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Smart Logistics: Catalysts Changing the Logistics Sector

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Archives, Global Logistics, Global Trade Daily

Smart Logistics: Catalysts Changing the Logistics Sector

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The logistics industry is watching closely as United States and China negotiate to resolve their trade war amidst the threat of higher tariffs starting March 1. At stake is $635 billion in annual trade – China exports $505 billion and imports $130 billion with the US[i]. These negotiations have repercussions for the global economy well beyond the US and China. Many industries engage vast trade networks that span myriad countries leaving few markets or nations exempt from these talks. For the US alone, which imports $2.3 trillion and exports $1.5 trillion annually[ii], its entire trade regime is now in play.

Countries are not alone in broiling trade disputes. This month XPO issued a profit warning citing the expected loss of $600M[iii], or 3.5%, of revenue from an unnamed customer. Amazon, widely believed to be XPO’s unidentified customer, is expanding its own logistics capacity. The expansion of e-commerce has been a boon for the logistics industry and bane for traditional retailers. Now as Amazon develops its own distribution capability, logistics providers and retailers alike are threatened. 

Global Logistics – an Industry in Transition

Ecommerce has been a key growth driver for the global logistics industry, which is expected to grow 7.5% annually from $8.1 trillion in 2015 to $15.5 trillion in 2023[iv]. The logistics of delivering directly to consumers is far more intensive than distributing in bulk to big box retailers. Long haul full truckload remains the largest market segment in logistics with a 70% share, yet less than truckload, parcel and intermodal – which together comprise 15% share of the logistics market – are fastest growing. 

The politics of logistics extends beyond trade disputes. US freight employs over three million truck drivers. As the graph below indicates, trucking is the largest employer in 29 of 50 states across the US. The American Trucking Association estimates a need for an additional 900,000 truckers[v] over the next ten years to keep up with demand. The industry already faces a shortage of over 50,000 drivers[vi]amidst the need to replace an aging workforce: 57% of US truckers are over 45 years old and 37% are over 55[vii]. Given the backlash over Amazon’s recent pullback of a second headquarters in New York City for 25,000 jobs[viii], one might imagine the political stakes involved with four million truck drivers across the US in the coming decade. 

Logistics – a Magnet for Venture Capital Investment

Venture capital has poured into the logistics sector in recent years. In 2018, global venture investment in logistics reached nearly $14 billion, more than the three previous years combined. Funding for supply chain, logistics and shipping businesses continues to grow in 2019. In February alone, investors have committed over $5 billion to the logistics sector. Major financings include a $1 billion investment in Flexport for intermodal logistics, $940 million in Nuro for its self-driving delivery vans, $700 million in Rivian for electric delivery vehicles, $400 million in DoorDash for local food delivery, and $300 million in Hong Kong-based Lalamove for last mile delivery. 

Five catalysts are driving innovation and investment in the logistics sector:

Ecommerce: Online retail continues to cannibalize physical retail. Ecommerce in the US reached 9.8% of total US retail in 2018, nearly triple the share of retail ten years earlier[ix]. Ecommerce is growing even faster in Asia, Europe and the Middle East. Traditional retailers are embracing omnichannel marketing as ecommerce extends to more retailing categories. The physical landscape will change dramatically in the decade as ecommerce players build more warehousing capacity replacing stores due to overcapacity in the traditional retail sector.

Crowdsourcing: Much as Uber, Lyft and Didi among others have disrupted the taxi industry through crowdsourced drivers, the gig economy is infiltrating the logistics sector enabling new services. Consumers are the biggest beneficiary through the rise of the concierge economy. Crowdsourcing has lowered delivery costs making home deliveries available for a broader range of items. Food delivery has received most funding with the rise of Uber Eats globally, Doordash and Postmates in the US, Just Eat and Deliveroo in Europe, Swiggy in India, and Meituan in China.  

Intelligent Automation: The securities brokerage industry has gone digital in the past two decades. The logistics brokerage industry still runs on phone calls and fax machines with limited price transparency and inefficiencies borne by limited supply chain visibility. Digital brokerage is now coming to the logistics sector through the confluence of sensors, cloud and intelligent automation. ELD and camera technology now monitor drivers reducing wait times, reducing accident risk, and helping to adjudicate cases when accidents occur. Venture backed companies that have raised $100 million or more in the US alone include Convoy, Flexport, Nauto, Next Trucking and Transfix, amongst others.

Electric Vehicles: The prospect of replacing diesel trucks is as welcome as replacing gas vehicles in the consumer sector. Tesla is now tackling the challenges of transporting large trucking payloads. Others are as well including the recently funded Rivian Automotive and Thor Trucks.

Autonomous Technology: End-to-end autonomous trucking may still be decades away yet the use of autonomous technology in logistics is already live in the warehouse with pilots underway for first and last mile as well as interstate long-haul deliveries. Autonomous delivery startups announced over $1.5 billion in February alone, including Endeavor Robotics, Ike and Nuro in the US and AutoAI, Mogu Zhixing and TuSimple in China. 

Logistics is a vast sector ripe for innovation across the supply chain.  Entrepreneurs and investors have flocked to logistics seeking to disrupt an industry representing over 5% of the US economy. While investment in logistics has increased substantially, funding has focused on major sectors. We believe many opportunities remain for further innovation across the supply chain as new technologies such as robotics, autonomous vehicles and machine learning develop for the logistics sector.    

[i] Stifel analyst report

[ii] Stifel analyst report

[iii] https://www.thestreet.com/investing/xpo-plummets-on-earnings-miss-and-warning-about-2019-14868169

[iv] https://www.prnewswire.com/news-releases/global-logistics-market-to-reach-us155-trillion-by-2023-research-report-published-by-transparency-market-research-597595561.html. 

[v] May 2018 Techcrunch article

[vi] May 2018 Techcrunch article

[vii] Stifel analyst report

[viii] https://www.nytimes.com/2019/02/14/opinion/amazon-new-york.html

[ix] https://ycharts.com/indicators/ecommerce_sales_as_percent_retail_sales


Archives, Executive Education, Global Trade Daily

2019 Manhattan Momentum: 25 Years and Counting

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It’s the 25th anniversary of the annual supply chain-centered conference, Manhattan Momentum which boasts an agenda packed with insightful sessions led by some of the most important supply chain movers and shakers across a variety of sectors.

From May 20-23, Manhattan Momentum will draw in more than a thousand global senior supply chain, retail, omnichannel, logistics, press, industry analysts, and innovative partners to network and learn about the latest and greatest trends, innovations, and technologies changing the pace for the supply chain environment. This year’s event will take place at the JW Marriott, Phoenix Desert Ridge Resort and Spa in Phoenix, Arizona.

With a full agenda scheduled, a special Modern Robotics Enabling Flexible Automation session with IDC’s John Santagate will be held on May 22. Other keynote speakers include former NFL player Jon Dorenbos, ULTA Beauty Senior IT Manager Nancy Mclain, IBM’s Senior Offering Manager Jason Tavoularis, and many more leaders speaking on topics such as enterprise management, supply chain intelligence, and 2019 retail opportunities, to name a few.

To review the full agenda and registration information, please visit: manh-momentum.com

Archives, Global Trade Daily, News

ProMat Day Three Combines Education, Awards, and Comedy

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Thought leaders, exhibitors, and attendees kept the momentum going on day three of this year’s massive ProMat Trade Show in Chicago, despite chilly temperatures. Wednesday’s education seminars continued addressing some of the biggest industry challenges while identifying key differentiators that foster optimal results and competitive advantage.

One of the most talked about themes at this year’s conference is the major issue of labor shortages. Employee recruitment and retention are among the biggest concerns for industry players. As automation continues reducing unnecessary manpower, human involvement has become a complex role to balance. Topic leaders across multiple sectors have already made it very clear that humans in the workplace continue to be a critical component. Even so, some companies continue expressing uncertainty in how to approach tapping into the labor market.

OPEX Corporation’s John Sauer addressed these concerns head-on in a presentation on Wednesday. Sauer is the Senior Business Development Manager for OPEX and boasts 8 years of front line material handling management experience. In his presentation, Sauer confirmed some of the biggest issues among employees in warehouses are factors some might consider to be small – such as climate control, physical demands, consistent hours, and work independence. At the end of the day, employees nowadays are looking for more than just a salary – they want to feel some importance and pride in what they do.

In today’s technology-centric environment, these factors can be addressed through strategic implementation of the technology at-hand. By utilizing technology for optimizations in operations and creating an environment that supports a positive work environment for employees, retention and recruitment challenges can be alleviated.

MHI Industry Night

Wednesday concluded with a special networking event featuring comedian and actor Craig Ferguson following the announcement and recognition of leading companies for “Best Innovations” and Young Professional Awards. There were 108 submissions for the awards and only four finalists were selected for each category. Among the winners included:

Best New Innovations:

Fetch Robotics for CartConnect

Locus Robotics for Gamification

Attachments for Forklift Safety Device (FLSD)

CMC srl for Pick2Pack

Best Innovation of an Existing Product:

ProGlove for Mark 2 Smartglove

RightHand Robotics Inc. for RightPick: The Piece Picking Solution

Artitalia Group Inc. for Versatile Nesting Cart

Swisslog Logistics Automation for ItemPiQ

Best IT Innovation:

Yard Management Solutions for Eagle Eye Yard Management Software

LogistiVIEW for Vision Pick and Put Wall

Schaefer Systems for WAMAS Lighthouse

KNAPP Inc. for redPILOT

Archives, Global Trade Daily, News

ProMat Day Two: Disruptive Technology and Game-Changing Strategies

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Day two of this year’s ProMat Trade Show kicked-off with exhibitors showcasing the industry’s top innovative solutions and another full day of keynote speakers and education seminars – many of which were at full capacity.

Among today’s featured speakers included Raymond Corporation‘s Stacey Patch, Dale Dunn, and Derrick Miller speaking on the importance of optimization efforts before implementing automation into operations. In order for a company to fully grasp the benefits of automation, a deep understanding of potential efficiency must come first. The process of automation should start with a focal point on optimization before investment. Additionally, the company made it clear that before fully replacing, tech and automation will maximize human activity and support operations.

Swisslog Logistics Automation’s made an appearance on stage as well, informing attendees of ways to creating a competitive weapon out of supply chain. John Dillon Vice President, E-Commerce/Retail and David Schwebel Vice President, Business Development and Market Intelligence identified the industry’s biggest challenge of risk and how to navigate through it with strategic, forward-thinking approaches, as seen with their container-based warehousing system providing increased efficiencies and flexibility.

Day three will continue exploring the world of leading logistics initiatives, product innovations, and industry education on topics including removing barriers for improvement, addressing the labor shortage, and smarter packaging technology options.

Archives, Global Trade Daily, News

Enhanced Security Solutions Provided with Paramount Advanced Technology & Hexagon Partnership

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Smart transportation, displacement monitoring, mining security and infrastructure monitoring are just a few of the improvements for enhanced African rural safety following the newest partnership between Paramount Advanced Technologies and Hexagon’s Geospatial and Safety & Infrastructure divisions. Paramount Advanced Technologies serves as a subsidiary of the African-based global defence and aerospace company Paramount Group. 

“Paramount Advanced Technologies’ cutting edge research and development (R&D) and systems integration expertise which has delivered solutions effectively across the African continent, coupled with the technological innovation and overarching support that Hexagon brings from decades of system deployments globally makes for an impactful partnership to the betterment of the continent’s infrastructure and security capabilities, an alliance which we are privileged to announce,” stated Paramount Advanced Technologies CEO Ralph Mills.

Additional benefits from the partnership include facilities and inventory management, public records management, command and control and tactical emergency services. Paramount’s Integrated and Smart Systems (ISS) provides an innovative approach to providing proactive solutions for rural safety initiatives with a foundation built on the strongest industry partnerships.

“We live in exciting times, where the era of the Fourth Industrial Revolution upon us is driven by disruptive technologies such as IoT, augmented reality, blockchain, drones and robotics, amongst others. Technological changes are rapid while the availability of unstructured data is prolific,” Mills added. “The challenge before us is to make sense of that data, leveraging real-time information and intelligence to solve real-world problems, ensuring that organizations are best aligned to harness the advantages of this era by being digitally enabled, so as to avoid the risk of being left behind.”

3pls, Archives, Global Trade Daily

RSL AND THE COMPETITIVE ADVANTAGE OF ORDER FULFILLMENT

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Order fulfillment can be labeled as the least appealing part of the e-commerce lifecycle. However, as unappealing as it is, order fulfillment is integral to the shopper and retailer. On its simplest level, an order that is placed must be shipped out. So, how can an order fulfillment 3PL be a competitive advantage for retailers?

Rakuten Super Logistics (RSL) is a leading 3PL that operates a nationwide network of 12 order fulfillment facilities. With such an expansive network, RSL is uniquely positioned to provide the competitive advantage that many retailers need.  “The RSL network opens the marketplace to choice and flexibility,” says Michael Manzione, CEO of Rakuten Super Logistics. “Scaling up and down is invaluable and, depending on your size and need, you can utilize our two-day delivery network or drill down to further locate your product closer to the end consumer.”

While RSL is among the 3PLs with the most expansive U.S. networks, they are not stopping there. They recently announced plans to open an additional six U.S. facilities by the end of the year. Their expansion will include the major metropolitan cities of Houston and Los Angeles.

“Our continued expansion into major metropolitan markets is a commitment to our customers,” Manzione says. “Our larger footprint will facilitate our ability to deliver our clients product to their customers via next day ground and even same day in some cases.”

Meeting a client’s demand is always a priority. This is evident in RSL clients that practice Just In Time (JIT) inventory from overseas. When executed properly, JIT is a competitive advantage as the inventory system increases efficiency and decreases waste by receiving product as it is ordered, thereby reducing inventory costs.

Rakuten Super Logistics’ 12 facilities are all located near major shipping ports, which reduces the time from when a product enters the country to when it is received in the warehouse. That close proximity to major container ports allows RSL clients to keep lower inventory levels, thereby reducing their costs while leaving room for scalability.

Scalability is a huge advantage for retailers that have seasonal lifecycles. Take Black Friday as an example. In 2018, Black Friday e-commerce sales in the U.S. topped $6.2 billion, dwarfing the $5 billion in 2017 Black Friday sales.* The strain on 3PLs was enormous but managed through valuable resources. However, many retailers who managed order fulfillment in-house could not meet the increased customer demand.

Operating a vast network of facilities, RSL provides more than just the ability to scale. It provides significant cost savings to its clients. “Our approach to serving the small to middle-size e-commerce companies allows them to compete equally with their larger competitors at a competitive rate,” says Manzione.

Rakuten Super Logistics negotiates shipping rates with the major carriers based on their large-scale shipping volumes. This means that when an e-commerce retailer partners with RSL, they receive the reduced, negotiated shipping rates.

“With the USPS First Class Packages service structure change to zone-based pricing, all e-commerce retailers must consider how to locate their product closer to their customers,” Manzione notes. The zone-based pricing structure will leave many retailers sticker shocked–the cost to ship a one-pound package from LA to New York will be significantly higher.  Leveraging Rakuten Super Logistics’ shipping rates will help keep these costs more manageable.

The savings isn’t always bottom line either. “We have built a great two-day ground network and now want to offer additional choices for those seeking same day and next day delivery, while maintaining lower shipping costs,” Manzione says. “Technology is the key to our success. In 2018, we implemented ‘picker-robots’ developed by California-based inVia. The picker robots help increase production and order accuracy. Technology and innovation have been the backbone of Rakuten Super Logistics. We continue to implement the latest technology.”

Manzione continues: “The exponential growth in e-commerce couldn’t have been accomplished without significant changes to logistics. Rakuten Super Logistics has been on the forefront of 3PL innovation; from using robotics to zone skipping, Rakuten Super Logistics provides clients with a competitive advantage to succeed in the tough online space.”

Source: Statista