The supply chain has become one of the most critical functions in an organization. Its dynamic nature and the high impact it has on the business makes it challenging to manage. Thus it is necessary for the success of the business to have a strong and well-informed leader at the helm.
However, good leadership skills and information savviness alone are not enough to handle the supply chain function and manage the team. There are other necessary capabilities apart from business know-how and general leadership skills that a supply chain leader needs to lead the function efficiently and effectively.
What are the most important skills that every supply chain leader should have?
While there are many skills a supply chain leader should have, tome impact the business more than the others. These skills are non-negotiable and a must-have. They are:
Strong Analytical Skills: Supply chain is all numbers and analysis. To lead the function effectively, it is extremely essential for the leader to be comfortable with numbers, handling large amounts of data, analytics, and the various analytical models that are used for decision making. A lack of these skills or discomfort with analytics can be fatal for not only the function but the organization as well.
Technology Know-How: Since the past couple of years, supply chains have been adopting new technologies, digitalizing, and automating processes. In such a scenario, it becomes crucial for the leaders to understand and be open to adopting new and advanced technologies to manage the function. In fact, they not only need to understand, but they also need to lead the adoption of technology for their organizations.
A report by Gartner titled “Gartner Top 8 Supply Chain Technology Trends for 2020” says, “It is important for supply chain technology leaders to adopt a mindset that accepts and embraces long-term perpetual change”. Supply chain leaders should be able to identify what technology will work best for their organizations and be the champions for change. If supply chain leaders possess such a mindset, it becomes easier for them to convince the management to adopt new technologies as and when an upgrade is required and to lead the team through the change.
Strategic Thinking and Operational Mindset: Supply chain is a function that involves both strategy-making and operations. To be able to make good strategies, the people leading this function need to have an understanding of business and the environment the business operates in. And, to make sure the supply chain functions smoothly, they should have knowledge of how things work on the ground.
In short, a supply chain leader should be able to think strategically and execute the plans operationally with equal efficiency. If either of the skills is missing, it becomes difficult for the supply chain to function smoothly and create value.
Negotiation Skills: Leading a supply chain function means endless negotiations with internal stakeholders and external business partners. They need to know how to put forth their viewpoints and get a buy-in from the other parties involved. To be able to do this efficiently, they need to have a good grasp of the market dynamics, rates and pricing of services, and the latest industry trends.
Quick Decision Making: Supply chain is a fast-paced function. In the supply chain, it is common to come across situations that require quick and on the spot decisions. At such times, the supply chain leader should be able to use the data and information on hand to make quick but informed decisions and follow through with them. He should also be able to train his core team to do so. A lack of this skill can lead to further disruption of operations and delays in completing the task. If this happens often, it can make the supply chain inefficient.
People and Relationship Management: Today’s supply chain is usually not limited to one geography or location. They are spread across the globe. A global supply chain has many participants in the form of internal teams spread across regions, vendors, business partners, and business associates from different parts of the globe. Each team or partner has its own way of working, cultural mindset, and knowledge.
They should also know how to bridge the gap in knowledge of the function and technical understanding to make sure none of the team members feel left behind and are able to cope with the dynamic function. To do so, they need to have an understanding of different cultures, regional peculiarities, emphatic attitude, soft skills, and people management skills.
Statutory and Legal Knowledge: Supply chains have to comply with a lot of taxes, duties, labor-management laws, and export-import formalities. Even a little slip up in any complying with a statutory or legal requirement can result in large fines. This is why, along with functional expertise, supply chain leaders need to have at least a basic understanding of laws and regulations of the regions they operate in. This also ensures that they can get the best solutions for such matters from their local teams.
Along with these skills, supply chain leaders also need trusted partners to make sure their supply chains are running smoothly. That’s where we – BlueGrace Logistics come in. Our team has expertise in analyzing supply chains and helping our business clients find the right solutions to improve their supply, make it more effective, and create value.
To know more about how we can work with your supply chain leaders and teams to take your supply chain to the next level, get in touch with us today!
There are some common causes for tender rejection, but the following list certainly doesn’t account for every reason a load might be rejected.
Long distance to potential backhauls creating a lot of deadhead miles
Short lead times
An exceptionally competitive truck market
Tight capacity in specific trucking segments
Minimizing Tender Rejections
You can’t eliminate the possibility of tender rejections altogether, but there are some ways that you can reduce the number of shipments rejected by carriers.
Occasionally, tender rejection may occur if a request for proposal isn’t clear enough. Ensure your internal processes give carriers all the information they need to understand the scope of your haul.
Choose Your Carriers Wisely
If the rate a carrier offers seems too good to be true, it probably is. A carrier may quote in order to gain business, but if their quote comes out below what the service costs to perform, they may reject the load.
A carrier audit is a great way to check in on tender rejection rates and determine if these rejections are making doing business with certain carriers in your repertoire too costly.
Increase Your Lead Time
If at all possible, try to stretch out lead times to at least a couple days. Give carriers time to fit you into their schedule ahead of time so that they can be assured business.
Consider forming relationships with carriers of all sizes and specs operating in your lanes. When you’ve got a long list of potential carriers for a load, you don’t have to hire a carrier who says they can probably fit you in. Spreading your business around helps small carriers thrive, and you may find a great new partnership.
Opt for Multi-Lane Carriers
Carriers may reject a load that comes with too high a connection cost. Any load that’s going to require a driver to schlep a lot of extra miles is one that’s not very appealing.
When you choose a carrier who operates in multiple lanes, especially lanes that connect to your load’s destination, the carrier can keep their costs down by turning another load in short order and therefore are less likely to reject a load.
Build Great Carrier Relationships
While you can’t mitigate every reason for tender rejection by building relationships with carriers, it can certainly go a long way towards getting your load out on the first try.
This is one of the big benefits of working with a 3PL to broker your loads. Freight brokers have already developed great connections with the carriers they engage. When faced with two similar loads at similar rates, a carrier is likely to opt for the load commissioned by the party with whom they have the best relationship.
One way to mitigate the impact of tender rejections is to use a 3PL. It’s a lot less trouble for you if a freight broker acts as intermediary when a load is rejected, and they have extra incentive to keep costs low while seeking an alternate carrier in order to keep your business. Need help assessing your carriers or adjusting processes to avoid tender rejection? Call us at 800.MYSHIPPING or fill out the form below.
While brick and mortar stores haven’t died out completely, the pandemic hasn’t done them any favors. Not being able to leave the house due to COVID-19, many consumers are realizing that it’s not only easier to shop online for their household consumables, but that it’s preferable to having to run out to the store when the pantry starts running low.
Whole Foods, for example, has done incredibly well, owing largely to its owner, Amazon. Much like Walmart, Target, and Apple, Whole Foods, and Amazon have seen some incredible growth in their grocery sector.
“During Amazon’s second quarter of 2020, the retail giant continued to see huge gains overall due to the impact of COVID-19, with online grocery sales alone reaching three times last year’s figures,” reads an article from SupermarketNews.
The second quarter, which ended on June 30, 2020, left Amazon with an overall net income at a staggering $5.2 billion, compared to the $2.6 billion during the same quarter last year. It should come as no surprise that net sales surged 40% from $63.4 billion in 2019 to $88.9 billion.
While the pandemic was at its full height and lockdowns were initiated, consumers took to their keyboards to go shopping.
Spending Money to Make Money
Of course, with higher than average sales comes higher than average operating costs. As Amazon conducted more business, it also had to increase its operating costs to keep pace with the influx of new orders.
Amazon created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions
Jeff Bezos, founder and CEO, noted in a statement, “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand — purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefit, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions.”
Amazon’s Grocery Sales Continue to Grow. Rapidly
It’s hard to believe that Amazon originally started as a bookstore. Now it’s become a full-service virtual grocery store, which has been paying dividends for the once bookseller.
“Amazon’s second quarter was another highly unusual quarter,”says Brian Olsavsky, chief financial officer & senior vice president. “As I mentioned on our last earnings call, we began to see a significant increase in customer demand beginning in early March, and demand remained elevated throughout Q2. Strong early demand in groceries and consumable products continued into Q2, while demand increased during the quarter in our other major product categories like hardlines and soft lines.
Amazon, which owns more than 500 Whole Foods stores, said it increased grocery delivery capacity by more than 160% and tripled grocery pickup locations during the second quarter
It was only three years ago that Amazon bought out Whole Foods, which gave it the necessary oot in the door to begin selling groceries online. While this move garnered some criticism it turned out to be a smart move on Amazon’s part in the long run. “Amazon, which owns more than 500 Whole Foods stores, said it increased grocery delivery capacity by more than 160% and tripled grocery pickup locations during the second quarter,” says SupermarketNews.
“We’re reaching more customers with our grocery offerings,” said Olsavsky. “Online grocery sales tripled year-over-year.”
Getting in is the Easy Part
Obviously, being a supplier for a company like Whole Foods is ideal, especially when you can indirectly hitch your star to Amazon. However, becoming a supplier for Whole Foods is the relatively easy part. On the other hand, living up to their high standards and demands is where things get decidedly more difficult.
If you’re thinking of becoming a supplier for Whole Foods or want to understand better what it means to be a supplier and how have requirements and the business changed now that they are part of the Amazon juggernaut, read our Whole Foods white paper.
Every company has contingency plans for when things don’t go as expected. Whether it’s a backup supplier in the case of a material shortage; or a different carrier for when capacity gets tight. However, when the weather picks up, is your supply chain ready to weather the storm?
Major weather events pose a significant disruption for supply chains, and hurricanes are no exception.
Major weather events pose a significant disruption for supply chains, and hurricanes are no exception. High winds and torrential rains can make travel all but impossible. Flash flooding and road damage can make typical routes impassible. After the more severe storms, much of the carrier capacity is consumed by rebuilding and relief efforts. All in all, if you don’t have a solid plan, you could find your supply chain washed out.
To that end, we want to make sure that your supply chain is prepared. We believe that there is no such thing as being over-prepared, especially when it comes to hurricane season. We’ve created our 2020 Hurricane Preparedness Guide to help you make sure your supply chain is protected. But first, take a look at what’s expected this hurricane season.
2020 is set to be a Record-Breaking Year for Hurricanes
With the way the year has gone so far, is it really any surprise that 2020 is already breaking records for hurricanes? So far, the Atlantic Hurricane season is already in full swing, well ahead of the peak month which is typically September. Hurricane Isaias which caused significant damage on the east coast was the earliest ninth named storm on record. Now, the National Oceanic and Atmospheric Administration (NOAA) is predicting that even more records might be broken in the upcoming months with at least 10 more named storms.
The updated outlook released Thursday calls for a total of 19 to 25 named storms
“Theupdated outlook released Thursday calls for a total of 19 to 25 named storms (winds of 39 mph or greater), of which 7 to 11 are expected to become hurricanes (winds of 74 mph or greater), including three to six that could become major hurricanes (winds of 111 mph or greater). This update covers the entire hurricane season, which ends Nov. 30, and therefore includes the nine named storms to date,” reads a recent Washington Post article.
According to the National Weather Service Director, Louis Uccellini, 95 percent of hurricanes and major hurricanes, form between August and October. “In over two decades of issuing storm warnings and forecasts, NOAA has never predicted that as many as 25 named storms would form in a single season,” says the Post.
The Long List isn’t Quite Long Enough
Interestingly enough, the list of names that are assigned to storms is predetermined ahead of time by the World Meteorological Organization. As it stands, there are only 21 names left on the Atlantic list. Afterward, forecasters will have to resort to using characters from the Greek alphabet. This has happened only one other time, back in 2005, which was the most active hurricane season on record.
NOAA’s Initial Predictions Might have been Too Optimistic
The initial prediction from NOAA, which was released in May, called for a 60 percent likelihood for an above-average level of hurricane activity. The prediction called for a 70 percent chance for 13 to 19 named storms, with six to 10 having the potential to become hurricanes. Of the predicted hurricanes, three to six could become major hurricanes with a Category 3 rating or higher.
The updated forecast now places the chance for an above-average season at 85 percent, 24 named storms, which include 12 total hurricanes, five of which will be major.
The season has the potential to be one of the busiest on record, NOAA said.
Battening Down the Hatches
A busy hurricane season in of itself has the potential to be devastating to businesses along the coast. Supply chains can very easily become disrupted as carriers are pulled away to haul for humanitarian aid for the places most heavily affected. Couple in the fact that storms will continue to hit in quick succession, leaving little time for roadways and other necessary infrastructure to be repaired and you have the perfect recipe for disaster.
For companies that manage extensive supply chains along the Atlantic coast, now is the time to begin preparing for the rough season ahead. Fortunately, we here at BlueGrace have a lot of first-hand experiences with Hurricanes, being based out of Tampa Florida. Working with shippers and carriers alike, we have our 2020 Hurricane Preparedness Guide down to a science. Don’t get caught unprepared, download our white paper today!
With the global pandemic still in effect, freight capacity is fluctuating even more than usual. Over the past few months, we’ve seen a tightening of capacity for numerous reasons, not the least of all being several smaller carrier companies going bankrupt. Whenever there is a change in the overall availability of capacity, changes to both spot and contract rates are right behind it.
Understanding those rates can help your company make better decisions about how to move your freight
Understanding those rates can help your company make better decisions about how to move your freight, saving you both time and money, while keeping your operations flowing smoothly. But what is the difference between the two different rates, and which one should you be more focused on?
Understanding the Relationship between Spot Rates and Contract Rates
Freight rates are broken down into two different categories, contractual rates and spot rates. Contractual rates make up about 70 to 80 percent of overall market rates and are governed by the average spot rate at the time of bidding. Contract rates offer peace of mind for both parties. For carriers, there is guaranteed volume, while shippers have the peace of mind knowing that trucks will show up, on time, to move their freight, even when capacity gets tight.
However, there are situations in which shippers will opt for a spot rate instead.
However, there are situations in which shippers will opt for a spot rate instead. For inconsistent freight volumes, seasonal or one-off shipments, shippers might not benefit from a contracted carrier. However, spot rates are incredibly volatile and change with demand. While demand is low, shippers can often get a better rate, but run the risk of going over their shipping budget when the overall available capacity swings the other way.
Shippers Should Start Considering Contracts
When the Covid-19 outbreak first started, overall consumer spending dropped drastically. This led to a significant drop off in freight demand which, in turn, dropped spot rates and opened up capacity. While this was incredibly beneficial for shippers, carrier profitability comes under pressure. Couple this with the Trump administration’s trade war with China, and many smaller carriers couldn’t afford to keep their doors open. With fewer carriers, and continued pressure on underperformers, the available capacity will continue to drop. As the U.S. begins to open back up, and consumer spending picks up, this means that demand will see a sharp uptick.
“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 of 2021,” William B. Cassidy, of JOC.com
This means that spot rates will climb, rather quickly. So what does that mean for contract rates?
Like we mentioned above, spot rates affect contract rates, which means an increase in both. However, for shippers, bidding out a freight contract for a carrier might prove to be more beneficial in the long run due to the following:
Spot rates will continue to climb as reopening continues across the country and demand increases.
Shipers have likely already seen the floor for spot rates, meaning we’ve seen it at its lowest point so it has nowhere to go but up.
Shippers will begin to experience capacity issues. This perhaps the most important issue. Whenever there is a capacity crunch, carriers can cherry pick freight for the best rates which means you’re either paying a premium, or your freight ends up sitting on the loading dock.
The secret to maintaining operations is to find the balance between contract rates and spot rates. As carrier operations begin to capitalize on the effects of continued increases of the spot market rates, it will be time for shippers to start looking for more carriers and fulfillment options to fill the void.
Want to Learn More?
Want to learn how to better manage your contract and spot rates? Curious about what the second half of 2020 holds for freight rates? You can watch this webinar, as well as all of our past sessions, as part of our free resource library, to learn more. Every month, we here at Bluegrace will have a new webinar on the topics that matter to you! Stop in for next months webinar and receive a free supply chain analysis for your business.
As much as we’d like to believe that our supply chains are both quick enough to react to major disruption and flexible enough to maneuver around major obstacles, the global pandemic has taught us that often isn’t the case. It is the single major weakness of most supply chains, an inability to react to a sudden and massive large-scale disruption, which can include pandemics (such as Covid-19) massive weather events, and a myriad of other setbacks. This lack of resiliency is most notable in supply chains for life sciences, health care, and food industries in particular.
The Chinese market is massive, for one thing, and most companies can’t afford to withdraw completely, otherwise, they might lose any competitive edge they might have had.
After COVID broke loose around the world, the current administration issued a call for companies that have offshored their production to Asia, (China, in particular) to bring it back stateside. However, for many companies, this proves to be challenging and counterproductive. The Chinese market is massive, for one thing, and most companies can’t afford to withdraw completely, otherwise, they might lose any competitive edge they might have had. Additionally, because the Chinese market is now either the dominant, if not sole source, for thousands of different items, reducing the dependence on those goods will take a significant amount of both time and money.
Reshoring wouldn’t necessarily mean resiliency either. The meat shortage in the United States is a perfect example of this. The industry’s supply chain is entirely domestic. In an attempt to reduce costs, many companies focused on consolidating manufacturing activities, which means a smaller number of slaughter and processing plants are now producing much of the beef and pork products consumed in the United States. This created a vulnerability as shutting down one plant, even for a few weeks, creates a major impact throughout the country. Farmers, who get paid to raise the feedstock, are now stuck with taking a potentially devastating loss on their products while the rest of the country faces months of meat shortages.
Remap instead of Retreat
Instead of retreating outright from the forign market, the best approach to building resilience into the supply chain is by conducting an internal audit. More specifically it’s the process of mapping out the layers of suppliers, manufacturing plants, distributors, and the other various elements of the logistics network and then implementing a stress test to evaluate the ability to recover from the disruption of any of the various links. Understanding where various bottlenecks will occur means being able to create mitigation strategies which can include increasing manufacturing capabilities, adding more suppliers to the roster, or building up buffer stock.
The added advantage to mapping and stress testing the supply chain is that companies using this method can find unexpected weaknesses or high risks throughout the organization. The more complex the produced good is, the higher the risk of utter disruption.
“Work that one of us (David) did with the Ford Motor Company found unexpected high risk associated with small suppliers, including many local suppliers. One part it identified that fell into this category was a low-cost sensor widely used in its vehicles: If the supply of it were disrupted, the carmaker would need to shut down its manufacturing operations. Because the total amount spent on this item was low, Ford’s procurement group had not paid much attention to it,” reads a recent article from HBR.
Stress Testing on a Policy Level
Essential industries, such as pharmaceuticals and health care, need to have a level of government involvement to ensure that supply chains are resilient enough to continue operating, even during the worst-case scenario. Consider the mask and hospital supply shortage when the pandemic first started to hit the United States. While panic buying created part of the problem, the supply chain itself faltered and eventually failed under the crushing demand.
If such a test can be conducted for banks, it can similarly be conducted for all life-critical supply chains.
There is a precedent for such involvement, however. Back in 2008, during the recession, the U.S. government and the European Union conducted a stress test for banks to guarantee that the major financial institutions that prop up the entire financial system, could survive a major crisis. If such a test can be conducted for banks, it can similarly be conducted for all life-critical supply chains.
The Long Road to Resiliency
Creating supply chain resilience for essential products and services here in the United States could very well require domestic manufacturing. But that’s neither an easy nor cheap fix. Take the pharmaceutical industry, for example. Of the drugs sold in Europe, more than 80% of the required chemical components are manufactured in China and India. Because chemical production is a significant environmental hazard, it would require the development of clean technology and manufacturing processes to create a domestic supply chain. This process could take upwards of 10 years and would require a hefty financial investment. Could it be done? Absolutely. But not easy, and not cheap.
However, until companies have a full comprehension of the vulnerabilities throughout their supply chain, these kinds of decisions can’t be made. The pandemic has created an excellent opportunity and, perhaps more importantly, a motive to put in the necessary time, energy, and resources. Only then can they protect their supply chain from a potential devastating disruption that may be lurking on the horizon.
Do you have supply chain questions that you need answered? Do you need help bolstering your current supply chain to handle these new and disruptive global situations? Feel free to contact one of our logistics experts today and lets talk more about it today.
Prolonged dwell times have been an age-old inefficiency that the trucking industry has been trying to curb. Longer dwell times affect the drivers, carriers and shippers alike. An estimated detention time or dwell time can cost trucking companies $3 billion per year as per the Federal Motor Carrier Safety Administration.
The total time spent at a facility by a driver is called dwell time while detention is the gap between the allocated time to start loading/unloading and the actual time of loading/unloading. Longer detention at customers’ premises has largely impacted drivers’ available hours-of-service. Ideally, shippers and receivers are allowed a 2-hour window to load or unload a truck. Any time spent outside the allotted time calls for detention charges. Detention is thus used to offset the cost of a truck being detained at a shipper or receiver’s premises.
Dwell time in unprecedented times – A challenge
The month of March saw an unprecedented rise in panic-buying, which resulted in a tremendous spike in demand. The truckers continued to ply on the highways, making essentials available throughout regions. With increased demand, came the perils of heightened dwell times and detention times. The added safety protocols, social distancing, precautionary SOPs to be followed at the shipper and consignee facilities and the shortage of manpower had considerably impacted the driver detention times. On the other hand, transit times may have improved, owing to less traffic congestion during the lockdown period.
Improvement in the check-in process, ensuring social distancing, enhancing driver safety and the use of technology to manage appointments and improve collaboration between all parties have been the key drivers of change.
Improvement in the check-in process, ensuring social distancing, enhancing driver safety and the use of technology to manage appointments and improve collaboration between all parties have been the key drivers of change. While the world adapts to the new normal in supply chains, it is of utmost importance that more sustainable solutions are innovated and implemented.
Detention: Causes and Impact
Inefficiencies at the facility such as the lack of manpower to load and unload consignments, the unwillingness of the shippers or consignors to invest in manpower to accommodate increased freight movement and the inability at the individual level are the main reasons for increased detention durations. Additionally, mismanagement of appointment times such as goods not being ready for dispatch while the vehicle arrives at the premises lead to unwanted delays. Another common reason is the overbooking of appointments – when more trucks are booked than what the loading location can handle. All of the above contribute to increased detention times, which in turn amounts to losses for truck drivers. On average, truck drivers spend two and a half hours waiting at the shipper or receiver premises to load or unload goods. These hours are not considered as working hours, thus, leaving them unpaid.
We need to understand that most of the drivers are paid on a per-mile basis, therefore, every moment lost in delays is a direct loss of income for drivers.
We need to understand that most of the drivers are paid on a per-mile basis, therefore, every moment lost in delays is a direct loss of income for drivers. On the other hand, for LTL carriers, waiting at a certain facility for longer durations can mean skipping the delivery altogether.
As per a 2018 report published by the Department of Transportation Officer of the Inspector General (OIG) that sought to understand the correlation between driver detention times, crash risks and costs incurred, it was found that detention time may impact annual earnings for truck drivers by $1,281 to $1,534 per year in the negative. Shippers of essential goods have experienced longer detention times at facilities lately. For example, the recent crisis of toilet paper around the nation had trucks lining up at facilities for hours before being loaded with goods. Detention fees paid by shippers to carriers can only offset the loss up to an extent but that money fails to cover the driver wages lost by not driving. Primarily, the carrier efficiency and a driver’s payable hours-of-service are at stake, but the effects of longer detention times invariably trickle down to every stakeholder across the supply chain.
Is there a long term solution – that can increase efficiency, while ensuring optimum asset utilization and prioritizing driver safety in times of crisis?
Longer dwell times and increased detention times are not a byproduct of the current economic crisis alone. They have lingered in the industry for quite some time now and only technology can help provide long term solutions to enhance supply chain visibility. In a recent statement by Collins White, the president of Alabama Motor Express, he stated, “It has become progressively worse since 2018. We have bought software that automatically tracks when the truck goes over the allotted two hours of dwell time and automatically bills the customer.” Better technology that tracks the movement of trucks with a precise estimation of time spent at shipper or receiver facilities will help us give a clearer picture of the spots where the detention is taking place. Identifying these spots will further enable a better understanding of bottlenecks, allow correct allocation of resources and change practices to streamline the flow wherever necessary.
On the other hand, the tried and tested drop-trailer business model may have worked for some quite well. In the drop trailer method, a driver leaves a trailer at the facility for a stipulated time period until another vehicle picks it up. This doesn’t time-bound the shippers and they can load trailers at their convenience. Given the current situation of restricted labor availability, this method comes as an interim respite but cannot be considered as an all-round solution to the problem.
Investing in data-enabled technology is necessary to be able to make any supply chain more robust and induce complete visibility.
Investing in data-enabled technology is necessary to be able to make any supply chain more robust and induce complete visibility. Location Intelligence (LI) is set to make location data more accessible to participants in a supply chain. The use of LI is a promising trend as it uses geographical relationships to decipher complex data that can provide fleets with critical insights of accurate detention time calculations. It can provide accurate information such as time of arrival and departure of a truck at a site. They can also monitor a driver’s fuel stop time or break times which can further help enhance asset utilization. Insights into trends pertaining to a particular time of a day or week can translate to better prediction of transit times and estimated time of deliveries. All of these are elemental in aiding data-enabled business decisions through optimized route planning with reduced dwell times that boost overall productivity and enhance supply chain performance.
As the nation grapples with the ongoing economic crisis, a sudden surge in demand followed by flattening of the curve, the unpredictable rise of freight volumes and its correlation with increasing or decreasing dwell and detention times remain a cause of concern. What must not be forgotten is that these problems of detention and dwell times pose the opportunity for a permanent change towards creating a symbiotic relationship between carriers and shippers. There is an immense potential for cost savings and enhanced operational efficiency that will invariably impact the driver community’s way of life on the road.
The recent federal decision to authorize the import of certain citrus fruits from China has garnered significant attention since its announcement in April. More so in an ongoing pandemic situation across the world, this came as a major shock to the indigenous farmers and authorities in Florida. While there have been neutral remarks by California industry representatives who do not foresee any formidable impact on the fresh produce markets owing to the smaller volumes of import, Florida seems to differ on the opinion.
What’s the USDA decision regarding citrus imports?
Towards mid-April, the U.S. Department of Agriculture authorized the import of five commercial citrus fruits from China. Chinese pomelos, Nanfeng tangerines, Ponkan tangerines, sweet oranges, and Wenzhou tangerines are the five varieties of citrus fruits that can now be imported into the U.S following systematic plant pest screening. The decision comes after the federal scientists reinstate that these five varieties can be safely imported given the farmers, packers, and shippers use a systematic approach to minimize pest risks.
Following the announcement US Senators Marco Rubio and Rick Scott penned a letter to Sonny Perdue, the USDA Secretary to reconsider his decision of importing these varieties that may be detrimental to the current scenario of Citrus trade in Florida. The impacts could be manifold pertaining to the safety of these produces in the aftermath of a pandemic.
Why are these five fruits such a cause of concern?
The four main things to know here are:
The dwindling Citrus Industry of Florida.
Firstly, the sorry state of Florida’s Citrus industry over the past decade has been a major concern for the agricultural community as well as industry experts. The reasons for such a downward spiral are hurricanes, unfair pricing of imports, and citrus greening. Mike Sparks, executive vice president and CEO of Florida Citrus Mutual, stated,
We need to take another look at this decision. Add to the fact it will hurt growers by flooding domestic markets with Chinese citrus and it really is a double whammy.
At a time when the indigenous growers are facing a steep challenge with the ongoing economic crisis, this move seems to come as a severe blow to the agricultural community in Florida.
Citrus Greening or Huanglongbing, HLB, a disease that originated in China and entered the U.S. through imported citrus is a serious cause of concern. The disease primarily affects the growth of the plants and produces asymmetrical and stunted fruits with thick yellowing peel and a bitter taste. Citrus Greening has been majorly responsible for the dwindling citrus fruit production in the US and many other countries around the world.
Potential invasive pest and disease threats.
Especially in the aftermath of the pandemic engrossing the world, there is a potential invasive threat of pests and diseases. While Florida industry representative Dan Richey finds the agreement of the country to import Chines citrus fruits close to lunacy, he emphasized the likely threats new imports could introduce to the nation. He stated
I am much more concerned with the invasive pest and disease risk, not only with the fruit but with pallets the fruit is shipped on. We are required to use heat-treated pallets to ensure no wood-boring insects are hitchhiking in the pallets. Again, the Chinese cannot be trusted to adhere to this rule and who knows what may arrive in these pallets and on our shores?
Adherence to the Systematic Approach of Imports
Lastly, the USDA supported the decision based on the prerogative that if a systematic approach is adhered to in importing these fruits, then there is absolutely no cause of concern. But the question is who is to guarantee that such a systematic approach is being strictly followed?
This systematic approach demands that the growers, packers and shippers implement a methodical approach that minimizes the risk of pests. Limiting imports to commercial shipments alone, registering production sites & packaging plants, certifying the safety of the imports and that they are devoid of any pests or infections, regular inspection and sanitization of the production sites and proper disposal of waste. While these seem the best practices that must be followed to ensure safe consumption, Richey remarked, “If we think for one minute that China will hold their grower/packers to the standards required of a systems approach, we are fools.”
While the apparent impact of the imports on the market is believed to be small, the threat of introducing invasive varieties to the region is real and the subsequent adverse impact on the agricultural community cannot be overlooked. The decision seems to be ill-timed and irresponsible given what the industry has faced in the last decade as well as on account of the ongoing economic crisis.
As the global supply chain settles into the COVID19 technology driven and customer-centric decade, there’s no time to pause and reflect on what has happened. Now, more than ever is a time for action. You need to pick up the pace and ensure that your processes are leaner, faster, and you are equipped to meet your customer’s expectations. Understanding the nuances of your supply chain and how to improve upon it is the best way to achieve maximum savings, optimize efficiency, and manage customer expectations.
We’ve come up with a concept called the Three M’s, three key areas that you can explore and break down in order to realize the full potential of your company that can help you to get the biggest, fastest savings in your supply chain, today.
They are: Measure; Manage; and Maximize.
The first of the three M’s is the measure, and it’s all about understanding your supply chain and how it functions. To measure your supply chain is to create an overview of your operations and within that, to develop an understanding of your key processes and where your company’s strengths and weaknesses lie.
Understanding how to create an overview of your supply chain is the very first step in measuring what your company is doing right now and what your current process looks like.
“Understanding how to create an overview of your supply chain is the very first step in measuring what your company is doing right now and what your current process looks like. Either creating an overview or even having an external analysis done by a third party will help you gain visibility and understanding why you’re doing things the way that you do and then taking that information and turning it into actionable information that your company can then use to make better business decisions,” suggests Amanda Staffon, our Senior Business Development representative.
Measuring can help you to:
Analyze the need for process improvements.
Understand where cargo can be consolidated to increase cost savings.
Measure carrier cost structures to maximize efficiencies and lower costs.
Better financial efficiency of your end to end supply chain network.
Enhanced control over shipment scheduling.
Manage is all about the internal conversation within your organization. It’s about understanding why key stakeholders which should include, vendors, purchasing, customer service, sales, are making the decisions that they do and how those decisions affect your supply chain. Manage is also about understanding the flow of goods, money, and information throughout your organization.
The data and analytics gathered during the measure phase is instrumental to a proper understanding of your operations
The data and analytics gathered during the measure phase is instrumental to a proper understanding of your operations and can create the insight necessary to understand why these decisions are being made and how you can improve upon them.
There are four key advantages to the management phase:
Visibility across the entire supply chain from sourcing raw materials to the delivery of finished goods
Modeling future supply chain scenarios as your company grows/changes to ensure speed to market while maximizing cost structures.
Complete insight into the production, partner, and supplier performance to ensure responsiveness to customer needs.
A Global perspective to keep updated on the latest developments and optimize processes across North America.
The last of the three M’s is Maximize, and all about making the most possible good from every factor and decision within your organization. For example, technology helps to maximize efficiency and, in turn, increase profitability.
A well-managed supply chain provides companies with the ability to execute best practices
The other two steps are crucial to maximize as they help you to understand the layout of the organization and what steps you need to take in order to see the most benefits, whether that be further developing strengths, optimizing a specific aspect of your operation, or outsourcing aspects that your company isn’t particularly strong in.
A well-managed supply chain provides companies with the ability to execute best practices in the following areas:
Risk Management and Contingency Plans
Putting it into Action
Of course, the first step in this process is often the most daunting. During the uncertainty, dedicating resources (time, energy, money) to anything that doesn’t have an immediately apparent return can be terrifying. However, taking that first step is most important as it lays the path towards improvement and growth in the future.
We encourage you to listen to our free Webinar about the Three M’s to get a more in-depth understanding of the process as well as to take advantage of our free supply chain analysis to see how BlueGrace can help you to improve and optimize your operations.
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.
To a large extent, Supply Chain and uncertainty go hand in hand. Driver delays, transportation failure, strikes, hike in fuel prices, carrier capacity shortage, vendor hold-ups, thefts, and fires at warehouses are all common issues in the supply chain ecosystem. Most supply chain leaders are not only aware of them but also have alternate plans or solutions ready to tackle these issues as and when they arise.
However as supply chains become increasingly global in nature, businesses not only have to contend with minor uncertainties but also have to manage larger global disruptions that may threaten their very existence. These disruptions are like black swan events which no one can forecast or plan for in advance. They arrive on the horizon suddenly and upset the status quo, often requiring a rearrangement of how the business functions and manages its supply chain in the future.
What Global Disruptions does the Supply Chain need to be aware of?
Globalization has added a layer of complexity to business operations. Now businesses have to keep an eye on what’s happening around the world and be able to identify possible threats to their business in all the countries that they operate in or source raw materials from.
Natural disasters are the most common global disruptors. Wildfires, earthquakes, hurricanes, storms, and floods can interrupt regular operations for a long time in the country that they happen in. It can take years to rebuild factories and get them operating at optimum capacity. For example, according to reports, the 2011 earthquake and Tsunami in Japan had caused grave damage to infrastructure and manufacturing facilities in the country. Given the wide scope of Japanese companies’ operations, the impact of the earthquake and Tsunami was felt by their business partners around the world.
Political and Trade Relations:
Cordial political and trade relations amongst the governments of the originating country and the nations that the organization wants to do business are a must for smooth operations. If there’s any change in the relationship either political or trade, it can become difficult for the business to carry out its business activities without disruptions. A recent case in point is the ongoing trade war between China and the US. This has not only soured relations between the two nations but has also created a tumultuous situation for other nations involved in international trade with the two countries.
Similarly, an unfavorable change in foreign trade policies – without the threat of a trade war – due to political fallout or change in the growth strategy can make it hard for foreign businesses to sustain long term in the country.
Another factor that can derail supply chains across the globe is an economic recession. If any of the major economies of the world like the US, China, Germany, India, France, and the UK experience an economic downturn it is bound to impact the nations that it does business with. A major economic failure can also lead to a global recession like the 2008 global recession which led to many businesses closing shop or limiting their reach to certain geographies only.
Since digitalization and technology have become an integral part of the supply chain, another threat that can cause great damage to not only the business but also customers are cyber attacks. These attacks on technology and systems can impact a business’s reliability, trustworthiness, and endanger the trade and even personal data.
Unlike the regular supply chain disturbances, these threats are unforeseeable and due to their unpredictable nature, not easily manageable. Each event – even if it is of the same kind – requires a specialized and unique response.
The better prepared a supply chain is to respond to a sudden event, the more likelihood of it overcoming the challenge and sustaining its operations. Hence, now more than ever it has become critical for supply chains across the globe to assess themselves against invisible threats and prepare to deal with black swan events as and when they occur.
What can you do to make your supply chain ready to weather disruptions?
While there is no fixed roadmap on how to deal with these kinds of threats, there are a few steps that businesses can take to safeguard their interests and bounce back with minimum possible damage.
Imagine the unimaginable: Organizations now need to think ahead and plan for events that may or may not happen. It is critical to simulate scenarios that can disrupt your business and find solutions to overcome them before these scenarios play out in the real world. Create a contingency plan for what-ifs: for example – what would you do if an earthquake struck your manufacturing facility or if one of your vendors had to temporarily close down business because his unit was in the eye of the storm? Do you have an alternative option? If not, then that’s where you start your planning.
Find substitute suppliers: We have often highlighted the importance of having multiple trusted vendors on board. There’s no better time than now to reiterate this point. Find vendors in different regions when the business and the world is functioning in normal conditions. Try out a few transactions with them and work on building a relationship with them. Access to vendors in different regions can help keep the business running even if there’s some disturbance in one region or country. This will enable you to keep your supply chain functioning.
Build alternative service providers and business partners: It’s not just the suppliers that you need to keep your supply chain up and running. Along with a roaster of trusted suppliers you also need to build a repository of other service providers and business partners such as transporters, shipping lines, warehousing facilities in all the regions where your business operates. This is critical because if you have to shift your business from one sector to another due to some contingency, you will know who to hire and partner with.
Identify the pain points of your supply chain: No business or supply chain is perfect. Some have a strong inventory management system but a poor relation with transporters. Others have a rigorous forecasting procedure in place but struggle with people management or may have customer issues. Any of these weak points have the capability to be further aggravated during an emergency. Hence, it is critical to know the pain points of your supply chain and work on finding viable solutions.
Make data security a priority: In the current scenario where technology is a part of every function and system within an organization, data security has become critical. It’s not just your business data that is at risk, but also the information that your customers and vendors share while doing business with you that is in danger. Even a small breach of data can put your and your customers or business partners at risk. So make technology and systems audit an integral part of your organization.
Learn from past disruptions: Maybe the earthquake in Japan did not impact your business or the hurricane Katrina did not affect your region, but it did cause damage to other businesses and regions. Observe what they did to get their business and supply chain up and running. Find out what were the difficulties they faced, learn from them, and find solutions for such situations that are viable for your business.
Analyze, Analyse, and Analyse: We can’t emphasize the importance of carrying on an ongoing analysis of your supply chain. This is the only way where you can not only find out the risk to your business, but also identify threats and challenges, and work on solutions to mitigate them before they become unmanageable.
Will the analysis help in mitigating risks from black swan events? If you keep these threats in mind while conducting analysis, then it will help build awareness among your team and urge them to work on finding viable solutions.
If you need any assistance in starting your supply chain analysis journey, then get in touch with our team of experts today!
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.
The ongoing slump that had begun in October 2018 had started to affect the Class 8 truck market in early 2019. While there were a few months during the year where orders for heavy-duty trucks peaked – although not as high as the previous two years, it was all in all a slow year for the industry.
How bad is the situation?
An article in Wolf Street shared numbers released by the FTR Transportation Intelligence for 2019. According to the report: during the year there were 179,000 orders for Class 8 trucks. This was a drastic reduction of 64% when compared to the 497,000 orders during 2018. The difference in the orders in just the span of a year is telling of the difficulties that the trucking manufacturing industry is set to face until the freight market stabilizes.
More recently, on February 19, 2020, in a write up on the issue Freight Waves shared: “The ratio of retails sales of Class 8 trucks to inventory in January 2020 ranked second-highest in the industry history, trailing only the worst month of the Great Recession a decade ago”, signaling that the heavy-duty vehicle market may continue to experience a downward trend for some more time.
What’s the cause?
The cause of the current turmoil faced by the Class 8 truck manufacturing industry can be broadly bifurcated into two parts.
The first reason stems from the slowdown in the manufacturing sector. It has a direct impact on the orders fleets place for new trucks.
The first reason stems from the slowdown in the manufacturing sector. It has a direct impact on the orders fleets place for new trucks. If the sector is doing well, there is a demand to increase the fleet size, hence more orders for new trucks. On the other hand, when it is experiencing a slowdown, trucking companies hold back on increasing their fleet size – exactly what is happening now.
The current economic and political scenario in the country has put a strain on the manufacturing industry. The US and China trade war which began in 2018 and the tariffs imposed by the two countries on each other has been detrimental for business and allied service providers, including truck manufacturers. If we are to consider the disruption that the Coronavirus is causing in global trade, we can presume that it will be a while before the freight business picks up again.
The other reason industry experts are giving for the drop in Class 8 orders is a market correction.
The other reason industry experts are giving for the drop in Class 8 orders is a market correction. Monitor Daily quotes Act Research’s President and senior analyst, Kenny Vieth explaining the downturn: “After peak sales and build in 2019, significant declines are ahead in 2020, as heavy-duty sales and build follow the net orders trend down. But if our forecast of ongoing (but slower) economic expansion holds in 2020, the drop will be a correction (along the lines of 2015 and 2016), not a devastating recession (as in 2008 and 2009).”
What’s the impact?
The declining order book for Class 8 trucks has already started to show its impact. According to reports, quite a few truck makers including larger manufacturers like Volvo, Mack Trucks, Daimler, and Navistar have already gone through a round off layoffs or are considering cutting their workforce and reducing their production plans. For example, Cummins, the engine maker is reported to have planned laying off around 2000 workers in early 2020 and Navistar has already gone through two rounds of layoffs last year. When the bigger companies are taking such drastic measures, it will be difficult for the smaller manufacturers to tide over this recessionary phase.
The cost of maintaining and managing the excess inventory will be another issue that the truck manufacturers will have to deal with.
The cost of maintaining and managing the excess inventory will be another issue that the truck manufacturers will have to deal with. According to reports, the inventory to sales ratio was 3.9 months in January, which is much higher than the industry’s normal average of 2 to 2.5 months. Till this excess inventory is not sold off, the truck makers may have to further cut production plans and bear an additional burden of their operating funds.
This problem doesn’t end at the manufacturers. Even the dealers who may have taken additional inventory of Class 8 trucks when the market was good, will now have to either hold the inventory till there are buyers in the market or sell their inventory at a discount. Either way, it will have a negative impact on their bottom line.
Till the freight business does not pick up, it will be a rough ride for all the stakeholders in the ecosystem be it – shippers, carriers or truck manufacturers.
However, companies that have built-in diversity in their supply chain – keeping in mind the cyclical and uncertain nature of trade and keep a rigorous check on it, have a better chance of surviving such downturns. If you want to know what are the weak points of your supply and how you can strengthen it, get in touch with our team for a supply chain analysis today!
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).