Investors are turning to AgTech in recent years, and it’s no mystery why. While much of the tech boom of the past couple decades has focused on saving time or money and entertainment, AgTech embodies higher ideals. The global population is predicted to grow to 9.8 billion by the year 2050, an increase that exceeds today’s food production capacity, so this technology is critical not only to moving humanity forward and reducing emissions, but to our survival.
On that dire note, let’s talk about what’s new in AgTech this year.
Tech-Savvy Farm Equipment
Farm equipment today isn’t your grandpa’s tractor, and it’s getting cooler by the day.
Drones are being developed to collect crop data, spread pesticides, selectively irrigate dry sections of fields to conserve water while improving yields, and even plant crops with utmost precision. Autonomous robots like the TerraSentia are being used to track plant health and field conditions. Custom farming is being carried out by autonomous vehicles (driverless tractors), as developed by up-and-coming AgTech company Sabanto. Wearable devices for animals are being developed and refined to monitor health, potentially heading off illness or other issues.
Data-Driven Farming and Land Management
As is the case in other industries, data and analytics are playing a big role in AgTech. Some data collection is being facilitated by specially developed devices as are mentioned above, but other data is gathered through networking.
Great data makes way for great analytics, helping to drive the ag industry
Great data makes way for great analytics, helping to drive the ag industry, from the fields to the boardroom, towards smarter, leaner, more productive operations.
Supply Chain Improvements
To get in line with recent years’ connectivity improvements in other industries, much of the agriculture industry is moving to more connected format. IoT sensors are being used to help track food through the supply chain, creating better accountability and understanding from fields to retail shelves. Companies like Intelliconn, with their VeriGrain data management program, are creating food supply chain game-changers.
Through networking, farmers and other supply chain players in the agriculture business are finding ways to communicate faster and better
Through networking, farmers and other supply chain players in the agriculture business are finding ways to communicate faster and better. When pricing, product information, and other pertinent data becomes readily available, everyone involved can make better decisions.
AgTech isn’t necessarily a new revelation. Farmers and ranchers have been looking to new tech to improve their operations for centuries, but the food supply chain is evolving faster than ever.
AgTech isn’t necessarily a new revelation. Farmers and ranchers have been looking to new tech to improve their operations for centuries, but the food supply chain is evolving faster than ever. Wondering how you can keep up? Call us at 800.MYSHIPPING or fill out the form below to set up a consultation with one of our supply chain experts who can help you springboard your agricultural logistics operation into 2020 and beyond.
Transporting perishable goods and fresh produce is fraught with higher risks than most surface transportation, there is a risk of spoilage, loss of freshness and quality.
Perishable goods require a specialized service provider with intimate knowledge of refrigerated trailers, or reefers. It enables the movement of goods like fruits, vegetables, seafood, some medicine and other pharma products, dairy and bakery products, meat, and flowers and plants. Refrigerated trucking helps connect farmers, bakers, meat production plants, pharma companies with markets and ensures end customers even at remote locations get fresh and quality products.
While North America has a static network for refrigerated transportation, its demand significantly increases out of regions with active harvests, commonly referred to as “Produce Season”
While North America has a static network for refrigerated transportation, its demand significantly increases out of regions with active harvests, commonly referred to as “Produce Season”. Given that the season is now in full swing, let’s take a look at what factors should be considered by both shippers and transportation partners while facilitating the movement of fresh produce and perishable goods.
What important factors should shippers keep in mind while transporting fresh produce?
Each fresh produce or perishable product has a specific shipping requirement, like the mode of transportation, type of container, temperature settings, and the transit time it can tolerate.
If even one of the transport requirements of perishables is not met, the goods can become unfit for consumption or further processing.
If even one of the transport requirements of perishables is not met, the goods can become unfit for consumption or further processing. To ensure that this does not happen, here are a few points that shippers must keep in mind while transporting their fresh produce:
Complete Product Knowledge: This is non-negotiable. For safe and smooth transport of their perishable products or fresh produce, it is necessary for shippers to clearly define these expectations to their warehousing and transportation partners. Some important things that shippers and their teams should share about the fresh/perishable product they deal in are:
Packaging requirements of the product.
The best method and transport mode to ship it.
What is the temperature requirement – are there OptiSet or Intelliset temperature settings available
The temperature needs of the product while in transit and what is proper protocol if an issue arises in transit.
Tolerable transit time for the product to aide in the recovery of delay
Food safety requirements unique to your product
The documents/formalities required in both the importing and exporting state/country.
Conduct a Market Study: It’s important to find the right market for fresh produce, especially for those products that spoil easily. It’s financially beneficial for the shipper if this product reaches the market quickly and in good condition. It’s also beneficial for the buyers as they get better quality and fresh products. So, before you decide on a specific market, conduct a study to find out:
When and where your product is going to be in peak demand, consider local growing seasons you will be competing with.
The rate at which you can deliver and distribute in the given market
The transit time to various markets and how fast can you replenish.
Outlets or Wholesale partners in the event of a quality rejection
Any specific customs formalities/documents required by the importing state for this product
Once you have this information ready, you can pick the best possible combination of market, rate, and transport requirements.
Choose the Right Transporter: If fresh produce is not managed correctly during transit, the quality and shelf life can be negatively affected. Thus, the choice of the transportation provider can make a huge difference in how your product is shipped. So, when you’re searching for a transportation partner, you must check the following:
The track record of the transportation provider in moving perishable goods.
Do they have the requisite experience, and references?
Is the equipment well-maintained, cleaned, and serviced regularly?
Are the drivers trained to manage the special equipment and carry perishable or fresh produce?
Do they have tie-ups with service centers en route, in case the equipment or vehicle needs emergency servicing?
Can they replace the container or the carrier in case of a breakdown?
What is the transit time being offered and do they have the ability to expedite?
Does the provider have ample capacity to be flexible in a fluid situation?
In the event you can use a multimodal approach to ship your cargo, carry out this exercise for all the providers. Also look for opportunities to consolidate where transportation providers have multiple service lines.
Provide Clear Instructions: Once you’ve selected the transporter(s), it is important to communicate instructions specific to your product clearly to them. Make sure they know how the product is to be handled, the temperature to be maintained throughout the transit, and if it is an LTL shipment, then which products/goods can it not be carried with or kept close to. In the case of multimodal transportation, provide a set of instructions to each transportation partner and make sure each provider knows who to hand over the cargo and onward shipping instructions to.
Communication with the Buyer: It’s often observed that while the goods reach the destination safely, they get spoiled at the buyer’s facility for lack of proper instructions on how to manage/store the goods. Hence, it is necessary to make sure that proper instructions have also been communicated to the buyer.
Get Adequate Insurance Coverage: Transporting perishables and fresh produce is expensive. There is also a risk of spoilage on the way. This is why insurance is critical in such cases. Before you put your cargo in transit, make sure you have the right insurance coverage for the cargo. This will ensure that you have financial support in case the cargo does not reach the destination in the best condition.
What Important Factors Should the Transporters Keep in Mind When Transporting Fresh Produce?
The transportation provider is responsible for the perishable products while the goods are in transit. Hence, it is necessary for transportation providers to also have a checklist for perishable goods and fresh produce. Here are some important points that they should keep in mind when accepting fresh produce goods for transportation:
Communicate Clearly with the Shipper: Transporting perishable goods is time sensitive. Make sure you share the correct information regarding transit time, the route to be taken, contingency plans, and documentation requirements, with the shipper at the time of inquiry. This not only helps the shipper make an informed decision, but also helps your business avoid unnecessary risks.
Get All Required Details from the Shipper: The transportation provider should double-check if the shipper has supplied all the required information or not. In case any crucial detail regarding the product is missing, they should proactively ask for it from the shipper prior to departing in order to avoid delays in transit
Discuss Packaging Requirements: Check with the shipper how the goods will be packed and labeled. In case there are any specific requirements for packaging and labeling at your end, communicate the same to the shipper. It is important to get the packaging and labeling right in case of perishable goods as they need to be handled with care and can spoil easily.
Understand Handling and Temperature Instructions: For perishable goods, the transportation provider needs to understand how the goods are to be handled and what temperature is to be maintained while the goods are in transit. Also, check if there are any specific guidelines on how the temperature is to be managed while the cargo is being loaded/unloaded.
Assist the Shipper with Documentation: Fresh produce and perishable goods often have more documentation needs than regular cargo. Sometimes shippers, especially those new to the trade, are not aware of the cross-border documentation. In such cases, it becomes the transportation providers’ duty to make sure the shipper completes all documentation requirements in the right format. This not only helps complete the shipment formalities but also helps the trucker while crossing the state borders.
Service the Reefers Before Allotting: The transportation provider should make sure the reefer is properly serviced, cleaned, and checked before it is allotted to the shipper. They should also monitor the temperature throughout the transit and report any discrepancies to the shipper.
Train Your Drivers to Handle Perishable Goods: For transporting perishable cargo safely, it is essential to have experienced and trained drivers on board. The driver should understand the handling instructions of the fresh produce and be able to manage temperature settings of the reefer container.
Update the Shipper Timely: Share regular status updates with the shipper while the goods are in transit. In case there are any issues with the container or temperature monitor, inform the shipper immediately, and seek alternative solutions.
Deliver On-Time: It’s a good practice for logistics and trucking service providers to deliver goods on time. In the case of perishable goods and fresh produce, on-time delivery is crucial as even a slight delay in transit can affect the quality of goods, spoil them or make them unfit for consumption. Hence, it is necessary to make sure that the entire team handling the cargo understands the importance of on-time delivery!
If you’re looking for a reliable partner to transport your fresh produce and perishable goods, get in touch with our team today! We not only take responsibility for delivering your goods on time but also ensure that you get access to an online platform powered with advanced technology to plan and monitor your shipments more effectively!
The overall Consumer Price Index (CPI) has seen a nominal increase of 0.1 percent for the 12 month period ending May 2020, according to the U.S. Bureau of Labor Statistics. While this is an average across all measured goods and services, food is showing something completely different. According to the CPI, the total food index has increased by 4.0 percent while the food at home index has jumped up by 4.8 percent.
Month-over-month, there has been an increase in the cost of food, most notably a 3.7 percent increase for meats, poultry, fish, and eggs. Beef, in particular, has seen a massive up jump at 10.8 percent, the largest monthly increase ever.
Month-over-month, there has been an increase in the cost of food, most notably a 3.7 percent increase for meats, poultry, fish, and eggs. Beef, in particular, has seen a massive up jump at 10.8 percent, the largest monthly increase ever. This created an obvious concern for increasing prices in consumers and retailers alike, both of which are bracing themselves for further price increases as food production struggles with a myriad of issues, ranging from plant closures to the loss of farm labor.
While we can attribute at least some of the CPI increases due to more people dusting off their cookbooks during the quarantine period, there are other issues to consider as well. Arable land is subject to both inconsistent weather conditions as well as natural disasters. For example, an unexpected frost can wipe out an entire crop causing a significant delay in production and output. While that’s not great for farmers, it can also create shortages in the food market at both the consumer and commercial level. However, that might be an issue of the past before too much longer as indoor, vertical farms begin to take root.
Growing UP with the Fifth Season
For the uninitiated, vertical farming (as we are discussing) is the concept of growing consumables in a stacked and modular fashion which drastically increases crop yield per acre than traditional farming.
“Vertical farming is actually a rather old idea. Indigenous peoples used vertically layered growing techniques like the rice terraces of East Asia. The term vertical farming was coined by American geologist Gilbert Ellis Bailey in 1915. In 1999, Dickson Despommier, a professor at New York’s Columbia University, popularized the modern idea of vertical farming, building upon the idea together with his students,”
Not only is the indoor farming movement growing, it’s thriving.
“It is the inefficiencies across the supply chain from farm to truck to packer to supermarket and foodservice that has fueled the burgeoning indoor farming industry, which in 2017 accounted for $106.6 billion and expected to reach $171.12 billion by 2026 growing at a CAGR of 5.4 percent during this period, according to the Worldwide Indoor Farming Market Report,” according to a recent article from Forbes.
Fifth Season is an indoor farming company, based just outside of Pittsburgh Pennsylvania, combines vertical farming concepts with proprietary robotics and artificial intelligence.
While neither indoor nor vertical farming is anything new, after all greenhouses have been around since the 1800s, Fifth Season is taking vertical farming to a whole new level. Fifth Season is an indoor farming company, based just outside of Pittsburgh Pennsylvania, combines vertical farming concepts with proprietary robotics and artificial intelligence. CEO and co-founder of Fifth Season, Austin Webb, is looking to disrupt the nation’s produce market by creating a completely new category of “hyper-local” fresh produce. Currently, two of Fifth Seasons’ biggest clients are the Giant Eagle supermarket chain and Whole Foods.
At 25,000 sq.-ft growing space, Webb’s company is seeing double the yield of traditional vertical farms, almost 500,000 lbs of produce in the first full year of operation. What’s even more impressive is the produce is grown using 95 percent less water and 97 percent less land than conventional farming. All of which is grown without the need for pesticides and has an average shelf life that lasts for weeks instead of a few days that is normal for shipped produce.
A New Future for Farming Supply Chain
Unfortunately for produce, the supply chain just isn’t nearly efficient enough for large scale distribution. Produce is typically harvested, then loaded onto a truck to be shipped for packing or processing. From there it’s loaded onto another truck before it reaches its final destination. That leads to a higher risk of spoilage and shrink. Fifth Seasons use of machine learning, AI, and computer vision gives them the ability to track and trace down to an individual tray within their farm. Webb says this gives his company and its customers a whole new level of transparency that wasn’t previously available. The technology creates information from “seed, to harvest, to package, to a doorstep, to a table (or store shelf).”
This is about more than just fresh vegetables, however. This level of vertical farming has some interesting implications for the supply chain as a whole.
This is about more than just fresh vegetables, however. This level of vertical farming has some interesting implications for the supply chain as a whole. For starters, it drastically cuts down on the total mileage that fresh produces need to travel which, in turn, lowers overall food costs and transportation costs for customers. Moreover, hyper localization of production could lead to an interesting shift in logistics and food production in general.
A Cool Move for BlueGrace
Produce, like many perishables, requires the use of refrigerated trucks to keep goods fresh as they travel across the country. With vertical farms like Fifth Season boasting such a prodigious level of production, the need for reefer units will be that much greater. That is why we are proud to announce our newest acquisition, Anthym Logistics which has significantly bolstered our refrigerated truckload capacity for our customers. To learn more about Anthym and BlueGrace or to see how we can help your operations, visit us here.
Call us at 800.MYSHIPPING or fill out the form below to set up a consultation with one of our supply chain experts who can help you springboard your agricultural logistics operation into 2020 and beyond.
While all facets of the modern business are important, arguably the most important to any retail, manufacturing, or goods based service is their supply chain. The supply chain serves as the backbone of these companies and has a significant impact on the company’s business strategy which directly affects its operation and operational costs. Additionally, the performance of the supply chain has a direct impact on a company’s ability to provide services to their customers and create additional value via services offered or simply through reliability. With the multitude of changes that have been occurring within the logistics, trade, and freight industries now, more than ever, is an opportune time to conduct or review the process of internal audit of your supply chain.
An internal supply chain audit is one of the most powerful methods of evaluating and possibly improving your supply chain, reduce operations costs, and increase competitive advantages.
An internal supply chain audit is one of the most powerful methods of evaluating and possibly improving your supply chain, reduce operations costs, and increase competitive advantages. The goal of the internal audit is to help you find weaknesses within your supply chain and correct pain points, bottlenecks to increase supply chain flexibility, agility, and overall efficiency.
To make the most out of your audit and its results, it’s important to understand that the supply chain isn’t a stand-alone, isolated feature of your business. In all actuality, the supply chain is suffused in every aspect of your business. As such the supply chain needs to be viewed between all participating companies and suppliers throughout the supply chain, with solutions applied from a holistic approach.
Why an Internal Audit is Necessary for Your Supply Chain
For most companies, audits are typically part of the normal routine, either for financial records or for physical inventory. The entire purpose behind an audit is to make sure things are where they should be and that everyone is playing by the same rules.
“Internal auditing is defined as an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes,” as defined by The Institute of Internal Auditors (IIA).
This is especially important when trying to maintain retail compliance, for example, with increasing customer demands like On Time; In Full (OTIF) or Must Arrive By Date (MABD).
Simply put, an internal audit is a multi-step process that is a means of determining whether your current systems and operations are in compliance with your company’s predetermined operating procedures and regulations. This is especially important when trying to maintain retail compliance, for example, with increasing customer demands like On Time; In Full (OTIF) or Must Arrive By Date (MABD). Conducting an internal audit does more than just evaluates the supply chain, it also takes a necessary look at the interaction between other aspects of the organization such as the accounting and financial systems, practices, and procedures. For example, are your planners and purchasers communicating properly, not only with each other but with the production floor and shipping department? Are parts coming in with enough lead time that items can be manufactured and shipped according to customer requirements?
An internal audit is important because it allows the company executives and logistics decision makers to examine the effectiveness of their business operations and controls and applications of new policies. Over time, establishing those best practices means a more competitive and more profitable company in the future.
Things to Consider Before you Start the Audit
Performing an audit is one thing, but knowing what areas you need to be focusing on is something else entirely. While every audit should be more or less tailored to the specific needs of an individual organization, here is the basic framework for initiating an audit that needs to be included:
Audit Planning: Internal auditors should have a plan in place well before the actual auditing begins.
Examining and Evaluating Information: Internal auditors should have a standardized criterion to compare findings against.
Communicating Results: Audit should have a clear and concise method of reporting their findings.
Follow Up: Internal auditors should follow up in a timely manner to ensure that appropriate actions have been taken to correct audit findings.
This framework also serves as a support system for corporate managers and allows managers of larger production systems to delegate the oversight of the audit to the internal audit department. This is important for a few reasons:
Operating Complexity: Automated data processing has increased the levels of complexity when analyzing data, a task better suited for those who know what to look for.
Decentralization: Given that supply chains are prone to be decentralized in terms of a physical location due to globalization.
Lack of Expertise: As the adage goes, stick to what you know. Leave those auditors in charge of the audit for the best quality audit.
With the right framework in place for the audit to commence, let’s take a look at the tasks involved for the actual audit.
Supply Chain Structure and Internal Audit Tasks
Like we mentioned above, every company is different and, as a result, the needs for every individual supply chain will vary. So while there is no hard and fast or “Use audit ‘A’ for Supply chain system ‘1’ ” convenient method of doing things, there are some common focal points that are applicable for just about every organization and style of the supply chain.
The supply chain management processes identified by The Global Supply Chain Forum are:
Customer Relationship Management
Supplier Relationship Management
Customer Service Management
Manufacturing Flow Management
Product Development and Commercialization
All of these processes are hallmarks of a healthy supply chain and also indicative of the successful supply chain management. Here again, we can see all of the links that connect the supply chain to every other facet of the business. Another benefit to performing an internal audit is that offers to perfect opportunity to increase the synergy between these various departments. For CFO’s and supply chain leaders, this means that supply chain management deals with total business excellence and represents a new way of managing the business and relationships with vendors, suppliers, and partners.
An internal audit can help a company in finding answers to crucial questions about managing success factors of supply chain excellence, of which these can be divided into five main sections:
Strategy – To determine if the enterprise has a clear strategy tuned to business expectations and focused on profitably servicing customer requirements
Organization – To determine if an effective organization structure exists enabling the enterprise to work with its partners to achieve its supply chain goals
Process – To determine if the enterprise has excellent processes for implementing its strategy, embracing all plan-source-make-deliver operations
Information – To determine if the enterprise has reliable information and enabling technology to support effective supply chain planning, execution, and decision-making
Performance – To determine if the enterprise is managing supply chain performance in ways that will increase the bottom line, cash flows and shareholder returns
Supply Chain Risk Management
As much as we wish we could, the ability to see and accurately predict the future still eludes us to this day. In the end, it all comes down we can optimistically refer to as an “educated guess”. With that being said, even the most educated guesses can’t predict the weather or a broken down truck. This means that within every supply chain, there will always be an element of risk. That risk represents any number of things that can go wrong within your supply chain and halt or delay your shipments. For this very reason, risk management is incredibly important when evaluating your supply chain.
An internal audit can provide business leaders with the necessary framework to develop an appropriate supply chain risk management program.
Risk management is a huge proponent of supply chain health, especially given the instabilities in the global marketplace created by political uncertainty, trade tariffs, etc. An internal audit can provide business leaders with the necessary framework to develop an appropriate supply chain risk management program. This is how your supply chain audit can also help with risk reduction and increased security:
Reviewing and understanding supply chains, including their strengths and weaknesses, in developing markets, to validate monitoring programs
Working with the company’s supply chain specialists to help develop a monitoring process that can be repeated
Helping to identify which suppliers are critical
Assessing which suppliers may be vulnerable to threats and helping draw up a residual mitigation profile
Identifying strong risk control procedures
Helping to develop key analytic tools and techniques
Aiding with compliance monitoring
Ideally, the risk mitigation will also allow companies to increase supply chain efficiency to the point where on hand stock can be reduced. While having excessive stock might create a buffer in time where shipments are running late or capacity is tight, that excess can also eat into company profit margins. Additionally, having a well-running supply chain vastly lowers the chance for disruptions, operating costs, and other unexpected costs such as chargebacks, detention fees.
Despite the cause, however, the results are often the same, a drastic slow down of operations and a huge impact on customer satisfaction and profitability.
Supply chain management is a very complex structure of activities with cross-functional processes, and it presents one of the most important functions in the company since it is directly linked to all functions of the company. Supply chain problems can result from any number of things including natural disasters, labor disputes, supplier bankruptcy, an act of war or terrorism, systems breakdowns, procurement failures, and other causes. Despite the cause, however, the results are often the same, a drastic slow down of operations and a huge impact on customer satisfaction and profitability.
The supply chain internal audit aims to support managers in process optimization and above all in cost reduction which result from an uncertain environment by evaluating and directing management towards approaches which will prevent or reduce negative effects.
After analyzing definitions and some of the standards of internal audit, it can be concluded that this process can improve effectiveness and efficiency, and by that, the performances of many functions within the organization. High-impact supply chains are more competitive and are capable of winning market share and customer loyalty, creating shareholder value, extending the strategic capability and reach of the business. Independent research shows that excellent supply chain management can yield:
25-50% reduction in total supply chain costs
25-60% reduction in inventory holding
25-80% increase in forecast accuracy
30-50% improvement in order-fulfillment cycle time
20% increase in after-tax free cash flows
To increase supply chain strength, agility, and overall integrity, companies should develop a framework for a structured approach to ongoing risk identification and management. This will enable businesses to proactively address organizational supply chain risks on a periodic basis – a practice that affords stronger company and brand protection against supply chain risk gaps.
The more we know the more we can simplify.
The more we know the more we can simplify. When we know what your current transportation situation involves and what your pain points are, we can really help you simplify. The journey with our customers begins with the Needs Assessment process and the goal to determine transportation management solutions that increase productivity and decrease overall costs. To speak to one of our freight experts, call us at 800.MY.SHIPPING or fill out the form below to receive a FREE Supply Chain Analysis.
Amazon delivered a swift blow to retailers with the introduction of Amazon Prime. Walmart is fighting back.
Amazon spent years building what was to be its competitive advantage in e-commerce, its formidable distribution network. By building distribution centers across the country, investing in algorithms to optimize pick-time, and hiring operational wizards from Walmart and other competitors, Amazon gets products to customers anywhere in the United States cheaper and faster than anyone else.
Walmart went in the opposite direction, taking a ‘build it, and they will come’ approach, building stores in rural areas and locating them close enough together to allow for shared warehousing and logistical resources. Walmart plays in the low margin discount retail arena, and they do it better than anyone else. Perishables such as bread and milk are extremely low margin products, but the wide range of offerings gets customers in the door more often and buying more while they’re there. This is their secret, money-making-sauce, the strategy that allows for a wide distribution of fixed costs and lowers their break-even point.
In 2005 Amazon launched a little thing called Amazon Prime, a membership program with perks which is now enjoyed by roughly 150 million global paying members.
In 2005 Amazon launched a little thing called Amazon Prime, a membership program with perks which is now enjoyed by roughly 150 million global paying members. At the time, Walmart was the giant, its profits being larger than Amazon’s revenue. A decade and a half later, however, and Amazon reigns supreme over online sales. In 2019, Amazon accounted for almost 40 percentof the US e-commerce market. Walmart lagged far behind with slightly more than 5 percent.
An ethos of sales is to make it easy for customers to do business with you. Prime aims to do just that. For $119 a year, Amazon Prime offers services such as music and video streaming, one-day shipping on more than 10 million products, and same-day delivery from Amazon Fresh or Whole Foods. It has its loyalty base hooked and has customers shopping more often and spending about twice as much as non-prime customers.
Walmart, however, still reigns supreme in brick-and-mortar retail.
Walmart, however, still reigns supreme in brick-and-mortar retail. As reported by Recode, they’re now fighting back with an expansion to their grocery-delivery subscription service, which launched last year. Walmart will be using its 20% market share (of an $800 billion category) as a foothold to launch the introduction of Walmart+. To differentiate themselves, Walmart is looking to include perks that Amazon won’t be able to replicate and may offer discounts on fuel and prescription drugs.
Walmart’s Delivery Unlimited service currently delivers groceries from more than 1600 US stores and costs $98 per year or $12.95 monthly and offers a free 15-day trial to lure new members. It also offers a per delivery fee for non-members and is testing a service that will take the extra few steps and deliver your groceries right to your fridge.
Widening the Customer Base
As we laid out in our Walmart and Whole Foods white papers, Millennials are outpacing baby boomers as the largest living adult generation, and their buying patterns are heavily focused on eCommerce.
CEO Doug McMillon has given Chief Customer Officer Janey Whiteside the task of widening their customer base to include more upscale shoppers and create a seamless customer experience, whether shopping online or instore. Whiteside has also put together a product team, to be headed by Chief Product Officer Meng Chee and will focus on using advancements in tech to improve the customer experience.
Amazon is now also widening its target customer base to include lower-income shoppers and is hoping to lure them into Prime memberships with monthly membership rates.
Although both Walmart and Amazon deliver groceries to food stamp recipients, only Walmart currently offers a monthly membership fee option. Amazon is now also widening its target customer base to include lower-income shoppers and is hoping to lure them into Prime memberships with monthly membership rates. Customers may find more financially viable than a one lump sump yearly membership fee.
Walmart has had a bumpy road in its foray into e-commerce. In 2016 Walmart bought out Jet.com for $3.3 billion, but Jet failed to become a driver for online grocery sales and provide the boost into urban areas they were looking for. Walmart announced in June of last year that it would be folding Jet into its e-commerce operations and ended Jetblack, the AI-powered personal shopping service it rolled out in May of 2018.
Back in 2017, they tested a program called ShippingPass, a $49 per year two-day shipping membership, which was then discontinued, members were then refunded their $49 fee.
Both Amazon and Walmart are forerunners into e-commerce, struggles, and even failures are to be expected. Far from being out for the count, it seems Walmart is coming back swinging.
Do you ship to Amazon, Walmart, Target or other large retail or grocery store chain? The rules are changing and it is getting harder and harder to be able to adhere to them. This is where the logistics experts at BlueGrace Logistics can help your team! Feel free to contact us using the form below and set up a 15 minute chat to discuss how we can help you succeed!
Our highways and transit infrastructure are mainly funded through the Highway Trust Fund (HTF), which in turn is primarily funded by the federal motor fuel tax. Since 2001 the HTF has consistently spent more than it generates through highway and transit programs. The shortfall has been covered mainly by the $144 billion it’s received from the Treasury’s general fund. The Congressional Budget Office estimates that the HTF will hit bottom by 2022.
Senate Environment and Public Works Chairman John Barrasso and Finance Committee member John Cornynhave proposed the S. 2302 bill which would impose a Vehicle Miles Traveled (VMT) tax on commercial truckers. The bill is part of a three-prong approach, Barrasso and Cornyn are also looking to tax electric vehicles as well as index the motor fuels tax.
As cars increasingly become more efficient, and the use of electric cars become more prolific, fuel tax revenues decline accordingly. The tax on electric vehicles looks to regain the lost revenue, and with automakers planning to launch up to 100 new electric vehicles by 2023, it’s a good idea. But it’s a small piece of a massive puzzle.
Commercial trucks do take a heavier toll on our highways than lighter vehicles. Therefore, the VMT imposes a tax on the miles traveled. The heavier the truck, the more damage it does to our roads, which is why a scaled tax structure based on a truck’s configuration and weight. It sounds like a fair deal, those who do the most damage pay the highest bill.
However, the industry argues, that they already pay a steeper sum than other highway users through fees, an excise tax on tires, and a heavier gasoline bill, paying six cents-per-gallon more than other motorists. Then there’s the question if the industry can support the increase, given the number of trucking companies that closed its doors in 2019, it’s a fair question. And lastly, could the tax be implemented in a fair and trustworthy manner?
Using data on 2017 truck traffic, the CBO estimated that a tax of 1 cent per mile on all roads would have raised approximately $2.6 billion if imposed on all commercial trucks. However, in order to cover $14.6 billion that truck owners paid in 2017, as well as their proportional share of the $13.5 billion deficit, the tax would need to be increased to 7.5 cents per mile, which would have generated a total of $19.4 billion. The CBO warns two behavioral responses would result: a reduction in overall freight shipments and a shift in some freight traffic from trucks to rail.
Together, the gasoline and diesel taxes yielded close to 90 percent of the $40.9 billion in revenues credited to the trust fund in the fiscal year 2017. Of that amount, $25.9 billion (64 percent) came from gasoline taxes and $9.8 billion (24 percent) from diesel fuel taxes. The three taxes that apply to trucks and other large vehicles generated revenues totaling $5.2 billion.
Capital and Implementation Costs
Three methods of implementation are offered:
Electronic logging devices (ELD) installed in cars (capital costs would depend on the set of trucks included in the tax base, intermediate enforcement costs)
Collection booths or RFID readers on road gantries (significant capital costs, low enforcement costs)
Periodic odometer reporting (no capital costs, high enforcement costs)
Although costs are uncertain, capital and implementation costs would, of course, cannibalize a portion of the revenue.
The American Trucking Associations wants to raise fuel taxes by 5 cents annually over four years, which would bring in $340 billion over ten years. Although it continues to lack Senate support, The American Road & Transportation Builders Association (ARTBA) advocates for both an increased motor fuel tax and the VMT tax.
The Owner-Operator Independent Drivers Association(OOIDA) members aren’t mincing their words. In a letter written on February 24th to Chairmen Grassley and Barrasso, the OOIDA says the ARTBAs support of the VMT tax is “shameless, and exposes the organization’s ignorance.” Chris Spear, President of the American Trucking Associations, and Sheila Foertsch of the Wyoming Trucking Association call the tax discriminatory.
Trucking-aligned farm groupswant broad-based funding mechanisms and caution the VMT would place a disproportionate share of the burden on freight transportation and would leave U.S. agriculture at a competitive disadvantage against foreign competitors.
As the ARTBA pointed out in their letter, if a controversy-free solution existed, it would have been enacted years ago. But America’s infrastructure is failing, and transportation investment is coming up short by the tune of $1.1 trillion by 2025. According to the American Society of Civil Engineers’failure to Act study, by 2025, the nation will have lost almost $800 billion in GDP and have 440,000 fewer jobs due to transportation system deficiencies. Time is of the essence.
Throughout 2020, truckload carriers felt the burn of the China-U.S. trade war, declining capacity, and low spot rates. In general, markets with lower spot rates are more beneficial to shippers, keeping carrier profitability in check. The opposite applies when contract rates are lower, allowing carriers to retake control and reap greater profits. In addition, the risk for a resurgence of higher spot rates and renewing interest in truckload freight contracts is an area, shippers should understand and keep their eye on in 2020. According to William B. Cassidy of JOC.com, he describes this chance:
“After six consecutive quarters of deflation, the market is rebounding, heading back towards an inflationary environment, the spot market will reach an inflationary environment by Q1 2020.”
To combat that prediction and also consider the influence of the coronavirus, shippers need to understand the driving forces of change in the truckload market, what is already happening with the coronavirus, and a few tips to better underscore and improve use of both truckload freight contracts and spot rate shipping.
Driving Forces of Change in Contract and Spot Rate Markets
The biggest driving force of change in the market involves available capacity and its influence on capacity. As explained by Cassidy:
“DAT noted that freight demand, in terms of total spot and contract volumes, has been increasing, with spot volumes rising 7 percent in 2019 year over year and contract volumes 4 percent. The American Trucking Associations (ATA) predicts a 1 percent increase in contract truckload volumes for 2019, down from annualized growth of 3.2 percent in 2018 and 3 percent in 2017.”
How much capacity must exit the market before supply and demand move back to a closer alignment? Some experts believe truckload capacity and freight demand already are closer to equilibrium than they’ve been since 2017 and that a surge in demand could tip the balance. Others think trucking’s supply-demand gap will take more time to close.”
Unfortunately, that prediction and driving force now hangs in the balance with a likely swing away from the prediction. That’s right. Capacity is rapidly increasing overseas, and it will likely lead to changes in the U.S. truckload freight contracts’ market.
The State of Truckload Freight Contracts Will Retract Due to the Coronavirus
Capacity is dependent on the demand in the volume of imported raw materials, finished products, and other supplies from around the world. Many electronics, automotive, and medications and medical equipment arrive in the U.S. from China. In addition, the flow of exports from the U.S. to the APAC region, including the iPhone and agricultural products, are at risk. There is a near-stop to the flow of freight in the region due to the coronavirus. So, what happens in other areas abroad and in the U.S.?
The freight that would have filled trailers and help carriers push spot rates upward vanishes. Now, carriers have too much capacity, too many drivers, and too few lanes to travel that make a profit. As a result, the spot rate market is on the verge of bottoming out, and shippers will benefit to an extent. The real problems for shippers will not become evident until their favored carriers start to close lanes and begin to exhibit signs carriers are looking to gain profitability when more reweighs and reclasses occur or accessorial fees tick up. At this point, shippers will face the uncertainty of limited carrier availability, if any, and an inability to move freight to their customers as cost-effectively.
The only way to maintain operations lies in creating a balance between the use of contract and spot rates to get the best deal to benefit everyone.
The only way to maintain operations lies in creating a balance between the use of contract and spot rates to get the best deal to benefit everyone. As carrier operations begin to suffer the effects of continued drops in the spot rate market, it will be time for shippers to start looking for more carriers and fulfillment options to fill the void.
How to Better Understand Contract and Spot Rates
Shippers that wish to create a successful balance between the use of spot rate and truckload freight contracts need to follow these steps:
Connect your supply chain assets to a centralized supply chain control tower.
Leverage the full scale and scope of the BlueGrace TMS.
Take advantage of managed services, including invoice auditing and accounting services.
Rate shipments across all modes and potential trade lanes to determine the best-case, not the cheapest, shipping option.
Always consider the “other” factors in tendering freight, including claims’ insurance and management needs.
Diversify your carrier network to include the small and local carriers that have expertise in both truckload and last-mile delivery.
Extend your TMS and order fulfillment systems across your whole supply chain, including brick-and-mortar stores.
Remember to integrate new systems with existing platforms to enable omnichannel capabilities and take advantage of all available inventory.
Gain Better OTR Rating With an Advanced, Customizable TMS at BlueGrace
The freight rate market is continuously changing to reflect the risks and opportunities in the market. As the year rolls on, shippers need to take the steps necessary to shore up their operations against the industry’s top risks, including market volatility and the coronavirus. Moreover, applying the functions and wide-ranging benefits of a dedicated TMS and 3PL’s lineup of managed services will provide a protective barrier against risk and help your organization succeed. Find out how more information and visibility can improve your use of spot rates and truckload freight contracts by calling BlueGrace at 1.800.MY.SHIPPING or filling out the contact form below.
Supply chains are evolving fast. To keep up with the fast pace of supply chain evolution it is important for supply chain planners to upgrade their skills and step up their business planning and forecasting techniques. If the planners lag behind, it will have an adverse impact on not only the supply chain but also on the organization as a whole.
The Gartner Supply Chain Planning Summit held in Denver, USA, in November 2019, emphasized this very aspect. According to Marko Pukkila, Vice President and Team Manager, Gartner, who shared his views during the summit:
“The job description of SCP leaders today looks totally different than 10 years ago. It’s no longer enough to provide copious amounts of data — planners must use the data to draw conclusions about future risks and opportunities. It’s all about supporting business objectives. Gartner calls this an outside-in mindset.”
What is the Outside-in Mindset?
As Gartner defines it, the outside-in mindset is about being
“aware of what is happening around you — be it a business objective or an upcoming recession — and use the capabilities of the planning function proactively to set up internal processes that are optimized for whatever will happen in the future.”
In simple terms, the outside-in mindset is about understanding external factors and the impact they will have on the business objectives. It is about creating a system that can not only take into consideration the impact of these outside forces but can also respond quickly to the ever-changing global economic-social-political environment. It is about creating a planning process that is agile and flexible enough to integrate future events.
What are some situations where the outside-in approach would help?
Let’s take the US-China trade war situation. This scenario has been in existence since 2018. It has impacted the trade relations between the two nations. Needless to say, it has had an impact on the supply chains of the organizations of the two countries. For example, Chinese organizations that were exporting to the US may have seen a decline in the orders due to tariffs or the US organizations would have had to reduce quantities of goods imported from their Chinese counterparts. In this situation, the US companies would have to find another source (country) to fulfill their requirements and the Chinese would have to find alternative buyers for their finished goods.
While the trade war is an anomaly, as a concept is not unheard of. In this situation, organizations that may have researched and identified alternative buyers or sellers ready to do business with them in case of a change in the trade relationship between their countries would have suffered less of a set back as compared to those who may have neglected to take this factor into consideration.
A current situation that is creating havoc on supply chains is the Coronavirus virus outbreak. An article published on February 14, 2020, in The Wall Street Journal which quotes Lars Jensen, head of Denmark-based maritime research group Sea-Intelligence, saying:
“Substantially less cargo is being moved between China and the rest of the world. Last week we had an additional 30 sailings canceled, with 23 across the Pacific and the rest to Europe.” The article further states that “Mr. Jensen said the canceled trips, which have topped 50 since late January, will delay or reduce shipments into the U.S., where retailers may see a slowdown in their traditional restocking of inventories for the spring.”
According to the article, “Analysts reckon that the virus could lead to Apple shipping 5-10% fewer iPhones this quarter and could scupper its plans to ramp up production of its popular AirPods.”
These are just two instances that are coincidently related to one of the major economies of Asia and will have an impact on US businesses. But there are many other situations that may not have a far-reaching, global effect but can disrupt the supply chain at a local level. For example, labor strikes can impact day-to-day operations and create a backlog in the supply chain. Supply chain planners need to factor in local incidents as well while making supply chain plans.
The Gartner outside-in approach suggests that it is important for supply chain planners to be able to read the data and information available to them and identify possible outliers – roadblocks, challenges, and opportunities, in the future. They should then incorporate solutions or plans to be able to navigate their supply chain should those outliers become a reality in the future.
How to incorporate the outside-in approach in supply chain planning?
To incorporate the outside-in approach in supply chain planning, Gartner advises a 3-step process:
1. Realize that the time to transform is now: Citing the 2008 – 2010 economic recession, Gartner says that organizations that were ready with planning processes in place that provided forward-looking insights fared better during and post the recession than those who tried to streamline their supply chain after the recession hit. To put it simply, there’s no time like the present to streamline the supply chain with the evolving global business, economic, political and social scenario. While the change may seem to be in the distant future, it is wiser to prepare the supply chain for it today.
2. Refocus the planning team to business outcomes: Organizations need to understand that supply chain planning and business planning are not independent of each other. Explaining this point, Gartner says: “It’s no longer enough to just provide a forecast — planners must use the forecast to find pathways that guide the business to where it wants to go. Think of an advanced navigation system that doesn’t only plot the best route, but also foresees roadblocks and traffic jams and navigates around them.” Further adding, that the planners need to be able to convince the other stakeholders why this plan is good for the business and how it will help them succeed.
3. Become the orchestrator of success: The supply chain planners need to take the lead on creating cohesion between the different departments of the organization and their business plans. Explaining the point, Marko Pukkila, Vice President and Team Manager, Gartner, says: “The whole is more than the sum of its parts when all parts of the business go into the same direction. This is what planning should accomplish”.
Today supply chain planners have data available to them from every touchpoint of their business. This data, if used effectively can form a strong foundation for supply chain plans. But data is just the starting point. As the Gartner three-step process suggests, supply chain planners should use this data in a constructive manner to create actionable insights, solutions, and bring all the stakeholders on board to follow through the plan.
We know implementing an outside-in approach in supply chain planning is easier said than done. That is why our team of experts not only helps you analyze your supply chain with the help of advanced technology but also guides you in finding effective and efficient solutions to address the issues in your supply chain. Get in touch with our team to know more!
Digital and physical are reaching a point of total convergence, something that would have been unheard of 20 years ago. Companies like WholeFoods and Amazon are changing up their logistics goals in a big way, something that is likely to ripple through other similar industries.
Amazon Tips its Hand to Logistics
It’s unarguable at this point that Amazon has a knack for developing an in-house system and turning it into a massive profit generator down the road. We’ve seen it before with Amazon cloud computing when the company needed to boost its data handling capabilities. Now Amazon’s cloud drive, known as Amazon Drive has become a for-profit service that is used around the world.
So what happens when the e-commerce giant turns its eye towards logistics?
We’ve seen over the past few years that Amazon isn’t content to wait for packages to be delivered at someone else’s pace. With Amazon Prime, subscribers have grown accustomed to two-day delivery, a feat which has made smaller companies buckle under the weight of consumer expectation. Not content to rest on their laurels, however, Amazon is pushing the envelope again towards next or even same-day delivery. Banking on the fact that as more people realize they can get their items delivered even faster the more people will sign up for a Prime Subscription. And so far the gamble has paid off.
“Driven by Prime Free One-Day Delivery and Free Same-Day Delivery, it was another year in which Amazon was able to set shipping records. That was rewarded with a 4% surge in its stock. It now sports a market capitalization of $927 billion,” says the MotleyFool.
“For the holiday period, the tech giant set records for the number of people who tried Prime. In one week alone, Amazon said five million new customers either began a Prime membership or started a trial. The number of items delivered via Prime Free One-Day and Prime Free Same-Day Delivery nearly quadrupled compared to a year ago,” the Fool adds.
This year, Amazon’s in-house logistics delivered more than 3.5 billion packages compared to FedEx’s 6 billion. Which isn’t terrible when you consider the fact that Amazon started as an internet book store. What’s more, is 60 percent of Amazon customers opted to ship to an Amazon drop point to pick up the packages themselves, further pushing back FedEx, UPS, and the United States Postal Service.
It wants to control everything from shipping out of the warehouses to delivery to customers’ porches.
“It wants to control everything from shipping out of the warehouses to delivery to customers’ porches. That requires large upfront investments. In the second quarter of 2019 alone it spent $800 million to expand its one-day delivery for Prime Members. It’s also investing $1.5 billion to develop an air hub in Kentucky that’s slated to open in 2021 and will be home to fifty aircraft. Amazon announced its Delivery Service Partner program in May, enabling entrepreneurs to create delivery networks to handle last-mile deliveries for Amazon. The company is also investing tons of money into drone technology and, in June, debuted its Prime Air Drone design,” reads the Fool.
Building their own in-house logistics network means less reliance on the now “competition” and giving their customers little reason to shop anywhere else. Amazon is also hedging a bet that by using its own logistics network, it can eventually cut down on the cost of packing and delivery.
The Convergence of Digital and Physical and the Reimagining of the “Store”
Amazon building its own logistics network is also changing the landscape for the traditional brick and mortar retailers. Within the past two years, we’ve seen the fall of some major retailers like Toys R’ Us and Bon-Ton. These companies are among those that lacked the ability to grasp the importance of a digital presence and the shape of consumer expectations. As we enter into a new decade, many traditional retailers are beginning to change the way they do business, which might be the only thing that keeps them out of Amazon’s massive shadow.
“Shopping malls and physical outlets may have seen their best days for foot traffic. However, they have been given a new “lease” on life as fulfillment locations. Retail giant Target Corp. uses virtually all of its 1,900 stores as fulfillment locations, and about 80% of its online orders are fulfilled through a store. The new decade will see an increasing convergence of digital and physical operations as brick-and-mortar locations are positioned as hubs closer to the customer and e-commerce sites direct more package delivery to retail outlets, ABI Research said in a late December study,” reads an article from Yahoo! Finance.
As e-commerce takes an ever-larger share of total retail sales, the strategy and execution of delivery networks will become the axis of success.
“As e-commerce takes an ever-larger share of total retail sales, the strategy and execution of delivery networks will become the axis of success. Regardless of the industry, logistics will increasingly be the difference between an enterprise’s success or failure,” the article continues.
Even grocery stores are changing the way they serve their customers. 20 years ago, we never would have considered ordering our produce and perishables online, especially not for delivery, yet new startups like Misfits Market and Butcher’s Box are doing just that. Virtually every major grocery store chain now offers some form of digital grocery shopping where customers can order their items and have them delivered to their car in the parking lot.
These are just some of the changes we’ve seen in the past few years, but some grocery stores are taking it to a whole new level.
A True Change of Pace for Whole Foods
Perhaps one of the biggest changes in the grocery scene is what we’re seeing from Whole Foods. The organic food market was purchased by Amazon in August of 2017 and under the titan of commerce’s influence has become a supplier for other retailers. How have they been doing so far and what does that mean for their logistics network? Download our White Paper about the subject and learn how you can establish processes and systems that are in line with supermarkets and retailers’ requirements, such as On-Time and In-Full (OTIF) or Must Arrive By Date (MABD).
Small and mid-size businesses are finding themselves in a difficult position in today’s market, courtesy of the Amazon effect. Consumers now expect free shipping and in most cases they expect it to be either two days, one-day, or even same-day delivery. That’s all well and good when you have a massive financial engine to throw behind it (having your own in-house logistics and distribution network doesn’t hurt either) but for smaller companies, that’s not always an option. Instead, SMBs are left with the choice of eating exorbitant shipping fees to meet customer expectations or stick with standard delivery and risk losing their market share.
In 2020, SMBs are going to have to make some tough decisions on how they invest their shipping and logistics dollars,
Through 2019, this tension has been growing, complicated even more so by big-box retailers, Walmart in particular. In 2020, SMBs are going to have to make some tough decisions on how they invest their shipping and logistics dollars, when and where to invest in technology over team (or vice versa), and where they can go for reliable and affordable delivery options.
The Ever-Growing Logistics Challenge
SMBs are going to have their hands full when it comes to figuring out the best route to go for logistics, especially when trying to keep up with Big Box Influencers. Walmart has put a tight fist on logistics with its MABD and OTIF policies. In an effort to keep products on the shelves exactly where and when they need them, the retail superstore has begun punishing carriers who don’t deliver everything they are supposed to, exactly when they’re supposed to deliver it. Given that Walmart is an incredibly lucrative contract for carriers they will, of course, oblige. Ensuring that Walmart gets exactly what it needs.
SMBs don’t typically have that sort of clout, however. So what options do they have available to them? Understanding that their customers expect a new level of service that would never have been considered as possible 20 years ago, SMBs will have to look at alternative logistics strategies to ensure that their customers are happy while keeping profit margins in the black.
Knowing where to Source Carriers
Knowing where to source carriers from is among the top challenges for SMBs. Sure, there’s a UPS store down the street, but is that the most cost-effective means of shipping out goods? There’s also a USPS in every town on the map, but will they get products there on time? These are just some of the questions that SMBs will have to be able to answer.
All of these questions and variables make it incredibly difficult for smaller companies to come up with a stable plan for their logistics.
There’s also the matter of fluctuating shipping rates, and tightening capacity, which are subject to change with seemingly little or no notice. All of these questions and variables make it incredibly difficult for smaller companies to come up with a stable plan for their logistics. Most of them are resigned to the fact that they will have to increase their shipping and logistics budget and hope for the best.
Investing in Technology
Tech is another difficult consideration for SMBs. On the one hand, many companies realize that it’s important to have the right technology solution in place. On the other hand, it can be expensive to the point of being cost-prohibitive. What technology should smaller companies invest in? What is going to help them the most to stay relevant and viable in today’s market? These are questions that don’t always have an easy or straightforward answer and that tends to make smaller companies more hesitant when deciding how to invest their logistics dollars.
In addition to managing the relationship with shippers, it might also be time to involve the financial experts that are in your industry.
In addition to managing the relationship with shippers, it might also be time to involve the financial experts that are in your industry. Many businesses tend to compartmentalize their logistics and their C-Suite when ultimately, both have tools and skills that the other needs to not only survive but thrive. We’ve also got something to say about that as well.
Lastly, if you still have questions about how to compete with the big box stores or make your logistics dollars go further, let us know. The BlueGrace expert team is ready, willing, and able to answer your questions and to help turn your business into a lean, green, logistics machine it was always meant to be.
As the COVID-19 coronavirus began to spread across our country, and people began to absorb the full impact that it would have on our workplaces and culture, Americans reacted by heading to grocery stores and buying “essentials” in bulk. It is possible consumers had become conditioned by other natural disasters like hurricanes, tornadoes, polar vortexes and the like to expect large-scale disruptions to the traditional grocery store supply chain.
Within a couple of weeks, the news media became flooded with pictures of empty shelves and lines of people waiting for consumer package goods (CPG). The most curious case, and the one that has caught social media by storm, is the fact that consumers are ripping the toilet paper off the shelves quicker than manufactures can supply it. When there is a shortage that means some will go without. Those waiting for their paycheck? They’re out of luck. The elderly who can’t get to the store on time? Also, out of luck. In the UK, the overbuying has led to products being rationed and price hikes. In Hong Kong, it led to armed robbery. However, when looking at it from a supply chain perspective, the problem has a simple explanation, one that is under-reported in the media. The true demand for toilet paper hasn’t really changed (consumers aren’t all of a sudden using more toilet paper per capita) but their collective buying behavior has caused a change in demand upstream.
The industry runs on extreme efficiency and mills work at full capacity.
Since majority of people are working from home, restaurants
are closed and any public place with a restroom are closed as well, there is
less of a need of “industrial” toilet paper and an increased demand for “commercial”
toilet paper. The toilet paper industry is unique in that this paper is a
high-volume product but low value. It also has a low value by density. It’s
large in size but weighs little and costs little. This means transportation
costs are a significant portion of its total value. The industry runs on extreme efficiency and
mills work at full capacity. Manufacturing schedules are based on demand having
little fluctuation, but this only works if demand is steady. When demand
changes this causes supply problems. According
to Will Oremus, with 75% of workers now working from home people are buying
more commercial toilet paper than ever before, causing a huge spike in demand
for this particular category of toilet paper.
Conversely, once this coronavirus crisis ends, demand for
residential toilet paper will subside quickly back to traditional levels. Therefore, the average family will then be overstocked,
and their purchases will pause for a period of time until their inventory is
depleted. At this point in time, when
the CPG company replenishments arrive in stores, there will be a surplus since
consumers are overstocked.
Because there were no shortages in the raw materials used to
produce this product, and demand skyrocketed, we are seeing what is called the “bullwhip
effect” (seen below). We find ourselves
stuck in a situation where panic demand causes the system to produce drastically
more product for which there will not be enough buyers once the inventory
finally arrives to catch up.
We simply can’t just replace the toilet paper
It’s important to note that we simply can’t just replace the
toilet paper that belongs on the shelves with the unused toilet paper in
airports, restaurants and other closed down businesses. These are essentially
two different products that come from two completely different markets
(commercial and industrial). The industrial paper comes from a completely
different mill than the commercial paper requiring different supply chains. In
fact, people are using 40%
more commercial toilet paper than usual at home than they would be at any
“normal” day. If we were to redirect the industrial supply to consumer supply
there would be a need to establish new relationships and contracts with
suppliers, design new packaging and shipping and route new trucking routes, all
of which normally take years to accomplish and extremely costly.
The customer must be convinced that excessive purchasing of toilet paper is unnecessary.”
We are at an uncertain time right
now but it’s important that our actions reflect facts and not fears. The short
supply of toilet of paper doesn’t necessarily come from panic and fear; it is
simply a function of the differences between the B2C and B2B supply chains for
this single product. There is a spike in demand and people are temporarily buying
more for their homes, therefore supply is working to keep up with demand. The CEO
of ThroughPut explains that “when there is no more that can be done on the
production side, the customer must be convinced that excessive purchasing of
toilet paper is unnecessary.”
In the current economic scenario where businesses are shutting shops with alarming regularity, it has become necessary for organizations to diversify their supply chain. Given the importance of the subject, we hosted a webinar on the topic – From Chips to Dips in Service? Supply Chain Impact of Diversifying Chris Kupillas, VP Sales, at BlueGrace Logistics discussed the topic. They talked about why it was crucial for businesses to bring in variety in their supply chain, what factors were needed to be considered and the challenges that businesses might face in the process.
Below, taking reference from the article, we discuss why this is good for the business and how it can benefit them and other stakeholders in the ecosystem.
How does a diversified supply chain help the business?
As the quote from Greg Foran suggests, diversifying the supply chain helps businesses stay relevant. There are multiple ways in which businesses can do this. They can offer variants in their current product offering, introduce new products, introduce the business to different regions within their country or go global.
Variants and new products will allow businesses to retain customers by enabling them to cater to their ever-changing needs and demands. And entering new regions or countries will widen their customer base. A business with more products and/or serving multiple regions or countries tends to have a better chance at survival in times of economic recessions or downturns or political strife.
Is diversification only for the demand side of the supply chain?
No. For a business to be prepared for different cycles of the market, it is also important to introduce options on the supply side of the business. This means identifying new sources for raw materials, spare parts, and alternative manufacturers where they can outsource the manufacturing of their products if required. They also need to identify service providers like transporters, warehouse operators and 3PL service providers who can work with them when needed. Having these alternatives on standby or in a working relationship will ensure that in the event the regular service provider cannot fulfill the business requirement, the business will not suffer.
Diversification is great for other stakeholders in the ecosystem
A manufacturer is just one of the beneficiaries of a diversified supply chain. Other stakeholders in the business ecosystem also benefit from it. For example wholesalers, retailers, e-commerce websites, also benefit in the form of more saleable goods to offer their customers. For them, the wider the range of products, the higher the probability of making a sale. This means more business for them which ultimately generates more business for the manufacturer.
Similarly, it provides transporters and other logistical service providers with more business and regular work opportunities. Take, for example, a small transporter who is working with a company that produces only seasonal goods – let’s say woolen garments. The transporter will only get work from this organization until the woolen garments season lasts. After that, it may have to search for another client until the season rolls back again. Now, if the same company started to also produce summer wear, the transporter will not have to engage another client if it doesn’t need to. It will have year-round work from one source.
That’s not all. Diversification also empowers customers. It gives them multiple options to choose from. Since diversification also creates competition, it provides customers not only with quality options but also competitively priced products, making sure businesses work on creating better products within a set budget.
What are the benefits of diversification for the supply chain?
Now that we know why diversification is crucial for businesses, let’s look at why it is the lifeblood of it benefits the supply chain of your business.
Risk mitigation: As mentioned earlier, a diverse supply chain helps businesses sustain in less-than-ideal circumstances. It provides alternatives to continue the business even if the demand for a product goes down, or a supplier discontinues service or there is a disruption – political, nature-based, social, economic or cultural. For example, take the case of the coronavirus outbreak in China. If companies selling their products in China do not have a presence in other markets, it will adversely impact their business. Or if a company is only sourcing from China then it’s supply of material or products will be affected which would again create an untenable situation for their business.
More flexibility: A diverse supply chain provides opportunities to optimize available supply options with the demand side of the business. It gives the opportunity for businesses to divert their manpower, funds, and efforts to products or regions that are doing well. If the business operates in a single product or serves a single market, this flexibility is not available.
Negotiation power: Cost is an important factor in supply chain. A supply chain that can control its costs has a higher opportunity to improve its bottom line and earn profits. A supply chain that works with multiple suppliers and service providers has more room to negotiate better rates and service contracts as compared to the one that works with a single source or service provider.
Promotes out of the box thinking: To diversify one has to continuously be on the lookout for new opportunities to differentiate. It can be for a new product mix, design, packaging, supply, or go-to-market strategies. This helps employees develop curiosity, find creative solutions to operational problems and creates a culture of innovation in the organization.
Twenty years ago, no one would have imagined for a second that they could order a product online in the morning and have it on their porch before they got home from work. Today, it’s all but expected that delivery occur within very small timeframes, even the same day.
The battle amongst large players in the e-commerce segment like Amazon and WalMart for fastest delivery times appears to only be escalating, meaning consumers are becoming more and more used to getting their packages within a couple days. This means changes in logistics operations must continue to evolve in order to support these demands. Note: Download our whitepaper, Walmart: The Retail-Supplier Relationship for even more details.
In order to keep up with consumer demand, logistics must evolve.
Today’s consumer demand means that buyers expect more from suppliers. They need the right merchandise delivered at the right time in precisely the way they need it delivered. When these expectations aren’t meant, suppliers may be faced with penalties that can be crippling. The drive for on-time delivery can also lead to unexpected accessorial fees. In order to keep up with consumer demand, logistics must evolve.
Logistics Technology Evolves to Meet Demands
Many logistics divisions are turning to technology to help meet evolving demands. Without the technology, keeping up is a pipe dream for many operations. Here are some of the technologies logistics operations are falling back on in order to serve their customers better:
Demand Planning– It’s critical to stay ahead of the game when delivery timeframes are so short. Demand planning software is changing to make sure suppliers are ready to meet demands.
Smarter Analytics– Top notch analytics are being implemented across logistics operations, from warehouses to transportation, to give logistics providers a leg up. Analytics are used to support many arms of the logistics operation, as well as keeping stakeholders informed.
TMS– Comprehensive transportation management systems are critical to getting loads out the door and ensuring on-time delivery. Improved routing, load tracking, cost control, and reporting are critical to helping companies meet consumer demands while working within their operational budget.
IoT– The Internet of Things has major potential to help suppliers meet stringent demands. Load tracking (i.e., real-time GPS tracking) and monitoring (i.e., atmospheric conditions, handling sensors to detect impact to parcels) are two major IoT applications being implemented by cutting-edge suppliers to improve delivery.
Blockchain– Blockchain is a technology being implemented to improve traceability and accountability in supply chains by recording data in a way it can’t be tampered with or changed.
Demands for Faster Delivery Mean Demand for Better Visibility
A transparent supply chain is one of the most important factors in meeting deadlines. Consumers and retailers alike insist on knowing where their merchandise is, when they’ll get it, and how they’ll get it.
Supply chain visibility is a top priority at most companies, but only 6% of companies say they’ve achieved full visibility. While supply chain visibility ranks behind OTIF and delivery issues in a 2017 Geodis survey, it may hold the key to solving those problems.
Staying one step ahead is critical to supplier success, and stagnation simply won’t do in the current logistics
Consumer and retailer demand will inevitably continue to evolve and put more pressure on the logistics industry. Staying one step ahead is critical to supplier success, and stagnation simply won’t do in the current logistics market. Wondering how your logistics operations can keep up with ever-hastening delivery expectations? Contact one of our representatives at 800.MY.SHIPPING or fill out the form below to get a free supply chain analysis from one of our experts!
While there are many factors to consider when choosing a 3PL service provider, cost and customer service are two of the most critical factors.
Finding the right balance is the ultimate chicken and egg situation for all logistics managers. If they can crack this, they can get a step closer to creating a better and more effective supply chain.
Why The Conundrum?
On the one hand, organizations have a set budget to spend with a 3PL partner on transportation, warehousing, and related activities. On the other hand, the logistics partner is not only accountable to provide precise, efficient, and affordable logistical services to the organization but is often the face of the company for the end customers – regardless of the organization operating in the B2B or in the B2C space.
For both sectors, the 3PL is the first point of contact with the customer and more often than not, it has multiple contact points in the end-to-end supply chain.
This is why, for logistics managers, choosing a 3PL partner is the crux of their job.
This is why, for logistics managers, choosing a 3PL partner is the crux of their job. The right decision may make the difference between success and failure. The wrong choice wrecks havoc not only in the logistics department but company-wide. When negotiating a contract with a 3PL starts logistics manager should:
Conduct a thorough cost-benefit analysis of the proposal sent by the 3PL
Understand and calculate an estimate of the lost opportunity cost of choosing a low priced service at the expense of efficient customer service.
Find out if the lost opportunity cost would be less or more than than the cost of hiring a 3PL which provides a premium customer service
Understand the management’s position on overshooting the logistics budget
They should also ask the following questions:
Can the organization accommodate an increase in logistics cost?
How will it impact the bottom line if the costs were to be absorbed by the organization?
Is there a scope to increase the product price? How will it affect sales?
Now that we know why the decision is critical and why it poses a challenge, it’s also important to know why both of these factors are individually critical.
Why Is Cost Important?
The cost of hiring a 3PL forms a part of the complete product cost and thus impacts the pricing. While a slight increase in the pricing for high-value goods may not affect a customer’s purchasing decision, it may impact sales of fast-moving consumer goods (FMCG). Sometimes even a slight increase in the price for FMCG goods can negatively influence its sales, giving the competition room to gain market shares.
Why is Customer Service important?
Like cost, customer service also plays an important role in the complete packaging of the product. How long can an organization sustain its business with a transporter who delivers goods late or in damaged condition? Or a warehousing facility that is not able to maintain the goods in a sale-able condition? Not for long. Sooner or later, these aspects – late delivery and poor product condition or damaged products will start to impact the product image in the market, and thus start to adversely impact its sales.
How a 3PL handles customer queries related to product delivery, or processes returns also form a part of customer service and affect the overall perception of the customer about the product and the company.
In addition to the above aspects, how a 3PL handles customer queries related to product delivery, or processes returns also form a part of customer service and affect the overall perception of the customer about the product and the company. Thus, both of these factors have the ability to influence the success or failure of the product or an organization. Then how does a logistics manager choose on which factor to focus on and where can he take a little leeway?
So, What Is More Important?
As we have seen, if the cost for a 3PL goes up, it will to some extent affect the product pricing. And depending on how the company chooses to deal with extra cost, it can also have a bearing on its profit margins and the bottom line.
An article in CMO by Adobe shares that according to a survey by PwC titled Experience Is Everything, “52% of the respondents would pay for speedy and efficient customer service”. For 73% of the respondents, “a good experience is key in influencing brand loyalties”, and “60% said they would stop doing business with a company if they experienced unfriendly service”.
A survey carried out by Capgemini in 2017 talks about consumer willingness to pay for a better service. According to the survey, 81% of the respondents are “willing to increase their spend with an organization for a better experience”. According to an article in Multi-Channel on a 2018 PwC survey titled: Future of Customer Experience, “customers across a wide variety of industries said they were willing to pay as much as a 16% premium for better service”.
The importance and need for good customer experience are only going to become more critical.
These statistics spread over a couple of years adequately highlight the growing importance of good customer experience. In the interconnected global business environment, the importance and need for good customer experience are only going to become more critical.
The above survey results also highlight two very crucial points related to customer service: the first, if it is good, it can help retain customers and even bring in new ones; the customers are willing to pay for quality customer experience and service. The second point that these surveys bring forth is that customers can discontinue business based on even single poor customer experience. In the long term, poor customer service will tend to have a larger impact on the bottom line than a slightly higher cost of the 3PL’s service.
If you choose the right 3PL, in addition to good customer service you get many other benefitsas well.
And if the surveys on customer service are anything to go by, efficient and timely customer service will be able to persuade the customers to bear a slightly higher product or service cost. If you choose the right 3PL, in addition to good customer service you get many other benefits as well.
BlueGrace knows both these aspects are critical in creating a winning product proposition. We help build a cost-efficient and customer friendly supply chain, get in touch with our team today!
Amazon has already proved its mettle in the e-commerce space and in the distribution sector. Earlier in the year the company also staked its claim in the digital freight brokerage industry. Now, it has set its sight on the grocery business.
Amazon’s Grocery Connect
Unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet.
For the uninitiated, Amazon is not new to the food business. It has been operating in the food and grocery sector since it acquired Whole Foods in 2017; Amazon Go stores; and its fresh grocery delivery service. However, unlike its other ventures, the retail giant’s foray into the food and grocery business has not been profitable — at least not yet. According to an article published in The Motley Fool, Amazon’s CFO Brian Olsavsk speaks about the company’s latest quarterly results saying, its sales from physical stores, which are principally Whole Foods revenue, were actually down by 1.3% from the previous year — “this is the only major segment of Amazon’s net sales that didn’t show any growth”.
This has not dissuaded the company from making further investment in the food and grocery business though. Early last month, it announced its plans to launch a new brick and mortar food and grocery store brand. The first store will be opened Woodland Hills, California in 2020. This new business will be separate from its existing food and grocery business.
With this announcement, one can say with certainty that for next year, one of Amazon’s major business goals will be to acquire a large slice of the global grocery and food retail market which is estimated to be worth USD 12.24 trillion by 2020.
What will be different in the new venture?
While Amazon has a presence in the food business, its reach has been limited. According to news reports, Amazon is aiming to reach a wider customer base. While Amazon’s Whole Foods business caters to the high-end customer, the new stores will be designed to cater to mid and low-income households. The new stores are expected to enable Amazon to offer their customers a range of products more in line with other large retailers like Walmart, Costco, and Kroger.
In an article in Forbes retail expert Neil Stern, explores in-depth what the customer can expect from Amazon’s yet to be named new grocery venture:
The new store will be omnichannel from the beginning
It will have ample space for in-store picking and holding facilities
The focus will be on mainstream products
It will be more price-competitive than the Whole Foods business
It may focus more on Amazon’s private label
Will technology be a part of the new venture?
Anything that Amazon does is powered by technology.
Anything that Amazon does is powered by technology. So it goes without saying that technology will be a large part of the newly announced grocery venture as well. In his article, Neil shares that the new store might not be as tech-savvy as the facilities available at Amazon Go stores. Further adding that technology in the new store might not be immediately scalable.
Irrespective of the level of savviness, we can safely assume that technology will play an important role in the store, if not initially, then going forth.
What’s in it for you?
Anyone associated with the business world knows, Amazon works on a large scale. The new grocery venture will sell a wide range of products. To run this operation efficiently and competitively, Amazon will need to source products from a variety of suppliers. And for this, the e-commerce behemoth will need to enlist a large number of suppliers.
While working with a large scale operator like Amazon has its perks, it also has stringent requirements. Organizations like Amazon expect high quality, regular supply of goods, and adherence to delivery timelines from their suppliers. Given the fact that the e-commerce giant is a technology-driven company, it will also look for tech-savviness in its business partners.
So, what are the qualities required to become a supplier for such a large scale venture?
You need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center.
While the company will share what it would look for in a supplier, there are a few things that are usually expected from suppliers working with large scale multinational companies such as Amazon:
Quality products: There can be no compromise on this ever. The product, packaging, and delivery all have to follow a set standard. Any deviation from the standard can lead to losing the contract.
Technology: Technology is gradually taking over the retail space. Data transfer, reports, and invoicing are all done electronically, usually with the help of specialized software. Suppliers need to ensure that their organization is not only able to transfer required data in a systematic way electronically but is also connected internally through technology. This will help ensure both accuracy and speed in work and data exchange.
Strong supply chain: A robust supply chain with end-to-end visibility is an essential requirement to do business with large scale organizations such as Amazon. For this, you need to have a rigorous inventory management system, a strong forecasting technique, and a well-managed distribution center.
Reliable transporters: Another important factor in successfully servicing a large retail store chain is a reliable transporter/carrier with a well-connected network and a good track record of on-time delivery.
The food and grocery retail landscape is set to change with new technologies being adopted by the retail leaders. To cater to them and work alongside them, their suppliers will also have to deploy modern technology in their business. This is where we can work with you to make your supply chain – Amazon ready or any food and grocery retail business ready. To know how we can assist you in getting there, connect with our team at 800.MY.SHIPPING or fill out the form below.
Technology has become synonymous with supply chains. It’s not only creating new and innovative products to support global supply chains, but is also rapidly changing how the industry operates. These new technologies are being leveraged by both traditional and tech-first logistics companies in the freight and logistics space to help build digital and integrated supply chains that provide end-to-end visibility to all the stakeholders.
According to this report by Gartner, released in January 2019, the top technology trends for the year were artificial intelligence, advanced analytics, IoT, robotic process automation (RPA), autonomous things, digital supply chain twins, blockchain, and immersive experience.
Others like artificial intelligence, autonomous things, blockchain, and robotic process automation are comparatively new and yet to be explored fully.
While all the above technologies are gaining ground in the industry and are being used to solve supply chain problems, some of them like IoT and advanced analytics have been around for a while and are familiar. Others like artificial intelligence, autonomous things, blockchain, and robotic process automation are comparatively new and yet to be explored fully. However, 2019 did see some of the newer technologies making big strides and are expected to be in trend in 2020 as well. They are:
Autonomous trucks: We’ve been hearing about autonomous trucking for a while now. In 2019 autonomous trucking gained a lot of ground with a few companies in the sector ready to roll out their self-driving trucks on the road. Some companies making news in this sector are TuSimple which got funding at the beginning of 2019 and Plus.ai, a Cupertino, California-based startup, that has already tested its autonomous truck on the road. Plus.ai’s autonomous truck has made the world’s first cross-country trip to transport butter to a town in Pennsylvania. The autonomous trucking industry is expected to keep up the momentum in 2020 also. According to an article in Supply Chain Digital, Allied Market Research has forecasted that the global market for autonomous trucks is expected to cross $1 billion this year and show a growth rate of 10.4% every year up to 2025.
Blockchain: While Blockchain technology has been around in the logistics and freight industry for a few years, there’s still a lot of scopes to explore this technology. Last year, TradeLens – a blockchain shipping platform developed by Maersk and IBM finally started picking up after a lackluster start. According to a news release on Maersk’s website, the platform will now be used by MSC, CMA-CGM, Hapag-Lloyd, and ONE. The success of platforms like this will help in getting more companies in freight and logistics to explore blockchain technology. More supply chain partners on a single blockchain-enabled platform will help facilitate the timely and safe exchange of data among the various stakeholders, even competitors, and enhance traceability, reliability, and transparency in the system.
Artificial intelligence: The Gartner report had listed artificial intelligence as one of the promising supply chain trends of 2019. Since all technologies that require a certain level of responsiveness and user interaction are empowered by artificial intelligence, this is one technology that will evolve with new technologies and needs of the industry. So in 2020 also one can expect AI to be an important part of the technological revolution in multiple supply chains.
Robotic process automation: Robotic process automation (RPA) is an artificial intelligence software that helps program robots to carry out standard processes without intervention. It is also useful in programming robots to collect data while they are doing their set activities. According to a 2019 Gartner press release, in 2018, the global market for robotic process automation grew 63%. The research firm expected the revenue in 2019 to reach $1.3 billion. Similar to AI, the RPA software demand will grow along with the deployment of robotics in supply chains.
Digital supply chain twin: A digital supply chain twin has been defined as a replica of the real-world supply chain function. The digital platforms that helped integrate all organizational functions and manage and monitor the processes digitally have now given way to more sophisticated systems that present a mirror image of the on-ground supply chain functions. These digital replicas are making it easier for organizations to simulate the real-time supply chain, identify plausible issues and take preemptive actions. This kind of technological representation of the supply chain is expected to be one of the top trends in 2020.
While technology forms a critical part of understanding where the logistics and freight industry is headed, it is not the only factor.
These are just some of the main technological trends of 2019 that are expected to continue getting focus in 2020 and probably even in the next few years as well. While technology forms a critical part of understanding where the logistics and freight industry is headed, it is not the only factor. There are other aspects like regulations, laws, economy, and freight rates that help determine the fate of the supply chain. To know how the industry fared on these counts on the year gone by and how these aspects are expected to impact the logistics and freight community in the new year, register for our webinar: State of the Logistics Industry here.
In addition to connecting with industry experts and gaining insight into where the industry is headed in the new year, all registered webinar attendees will also have the option to get a free supply chain analysis and optimization study based on their current data! Get in touch with our team at 800.MY.SHIPPING or fill out the form below to find out more.
The United States-Mexico-Canada Agreement (USMCA) is the new trade deal between the three countries. It is set to replace the North American Free Trade Agreement (NAFTA) which was in effect since January 1, 1994. As on date, the new trade agreement has already been approved by the Senate Finance Committee and it is due to be presented in the full Senate in the latter half of January 2020. While Mexico has already ratified the new trade deal, Canada is yet to ratify it.
The Office of the United States Trade Representative describes the new agreement as: “The United States, Mexico, and Canada have reached an agreement to modernize the 25-year-old NAFTA into the 21st century, high-standard agreement. The new United States-Mexico-Canada Agreement (USMCA) will support mutually beneficial trade leading to freer markets, fairer trade, and robust economic growth in North America.”
The Trade Representative’s website also quotes President Trump on the new agreement, saying – “USMCA is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our farmers and manufacturers, reduces trade barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world.”
In short, the new agreement aims to update the provisions of NAFTA to suit the current economic and business scenario.
How Does The New Trade Deal Benefit The US?
The new trade agreement provides the US with benefits in the areas of intellectual property, digital trade, De minimis, financial services, environment, currency, and labor. It is also expected to help improve agriculture trade in the region and boost manufacturing activities.
According to an article published in CNN.com, which quotes data from the US International Trade Commission, a federal government agency, the initial phase of the new trade agreement is expected to add around 176,000 jobs after 6 years of its implementation and increase the GDP by 0.35%. It is also expected that the USMCA will help streamline trade among the three participating nations and provide them with opportunities to optimize trade transaction costs.
What Will Be Its Impact On The Shipping And Logistics Industry?
Like all cross border trade agreements, the USMCA will also have some amount of impact on the shipping and logistics industry. Chapter seven of the trade deal talks in detail about the Customs and Trade Facilitation aspect of the agreement, the points mentioned here will directly affect the shipping and logistics industry. Some of the key points are:
Digitalizing regulations: Lack of proper and accurate regulatory information is one of the biggest hindrances to cross border trade. Incorrect information or cumbersome data gathering process often keep small businesses away from expanding their trade. USMCA aims to eliminate this primary barrier to trade. It has provided guidelines to the trading partners to provide easy, free, and online access to the country’s regulations, trade procedures, laws, duties, various charges, and documentation requirements.
Online documentation processing: In keeping with the current times, the USMCA has directed the member nations to leverage technology to simplify and speed up the process. The trade deal requires the trading partners to create a digital platform to submit customs declaration and other required documents and make the system accessible to all concerned parties.
Streamlining compliances: In Article 7.11- titled Transparency, Predictability, and Consistency of Customs Procedures, each of the participating nations are expected to create uniform trade/export-import rules and regulations for their country. This will not only help smoothen the trade procedure but will also simplify it.
Increase in De minimis: In the new trade deal, the US has acquired an increase in the De minimis shipment value from both of its trading partners. When the USMCA comes into force, in addition to the current USD $50 threshold for tax free shipment, the US will also get duty free shipment up to USD $117 from Mexico. Canada has also increased its De minimis shipment value from C$20 to C$40 and will offer duty-free shipments up to C$150.
A higher De minimis value will help both small businesses and transporters to increase their trade with the two partner nations without having to bear the burden of additional duties and taxes.
Express shipments: One major complaint shippers have is delay in shipment release at customs. This point has been addressed in the new tri-party trade deal under the express shipment clause. The clause asks the nations to process all documentation prior to shipment arrival and expedite the release of such shipments if all required documents and data have been duly submitted.
Single window: To speed up the cross border trade, the new agreement has made provisions to set up a single-window clearance system that is technology-based. It also instructs the trading countries to ensure that the system timely informs the exporters, importers and other users of the status of their cargo.
Along with these provisions, the USMCA has also taken into consideration import-export aspects like post-clearance audit, risk management, protection of trader information, and creation of a committee on trade facilitation among other various provisions with an aim to boost trade in the Northern region.
If you would like a FREE supply chain analysis or if you would like to know more about how the Customs Administration and Trade Facilitation rules and regulations impact your business, get in touch with our team today at 800.MY.SHIPPING or fill out the form below !
We could be seeing another speed bump in the road for trucking as we’ve just passed the Dec. 16 deadline for motor carriers and truck drivers to make the switch from automatic onboard recording devices (AOBRDs) to the federally mandated ELD or electronic logging device.
The AOBRDs were originally grandfathered into the ELD mandate back in 2017, but are currently being targeted for an upgrade. No one is quite sure just how many of the older systems are in play currently, let alone how many companies and drivers have made any progress towards the switch.
As ELD technology continues to evolve, the technological (and financial) gap between the two technologies continues to widen.
What complicates this issue is the growing complexity behind the switch from AOBRD to ELD. As ELD technology continues to evolve, the technological (and financial) gap between the two technologies continues to widen.
“The industry as a whole would have liked to transition earlier, but the providers didn’t have software ready at the time,” said Michael Owings, vice president of corporate services and support at less-than-truckload (LTL) carrier Southeastern Freight Lines.
And, to a certain extent, there are a number of carriers that are hesitant to make the change to the more exacting ELD. With AOBRDs it was easier to find logging loopholes in how you move a truck,” said Jeremy Stickling, chief administrative officer of truckload carrier Nussbaum Transportation.
For example, ELDs will trigger “on-duty” status for a truck that begins to move faster than 5 mph. For tractor-trailers that have to stay overnight at a customer’s site before they can be loaded for their trip, that becomes problematic.
“Let’s say the docks were full the night before, so they knock on the driver’s tractor door at 5 a.m. to get him to drive to the dock for a live load that takes three hours,” Stickling said. The ELD will start the driver’s clock for the yard move, meanwhile, the driver is left waiting until the truck is loaded before they can hit the road. If the loading process takes around 3 hours, the driver has now lost over a quarter of their daily on-duty time.
“We try to train [drivers] against this, but it does happen,” Stickling adds. “Shippers leaned on that, but it’s not going to be an option anymore.” As ELDs become the norm, “shippers are beginning to feel the letter of the regulations a little more than they used to, and that’s not a bad thing.”
Installation Takes Time
For the past few months, ELD vendors and truck telematics companies have been warning the trucking industry that waiting to have an ELD installed to the last minute could impact last-minute deliveries. Barring the physical hardware installation, there is also the need to train drivers on new policies, orient them to the new device, and adapt the software to communicate with company operating systems. All of these things take time and time is running out.
For the South Carolina based regional carrier, Southeastern, making the switch from AOBRD to ELD took approximately six months. The company had to install the new software and subsequent equipment in nearly 3,200 trucks and tractors, and train their driving team of over 4,000 drivers on how to use it.
“It went well, but it did take a very long time,” Owings said. “We sent teams from our safety department and operations to every location to do onsite training. We would convert all the tractors during the training, and then the drivers would come out and log in to the ELD. Our team would be there for a couple of days to help as they got used to the system.”
The ELD is Not the End of Efficiency
When the ELD mandate was first announced, it was heralded as the end of times. Carriers rallied that it would kill productivity and it would cause the industry to come to a grinding halt. But in truth, Southeastern, and Nussbaum, two very different companies operating in different regions, have seen little impact on their productivity levels as a result of switching over the ELD.
However, that is because both companies were diligent in keeping up with the hours of service regulations.
While trucks are still picking up and dropping off loads more or less within their routine operating schedule, the missing time usually comes out of a driver’s “home time.”
There is, however, a trade-off. While trucks are still picking up and dropping off loads more or less within their routine operating schedule, the missing time usually comes out of a driver’s “home time.”
“Our productivity really hasn’t dropped, we’re getting the same loads and the same miles,” Nussbaum’s Jeremy Stickling says. “But it takes us more on-duty time to do it. We’re using more of that 14-hour daily on-duty time to get the same work done, and that squeezes the driver’s weekly 70-hour limit.” According to the US HOS ruling, drivers may work up to 70 hours in an eight-day period, or 60 hours in seven days.
That loading delay that we mentioned earlier is the real impact of the ELD. A seven-hour loss of driving time in one day means that a driver is likely not where they wanted or expected to be by the next day or even the day after. The loss in driving time, which is measured in minutes instead of miles, is cumulative throughout the week.
“The drivers feel it when they’re not getting home Friday at 7 p.m., they’re getting home Saturday at 6 a.m. That’s squeezing their home time, the amount of time they sleep in their own beds during their 34-hour reset. Maybe it’s just on Saturday night, rather than Friday and Saturday. You can still leave Sunday evening for a Monday pickup, but it’s less time at home.”
Still, the closing of loopholes that allowed drivers to take shortcuts around hours of service rules “is a good thing,” Stickling said, as is pressure on shippers to eliminate slack in their own operations, ensuring that they’re not saving time and money at the expense of truckers hauling their freight.
An Overall Positive Change
The trucking industry is decidedly less doom and gloom about the logging device, although some grumblings are still being heard about the hours of service regulations. And, overall, there is a positive change taking place due to the ELDs.
As a safety precaution, there are less exhausted drivers on the road, making it safer for everyone.
By having a more permanent less “fudgeable” means of tracking drivers times, companies are cutting the slack out of their operations, running cleaner, leaner, and more efficiently. As a safety precaution, there are less exhausted drivers on the road, making it safer for everyone.
The additional benefit is the vast influx of new data that is being collected by the ELDs. This data will create a turning point for the transportation industry. Linked into the various technologies that are driving change throughout transportation and logistics, the ELDs might be the herald of the new future for trucking.
BlueGrace Logistics today announced that it joined the SmartWay® Transport Partnership, an innovative collaboration between U.S. Environmental Protection Agency (EPA) and industry that provides a framework to assess the environmental and energy efficiency of goods movement supply chains.
BlueGrace Logistics will contribute to the Partnership’s ongoing savings of 279.7 million barrels of oil, $37.5 billion in fuel costs and 134 million tons of air pollutants. This is equivalent to eliminating annual energy use in over 18.2 million homes. By joining SmartWay Transport Partnership, BlueGrace Logistics demonstrates its strong environmental leadership and corporate responsibility.
“Our customers rely on BlueGrace to provide reliable, cost-effective logistics solutions, and our carrier network seeks BlueGrace to develop business opportunities that meet their needs.”
Bobby Harris, Founder and CEO of BlueGrace Logistics, commented on this achievement by adding, “Today’s freight shipping clients are increasingly demanding accountability and transparency from the companies in their supply chain, including their transportation partners. As one of the most progressive third-party logistics (3PL) companies in the United States, BlueGrace play a central role in the national supply chain. Our customers rely on BlueGrace to provide reliable, cost-effective logistics solutions, and our carrier network seeks BlueGrace to develop business opportunities that meet their needs. Our clients want us to help address growing demands to improve environmental performance and address environmental risk throughout their supply chain. This SmartWay Transport Partnership with the EPA brings BlueGrace closer to reaching all of these goals.”
Developed jointly in early 2003 by EPA and Charter Partners represented by industry stakeholders, environmental groups, American Trucking Associations, and Business for Social Responsibility, this innovative program was launched in 2004. Partners rely upon SmartWay tools and approaches to track and reduce emissions and fuel use from goods movement. The Partnership currently has over 3,000 Partners including shipper, logistics companies, truck, rail, barge, and multimodal carriers.
About BlueGrace Logistics Founded in 2009, BlueGrace Logistics is one of the largest third-party logistics (3PL) providers in the United States. With over 600 employees and working with over 10,000 customers to provide successful shipping solutions, the company has achieved explosive growth in its 10-year operating history. Backed by a $255 million investment by private equity firm Warburg Pincus, the company operates 12 locations nationwide, and its headquarters are in the sunny Tampa Bay area of Florida.
Climate change and a deteriorating environment is the most discussed subject around the world. In fact, it would not be remiss to say that issues related to environmental degradation and climate change have already begun to emerge in various parts of the world. In some places it is in the form of floods, storms, hurricanes, others it is showing up in the form of famines and long dry spells. In a few parts of the world, a distressed environment is protesting in the form of unbreathable air and shortages of clean drinking water.
It’s time to wake up and take positive action.
Irrespective of the way in which the environment is showing its displeasure, it is sending the same message everywhere – it’s time to wake up and take positive action.
While each one of us is responsible for protecting the environment and managing climate change, businesses can lead the way in creating positive change by making their supply chain environment – friendly and following sustainable business practices.
Why is it important for businesses to participate in this movement?
Given the negative impact certain business activities or accidents have on the environment, it makes sense for businesses to take preventive actions proactively. Sometimes the impact of these incidents lasts for years to come or worse, irreversible. While one doesn’t have any control over accidents, organizations can try to reduce activities such as throwing out untreated industrial waste, air pollution, noise pollution, energy wastage, and oil spillage. The other reason is that big corporations and brands tend to influence how people think and behave, this can be used to encourage people to practice sustainable living.
How can you contribute?
Overhauling an entire supply chain or changing business practices takes time. So, while all of us may not be equipped to build and operate a distribution based on renewable energy like Nike is doing or put up a fight against the ruling administration like the State of California, all of us can do little things to help the cause. Here are some ways in which you can make your business and supply chain environment friendly:
Eliminate Single Use Plastic: This should not be difficult to do. Whether it is a part of your product-straws, bottles, stirrers, and packaging or a part of things you use within the company like drinking bottles and disposable cutlery in your canteen, plastic can be replaced with other eco-friendly materials. These 22 companies are doing it, so can you.
Participate in The Community Discussion: This is a critical step to finding sustainable solutions that can help both businesses and communities live sustainably. At BlueGrace, we believe in working with the community. Our CEO, Bobby Harris joined the Northwestern University Transportation Center (NUTC) Business Advisory Council (BAC) last year. This group comprises of highly respectable senior – level business executives from the transportation industry. The group meets regularly to discuss the latest NUTC research and to consider solutions to the economic, technical and social problems facing national, local and global transportation systems. Connect and work with your local administration, research institutes, and environmental associations to find plausible and implementable solutions for the community. This will not only work for finding solutions to the environment problem but will also aid in identifying and finding solutions to other issues that impact the lives of the people who live in the community. Isn’t that what businesses are for?
Use Energy-Efficient Lighting: Save electricity. Use lighting solutions that consume less power. Encourage your employees to switch off lights that are not centrally controlled and turn off the switches to their charging points or desktop connections when not in use. If possible explore if you can install solar panels to generate electricity in the office and other facilities like your warehouses and factories.
Go Digital: One of the easiest ways to start the sustainability project is to eliminate or minimize the use of paper. Start digitizing company-wide communication, and bring all processes and systems online. While it may seem costly at the beginning, digitization will not only help you save paper but will also make your operations more efficient and easier to monitor. If you’re looking for an integrable logistics solution, connect with our team and let’s work on making your supply chain environment-friendly, effective and efficient.
Optimize Logistics: Movement of goods is essential for both businesses and consumers. So while trucking is an integral part of logistics, it also causes air pollution. However, the threats to the environment from trucking can be controlled and minimized by making better transportation plans and optimal planning of loads. And as we said earlier, transportation is our area of expertise.
If you’re looking to optimize your logistics and contribute to reducing pollution levels, then let’s talk. Contact us at 800.MY.SHIPPING or fill out the form below to speak to one of our experts today.