it determined that Glanbia’s claims ratios claims ratio further.

BY JOHN D. SCHULZ, CONTRIBUTING EDITOR

40 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

 Under this program, the 3PL
partner created multi-stop shipments
THE SAVINGS ARE REAL
within Glanbia’s network, as well as
determined opportunities outside its In the first year of
network to achieve the benefits of the collaboration effort,
multi-stop truckloads. To help in this GPN realized SAVINGS of
stage of the solution, the partners
chose Illinois-based truckload carrier
$100,000
Best Solution Express to be the key
asset carrier to handle much of the freight Glanbia is utilizing
multi-stop moves. SAVINGS a more EFFICIENT
“The main driver was really is off mix of modes
about consolidating LTL to get cost
improvements and reduce transit 34% freight bills,
mostly on 58%
times,” says Kurt Hepker, Glanbia’s
OUTBOUND LTL
director of logistics. “Truckload dam-
FREIGHT
ages are much less than LTL because
the freight gets handled so many
32%
fewer times.”
TL
Besides the strategic and opera-
tional changes, Hepker says that 10%
one of the key ingredients was the Intermodal
human element. Danielle Arriaga,
operations manager for Transplace,
is one of three 3PL employees who are embedded at Glan- orders, and we’re communicating all the time about co-
bia to make sure operations are humming and efficiencies loading and what loads we can combine. Every time she
are gained going forward. hears the word ‘co-load,’ we realize we can save money.”
“Most days I’m pretty involved in their whole operation,” Now, let’s take a deep dive into how the Glanbia,
says Arriaga. “Being on site in the shipping office is crucial. Transplace and Best Solution Express collaboration
I’m sitting next to the person in shipping who pulls their works and highlight the quantifiable savings and opera-
tions improvements that earned this team a 2017 Alli-
ance Award.
Editor’s Note: The successful
partnership forged by Glan-
Define the needs, develop the solution
bia Performance Nutrition,
There were a couple pieces that needed to fall into
Transplace and Best Solu-
place. First, Transplace had to fully analyze the situa-
tion Express was awarded a 2017 Alliance Award. The Alliance
tion and find the trucking partner (Best Solution) that
Awards, sponsored by Logistics Management and SMC³, recog-
had the geographic coverage and ability to handle the
nize how shippers and their service providers work together to
freight demands. Second, Glanbia had to define the
overcome challenges to critical components of their unique
specific goals they were looking to achieve then make
supply chains. Winners are singled out for their ability to effec-
sure the collaborative effort was laser-focused on meet-
tively solve challenges through innovative, measurable means.
Entries for the 2018 Alliance Awards will soon be accepted at ing them. After much deliberation, the team decided
logisticsmgmt.com. that the solution needed to:
• Reduce cost focusing on shipments in the 5,000-pound

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 41

Global Logistics: Improving 3PL Management

“There’s an enormous amount of

collaboration and planning involved
when implementing a seamless multi-
stop truckload solution across numerous
shippers. Having a person in-house and
onsite just makes the solution that
much simpler.”
—Kurt Hepker, director of logistics, Glanbia

to 30,000-pound range and shipments that utilize 12 feet can see first hand what freight is changing and what
to 30 feet of truck space. opportunities need to be made.
• Reduce claims ratio. Everyday Hepker is on a conference call with his
• Reduce handling and exposure to outside risks. warehousing team to discuss issues on the ground
• Improve transit time and on-time percentage to consignees. as well as corrective measures. In addition, there are
As with many transportation partnerships, the solution weekly long-range planning calls with the wider group
also came with ancillary benefits. “One of the side benefits of Transplace planners, followed by monthly and quar-
was reduction in damages, but the main driver was consoli- terly business reviews. In the end, little is left
dating freight, claims reduction and transit times,” says Hep- to chance.
ker. “The real key piece was working with Transplace to find Before her career at Transplace, Arriaga worked at
ways to gain service improvements and cost reductions.” LMS Logistics, a provider that specialized in embed-
The key was Transplace consolidating myriad LTL ship- ding people on site for projects. “That was our niche,”
ments to get cost improvements and reduce transit through she recalls. “It was new to Transplace, but they’ve seen
greater use of full truckload. Truckload freight is handled less the benefits of having people in a client’s operations.”
and usually results in fewer damages than LTL. According to Hepker, that is a growing trend in the
“When I first got here and looked at the mix of freight and industry—and for good reason. “There’s an enormous
pallet counts, I put things together that opened their eyes,” amount of collaboration and planning involved when imple-
says Arriaga. “We started combining loads and putting freight menting a seamless multi-stop truckload solution across
on the same truck to save money.” numerous shippers,” he says. “Having a person in-house
According to Arriaga, there was “a lot of opportunity” to do and onsite just makes the solution that much simpler.”
that within Glanbia’s customer base; however, there were also Collaboration among Transplace, Glanbia and Best
other Transplace customers shipping in roughly the same geo- Solution—the primary TL partner—was critical to
graphic regions. This opened up other opportunities to save achieving the goals set for the program, but there was
money and reduce claims. additional collaboration needed with other shippers
included within the TransMATCH program.
Showcase of collaboration With Transplace’s visibility of Glanbia’s network,
In a world of instant, global communication, Transplace and the team determines shipments that are eligible for the
Glanbia are proof that old school face-to-face still works just program and then plans and identifies candidates for
as well in the age of digital logistics management—maybe those shipments. Transplace sends this information to
even better in some cases. its transportation management system (TMS) where a
Arriaga is one of three employees embedded on site at multi-stop truckload solution is created. During this pro-
GNP headquarters in Downers Grove, Ill., as well as at cess, the 3PL and Best Solution work closely each step
the distribution center in nearby Aurora. “The on-site team of the way to execute to the plan.
takes communication to another level,” says Hepker. “They The results of the collaboration have been realized

42 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

 through reduced transit time, improved on-time percent- Quantifiable results
age, and reduced damage—all while they watched costs The savings are real. In the first year of the collaboration
decrease. And both Hepker and Arriaga agree that it’s effort, Hepker estimates that GPN realized $100,000 in sav-
really the industry experience and institutional knowl- ings—a number he knows is tracking higher today. And when
edge that really make it all work. he boils it down, actual freight savings is 34% off freight bills,
“You just know places where a lot of freight goes,” mostly on outbound freight. Glanbia is also utilizing a more
says Arriaga. “For example, a lot of West Coast-bound efficient mix of modes. Its current modal mix is 58% on LTL,
freight is co-loadable, so as soon as we get stuff going 32 % TL, and 10% intermodal.
west, we know what to look for. Our group is good at “We look at it lot of different ways,” says Hepker referring
saying: ‘I have this load. Do you
have anything going that way’?
“I’m sitting next to the person in shipping who
All the pieces are working pulls their orders, and we’re communicating all
The final piece of the puzzle
involved getting suitable freight
the time about co-loading and what loads we
from other shippers in order to can combine. Every time she hears the word
make Glanbia’s freight solution cost
‘co-load’ we realize we can save money.”
effective. To do this, Transplace
leveraged its load-matching opti- —Danielle Arriaga, operations manager, Transplace
mization solution that opens up a
network of shippers to help create
the ideal load. to the benefits. “Cost is a big one, but not the only one. Transit
According to Arriaga and the Transplace team, Best times reductions are a significant benefit, and one that makes
Solution’s nationwide network was able to support our customers happy.” Ancillary benefits are lower claims as a
Glanbia’s unique needs and has a driver base that’s result of less handling of the freight and environmental benefits
able to accommodate the numerous stops and handling to help Glanbia in areas of sustainability.
that’s involved—a characteristic that she believes isn’t According to Hepker, overall supply chain operations have
typical among TL carriers. seen a number of benefits as well. Most notably, Glanbia is
For example, a shipment that was recently moved now able to deliver to customers faster and more efficiently
from Glanbia in Aurora on a Thursday going to Van while providing security to their products.
Nuys, Calif., weighing approximately 13,000 pounds Going forward, more of Glanbia’s shipments will be
was taking up approximately 26 feet of truck space. included within the project leading, hopefully, to greater ship-
Transplace was able to load this shipment with other ment improvements and cost savings across the board. Remov-
shipments—not belonging to Glanbia—going to Las ing high weight shipments in the 12-linear to 30-linear-foot
Vegas weighing 18,250 pounds and taking up approxi- range from LTL carriers will not only help LTL carriers
mately 24 feet of truck space. improve on their operating ratio, but will also help them
Through coordination between the shipping facilities and improve their overall service.
Best Solution, the carrier was able to load the shipments The U.S. Glanbia Performance Nutritional division is only
to deliver in proper order to reduce miles traveled and han- about eight years old, but has made seven acquisitions over
dling. “Being that these shipments were over the typical LTL that relatively short period of time. “That’s another reason we
linear foot allowed under standard LTL pricing, it’s likely outsource,” says Hepker. “We’re growing so rapidly, and with
that both would have been moved as full truckloads—with that many acquisitions it’s difficult to integrate a bunch of dis-
more than half of the trailer empty,” says Hepker. parate transportation programs. As we continue to grow, this
According to Arriaga, typical LTL transit time would benefit extends to other businesses we acquire. It’s just more
have this shipment arriving in seven days; but through opportunity to take that model and make it work.” •
this solution, it was delivered in five. Glanbia also says it
was able to save over 30% on this move as a result. John D. Schulz is a contributing editor to Logistics Management

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 43

Supply Chain

Retailers committed to transforming their supply

chains need to step back and look at their business
model through a different lens.

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 Why RETAIL
Supply Chain
TRANSFORMATIONS
FAIL—and how to
GET IT RIGHT
BY SANDEEP GUPTA

T
HUMB THROUGH THE PAGES of any busi-
ness—or supply chain—journal and
you won’t look long before you stumble
across the word “transformation.” Busi-
ness professionals across the world
are in love with the word as well as the idea of
transforming their organizations to tackle the
challenges confronting their businesses and put
a cloud of dust between them and their competi-
tors. It’s part of the daily business spiel, tossed
around in the boardroom and C-suite; in consul-
tants’ presentations; at management conferences;
and in the pages of Supply Chain Management
Review. But if we ask those same executives just
what the word transformation means to them,
there would likely be little if any consensus on its
definition or how it applies to their organizations
or supply chains.

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 45

Supply Chain: Retail Transformations

FIGURE 1

A standard view of pillar functions

grow revenues and contain costs
Plan
even while keeping up with the
• Plan supply chain • Plan make • Plan return
• Plan source • Plan deliver moves being made by Amazon,
and new regulations in geog-
Source Make Deliver raphies like the Middle East,
• Source stocked product • Make-to-stock • Deliver stocked product where former tax-free havens
• Source make-to-order product • Make-to-order • Deliver make-to-order product
• Source engineer-to-order • Engineer-to-order • Deliver engineer-to-order
are preparing to introduce value
product product added taxes (VAT) to reduce
• Deliver retail product
the region’s dependency on rev-
Return
enues from oil.
• Source return defective products • Return MRO product • Source return excess product
Clearly, no organization,
• Return defective product • Deliver return MRO product • Deliver return excess product regardless of industry, can
afford to ignore this tsunami of
Enable
change. In recent years, how-
• Manage supply chain • Manage supply chain • Manage supply chain network
business rules human resources
ever, the impact of these crash-
• Manage regulatory compliance
• Manage performance • Manage supply chain assets • Manage supply chain risks ing waves has been especially
• Manage data and information • Manage supply chain contracts damaging to retail. In part, that
is because retailers lived for too
Source: Sandeep Gupta
long in a state of denial about
For the purposes of this article, we’ll use the definition the changes being wrought on their business models by the
that comes up in most searches, which is that “transfor- Internet; and in part it is because once retailers saw the
mation is the process of driving fundamental and sus- light, there were no clear and easy solutions. The failure
tainable change.” Those two key words are crucial. Busi- to get things right has created distress for many leading
nesses around the world are experiencing never-ending retailers—just look at what has happened to stalwarts like
transformations caused by a number of trends at play, JCPenney, Sears, Macy’s and even Walmart. It will come
including but not limited to the following: as no surprise then that retail supply chains are seeing
• customer demands for customization and quality at the ever-increasing pressures to deliver more from less, be it in
lowest cost, shifts to services, all leading to ever-evolving procurement or last-mile delivery. They are ripe for trans-
business models like omni-channel; formation, no matter how we define it.
• life-cycle compression, which isn’t limited to just the That brings us to another dilemma: While the need for a
ever-shortening life-cycle of products (an article last year fix now is imminent, transformations are notoriously slow,
in Forbes noted that as recently as 50 years ago, the life and as many as 70% of them fail, according to an article
expectancy of a firm in the Fortune 500 was around 75 published by McKinsey. There are many theories as to why
years; now it is compressed to less than 15 years and this is so, but there has been very little, if any, new think-
declining even further;) ing to over-ride the traditional approach to such programs.
• intense, global competition driven by players like Ama- It is in that context, based on my experience of working
zon, Uber and Alibaba that are changing the rules of the with many retailers, that I offer the following point of view:
game through their ever-evolving business models, The fundamental problem in the retail world is that the
• disruptive forces such as the Internet of Things (IoT), business model follows the organization model and not the
3-D Printing, Artificial Intelligence, Robotics Process other way around.
Automation and even visionary political and business That is a different lens through which to view retail
leaders who are creating Smart Cities in places such transformation. But it is the reason I believe that the phrase
as Dubai and Singapore. “supply chain transformation in retail” is a misnomer, a
As if these four were not enough to keep supply chain point I will buttress later in this article with three case study
executives up at night, there are the ubiquitous pressures to examples of supply chain transformation initiatives from my

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Supply Chain: Retail Transformations

consulting work in retail. It’s important for me to note that my root cause that drives disconnects and creates grounds for
observations are drawn from my work over the years, and are the failure of supply chain transformations in retail.
not necessarily the views of the consulting firm where I now For the sake of comparison, let’s look at consumer pack-
work. The point is that the primary and meaningful way to aged goods (CPG) or fast moving consumer goods (FMCG)
make supply chain transformations work is to see them not as firms. In those industries, the focus is on creating and ful-
functional-specific but as organization-wide. In other words, I filling demand. Demand creation sits with marketing and
am pointing a finger at the retail organization model. The dif-
ferent lens that will be detailed in this article should make you
Retail organizations typically structure
re-think your entire retail operating model.
themselves differently: Not only
A new model are the terminologies different, but
Like many industry sectors, retail organizations begin by
the functional incumbents also see
setting up an organizational model: They structure the pyr-
amid, define roles, job titles and lines of report, and then themselves as different.
delegate authority. Only after the organization is in place
do they design the relevant business model, dictating how sales, while the supply chain is tasked with ensuring that
the business will operate and go to market. the demand is satisfied in the most optimal manner. Hence,
This last phase of design is constrained by the structure these two sets of actions or functions are primary; all other
of the organizational model. As a result, managers end up functions play a support role, like a backstage crew.
force-fitting ways of working around the organizational A retailer’s perspective is different, even though the sci-
structure. By this time, the damage is done. ence is exactly the same as that of CPG/FMCG. Take
Such disconnects happen all too often in today’s retail luxury retail, be it retailing leather jackets, red-soled sti-
supply chain. These create the perfect storm for failed lettoes or diamond-studded jewelry. In this segment, the
supply chain transformations, and in retail, they fail often. key decision-making functions are:
However, because organizational models reflect the power • merchandisers and buyers who travel across the globe,
equations, hardly anyone is willing to acknowledge or bring read the trends and decide what products/assortments to
out the elephant in the room. bring into the stores; and
Before we study the real-life examples that will illus- • planners who hold the purse strings through the OTB
trate that point, let’s consider organizations from a large (Open to Buy) and work hand in glove with the buyers.
segment of industries that aligned their supply chain func- Figure 2 matches the two value chains—that of a Con-
tions to the SCOR methodology (Supply Chain Opera- sumer Packaged Goods (CPG) or Fast Moving Consumer
tions Reference Model). Figure 1 is a standard view of the Goods (FMCG) organization with Retail.
pillar functions one can find in the broader supply chain As the illustration shows, the retail industry’s value chain
function. breaks apart the traditional SCOR-based supply chain
Most readers will connect with the following typical sub function. Select parts of the supply chain disassociate from
units in their supply chain organization: the SCOR model and see themselves as radically different;
• demand/supply planning; even though the essence of what they do is unchanged.
• sourcing and procurement; • The planning sub-unit of a CPG supply chain becomes
• manufacturing (contract and own); and planning in retail.
• operations or distribution and warehousing, logistics and • The sourcing sub-unit of a CPG supply chain becomes
transportation. retail’s buying/merchandising arm.
Retail organizations, however, typically structure them- • “Make” is mostly sub-contractors if the retailer has a private
selves differently: Not only are the terminologies different, label in the portfolio; otherwise this sub-unit doesn’t exist in
but the functional incumbents also see themselves as dif- retail.
ferent. This manner of structuring the business model is the These sub-units do not see themselves as having any

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Supply Chain: Retail Transformations

connection with the supply chain. In their view, supply The real world
chain is only about moving boxes, managing labor/ware- Let’s now review the details from some real-world retail
house or driving trucks and delivering stocks to stores examples from my consulting work. The first is a retailer
and customers. that operates in multiple segments and has a large footprint
This structural difference has far-reaching conse- of brick-and-mortar stores in emerging economies.
quences. For example, in retail, merchandisers are respon- During periodic reviews of the financial performance
sible for procurement. They are constantly searching, for one specific line of business, the CFO repeatedly
evaluating and selecting new brands and vendors. Addi- noted that inventory levels were trending upward. The
tionally, there are various issues in inventory process flow impact on the availability of working capital was pinch-
around order split or consolidation (at both levels—order ing the business. To address the issue, the retailer
creation as well as execution). This requires ensuring cer- brought in a team of consultants to look for ways to
tain capabilities to manage multiple sources of supply in an reduce inventory levels.
optimal manner. Think International Commercial Terms The consultants undertook a detailed review, studying
(Incoterms). the product flow, actual lead times, ordering mechanisms,
Question: Why is the logistics function not engaged aging of SKUs at the store level and other dimensions.
with contract discussions with vendors to ensure that the They drew up a road map for transformation that was
most appropriate Incoterms have been included? embedded with a set of operational and strategic solu-
The need for retailers to transition toward omni-channel tions. They claimed that the proposed solutions could
is now a given. Omni-channel leads to stores rationalization reduce enterprise inventory levels by as much as 50%
without any adverse impact on
FIGURE 2 customer experience.
Consumer packaged goods vs. retail Skeptical of the claim,
Primary functions Support functions the divisional vice president
dismissed the recommenda-
FMCG Supply Marketing
Legal HR IT Finance R&D
value chain chain and sales tions, claiming that based on
his years of experience, a 50%
reduction in inventory was pie
in the sky. He was extremely
Plan Source Make Deliver Return Enable
wary of moving forward on this
transformation. Still, the CFO
asked the consultants to imple-
Retail
Planning Merchandising
Commercial/
Marketing Legal HR IT Finance Logistics
ment a pilot of their recom-
value chain Stores
mendations. The consultants
Primary functions Support functions drew out a phased approach
Source: Sandeep Gupta
that clustered brands into
waves based on certain criteria
as is evident from the number of stores being shuttered and then implemented the plan in select solutions. The
by major chains as varied as Target to Walgreens and from first wave focused on 10 high-volume brands sourced
Office Depot to Barnes & Noble, with news of new clos- from a common market.
ings trickling in every month. A few months later, the consultants reported that
Question: The closure of stores has a direct impact on the pilot had reduced the inventory of those selected
the design of the supply chain network. Why, then, isn’t brands by 6%. After the finance team vetted the real-
supply chain engaged during the decisions to open or close ized benefits, the consultants were sent on their way
stores because they have an impact on the efficiency of the with a pat on the back while business leadership
supply network as well as the total landed cost of the mer- decided to proceed with the rest of the implementation
chandise being sold? on its own. After two years, the business failed to cap-

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Supply Chain: Retail Transformations

ture more than that initial 6% reduction in inventory.

FIGURE 3
The essence of what went wrong (and therefore, the
What went wrong: Cause and effect
various recommended solutions) was across all dimensions
of the operating model. Figure 3 is an example of how vari-
ous issues had created an inter-play of cause and effect.
Organization/ Business
The center of the illustration shows one of the hypothesis RACI processes
used by the consultants: New inventory stock was being sent Who is responsible to What is the
stock replenishment replenishment process
to the stores even though the stock already on the shelves orders? Who reviews? including assortment
Who planning?
was not selling, compounding the inventory issue. In fact, approves?
the hypothesis had proven true. The schema provides a Stocks sent to
glimpse to the types of questions that were raised during the stores when the
same SKUs are
deep-dive on each dimension of the operating model—Orga- already not selling
in those stores
nization (or People), Business Processes (including Policies),
Systems and Performance Management. System/Tools
Performance
management/KPIs
Think of the “5 Whys” from Lean; the true hypothesis What systems
Which KPIs are at
are in use for
was like a symptom and the questions across all dimen- play? Is out-of-stock-
replenishment
in-store KPI driving
sions were searching for the root causes and testing for orders?
replenishment?
direct correlations. As the consultants delved deeper, the
chain of root causes and their linkages grew and grew like
a spider web. Some questions, in turn, became hypothesis
Source: Sandeep Gupta
that needed further validation. The causal relationship
across multiple attributes was deep-rooted and spread out
across all dimensions of the organization. Slowly the can- has been in business for more than 40 years and
vas, as illustrated in Figure 4, became larger. has built an envious portfolio of global brands. A few
Imagine the true scale of the transformation needed years ago, it began to face eroding profitability due to
to address the business issue. This was a gangrene of changing market and economic conditions. As various
sorts, but amputation was not possible. governments opened their markets and reduced Foreign
Real transformational success requires that an organiza- Direct Investment (FDI) restrictions, some high profile
tion keeps peeling back the onion layers to finally reach the brands ended their marriage with the franchise partner
core and then design relevant solutions. In this instance, and went independently to market. Additionally, the dis-
growing inventory levels are not like the common cold— appearing wage arbitrage across markets led to a rise in
you cannot address it with over-the-counter medications. labor and operating costs.
Even worse, this retail organization did not have In short, revenues as well as profits came under
either the appetite nor the courage to progress on the severe pressure. As a result, the CEO and CFO con-
implementation and ask the relevant questions. Whose cluded that unprecedented times needed creative think-
problem is inventory? Will the problem-owner also own ing and were keen to initiate a series of projects. Even
the solution? Given that the transformation program support functions, such as logistics, were required to
cut across planning, buying, technology, HR, etc., who identify topics or themes of transformation to achieve a
would sponsor the initiative, if not the CEO? Is this step-change in profitability.
really just a supply chain transformation program or is it In fact, logistics was tasked with optimizing total landed
an organization-wide transformation program? costs (TLC) as an avenue of potential savings. However,
In this case, the ultimate outcome is easily predict- because TLC includes the cost of the products, which sat
able: The constant bleeding or hemorrhage will one day with the buying function, the scope of logistics’ study was
lead to the death of this business unit; they are only restricted to other cost elements, excluding product cost.
postponing the inevitable. The study required some very heavy data lift-
Let’s look at another example: This franchise retailer ing to understand the historical flows of ordering

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Supply Chain: Retail Transformations

FIGURE 4 the responsibility for TLC had

The spider web grows been handed to the supply chain
(logistics), even though the buy-
ers select the brands and negoti-
Organization/ Business ate prices and volumes using the
RACI processes
Who is responsible for What are the steps OTB worked out by planning. In
assortment planning? in the current process? the case of this retailer, most buy-
Organization/ Business
What are the supporting Are there any non- RACI processes
brand guidelines/ value add Who is responsible to
stock replenishment
What is the
replenishment process
ers had no idea where the mer-
policies? activities? orders? Who including
reviews? Who assortment
planning?
chandise would be sourced from,
approves?
pp
The process Stocks sent to how it would be shipped or which
of assortment stores when the
same SKUs are
planning is already not selling
in those stores
Incoterm was most suited to their
broken/weak
Performance organization. Some buyers did not
System/Tools management/KPIs
System/Tools Performance What systems Which KPIs are at even know the existence of the
are in use for play? Is out-of-stock-
What tools are management/KPIs replenishment in-store KPI driving
available to generate How is the
orders? replenishment?
p word Incoterm, which is the key
periodic analytics at responsible function to managing TLC.
various levels (e.g. measured on
brand, category, assortment It will come as no surprise
SKU, etc.)? planning?
that the transformation died
before it was born.
Source: Sandeep Gupta
I present one final real-life
example. The logistics function of
an apparel retailer operated as a
cycles, receipts, the time that inventory sat idle in a separate service provider, with a charge-back model based
warehouse before it was issued to a store, including all on the unit volume of products being handled. Every year,
possible variations of cross-docking and direct store deliv- in the budgeting rounds, logistics came under pressure
eries. The franchise nature of the business did not permit from the internal clients/P&L owners to push this unit
a like-to-like comparison to international benchmarks cost down.
on TLC. However, the project team was able to develop A diagnostic review highlighted that the warehouse
some very specific proposals that could shave 7% to 12% staff was often busy with fire-fighting activities that added
off their baseline cost. The challenge was that most of the no value. A more detailed study concluded that the bulk
proposed solutions were strategic in nature. of these activities were related to inbound shipments.
One solution called for a re-examination of the Inco- The key issue was that when shipments from non-EDI
terms negotiated with the brands. The study highlighted a brands arrived at the warehouse, the corresponding pur-
number of instances where the retailer was operating on chase orders were often missing in the ERP system.
unfavorable Incoterms. For example, some brands operated As a result, even though the warehouse had physical
on delivered duty paid, or DDP, but the retailer could save custody of the merchandise, it could not take ownership on
significantly on shipping costs if the Incoterm was changed the books, leaving the stocks uninsured and in quarantine on
to ex-works (EXW). Analysis showed that there were other the docks. What’s more, back-of-the-envelope calculations
potential savings involving different choices of Incoterms. concluded that logistics was spending as much as 25% to
The challenge to realizing those savings was that the 30% of its efforts on such non-value added activities.
higher logistics costs had their roots in the way buyers were But while logistics was bearing the brunt of the case of the
negotiating vendor contracts. So, what began as a logistics missing purchase orders, it had no role in procurement, which
transformation initiative made little progress because the was done months earlier, or in the posting of purchase orders.
route to success passed through buying, planning and mer- That raised at least two questions: How can logistics deliver
chandising. The question for the retailer was: Where should operational and unit cost reductions when activities beyond
real transformation begin? As is mostly the case in retail, its scope affect its overhead? More importantly, how do you

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Supply Chain: Retail Transformations

FIGURE 5

…and grows

Business
Organization/ Organization/ Business
processes
RACI RACI processes
How are system
Who is the custodian Who is responsible for What are the steps
settings (e.g. lead time,
for System X? Who assortment planning? in the current process?
service levels, etc.)
approves any changes What are the supporting Are there any non-
reviewed and
to system rules
s Organization/ Business brand guidelines/ value add
periodically RACI processes
or MDM? Who is responsible to What is the policies? activities?
amended? stock replenishment replenishment process
orders? Who including assortment
Replenishment reviews? Who planning?
orders are app o es
approves? The process
Stocks sent to
generated from stores when the of assortment
same SKUs are
System X and never already not selling planning is
in those stores
reviewed broken/weak
Performance
System/Tools management/KPIs
What systems Which KPIs are at
are in use for
replenishment
play? Is out-of-stock-
in-store KPI driving
System/Tools Performance
System/Tools Performance orders? replenishment?
p
What tools are management/KPIs
management/KPIs available to generate How is the
Is the algorithm
to forecast demand What are the KPIs periodic analytics at responsible function
and supply mapped at play to manage various levels (e.g. measured on
correctly? the System X? brand, category, assortment
SKU, etc.)? planning?

Source: Sandeep Gupta

convince internal customers that they are the real culprits here? transformations will continue to fail or deliver very little
Ultimately, planners and buyers viewed the creation of in the way of tangible business benefits.
purchase orders as a mundane, non-glamorous job that could Based on my consulting experience, retailers need to go
be procrastinated. Of course, the “do it later” mentality too back to the basics and bring in the three very important
often meant that POs were never issued until the fire fighting considerations below.
was underway. Logistics would have to take the stocks into • Retail is all about the supply chain: Your organizational
the warehouse to avoid paying demurrage, keep a manual model should reflect this.
count for all such shipments and follow up by the hour. In • Only those retailers that have supply chain talent and
parallel, all kinds of multiple manual handling kept happen- thinking embedded across the various functions will be
ing until the final put away or cross-dock was completed. successful in the future; that includes buyers.
The true impact of this could be devastating for those • Any supply chain transformation must begin as an orga-
retailers that have implemented an omni-channel strategy, nizational transformation in scale and depth—know it,
where demand fulfillment is completely dependent on how and deal with it.
quickly can you move your products from receiving to ship- Based on the examples I have shared, I believe that when
ping. No one can deny that the supply chain is the backbone the organization model precedes the business model, the
of omni-channel fulfillment: You either perform or perish. organization has a written end-date for itself. This single,
fundamental flaw becomes the bane for many transforma-
Transformation success tions. Instead, if retailers first paint the canvas with “how do
In all three real-life examples, the reference to buying and we want things to be done” and then go on to define “who
planning functions is neither deliberate nor accidental. will do what,” they may see a completely different horizon—
There is no denying that these functions are lynchpins in one full of transformation success and positive results. •
the success or failure of any retailer.
What’s more, if you look at transformation through Sandeep Gupta leads the Business Excellence team
a new lens, it is clear that their genesis is in the supply at Al Tayer Group, UAE. He can be reached at
chain. Until retailers recognize this, most supply chain sandeep1gupta1@hotmail.com.

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Warehouse/DC Management

What’s at the heart

While automated equipment at today’s warehouses can be at the heart of their

success, any single piece of automation needs to be balanced with upstream and
downstream processes, raising the importance of software to sync the flow of
work and ensure the heart of the system keeps ticking.

I
t’s tempting to copy the choices of ing the path taken at another DC may
distribution centers (DCs) that have turn out to be disappointing if the
BY ROBERTO MICHEL, broken through to higher productivity automation installed doesn’t support
EDITOR AT LARGE
after deploying automated materials core goals or match the nuances of your
handling. There are countless examples facility’s order profile.
of companies that have tapped solu- “Copying what another facility has
tions like mini-load shuttles, voice done can be the worst way to approach
picking or goods-to-person robotics to a project because it’s the tail wagging
achieve greater speed, labor savings the dog,” says Chris Castaldi, vice presi-
and accuracy. dent of sales for DMW&H, a warehouse
So, why not just install some of that consulting and systems integration
equipment at your DC and wait for firm. “You have to back up and really
similarly dramatic benefits? The short understand the nuances of a company’s
answer, say consultants involved with business and customer service require-
warehouse automation, is that replicat- ments, and then from there, think about

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of your system?

the tenets that will drive the systems sis of the order profile and throughput
and processes you should put in.” requirements, with close attention to
DMW&H clients such as REI, the stock keeping unit (SKU) characteristics
outdoor goods retailer, have had success such as products that are non-conveyable
with specific types of automation, notes or difficult to bar code.
Castaldi, but he believes the key to But DC projects also increasingly must
REI’s success was keeping core opera- address omni-channel requirements such
tional goals in mind as they selected as more each picking and tighter cycle
methods and equipment. times. These e-commerce pressures are
Other consultants concur that decid- driving a need for warehouse control
ing which automated systems should system (WCS) solutions, also known as
drive productivity—in effect determin- warehouse execution system (WES) solu-
ing what should be at the heart of your tions, to orchestrate a DC’s automation
DC—goes well beyond an equipment and balance the flow of work to crank
capability focus. It starts with analy- more orders through a facility in less time.

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Warehouse/DC Management: Automation/Systems Integration

what an omni-channel DC is all about,

you need a smart brain.”
The use of totes holding a single SKU,
light-based picking instructions, and sim-
plicity of the pocket sortation procedure
ensures high order accuracy without hav-
ing to build in extra bar code labeling or
data collection procedures, says Castaldi.
For DCs that often deal with small items
or products like bagged garments where
the bar code label isn’t in a reliably read-
able position, bar code validation can cre-
ate extra labeling and data collection work.
“The combination of shuttle and
pocket sortation technology fit the
nuances of what REI was trying to
accomplish, which was to make things
simple and accurate without creating
extra steps,” Castaldi says. “The start-
Speeding up picking with automation like voice may call for some automation at pack/ ing point was ensuring the best possible
ship stations to achieve balance.
customer experience, and from there,
we looked at the best options that would
Follow priorities Castaldi, because it constantly is filling allow us to streamline the fulfillment
When REI came up with the systems store orders. DMW&H’s WCS solution processes. It’s important to keep your
for its new warehouse in Goodyear, is used to match incoming e-commerce core goals in mind, and then see which
Ariz., it followed a set of core goals or orders with store replenishment orders options best align with those goals.”
“tenets” that centered around sustain- so that if a tote with the needed SKU
ability and connection with the REI is headed to a workstation, the e-com- Breaking constraints
brand. As part of these tenets, REI merce order can be picked concurrently DC projects have always started with
wanted an order fulfillment method with the store order. careful analysis of order profiles, SKU
that was simple and efficient, and “The driving idea was that one person characteristics and throughput targets,
that would streamline the number can be filling retail orders while at the notes Carlos Ysasi, vice president of
of touches needed to pick orders for same time filling direct-to-consumer engineering for VARGO, a warehouse
stores or e-commerce. These goals, orders,” says Castaldi. systems integrator and WES provider.
says Castaldi, coalesced around REI’s And while the facility employs specific “It all starts with the order profile, and
concept of one-touch production and automated equipment to speed up and what that is telling you,” he says. “Then,
eventually led to a system that com- simplify picking, Castaldi adds, much you must consider the throughput that
bines an automated shuttle with pocket of the success of the overall system is DC is going to need to achieve and
sortation to create workstations for in how the automated solutions are start looking at the processing engine or
omni-channel fulfillment. combined, and how the WCS software automation you need to have in place
At these workstations, for store dynamically assigns orders to the right to achieve that type of throughput. We
orders, associates pick items to cartons; totes and workstations. “We were tasked break that down by the output by the
and for direct-to-consumer e-commerce with making the DC super efficient,” says hour and begin looking at what can
orders, they pick to pockets in a pocket Castaldi. “That efficiency is driven by actually handle that throughput.”
sorter. Pick-to-light displays in the software, or the ‘brains’ for the automated VARGO served as an integrator and
workstations instruct the workers, while systems, which can be seen as the heart WES solution provider for American
photo eye sensors catch misplacements. or muscles of the DC,” says Castaldi. “If Eagle’s omni-channel DC in Hazle
The system works well for REI, says you want to be multi-tasking, which is Township, Pa. In that project, says

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Warehouse/DC Management: Automation/Systems Integration

Ysasi, the throughput requirement “Driving down order cycle time and flow have become the top things
was 20,000 units per hour, which to focus on, while efficiency, though still important, is becoming
drove the need for some automated
secondary. That’s a change from where we were in the past.”
machinery.
The systems in use at the DC —Art Eldred, client executive for systems engineering, VARGO
include an inbound conveyor and
sortation system that routes incoming and flow have become the top things up the number of orders picked per
goods directly to where they are needed to focus on, while efficiency, though hour, but has no pack automation in
most—either for store orders or direct- still important, is becoming secondary. place, a bottleneck can easily occur at
to-consumer orders—and a large unit That’s a change from where we were in its pack stations. The better approach,
sorter and put walls for picking, as well the past.” says Hanrahan, is to look at ways
as other picking methods, including ring Ysasi also sees a change in DC to balance the flow of work through
scanners. Coordinating the various auto- methods where omni-channel fulfill- the overall system, rather than try-
mated systems is VARGO’s WES. ment centers want to get product ing to accelerate just one area. One
While specific types of automa- moved quickly from receiving to the streamlining step could be to voice
tion may be needed to meet particular active picking environment without pick directly to cartons—using car-
throughput goals, a good WES serves to the extra touches involved in build- tonization logic to select the proper
ensure a smooth flow between the vari- ing pallets; storing pallets to a reserve cartons—rather than picking to a tote
ous solutions, says Ysasi, making deci- storage area; and moving goods once and sending the tote to a pack station.
sions in near real time based on demand again from reserve to a ready reserve “You essentially are combining two
at the time. “WES is making all of these or pick area. main tasks when you do that,” says
decisions and driving the flow of pro- With WES software, it’s possible Hanrahan.
duction through the building so we don’t to quickly make decisions on where WES/WCS software not only
overwhelm a process, starve a process inbound cases of goods are needed orchestrates that different automa-
for work, or so we don’t have to buffer in most, and route them straight to the tion along the same material flow, says
between processes,” he says. optimal picking area, thereby speeding Hanrahan, but also can manage parallel
Art Eldred, VARGO client execu- up the overall flow, says Ysasi. “When processes so order elements that use
tive for systems engineering, adds you have fulfillment centers with all different machinery all get to outbound
that as omni-channel fulfillment has active inventory, where basically every shipping at the right time. An example
become a reality for more DCs, it has piece is available at any possible time to of this would be oversized items that
tightened order cycle times to such get picked, packed and shipped, you’ve are non-conveyable, but need to be
an extent that WES is needed to con- just opened yourself up really decreasing shipped concurrently with smaller
tinuously match orders and work to cycle time,” he says. items going to the same customer.
the DC’s resources and coordinate the “The software is key—you need good
flow of work between automated sys- Think lean warehouse execution/control software
tems. While warehouse management Some DCs may rely heavily on a major with a sophisticated picking module
system (WMS) solutions that batch piece of automation to attain a pick rate, and wave management logic to allow
work together in planned increments, but for most DCs, the key to through- for parallelism in picking across differ-
or waves, tend to work well for more put is balance between pick, pack and ent zones, and then consolidating,” says
manual facilities doing traditional store ship operations, says Dan Hanrahan, Hanrahan.
fulfillment, they aren’t dynamic or real CEO of The Numina Group. “I look at Ultimately, balance and flow
time enough to serve as the brains for a order fulfillment as a three-legged stool between key areas of the DC work
highly automated omni-channel facility, of picking, packing and shipping,” he together to achieve fulfillment goals,
says Eldred. says. “If any one of those areas gets out says Hanrahan. “Your overall process
“Today, WES as the brains to make of alignment with the others, it causes is like an order fulfillment machine, so
things come in and out of the automa- problems.” you need to keep pick, pack and ship
tion becomes more important,” says For example, says Hanrahan, if a processes in balance to ensure that
Eldred. “Driving down order cycle time DC adopts voice picking and ramps orders flow optimally,” he says. •

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Warehouse/DC Management

DOM’s Impact
Distributed order
management
(DOM) suppliers
ONCustomer
Experience
and users tout its
ability to strengthen
the customer
experience through
better ties to store-
level systems to
improve buy-online/ E-commerce has made distributed order management (DOM)
pickup-in-store systems—a layer of software that sits above inventory systems and figures
efforts. out how to best fulfill orders—a key part of omni-channel strategies. The
routing logic in DOM quickly assesses which warehouses, stores or third-
party locations should be tapped to fill an order, regardless of channel.
In short, DOM brings efficiency to more attention is being paid to integration
fulfillment. But that’s the internal view of with store solutions, says Zalowitz.
DOM, also known as an order manage- “There are two main questions involved
ment system (OMS). As omni-channel in designing your OMS solution: Do all
retailers seek to make stores more useful my commerce systems ‘speak’ the same
BY ROBERTO MICHEL, for customers who buy online, DOM’s language, interface-wise; and second, is the
EDITOR AT LARGE ability to improve the customer experience business logic interpreted the same?” says
is gaining attention. For options such as Zalowitz. “The better those two questions
buy online/pick up in store (BOPIS) to are answered, the more value retailers will
work effectively, the foundation will likely find in their solution.”
involve an OMS that integrates with store- DOM typically integrates with multiple
level solutions. systems to gain knowledge of inventory,
DOM functionality has centered around logistics and labor issues. DOM integrates
order routing, inventory visibility, order with warehouse management system
modification and ship-from-store features, (WMS) solutions to know what is on hand
says Zach Zalowitz, practice lead for omni- in distribution centers, as well as with store-
channel supply chain at consulting firm level systems including point of sale (POS),
SCApath. While the functions OMS ven- merchandising or other inventory systems.
dors are expanding on varies by industry, “One key area of focus for vendors is

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around store labor and capacity plan- in enterprise resource planning (ERP) in some cases thousands—of potential
ning to enable better order routing systems. ERP order management was points of fulfillment to a network.”
decisions,” says Zalowitz. “The more conceived at a time when supply chains
finely tuned you can be around show- were more linear, with a DC shipping to Stores as DCs?
ing what labor is available for each part stores in its region, and little variation DOM solutions may not be able to turn
of each day, the more it helps man- beyond that, notes Brian Kinsella, vice stores into tightly controlled DC envi-
age order allocations properly. It’s not president for product management for ronments, but they can use integration
enough just to route an order to a store Manhattan Associates’ OMS solution. capabilities, rules and software intel-
because that is the inventory point “The supply network for omni-chan- ligence to reliably figure out how much
closest to the customer—you need the nel has gotten far more complicated,” available goods are in specific stores
people there to service those orders.” says Kinsella. “What’s all the rage now without disappointing either e-com-
Today’s DOM/OMS solutions are is turning stores into fulfillment points, merce or walk-in customers.
different from the order management so now you’ve just added hundreds—or Stores tend to be chaotic environ-

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Warehouse/DC Management: DOM

Modern order management systems

ments for inventory control, provide intelligent order routing from the store’s e-commerce
especially outside the back- site and buy one item in per-
room, where customers are son, the Aptos software can
moving goods, trying them do it in one transaction.
on or purchasing them. As “The way we think about
result, says Zalowitz, as part order management, with every
of an enterprise order man- Order decision we make about how
agement (EOM) project, the software works, we put the
omni-channel retailers may customer in middle of it and
Order Management system
need to consider an inven- then wrap the software around
tory protection strategy. those workflows,” says Rawlins.
Under these strategies, One of Aptos’s custom-
says Zalowitz, an appropri- ers drawn to this blending of
ate stocking level is set for software needed for in-store
each item by department Retail stores Distribution Vendors retailing and online order man-
and store so there is enough agement is TUMI, a luggage
“protected” inventory to Inventory system of records Vendor inventory brand that sells online as well
avoid stock outs in stores, as through its own stores and
Source: Kibo
while also guarding against other retail partners. Earlier
committing to online sale as the data you feed into it,” he says. this year, Aptos announced
of items in a store that could prove dif- DOM vendors may offer merchan- that TUMI, an existing customer for
ficult to locate. Factors such as how dising or POS solutions as well, and Aptos’s software including POS and
deep to set the inventory for an item, its in these cases, they have typically pre- customer relationship management solu-
sales velocity, and how prone an item is integrated the solutions so OMS can tions, selected Aptos Enterprise Order
to loss or “shrinkage,” are typically taken get timely updates. “A DOM system is Management for DOM duties.
into account in inventory protection. opened up pretty deeply with applica- The overall solution is aimed at
“The critical misstep some retailers take tion programming interfaces (APIs) enabling TUMI to integrate physical
is to use ‘blanket’ protection across the because it relies on data from other sys- and online retail channels, and enable
board for all items in the store, which tems to work,” says Ian Rawlins, strategy shoppers who go into stores to have
leads to lost sales,” Zalowitz says. leader at Aptos, a vendor that offers “endless aisle” fulfillment options. Flex-
While most DOM solutions have DOM, POS and other retail solutions. ibility for TUMI’s customer is the goal,
logic to support inventory protection, “By contrast, some point-of-sale sys- says Rob Cooper, general manager for
explains Zalowitz, inventory updates tems, especially the older ones, are like TUMI North America. “Aptos Enter-
from store-level systems present further closed universes. They are a little more prise Order Management will allow us
opportunities for fine-tuning protection difficult to work with, even though we to present our vast product assortment
levels because the OMS knows what is can use our APIs to push and pull data.” to customers in an ‘endless aisle’ format,
on hand. Many retailers have been adopting while ensuring products can be fulfilled
For most retailers, a merchandising new POS solutions the last couple of with the customers’ convenience in
system integrates with a POS to give years, says Rawlins, first to prepare for mind.”
DOM a complete view of inventory. Intra- chip cards, but more recently, to have
day signals from a POS give a DOM a an interoperable POS for omni-chan- DOM’s integration points
more real-time inventory view. Without nel. With Aptos’s suite of solutions, DOM solutions have other key points of
this signal, Zalowitz explains, the protec- he adds, the DOM and POS can work integration besides store-level systems,
tion levels must increase to offset “stale” together to simplify things for the points out Fab Brasca, vice president
inventory knowledge. “The best DOM in customer, so that if a customer at the of solution strategy with JDA, though
the world is only going to be as effective store wants to order a couple of items certainly a view into store inventory and

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Warehouse/DC Management: DOM

store labor is critical for BOPIS. JDA enabling multiple points of integration successful,” says Sherman.
is a partner with IBM’s Sterling Com- to handle the complexity,” says Brasca. Inventory protection logic in DOM
merce for DOM software, combining Because DOM solutions typically can help improve the customer experi-
IBM’s DOM with JDA’s lineup of supply need to integrate with multiple sys- ence by ensuring inventory in stores isn’t
chain management software, including tems, DOM vendors need to provide over-committed to online customers, or
WMS and some planning software. excellent integration technology, sold out for in-store shoppers. However,
setting up protection rules in DOM can
be time consuming, so one area of DOM
“The leaders in omni-channel think about the evolution is in systems that self-adjust to
customer’s journey first and work backwards demand and supply patterns, says Man-
from there. They need to think through: what does hattan’s Kinsella. “We call it Adaptive
the customer need here, and how can I make the Network Fulfillment,” he says. “It’s better
experience seamless and convenient for them?” if the system can be self-tuning, rather
than having to have users configure 50 or
–Zach Zalowitz, SCApath 60 different flags.”
DOM solutions also should provide a
For example, the integration can link says Jennifer Sherman, senior vice means of handling exceptions or unex-
DOM with JDA’s replenishment plan- president of product and strategy for pected changes, such as weather events.
ning so the true source of demand can Kibo, a DOM vendor that also offers “The best OMS providers have all made
be considered, which can be tricky for e-commerce and mobile POS software. investments in better workflow-driven
omni-channel retailers. For example, a “You have to have a robust integra- frameworks for exception management,”
customer may walk into the store, where tion layer—one that ensures that the says Zalowitz. “Additionally, the DOM
an associate orders a product for home integrations put in place don’t have to providers are investing in available to
delivery fulfilled from a DC. change even if the underlying software promise engines and in making store
The true point of demand is the does,” says Sherman. fulfillment functions easy to use, espe-
store, so ideally, explains Brasca, DOM Kibo also offers some basic WMS- cially functionality on mobile devices.”
should link with replenishment plan- level functions, including the ability The overarching interest for both
ning to consider such patterns. “In to pick, pack and ship as well as some DOM vendors and users, says Zalowitz,
today’s world, when you think about wave planning, as part of its platform. is to strengthen the customer experience,
replenishment, you need to capture Sherman calls it a “WMS light” capabil- whether it’s fulfillment for online orders or
these multiple points of data for a ity that suits some of its users, though in-store workflows. To succeed, concludes
single transaction to truly understand some may choose to integrate Kibo’s Zalowitz, better, integrated software helps,
where that inventory should be in the OMS with a separate WMS. but the real value is in designing processes
future,” says Brasca. that center on customer needs.
DOM’s tie to transportation man- Customers at stake “I think where companies tend to miss
agement software also is critical to At the store level, points out Sherman, the boat is that they think about processes
be able to instantly figure out the store associates benefit from mobile apps like pick-up-in-store from a transactional
logistics involved in consolidating that help them service customers who viewpoint,” he says. “Rather, the leaders in
multiple items for an online order for might want to order online while at the omni-channel think about the customer’s
store pickup when those items are in store. Retailers also should consider eas- journey first and work backwards from
multiple stores, DCs, or a combina- ily overlooked details such as signage for there. They need to think through: what
tion of both. Brasca says this “click and pickup up of online orders, as part of per- does the customer need here, and how
collect” capability relies on DOM that fecting the customer experience. “Where can I make the experience seamless and
integrates with WMS and store inven- we see most omni-channel efforts fail convenient for them?” •
tory systems, as well as transportation it’s because they did not involve the
management, to work correctly. “When stores upfront, and think about all things Roberto Michel is editor at
we talk about click and collect, we are involved in making their store associates large for Logistics Management

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 A SPECIAL SUPPLEMENT TO:

6 ways
®

BIG DATA
is enhancing the
global supply chain
D
efined as the massive volume of structured and
As global supply chains unstructured data that can’t possibly be processed
become more complex and using traditional software or database strategies, Big
customers more demanding, Data is affecting every corner of the business world. It’s no
the race is on to develop surprise, really, seeing that more data has been created in
software applications that the past two years than in the entire history of the human
can effectively manage and race. By 2020, roughly 1.7 megabytes of new informa-
make sense of the zettabytes tion will be created for every second for every human being
of data being generated by and, at that point, the digital universe will be 44 zettabytes
our digital world. strong (up from a current 4.4 zettabytes).
As supply chain managers scramble to wrap their arms
around the reams of information now at their fingertips,
BY BRIDGET MCCREA, a growing number of software providers are making the
CONTRIBUTING EDITOR
task more manageable and useful. In other words, simply
having the data at your avail isn’t enough; it’s about tak-
ing that information and transforming it into actionable
insights that help drive operational efficiencies across the
supply chain.

64S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

 Top 20 supply chain management software suppliers
SCM (SCE, SCP, Procurement) Total Software Revenue

2015 2016 MES/

No. Supplier SCP WMS TMS Procurement Website
Revenue Revenue MRP

1 SAP 2,666.8 2,932.4 x x x x x sap.com

2 Oracle 1,447.8 1,552.9 x x x x x oracle.com

3 JDA Software 467.8 475.9 x x x jda.com

4 Infor Global Solutions 105.5 243.3 x x x x x infor.com

5 Manhattan Associates 209.3 218.8 x x x manh.com

6 Epicor 162.1 191.6 x x x x epicor.com

Descartes Systems
7 Group 145.3 159.2 x descartes.com

8 HighJump 129.7 134.9 x x x highjump.com

9 Basware 112.6 122.3 x basware.com

10 Coupa 72.4 114.3 x coupa.com

11 IBM 126.6 112.0 x x ibm.com

12 PTC 105.8 104.6 x x ptc.com

13 Dassault Systemes 74.9 92.9 x x x 3ds.com

14 BluJay 76.6 85.8 x blujaysolutions.com

15 Jaggaer 82.2 84 x jaggaer.com

16 Kinaxis 66.3 82.8 x kinaxis.com

17 Perfect Commerce 44.5 72 x perfect.com

18 e2open 57.7 69.8 x x x e2open.com

19 Zycus 49.4 65 x zycus.com

20 GEP 55 63.3 x gep.com

Total 10,180.7 11,183.3

Revenue listed in millions of USD

Source: Gartner

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 65S

Special Report: Big Data A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

“Supply chains are more complex and helping companies take the right notifies the user about a late shipment
than ever, and with these complexi- actions. before the carrier issues the notifica-
ties come many challenges,” says 1. Get better diagnostic infor- tion,” Vaillancourt explains, “then that
Shannon Vaillancourt, president at mation. To solve problems and cir- user can enact a contingency plan and
RateLinx. “Big Data allows compa- cumvent future challenges, companies get the product faster from an alter-
nies to diagnose the issue so they need good diagnostic data. Big Data nate source.”
truly understand what is causing it.” gives them that, according to Vaillan- 2. Get a clearer “crystal ball” for
Of course, capturing the data and court, while also ensuring that their the future. Defined as the data mining,
then using it to make good decisions future strategies are based on solid statistics, modeling, machine learning,
are two entirely different things. To historical information. “Big Data can and artificial intelligence used to analyze
help fill that “gap,” Vaillancourt says help companies diagnose many issues, current data to make predictions about
software developers are focusing on which will in turn allow them to the future, predictive analytics is the
the 5 Vs of Big Data: variety, velocity, develop strategies to solve the issues,” modern-day supply chain manager’s
veracity, volume and value. he says, “and then ultimately deploy crystal ball. “Predictive analytics makes
Vaillancourt says the final “v” is the strategies successfully.” it possible to analyze data and create
extremely important and often over- For example, the organization that assumptions as to what will happen to
looked. “Companies need to be look- wants to leverage Big Data for track not only predict the future, but influ-
ing for software that turns all of their and trace of its products can do so by ence it as well,” says Marcell Vollmer,
data into value—or, actionable,” he combining the purchase order (PO) chief digital officer at SAP Ariba.
points out. “Actionable data is created details, shipment information and the In Kansas City, for instance, a local
through analytics; it’s the analytics carrier’s tracking information. Then, police department is using data to stop
that tells the user what to do, and ulti- once that data is standardized and crime before it happens by identify-
mately what action to take.” cleansed, analytics can be applied to ing “hot spots,” patrolling those areas
Following are six big ways that Big it in a way that truly makes the infor- more aggressively and then more
Data is affecting the supply chain mation actionable. “If the analytics closely monitoring the activities of

SCM market will hit $13 billion in 2017

A s global supply chains become more complex and
intertwined, a growing number of companies are
turning to technology to help them manage their supply
to dominate the market in 2016, with the top five providers
accounting for 49% of the total market (see chart page 65S).
The same top five market leaders had dominated the list
chains in a way that maximizes customer value while since 2012, but Infor’s acquisition of GT Nexus has bumped
improving competitive advantage. it from 11th place in 2015 to No. 4 with $243 million.
The proof is in the numbers: the market for supply There is still a sizable gap between fourth place and the
chain management (SCM) software grew by 9% in 2016, top three, where SAP ($2.93 billion), Oracle ($1.55 billion)
according to Gartner, which includes both supply chain and JDA ($476 million) retain their ranks. In fifth place is
execution (SCE) and supply chain planning (SCP) ap- Manhattan Associates with $209 million, followed by Epi-
plications under the SCM umbrella. The SCM market is cor, which grew 18% to $192 million.
expected to exceed $13 billion in total software revenue The push for Cloud capabilities also fueled some of
by the end of 2017, with Cloud-based applications grow- the acquisition activity over the last year. Key transac-
ing by 20% annually. tions included Infor’s acquisition of GT Nexus, Kewill’s
Supply chain execution systems, which include ware- acquisition of LeanLogistics, Oracle’s acquisitions of
house management systems (WMS) and transportation LogFire and NetSuite, and E2open’s acquisitions of
management systems (TMS), grew more than 10% to Terra Technology (and, more recently, Steelwedge).
$3.5 billion. The market for supply chain planning systems Other notable trends include suite vendors’ ongoing
crossed the $4 billion mark after growing nearly 8%, with push to develop end-to-end solutions that help tie cus-
the top five companies accounting for 59% of the list’s tomer relationship management (CRM), replenishment,
total revenues. network design and other capabilities into their broader
Market leaders in the overall SCM category continued solutions.

66S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

Software that connects
brands and co-pack
suppliers for perfect
order execution.

www.nulogy.com
Special Report: Big Data A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

recent parolees. In the business world,

predictive analytics is allowing firms
to more clearly understand customer
needs and adapt their business to
accommodate them. Take pricing, for
example. Using predictive analytics, “By coupling Big Data with predictive
companies can predict equilibrium
before releasing a new product, thus
analytics, it’s quite possible to keep a handle on
numerous economic and consumer behavior metrics to be
maximizing the revenue of the solu-
tion out of the gate while also under- better prepared for what’s coming next.”
—Rich Wagner, CEO, Prevedere
standing future demand. “Data is the
new currency,” Vollmer adds, “and
predictive analytics is the key to col- to oil prices to consumer demand, they’re operating in a dynamic envi-
lecting the dividends it pays.” supply chain executives who can ronment where consumers expect
3. Manage external factors that quantify and anticipate such impact quick, accurate deliveries. “If a prod-
are beyond your control. External can better plan their materials and uct is unavailable, manufacturers and
factors can have a substantial impact inventory,” says Rich Wagner, CEO retailers alike risk not only losing a
on supply chains, yet in many cases at Prevedere. He says retailers are customer forever, but also a digital
these outside forces are hard to con- particularly well positioned to lever- media backlash,” Wagner points out.
trol and even detect. “From weather age this advantage, namely because How can Big Data help? By helping
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Special Report: Big Data A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

firms better predict demand, and becoming more interconnected and, numerous economic and consumer
therefore better plan their inventory to subsequently, more impacted by world behavior metrics to be better prepared
mitigate against shortages. The same events. “By coupling Big Data with for what’s coming next.”
benefits apply on a global scale, where predictive analytics,” Wagner says, 4. Make more profitable supply
both supply chains and operations are “it’s quite possible to keep a handle on chain demand forecasts. Access
to global data, combined with the
power of Cloud computing, is giv-
ing technology more power to tackle
even the toughest supply chain chal-
lenges. “With today’s advancements
in machine learning, companies
can use technology to constantly
monitor those external forces,” says
Wagner, “and get a real-time view
of what’s ahead.” He sees this as a
fundamental change in demand plan-
ning—compared to traditional fore-
casts built on past performance with
the assumption of stable economic
conditions. “Executives know that
they can’t rely on precedence and
they need insights to make decisions
about the future with certainty,” says
Wagner. “This desire to be immedi-
ately notified of shifts in momentum
is now a reality.” For example, one
global beverage manufacturer saved
about $9 million by improving prod-
uct distribution through predictive
demand models. “The manufacturer
realized that external factors (e.g.,
the architectural billings index) were
leading indicators of performance,”
says Wagner, “so it adapted its supply
chain planning across 400 brands and
21 distributors.”
5. Reduce demand variabil-
ity and cycle times. Big Data is
turning supply chain managers into
“mind readers,” allowing them to pre-
dict and react to buyer behaviors in
new ways. On the demand side, for
instance, Big Data helps companies
gain better understanding over con-
sumer behaviors, foot traffic, buyer

70S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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LEADERS.
preferences and the actions that their competitors are
taking. “This gives companies a solid offensive footing,”
says Dennis Groseclose, president and CEO at Trans-
Voyant, “and allows them to fuse external data and
demand patterns to more effectively reduce demand
variability.” Having actionable data also helps compa-
nies better manage lead times, variability and capacity.
This, in turn, helps them better understand manu-
facturer and carrier behaviors. “With this information
in hand, companies can squish planning cycle times
down to one month vs. five months,” says Groseclose,
“or to one week vs. five weeks.”
6. Prepare for the “SNEW” wave. Here’s a buzz-
word you may not have heard of yet: SNEW, or social
media, news, event and weather data, is the next acronym
that’s either going to make supply chain managers sit up
and take notice, or make them roll their eyes and groan.
Either way, SNEW data promises to help improve supply
chain capabilities and give companies even more data to
sift through, digest and make sense of. An existing forecast,
for example, can be adjusted accordingly when accurate
weather predictions are factored into the equation.
Driven by the Internet of Things (IoT), SNEW uses
a “combination of data feeds to determine the best rout-
ing, risk management, and other supply chain decisions,”
according to Steve Banker, vice president, supply chain
management at ARC Advisory Services, who sees SNEW
as a potential player in the future of supply chain visibility
and risk avoidance (or mitigation).
“This is a new solution to the market, and it’s being
driven by the emergence of new technological capabili-
ties,” Banker notes. The integration of social media,
news, event and weather data into the manufacturing
and distribution process is also getting a boost from the
ongoing digitization of the supply chain.
“What we’re looking at is a series of technologies
that are either rapidly emerging or already further along
in terms of emergence,” says Banker, noting that while
IoT is a bit further along in terms of maturity, concepts
like SNEW and blockchain (i.e., a digital ledger where
transactions made in bitcoin are recorded chronologi-
cally and publicly) are still nascent. “Over time,” he
concludes, “these innovations will continue to generate
Big Data that companies will use for decision making.” •

LOGISTICSMGMT.COM
 TOP 25 FREIGHT FORWARDERS
®

A SPECIAL SUPPLEMENT TO:

Freight Forwarding 2017:

DIGITIZATION
D
DIGI
IGI
&E-COMMERCE
continues to reshape marketplace
The global freight forwarding market has grown by
2.7% in real terms since this time last year, but owing
to a continuation of excess capacity issues and
lower average oil prices, rates continue to fall in both
air and sea freight. Forwarders now need to ramp up
the value-add visibility services in an effort to boost
revenues and keep shippers smiling.

O ver the course of 2016, real revenue

and volume growth in the air and sea
freight forwarding markets was remark-
ably similar globally, but this disguises
significant differences across important
countries and regions, say analysts who
keep a close eye on the market.

By Patrick Burnson, Executive Editor

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 73S

SPECIAL REPORT
TOP 25 FREIGHT
FORWARDERS A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

Top 25 Global Freight Forwarders

Ranked by 2016 Logistics Gross Revenue/Turnover and Freight Forwarding Volumes*

A&A Gross Revenue Ocean Air Metric

Provider
Rank (US$ M) TEUs Tons
1 DHL Supply Chain & Global Forwarding 26,105 3,059,000 2,081,000

2 Kuehne + Nagel 20,294 4,053,000 1,304,000

3 DB Schenker 16,746 2,006,000 1,179,000

4 DSV 10,073 1,305,594 574,644

5 Sinotrans 7,046 2,950,800 532,400

6 Panalpina 5,276 1,488,500 921,400

7 Nippon Express 16,976 550,000 705,478

8 Expeditors 6,098 1,044,116 875,914

9 UPS Supply Chain Solutions 6,793 600,000 935,300

10 CEVA Logistics 6,646 681,600 421,800

10 GEODIS 6,830 690,000 330,000

11 Bolloré Logistics 4,670 856,000 569,000

12 Hellmann Worldwide Logistics 3,443 902,260 576,225

13 Kintetsu World Express 4,373 556,640 495,947

14 Yusen Logistics 4,169 633,056 332,389

14 Kerry Logistics 3,097 1,055,600 282,200

15 DACHSER 6,320 481,400** 272,100

16 C.H. Robinson 13,144 485,000 115,000

17 Agility 3,576 513,500 372,700

18 Hitachi Transport System 6,273 430,000 230,000

19 Toll Group 5,822 542,000 114,000

20 Damco 2,500 659,000 190,000

21 XPO Logistics 8,638 131,500 72,300

22 Logwin 1,095 600,000 140,000

23 NNR Global Logistics 1,676 146,278 286,897

*Revenues and volumes are company reported or Armstrong & Associates, Inc. estimates. Revenues have been converted to
US$ using the average exchange rate in order to make non-currency related growth comparisons. Freight forwarders are ranked
using a combined overall average based on their individual rankings for gross revenue, ocean TEUs and air metric tons.
**Includes LCL shipments.
Copyright © 2017 Armstrong & Associates, Inc.

74S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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SPECIAL REPORT
TOP 25 FREIGHT
FORWARDERS A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

For example, airfreight

forwarding growth in China is
thought to have been robust
this past year, while sea freight
growth was much weaker. Con-
versely, the United States saw
moderate expansion in sea freight
as air cargo growth faltered over
the same period.
Looking ahead to the next 12
months, the market is antici-
pated to grow at a real compound
annual growth rate of 4.1%, as
global trade volume growth accelerates. Mean- ers will intensify over the next five years. Indeed,
while, logistics managers moving freight globally researchers feel that with investment in technology
should plan their budgets accordingly. and offering new or more value-added services,
According to the new “Global Freight Forward- middlemen will develop more successful strategies
ing 2017 Report” compiled by the London-based to sustain margins. In addition, it appears that con-
think tank Transport Intelligence (Ti), a continua- ventional forwarders are set to lose volume share
tion of excess capacity issues and lower average oil to other parties like smaller, more technologically
prices in 2016 led rates to fall in both air and sea savvy 3PLs, but the threat may be “asymmetrical”
freight, meaning most forwarders reported lower for air and sea.
year-on-year revenues. A deep dive into the world of freight forward-
“While air and sea volume growth picked up a bit ing technology reveals the disruption caused by
in 2016, most forwarders experienced declining rev- digitization, changes to the competitive landscape,
enues on the back of substantial rate declines,” says and, ultimately, whether forwarders can adapt and
David Buckby, an economist at Ti. “However, and survive the upheaval being caused by the contin-
as usual in such circumstances, the fall in forwarder ued evolution of the digital supply chain.
sell rates did not match the drop in their buy rates, “The research we’ve conducted indicates that
leading to improved gross profit margins.” there’s substantial demand for online interfaces
Over the medium term, Buckby expects growth that allow forwarders to better serve shippers,” says
to pick up in line with higher global trade volume Ti analyst Alex Le Roy. “Nonetheless, it’s clear that
forecasts in 2018, though risks are tilted to the the scope of these solutions, in terms of geographic
downside due to factors such as political uncertain- coverage for example, needs to broaden in order for
ty and continued trade protectionism rhetoric. them to deliver value. This will occur, but we are
now bearing witness to a race for scale amongst the
Deep dive into the market start-ups.”
The Ti report also explores the performance of the John Manners-Bell, CEO of Ti, also asserts that
top players against the rest of the market; disinter- the forwarding sector is facing a challenging time,
mediation; regionalization; vertical sector oppor- not least because the global economic environment
tunities and the effectiveness of online booking has remained volatile and difficult to anticipate—
platforms. though this was nothing new, and the sector has al-
On profitability performance, survey results ways coped well in such circumstances. He warns,
indicate that excluding the impact of volume however, that structural challenges such as trends
and rate changes, margin pressures for forward- toward regionalization and near-sourcing, coupled

76S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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SPECIAL REPORT
TOP 25 FREIGHT
FORWARDERS A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT

with greater technological “The new generation entering the logistics markets have
demands, will prove more dif-
grown up with the laptops and smartphones and expect
ficult to manage.
“Political, economic and business transactions to be the same or just as easy as
technological pressure will ordering a pair of shoes from Amazon.”
continue to shape the industry
in the coming year,” says — Cathy Morrow Roberson, Logistics Trends
Manners-Bell. “One thing is & Insights Morrow Roberson.
certain, whether large or small,
freight forwarders will need to remain agile if they shoes from Amazon.”
are to flourish in an uncertain and complex world.” When asked what improvement will be uti-
lized the most over the next five years, 58% of
Digitize or die responding shippers named “digitization,” with
The Ti report mirrors much of what’s contained in 92% of survey respondents saying “digitization
a recent survey conducted by the consultancy Lo- adds value.” Furthermore, says Morrow Rob-
gistics Trends & Insights. According to “The Evolv- erson, 58% of survey respondents view online
ing Freight Forwarding Market 2017,” digitization freight marketplaces as an opportunity for tradi-
is looming large in the immediate future. tional forwarders.
Cathy Morrow Roberson, president of the “In fact, we’re seeing partnerships being estab-
consultancy, maintains that the advent of non- lished between traditional forwarder and non-tradi-
traditional players riding the wave of e-com- tional,” says Morrow Roberson. “DB Schenker and
merce growth—such as Amazon, Alibaba, and uShip, for example. Schenker acquired an equity
the many new tech-based startups—are changing stake and is using uShip within the European
the face of forwarding. road freight market. Drive4Schenker uses uShip
“The digitization of supply chains has forced technology to connect the some 30,000 transport
many traditional forwarders into investing and partners in the European land transport network to
automating their processes,” says Morrow Rob- their freight.”
erson. “The new generation entering the logistics Morrow Roberson adds that partnering with
markets have grown up with the laptops and an online freight marketplace allows a traditional
smartphones and expect business transactions to forwarder to offer a digital solution in a faster
be the same or just as easy as ordering a pair of manner. As an example, she points out that DHL
introduced its online marketplace—CILLOX—that
matches full truckload and less-than-truckload
shipments with available transportation providers.
“A big plus for digitization is that it levels the
playing field for small- to medium-size forwarders as
well as the larger ones,” says Morrow Roberson. “And
it’s not only forwarders, but also shippers of all sizes.
Shippers can take advantage of numerous online mar-
ketplaces, such as Freightos, to obtain a rate, book the
freight and track it from beginning to end.”
According to Morrow Roberson, a drawback to
many, if not all of these marketplaces, is that not
all trade lanes are included; so shippers will need
to choose wisely which marketplace to use and

78S L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

 SPECIAL REPORT
TOP 25 FREIGHT
A SPECIAL SUPPLEMENT TO LOGISTICS MANAGEMENT
FORWARDERS

remember to compare rates among all of them,

including those of traditional forwarders.
“The big question to ask,” cautions Morrow Rob-
erson, “is as if the rates are published or negotiated.”

Margin watch
Dr. Zvi Schreiber, CEO of Freightos, a technol-
ogy provider focused on instant freight quotes for
freight forwarders and shippers, admits that the
last quarter “ended on a somber note for digitiza-
tion” due to cyber-attacks that temporarily crippled
some of the major global forwarders. tion. In Germany, Panalpina launched a pilot ocean
“However, the shipping community will remain shipment management system. “Finally, CHAMP
vigilant in safeguarding the progress we’ve made took tracking further with voice-based air cargo
toward transparency,” says Schreiber. tracking via Alexa,” says Schreiber. “And the timing
The most recent Freightos newsletter, “LogTech couldn’t be better.”
Review: Q2 2017,” notes that during the second Brandon Fried, executive director of the Air For-
half of June, Amazon and Alibaba both held confer- warders Association (AfA), agrees with Schreiber
ences in the United States, appealing to small and positive take on the innovation being pushed into
midsize businesses selling on their platform. the market, noting that while air cargo volumes
“While Alibaba was advocating sales to China as have increased, margins remain depressed and
Amazon encouraged cross-border importing, both most of AfA members are looking forward to more
were clearly pursuing a small- to medium-sized tech-driven opportunities in which profitability
business focus, as Big Box retailers continue to may improve.
struggle,” says Schreiber. “One influencing factor to consider is the growth
For enterprise forwarders and carriers, the of capacity we’ve seen over the past couple of years,
marching orders for the second quarter appeared keeping pricing at lower levels,” says Fried. “This
to be freight visibility, as a number of companies increase in space is attributable to the large amount
unveiled solutions to enhance cross-supply chain of new and efficient wide-body aircraft, each with
visibility of shipments. The last-mile drone delivery generous belly space flying the popular trade lanes.”
space stayed hot, both in the air and on the ground. Another significant factor inhibiting this growth
Meanwhile, Uber Freight formally launched its in many cases lies with lower customer pricing
product, while continuing to face strong competi- agreements that may no longer reflect today’s mar-
tion from other on-demand trucking startups. ket conditions. Once these contracts expire, says
“The second quarter of this year was a strong Fried, prices and margin should improve overall.
quarter for visibility technology,” says Schreiber, “However, new transport pricing agreements alone
“particularly for DHL’s varied divisions.” DHL will not assure increased profitability, and this is why
Global Forwarding launched Ocean View, which forwarders must be searching for more operational
offers real-time updates on maritime shipments; efficiencies that only technology can provide,” says
DHL SupplyWatch, an AI program for identifying Fried. “People still play a crucial role in our business,
supply chain disruptions; and Saloodo, an online but technology will help them work smarter and
trucking marketplace. provide an improved customer experience.” •
Meanwhile, DP World also released a container
visibility solution in the UK, as French startup Patrick Burnson is executive editor of
Traxens unveiled a smart freight train tracking solu- Logistics Management

LOGISTICSMGMT.COM SEPTEMBER 2017 | L O G I S T I C S M A N A G E M E N T 79S

Pacific Rim Report
Patrick Burnson is executive editor
of Logistics Management. To contact
Patrick with feedback or a story idea,
By Patrick Burnson please send an e-mail to pburnson@
peerlessmedia.com.

Peace on the waterfront

When the Intermodal Association of North America Readers of this column will no doubt recall that
(IANA) stages its Intermodal EXPO 2017 in Long last year at this time a broad coalition of shippers
Beach this month, much of the discussion will be pleaded with longshore labor and management to
focused on the rebirth of U.S. West Coast ports—as it come to just such an agreement. These organizations
should be. represented manufacturers, farmers, agri-businesses,
The event comes on the heels of an historic announce- wholesalers, retailers, importers, exporters, distribu-
ment celebrating an unprecedented cooperative agree- tors, transportation and logistics providers—pretty
ment between dockside labor and management that all much everyone involved in supply chain management.
but assures the continued robust cargo throughput at our In a letter sent to both the PMA and ILWU, they
nation’s leading ocean cargo gateways. stated the need for “a new model and for continuous
With formal ratification of the contract
between the Pacific Maritime Association
(PMA) and International Longshore and “ We feel that a decision to extend the contract
Warehouse Union (ILWU) now complete, reflects improving relations and performance
PMA president James McKenna is justifiably
enthused about the historic three-year con-
up and down the West Coast ”
tract extension that covers workers at all 29 —Chris Lytle, Port of Oakland
West Coast ports through July 1, 2022.
“This first-of-its-kind contract extension is great negotiations that would promote an open dialogue.”
news for the maritime industry and the nation, setting Fast-forward to this year, and just such a “model”
the stage for reliable and productive cargo operations became a reality, with no one party more excited about
for years to come,” observes McKenna. “This agree- the labor/management contract than the Pacific Rim
ment also continues to provide ILWU workers with a ports themselves.
generous wage and benefits package during a time of “The ILWU’s vote to extend their contract by three
great change in the global maritime business.” years helps sustain the momentum building in our
ILWU International president Robert McEllrath supply chain as we continue to focus on delivering
was equally pleased, noting that the rank-and-file mem- innovation, value and efficiency for the U.S. importers
bership has made their decision and expressed a clear and exporters,” says Gene Seroka, executive director
choice. “During the past year we saw a healthy debate of the Port of Los Angeles. “The certainty that comes
and heard different points of view, with concerns raised with this contract extension is great news for all of
by all sides,” he says. “The democratic process allowed Southern California, where one in nine jobs in the
us to make a difficult decision and arrive at the best five-county region is connected to the San Pedro Bay
choice under the circumstances.” port complex.”
For shippers the deal is a win/win as well, says the For the Port of Oakland, the new contract signals
Washington Council on International Trade (WCIT). that Pacific Rim ports “mean business,” says execu-
“For Washington businesses to remain globally com- tive director Chris Lytle. “We’re the most efficient,
petitive, it’s essential that our ports operate as reliable timely and cost-effective gateways for international
and efficient global gateways,” says Lori Otto Punke, trade and with a contract extension, we’re also the
president of the WCIT. “The last port disruption in most dependable.”
2014 and 2015 cost Washington businesses nearly Furthermore, notes Lytle, a contract extension will
$770 million in near-term losses alone.” ease concerns about labor-management disputes that
According to Punke, Washington state businesses can arise when waterfront contracts are negotiated.
lost international customers and long-term contracts Since the last contract was signed in 2015, labor rela-
and had to find alternative ways to transport their goods tions have been good and productivity high. “We feel
at tremendous expense. Indeed, some agricultural that a decision to extend the contract reflects improv-
producers in the Pacific Northwest lost entire harvests ing relations and performance up and down the West
that spoiled before they could be exported. Coast,” he adds. •

80 L O G I S T I C S M A N A G E M E N T | SEPTEMBER 2017 LOGISTICSMGMT.COM

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