The highway bill debate is behind us, but the logistics/supply chain community will still face challenges throughout the year. Here's what to watch for.
Each January for the past few years, I've tried to predict what's in store for us in the coming year. Sometimes, I've been right; other times, not so much. For example, I really thought this was the year for the Dallas Cowboys, but as we now know, that just didn't pan out.
As for what the future holds for the world of logistics and supply chain management, opinions are mixed. Some say rates will go up; others say they'll drop. Some see a severe capacity crunch taking shape; others do not. As important as these matters are, they are not the only challenges facing logisticians. I believe three other developments that are now taking shape could bring about fundamental changes in the way we conduct our supply chain business. They are as follows:
Fuel taxes and infrastructure. The big news is that we finally have a long-term highway bill, and members of Congress are patting themselves on the back. While the legislation was much needed and long overdue, it is also flawed in that it lacks a sound funding mechanism. For example, about 10 percent of the money is subject to annual appropriations, and some of it is coming from unusual sources, such as savings from turning IRS collections over to private firms ($2.4 billion). Already, some states are saying that the approved funding is insufficient and that they will move ahead with plans for supplemental funding sources. I believe 2016 will bring us higher fuel taxes in many states, as they try to find ways to finance planned improvements.
LSP market consolidation. The logistics service provider (LSP) industry will continue to grow, and I see further merger and acquisition (M&A) activity ahead. As investment bankers become more involved in the industry, they're bringing a "bigger is better" mentality to the marketplace. History has proved that this is not necessarily true, particularly in the LSP arena. Nonetheless, I think we can expect to see more consolidation activity this year.
The Amazon effect. To say that Amazon will have an impact in 2016 is a blinding glimpse of the obvious, but it's difficult to predict what it might do next. Apparently, it has begun to fly products around the country in four leased 767 cargo planes, dipping its toes in the FedEx and UPS waters. Plus, it announced in early December a new fleet of Amazon-branded trailers for moving goods among the e-tailer's various DCs. Many already view Amazon as an LSP rather than a distributor, so why not provide its own transportation?
Amazon's push to same-day delivery is putting enormous pressure on its retailer competitors, sparking some rather creative responses. Already we see Uber-type deliveries being made on bicycles as well as in 1990 Toyotas and any other vehicles individuals can put their hands on. (I believe that drones are fun and will be useful in some industries, but I don't see package delivery as their highest and best use.) I do not believe that retailers can continue to be efficient making deliveries from a limited warehouse network, store backrooms, and other patchwork operations.
I predict we will see two Amazon-driven developments in the retail delivery arena—and probably soon. The first will be a growth in basic courier services, with deliveries made by responsible, properly insured, and efficient companies. Their efficiency will be enhanced by already available, but rapidly improving, technology for routing, pricing, and so on.
Second, I believe we will see a major logistics service provider step up to compete with Amazon on behalf of its retail competitors. I think it's only a question of time until someone takes Amazon on, specializing in rapid, efficient deliveries, similar to what Genco did with reverse logistics several years ago.
Overshadowing all this is our increasing concern for the well-being of our businesses and our employees, and I think it is safe to say that our lives are going to be changed considerably for the foreseeable future. Notwithstanding this, my very best wishes for a happy, healthy, and prosperous 2016.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
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!