Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
In these cost-conscious times, you'd expect that shippers would be trying to cut freight costs to the bone. Yet some importers that typically ship goods in less-than-containerload (LCL) shipments from Asia are switching to air freight or shipping half-empty 20-foot containers instead. They're willing to pay as much as four times the cost of conventional LCL for one reason: to get more reliable, predictable delivery.
Maybe they don't need to. Several less-than-truckload (LTL) truckers and their ocean carrier partners now offer services that are much faster than traditional LCL and far cheaper than air. Although they're relatively new to the market, these services appear to be gaining some serious traction. Several carriers report that the new offerings have been so well received that they're now fielding requests to expand the programs' scope.
Time for a change
To understand the new services' appeal, it helps to know a little about the background. Traditionally, LCL was handled directly by ocean carriers. But by the 1990s, ship operators could not compete with lower-cost freight consolidators, or NVOCCs (non-vessel-operating common carriers), and they "more or less left the LCL business to the [NVOCCs]," says Bill Villalon, vice president, land transportation services for APL Logistics (APLL).
Regardless of who was in charge, however, importers endured unbearably long transit times and unpredictable deliveries. And no wonder: Carriers and consolidators waited for enough freight to fill the containers at the point of origin, often trans-shipped them multiple times, and then had to sort out and hand off all those small shipments at the destination. It's little surprise, then, that some importers turned to pricey alternatives like air freight or exclusive-use containers.
Sensing there might be a market for a service that fell somewhere in the middle, several carriers began making inquiries out in the importer community. What they found confirmed their hunch. "[Importers] wanted an option where they could get guaranteed delivery on a time-definite basis, yet not pay an arm and a leg like they do for air freight," says Bill Wynne, vice president, marketing for Con-way Freight. They also wanted a single provider to stitch the modes together and arrange port-to-door delivery—and make it all seamless, notes Jimmy Crabbé, vice president, global ocean trade services for UPS Supply Chain Solutions.
The market spoke, and carriers responded. OceanGuaranteed, a joint product of APLL and Con-way Freight, was introduced in 2006, and similar services soon followed. Among them are Pacific Promise (Old Dominion Freight Line and Hanjin Logistics), Asia-Memphis Express (Averitt Express), and UPS Trade Direct Ocean.
How do they do that?
All of the services share several characteristics. For one thing, they serve the Asia-to-United States market. Asia-Memphis Express and Pacific Promise do so exclusively; OceanGuaranteed also serves Mexico, and Trade Direct Ocean is available in Asia, Europe, and the Americas.
For another, they give customers a single point of contact, one bill from origin to destination, and simplified pricing. Some guarantee delivery dates and will reduce their freight charges if shipments are late. (They rarely are; on-time rates are around 98 percent.)
Pricing is just a little higher than traditional LCL and as much as 75 percent below air freight. Greg Plemmons, vice president of Old Dominion's OD Global division, offers this example: To fly a 1,200-pound pallet from Shenzhen, China, to Atlanta, Ga., would cost an estimated $2,950 for air, about $670 for conventional ocean consolidation, and $815 with Pacific Promise. Another example: An OceanGuaranteed customer, which was paying $25 each to ship handbags by air from Asia, now pays just $5 apiece.
Most impressive, perhaps, is that transit times are days or even weeks shorter than those for ordinary LTL consolidations. In Plemmons' example of the Atlanta-bound pallet, air might take seven to eight days from receipt at the freight forwarder's premises in China to arrival at the importer's door. Traditional LCL consolidations would take 30-plus days, while Pacific Promise would require just 19 days for the same trip, he says.
Other carriers cite similar time savings for their services. Averitt's Asia-Memphis Express cuts up to 10 days off typical port-to-door transit times, says Charlie McGee, vice president, international solutions. A hypothetical OceanGuaranteed shipment from Hong Kong to Columbus, Ohio, would take 18 days, according to Con-way Freight's Wynne, and one Trade Direct Ocean customer cites a three-week time saving compared with its previous shipping method.
To importers accustomed to month-long transit times, those numbers might seem almost too good to be true. How did the carriers cut so much time from the process? As it turns out, they have adopted different strategies for streamlining their operations. What follows is a brief look at the approaches various carriers have taken:
Averitt Express works with 14 ocean carriers but most often uses Matson, which McGee says has the fastest transit times from Shanghai to the West Coast and "probably the best-controlled intermodal network in the United States." Containers move intact by rail to Memphis; Averitt, which is also a customs broker, clears the shipments while the container is in transit to its customs-bonded container freight station (CFS). McGee notes that the CFS is located just 400 yards from the intermodal ramp, so shipments usually can slide right into the domestic LTL system the same day they arrive at the rail yard.
Flexibility is key for Hanjin Logistics and Old Dominion. For example, Hanjin is free to use any ocean carrier and is not tied to its parent company. "We make decisions jointly and look at each opportunity on its own merits," says Plemmons. The partners also designed a Web interface that lets Pacific Promise customers book shipments through either company and get a guaranteed quote and transit time in less than a minute. Once Old Dominion takes over, delivery is swift: A move from Los Angeles to Atlanta, for example, takes just three days.
At origin ports, OceanGuaranteed containers have "late gate" privileges. APL Logistics arranges for them to be "hot stowed" on sister company APL's ships, making them last to load and first to unload. Most OceanGuaranteed customers have been certified under the Customs-Trade Partnership Against Terrorism (C-TPAT) security program; APLL segregates their shipments in separate containers so they qualify for "green lane" expedited processing by customs authorities, Villalon says.
Warm reception
The ocean/LTL services hold particular appeal for importers of high-value goods like electronics, seasonal and time-sensitive products like printed material and fashion accessories, customized items such as corporate-logo merchandise, and manufacturing parts. Many of the customers are small and mid-sized businesses, but even large retailers that use LCL in some markets take advantage of the day-definite services.
All of the carriers say their ocean/LTL services have been warmly received. McGee reports that Asia-Memphis Express now builds two to four containers a week from Shanghai alone. Several carriers have added new origin points in response to customer demand—OceanGuaranteed is now available from seven countries in Asia—and importers are clamoring for more. Plemmons, for instance, has fielded requests to expand Pacific Promise to Vietnam and South Korea.
Perhaps the strongest evidence that ocean/LTL services are meeting a market need, according to the carriers, is that once customers have tried the services, they keep using them. "A repeat purchase," says Villalon, "is the best endorsement."
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
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.
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.”