Tag Archive: transportation

What do UPS, Shamrock Foods, Amazon & a 3PL Have in Common?

March 14th, 2019

In touring multiple facilities, ranging from package shipments to cold storage food service delivery to the e-commerce behemoth to 3PL organizations, it despite the conversations that take place about labor costs and other daily concerns, the #1 concern across the board is transportation costs. The numbers support this sentiment. According to CSCMP, transportation costs are 65% of total logistics spend.

Logically, it also makes good sense. No matter your business, materials, parts sub-assemblies and/or products need to arrive at your facility. Often, especially in industries such as aerospace, the parts make multiple trips around the area (unless you are unlucky enough to require sourcing outside of your local area) for outside processing services such as anodizing and painting. Lastly, every work-in-process part or finished good must go to the next stop along the way to the customer such as a final assembly customer, your distribution center, your customer’s distribution center or the end customer. That makes for quite a lot of transportation, often involving multiple modes of transport from air freight to ocean freight to rail to trucking.

Given these alarming statistics about transportation costs, the question becomes: What can we do to proactively manage these costs as well as reduce the impact on the environment? After listening to several experts on these tours and experts from Georgia Tech, APICS (learn more about the critical importance of logistics in our APICS-IE CLTD, certified in logistics, transportation and distribution certificate program) and CSCMP SoCal (at the state of the industry event), a few ideas emerged.

  1. Collaborate with strange bedfellows:As recently published in an I’ve Been Thinking article, collaborating with strange bedfellows can achieve 1+1+1 = 25 minimally. In terms of transportation, there is no doubt maximizing the space used in your truck, container or plane is vital. Why not collaborate with another business to increase your utilization?
  2. Take the holistic or systems view: It is quite challenging to see the forest for the trees as the old slogan goes. We have all been there! I have worked with clients for extended periods of time and found myself with this same issue.  So, I have to deliberately shake it up to maintain the systems or bird’s-eye view. For example, don’t worry about saving a few pennies on a non-essential element of your transportation infrastructure when you are missing the key point that your mix of modes of operation or something like that is costing you millions.
  1. Utilize technology that focuses on the critical transportation factors: In every case (at every tour, event and in every conversation), leveraging technology where it makes sense came up. Certainly, artificial intelligence is the new craze since it has the potential to transform entire industries including logistics. However, robotics are being considered even in industries such as 3PL where they never were previously due to the nature of managing different customers and products. Of course, IoT is prevalent in the world of logistics and transportation as well as topics such as alternative fuels and automation. And what about the basics of a solid ERP system and TMS (transportation management system)? Don’t panic over the horror stories. Contact us if you want to overcome them.
  1. Be customer friendly:Interesting how often being customer friendly arises, no matter the industry or size company (small family owned to private equity backed to large complex organizations).  With rising truck rates and a shortage of drivers, if you aren’t a preferred shipper, you might just be out of luck no matter how much you spend. What does it take to be a preferred shipper? It depends on your business, carriers, locations and more. However, it starts by thinking about what is important to your carrier (not you). Are they looking for flexibility? A quick turnaround time? Fast payment? Good treatment for their drivers?

Since transportation costs are, at minimum, 65% of your total logistics spend, it requires further thought. With the vast amount of technology options available, the best approach is to start with your foundation (your ERP system) and ensure it is stable. Once you have a scalable base, find the ‘right’ technology for your situation to maximize the value of your logistics infrastructure. However, remember the 80/20 goes back to people. What are you doing to develop strategic partnerships and to ensure you are customer friendly and a preferred shipper? Given the impact, don’t leave this to chance or make assumptions. We all like to think we are preferred but what can we do to take it an extra step further?

Did you like this article? Continue reading on this topic:

Systems Pragmatist

 The Sheer Relevance & Impact of Transportation (a Billion Here, a Billion There)The Resilient Supply Chain: Should We Invest in Technology?

 



The Global Logistics Landscape

February 15th, 2019

In the past two weeks, I attended the CSCMP State of Logistics event, am preparing for the Future of Supply Chain & Logistics reception event as part of the leadership team and have debriefed with LMA Associate, Elizabeth Warren who attended the State of the L.A. Port and the State of Long Beach Port events. To summarize, I’ll borrow from the Port of L.A.: “Busier, safer, greener”.

Still number 1 and 2 in the U.S., the ports of Los Angeles and Long Beach increased volume last year to 9.5 million TEUs (twenty-foot equivalent units) and 8.1 million TEUs respectively.  With the threat of tariffs, there was a surge of imports around the holidays, creating record-breaking days in both locations and the second busiest month in history at Long Beach.

Significant progress has been made in terms of air emissions. From 2005 to 2017, diesel particulate matter has decreased by 88%; nitrogen oxide has decreased by 56%; sulfur oxide decreased by 97%; and greenhouse gas by 18%. In terms of targets, there is a goal to reduce greenhouse gasses by 40% in 2030 and 80% in 2050. Certainly, California leads the way when it comes to green and sustainability.

Logistics is around 7.7% of GDP or $965 billion. It has increased around 20% since 2006 yet decreased as a percentage of GDP by 30%. In comparison to other countries, we are far lower with Japan the closest around 11% and China the furthest around 18%. E-commerce is increasing around 15% per year, and it carries high supply chain costs around 25-30% of e-commerce sales.

All modes of transportation were up (airfreight, rail, trucking)! With that said, trucking is 76% of transportation spend and is the 100 pound gorilla. Rates have been on the rise, capacity is tight and shippers have to be more proactive. There are lots of technologies being explored but no near-term, viable solutions to resolve the issues. Again, similar to the ports, there are countless conversations about sustainability.

What Should We Consider and/or What Impacts Could Arise?

Global logistics is relevant to GDP and to every business that produces, distributes and sells products. Whether an aerospace manufacturer with multiple outside service steps all requiring transportation or Walmart, requiring a supply chain sourced both locally and from afar as well as grocery delivery on the customer side, without logistics, business will cease.

In today’s Amazon-impacted marketplace where quick turnaround, short lead times and frequent order changes are the norm, re-thinking your manufacturing and extended supply chain footprint is becoming a necessity. Whether re-evaluating make vs. buy decisions, re-configuring sales channel structures or revising inventory fulfillment practices, logistics is one component that can no longer be an afterthought.  

In our view, those clients with a resilient supply chain will thrive in this new normal business environment.

To learn more about how to create a resilient supply chain to navigate disruption and achieve peak performance, check out our new series or contact us for customized expertise.



How Resilient Are Your Business Partners?

December 20th, 2018

As we kick off our new series “The Resilient Supply Chain”, we are thinking about resiliency from all angles that will impact success.  One of the first that pops to mind is the resilience of your business partners.  You and your company could be 100% proactive and resilient; however, if your business partners aren’t, you’ll still crash and burn!

In thinking about recent client examples of disruptions and volatility, there are many!  Here are a few, along with some questions to think about:

 

  • Tariffs started impacting suppliers.  If/when this happens to you, do you know broadly how to handle it?
  • Capacity shortages starting to increase throughout the supply chain.  This has been especially true in aerospace.  Do you know in advance and have backup plans and partners? Or, are you surprised when this occurs?
  • Sales revenues increased more than expected.  A bit of unexpected success can be a nice lift but it also can create several unintended consequences to keep service levels intact. Are you proactively communicating with your supply chain partners?  And, how about your trusted advisors, such as your bank?
  • Transportation shortages have been creating havoc.  The conversation is no longer about price and saving pennies, it is about finding trucks.  Moreover, the key question is whether you will get the truck or whether your competitor will.  Are you the preferable partner to do business with?
  • Shifts in e-commerce and direct to customer have been changing industries. What are you doing to stay on top of these trends and share them with your business partners?
  • New technologies are creating disruption, obsoleting industries and bringing profit opportunities to the surface.  Do you have a plan?  Are you talking with technology trusted advisors, as well as finding ways to collaborate with supply chain partners to find the win-win?
  • And, what about your negotiations with suppliers?  According to APICS 2018 International Conference speakers from companies like Cisco, AkzoNobel, McDonald’s and NASA, it is no longer about negotiation.  It is about win-win collaboration.

This list could go on and on.  At our most recent Harvey Mudd executive roundtable, the CEOs discussed how culture (with employees and business partners) was the key to growth.  Making sure you are partnered with the “right” business partners who share your goals and are resilient might just make or break your success.

It pays to give it some thought!

 



The Sheer Relevance & Impact of Transportation (A Billion Here, a Billion There)

November 24th, 2018

Recently, I attended Mobility 21, the Southern California transportation coalition, and it reminded me of the sheer relevance of transportation.  No manufacturer can operate without transportation: distributors are out of business without trucks dropping off and picking up, healthcare would stop functioning and our frequent Amazon orders would be a thing of the past.  In essence, everything would come to a grinding halt!     

Certainly, trucks are what we typically think about when it comes to transportation.  They account for $722 billion in freight flows with Canada and Mexico, for example. Whereas rail still accounts for $174 billion (not pocket change).  The ports are our gateway to the rest of the world (and the Los Angeles ports alone bring in 40% of the U.S. volume). Air carries an impressive number of packages especially with the rise of e-commerce. UPS and FedEx are expanding at amazing rates, especially at Ontario airport, the hub of e-commerce activity.  For example, during the 2017 peak season, this region of UPS alone processed 13.1 million packages!

At Mobility 21, there were some interesting statistics throw out:

  • AAA has 60,000 service calls per day
  • Transportation has a $700 billion dollar economic impact on Southern California and accounts for 1/3 of the jobs in Southern CA!  
  • 350 billion miles each year are driven in California
  • The number of trucks is expected to go from 1.8 trillion to 3.9+ trillion by 2045
  • And the list goes on….

What Should We Consider and/or What Impacts Could Arise?
At a minimum, why not take a step back to think about your transportation network?  What does it look like? How do you receive materials and products? Do you use the ports?  Air? Rail? Undoubtedly, you use trucks! How expansive is your network? Are there many players involved?  Since it could cause your operations to cease, it makes sense to find out!

Next, think about what you’d like your transportation network to deliver.  Do your customers expect rapid deliveries and “above and beyond” service? If so, who is your partner in ensuring this occurs?  

Your transportation partners are your last face to your customer. And, in today’s marketplace, there is a significant demand and challenges your transportation partners must navigate.  If you plan to be successful, you must stay on top of your transportation network and partners. Are you attractive to them? Perhaps we better think about that further….



What’s Next in the Supply Chain?

August 10th, 2018

Our most successful clients always ask “What’s next?” as they want to stay ahead of the curve.  It is quite clear that staying on top of current trends and what is expected down-the-road is essential to successfully navigating your business to scalable, profitable growth.

For example, if you think your industry might develop a new way of servicing customers, you need to attack it quickly as you afford to be left in the dust.  Clearly, providing an exceptional customer experience is important but so is developing this new service method in a scalable, profitable way. It will be much harder if behind the eight ball. Are you thinking about what is next?

With our definition of the supply chain from creation to customer, there are countless topics to be thinking about when it comes to What’s Next:

  • New Products and Services: What new products and services will your customers want?  We have found that most customers (just like most of our clients) might not know yet.  You better be thinking about it and prompting ideas!
  • Suppliers: What new materials, components and supplies will you need to improve performance at a lower cost? (These win-win successes require innovation and collaboration.)
  • Transportation: What’s next in transportation?  Think of the relevance – from suppliers to manufacturers, from manufacturers to manufacturers, from manufacturers to distributors, from distributors to end customers, from one facility to another facility, and so on.
  • Technology:  What’s next in technology as it connects each of these people along with equipment, and much more (think IoT) with data and information flows.  We find that this often-times can be the bottleneck to achieving scalability.
  • Manufacturing:  What’s next in manufacturing?  Even if you aren’t thinking about using 3D printing, you should be considering the impacts if your competition, your suppliers, your customers and more start using this additive manufacturing capability.  It is likely to impact every step of the supply chain. What else is likely to happen in your industry?
  • Distribution:  What’s next in distribution?  In your industry, what is essential?  To think about distribution, you must think about your customers’ needs.  You also should be thinking about the rest of your supply chain. For example, if 3D printing takes off, it changes the distribution model.  If e-commerce continues to be important, your entire setup would change if you are more traditional currently. Do customers want you to take over worrying about what to stock and where to stock it?  Perhaps you should suggest taking on VMI/ replenishment.
  • Customers: What’s next with your customers?  How about your customers’ customers? Are you even talking with your customers’ customers?  Do you understand the industry trends throughout your chain? If you aren’t getting out of your office with an internal focus, you won’t.  Who have you called lately? Who have you visited? Do you ask questions? Attend conferences?
  • People:  What’s next with your colleagues and partners?   Nothing else will be achievable if you don’t have the best people on the team.  It wasn’t that long ago we thought virtual meetings were a big deal. Now they occur daily.  (Remember, illennials often-times like coming into the office for the community – and prefer the Google-like environment.)

Thinking about what’s next can distinguish you from your competition.  Eventually, a decision will arise that requires this knowledge. If thinking of the future is part of your daily culture, you’ll pass by the rest!