When the military expanded its online PX shopping privileges last fall, eager customers flooded its website with orders. New warehouse software and automated equipment helped its DCs cope with the deluge.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
One of the largest retailers in the country is a 123-year-old operation with a highly exclusive customer list—to shop at this store, you must have served in the U.S. armed forces.
Despite that stipulation, the Army & Air Force Exchange Service (AAFES)—also known as the "Exchange" or the PX (an Army abbreviation for "post exchange")—has grown to become the 56th largest retailer in the country, operating some 2,700 stores on Army and Air Force bases in all 50 states and more than 30 countries worldwide.
"We spent the last year and a half making changes in our DCs to handle the increase in e-commerce," said Alan French, the the Army & Air Force Exchange Service's vice president of logistics operations.
The Exchange no longer does all its business through stores, however. In 2014, AAFES launched an e-commerce website in an effort to keep pace with an increasingly omnichannel world. Although that move proved popular with customers, it created problems for the back end of the operation. The Dallas-based Exchange quickly realized that its existing distribution process, which was geared toward store replenishment, would need a serious overhaul to meet the demands of e-commerce. As the volume of direct-to-consumer orders grew, it began investing in automated material handling systems.
Twenty-two months ago, that process shifted into high gear when AAFES CEO Tom Shull began laying the groundwork to open up the Exchange's e-commerce business, ShopMyExchange.com, to a much wider audience. Defense officials had decided to extend online shopping privileges to all honorably discharged veterans as well as its traditional customer base of active-duty and retired service members and their families. The change expanded the ranks of potential e-commerce customers overnight to 30 million from 11 million.
To handle the flood of shoppers eager to access the site's tax-free deals, the Exchange launched a major overhaul of its three main U.S. distribution centers, making changes at the various sites that included adding voice-directed picking technology, and installing new conveyors and a put-to-light wall. The keystone of the upgrade was swapping out its 30-year-old warehouse management system (WMS) for JDA Software Group Inc.'s latest WMS. The upgrade has enabled new capabilities like giving customers greater visibility into their order status, optimizing outbound shipments, and processing e-commerce orders through a shared-inventory single-WMS environment in order to cut inventory-carrying costs, Exchange officials said.
Many of those upgrades are familiar strategies to any e-tailer looking to provide swift omnichannel fulfillment service at an affordable cost. However, the Exchange has many unique attributes that made its e-commerce makeover unique.
FAMILY SERVING FAMILY
Unlike niche websites that specialize in specific types of inventory, the Exchange sells a nearly universal range of goods in order to satisfy its mission "to bring troops a taste of home." It carries everything from Michael Kors sunglasses to Vera Bradley handbags to razor blades to diapers, along with dishwashers, flatscreen TVs, and saltwater fishing rods.
In return, military members who have served foreign deployments thousands of miles from U.S. shores often feel a deep loyalty to the Exchange. A visit to an AAFES store in a foreign port offers a connection to American culture and community that goes far beyond checking off items on a shopping list.
One former Marine interviewed for this story fondly recalls visits to "the land of the big PX" as a near-Disneyland experience—a stark contrast to the rigors of life on an active military base. For someone like him stationed a long way from home, PX privileges meant instant access to cherished items like Cheerios in Germany or a Nintendo videogame console in Panama.
That relationship creates a far tighter bond between the store and its customers than you'd see with a typical big box retailer and its clients. In fact, the Exchange describes its business model as "family serving family," noting that about 85 percent of its 34,000 employees are connected to the military in some way, whether they're retired veterans or National Guard or Reserve personnel themselves or the spouses and relatives of those service members.
Shopping at the Exchange even supports fellow military members financially, with roughly two-thirds of earnings reinvested in programs such as Army child development and childcare centers, fitness centers, Air Force outdoor recreation programs, and school meals for warfighters' children overseas. With 2016 revenue of $8.3 billion and earnings of $384 million, the Exchange provides significant support for military families worldwide.
READY FOR SHOWTIME
With such a loyal following, leaders of the Exchange knew their revamped e-commerce operation had to be ready to handle a surge of orders from the first day the expanded eligibility requirements took effect.
"We spent the last year and a half making changes in our DCs to handle the increase in e-commerce. Among other things, we revamped our systems and carved out space for a consolidation area, a pack station, and a shipping area," said Alan French, the Exchange's vice president of logistics operations.
The updates affected the Exchange's three main U.S. DCs: the 1.4 million-square-foot Dan Daniel Distribution Center in Newport News, Va.; the 707,000-square-foot Waco Distribution Center in Texas; and the 849,000-square-foot West Coast Distribution Center outside Sacramento, Calif., along with its satellite facility, a 240,000-square-foot building at the nearby Sharpe Army Depot.
To obtain the capabilities it needed, the operation embarked on a project to upgrade its WMS software platform to JDA's WMS 2013.2 product. The Exchange has now installed the system in its West Coast and Waco facilities as well as a new distribution center in Germany. It is currently working to roll out the new WMS at its flagship DC in Newport News, according to JDA.
As a result of the upgrades, the three facilities are now the most efficient of the 11 DCs operated by AAFES, according to the Exchange. That efficiency is the result of new processes enabled by the WMS. For instance, unlike the legacy system, which assigned employees to jobs based on static warehouse functions, the new software lists the tasks each worker can perform, then sets a priority for each task, compares that with a worker's proximity to the task location, and assigns jobs accordingly. The result is a more effective work flow because the system directs the closest and best-qualified workers to the tasks that are most pressing at any given moment, according to the Exchange.
At the same time, the software has pulled back the curtain on the fulfillment process, giving customers greater visibility into the status of their orders. With the previous platform, customers couldn't obtain updates until the DC shipped the merchandise. But now, thanks to the implementation of a warehouse order management system (WOM), they're able to see the status of each order as it makes its way through the DC.
Modernizing the WMS allowed the Exchange to make other technology updates as well, including the addition of a Vocollect voice-directed picking system from Honeywell Intelligrated. The Exchange also worked with Honeywell Intelligrated to install advanced conveyors and a put-to-light wall in its Newport News site, according to Honeywell.
Honeywell Intelligrated had previously worked with the Exchange to replace the aging conveyor system in its Waco DC with a faster, higher-capacity version, Honeywell said. That new, wider accumulation conveyor at Waco also features upgraded controls that replaced dated mechanical sensors with electric sensors and servo drives, as well as a sliding shoe sorter and upgraded pick modules.
According to Morgan Meeks, the Exchange's vice president of transportation, the Exchange's flagship Dan Daniel facility recorded a 30.42-percent productivity increase over 2016,
The Exchange is confident these and other technology updates will allow it to accommodate the increase in online order volume. For example, the Dan Daniel DC is now equipped with a carousel retrieval system from Kardex Remstar that provides high-density storage, using flat trays to handle small items, said Morgan Meeks, the Exchange's vice president of transportation. (You can view clips of the automated equipment below.)
Choosing commercially available material handling equipment was a novel approach for a unit of the Department of Defense, which has a reputation for buying expensive specialized hardware from defense contractors. "As a government agency, we tend to move slowly, as contracts need to be signed and then we need to get government funding," French acknowledged. "But we have the intention to upgrade quickly and make changes fast in the future. We need to use [commercial off-the-shelf] products to stay up-to-date and stay current because e-commerce is changing so quickly."
DELIVERING RESULTS
When the Exchange opened the electronic doors of its website to an expanded audience last Veterans Day—Nov. 11, 2017—the orders came pouring in as expected. In fact, the number of orders placed on ShopMyExchange.com over Veterans Day weekend was nearly triple the number from the previous year, as newly eligible military shoppers logged in to take advantage of the tax-free deals and the "family connection."
In raw numbers, the website logged 172,396 orders over a period that included Veterans Day weekend, Thanksgiving, Black Friday, the Saturday after Thanksgiving, and Cyber Monday, which represented a 132-percent increase from 2016 levels, according to the Exchange. Measured by units shipped, the website handled 351,175 items of inventory over that period, notching a 202-percent increase from the year before.
As for how the new systems worked out, the Exchange's e-commerce operation weathered the storm, executives said. The flagship Dan Daniel facility recorded a 30.42-percent productivity increase over its performance in 2016, measured by units shipped per day, while using the same number of workers, Meeks said.
"We see ourselves as very unique," said Julie Mitchell, the Exchange's public relations specialist, Executive Group (EG). "This is different from a commercial business; our customers are our family. We serve a special type of customer who raises their right hand and takes an oath to serve their nation, so we consider it a privilege and honor to serve them."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.