Managing the Q4 Peak: Considerations and Recommendations for your Supply Chain

In a time that has seen UPS impose shipping restrictions on major retailers to maintain performance (not to mention covid-19 vaccine distribution), it is all the more important to take preparatory measures to build flexibility and buffers into supply chains. Below, we discuss considerations for your network, transportation, and warehousing segments of your supply chain.

Strategy

Locations: Balancing the Workload

• Shipping from the closest fulfillment center isn’t always the best option.  There are a whole host of considerations: Do we stock that item here? How many pending orders for that location? Can it be batched with other orders? Rate of on-time delivery? Profit based on shipping costs? and many more. Rethinking distribution strategy can lead higher on-time delivery rates and maintaining service level goals.

3PL: Are you top priority?

• What we like to call finding the 'right fit' is important for these times of the year. It requires a balance  to find a 3PL that is both technologically advanced and connected across the country that is also flexible enough to work with the specifics of your business and will prioritize you when you need it the most.

Transportation

Flexibility: Expeditors, Plan B Carriers

• Understanding your relationship with your carriers and where you fit in to their network is key to success during peak season. There will undoubtably be shipping emergencies during peak/holiday season. Testing out alternative carriers and expeditors during off-times will bring confidence they will deliver in your time of need.

Surcharges

• Another consideration is peak-season surcharges. Discuss planned volumes with your providers in advance to minimize surprise and therefore surcharges. Overloading carriers' networks with unpredicted volumes is exactly what these charges try to avoid. By working with carriers in advance, you can negotiate these surcharges down.

Dedicated Fleet

• Depending on the size of your business and the distribution of your customer base, a dedicated fleet may be a legitimate option for you. This extra ownership over the delivery of product to customers could offer redundancy and potentially present freight cost savings.

Warehousing

Layout and Organization

• Before peak season is the time to revisit warehousing setup & storage media. Organizing the facility, utilizing space efficiently, and giving everything a place creates necessary space to succeed in peak volumes.

Extra Shifts/Staffing Agencies

• What shifts are you currently running? Can you operate another shift over the weekend or extend the hours during the day? As staffing issues plague warehousing & distribution companies, especially during Covid-19, it is important to exercise all of your options. Check with local staffing agencies to potentially supply you with temporary workers.

Technology

• If staffing does not solve the problem, consider tech solutions. Those solutions could be picking aids like voice picking, pick-to-light, and RF scanners or it could be AMR's or AGV's that move product on their own. These technologies simplify the human warehousing element, minimize error, increase efficiency, and can operate consistently for longer than 8 hours.

How to Modernize Your Warehouse/Distribution Center: Part 2

In Part 2 of our process to modernize warehouses, we discuss the systems and automated confirmations necessary to eliminate human error and increase efficiency.

Support Systems

Support systems are critical in transitioning a warehouse into the modern age of logistics. Some of the most common types of support systems include Enterprise Resource Planning (ERP) systems, Order Management Systems (OMS), Warehouse Management Systems (WMS) and Inventory Management Systems (IMS). Whether your distribution network consists of hundreds of warehouses around the globe or a single warehouse that ships to just a few customers, there is a support system that can help. There are numerous different options out there and each one has different capabilities, strengths, and weaknesses. Finding the right support system for your business is critical for any operation. These systems generally support warehouse operations by collecting and tracking data, standardizing processes and allowing operations to be executed more efficiently. The system should support all the current operations by decreasing manual work and helping implement future improvements. Without a WMS or other support system, warehouse processes and operations will be very manual and slow. Additionally, without a support system you will be limited in the further improvements and technology that can be added to the warehouse. Implementing a support system is a significant investment and might be difficult to see the exact ROI but it is one of the most important investments that can be made in a warehouse. It will support the entire operation by:

• Allowing processes to run quicker, meaning less time is spent on standard operations and higher throughput is achieved.

• Tracking and giving access to data which can be analyzed to see where further improvements can be made to reduce costs and increase output.

• Making it easier to track and manage inventory and KPIs which will result in better performance, lower costs, and higher output.

Automated Confirmation

Automated confirmation is the piece that brings together everything that we have talked about so far. We use the term ‘automated confirmations’ to be a blanket statement for all methods of an operator verifying their warehouse activity systematically, such as RF scanning, RFID, voice picking, etc. Using automated confirmation technology can drastically reduce the opportunity for human error and the time it takes to perform operations. An operator just needs to scan/speak/move a product and/or location rather than writing information down or updating the system manually. This will also provide increased visibility. Since the system is being updated at the time of the transaction, there will be a more accurate and real-time look at data which can help with knowing where products are and how much time is spent on different operations.

Adding these improvements will modernize your warehouse and allow it to operate more effectively and efficiently compared to how it operates today. They will also set you up to continuously grow and improve by making it easier to implement new improvements and technologies down the road.

How to Modernize your Warehouse/Distribution Operation, Part 1

For companies to stay successful over a long period of time, they must constantly be improving and changing with the times. This is especially true in warehousing and distribution. One of our core competencies at Establish is helping our clients logically and cost-effectively modernize and improve their warehouses and distribution centers. Over the next few weeks, we will be walking you through many of the steps necessary to modernize warehouses, from the most basic operation to a fully automated solution and everywhere in between. We start with two of the most important: Inventory Locations and Product Labeling.

Inventory Locations

Throughout a warehouse, there are many different places that inventory is stored. Simply adding names to each of those locations can help pave the way to a modernized warehouse so that an item and quantity can be tied to for efficiency and accuracy.

The naming structure can be virtually anything and should be relatively easy to follow. Each individual location should have a unique name and be labeled, with the labels being be easy to read and including barcodes to allow for scanning capabilities or check numbers. At a minimum, inventory location labels should have the location name and barcode, but they can also include more information such as color coding and the product(s) stored there. Below is a sample location name for a warehouse with standard pallet racking aisles:

The benefits of adding inventory locations to your warehouse include:

• Better tracking and traceability of inventory.

• Improved inventory accuracy and easier cycle counting.

• The ability to implement more robust warehouse practices such as barcoding.

• Improvement to current picking and put away processes.

• More functionality out of the current support systems.

Product Labeling

In addition to labeling the inventory locations, all the products in the warehouse should be properly labeled. These labels should include the product name, associated barcode, lot/batch/expiration date (if applicable) and be clear and easy to read. Products should be labeled directly upon receipt, prior to being put into storage. Even better, it can also be coordinated with suppliers to include these labels on the products that they come in already labeled. Labeling allows products to be identified seamlessly during receiving, picking and inventory counts and will help reduce human error and manual processing.

Next time, we talk about the IT and Support Systems as well as Automated Confirmations (RF scanning, voice, RFID, etc.).

Blockchain in Logistics: How it Started and How It's Going

Blockchain’s origin is rooted in the release of the whitepaper written under the name Satoshi Nakamoto explaining the foundation of what we know as today, Bitcoin. Bitcoin offered an avenue to worry-free digital transactions due to transparency and decentralization of the data. This ensured that information could not be altered and prompted the crypto-currency boom. The core-principles of blockchain and success of Bitcoin started a wave of curiosity into other possible applications, thus the development of the technology began to arise.

One of these applications was supply chain. Blockchain emerged and appeared to be the solution to everyone’s problems. In 2019, The Port of Rotterdam and The Port of Busan pilot tested blockchain into their maritime logistics and found success in automation and reducing operation cost.

What is Blockchain? As Explained from Blocklab:

• A “digital ledger” or spreadsheet that is duplicated and stored in a distributed network in multiple locations which can be updated instantly at any location.

• Data is decentralized since it is in multiple places at once. Thus, becomes a secure network as data cannot be modified without all approval of all the members and makes it difficult to hack.

• Information is constantly monitored which makes it difficult to change data and ensures that the information is distributed but not copied.

• Agreements become mutual and documented which enhances security and traceability as transactions are logged into the ledgers which reduces the worry of parties keeping their end of the deal.

• This results in lower costs, improved efficiency, increased transparency and increased trust.

Blockchain enables users to record and store data more easily and in a decentralized way which allows for transparency from all parties, accurate/real-time data, and improved traceability from production to delivery. Currently most companies manage their data individually on independent software support systems. The information is not shared across platforms which can cause confusion and miscommunication when the information does not align. Now, imagine the ability to track end-to-end performance of your goods and trust in the data being viewed. Blockchain provides exactly that solution. Participants in the network will provide information that would be difficult to change. The transparency allows anyone to audit any point in the supply-chain and reduce errors. Goods come as expected and as a result, increase trust amongst parties and reduce operation costs.

So Why isn’t Blockchain Used More?

 A study published in 2020 in the Journal of International Trade and Commerce, delved into the blockchain adoption focusing on Port of Busan and Port of Incheon. Despite all the possible applications of blockchain, the finding suggest it may be more difficult to sell than people think.

1. Logisticians have difficulties getting a clear idea on the benefits and successful blockchain adoptions.

2. Consultants and academics worry about the technological maturity of blockchain.

3. Competitive edge of the industry is highly influenced by economic factors related to financial and time-related aspects.

Blockchain Takes a Huge Shift in Infrastructure to Implement

Blockchain performs its best with more participants because there is more information. Without participants, the use case of blockchain no longer becomes applicable. Therefore, a decent size number of entities must agree on implementing blockchain which is harder than it sounds. Blockchain requires a huge shift in infrastructure.  Instead of storing information on their own subscription platform, the information will instead be widely available to anyone in the network which may be intimidating. Not only that, but the technology is new, and companies are hesitant on uplifting their entire structure. The pilot program by The Port of Rotterdam and Busan has shown that blockchain does perform up to expectation, but only provides a single example of the tangible benefits of adoption. A few ports have started pilot testing since, but until we see more entities willing to integrate this technology, it will be a long time till we see any major shifts in supply chain management.

Blockchain is the Future of Logistics

As supply chains become increasingly complex to meet the needs of consumers, the benefits of blockchain are far too good to not be considered as a solution. Not only does it provide relief to cumbersome problems in logistics, but transparency is becoming an important factor to consumers. Ethical sourcing and detailed package tracking are just a few factors that consumers are starting to consider. Blockchain allows for trusted end-to-end product visibility, which will become more vital to companies and consumers alike.

Supply Chain Network Optimization – How to Do it Right

The time is right to re-align your Supply Chain Strategy, for many reasons including:

• Logistics and fulfillment are the new storefronts and sales tools

• The explosion of direct-to-consumer business forces all companies to have an omnichannel strategy.

• The sourcing landscape is rapidly changing with more near-sourcing and risk minimizing.

• Sustainability awareness is increasingly unavoidable - and transportation is a big piece.

The traditional approach very often leads to more of an endless data crunch and, in best case, a mathematical answer that minimizes the theoretical logistics costs but does little to create an implementable supply chain strategy.

But you don’t do a network optimization to relive the linear programming classes from college and show your mathematical acumen. Well, some of us may. For the rest of you, here are some crucial hard-earned learning points from many network optimization projects:

1. Avoid Spending Time and Money Feeding the Monster with Data

Nobody has perfect data. A proper strategy for cleaning and curate the data will be one key to the success of the project.

The important thing is to know what data really matters and how to curate the imperfections into a usable dataset.  The most critical data for the outcome is the shipment data and it is often the hardest data to get. If you don’t have access to this data internally, the carriers do have it. They are not always keen on sharing it, but they are still the best source. The order data is usually readily available and can be used to recreate shipments though the dim/weight can complicate things. This is an area where data-enrichment from firms specializing on this can work and also item profiling to reduce the complexity to where it matters.

Most advanced models require much more data to run, but the impact of other data is less critical and can in many cases be handled with benchmarks to get a starting point and sensitivity analysis where you rerun the model with the critical datapoint varied until you find the breaking point where the recommendation changes. It is much easier to make a call when you see where it really matters and have clear choices.

2. The model will not give you a strategy. It will only tell you which alternative is mathematically the best.

Before you run the model; use the data that has been collected to profile your supply chain. This will enable you to evaluate relevant solutions.         

• Customer profiles and requirements: Delivering to the big retailers demands a different solution than direct to consumer deliveries. Two separate networks?

• Inventory profile: Certain products may have demand patterns very tilted geographically or being critical from a supply perspective. Slow-movers vs best sellers. Examples of facts that would determine the eligible alternative network structures to optimize such as Central DC, Regional DCs, Satellites, Forward Stocking Locations, etc.

• Order profile, supply profile, product profile are other examples of facts that are important to analyze pre-modelling.

3. Sensitivity Analysis

Instead of trying to create the perfect dataset. Use the model to find out with what value on critical but uncertain data that the recommendation changes. This saves a lot of time and makes the decisions relevant.

4. Use the Right Software Tool for your Challenge

The most advanced optimization tools are expensive and require a lot of effort to configure. You’ve spent a lot of time and money before you are ready to run the model. This is totally worth the investment if your supply chain is very complex and you intend to, once configured, use the model frequently. Those software tools are sophisticated and awesome with all their possible add-ons.

Most companies have a more straightforward supply chain or can optimize the network in North America, or Europe, Asia, etc. separately and then piece them together. If this is the case, the most complex tools are complicating things without the added value. Spend the time and money you save on an adequate optimizing tool to focus on strategy development instead.

Supply Chain Management Post-Covid-19 – Regional Supply Chains

Regional supply chains, near-shoring manufacturing, inventory management, warehousing as a market tool: oldies but goodies are making comebacks in the new, post Covid-19 world.

Life has changed drastically the last few months since this novel coronavirus disrupted the world as we knew it. Supply Chain Management is making a comeback on what is trending after its last visit on the charts back in the last century.

The trend from global to regional supply chains has been going on for a while. One reason is of course President Trump’s trade war with China. Interestingly, this has demonstrated more of the difficulties to relocate complicated supply chains from the dominating supplier clusters in China. There are so many components only available there that it is not only cost-prohibitive to moving technologically complicated production to North America or Europe. China is very deliberately undergoing a Japanization, in the sense that it used to be the place where all the cheap, low quality stuff was made and now it is becoming the high-tech hub. The tariffs and trade frictions have anyway started a motion towards more regional supply chains.

It has also demonstrated how developed the regional supply chains in east Asia are. China’s Silk Road project will undoubtedly exacerbate the growth of the Greater China supply chains. The main market may well be in Asia.

The tariffs and the COVID-19 crisis have brought the forgotten artform of scenario planning and risk mitigation back into the supply chain management world. Check in with the Site Selection Guru Bob Hess at Newmark for details on how to do this.

One answer to the risk mitigation is “near shoring” – regional supply chain in the own country or a safe region i.e. within EU or within the USMCA block. Establishing safe and resilient, regional supply chains for medical equipment is on top of many procurement specialists’ agenda.

We know from our clients with assembly/production in North America that a lot of companies are trying to find or develop suppliers of critical components within the USMCA. This is a process that takes time and the result will not be visible short-term but certainly over time. Most likely is that this will materialize in the form of regional clusters like you see for furniture in Western Michigan, cars in the Midwest or pharmaceuticals around Boston and Raleigh.

A third area for regional supply chains is products that can be made by robots or other forms of automated production. This is driven by the increasing salaries in China and the decreasing costs for robots combined with the ever-increasing capabilities and versatility they have. We see more and more very successful and growing companies built on automated production in both Europe and North America. It is not far-fetched that they will help form the foundation for regional supply chains.

The most important factor driving the growth of regional supply chains is psychological and materializes in attitude. Where offshoring to low-cost China was a default in the 1990s and 2000s, it is now mainstream to think sustainability, resilience and creativity. Enter regional or even local supply chains. Farm-to-Table or Made-in-your-County.

Supply Chain in COVID-19: The Option of Nearshoring

Our CEO, Håkan Andersson, was recently featured on a podcast with industry expert, Bob Hess, about the potential for #nearshoring as a result of the pandemic.

Listen here: https://nkf.re/3dhqU0

Outsourced vs In-House Transportation: A Guide

All companies at some point have to make a decision on what aspect of a business to keep in-house, and what should be outsourced. Transportation is such a critical part of a supply chain that many companies leave it to specialist third party logistics (3PL), but depending on the type of company and the trajectory of the business, insourcing could be a valuable investment.

The three main options for transportation are:

1. Contract Carriage: An agreement between an established carrier and another party for transportation. This is the most popular option as it is the most well-known and the most flexible. The upside to this option is that there is no transportation management other than scheduling pickups and deliveries for products as they are ready to ship. The downside is that the transportation is at the mercy of big trucking companies and if there are emergency shipments it’s not always possible to schedule last-minute transportation.

2. Private Fleet: Owning tractors and trailers and employing drivers to run transportation operations. A private fleet enables a company to have complete ownership of the transportation network. The benefit to this is that there is total control over the operation, but this comes with the burden of managing a separate entity that is likely not the company’s specialty. It requires capital to invest in trucks and trailers, as well as hiring and retaining drivers and adhering to regulations for these truck drivers. Very consistent demand and shipments would be required to justify this option.

3. Dedicated Fleet: Assigning a group of tractors, trailers, and drivers exclusively to fulfill transportation needs. This option is essentially a private fleet but is managed by experienced companies, so is somewhere in the middle of insourcing and outsourcing. This is a desirable option often because companies do not want to deal with the intricacies of owning a private fleet, but they want the flexibility and service levels that come with owning it. Dedicated fleets are usually run through 3PLs.