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5 Timesaving Tips for Your Manufacturing Business

manufacturing business

5 Timesaving Tips for Your Manufacturing Business

As a manufacturing business, you are constantly looking to save time. Well, if you aren’t, then you should. This is because time, as they say, is money. This further suggests that the more time you save, the more money you will, too. Some manufacturing businesses often make the mistake of thinking that making huge and sudden changes is the way to go. This often is a terrible idea. The strategies that yield the best results are long-term term and incremental.

In this article, we show you some of the timesaving ideas to implement to better your business in the long run.

1. Complete Assessment

Even though you are looking just to save time, you still need to do a thorough assessment of your business. As a matter of principle, you should make a habit of doing a thorough assessment whenever you want to carry out any actions. When you take the time to look through the business’s entirety, you will realize how the different components work and how different processes affect your business.

While carrying out your assessment, consider global and industry standards. You may also want to check out the competition. However, do not be lost in studying the competition, neglecting the uniqueness of your own business. This is why the evaluation must be internal first before becoming external.

Afterward, you can make your plans. Having a complete view from the start helps you make cohesive plans. Set strategic goals and plans. How much time does it take to carry out a specific task? What amount from that time do you want to reduce? Working with specifics helps put things in a better perspective.

2. Focus on the Return on Investment (ROI)

Keeping an eye on the money can be a strategy to eliminate time waste. This is a strong point most businesses are paying attention to. Hence, manufacturing businesses, transportation, medical services, gambling services like csgobetting, rentals, and leasing services all pay attention to how much they pull in within a specific timeframe.

When you focus on ROI, you will notice the areas that aren’t yielding returns. You will also observe processes that take more from the business than they give. You will then be able to eliminate those, freeing up your business to do better in the future.

3. Involve the Employees

No one knows your manufacturing business as well as your employees. That’s right, not even you. They can easily point out where the operational wastes are and identify the different practices that waste your business’s time and resources. Even more so, they can easily identify the solutions to any time-lags that your business experiences.

The reason for this knowledge is the fact that they have firsthand information about the business. In most cases, this hands-on experience puts them in a position to know much more about the business than you.

Sadly, a lot of manufacturing business owners fail to involve their employees in their assessment process. This could be because of a diversity of reasons, some peculiar to each business owner.

You may want to consult your employees to know how you could save time in the business. They would offer insight into strategies to implement for all stages of the manufacturing process.

The consultation need not be formal, although it could be. You could simply have an informal conversation over lunch with specific (key) members of your team. In fact, you could cut this out entirely and choose to observe the employees instead. Watching them carry out their regular operations could reveal strategies you have overlooked in the past.

Similarly, you can share this result with other team members. Incorporating great results from team members will ensure that the same operational standards are employed throughout the business.

Finally, consulting your employees benefits both you and them. It sends the idea that you are caring and empathetic. For the employees, they will continuously seek to improve. In the end, your business is the biggest winner.

4. Downsize and Outsource

Hoarding properties and resources will not benefit you. Also, having complicated systems and processes may seem ideal but actually just slows down your business’s pace. Hence, strive to keep your processes as simple as possible. Eliminate steps that are not useful or at least the ones whose time-consumption outweighs their usefulness.

Keep bureaucratic processes to the minimum. The beauty of non-government owned businesses is the emphasis on efficiency. Thus, when you notice that any aspect of the business slows down the system, eliminate such.

Furthermore, focus on the core of your manufacturing business. Having a ‘Jack of all trade” sort of outlook only hurts the business. Look through your business and identify your areas of strength and then focus on those. Outsource the others.

Outsourcing is increasingly becoming a very important tactic employed in the manufacturing business. Focusing on your core makes you specialized. In the same vein, you need to locate specialized businesses and outsource some of the process steps to them. This is crucial as it saves you time, leaving you free to focus on the areas that really matter. Some of the processes you could outsource include transportation,  machinery maintenance, consulting services, labor, etc.

5. Automation

With the world increasingly becoming digitalized, automation is often the way to go. AIs and robots are helping smoothen things over, increasing the efficiency of processes, and eliminating redundancy. Technology is constantly evolving, with different processes introduced to make businesses better.

Thus, you may want to identify repetitive processes and automate them. This is a great strategy to reduce the time spent in carrying out these actions while also saving costs. The aspects of the business that can be automated actually depends on your company. Granted, there are generally accepted processes that can be automated. However, you can take a look at your unique circumstances and fashion out the process or set of processes that you could eliminate or automate.

Conclusion

Your manufacturing business ought to constantly strive to be efficient, giving the best returns within the best short possible time. This can only be possible if redundant processes are eliminated. Seeking to save time helps you achieve a lot in the business while yielding revenue in the long run.

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Theresa Cofield is a freelance writer who has a love for creativity and a passion for helping others. She works as a blogger at csgobettingg.com where she covers the topics of esports and the gaming industry.I will be waiting for your feedback!

retailers

The Future of Retail – Is It Touchless?

Covid has made all of us more aware of what we touch in public spaces. And, as health concerns over Covid have now been with us for many months, new behaviors have become ingrained habits that are probably here to stay.

It’s no use trying to swim against this tide. Every retailer must take a fresh look at how their customers prefer to shop and make it easy for them to do so. Or they will risk losing their customers to competitors who give them what they want.

For most businesses that means an increasingly digital and multi-channel operation.

Pure play digital retailers have had the advantage in our new Covid world. They offer the ultimate touch-free solution and have established fulfillment routes, although some have struggled to cope with huge volume increases. High sales during the pandemic period have helped Amazon double their net profit this year to $5.2 billion and the recent Quarter 2 sales have been higher than the Christmas quarter of 2019.

Most digital-only retailers consider their biggest challenge to be the “final mile”, as it represents the most expensive and complex part of their process. If you turn this view on its head and look from the customer perspective, the biggest issue with online shopping is the first mile of the returns process. Whether you’ve got to go to a parcel office or designated drop off point, it’s just not as easy as ordering your items. Smart retailers are increasingly offering a returns pickup service. Physical retailers have the advantage of stores that create the opportunity for a convenient returns process for their customers and the possibility of an extra sale from the additional footfall for the retailer.

However, retailers that started with physical stores tend to be on the back foot when it comes to touchless and digital customer journeys. Some physical retailers have buried their heads in the sand and hoped the fad for touchless would pass over. These businesses are now struggling to remain viable as online research and purchase is an increasingly attractive customer proposition. Most store-based businesses offer a touchless route, however, yet only the sharpest have a truly integrated operation that allows customers to seamlessly move between multiple channels; whether instore, online, or via a call center.

So where should retailers focus to align themselves with entrenched touchless trends?

1. Payment instore is moving away from the system of customers queuing to pay a colleague at a till. The use of contactless cards, rather than chip and pin or cash, has become customers’ preferred option. It saves operational time instore as the payment itself is quicker and it reduces time spent handling hard cash.

But the real transformation in payment has been because of technology that helps skip the line altogether. Self-checkout tills have been around for years and are now being superseded by customer apps that enable self-scan and payment from your own device or a handset. Retailers are now juggling with a mix of payment methods that require new instore furniture, a revised front-end layout and different colleague cover models. The customer experience you deliver during payment creates a lasting impression that will influence where the customer chooses to shop in the future.

2. Digital fulfillment via stores, whether kerbside collection or picking up a Click and Collect parcel instore, is a moment of truth that really matters to busy customers expecting an efficient experience. It took me 45 minutes to retrieve my grocery order by kerbside collection at one store, and I couldn’t just drive away as I had already paid for my shopping. The store’s errors were not having enough colleagues to match the number of booked pickups and the collection point being a long way from their storage bay, so it took ages to wheel the order over. They sound easy to avoid, yet these seemingly simple to solve problems happen more often than you’d hope. Follow the simple rules of match your resource to the order numbers, keep the storage and collection points close to minimize travel time, and make sure your colleagues are trained on your process and you’ll drive both online and instore sales

3. Map all your customer journeys and make sure there aren’t any missing. For returns, for example, does the customer have multiple options or are you restricting them to just returning to one physical location? Many retailers have realized they need new customer journeys and Covid has spurred them on to make changes in weeks that were previously under consideration for months and even years. Don’t get left behind because there will always be a competitor willing to look after your customers better than you do.

4. Review every stage of every journey and check it is smooth for your customers and as efficient as possible for your operation. It is likely that you will have work to do to integrate your physical and digital routes, which is a driver for digital investment. KPMG’s research over the pandemic period for its Enterprise Reboot report found that 59% of executives say the pandemic has created the impetus to accelerate their digital transformation.

5. If you invest in technology to help your touchless journey, whether that is new kiosk payment or RFID stock systems to reduce counts instore and help you publish accurate stock numbers to customers shopping online, make sure you consider how your operating model needs to flex to accommodate the technology. For example, adding self-checkout tills reduces the cover needed on traditional tills, yet you must decide the model you will use to support customers at self-checkout tills when they need help. Dodgy scales, systems that can’t cope with coupons and difficult to use customer interfaces all drive increased requirement for colleague interventions and annoy customers. Consider too, how you target and incentivize your store teams to make sure they drive the right behaviors. If helping a customer with an online order doesn’t help towards a team’s sales target or returns are netted off the daily sales total, the store team is unlikely to go out of their way to make things easy for the customer.

Touchless retail is already here. How you adapt to it and evolve your operation as customer habits and preferences continue to change will determine how successful you are.

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Article by Simon Hedaux, founder and CEO of Rethink Productivity, a world leading productivity partner which helps businesses to drive efficiency, boost productivity and optimise budgets. For more information see https://rethinkproductivity.co.uk/

e-commerce

7 Steps to Create Good E-Commerce

In the midst of the recent release of the Best Online Shops 2021, Newsweek, DK Hardware CFO Art Goldman shares his thoughts on what it takes to build a solid and sustainable online sales strategy.

We call e-commerce a type of business that sells through an electronic store, either through an app or a website. When creating an electronic business, it is advisable that you follow these 7 steps to create good e-commerce.

Before starting, I have to warn you that -although it seems a simple and intuitive task- to be successful you must control many aspects and technical elements, as well as considering whether it is worth looking for an agency or business to help you or to do everything yourself. A good start is essential for the project to survive and continue in the following months and years. DK Hardware for instance was one of the first online retail stores in the United States and Canada back in 2008 and has continuously evolved to adapt to consumer needs and expectations.

The truth is that in order to be successful you must delegate many tasks to third parties; rarely can a person execute all the tasks alone. Hence, apart from these digital marketing tips, you should also take into account other legal advice and the different formulas that you can implement to associate yourself with the different professional elements that you require.

1) Analyze both internal and external elements that can harm your project

Logically, before starting any project, a good business plan must be made so that it has the success that we can expect from it. For this reason, the first step is to analyze both the internal and external elements that can harm your business. We already have a key piece that is choosing a good platform to manage the e-commerce or online retail perspective. In fact, if we do this analysis well, we can not only prevent some of those negative elements before they appear but also carry out future strategies so that if they arise, the team knows how to act against them before they escalate.

A) What is an internal analysis?

By internal analysis, we understand the observation of how the company is going to function and its financial resources. Here comes into play the work that legal consultants carry out in tax, labor, and financial law to advise entrepreneurs on how to optimize all these elements legally. However, you can also do it yourself, taking care of these aspects:

-Economic and financial situation of the company.
-Human resources and labor expenses.
-How to obtain financing.
-Structuring the distribution network to streamline expenses.
-How to formalize contracts with the different agents or subjects involved (employed, self-employed, subcontractors).

B) Analysis of external agents

This all about observing and analyzing the competition. It is especially important to have good tools that allow us to evaluate our main competitors in different aspects such as social networks and organic positioning in search engines.

On the other hand, from a legal point of view it is about analyzing the current legislation, being essential to observe the following normative aspects, which may vary in each state, country, and continent:

-Contractual law.
-Consumer protection laws.
-Data Protection law.
-Statute of the workers, the commercial and civil code to establish contractual labor relations.

2) Create a SWOT

From this list of steps to create good e-commerce, the next one I recommend is once we have analyzed our internal and external landscape, do a SWOT to synthesize the competitive advantages that we have; as well as the disadvantages, opportunities, and weaknesses.

Once we have the SWOT completed, it will be easier to identify our competitive advantage.

3) Identify the competitive advantage

The third step in creating e-commerce is to identify our competitive advantage. This must be maintained, expanded if possible, while always monitoring that the competition does not remove this differentiating element in the future. Hence, many entrepreneurs maintain that creativity must not only be maintained during the first stage of the business; but during throughout the endeavor.

Furthermore, if we identify the competitive advantage, it will be much easier to set prices.

4) Define the target audience

Once we have identified our competitive advantage, we must define our target audience. It is a difficult task on many occasions since it is not only about imagining it, but to try to find out who really buys those products and who is willing to buy them.

It is good to accompany it with interviews, prospecting techniques, surveys and focus groups.

5) Select a good e-commerce platform

Creating an electronic store is a difficult task which not only has to result in a functional platform with flawless user experience, but also be optimized for search engines and have all the appropriate psychological elements so that people who browse the website finally buy and acquire those products.

Therefore, there are many aspects and factors to take into account, like:

A) Choose a good domain.
B) Select the quantity of products that will be sold.
C) Hire a good hosting.
D) Select a technological platform.
E) Create an attractive and user-friendly design.
F) Use logistics and stock control software.

6) Communication strategy

Once the skeleton of the website has been configured and a coherent structure has been planned, you must create and design a solid online aligned communication message, led by professionals in the field. You can think of social media and public relations to convey your message initially and, if the budget allows, escalate that into aligned marketing campaigns with a traceable ROI. Google Ads and social media might surprise you with its efficiency and usual low costs for tailored advertisement.

7) Set product prices

Now that we have everything designed and that you have probably already executed each of the elements to create a good e-commerce environment, we will have to establish the prices for our products. It is good not only to have the advice of marketers on these prices; but also, from the tax consultant or financial advisor to help your company run properly and not have losses that endanger its validity.

To set prices on your online store, it is essential that you take into account the analysis of the situation that you did at the beginning of the project, both external and internal elements. Setting prices may sound quite easy, but in practice, a profoundly serious study is required to help you optimize each of the elements that make up the production and distribution chain of the company.

With this analysis we must enhance our strengths and create opportunities in our weaknesses, only when you know the profitable price of each product, you can later make discounts, promotions, offers, and bonuses on designated dates (Christmas, Valentine’s Day, Easter, Black Friday, etc.).

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Featured in America’s Best Online Shops 2021 – Newsweek, DK Hardware is one of the largest online home improvement retailers for a variety of hardware manufacturers all over the United States and Canada.

package

New Fulfillment Frontier: Going the Last Mile in Package Management

We are moving into the traditionally high-volume shopping months—back-to-school,  Black Friday, Cyber Monday, the holidays, and post-holiday sales. All this increased activity will be layered onto the already higher-than-ever levels of pandemic online shopping we have experienced for the last few months. According to the National Retail Federation, parents report plans for record-breaking back-to-school spending, with a particular emphasis on laptops, tablets, and headphones.

With more students and parents staying home,  multifamily properties should take their package experience of the last six months and work to create a package management strategy that will carry them through the peaks of the next online shopping wave.

E-Commerce Grows Double Digits

Growth in e-commerce over the last few months isn’t a blip or even a spike. It is more like a Teutonic shift. Thanks to the shop-from-home impact of the Covid-19 pandemic, e-commerce is poised to grow 18 percent by the end of this year. There are more Internet shoppers than ever before, and those shoppers are buying more. That means more—many more—package deliveries to multi-family properties.

From Millennials and GenZ to Boomers, all generations are in the game. More than 75 percent of the American population has purchased goods online, ordering literally everything—from toothpaste and diapers to televisions and dishwashers—from an estimated 12 to 24 million e-commerce sites. This tsunami of brown boxes has forced managers and staffs of multifamily properties to become an essential part of the “last mile” of the e-commerce supply chain.

What Is “Last Mile” and How Does It Affect Property Managers?

In the shipping and delivery industry, last-mile traditionally refers to the final step in the delivery of a product from a warehouse to the customer. This final leg, which can range from just a few blocks to fifty or a hundred miles, is often the most costly and challenging segment in the entire logistics flow—especially as online customers have come to expect rapid-fire delivery—often same or next day.

Whether it be for security or logistical reason, national carriers such as UPSFedEx,  DHL, or USPS,  deliver to a property’s designated receiving area; making the multifamily property staff the de facto last step of the last mile. Your team then has to log, notify, and deliver the avalanche of packages. They lift and carry, stack, stash, and store and are responsible for the safety and secure delivery to the correct recipient.

Think Like a Carrier

Managers of multifamily properties can take a cue from these national carriers. Here are three tips to help you develop a proactive package management strategy that prepares multifamily property staff to handle last-mile deliveries like the pros.

1. Assess Current Delivery Operations: The volume and variety of deliveries over the last six months has been a graduate course in delivery management. You and your teams already know much more about the impact of last-mile deliveries than you did a year ago. Take a moment to document the last six months of experience by gaining insights from all involved in the process:

-Residents: What aspects of delivery are your residents asking (or complaining) about? Typical priorities are security, convenience, 24/7 accessibility, and adequate receiving space. Since COVID,  contactless solutions are at the top of the list. What else do your residents want?

-Staff: How are deliveries impacting your staff? Do you have enough temporary parking or are delivery trucks monopolizing the receiving dock or precious curbside front entrance? Are shelves and boxes ruining lobby ambiance? How are deliveries impacting efficiency or morale?

-Delivery Carriers: Reach out to the drivers and route managers at companies that deliver most frequently to your building—both national and local carriers. Talk to them about delivering to your property. Are other comparable properties on their routes handling deliveries differently? Do they have suggestions for your specific property?

2. Let the Data Drive: Go back to the basics to get ahead of this growing delivery tsunami. Work with your staff to create a process to identify, collect, and report the data you will need to make effective decisions about future package delivery. Here’s a get-started list:

Delivery 

-Package types, sizes, weight

-Packages per delivery and per 24/hours

-Pickup and delivery times/frequency

-Carrier information – Amazon, UPS, USPS, FedEx, DHL, independent carriers

-Local delivery information – Dry Cleaners, Grocers, Food Delivery

-Odd- and over-sized deliveries (skis to TVs)

-Perishables

-Returns, waste management, and recycling

Building Logistics and Demographics

-# of units, average # of residents

-Elapsed time between delivery notification and resident pick-up

-Delivery path: docks and bays, driveways, pathways, controlled access to building

-Mail and package handling

External Data and Information Sources

-Industry associations (property management, retail, and others) for benchmarks, best practices, and trends. Example: NMHC or NAA

-Industry consultants, suppliers or vendors

-Managers of comparable properties

3. Technology: E-commerce delivery giants reinvented the delivery industry from the 1960s on with technology. FedEx revolutionized time-sensitive and urgent delivery. Decades before the iPhone, UPS drivers broke ground with hand-held tablets. Amazon Prime takes first place in warehouse automation. Now, these companies are testing sidewalk robots, drones, and driverless cars. On the residence side, leading-edge property managers can apply technology to the “last mile” with software, smart locker solutions and access-controlled package rooms that deliver convenient and secure 24/7 access for their residents.

Plan for the Future

For properties receiving packages, many days already feel like Black Friday and Cyber Monday all rolled into one. From forecasts and consumer behavior, we can only expect deliveries of all types to increase. By utilizing interviews, data collection, and adding technology, property managers can build an effective and flexible package management strategy that will continue to scale into the future.

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Donna Logback is marketing director for Package Concierge®, the trusted provider of automated locker solutions for the modern world. By combining industry expertise and cutting-edge/leading technology, Package Concierge seamlessly automates package management for multifamily properties, student housing communities, retailers, and office buildings. As the only vertically integrated solution, Package Concierge® products are built in the USA and powered by proprietary software to deliver on security, design and functionality. With over 75 million package transactions, Package Concierge® collaborates with customers to address their evolving needs by optimizing operations and enhancing user experiences through its scalable smart locker solution. For more information, visit www.packageconcierge.com.

manufacturing

How to Gain an Advantage in Manufacturing Facilities During Post-Crisis Times

In the United States today, as many manufacturers have entered post-crisis phases in their facilities, some have a much different business model than they did entering 2020. Others, such as those who manufacture medical supplies, craft supplies, and pet supplies, don’t look much different than they did at the beginning of the year, outside of a backlog of orders that they are doing their best to fill in a timely fashion. 

Some manufacturers were surprised at how well their products did during crisis times earlier in the year. For example, LumenAID, a manufacturer of portable, solar-powered lanterns that double as a phone charger, has seen a huge uptick in sales. It seems with people preparing for times unknown, emergency supply manufacturers of this type can’t fill the shelves quickly enough. Other manufacturers were well aware of the need for their products, like office chairs, school supplies, and pet training products. The comforts of home for those stuck at home became the quick front-runners in sales, and suppliers with stored inventories were pleasantly surprised with their sales numbers. 

Yet, for some manufacturing facilities, especially in the hardest-hit areas of the country, it wasn’t a lack of demand that shut down the product lines. It was the lack of production associates able to make it to the facility. Quarantine, public transportation being shut down, mandatory stay at home orders, and a lack of child care left some facilities looking much like a part of a ghost town. The most prepared of those production facilities put that time in the hands of their plant engineers and maintenance managers, and for good reason. 

In an industry where it is often common for machines to run in 72-hour cycles or longer to meet production needs, the downtime came as a blessing in disguise to many engineers and mechanics. They strapped on their tool belts and began performing preventative maintenance that had been put off, in some cases, until the machinery refused to operate any longer. While many production associates were home by no choice of their own, skeleton crews of mechanics and engineers quietly worked behind the scenes to ensure that the production lines that these associates returned to were repaired, lubed, and ready to run for another 100,000 rotations. 

While You Were Out…

Although we’re not positive what the “new” normal will look like, manufacturers are doing their best to get back to business as usual.  One key element is ensuring that their facility can handle the workload, and well-maintained production lines are a fundamental part of that process. Even those production facilities that did not have to implement the Emergency Contingency Plan and were still able to run socially distanced production shifts were finding difficulty in getting the parts necessary to perform preventative maintenance on their production machinery. 

Facilities with CMMS systems that handled their maintenance parts rooms were seeing just how much those systems did for them, possibly for the first time ever. These manufacturing facilities were able to perform preventative maintenance as normal, because of the reorder point set in the CMMS, ensuring that the parts to perform the maintenance were, indeed, stocked in the parts room. Due to the human element being removed by CMMS, the moment the last technician performed the PM and took the part off of the shelf, the system already issued a purchase order and had a replacement on the way. 

Full Speed Ahead

As manufacturers are getting back into the swing of things, especially those fortunate enough to have orders that they need to fill, the appreciation for well-maintained machines is at an all-time high. With most of the country able to return to work, and production lines full of associates thankful to be back on the line, returning to a facility with newly maintained machinery is just another day in manufacturing. However, from the mechanics and engineers who worked solo overnight shifts to prepare for firing the production lines back up, there is a nearly audible sigh of relief when the conveyor belts start running. 

Preventative maintenance was, in some facilities, the only items that could be completed during the height of the crisis, and production managers are reaping the benefits of those overhauls at the moment. In notoriously under-maintained facilities, the quietly operating, well-oiled machinery that is producing post-pandemic inventory is a sign of moving into stronger financial times. 

As A Post-Crisis Model

If your production facility is running at a pre-pandemic rate, you’ve more than likely gotten back into the normal preventative maintenance schedule, less a few adjustments. For those facilities that don’t have the need to run full production shifts at this point, investing labor dollars into machine maintenance is a smart move. Although the need may not be there at the moment, when the orders do come in, the ability to perform full production runs without stopping because of unperformed routine maintenance will be one more way to stay competitive. 

Well maintained machinery produces to specification, which reduces scrap and reworks exponentially. By producing a consistent and reliable product, your facility develops a reputation for quality, and that is priceless in post-crisis America. By ensuring that your production facility is adhering to a preventative maintenance schedule, you’re committing to running products that are manufactured to strict standards at a time when they’re more valued than ever. A CMMS is another tool in a manufacturer’s facility to ensure that they’re producing items that meet or exceed the expectations of their customers. 

In addition, maintenance costs are decreased by 5-10 percent by having a preventative maintenance program in place in a manufacturing facility. It also decreases the time spent repairing machinery by 20-50 percent. In terms of looking out for the bottom line as manufacturing facilities try to push forward in uncertain economic times, a strong preventative maintenance program makes sense. In saving both time and money long term for manufacturing facilities, preventative maintenance can help manufacturers get a leg up in the post-crisis American economy. 

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Co-Founder and CEO of REDLIST. Raised in a construction environment, Talmage has been involved in heavy equipment since he was a toddler. He has degrees and extensive experience in civil, mechanical and industrial engineering. Talmage worked for several years as a field engineer with ExxonMobil servicing many of the largest industrial production facilities in the Country.

cross-docking

What Warehouses Should Keep in Mind When First Implementing Cross-Docking

Warehouses that want to improve labor and space utilization without expanding to a new location or breaking ground may consider cross-docking because of its potential efficiencies. Unfortunately, it can also come with many pitfalls for those trying it for the first time.

Cross-docking requires a detailed understanding of your team, space, partners, and technology. For new warehouses, that means implementing cross-docking should come with significant testing and preparation, especially in terms of your inventory management, scheduling, spatial allocation, and the training you give your team and partners.

Test inventory management tools

Cross-docking prepares companies for just-in-time (JIT) shipping and distribution, making immediate use of inventory as it arrives. Companies that want to start utilizing cross-docking will need a robust inventory management system that can understand and differentiate these inbound shipments.

Your tools must be able to understand inventory utilization. If half of the goods on an inbound shipment are for JIT purposes, then the inventory platform must be able to split received goods and correctly update both inventory levels and the number of products you list for sale. If this action would require ongoing intervention from you or additional inventory counts, it could introduce higher labor costs that negate cross-dock benefits.

Ultimately, cross-docking can help with inventory management and often keep companies from needing to expand physical infrastructure for the products they hold. It might also help you expand operations to support backorders. This takes time, however, and requires tools that help you understand and manage inventory levels without adding burden.

Robust scheduling includes flexibility

Cross-docking is intense choreography. You’re going to need smart people and reliable technology to manage the planning of how people and trucks are moving in and around your site. Cross-docking and JIT operations demand having the people available to handle inbound shipments and process them while helping your team know what inventory is ready to use and what needs to be put away.

Dock availability and the time of truck arrivals and departures must be flexible so that your operations can run normally. Every cross-docking team plans on a smooth day where everything runs on schedule. However, that’s rarely a reality. Paperwork, traffic delays, accidents, or even someone needing to use the bathroom can cause a small delay. Something as simple as an employee driving through the parking lot can force a truck to wait.

If you schedule everything down to the minute and don’t give your team and partners flexibility, it’ll cause greater delays. In most cases, as you’re expanding and learning, arriving trucks will end up waiting because it’s hard to predict the time people need, but you also don’t want docks sitting empty for extended periods. So, ensure that you have people ready when trucks are there and test the time you give teams for inbound and outbound.

Dock door assignments should consider space and traffic

One other caveat that many warehouses don’t consider when they first start cross-docking is the physical space that people, trucks, and inventory required. Cross-docking effectively requires that dock door assignments be efficient and allow incoming and departing trucks enough space to maneuver safely and quickly. Adding extra points to a turn will slow the entire process down, for example.

If your warehouse wasn’t built with cross-docking in mind, test this thoroughly. Often, warehouses need significant reconfiguration of internal elements or will install new doors and adjust the building design to facilitate cross-docking. Multiple teams, doors, trucks, and the equipment everyone is using are going to take up extra space and need to be able to move freely and safely. Start by giving everything and everyone more leeway than you think they need.

Some new inventory and dock management platforms support cross-docking and can make suggestions based on timing, assignments, and other aspects of your operations based on historical and current data. When your tools offer this, try out their analysis and recommendations to see if you can maximize your efforts.

The entire supply chain requires competencies

Cross-docking is an advanced management and utilization technique for any warehouse or distribution center. You’re managing dock door assignments, transshipment, vehicle routing, product allocation, barcode scanning and putaway, new warehouse layouts, and the network and systems required to manage it all.

Your team needs competency in each of those areas and activities. Partners should have their own understanding plus the ability to support you. Inbound expertise is required, across the board, for JIT requirements and scheduling to be effective.

You’ll eventually want to build out appropriate penalties for time windows to keep things running smoothly, but that requires your team not to cause delays. In many instances, cross-docking is complicated mathematics disguised as people and trucks.

Take your time to test and implement it. Work with partners proactively to help understand what they need from you and explain what you need from them. Train your team specifically on the new processes and requirements. Simulate, test, and optimize procedures and layout continually.

Cross-docking can save warehouses significantly on a variety of costs and size requirements. You might reduce material handling and make labor more efficient. Customer satisfaction can be improved, too, as you’re relying less on backorders or older products. Achieving all of those wins is a lengthy process, and it’s important to walk into the situation with patience.

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Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

inventory management

10 Experts Share Tips For Better Inventory Management

Think about the online stores you buy from regularly. Do they consistently have the product you want? If the answer is no, then the business likely doesn’t have as good control of its inventory as it should. Inventory management is at the heart of any well-run, sustainable retail business. 

When a retail store owner or manager doesn’t have a detailed understanding of the inventory they have in hand, they’ll be greatly constrained in their ability to make smart reorder decisions. They cannot list items with accuracy on their online store since they don’t have correct visibility into their inventory. They could easily get stuck with too much inventory or fail to fulfil orders due to lack of product. 

If you want to get inventory management right, you’ll do well to listen to what the experts have to say. Here are 10 paraphrased tips from people who know a thing or two about successful inventory management.

1. Update inventory records in real-time and make the information available to relevant staff – Jonathan Gaunt, Managing Director, FD-WORKS

To stay a step ahead of their competition, businesses have to move quickly and accurately. Access to fresh, correct information is key in this regard. 

In the context of inventory management, tracking when the last transaction occurred, for instance, is crucial. There are costs to holding dead inventory such as warehousing, cleaning and security. Some products are seasonal or trendy. If it’s been weeks or months since a certain product sold or if there has been a dramatic decrease in its turnover, it might be financially prudent to sell it at a loss and inject the resulting revenue into an item that’s currently hot.

2. Categorize your inventory – Dan Schmidt, founder and CEO, The Emerging Business CFO

All products in your inventory aren’t created equal. If you devote equal inventory management time and resources to each product, you’ll be running overkill on some while shortchanging others. To maximize your inventory dollars and increase efficiency, divide your inventory into several categories depending on turnover, profitability and other distinguishing factors. 

3. Weigh the costs of inventory against the benefits of inventory – International Purchasing and Supply Chain Management Institute (IPSCMI)

Successful inventory management comes down to your ability to constantly balance the costs of holding inventory against the benefits of the inventory. Small and medium-sized ecommerce stores can be especially vulnerable to miscalculating the real cost of carrying an inventory. It’s not just the money tied down in inventory but also storage, insurance and taxes.

4. Inventory requirements vary from business to business – Norm Saenz, Managing Director and Don Derewecki, Senior Consultant at St. Onge

Whereas there are principles that underpin inventory management best practices, inventory management procedures will vary depending on customer requirements and the types of products the e-commerce store sells. There will be variation in inventory management between pharmaceuticals, food, apparel, electronics, furniture, stationery, automotive, building materials and general merchandise stores. 

5. Use effective methods for calculating safety stock levels – Bain & Company, Inc.

Are you using statistical formulas that incorporate production lead times, sales forecasts, manufacturing schedules and each product’s service-level data? Or are you still using rigid rules such as all products from a certain manufacturer requiring 20 days of safety stock? 

The problem with rigid rules is that they are often applied to products with uncertain delivery histories. Use a standard or automated statistical formula that extracts historical individual product data in order to come up with an up-to-date safety stock level.

6. Align individual delivery sub-elements with overall objectives – Mani Iyer, Senior Business Manager, Genpact

Ecommerce stores often believe that order-to-delivery cycle time reduction would realize the competitive edge their business needs. However, many drop the ball when it comes to defining goals of individual cycle elements that contribute to overall lead time adherence. Inventory management must incorporate sub-targets such as supplier performance management on fulfillment, customer service satisfaction, working capital levels and more.

7. Keep customer satisfaction at the centre of inventory control – James Ellis, Assistant Professor, Business Department, Central Oregon Community College

Avoiding excess inventory is certainly a desirable goal. However, getting overly fixated on minimizing inventory levels can take away your attention from the thing that matters most of all—customer satisfaction. If the inventory is running too low or running out, that will lead to lost sales and, ultimately, lost customers. Therefore, inventory levels should constantly be compared to customer satisfaction levels.

8. Put one person in charge of inventory management – David Wheat, Materials Manager, Krausz USA

Many ecommerce stores are small enough to be a one-person operation. However, if your business has grown to the extent that you have 2 or more full-time staff, assign the role of purchasing and inventory manager to one person. The designated individual should keep track of inventory and be the first person informed if there’s any change in supply requirements. They’ll negotiate discounts for volume purchases or early invoice payment.

9. Invest in inventory management training – Jaymison Haeussler, Warehouse manager, Graphic Packaging

#1 is absolute attention to detail when training and developing your inventory management staff and system. In several different scenarios, I’ve seen excellent staff and processes fall short of their goals because the training and implementation weren’t cohesive.

It’s hard to row a boat across the ocean when everyone is paddling in different directions.

10. Incorporate lead times for your peak sales seasons – Andrew Chritton, Head of Account Management, Stitch Labs

Most businesses have a seasonality to their sales. Q4 is crucial for many ecommerce stores thanks to the holiday season but different stores will have different peaks depending on the product they sell and the market they sell to. The peak season is critical for many businesses ‘ annual profitability so careful planning and management of inventory are needed. 

If you don’t own your means of transportation, which is the case for the overwhelming majority of ecommerce stores, transfers and shipping of products can be unpredictable. Build lead times early into your peak season inventory for shipping optimization and to ensure products are available in sufficient quantities.

11. Implement Inventory sync, Chris Crane, Advisor, Excelsior Integrated

Startups often run lean with minimal software layers. These companies should check which channels they can sync inventory to, or just rely on manually setting inventory themselves. For larger merchants with many sales channels, keeping inventory in sync across them all can become a challenge. When a sale happens on one channel, you want the other channels to be aware of it. Plus, if you’re selling with Amazon and using FBA, you’re responsible for maintaining enough inventory so you can quickly replenish FBA. There’s a point at which channel complexity justifies adopting an ERP system. Look for one that can handle inventory syncing to all your possible future channels, and if you’re using a 3PL, make sure they can integrate to it. 

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Will Schneider is the founder of insightQuote, a match-making service for B2B services, and writes informative posts about fulfillment services at Warehousingandfulfillment.com. He is passionate about helping businesses find the right solutions to improve their operations. When not working, Will enjoys coaching youth basketball.

retail

E-Commerce’s Newfound Role in Stabilizing and Expanding the U.S. Retail Sector

Kenny Tsang, Managing Director of PingPong Payments, comments on the impact of the pandemic on the retail sector, and how global online marketplaces are providing a lifeline to businesses with thousands of new sellers.

In recent months, online marketplaces have taken a huge step forward to become the primary option for consumers with the pandemic forcing traditional retailers to digitally adapt to consumers. As these lockdown restrictions begin to ease, many businesses and retailers are increasingly finding value in utilizing digital marketplaces to support further disruption.

Worryingly, the existing retail space still lost a shocking 1.3 million jobs from February to June with data released by the U.S. Bureau of Labor Statistics in August[1] showing little signs of recovery for the retail industry. With retail being the primary outlet of the U.S. economy supporting one in four U.S. jobs [2] businesses utilizing the e-commerce sphere are experiencing significant growth by recording an 18 percent increase in online sales[3] this year.

Retail businesses that have been sustainable during the economic slowdown over the last few months are showing increased utilization of online marketplaces as alternatives to traditional retail services. Many who have explored, or been forced to adapt to digital avenues, are seeing the potential for temporary digital measures to become permanent as the U.S. continues to demonstrate a seismic shift in shopping habits. Online marketplaces such as Amazon, eBay and Rakuten are leading the way, with Amazon more than doubling its valuation so far in 2020 – gaining a staggering $570 billion in market capitalization. eBay has just reported a record eight million new active shoppers, resulting in year on year revenue shooting up 18 percent.

While these numbers may be considered unsustainable in the long term, the 565,000 new merchant signups Amazon has already reached this year suggests the significant growth of online marketplaces will continue to exceed expectations. Many forecasters are estimating the business growth of e-commerce will to continue to reach unprecedented levels in the U.S. – with 1.1 million new sellers expected to join Amazon by the end of 2020.

Accessibility has long been a question for merchants hesitant to embrace the digital market and step out of their comfort zones into new mediums. Online marketplaces that are experiencing the most growth such as Amazon and eBay are increasingly finding ways to engage buyers and sellers to leap into the digital sphere. Thousands of sellers are experiencing natural growth, and the demand for consumer confidence while shopping on digital platforms has never been higher. E-commerce platforms cannot emulate the shop floor, however, we are seeing community-based marketplaces driving international consumer merchants to offer a quality service that delivers high customer satisfaction on primarily review-based models.

Sellers should capitalize on the opportunity to adapt and strategize against the current situation while focusing on understanding how their customer buying patterns were changing, to adjust quickly to demand, PingPong Payments identified the most popular selling categories in the e-commerce space during the pandemic to be groceries, toys and games, educational material and home and garden, while swimwear, travel-related products and consumer electronics such as cameras were no longer in demand.

With more consumer-centric additions, comes more growth, and the need for personnel to respond to the demand has heightened. For many e-commerce sellers, this is unprecedented ground, and it highlights the need for e-commerce sellers to have the right systems in place to facilitate these changes. Traditionally, a bulk of merchants’ operating internationally would spend their time minimalizing cross-border payments in unknown markets that would often lead to unforeseen expenses, long shipping times, and unreliable products. E-commerce sellers partnering with the right cross-border payment companies that specialize in convenient, quick money transfers can take this hassle away while lowering costs with these systems in place.

As consumers return to retail spaces – sellers should continue to utilize the flexibility that e-marketplaces have provided for businesses over the last few months with organic innovation increasing through competition for buy share. From the supply chain to customer-centric models – digital marketplaces are providing a platform to rival in-person sales with a significant expansion focused on retaining customers.

Admittedly, there will be consumers who continue to use traditional methods of shopping, and that will remain an open market for retailers as lockdown restrictions ease. Merchants with better familiarisation of the e-commerce industry should be able to continue to put the right systems and partners in place to maintain a continuous flow of sales worldwide. With added expansion in the industry, economic recovery in the U.S. can help propel pre-existing successful retail foundations into the future.

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[1] https://www.bls.gov/news.release/empsit.nr0.htm

[2] https://nrf.com/retails-impact

[3] https://www.emarketer.com/content/us-ecommerce-will-rise-18-2020-amid-pandemic

robots

THE EVOLVING RELATIONSHIP BETWEEN DRONES, MOBILE ROBOTS, AUTONOMOUS VEHICLES AND LOGISTICS

Last mile delivery is the most expensive part of the delivery chain, often representing more than 50 percent of the overall cost. This is mainly because it is the least productive and automated step. As such, many are seeking to bring automation into the last mile. In recent years, many companies around the world have been innovating to utilize autonomous mobile robots, drones, and autonomous vehicle technology.

Various autonomous robots and vehicles (sometimes called pods) are being developed around the world. These come in a variety of shapes and forms, reflecting the diversity and breadth of design and technology choices which must be made to create such products.

Drone Delivery: a Game Changer in Instant Fulfilment?

My new IDTechEx report, “Mobile Robots, Autonomous Vehicles, and Drones in Logistics, Warehousing, and Delivery 2020-2040,” covers the use of mobile robots, drones, and autonomous vehicles in delivery, warehousing and logistics—and suggests these could create a $1 billion market by 2030. That shows how far we have come since a previous IDTechEx report, “Mobile Robots and Drones in Material Handling and Logistics 2017-2037,” which analyzed the technologies that were then emerging in the last mile delivery space, including drones and autonomous mobile ground robots (or droids).

Several players, big and small, have entered the drone delivery game since then, but at the time of the 2017 report, the idea of drone delivery was sharply dividing commentator opinion, with some dismissing it as a mere publicity stunt.

Indeed, drone delivery must be viewed within the context of the emerging drone industry, which has grown to a more than $1.5 billion industry. In the ensuing years, consumer drones’ hardware platform became rapidly commoditized with prices falling.

The idea of drone delivery entered the mainstream media in late 2013. Around that time, drone delivery of e-commerce parcels was first demonstrated in parallel with drones successfully delivering medicine to remote areas. Since then numerous deliveries have been made, partnerships announced, and substantial sums invested.

Fleet Operation to Compensate for Poor Individual Drone Productivity?

Drone delivery faced critical challenges in 2017. Individual drones offer limited productivity compared to traditional means of delivery (e.g., consider a van delivering 150 parcels in an eight-hour shift). They can only carry small payloads and battery technology limits their flight duration, constraining them to around 30 minutes radius of their base while further lowering their productivity due to the downtime needed for re-charging/re-loading.

The limited productivity, in our view, is not a showstopper. This is because fleet operation can compensate for poor individual drone productivity. The unit cost of drones will be substantially lower than, say, a van, enabling the conversation of a few, highly-productive vehicles into many small drones with high productivity at the fleet level. This will require a further major reduction in hardware costs for commercial drones, but if the past is to be our guide, this will be inevitable.

Limited payload is also not a showstopper because, according to Amazon statistics, some 85 percent of packages weigh 5 pounds or fewer. Furthermore, the fall in delivery costs and time for customers is changing purchasing habits: frequent orders of small items is replacing that big infrequent order. This matches well to the strong points of drones.

The limited range is also not a showstopper even in suburban areas where customers do not live close to a distribution point. It will, however, mandate a gradual yet wholesale change in the location of warehouses with more placed closer to end customers or the use of large mobile drone carrier vans. The former is already happening in the background, while the latter has also been demonstrated at the proof-of-concept level.

Sidewalk Last-Mile Delivery Robots: a Billion-Dollar-Market by 2030?

Sidewalk robots are often designed to travel slowly at 4-6 km/hr (or 2.5-3.7 mph). This is to increase safety, to give robots more thinking time, to give remote teleoperators the chance to intervene, and to enable categorizing the robot as a personal device (vs. a vehicle), thus easing the legislative challenges.

However,  sidewalk robots are still far from being totally autonomous. First, they are often deployed in environments such as U.S. university campuses where there is little sidewalk traffic and where the sidewalks are well-structured. Many robots are also restricted to daylight and perception-free conditions. Critically, the suppliers also have remote teleoperator centers. The ratio of operators to robots will need to be kept to an absolute minimum if such businesses are to succeed.

There is still much work to do to improve the navigation technology. The robots will need to learn to operate in more complex and varied environments with minimal intervention. Furthermore, capital is also essential. The end markets are also highly competitive, imposing tough price constraints.

In general, we forecast a 200,000-unit fleet size until 2035 (accounting for replacement). The inflection point will not occur until around the 2025 period given the readiness level of the technology. This suggests both a large robot sales market and an even larger annual delivery services market provided asset utilization can be high (the services income could reach $1.6 billion by 2035 in a reasonable scenario).

Sidewalk Delivery Robots vs. Autonomous Delivery Vans

These robots, pods and vehicles are mainly designed from scratch to be unmanned. They are also almost always battery-powered and electrically-driven. This is for various reasons, including: (1) electronic drive gives better control of motion, especially when each wheel can be independently controlled; (2) the interface between the electronic control system and the electrical drive train is simpler, eliminating the need for complex by-wire systems found in autonomous ICE vehicles; and (3) their production process needs to handle vastly fewer parts, and as such could be taken on by smaller manufacturers.

Another key technology and business choice is where to navigate. Many robots are designed to travel on sidewalks and pedestrian pavements, while the van-looking pods and vehicles are often designed to be road-going. This choice of where to travel has determining consequences for the design, technology choice, target markets and business model.

Sidewalk robots are an interesting proposition. They come with various hardware choices. For example, some are few-wheeled while many are six-wheeled. Some include a single small-payload compartment, while others carry larger multi-item storage compartments. The key choice, however, is in what perception sensors to use.

Navigation Technology Choices

Mobile robots come with various hardware choices, e.g., number of motor-controlled wheels, payload size and compartment design, battery size, etc. Almost all have HD cameras around the robot to give teleoperators the ability to intervene All also have IMUs and GPS and most have ultrasound sensors for near-field sensing.

A critical choice is whether to use lidar-only, stereo-vision-only, or hybrid. Lidar can give excellent 360deg ranging information with spatial resolution and a dense point cloud which enables good signal processing. Lidars, however, are expensive and can have near-field (a few cm) blindspot. Therefore, the choice to use lidars will represent a bet for the cost of lidar technology to dramatically fall.

Most robots deploying lidars use 16-channel RoboSense or Velodyne lidars. These are mechanical rotating lidars, giving surround viewing. The technology of lidars is evolving with the likes of MEMS or OPA emerging. These could enable cost reduction but will reduce FoV (field of view), thus mandating the use of more lidar units per robot.

We project that the cost of lidars is to significantly fall over the coming years. This has the potential to put such robots on the path towards business viability. The other challenge is near-field blindspots. This is not an issue with cars, but can be in a sidewalk, where many low-lying objects can reside closely to the robot. To resolve these, complementary sensors will be needed.

The other approach is to go lidar-free, using stereo camera as the main perception-for-navigation sensor. This will require the development of camera-based algorithms for localization, object detection, classification, semantic segmentation, and path planning.

No off-the-shelf software solution exists. Indeed, no labeled training dataset exists that would allow training lidar-based, camera-based or hybrid deep neutral networks (DNNs) for sidewalk navigation. The sidewalk environment is vastly different to that of the on-road vehicles. As such, companies will need to collect, calibrate, and meticulously label their own datasets. Furthermore, the datasets will require great diversity to accommodate different light, perception, and local conditions. Deployments in many sites even as pilot programs are essential in further improving the robots and can indeed represent a competitive advantage.

The robots are energy-constrained. As such, the number of on-board processors and GPUs should be kept to a minimum, and heavy-duty computational tasks such as 3D map-making and edge-extraction should be carried off-line in powerful services. This almost always happens when robots are deployed to a new environment: They are walked around to capture data, the data is sent to servers for processing so it can be converted into a suitable map, earmarking edges, many classes of fixed objects, drivable paths, and so on.

Long Road to Profitability Lies Ahead

In general, there is still much work to do to improve navigation technology. The robots will need to learn to operate in more complex and varied environments with minimal intervention. This requires extensive investment in software development. This ranges from gathering data, defining object classes, labeling the data, and training the DNNs in many environments and conditions. It also requires writing algorithms for the many challenges the robots encounter in their autonomous operation.

Furthermore, capital is also essential. The businesses are heavy on development costs, especially software costs. The end markets are also highly competitive, imposing tough price constraints. The hardware itself is likely to be commoditized and many will outsource manufacturing once they have settled on a suitable final design. The payback for many will be having a large fleet to offer robots as a delivery service.

Future Outlook: Significant Robot Sale and Delivery Services Opportunity

Sales and delivery firms are likely to have a long road ahead of them before they reach profitability. They should improve the robots to work in more scenarios beyond well-structured neighborhoods and campuses, to extend their operation to all-day and all-weather conditions, and to extend autonomous operation with little error to nearly all scenarios to drive down the remote operator-to-fleet size ratio.

The deployed fleet size will need to dramatically increase to expand income from delivery services and allow the amortization of the software development costs over many units sold.

We have analyzed all the key companies and technologies in this emerging field. We have also constructed a forecast model, considering how the productivity of last-mile mobile robots is likely to evolve over the years. We have developed various scenarios, assessing the current and future addressable market size in terms of total accumulated fleet size. Our fleet deployment forecasts and penetration rate forecasts are based upon on reasonable market and technology assessments and roadmaps.

Consequently, our forecasts suggest, that despite the upfront technology and market challenges, the market will grow and those who plant their seeds today will reap the benefits tomorrow.

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Dr. Khasha Ghaffarzadeh is the research director at IDTechEx, where he has helped deliver more than 50 consulting projects across the world. The projects have covered custom market research, technology scouting, partnership/customer development, technology road mapping, product positioning, competitive analysis and investment due diligence.

His report “Mobile Robots, Autonomous Vehicles, and Drones in Logistics, Warehousing, and Delivery 2020-2040” covers the use of mobile robots, drones, and autonomous vehicles in delivery, warehousing and logistics. It provides a comprehensive analysis of all the key players, technologies and markets, covering automated as well as autonomous carts and robots, automated goods-to-person robots, autonomous and collaborative robots, delivery robots, mobile picking robots, autonomous material handling vehicles such as tuggers and forklifts, autonomous trucks, vans, and last mile delivery robots and drones. You can find the report here: https://www.idtechex.com/en/research-report/mobile-robots-autonomous-vehicles-and-drones-in-logistics-warehousing-and-delivery-2020-2040/706.

You can find his report “Mobile Robots and Drones in Material Handling and Logistics 2017-2037” here: https://www.idtechex.com/en/research-article/drone-delivery-publicity-stunt-or-game-changer-in-instant-fulfilment/11658.

IDTechEx guides strategic business decisions through its Research, Consultancy and Event products, helping clients profit from emerging technologies. For more information on IDTechEx Research and Consultancy, contact research@IDTechEx.com or visit www.IDTechEx.com.

infrastructure

THE TRADE COSTS OF GETTING A “D+” ON INFRASTRUCTURE”

A Failing Grade

The American Society of Civil Engineers regularly evaluates the nation’s infrastructure needs, grading the quality and condition of the infrastructure system through its report card. The latest grade is D+.

At 13th in infrastructure quality, the United States ranks behind many of its biggest global competitors, according to the World Economic Forum Global Competitiveness Report. U.S. infrastructure needs more than a boost. A substantial multi-year investment of approximately $2 trillion is needed to close a 10-year investment gap.

From commuters to truckers to farmers, everyone pays the price for continued inaction. That includes America’s manufacturers who rely on every type of infrastructure to keep production operational, profitable, and globally competitive. Modern manufacturing depends on robust and integrated supply chains, the reliability of which depend on healthy infrastructure systems. One does not function effectively without the other; both must operate with a high level of precision to maximize productivity.

infra and trade

A Drag on Recovery and Growth

Every day, manufacturers accept raw materials and other inputs via truck and rail to process them into finished materials. End products such as finished chemicals, machinery, autos and now—even more pressing in today’s COVID-19 response—cleaning products, essential household items, medicines, vaccines and personal protective equipment, all leave manufacturing facilities around the country to be transported to customers both here and abroad.

Insufficient or inefficient infrastructure can raise businesses’ transportation costs, putting a dent in U.S. manufacturing competitiveness and adding to the costs of trade. As one manufacturer recently explained in congressional testimony, “If ports are clogged, trucks are delayed, power is down, or the internet has a lapse, productivity and customer service are impacted. Across the manufacturing sector, transportation logistics matter, and congestion—whether at a port or on a crowded highway—is waste that drives the consumer’s cost up like a hidden tax.”

The manufacturing sector accounts for 11 percent of U.S. GDP and manufacturers in the United States would like to see that footprint expand. Investments in transportation infrastructure that improve freight connectivity, capacity, performance and flexibility can help manufacturers expand sales at home and around the world, helping to lead U.S. economic recovery and renewal.

US ranks behind

Connected and Energized

The infrastructure challenge is not limited to physical assets like roads and bridges. Continued investment and modernization of our nation’s broadband and wireless infrastructure is also critical to the success of today’s manufacturer. Technology is now embedded in all aspects of production as well as in the finished products themselves.

Manufacturing equipment is increasingly connected to the internet, making shop floors dependent on robust broadband networks. Innovative technologies have enabled a tremendous competitive advantage for U.S. manufacturers, and underscore the extent to which manufacturing and services are now intertwined. Manufacturers already invest in the most advanced and secure technology solutions to support their operations and products. Without a regulatory and policy environment that paves the way for additional investment in broadband and telecommunications infrastructure, manufacturers risk losing their competitive edge.

Similarly, for many manufacturers, energy is the largest and most important cost. The renaissance in U.S. energy production in all its forms—most notably natural gas—has not only kept energy costs low but also driven major new investments in manufacturing sectors. The nation’s network of pipelines, the electric grid and other energy infrastructure need to keep pace.

Manufacturers also require regulatory and fiscal policies that incentivize continued reinvestment of private capital in these infrastructure systems. Rail, energy and telecommunications infrastructure differ from other infrastructure sectors because they are almost entirely privately owned and operated. For example, private investment in freight rail has grown in recent years, averaging close to $25 billion annually. Burdensome regulations that create excessive red tape make project costs unaffordable and discourage private-sector investment in infrastructure, limiting the ability to innovate.

$2 T

Bridging the Gap in Public Awareness

Many often miss the link between infrastructure investments and their daily lives. Heavy traffic when driving to work and the grocery store or delays in a delivery are just accepted as the norm—rather than seen as a consequence of underinvestment.

Yet the public routinely and unknowingly pays for the hidden costs of congestion, increased vehicle maintenance and permitting delays. Average citizens are often complacent about the condition of infrastructure because, for the most part, it continues to work—just not as well as it should.

The same may be true for the level of understanding about the link between modern infrastructure and a nation’s ability to competitively trade with the world. A country’s system for moving goods – from the highway to the rail, from the seaport to the airport – are intimately tied to economic growth through trade. For both reasons, the United States is long overdue for historic and transformational investments to ensure its core infrastructure makes the grade.

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Robyn Boerstling

Robyn Boerstling is Vice President of Infrastructure, Innovation, and Human Resources Policy at the National Association of Manufacturers (NAM). Previously, she enjoyed a six-year tour at the Department of Transportation in the George W. Bush Administration, working in three different roles under two secretaries.

This article originally appeared on TradeVistas.org. Republished with permission.