Adding Value to Your Supply Chain

 

Demand to provide the optimal customer experience continues to escalate, and companies must continually seek out better ways to deliver customer satisfaction and retention. Many companies find that value-added logistics services help give their supply chain a competitive edge. Once limited to services such as shrink-wrapping, display building, and rainbow pallets, value-added capabilities now include everything from inscription and embroidery to configuring kits for e-commerce or inserting coupons or brochures in packages.

Wondering if it's time to add value to your supply chain? Duane Sizemore, senior vice president, marketing and business development with Saddle Creek Logistics Services, examines how value-added services can benefit your business.

1. Expand product offerings. From building gift baskets to creating twin-packs, value-added services help give your customers more buying choices.

2. Get products shelf ready. Value-added services such as price marking, tagging, and display building help to streamline the process of getting products on store shelves.

3. Enhance customization capabilities. Personalization is one of today's hottest trends. Want to offer a choice of embroidered logos on apparel? Allow customers to choose the face plate for their cellphone? Value-added services can help you deliver.

4. Manage inventory more efficiently. With the ability to customize products, you're able to stock fewer SKUs, thereby reducing the cost of carrying and managing inventory.

5. Reduce the number of suppliers. By asking your existing partners to perform more value-added functions, you can reduce the number of suppliers and streamline your supply chain. Even materials such as cardboard for displays can be shipped to a third-party logistics (3PL) provider to be built and sent out with customer orders to eliminate one step in the process.

6. React faster to changing business needs. With value-added operations close to the end customer, you can delay product configuration until the last possible minute to respond more accurately to customer demand.

7. Manage transportation costs. The closer packaging facilities are to manufacturing operations, distribution centers, or end destinations, the more cost effectively you can transport products.

8. Control labor costs. With automated solutions and careful review of supply chain processes, value-added services can help eliminate downtime and reduce the number of touches required in the packaging process—ultimately saving money on labor.

9. Ensure continuous improvement. If you team up with a 3PL, they can assist with process reengineering, packaging needs assessment, component purchasing, and supplier evaluation to ensure value-added services are delivering what customers demand.

10. Find a partner. Incorporating value-added services can be challenging. Experienced 3PLs can be valuable allies. They offer the flexibility and resources to accommodate unique requirements, seasonal fluctuations, and business growth. Many of today's 3PLs approach value-added services with a spirit of collaboration.

How Tariff-Proof Is Your Supply Chain Strategy?

Rethinking your approach in a time of uncertainty.

Shailesh Bhadauria

The United States government’s decision to introduce trade tariffs on steel and aluminum imports has kickstarted widespread tariff changes across the major world economies with strong responses from other countries, and further retaliations announced. The President of the European Commission, Jean-Claude Juncker, recently met with President Donald Trump to try and de-escalate this issue.

In mid-July, China put in a complaint to the World Trade Organization (WTO) regarding additional tariffs proposed by the U.S. on Chinese goods, at a value of $200 billion. The U.S. has proposed these further tariffs in a tit-for-tat exchange against retaliations across the globe from the initial tariff changes issued by Trump. A global trade war is forming, and the IMF has reported this could cost the global economy, by lowering worldwide growth by as much as 0.5% by 2020, amounting to around $430 billion in lost GDP.

Regardless of whether these trade tariffs do escalate into a full-scale global trade war or not, they will affect an increasing number of industries over the course of 2018 and into next year. Whatever the ultimate outcome, in this period of uncertainty, businesses must look to dynamic supply chain strategies to address an ever-changing landscape. Here’s a look at the impact this issue may have on industrial companies, along with suggestions for appropriate mitigation strategies.

The Impact on Industrials

The US has levied an import duty of 25% on steel and 10% on aluminum. The EU has proposed retaliatory measures in response, imposing 25% tariffs on US motorcycles, denim, cigarettes, cranberry juice and peanut butter, among other products. Although there are foreseen job increases for those working in steel and aluminum industries within the U.S. due to the protectionist move, the impact is already being felt among those industries most dependent on steel and aluminum imports—such as the automotive, building, machinery and consumer appliance industries, as well as on those who are gaining protection from such measures.

Vehicle manufacturing: Automotive uses just over a quarter of total steel consumption in the U.S., and 40% of the aluminium.

Harley Davidson recently announced a plan to move some production operations from the U.S., as the levies introduced in response to the U.S. will increase its costs by as much as $100 million a year.

Volvo recently opened its first U.S. factory, a $1.1 billion plant in Charleston, South Carolina. This will help partially insulate the automaker from the threat of tariffs and encourage Volvo to source more parts in the U.S., which is presumably what the Trump team would want. But it will not help the company if it wants to export vehicles during a global trade war. The more likely result is less U.S. investment, not more. Volvo’s CEO has indeed stated: “If we go back to the 19th century when everyone wanted to protect their own market, that is definitely not good for the wealth of nations. That would really be bad—not just for Volvo.” Volvo had promised to hire 4,000 employees for a new plant in South Carolina, but has said it may have to break this promise as a result of the tariffs.

Building and construction: uses 43% of total steel consumed in the U.S. and 14% of the aluminium.

The increase in import costs has forced America’s largest nail manufacturer, Mid-Continent Nail, to lay off employees. There is concern that more layoffs will come.

Consumer appliances: The 20% tariff on washing machines in January helped  Whirlpool Corp: it had been losing market share to Korean manufacturers LG and Samsung, and had asked the U.S. government for protection from competitors. The company has created 200 new factory jobs, thanks to the tariff introduction.

Mitigation Tactics: How to Prepare and Respond

With the shift in trade policies, we now have many countries looking to alternative sources of products outside of the U.S.—and creating trading links with them—and we have businesses looking to move to more regional production within their home country.

As this increases supply chain complexity and, ultimately, costs, buyers should investigate alternative supply sources. When assessing suppliers from non-exempted countries, emphasis should be on the long-term supply chain risks. It is also advisable to include in the equation the impact a shortage of supply would have on manufacturing and operational costs.

Another factor to consider is an increase in the cost of raw materials throughout the production chain. For instance, the tariffs on steel and aluminium imported from China may increase raw material costs by 2 to 5%. This may not be enough to increase product costs in all cases, but there are certainly circumstances when cost escalation is hard to avoid, and the end-consumer has to bear the brunt as product prices increase. Cost rationalization, in this case, becomes critical for procurement. Sourcing restructuring and more effective supplier negotiations, for example, with a focus on the categories not affected by tariffs, may help offset the unavoidable cost increases. Since the duties are imposed on aluminium and steel, companies can try and optmize their spend on other metals such as copper, nickel, titanium, cobalt—as no matter what you do, the cost of buying aluminum and steel will result in increased cost of components dependent on these two materials.

 An escalation in trade conflicts could also lead to more processed and therefore value-add products included in the retaliations and escalations. And as manufacturers pass the cost increases to customers, they risk losing market share. Take a textbook example of the duopoly between Boeing and Airbus. If Boeing increases customer pricing given an increase in raw material costs, then it will certainly lose business to its European competitor. Boeing, in this scenario, can use alternate materials like composites and carbon fibers, which is the case in the latest aircraft, along with cost rationalization through productivity improvements. The result: optimizing logical costs and earning somewhat lower margins—and eventually earning more through maintenance, repair and operations (MRO) contracts, which run for 10-15 years.

To adapt their category strategies as global trade changes, procurement teams need to more closely monitor commodity prices and how they may impact sourcing, quality and supply continuity. By working hand-in-hand with the commercial and finance teams—and being involved in all strategic discussions that take place within the  business—procurement can respond and advise depending on how global trade shapes up in the future.

Both internal and external data and intelligence should be leveraged to generate insights to help plan for future scenarios, as well as improve risk mitigation across the business. One way to ensure that knowledge is captured and shared is to form a cross-functional team, with representation from across the business—covering supply chain, government relations, marketing, strategy and finance. Bringing in outside perspectives from third-party experts to provide specialized analysis on specific categories or supplier environments can also add value.

Are freight forwarding companies at a crossroads?

Technology companies promise to disrupt the freight forwarder, but will they succeed?

AUTHOR

Edwin Lopez@EdwinLopezT37

Innovation is spreading like wildfire upon the logistics world, promising to disrupt the freight forwarding process like never before. Online load boards; cloud-based freight marketplaces; connected containers; online customs processing.

As consumers, have become conditioned to expect services on demand, businesses too will begin to feel the pressure of customer service. Like e-mail did to fax, or bank statements to endless teller lines, shippers are looking to bypass the micro inefficiencies — those bureaucratic delays that add up, making the entire process slow and burdensome.

In fact, the process is so complex that shippers have long outsourced it to an agent: the freight forwarder. A shipper may choose to contract independently with the truckload carrier, a customs broker and an expeditor for emergencies — in fact, many do — but the forwarder pledges to take on the burden otherwise. A supply chain manager must worry about S&OP and excess inventory, why should they have to file customs documents, too?

Yet the emergence of new, convenience-driven technologies has raised a troubling question: If the process becomes more efficient, will the forwarders’ job become obsolete?

1. Why freight forwarders are not threatened by automation

The answer to that question is, not anytime soon, both traditional and next-generation forwarders told Supply Chain Dive. At the end of the day forwarding is a service, not a task.

Take a typical supply chain: An automotive manufacturer based in Detroit may have buyers in Mexico, Canada and Japan. Without a forwarder, in each case the manufacturer would have to determine the best intermodal route to send shipments to each country:

• Under what circumstances would air freight make more sense?
• Should the shipper send the shipment by rail to Seattle or Los Angeles?
• Would it make sense to truck the goods, and if so, which carrier could provide the best rate?
• When a crisis strikes, how can the shipper ensure production continues?

Adding to that, questions of contracting versus spot rates, customs filing for each good and the need to ensure pickup and delivery cause the job to quickly become overwhelming.

Until technology can offer the same level of customer service and relationships, freight forwarders will not bat an eye.

Supply Chain Dive

Yet the freight forwarder deals with these questions on a daily basis, so when the shipper calls, answers and recommendations are available. In addition, they may have divisions for pursuing better contract rates due to long-standing relationships with carriers, or for ensuring customs compliance is up to date.

If shippers have trusted freight forwarders for decades, it is not only because they can get a product from point A to point B, but because they can dedicate to doing it exceptionally well. This in turn frees the shipper up to manage more complex, strategic issues. Until technology can offer the same level of customer service and relationships, freight forwarders will not bat an eye.

5. How technology will optimize the forwarding process

If the forwarder is not at risk of being replaced, then what’s all the buzz around the new platforms, marketplaces and uber-for-X apps constantly promising to disrupt the industry? Conversations with these companies reveal it is not the freight forwarder’s role they are looking to disrupt, but the forwarding process altogether. In fact, some so-called next-generation forwarders are looking to sell software to forwarders themselves.

The reason? The forwarding process has yet to reach the digital age. A recent survey by online freight-marketplace provider Freight of revealed that just 1 of the top 20 global freight forwarders could provide an instant quote online for an anonymous prospective client.

1. The missing link: full supply chain visibility

Yet, technology providers and apps cannot fix the burdensome market inefficiencies alone. Consumer trends demand both visibility and low rates from an extremely fragmented industry. Yet, technology overhauls can be costly and ROI remains uncertain. In fact, the status quo is compelling in this industry as shippers themselves have been slow to reach industry 4.0.

Digitization may be the name of the game for industry leaders like A.P. Moller Maersk, DHL or Kuehne + Nagel, but supply chains must walk in lockstep if they are to reach the full benefits promised by next-generation technology.

All signs say they are starting to, but … slowly. In just one example, the trucking industry fought a mandate forcing electronic logging devices, a precursor to many of today’s apps, for two decades. Similarly, the World Trade Organization’s Trade Facilitation Agreement — encouraging a customs standard and pushing online publication and processing in a minimum of 110 countries — just entered force this year despite being proposed in 1996.

Innovation is the first step, however — and at least for the moment, disruption in the positive sense appears to be coming for the supply chain.

Antiquated systems within the relationship business has created significant market inefficiencies due to a lack of transparency and access. Why would the spot market rate be lower than a contract rate? How would a shipper know?

From load boards to Big Data-enabled route or rate calculators, new technologies promise to improve access, reduce delays and increase visibility for those who choose to use it.

8 Facts About the Truck Driver Way of Life

Contributed to jobs.net by Kim Evans

There are select occupations you ought to first discuss with loved ones before even considering applying for a job in the field. Truck driving is one such occupation.

In many ways, being an OTR (over-the-road) or CDL driver is more a lifestyle than a job. Its demands, particularly upward of 300 days per year on the road, will certainly limit what time you spend at home, thus impacting relationships with those around you. And because it may be two years before you can move into a regional driving position that allows for you to return home weekly, instead of once every three weeks, spouses or partners deserve some say in your deliberations before you decide if driving a truck for a living is for you.

But if you're attracted to flexibility, 20 hours of solitude each day, and following a different routine from the rest of the population, then this career is definitely worth exploring. To assist you in a discussion with loved ones, and to fill you in on what to expect in this line of work, consider the eight noteworthy facts below about truck drivers in the US. You may be surprised by what you learn.

1.      Days can begin really early. Many drivers like to move with the light; others prefer to drive through the night. OTR truck drivers don't have set starting hours, unless they're calling in to dispatch after returning from "time off."

2.      You may be expected to work up to 70 hours over an eight-day period. After you've worked for 70 hours, you cannot drive again until you take a full 34 hours off duty. The 70-hour limit could be reached by working 14-hour days, but you cannot drive for more than 11 hours in a day. You must conclude your "Hours of Service" with a 10-hour break.

3.      Some drivers are paid hourly, but in most cases compensation is calculated by mile. A delivery driver does not get paid when he or she is not delivering.

4.      Employers who pay "practical miles" pay based on every mile driven while on the job. On the other hand, "paid miles" is more like drawing a straight-line on a map from Point A to Point B, even though routes aren't always straight. Your salary can increase if you become a trainer, are willing to haul oversize freight or hazardous materials, or if an employer pays you a percentage of each load you run.

5.      Often, you won't know what you'll be paid until the end of a year. A good estimate would be $35,000 in your first year, and $45,000 to $55,000 thereafter.

6.      You will either do "drop and hooks" or live loading and unloading, which can take two to three hours each. An OTR driver will almost never have to unload any freight, but you are reliant on various shipping and receiving departments observing your strict schedule.

7.      Most drivers are expected to cover 125,000 miles per annum. That breaks down to around 2,500 miles a week, which equates to 500 miles a day. Think about that.

8.      There are many perks that come with a truck driver's schedule, not the least of which is a unique view of the country, as well as camaraderie among your peers. You'll mostly get to drive modern trucks with comfortable, ergonomically designed seats to help you stay alert and focused. This is just as well, because most of your working days are spent in an 8' x 8' space, but that shouldn't confine your imagination or ambition.

Truck drivers have a long history of being held in high esteem by the public. There's an enduring cultural attraction to the 'Knights of the Road'–part cowboy outlaws, part supply-chain sheriffs. There's even a national appreciation week! Just be forewarned that even if you're young, single, and keen to be free, it's definitely not easy to be a "professional tourist." Talk through the ramifications of this lifestyle, for the sake of your loved ones and yourself.

A good day for a truck driver is always spent on the road (or on the road home). What about this occupation might appeal to you? How would you pass time from behind the wheel of a big rig? 

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At Dock411, we provide important dock information that truckers can use to make their day easier. We do this out of respect and admiration for the individuals that keep our country running. 

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