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The Importance of Retail Compliance in Today’s Market

Logistics and supply chain management has become a very tight game, almost cutthroat in its harsh severity. Consumers want their product today, that means that retailers want it delivered, checked in, and on the shelf yesterday. With the ability to order just about anything a consumer could possibly want from the vast online marketplace, brick and mortar retailers have to run an even tighter ship than they have before if they have any hopes of competing. To that end, some retailers are upping the ante and doling out punishment for shippers who aren’t in compliance.

So what can you do to maintain retail compliance? What about improving your operations to make your company more efficient? We covered these and many more topics in a recent webinar including:

  • Weekly Product Planning
  • Proactively Managing Appointments
  • Planning Optimal Shipping Dates
  • Eliminate Reactive Shipping
  • Creating an Internal Scorecard
  • Learning to identify Real Issues and Actionable Items
  • Improving Communication and Cooperation among Multiple Departments
  • Daily Tracking Updates
  • Full Visibility on Actual Deliveries
  • Learning to Identify Preferred Carriers
  • Utilize Upgraded Carrier Service Levels

Here are some of the key highlights from our webinar that can really have an impact on your business. While this doesn’t cover everything, these elements are vital to running a successful business in today’s marketplace.

Visibility is a Must

One of the key points that the webinar focuses on is visibility. Keeping up with retail compliance is more than just making delivery deadlines. The amount of disruptive technologies and customer expectations hitting the field requires a level of visibility that was, until recently, unheard of.

Customers want to know where their product is during transit. They want to be able to track its progress, start to finish until the product is in their control. More than that, they want to know the status of the product itself during transit. While this might not matter quite so much for clothing and other domestic goods, it plays a huge role for sensitive goods such as electronics and food items.

Being caught out of compliance could result in more than just heavy fines, it could result in a total shutdown of business and operations, which is ruinous for smaller companies.

Earlier this year, the FDA passed the Food Safety Modernization (FSM) act which details the requirements for sanitation, cleanliness, and closely monitored temperature control. Being caught out of compliance could result in more than just heavy fines, it could result in a total shutdown of business and operations, which is ruinous for smaller companies. This is one of many reasons why visibility is so vital to companies in their day to day operations.

OTIF and MABD Requirements

Walmart, one of the biggest retailers in the United States, is just one of many companies that are tightening their expectations for their suppliers. Walmart’s On-Time In-Full (OTIF) policy has set a precedent that will actually fine shippers and suppliers if goods don’t arrive when they are supposed, whether that be early or late. This means that shippers and carriers need to work closely together to hit the designated delivery window.

Must Arrive By Date (MABD) and OTIF are crucial for the changing client expectations.

Must Arrive By Date (MABD) and OTIF are crucial for the changing client expectations. Given that Walmart is such a substantial customer for many suppliers in the United States, making deliveries on time and in full is the difference between making a tidy profit, or losing out on a major customer. Additionally, chargebacks could carry a heavy fine, especially for smaller companies. As it stands, Walmart will penalize shippers by 3 percent of the total PO for any late or incomplete shipments. It’s not just Walmart that’s stepping up the regulations either as more companies continue to tighten their delivery windows.

We covered the importance of having someone managing these new requirements as well as questions that need to be answered. Are shipping dates being planned into production times? If there’s a mistake resulting in a delayed shipment, will you be able to identify where the mistake happened? What plans are there in place to reduce potential chargebacks and improve vendor reliability?

Better Planning Means Better Compliance

Planning is a large part of logistics, and being able to enhance planning is another touchstone of what we covered in our Retail Compliance Webinar. For example, what do you do if a truck breaks down while en route to a delivery? Is your company able to catch it with enough time to make the deadline? What about finding carriers with an open capacity to move product? Is your company able to find space, even when capacity gets tight?

These are a few questions that logistics planners and decision makers need to be asking themselves on a regular basis. Reactive shipping, planning a shipment due to a shortcoming of the original agreement, is a risky practice. There’s a lot that can go wrong when you’re already trying to play catch up. Much like maintenance on a piece of machinery, waiting for something to break is always much worse than fixing something before the breakdown actually occurs.

While there are a considerable number of possibilities to consider when trying to be proactive rather than reactive, it’s becoming easier to be proactive with the advancements of visibility and supplemental technologies.

The supply chain is very much the same. It requires a good deal of forethought to keep it flowing smoothly. If, for example, you don’t have a dedicated carrier fleet, will you have the necessary capacity to keep freight moving in a timely fashion? While there are a considerable number of possibilities to consider when trying to be proactive rather than reactive, it’s becoming easier to be proactive with the advancements of visibility and supplemental technologies.

That level of planning is no longer a novelty or a nicety for customers. It’s becoming a requirement as well as a differentiator among suppliers. Companies who are playing it too conservatively will have a harder time meeting retail compliance than companies who are staying abreast of the changes as they occur.

Staying Compliant

Changes in transportation regulations, tightening capacity, new technology hitting the market, higher spot rates and higher levels of demand from customers and consumers. Any one of these can be hard to navigate by itself, but trying to deal with all of it at the same time can border on the impossible.

Ultimately, everything we covered in our webinar is about helping your company to stay compliant and perform better across the board. From internal operations to external executions. Everything is connected and we broke it down for you. Click HERE to watch our webinar about retail compliance and learn more about how you can be successful. Ready to speak to an expert? Fill out the form below or call us at 800.MYSHIPPING

A Growing Need for 3PLs

It’s been a rough ride for over-the-road freight transportation over the past few years. Higher levels of government regulations have created a strain for drivers including the Hours of Service and the Electronic Logging Device mandates. These both came at a time that trucking companies were struggling with the pre-existing issue with a severe shortage of drivers. With the median age of drivers approaching retirement age, the condition will likely get worse before it gets better. Additionally, there have been huge fluctuations in both spot rates and demand over the years which have left carriers in a rather precarious situation.  

Despite the difficulties, there is good news on the horizon. Spot market rates, according to DAT and Truckstop.com, have risen upwards of 20 to 35 percent and contract rates have climbed by an average of 8 percent, year-over-year.  

This is good news for carriers, but managing the influx of work could require some extra help from intermediaries and 3PLs. Already, the conversations are beginning about solutions for the generational workforce as well as the adaptation to the increasing levels of disruptive technology hitting the markets.  

Higher Brokerage Margins 

Last year, 3PLs made due with fairly low margins, about 10 to 15 percent for freight transactions. Mostly as a result of vying for the top spot as a low-cost option for shippers who were looking for a truck on the cheap without using a service in the first place.  

Now, in 2018, with capacity tightening, shippers are making a return to 3PLs which will cause third party margins to increase to as much as 15 to 20 percent.

Because of the availability of capacity in 2016 and the first half of 2017, most shippers were able to obtain reasonable rates with carriers, which means that 3PLs had to provide an array of other services to set themselves apart from the competition. Now, in 2018, with capacity tightening, shippers are making a return to 3PLs which will cause third party margins to increase to as much as 15 to 20 percent. Carriers are hoping this will result in a sustainable relationship with 3PLs.

A Spike in Demand is on the Horizon 

Freight demand was unusually high between January and February, with a slight slow down through March. Given that these volumes are much higher than they were over the same period from last year, it’s another sign pointing towards the growing health of the transportation industry.  

If shippers want to keep up with demand, they’re going to have to change the way they do business.  

While this is undoubtedly a good start to the year, produce season, April through July, has kicked off, which means an even bigger spike in demand as produce season will give way to other peak consumer seasons including the Holiday season. Considering that all of this is outside the continual rapid growth of eCommerce markets, 2018 is going to be a busy year, to say the least. If shippers want to keep up with demand, they’re going to have to change the way they do business.  

Sensing the growing demand, many trucking companies are beginning to double up on their orders for new trucks. “Trucking companies ordered 35,600 trucks in May, more than double the orders from the same month a year ago, according to preliminary figures by ACT Research. That leaves manufacturers with an order backlog of more than 200,000 trucks, or 8.4 months of production,” according to an article from WSJ.  

“This is an astonishing rate of order placement,” said Kenny Vieth, president of the Columbus, Ind.-based ACT. “What’s facilitating it is that truckers are absolutely crushing it on freight rates and profitability right now.”  

Shippers might Start Looking to 3PLs for Visibility 

According to a report released by TIA working with Project44 and 10-4 Systems, 3PLs can, in fact, offer the level of visibility that shippers are looking for despite contrary beliefs.  

“Significant advances in visibility technologies have created a wide range of perceptions and expectations among shippers, including some that are inaccurate. 3PLs in this report identified a complicated web of factors that affect those perceptions and expectations, such as the demands of data aggregation, the need for more education, and the accelerated pace of change that affects 3PL and shipper alike,” the report says.  

Over the past year, the importance and need for visibility have only increased as suppliers are dealing with ever-increasing customer expectations and delivery standards

The TIA hopes that their report will highlight 3PLs that have a product or service offering that will provide the necessary information to shippers regarding their freight. With each passing year, the number of shippers that use 3PL services to keep them updated on their freight during the transportation cycle is increasing. Over the past year, the importance and need for visibility have only increased as suppliers are dealing with ever-increasing customer expectations and delivery standards. Walmarts OTIF (On Time: In Full) policy is a perfect example of this, which can punish shippers for not adhering to a strict delivery schedule.  

Data and Tech will Pave the Way 

It’s more than just the growth of demand that is making 3PLs a tempting partner for shippers. With the influx of big data, analytics, blockchain technologies, and so many more innovations, attempting to keep pace can be difficult. As demand grows and capacity tightens, shippers and carriers alike need to be smarter about how they operate if they want to stay competitive in today’s marketplace. 

As the industry continues to change, it’s likely that we’ll only see 3PLs continue to grow in popularity.

A Better Way of Doing Business

At BlueGrace, we take your current freight data and get an inside look at what your team may be missing. Our carrier procurement strategists will help you meet tight deadlines, optimize your freight expense, and ultimately, find peace of mind. Fill out the form below to find out more about how partnering with BlueGrace can create more visibility and opportunities to simplify, overall helping you find a better way to do business.

Supply Chain TLC

For the most part, we consider the supply chain to be a means to an end. While it’s an important means, it’s simply the process required to transition raw materials to finish product and take that product from the production floor to its end user.

While the supply chain is a rather complex system that utilizes a company’s logistics capabilities to the utmost, there are some companies that put decidedly more effort, energy, and even love into making it operate at its peak. Some companies will go the extra mile, quite literally, to make sure that they are producing the best possible product for their consumers and bringing some true innovation to the industry.

Some LUSH Sources  

Consumer consciousness has been on the rise lately as end users are becoming more aware of what goes into their products. There have been a number of reports about big companies catching flak and negative press because of their willingness to cut corners when it comes to bringing in their raw materials. It’s companies like Lush that really bring ethical sourcing to light, and have changed our understanding of a truly visible supply chain.  

Sandalwood, for example, has some incredible value for the cosmetics industry both for its scent as well as it’s therapeutic values. The tree itself takes over 10 years to grow to harvestable maturation and is predominantly found in India and Australia. Given the high levels of global demand, it’s become illegal to cut, harvest, and sell sandalwood out of India without permission from the state forest department, making it a perfect enterprise for criminal entrepreneurs.   

It strengthened my understanding of what we wanted and what we didn’t want,’ Gendry-Hearn says. In short, they weren’t going to get sustainable sandalwood from India.” 

“Gendry-Hearn and Constantine (buyers for Lush) were in India to investigate the dark underworld of sandalwood smuggling. The trip ended after a meeting in a hotel with a smartly dressed man she described as ‘the big boss.’ He entered with several bodyguards, sat across from them and put his gun on the table. Gendry-Hearn wasn’t scared. ‘My thought was: this is brilliant, this was exactly what we wanted,’ she explains. The big boss boasted that the price of sandalwood oil would never go down as he was sitting on massive reserves of wood and would restrict what was coming through. ‘It strengthened my understanding of what we wanted and what we didn’t want,’ Gendry-Hearn says. In short, they weren’t going to get sustainable sandalwood from India.”  

This is just one example of the lengths Lush undertakes to ensure their true to their word on ethically sourced materials. More than that, Lush builds on their relationships with their suppliers and promotes various initiatives (and funding) to increase awareness of corporate social responsibility.  

ADIDAS Kicks it Up a Notch 

When you consider the sheer amount of consumer goods that are made, transported, and purchased on a daily basis, it almost comes as a shock to realize that footwear is actually one of the most time-intensive products on the market today. The supply chain for shoes more closely resembles that of automobiles, parts and components are made in one location, shipped to another factory for the next assembly step, then shipped to the final factory location to be stitched, glued, and packaged as a finished product. This is a product that hasn’t changed much over the past 30 years.  

Now, however, with the rapid change in consumer expectation towards instant gratification and same day delivery, months-long process to assemble a pair of kicks simply won’t do anymore.

That’s what prompted ADIDAS to come up with the concept of the “speed factory.” “A couple of years ago, the top minds at Adidas decided this clunky, inefficient model was too limiting. “That’s why we looked into the technologies available and decided, ‘Hey, if we want to be faster and more flexible in doing what our athletes want and need, then we have to rethink the way we make products,’” says Gerd Manz, the head of technology innovation within Adidas’ Future team, which looks ahead three to seven years to set the company’s course.” 

Turning the average lead time from a few months down to a few weeks or even days is pretty astounding in its own, but when you consider the other ramifications of cutting out much of the supply chain it becomes even more impressive. The reduction of transportation costs and CO2 emissions alone will go a long way towards improving the companies standing and compliance with global green initiatives.  

Walmart’s Blockchain for Food Safety  

Walmart and blockchain alike have been garnering a good deal of headline attention in the recent past. Walmart, in particular, has launched a tough initiative for carriers and suppliers alike with their On Time: In Full (OTIF) policy which will penalize deliveries that are early, late, or incomplete.  

More than simply seeing the data, blockchain technology offers a total view of a product through its entire delivery through the supply chain.   

Blockchain, on the other hand, is an innovative new technology that will maximize the amount of accessible data within the supply chain. More than simply seeing the data, blockchain technology offers a total view of a product through its entire delivery through the supply chain.   

And Walmart’s plan with this new technology? To increase food safety.  

“One of Walmart’s grandest projects is an attempt to graft a blockchain, that immutable cryptographic ledger first used by bitcoin, onto the world’s complex food supply chains. Walmart has roped in some of the industry’s biggest players, among them fruit producer Dole, consumer goods giant Unilever, and Swiss water and food conglomerate Nestle, to form a consortium of 10 food producers and retailers to make it a reality,” according to Joon Ian Wong of Quartz 

“They’re building the technology with IBM, which has been among the most active technology firms pushing blockchain solutions to corporate technology departments. If Walmart is successful, the project could fundamentally alter the way information is secured, stored, and shared across the food and retail industry, ushering in an era where an item of produce can be tracked in real-time from farm to table, by producers and consumers,” he adds. 

Visibility is a Must

Again, consumer consciousness is on the rise. People want to know where their food and products are coming from. They want to know that it’s all being made and sourced responsibly and ethically. We’re living in an age where consumers want to know what’s going on behind the scenes of big companies and visibility is simply a must. BlueGrace Logistics offers complete, customized transportation management solutions that provide clients with the bandwidth to create transparency, operate efficiently, and drive direct cost reductions. For more information on how we can help give you the visibility you need, feel free to contact us using the form below: 

The Unique Needs of the Consumer Goods Sector

Almost everything we touch or consume or use in society is a consumer good. Bicycles, refrigerators, jewelry, clothing, etc. Consumer goods are products bought for and used by consumers, rather than by manufacturers for making other goods. The sale of consumer items is big business. Consumer spending represents 69 percent of the U.S. economy. Two-thirds of that figure is on services (such as housing and healthcare). However, a full one-quarter is spent on non-durable goods like clothing and groceries with the remaining portion on durable goods, like cars and appliances.  

The National Retail Federation estimates retail industry sales will grow between 3.8 and 4.4 percent this year, buoyed by economic growth. 

Deloitte’s 2018 Consumer Products Industry Outlook Report reports that “the US economy is likely to continue to grow at a moderate 2.0–2.5 percent rate into 2018. A key source of strength is consumers, who have benefitted from a strong labor market and rising incomes. Unemployment is at a record low of 4.2 percent, with an average of about 148,000 jobs added every month. Real disposable personal income is up, albeit slowly, by 1.8 percent in 2017, and is likely to pick up momentum next year, rising by more than 2.0 percent.” 

Unique Challenges of the Consumer Good Sector 

The transport of consumer goods presents unique logistical challenges. Non-durables must be transported quickly – and frequently. Fast-moving consumer goods (perishables, trendy items, items linked to promotions and product rollouts) are subject to certain operational constraints – some of which are controllable and some of which are not (highly variable outbound logistics).  

Customers control the choices and the buying process.

Durables, along with non-durables, are affected by the extra pressures of the “New Customer”  – a customer that is more aware, more demanding and who holds higher expectations than we have ever seen before. These expectations relate to the availability of products (on the shelf, i.e., no out of stocks) and timely, free, traceable delivery (for home shipment). Customers control the choices and the buying process.

A well-developed digital presence across platforms and channels – consumer-centric, smart-phone focused –  is what will drive future sales.  

Shopping patterns and distribution networks are changing. Some customers go to bricks and mortars stores to do their consumer research, then order online from the same store or rival. Others make their purchase in-store after engaging in online comparison shipping. In-store purchasing remains strong, but there is more choice for the consumer. A twofold presence for retailers (in-store and online) is becoming mandatory. A new trend is for stores to partially function as fulfillment centers for online orders. A well-developed digital presence across platforms and channels – consumer-centric, smart-phone focused –  is what will drive future sales.  

Where 3PLs Come In 

Many larger consumer goods firms have historically relied upon in-house logistics. Now they are turning to third party-logistics providers (3PLs) in droves, joining the ranks of smaller brands of consumer goods that do not have the same in-house distribution capabilities and are more familiar with outsourced relationships. Ninety percent of Fortune 500 companies operating in the US sought out help from a third party logistics provider in 2017 (up from 46% in 2001). 

Because 3PLs are nimble, they are able to juggle the B2C needs of the new world of consumer goods logistics well. They are uniquely suited to help firms cope with the rising costs of freight.

Unique advantages of 3PLS in the field include: 

  1. Consolidation – combining loads from closely located suppliers to keep logistics costs down.
  2. A network of resources – such as warehousing spaces and flexible transportation fleets. 
  3. Economies of scale – derived from an increase in handled items (leading to better productivity). 
  4. Technology – a robust proprietary software that can integrate complex supply chain ecosystems in a manner comparable to a leading enterprise.

BlueGrace uses proprietary technology to enable you to proactively identify opportunities to alleviate costs and optimize your supply chain. Fill out the form below or call us today to see how we can help simplify your distribution needs! 

Walmart’s OTIF Policy Gets Harder 

On Time In Full is a policy that Walmart created back in 2016 and implemented in August of 2017. In an attempt to drive their proficiency up and costs down, the mega retail chain started targeting their supply chain. Under this policy, suppliers that failed to deliver the total amount of promised goods, to designated stores at the prescribed time are penalized; fined up to three percent of the total shipment value.  

The shipment has to arrive exactly when it’s expected. Not before, and certainly not after.  

It’s not just trying to curb late deliveries, either. The OTIF policy also cracks down on trucks arriving too early, as it can create excess traffic and delays for loading and unloading. For suppliers and trucking companies, this means there’s no leaving early to create a buffer zone. The shipment has to arrive exactly when it’s expected. Not before, and certainly not after.   

In addition to making things more challenging for suppliers to make sure their goods arrive on time, it will bring even more stress on carriers – we discussed this in more detail in our earlier post. With the Electronic Logging Device more closely monitoring hours of service, truckers will be in a tight spot when it comes to making sure that deliveries arrive exactly when they’re supposed to, all while making sure to stay compliant with their working hours.  

A Tough Policy Gets Tougher 

As of April 1st of this year, the company made the policy even harder. Prior to this month, the OTIF policy stated that full truckload shipments needed to meet a 75 percent OTIF rating and less-than-truckload shipments needed to meet 33 percent OTIF to avoid fines. Now, FTL’s are required to meet an 85 percent standard (down from the lofty 95 percent they had originally planned) while LTL requirements have increased to 36 percent.

Keeping products on the shelf is the name of the game for Walmart.

Keeping products on the shelf is the name of the game for Walmart. With increased competition from the likes of Target, Dollar General, and Amazon, the more items Walmart can keep in stock, the less likely they are to lose out to the competition.  

A Necessary Change 

While it’s easy to paint Walmart in a bad light through this policy, they aren’t the only company to enforce such a policy. Competition stores like Target, Kroger, and Walgreens also have similar OTIF policies. If retailers don’t hold the supplier accountable and they don’t make them try to comply, then suppliers can cause backlogs.

With the 90 percent failure rate for full and timely deliveries, Walmart has found a rather convenient way to turn a problem into profit.

According to a Bloomberg report, Walmart had a OTIF success rate hovering around a dismal 10 percent. With the 90 percent failure rate for full and timely deliveries, Walmart has found a rather convenient way to turn a problem into profit. This new policy doesn’t cost the company a dime. In addition to generating money from the fines, increased product availability will also mean increased in-store sales.  

Given that Walmart is such a heavy hitter for suppliers, suppliers will have little choice but to either comply or lose out on some considerable business. With the extra revenue generation, Walmart can take that money and reinvest in its e-commerce business.  

A Hard Place for Small Suppliers 

While larger companies have no problem meeting delivery quotas, it’s the LTL deliveries that are going to take the brunt of the OTIF policy. Considering the strained nature of supply chain as it is, especially in the trucking sector. ELD and HoS mandates are pitting truckers against the clock as it stands. Couple that with the driver shortage and rising demand for LTL, and capacity becomes even more limited.   

Couple that with the driver shortage and rising demand for LTL, and capacity becomes even more limited.   

At least in that regard, the company has cut smaller suppliers a little slack, which is the reason that LTL shipments have less than half the requirements of their FTL counterparts. An LTL doesn’t schedule a delivery to a Walmart [distribution center] until the freight arrives at the terminal.

In order to avoid hefty fines being levied by Walmart and other retailers such as Kroger and Walgreens, suppliers are going to have to tighten and fine tune their logistics and supply chain considerably, especially given the current tight capacity environment.  

Do You Need Help With OTIF Issues?

A 3PL, such as BlueGrace, can help your business overcome the challenges of OTIF and other supply chain issues. If you have questions about OTIF or just how to simplify your current transportation program, feel free to contact us via phone at 800.MY.SHIPPING or using the form below and we will be happy to assist.