The story's quickly becoming familiar: DC managers identify a problem or bottleneck. They figure out what they need to solve it. Then comes word that the project's been put on hold until the economy turns around.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
As solutions go, it looked like a winner—an elegant design that would resolve a nagging productivity problem at a $15 billion retailer's DC. Though reasonably productive, the center's existing picking process left it with mounting numbers of leftover cases containing individual SKUs that were piling up and getting in workers' way. Problem was, the engineers' solution called for a $4 million capital investment—money that just wasn't available. Sent back to the drawing board, the engineers, working with consultants from The Progress Group, came up with a solution that used existing conveyors to return partial cases to the main induction station where they'd be available the next time a pick wave called for that SKU. The solution wasn't perfect, but the price was a lot closer to right—about $100,000.
That story is being echoed in DCs around the country. Caution is the byword where almost any major capital spending proposal is concerned. Short-term, lowcost projects with quick payback are getting the green light, while projects that promise a bigger payback but a slower return on the investment are put on hold. The trend has left companies looking for ways other than capital spending to cut costs, improve productivity and enhance service.
Sometimes that calls for creativity. "Clients are looking for innovative ways to make do with what they have …," says Art Van Bodegraven, partner emeritus of The Progress Group. "[They're] coming up with clever layouts or slotting methods, or seeing if they can tweak the material handling systems instead of replacing them. They're not really shelling out big bucks."
Dave Stallard, a founding partner of The Progress Group, concurs. "[Clients] are more comfortable making investments in innovative solutions where they get more back for their buck," he says. One of his customers, an apparel company, recently added some controls to its receiving conveyors , for example. The controls link advance shipment notice information to the cartons coming in the door; an ink jet printer marks each carton with a simple symbol that tells workers in the facility how to palle tize the goods. That gives the distribution center the option of using part-time help with less training. At the same time, it provides management with a better accounting of the goods in each inbound container.
Proceeding with caution That's not to say it's all quiet on every f ront. Some companies are gritting their teeth and spending. Unilever, Procter & Gamble and J.C. Penney, among others, have made major investments in their distribution networks over the last few years.
Hal Vandiver, executive vice president of the Material Handling Industry of America (MHIA), adds that while orders for material handling equipment generally sagged in 2001 and 2002,the pain was not felt equally. "Depending on their business approach, some [vendors] never saw any downturn at all," he says.
But they were certainly the exception. An economic brief published by the MHIA in May showed that new orders for the types of material handling equipment covered by its surveys declined by 11 percent last year from 2001 levels, closing the year at $16.3 billion. Shipments fell by a similar percentage, closing at $16.6 billion.Total U.S.consumption, which includes imports and excludes exports, fell by 8.8 percent to $17.6 billion.
Still, there are glimmers of hope: Orders in the fourth quarter were up 3.2 percent over 2001 levels. And new orders in 2003's first quarter ran 4.2 percent ahead of the first three months of 2002. The material handling industry, according to an analysis by The Business Alliance/MAPI, has entered an accelerated growth phase in the economic cycle—a phase MHIA forecasts will last through the first quarter of next year.
Vendors can't expect to sit back and let the rising tide lift their ships, however, says Vandiver. "They're going to work harder than they have worked in 15 years to realize significant gains," he predicts. "In the last decade, you could row your boat to the middle of the pond and the fish jumped in. Today, even with an improved economic environment, we're not going to approach that."
Though Vandiver doesn't expect to see major plant and equipment expansions right away, he's identified two potential growth areas for his organization's members. One lies in distribution logistics. "There is probably a lot of room for improvement in the way manufacturing connects to the marketplace through DCs," he reflects. "My hunch is that we're going to see more opportunity on our customers' behalf in those arenas."
He also notes that companies are closing what MHIA calls the "innovation gap" by replacing aging equipment and yesterday's technology with updated versions that promise big gains in productivity.
Ed Reel, senior vice president at Peach State Integrated Technologies, agrees. He reports that clients are looking hard at their legacy warehouse management systems. "A lot of them are disparate systems that have been modified and are hard coded. They are not performing optimally," he contends. "You can dump money into your legacy system or look at the best of breed [alternatives]." Updating a warehouse management system (WMS) or transportation management system (TMS) can provide a quick return on investment, he says.
Apparently, that message is getting out. "A lot of people are starting to look at investing in WMS again," Van Bodegraven reports. "There is only so much you can wring out of systems that have been around for years." Then too, he adds, marketplace competition has made WMS packages aimed at mid-sized companies more affordable.
Yet even in cases where they've gotten the green light to spend, few companies are making investment decisions quickly. Stallard reports that he recently completed a modernization design for an athletic shoe manufacturer's DC. " It's been typical in the past to get the go-ahead in weeks. Now, it's taking months," he says. "Even though they've decided to do the engineering work during the lull, they're having trouble mustering the confidence to pull the trigger."
John Lowry, president of Global Project Associates (formerly Lowry Technical Associates), adds that his company has responded by loading up its bids with all kinds of options. "Companies want enough to get by for now," he says. "The next option is to quote for the future. When the economy turns, capacity will be added. But when the choice is buying for now or spending for the future, most people are buying for now."
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.