James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
The economy may be down and businesses may be cutting back, but supply chain execution (SCE) software packages are expected to sell briskly throughout 2009. That's the consensus view of leading analysts who follow the supply chain software market for a living.
As for why these applications would be bucking sales trends, it's all about managing costs. In an economic downturn, companies are looking to pare warehousing and transportation expenses wherever they can. And that's precisely what tools like warehouse management systems (WMS), transportation management systems (TMS), and global trade management systems (GTM) are designed to do.
Why TMS is hot
The top-selling application in the supply chain execution sector this year will likely be TMS, software that oversees freight planning and movements. TMS revenues totaled $650 million in 2008, according to the Stamford, Conn.-based information technology and research firm Gartner Inc. Despite the recession, Gartner expects TMS revenue to grow 12.3 percent to $730 million in 2009.
Gartner analyst Dwight Klappich says there are a couple of reasons for his firm's bullish forecast. For starters, he says, the number of TMS users is still fairly small, even in North America and Europe. "Market penetration remains relatively low," he explains, "so there is a lot of new business potential."
On top of that, Klappich says, transportation management software offers a quick payback on the initial investment. "It's not uncommon to see cost reductions of 10 percent or more on the annual freight spend," he says.
In fact, nowadays, even small shippers can benefit from using a TMS, the Gartner analyst reports. That wasn't the case a year or two ago when the software's primary selling point was its ability to consolidate shipments. "A small shipper could not justify the cost of a TMS on optimizing 20 LTL shipments," Klappich explains.
In the last year, however, software developers have been loading up their TMS packages with new functions: carrier rate comparison features, governance mechanisms that force users throughout the corporation to select the low-cost carrier, and freight bill auditing capabilities that ensure that shipping charges reflect contracted rates. "Small shippers can now justify a TMS on the freight payment and audit feature alone," Klappich says. "Anyone spending $25 million or more on freight can now justify the cost of a TMS."
Analyst Adrian Gonzales agrees that TMS sales will remain strong in 2009. "Companies will want to prioritize transportation initiatives to cut costs and improve profitability, considering business sales are going down or remaining flat," says Gonzales, who is executive director of the logistics council at ARC Advisory Group in Dedham, Mass.
Gonzales says some of that demand is coming from a previously untapped source: companies that once outsourced their transportation management to a third-party logistics company but have since decided to do it themselves. "Companies need a TMS in order to bring that function back in house," he explains.
WMS: Still the revenue leader
TMS may be the fastest-growing segment of the SCE software market. But in terms of dollars spent, the hands-down winner remains the WMS, software designed to oversee distribution center operations. Gartner pegged worldwide revenues for WMS in 2008 at $1.03 billion; it expects revenues to climb 11.7 percent to $1.15 billion in 2009.
In the past year, much of that revenue came from sales to companies in Western Europe and the United States that were replacing their old systems. Sales of replacement systems will likely slow this year, but Klappich believes that weakness will be offset by growing demand for WMS from companies in Eastern Europe, the Asia Pacific region, and Latin America. And while North American companies may put major systems upgrades on hold, he predicts that they'll still buy add-on modules like labor and performance management.
Customs regs spur GTM sales
Another growth area for supply chain software will be global trade management systems, which have a smaller user base than either TMS or WMS. Gartner expects that vendors will see worldwide revenues from global trade software jump 16.7 percent to $238 million in 2009 from $204 million in 2008.
Although many companies still rely on their customs brokers, freight forwarders, or third-party logistics service providers to handle trade compliance, enterprises running global supply chains are likely to find it necessary to obtain software to deal with fast-changing customs regulations. "Even if they don't want to, companies may have to invest in this software due to customs," says Klappich.
Five more good years?
Despite all the turmoil on the world economic front, at least one prominent analyst remained bullish on this category of software at the end of last year. In an e-mail sent a couple of weeks before his death on Nov. 30 (see related article on p. 16), John Fontanella of AMR Research in Boston predicted that sales for all types of SCE software would remain strong for the next five years. According to his company's projections, the overall market for supply chain-related software will grow 7 percent annually through 2012.
As for why companies would continue to buy supply chain software in a period of corporate belt-tightening, Fontanella said it was a matter of cost control. The bailout of the financial industry expanded the money supply of major nations, he explained, leading to devalued currency and an environment favorable to inflation. "Supply chain managers will be expected to play an important role to protect product and company margins through cost control and increased efficiencies in their operations," he said.
On top of that, he added, in times of financial turmoil, companies hoard cash. "For the first time, cash preservation will become a major imperative outside the corporate treasurer's office," Fontanella said. "Capital spending will come under great scrutiny in this environment, so technologies that increase the velocity of cash collection will become a critical component of initiatives going forward."
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.
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.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.