John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
With gas prices spiking, it's no surprise that Americans are flocking to car dealerships to trade in their gas-guzzlers for fuel-efficient gas/electric hybrid models. But those hoping to make the switch this summer are likely to be disappointed. Production of the more popular models lags well behind demand, and many dealers have long waiting lists.
But one automaker, Ford Motor Co., has a plan for getting hybrid vehicles to its dealers faster and RFID technology is playing a major role in the effort. Managers at Ford's Oakville Assembly Complex (OAC) in Ontario, Canada, have come up with a way to streamline the assembly of two new hybrid vehicles scheduled to go into production as early as this fall. That plan calls for expediting the delivery of just-in-time parts on a 24/7 basis by using an active-RFID-powered automated "fast gate" check-in and check-out solution that will significantly improve the site's freight and inventory management system.
Ford's installation of Santa Clara, Calif.-based WhereNet's RFID-based real-time locator system represents part of a transformation of the Oakville site to flexible manufacturing, which will help Ford avoid the lengthy and expensive retooling process required of traditional model changeovers. The plant, which currently builds the Ford Freestar and Mercury Monterey minivans, is slated to begin production of hybrid versions of the Edge and Lincoln MKX crossover sport utility vehicles (SUVs) in the coming months.
Precision operation
The WhereNet solution being installed at the OAC will cover 5.4 million square feet, making it the largest real-time location system-powered yard management solution ever implemented by an automotive manufacturer. The system was expected to be completely installed by mid-summer, giving Ford the needed visibility to track the movement of about 1,000 trucks a day, ensuring that each of the 2,000 parts needed to build a single vehicle is delivered to the assembly line precisely on time.
"Wireless tracking is the next wave in supply chain logistics and will complement the plant's conversion to flexible manufacturing," says Frank Gourneau, OAC plant manager. "Our flexibility will allow a quick increase in production of [hybrid] models, and wireless communications will help to get hybrid parts and components to the final assembly area at the precise moment they are needed and in proper sequence."
Orchestrating the movement of those parts and components will be no small feat. With flexible manufacturing, inbound parts shipments from suppliers are smaller and more frequent than with traditional operations, typically involving hundreds of daily truckloads of thousands of components in sequence. By automating the check-in/check-out procedures, the WhereNet system saves Ford several hours a day in time spent processing deliveries and increases efficiency in the supply chain.
In addition to the smoother flow of trailers, Ford will benefit from knowing the details on each truck and its contents. Precise information about its cargo type of engine or style of wheels, for instance will be beamed wirelessly to a database, allowing quick access to the information. Workers will be able to locate a trailer of tires for the production of the Edge, for example, and tell the system which dock door to deliver it to and when.
"With all of the additional trailers coming in and with the more frequent deliveries they will be receiving, Ford needed to handle an increased throughput for the yard," says Gary Latham, director of industry marketing for WhereNet, which began deploying active RFID yard management solutions for Ford in 2000. "The goal is to leverage the same facility but get more trailers coming in and going out each day."
In addition to moving more trailers, the WhereNet system is helping Ford optimize labor productivity by minimizing the amount of time workers spend searching for trailers in its yard. "If you can get the trailers in but you can't find them in the yard, it doesn't do you much good," notes Latham.
Partly cloudy, with scattered waves
The WhereNet solution calls for 68 overhead antennas that will perform a number of tasks within the wireless grid from reading transponders installed in trucks to providing full Wi-Fi and Voice over Internet Protocol (VoIP) access. Forklift operators working inside Ford's parts distribution center will receive realtime status information on shipments arriving at any of the facility's 177 receiving dock doors.
In effect, the WhereNet system puts a "wireless cloud" over the entire Oakville complex, with active RFID transmitters permanently affixed to trailers belonging to Ford's dedicated suppliers and temporarily affixed to others. In addition, WherePort magnetic "exciters" are positioned at each gate. When a truck approaches a gate, the fast-gate system reads the active tag, cross-references detailed information about the truck in a database, and automatically opens the gate to grant entry if the truck and its load are authorized.
The driver then drops the trailer load at a receiving dock door and departs via a similar automated checkout procedure, without ever having to leave the cab. Meanwhile, the WhereNet system captures the location of each trailer and precise information about its cargo and wirelessly transmits that information to a database, providing Ford personnel with instant access to this information.
"Electronically managed inbound deliveries will enable Ford and our suppliers to monitor truck status and improve just-in-time shipments, reducing freight and inventory-carrying costs," says Alex Kumfert, OAC's material flow manager. "This technology ... matches the demands for efficiency of a flexible operation."
passive gets aggressive?
It appears that things are about to get interesting in the yard management systems market. For years, the business has been dominated by players like WhereNet and AeroScout, whose solutions use active RFID tags and real-time locating systems (RTLS). But now their dominance is being challenged, at least where smaller yard operations are concerned. And the threat, ironically enough, is passive the passive RFID tag, that is.
Over the past few months, a venture-backed startup, PINC Solutions, has been running pilots using cheaper passive RFID tags (tags without their own power source) to track vehicles and equipment at four retailers' yards. In July, PINC launched its biggest test to date at a facility that handles 500 trucks daily. But PINC isn't the only company dabbling in passive tags. Third-party service provider Exel, in partnership with Symbol Technologies, Fluensee Inc., Xplore Technologies and Canada Cartage, is using passive tags in a pilot for Shoppers Drug Mart, a Canadian drug store chain.
PINC, which has non-disclosure agreements with its clients, has not revealed the results of its pilots. But Exel is clearly encouraged by the outcome of its test. "We are seeing that there is an opportunity with passive technology," says Tony Hollis, Exel's RFID strategy and execution manager. "Although this is an emerging technology and a great deal of product development is still involved, our solution providers are responding quite quickly to our feedback on improvements ... and are quite open to work with us to make this operationally viable."
Each type of tag has its strengths and weaknesses. For example, active tags rarely present orientation problems and can be read from distances of up to 5,000 feet. By contrast, passive tags have read ranges of only about 20 feet.
When it comes to price, however, passive systems definitely have the edge. Installation costs for active systems can run anywhere from $300,000 to $1 million for a yard with 400 or more trailer moves a day. In contrast, a company like PINC can go live with a system for a 100trailer lot for approximately $50,000, says Aleks Gollu, CEO of PINC Solutions. That's about one-tenth the cost of a system using active tags.
The same holds true of the tags themselves. While an active tag costs anywhere from $40 to $75, the passive tags used in the Shoppers Drug Mart trial cost less than $10 apiece. Though Hollis cautions that costs will vary according to the number of trailers and tags, he also hints that prices may drop in the near future. "[S]ome providers are very eager to be competitive in a space that has primarily been dominated by active and RTLS players," he says. "So that's certainly a consideration for end users."
PINC isn't shy about promoting its cost advantage. The company, which is heavily backed by Siemens, says its model aims to deliver a return on investment in less than a year. It also points out that it looks to make its money from software support only. "We don't depend on hardware revenue," says Gollu, "and when hardware prices go down, we'll take our hardware prices down accordingly."
But active-tag players aren't exactly ready to concede the cost advantage to their rivals. WhereNet, for example, is quick to note that it also passes savings in hardware costs along to its customers. It also points out that it has already cut prices by 20 percent this year.
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”