Monday, September 29, 2014

3PL CEO study points to increasing optimism in global 3PL market

By Jeff Berman, Group News Editor
September 26, 2014
Optimism in the form of increasing profits was a key takeaway in the Annual Survey of Third-Party Logistics (3PL) CEOs, released earlier this week at the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in San Antonio.
Now in its 21st year, the survey was conducted by Dr. Robert Lieb, professor of Supply Chain Management at Northeastern University, and sponsored by Penske Logistics. It is based on feedback from 27 3PL CEOs throughout North America, Europe, and Asia-Pacific, with cumulative revenues in 2013 at roughly $46 billion.
One of the survey’s main findings saw that the average three-year revenue projections among 3PL CEOs in North America were 10.39 percent (down from 11.5 percent in 2013), and 7.71 percent for Europe (up from 6.4 percent in 2013), and 15.0 percent for APAC (up from 9.0 percent in 2013). And 15 of the 27 global CEO’s noted that their respective companies exceeded 2013 revenue projections, with 13 meeting projections, and seven coming up short.
“Naturally, there were differences across regions for revenue projections,” said Lieb at CSCMP this week. “If you look at the North American marketplace, the projections are pretty similar to last year’s survey, and are solid even though they are a little bit lower. 2014 looks like a good year for a lot of 3PLs and it looks to be a continuation of 2013 when it is all said and done.”
Lieb added that there are multiple factors driving ongoing 3PL revenue gains, including a continuation of near shoring from China to Mexico, with 3PLs in Mexico seeing subsequent resultant gains in business, due to the wage gap between the two countries narrowing, and a pro-business government in Mexico, a drop in crime in Mexico, and shorter lead times bringing about lower transportation costs.
While North American 3PL prospects are bright, Europe’s remain dim, as companies in southern Europe are still suffering, with any growth on the continent coming from northern and eastern Europe, noted Lieb. The rebounding 3PL-related sectors showing any type of rebound in Europe, he said, were automotive and lifesciences.
The slow growth, especially for asset-based European 3PLs, is currently viewed as a major hindrance, according to Lieb.
Another notable takeaway of the survey focused on merger and acquisition (M&A) activity within the 3PL sector, with just 3 of the 27 surveyed CEOs saying their respective companies were involved in significant M&A activity in 2013, and they added that revenue growth through acquisitions is expected to be modest over the next three years, with many CEOs expecting no revenue growth through M&A for the same period.
Among the reasons cited for little to no uptick through M&A were few attractive targets, overpriced companies, negative experiences with previous acquisitions, and risks related to economic uncertainties.
Penske Vice President of Logistics Joe Carlier said that even though there is some interest in M&A among 3PL CEOs, the larger challenge is finding the right company at the right price.
“That has been the big drawback, with companies saying they are looking but not seeing what they need or anything they like,” he said. “Companies also learn lessons from the past and factor them into their M&A price offering.”
Sustainability also received a fair amount of attention in the survey with ten of the 27 CEO’s reporting their companies kicked off green projects, 15 expanded existing sustainability programs and eight set to begin new sustainability programs next year.
From a Penske perspective, Carlier said it is more of a matter of staying true to the current sustainability initiatives it employs.
He cited how Penske endeavors to maximize its green focus, which has seen the company become part of the EPA SmartWay Program for several years through its transportation carrier program. Other major areas of focus and interest cited by Lieb and Carlier were natural gas-powered vehicles, speed limiters, and LEED-certified buildings, among others.
The survey also examines various industry dynamics cited by 3PL CEOs. Making the cut were nearshoring’s growth, Amazon’s impact on the supply chain, capacity issues in different modes of transportation, and labor-related issues.
In regards to the labor, Carlier observed that supply chain professionals and truck drivers are the biggest needs from a human capital perspective, with 3PL’s actively recruiting on college campuses for the former and the need for thousands of drivers throughout the sector.
“There is an uptick in economic confidence, and a lot of the companies that did not traditionally outsource were kind of holding off to see where things were going,” said Carlier. “This year, there is an increase in new opportunities for opportunities that have not previously outsourced. But now with more confidence in the market, there is a realization for a need to make investments in technology or whether to be a private fleet operator, or invest in additional warehousing space or outsource. This is increasing in all verticals, with companies taking steps to increase efficiencies in their end-to-end supply chain.”
The advent of the e-commerce-based supply chain also drew considerable interest in the survey.
And the question of whether e-commerce giant Amazon is a 3PL was raised in the survey, as it noted Amazon’s focus on speed and visibility and its underpricing of transportation services has subsequently increased customer expectations relative to speed and service. What’s more, ten of the surveyed global 3PL CEOs said they provide logistics support to Amazon and ten said that Amazon has captured the logistics requirements of many small online startups, while absorbing transportation capacity resulting in 3PLs reassessing competitive strategies.

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Wal-Mart opens its Pickup Grocery format in Northwest Arkansas

Submitted by The City Wire Staff on Mon, 09/29/2014 - 6:34am
story by Kim Souza (photos courtesy of Wal-Mart Stores Inc.)
ksouza@thecitywire.com

Grocery drive-up convenience with low price guarantees are the latest ploy by Wal-Mart Stores Inc. to bridge the digital and physical retail worlds. And on Monday (Sept. 29) the retail giant is unveiled its Walmart Pickup Grocery service to registered customers in Northwest Arkansas.
A grand opening ceremony is set to take place at 7:30 a.m. at the warehouse site located near the intersection of J Street and S. Walton Boulevard in Bentonville. Wal-Mart said its employees have in recent weeks tested the new format and it wants to continue expanding the test by allowing registered shoppers to use the service beginning Monday.
Former Walmart U.S. CEO BIll Simon first announced the plans for a drive-up grocery depot in March. The Bentonville City Council approved the warehouse site in early May and construction was underway within days. Last month Wal-Mart revealed the name for the format – Walmart Pickup Grocery – and began letting employees test the service.
USER GUIDE
Consumers who want to use the service must first register online with an email address. Wal-Mart said it will begin extending invitations to try the same-day service via email.
Registered shoppers can order from the online site (Link here for the page.) which contains roughly 10,000 grocery and consumable items including fresh meat, dairy, produce and common household products. The consumer then schedules a pickup time ranging from two hours to three weeks after the order is placed.
The shopper then drives to one of the kiosk stations at the pickup grocery site at the scheduled time and notifies the attendant who will bring their order to the car. Orders are paid for online. Wal-Mart said this test extends its everyday low prices with no hidden fee or surcharges.
“We know at Wal-Mart our customers’ needs are changing. They want and need more shopping options and we have the means to give them low prices, wide assortments along with value and convenience in a seamless shopping experience,” Deisha Barnett, Wal-Mart spokeswoman, told The City Wire in April when the new format was made public.
Barnett said the new convenient grocery format in no way is meant to replace traditional stock-up trips at its supercenters and Neighborhood Market stores.
MIRRORING A U.K. MODEL
Judith McKenna, the chief development officer at Walmart U.S. who has years of expertise as the retailer’s British grocery chain ASDA, is one of the leaders of the new format. In June, she said the ASDA model offers “learnings” as the U.K. market is more adept at online grocery than the U.S.
“ASDA customers have moved quickly to online and pickup grocery models. A program called Click & Collect was not available two years ago. It’s in 300 stores now and will be in 600 stores by next year,” McKenna said.
McKenna said population density is needed for the home delivery option to make financial sense for retailers. But in drive commuter markets, she said the click & collect models for grocery could find favor among many shoppers. She said the new format in Bentonville is a trial, but there is evidence in other places that it has possibilities.
Wal-Mart has been clear from the beginning that the new mini warehouse format is a test, one of many it’s conducting across the country to assess consumer sentiment toward delivery options versus pickup services for groceries.
The retailer has said the grocery home delivery tests in Denver were going well, but one   lesson learned in the process has been that more consumers would just as soon pickup their online orders at their own convenience for no added fees. The home delivery fee in the Denver market ranges between $5 and $10.
The online grocery market, worth $6 billion annually, is projected to grow at 9.5% a year between 2012 and 2017, according to the market research firm IBISWorld.
EXPERT INSIGHT
“Wal-Mart is testing this format because it is a vehicle – literally – for next-stage scale-building and a complement to its small format strategy,” said Carol Spieckerman, CEO of newmarketbuilders.

Continuing, Spieckerman noted: “Wal-Mart has everything to gain as it offers yet another option for convenience-starved customers and without the overhead of its other physical formats. Shopping eats up time and can be a major inconvenience for parents with small children and the elderly and infirm. This is also a great way for Wal-Mart to make the most of its digital platform, to acclimate more customers to using it and to gather more information on its customers’ searching and shopping habits as they place orders online.”
She adds that the while the click & collect locations are common in the U.K., this new format may have more influence in the U.S.

“It’s a pioneering move in the U.S. and that alone has the potential to bring new customers into Wal-Mart’s physical and digital ecosystem,” Spieckerman said.
WHY BENTONVILLE?
During shareholder’s week in June, Wal-Mart execs were asked why they chose Bentonville as the home for this newest concept. They responded, “Why not?”
Northwest Arkansas is a commuter society – with some estimates of more than 500,000 living in the metro area – and thousands of potential shoppers drive by the 15,000 square-foot pickup warehouse each day. In Wal-Mart’s own corporate ranks there are roughly 10,000 working just a few blocks away, many of whom commute into Bentonville from nearby towns.
Analysts said having the new grocery format close to the home office and technology center is also a benefit because they will be able to test new technology capabilities quickly and conveniently without travel.
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Question: What do you get when you take millions of people in emerging markets that are rising to the “middle class” and add them to a millennial generation with a voracious appetite for consuming products, services and gadgets?

Answer:  Supply chains under massive pressure.

Supply chains have never been as long or as complicated as they are today (Tweet this). The globalisation trend of the last two decades has meant that even smaller companies have had to build extended supply networks just to keep pace with growing demand in diverse locations.

In emerging markets as a whole, the middle class has grown from a third of the developing world's population in 1990 to over half today. The developing world is no longer simply defined by being poor. The buyers of today (and tomorrow) are the growing and increasingly well informed and connected global middle class who are not accustomed to having to wait for their needs to be met.

Retail Global Middle Class.jpg
With many companies now trying to differentiate themselves by the responsiveness of their supply chains, the transition from a supply chain to a demand network has already begun (Tweet this). There will come a time in the not too distant future when supply chains will not be chains at all, but rather will transform into demand networks.  For this to happen, it means breaking down the silos and embedding supply chain functions directly into the most powerful functions of the company, such as merchandising, marketing, engineering, service, and logistics.

For example, industries such as retail, consumer products, and high-tech need to become much more tightly integrated with marketing and merchandising organisations. Logistics service providers or wholesalers should leverage market data and customer insights to create new products and services for their customers. Only then can companies unleash the real potential of demand networks, eliminate redundancies, create efficiencies, and introduce truly innovative and differentiating processes.

"The buyers of today (and tomorrow) are the growing and increasingly well informed and connected global middle class who are not accustomed to having to wait for their needs to be met"

Sounds good doesn’t it?  Most companies today aren’t there yet, but technology has gotten considerably easier to use in recent years and is having a huge impact. Mobile, in memory computing and cloud are making supply chain optimisation and efficiency much easier now than in days gone by, but you still have to get your house in order with the right processes for integration, collaboration, transparency, traceability and sustainability.

As a business you need to plan, but chances are you also need to adjust those plans due to unexpected surges or shortfalls in demand and changing supplier capabilities. With the right tools, you can now automatically examine alternative scenarios. After the right response is determined, a history of the logic that went into why that is the best of different alternative responses can be stored. This type of advanced visibility is changing the way we think about supply chain agility and innovation, and the insights we can gain into how our supply chains are performing.

Leveraging the wealth of performance data about the supply chain enables real time analysis, provides insight into fragmented business processes and achieves a deeper level visibility.  Not all companies are ready or able to transform their supply chains into demand networks as yet, but they can certainly transition from management by exception to management by information.
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WHAT IS INTERNET OF THINGS?

Sep 25 2014
The Internet of Things (IoT) is a scenario in which objects, animals or people are provided with unique identifiers and the ability to automatically transfer data over a network without requiring human-to-human or human-to-computer interaction. In simple words, everything is connected over IP and would interact would each other based on pre-defined logic, e.g. refrigerator can order milk by itself when it is about to get over based on past consumption trends.
The keyword is “Things”. Here things includes people and animals which means that in future even the people might be connected to objects like health equipment or household appliances. This might sound straight out of a science fiction movie but that is how human to machine and machine to machine interactions are likely to take place. IoT describes a system where items in the physical world, and sensors within or attached to these items, are connected to the Internet via wireless and wired Internet connections. These sensors can use various types of local area connections such as RFID, NFC, Wi-Fi, Bluetooth, and Zigbee. Sensors can also have wide area connectivity such as GSM, GPRS, 3G, and LTE. In summary, the Internet of Things will:
1. Connect both inanimate and living things
2. Use sensors for data collection
3. Identify, track and communicate with objects over IP network
IPv6′s huge increase in address space is an important factor in the development of the Internet of Things. With IPv6, it is possible to assign a unique IP address to each atom on earth and still not run out of IP addresses.

EXAMPLES OF INTERNET OF THINGS

There are multiple ways in which Internet of Things can be used to drive the economic value across sectors. Today, we have a few examples of IoT but it is just the tip of the iceberg and many new use cases would emerge in the future. Some of the prominent examples are as follows:
1. Home Automation - home automation has become the central battlefield of the Internet of Things. This is probably the first and most celebrated use case of Internet of Things. Many houses are moving towards some form of home automation though this area is still evolving and currently very rudimentary form of home automation is being used.
2. Smart water systems and meters - The cities of Doha, Sao Paulo, and Beijing have reduced leaks by 40 to 50% by putting sensors on pumps and other water infrastructure. Smart metres are being used for preventing electricity pilferage and balancing grid loads.
3. Connected advertising and marketing - Cisco believes that this category (think Internet-connected billboards) will be one of the top three IoT categories, along with smart factories, and telecommuting support systems.
4. Healthcare - Hospitalized patients whose physiological status requires close attention can be constantly monitored using IoT-driven, non invasive monitoring using sensors. Remote patient monitoring is also a possibility by securely capturing patient health data from a variety of sensors, apply complex algorithms to analyze the data and then share it through wireless connectivity with medical professionals who can make appropriate health recommendations.
5. Public transportation/smart cities - London iBus system is a good example. It works with information from over 8,000 buses that are fitted with GPS capabilities alongside various other sensors which relay data about the vehicle’s location and current progress so bus stop signposts can display details of a bus’s impending arrival.

MATURITY OF INTERNET OF THINGS AND MARKET FORECAST

Internet of Things is still in infancy and would take over 10 year to get to mainstream. The Gartner hype cycle for emerging technologies (refer image below) clearly shows that the Internet of Things is still in the “Peak of Inflated Expectations” and it is still long way from reaching significant adoption.
As per Gartner forecast made in Dec, 2013, the Internet of Things (IoT), which excludes PCs, tablets and smartphones, will grow to 26 billion units installed in 2020 representing an almost 30-fold increase from 0.9 billion in 2009. Gartner said that IoT product and service suppliers will generate incremental revenue exceeding $300 billion, mostly in services, in 2020. It will result in $1.9 trillion in global economic value-add (which represents the aggregate benefits that businesses derive through the sale and usage of IoT technology) across sectors in 2020. The verticals that are leading its adoption are manufacturing (15 percent), healthcare (15 percent) and insurance (11 percent).
The potential for IoT is huge. The chart on the right shows the potential of Internet of Things with respect to some of the successful inventions of the digital space. Clearly, the potential is larger than anything till date but for that a lot of players in the ecosystem will need to come together and make IoT a reality.

KEY PLAYERS IN INTERNET OF THINGS

The evolving vendor ecosystem that is emerging to enable the Internet of Things continues to be extremely fragmented and includes a wide variety of small emergent players. A number of start-ups and established players are showing interest. I see the players broadly in two major categories
1. Platform Builders: These players would be the building blocks for internet of things like the carriers/MNO, OEMs, systems integrator, chip vendors, infrastructure services (device management, data modelling, etc. ), Analytics, etc.
2. Vertical Industry Players: These players would develop industry specific solutions on top of the platform builders, e.g. Nest Labs in energy efficiency
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Amazon Building Warehouses Everywhere, Hopes Christmas Gifts Actually Arrive By Christmas

By  September 26, 2014
Holiday time is shopping time in America, and millions of families turn to Amazon to get their gifts. But last year, Santa’s sleigh had some trouble getting where it needed to be on time: last-minute buying, bad weather, and snafus at UPS and FedEx meant plenty of presents were still in transit when kids went looking under the tree in the morning. Some Christmas delivery miracles occurred, but Amazon still had to issue plenty of apologies, refunds, discounts, and Prime extensions. But Amazon is determined not to see a repeat in 2014, if their year of planning and building pans out.
Bloomberg BusinessWeek reports on the extensive planning that’s been going on at Amazon in order to make sure every customer gets their packages of holiday cheer on time. Even Amazon, as large and diverse a company as they are, can’t do much about winter storms or natural disasters — but they can build flexibility and redundancy to deal with pretty much everything else.
And that’s what they’ve been doing, as they open new facilities around the country and the world. In addition to 38 new fulfillment centers (i.e. giant warehouses full of stuff) Amazon has open around the country, they’ve opened 15 “sortation centers” to go with.
These smaller (but still huge) facilities exist for, well, sorting. Instead of having every package go straight to a shipping partner, like UPS, FedEx, or the Postal Service, Amazon instead sorts them by ZIP code first. That allows them flexibility if something goes awry. For example, if UPS were to experience major delays in one region, Amazon would know which packages to hand over to another shipper instead.
The online retailing behemoth is also exploring alternatives that don’t involve the big shipping companies at all, BusinessWeek adds. In a handful of cities, particularly Seattle, Los Angeles, and San Francisco, Amazon’s been experimenting with their own delivery fleet. Forget the man in brown: your Amazon package arrives at your door in an Amazon truck with an Amazon driver.
The CEO of the company that did the research analysis explained to BusinessWeek that last year, “UPS was a single point of failure. Amazon was so married to them. Now if they get into a situation where five days into the holidays and UPS says ‘no mas,’” the sortation system gives them flexibility to work with the situation.
Amazon also tries to avoid bottlenecks with the big three shipping organizations by working with a number of smaller, regional delivery and courier services, especially near warehouses. (Yours truly sees the LaserShip van drop off a dozen Amazon boxes to neighbors nearly every morning.) These companies are also not flawless, but still provide flexible options that Amazon can choose to use or not to use depending on the circumstance.
Of course, these new warehouses are not evenly dotted around the country. Residents of the rural west are mostly out of luck, but Amazon shoppers in the major cities of the West Coast, up and down the Mississipi, and especially in the Northeast Corridor are fairly likely to live near one. But there’s always something: even living next door to an Amazon facility won’t spare you from some deepy questionable packaging.
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THE SOCIAL-COMMERCE REPORT: Social Networks Are Driving More Online Sales And Influencing Offline Purchases

  • SEP. 29, 2014, 7:47 AM
BII_SCommerce_Chart4BII
There’s been a lot of hype surrounding social commerce — the idea that posts and ads on sites like Facebook and Pinterest would generate lots of immediate sales on e-commerce sites.
Today only a fraction of retailer's online sales are actually generated directly through a referral from a social network. But the volume of social commerce is growing quickly, in the triple digits in many cases. Overall, social commerce sales grew at three times the rate of overall e-commerce last year.
Here are a selection of the key points from the report:
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U.S. Says Genetically Modified Wheat Found in Montana

Latest Discovery Comes as Earlier Oregon 

Incident Is Called Isolated

By
CONNECT
Updated Sept. 26, 2014 7:56 p.m. ET

WASHINGTON—Genetically engineered wheat has surfaced at a second unauthorized location in the U.S., the Agriculture Department said, raising new questions about agricultural companies' oversight of biotech crops.
The USDA said Friday that it began an investigation into genetically engineered plants discovered in July at Montana State University's Southern Agricultural Research Center.
The finding came as the USDA said it closed an investigation into a similar incident in Oregon, which had prompted some Asian countries to temporarily suspend U.S. wheat imports last year. The agency said Friday that it couldn't determine how biotech wheat got on the 125-acre Oregon farm but that it appeared to be an isolated incident.

Related

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No genetically modified wheat has been approved for commercial use in the U.S., although genetic engineers have worked off and on for years to develop varieties that can withstand pesticides. GMO corn and soybeans are widely grown in the U.S.
The USDA said both the wheat found in Oregon and in Montana were developed by Monsanto Co. MON -0.07% , though agency officials said the two events appeared unrelated. The biotech seed company and researchers had grown GMO wheat at the Montana State University facility between 2000 and 2003 in USDA-authorized field trials.
Monsanto said it was cooperating with the government's investigation, though a spokeswoman declined to confirm the company developed the wheat in question. The St. Louis company did develop the wheat found in Oregon, according to the USDA.
"While we believe our compliance program is best in class, we continuously review our processes and procedures to improve them, including site selection, field trial isolation, and verification and auditing of field trial locations," said Philip Miller, global regulatory affairs lead for Monsanto.
The agency's investigation into the Montana finding "is focusing on why [genetically engineered] wheat was found growing at the research facility location," the USDA said. Department officials will inspect wheat test fields planted this year and follow up after harvest to ensure "unintended GE wheat" isn't growing elsewhere, the agency said.
After the rogue GMO wheat was discovered last year in Oregon, Japan said it would hold back shipments of some wheat imports, and some South Korean flour mills suspended purchases of U.S. wheat.
The Montana State University research center doesn't operate as a commercial farm so there should be less cause for concern among importers of U.S. wheat, said Bernadette Juarez, a director of investigative and enforcement services at the USDA.
"We see the situation in Montana and Oregon as being very different," she said.
The Montana discovery comes at a time of heightened sensitivity in the global grain trade. U.S. corn exports to China earlier this year largely dried up after the country took a tougher stance against corn containing genetic modifications that China has yet to approve. U.S. grain-trading companies have estimated that rejected corn shipments and the lack of new orders from China have cost them hundreds of millions of dollars.
Andrew Kimbrell, executive director of the Center for Food Safety, which questions the safety of genetically engineered crops, said the USDA appears ill-equipped to manage the system for testing modified crops and called for Congress to look into the process.
"If you don't know how something happens, you don't know how to prevent it," Mr. Kimbrell said.
Monsanto said previously that its own analysis suggested that the Oregon wheat didn't come from seed left in the soil or from pollen drifting on the wind from other fields, and that sabotage was likely the cause.
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