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By Contributing Author | 12/11/2017 | 2:57 PM

By Jonathon Gregory, RFID Program Manager, Checkpoint Systems

When it comes to employing RFID to ensure accurate retail inventory, the traditional focus has been on in-store use. That’s fine, except retailers often misperceive that implementations earlier in the supply chain aren’t as important. But every time a store receives shipments without using RFID to check their compliance, inventory accuracy decreases, with associated damages.

I don’t mean to imply that in-store use of RFID isn’t important, because it certainly is. Scanning incoming cartons at the shipping dock upon arrival and performing periodic cycle counts via RFID scanners can quickly and accurately provide store personnel with information about their stock. And that information is vital to ensure retailers know what they can sell in-store or ship elsewhere for omnichannel sales. But if a carton with the wrong merchandise arrives at the store and it subsequently takes weeks to receive the correct merchandise ordered, the impacts are far ranging.  Typical DC audit rates are around three percent, so it makes sense to use RFID to automatically audit 100 percent. In fact, why not detect and correct in-transit inaccuracies before they leave the DC, or even earlier?

Experience with retailers and brand-owners shows that DC processes, outsourcing arrangements and corporate concerns vary widely.  While some retailers spend the time to manually audit all received items at stores, (certainly a time-intensive investment that RFID-based receiving streamlines) others infer receipt without any check, risking (as seen in pilot research) erratic accuracy levels in some product categories (e.g. women’s intimates).  In all cases for all companies, in-transit accuracy enables higher store inventory accuracy with lower cycle count frequency.  Consider the increased efficiencies and omnichannel uplift when retailers justifiably have high confidence in the accuracy of incoming shipments from distribution centers. The retailer can lower safety stocks and narrow excess inventory assignments, which in turn lowers working capital.  Stores can market items that are in transit, or hold omnichannel shipments until in-transit items arrive, consolidating the number of packages per order.

Many retailers have already taken advantage of this. A great example of the use of RFID in distribution centers can be seen in Spanish retail giant Inditex’s use of RFID-supported inventory monitoring system, which is implemented from source to shopper, including through the use of RFID tunnels in DCs. You can see it here.

Logistical Impact

Perhaps the biggest, or most readily realizable, opportunity in ensuring inventory accuracy at the DC level is automated claims compliance. This is such an important issue that instead of taking the time to track and prove non-compliance, some retailers simply impose a blanket charge-back fee of about three percent to suppliers. I know of one major retailer that places a surcharge on all factory shipments based on the assumption that there will be a few percent of shipment inaccuracies. Over the course of the year, it adds up to millions of dollars.  Similarly, Wal-Mart’s “On Time In Full” policy charges suppliers or carriers a three percent COGS fee for early, late or short product deliveries, with a 95 percent compliance target and narrow delivery window.

There is a substantial recurring financial benefit to automating claims compliance.  The opportunity is so large, that one SVP of logistics commented that financial penalties would be too great, and contracts would have to be softened if claims from automated auditing were enforced.  This has already been proven in pilots, which show that when adding RFID-based automated inspection and correction at brand DCs, shipment inaccuracies are virtually eliminated.  This benefits both the brand owner and retailer, and results in retailer whitelisting of such items from ongoing manual audits. 

But what happens when DCs receive out of compliance cartons from contract manufacturers? With technology such as RFID tunnels, they can use the data for vendor scorecarding and to drive better planning.  They can quickly make adjustments to ensure shipments have the right SKU mix and quantities.  This can save suppliers non-compliance penalties and ensure retailers receive all their ordered merchandise on time vs. waiting weeks for non-compliant cartons to be replaced with the correct merchandise.

Additional value can be found when capturing and sharing item-level data collaboratively across the supply chain.  Consignment tracking is enabled.  A brand owner can observe the effectivity of promotions by tracking the specific items used in promotional kits.  Sharing in-store item visibility with brand owners enables brand-driven optimization analysis and replenishment.  Retailers can tap into data collected about the items history – such as using source data for DC auditing efficiencies (e.g. isolating audit evaluations to specific sources).

Generally, if one carton out of a large shipment is found to be non-compliant upon inspection, all cartons may then be redirected down to an area for manual inspection. Consider the time and resources tied up when one such 1,000 carton order comes through. But using RFID, a retailer may discern that the carton in question came from a specific source factory. As such, it may decide to only audit those cartons from that factory, instead of the entire shipment, saving time, labor, and throughput.  Being able to see beyond the immediate source and leverage supply chain history enables retailers to set up business rules to determine what happens when specific cartons arrive from specific factories or locations or contain specific merchandise.

Other Benefits

Brand owners have sought to protect their brands by tracking their products found in gray markets. RFID enables them to know exactly where their products went after leaving their factories or DCs, so when merchandise is found in the gray market, they know how it got there and can act on this information accordingly.  Likewise, luxury brands have a vested interest in knowing chain of custody for their goods because of counterfeiting, not just at the store level, but also at e-commerce retailers – where there is a propensity to mix genuine and knock-off items. In addition, consumers are increasingly interested in knowing where and under what conditions these products are made.  For these retailers, having this information available is indispensible.

Where Is this all Headed?

The next logical step is industry action in which cooperating retailers share non-proprietary item-level data, such as track-and-trace details.  They may also share aggregated information about suppliers, such as quality and shipment “ratings” of factories, similar to how retailers currently use credit reports on consumers. If these modern relationships seem farfetched, many retail competitors are already sharing SKUs that are most at risk for shoplifting. In this manner, they are able to prioritize protection for selected inventory and collectively lower their shrink.  Industry cooperation has also led to what previously might have seemed to be an unlikely alliance: Kohl’s is now accepting Amazon returned merchandise. It drives increased foot traffic into Kohl’s stores, while lowering returns costs.

Summary

RFID is a great solution, but underutilized in the supply chain.  As noted, by catching inaccuracies more easily and faster in the supply chain, it can improve omnichannel fulfillment, get promised inventory to customers earlier, reduce order cancels and reduce retail costs by consolidating order shipments (based upon higher confidence). Ultimately this can lead to improved item-level decision support as well as increased customer satisfaction, margins and sales.

 

 

 Gregory_mestre
Jonathan Gregory serves as RFID Program Manager at Checkpoint Systems,
a division of CCL Industries. He is responsible for driving various major retail-industry RFID implementations of the Checkpoint RFID solution.

Making Supply Chains More Efficient: What We are Learning in the Three-Tier Beverage Alcohol Industry

By Contributing Author | 11/27/2017 | 8:32 AM

By Peter Lijewski, Vice President, Supply Chain Management, Breakthru Beverage Group

In many companies, “Supply” is viewed as a department. However, I believe it should be viewed much more broadly because the supply chain is the core that underpins everything a company does. It’s so central to the success of a business that the efficiency and management of the supply chain can serve as predictors of a company’s success.  Supply chains that benefit from effective management, the right investment, and are enabled by a supportive culture where collaboration is fostered from end to end will thrive.  Supply chains missing these key elements are likely to become fragmented and increasingly inefficient

In the beverage alcohol industry, in which the supply chain is divided across the three-tier structure implemented after Prohibition, collaboration has long been a challenge. However, a combination of necessity due to the evolving tastes and demands of consumers and advancements in technology are making beverage alcohol industry supply chains smarter and more collaborative and, therefore, more efficient.

For example, demand sensing applications and predictive analytics can be integrated into part of supply chain management with incredible results. Depending on your perspective, the application of these types of tools may be enablers or disrupters.  We see them as enablers that allow us to become smarter, nimbler, faster and more precise. And in the beverage alcohol industry, this has become increasingly important.

While the marketing department may use social networks to promote brands, their supply colleagues can also monitor the comments and feedback to determine consumers’ future purchase activity. This allows us to adjust our plans much earlier than waiting for a retail signal to flow through traditional demand monitoring systems. This falls under the category of “demand sensing” where practitioners are using social media filters and other indirect causal factors (weather predictions, brand sponsorship, brand appearance in hit movies or songs) to predict a rise or fall in sales.

However, technology is not the only solution to creating a more efficient supply chain. Companies also need to collaborate effectively internally and with their customers and suppliers. Technology alone can’t create a more efficient supply chain.  It is predicated on a culture of mutual respect and reliance between supply and demand, and an understanding of the importance of unhampered information flow.  Effective companies are using cutting edge tools to enhance their culture and capabilities and are enabling the fulfillment of more products more quickly than their competition. And those that enable the right culture and relationships will ensure that these technologies are being leveraged to their fullest.

This requires investment in smart growth, great talent and an innovative outlook to everything a company does—particularly its supply operations.  We are on this journey within the alcohol beverage industry—reaching across the three tiers to become more responsive to consumers by being at the intersection of technology, its application, our business and our stakeholders.

Peter Lijewski headshot

Peter Lijewski has nearly 20 years of expertise in the Wine, Spirits and Beer industry. Peter has worked in a variety of areas including vineyard operations, bottling lines, customer service, demand and supply planning and more. Along with his extensive industry background, he’s held titles such as the Vice President of Supply and East Coast Operations, Vice President of Global Procurement, and Vice President of Supply Management for Constellation Brands.  His leadership capabilities were instrumental with the transition of Constellation’s acquired businesses and its distributor consolidation. Peter oversees the development and implementation of strategies for the integrated supply chain management at Breakthru Beverage.

4 Options to Consider When Relabeling Warehouse Racks

By Contributing Author | 11/15/2017 | 10:01 AM

By Neal Lulofs, Chief Marketing Officer, ID Label Inc.

Is it time to replace your barcode location labels?

Whether you work in a warehouse, distribution center, manufacturing site or third-party logistics (3PL) facility, it's not uncommon for warehouse racks to require relabeling from time to time. A number of events can trigger this:

  • You’re reconfiguring your rack set-up and flow to accommodate seasonal inventory changes or facility expansion
  • Your beams require a refresh after several years of wear and tear
  • Your existing barcode location labels are damaged, missing or peeling
  • You’re upgrading your warehouse management system or inventory control software
  • You’re converting some bulk storage areas to picking bays
  • New tenants are moving into a section of your 3PL facility

What Are Your Best Relabeling Options?

There are several viable options. The right choice for you depends on your specific needs and environment. Let’s look at four solutions worth considering.

  1. Beam Cover-Up Strip

Are your beams scratched, rusted or dingy? Are your existing barcode labels damaged, missing or peeling? Would you like to avoid the laborious task of scraping off old barcode labels before relabeling?

If any of these apply, then a base cover-up strip with an easy-release top lamination may be an ideal solution.

Look for a manufactured cover-up product with a durable, opaque construction that can be applied directly over old warehouse beams and barcode labels without any show-through.

A cover-up solution will help you avoid the time and expense of cleaning, scraping or painting older beams. Products like these can typically be manufactured in a color to match your existing racking, so it really makes your beams look like they’ve been newly restored.

ID Label Cover Up

  1. Magnetic Warehouse Location Labels

Barcode labels adhered to magnets are another viable option to consider, especially for warehouse facilities that reconfigure their rack locations or inventory with regularity. They’re also a good choice for freezer storage environments.

Magnetic labels are easy to move, don’t require scraping, don’t leave behind adhesive residue and they keep your warehouse racks looking neat, orderly and clean. They can be manufactured in a wide variety of colors and sizes for use on horizontal beams or as vertical totem labels.

On the other hand, magnetic labels can occasionally be knocked askew or to the ground – or can even accidentally adhere to metal lift trucks – during the picking and placement of pallets and cases.

One final point: magnetic labels are typically more expensive to manufacture than other barcode labeling options, but they have a long useful life that offers a good return on investment.

  1. Removable Warehouse Labels

If your beams are in good shape, consider using a preprinted, removable barcode label. Like the other options above, a removable label makes it easy to relabel rack locations. They are simple to install and offer location flexibility, without any need for scraping or cleaning to remove them.

Look for a removable label with an advanced adhesive that adheres tightly to different surfaces, but is easily removable without adhesive residue left behind.

It’s a good idea to test these labels for a length of time to be certain they are the right choice for your environment.

  1. Ultra-Durable Barcode Labels

Are your current rack labels easily damaged by daily encounters with lift trucks and warehouse traffic? Will your labels be exposed to direct sunlight or heat, or come in contact with harsh cleaning solutions or chemicals? Perhaps you’d simply like to move from low-quality, print-your-own labels to a longer-lasting, more durable solution.

Label durability is probably the most important requirement our customers have. Why? Because it’s critical that barcode location labels scan accurately every time. Errors can lead to manufacturing issues, shipping mistakes, product returns and other costly missteps.

There are many factors in the label-manufacturing process that affect durability, from the base stock to the top coating to the printing technology used. Be sure to work with an experienced label manufacturer that can deliver a proven solution to match your operational requirements.

Know Your Relabeling Options

Warehouse rack relabeling is an increasingly common occurrence in today’s rapidly changing, e-commerce-driven market.

When it comes to finding the right relabeling solution, there is no one-size-fits-all answer. “Cheap” solutions may turn out to be the costliest ones if the labels easily damage, fade or peel off.

Asking the right questions and understanding and testing your options in advance will help ensure you find the best product for your requirements.

Neal Lulofs 2

Neal Lulofs is chief marketing officer at ID Label Inc., one of the nation’s leading providers of preprinted pallet and rack labels, warehouse signs and installation services.

6 Reasons to Track Your Truck Fleet

By Contributing Author | 11/08/2017 | 6:16 AM

By Sam Sims, APR,  US Fleet Tracking 

Automation is one of the defining factors of our day and age. We rely on machines in the modern day, and GPS is one of the systems we’ve come to depend upon most frequently. GPS devices have come a long way and can tell us more about a vehicle than just its location. We can learn all the information we’d want to know about a car, truck, or other vehicle with GPS systems, including where it is, where it should be, and how long it’ll take to finish a route.  

Usfleettracking2

Optimize Routes

Use the GPS data from your fleet to make your routes more efficient. You’ll also be able to find areas that are troublesome and fix those problems through close analysis. Additionally, you can discover the shortest routes for your trucks by finding areas to improve fuel efficiency and work on reducing the amount of time your vehicles are idle. All this important and helpful information is only available when you have your fleet equipped with the proper GPS systems – and using this data will allow you to reduce each truck’s travel time, getting your goods from point A to point B faster, and using less fuel in the process.

Reduce Operation Expenses

GPS systems do more than just track your fleet’s location; these systems provide you with raw data on how efficiently each truck driver operates their vehicle. They monitor the engine status of each truck, tire pressure, and other necessary details. You can also keep track of the maintenance each truck needs before it turns into an issue, which can prevent a frustrating, time-consuming, expensive breakdown from happening. Overall, GPS systems can reduce downtime, which (you guessed it) will save you money.

Reduce Insurance Bills

Insurance companies like vehicles with GPS devices on them. The more protection you give your fleet, the less your insurance company is going to worry about your vehicles. You can even receive discounts on your premiums, simply by using GPS systems in your fleet.

Micromanage Your Fleet’s Resources in Real Time

You may not be able to drive every truck yourself…but you will have a wealth of data in your hands to make sure things run smoothly. You can use the data to plan where your resources are needed and when they’ll arrive. Truck GPS systems also deter vehicle theft. Knowing where the thief is trying to go can increase the chances that he/she will get caught and better ensure recovery of your assets.

A Happy Customer Is a Returning Customer

The world runs on a clock. Everyone expects business partners to hold up their end of the bargain in a timely fashion. Being able to answer your customers’ questions with accuracy and certainty is a sign of stability, control, and dependability. You may not be able to make your truck get there faster, but you can absolutely keep your customer in the loop.

Reduction in Paperwork

Having less paperwork to keep track of and fill out will improve efficiency in every way. There’s less chance of clerical errors appearing and less time spent digging around for the data you need. Automatically tracking your fleet with GPS systems gives you more time to solve the important problems and reduces the amount of time spent sorting through file cabinets.

Automating your data collection is the biggest plus to using GPS systems. With it, you have all the information you need at your fingertips. Use that data to improve the logistical system you oversee and your company’s overall performance.

 

Sims photo

Sam Sims, APR, has been a member of the US Fleet Tracking team since 2009, stepping into the role as full-time Director of Public Relations and Marketing just one year later. Sims’ primary role focuses on helping US Fleet Tracking achieve their objectives by creating and fostering communication between the brand and its target markets.

 

Protect Your Supply Chain Like You Protect Your Home: Cold Chain ‘Smoke Alarms’

By Contributing Author | 11/01/2017 | 10:05 AM

By Rob Stevens, Tive

Did you know that smoke alarms have only been in use since the late 1960s? Imagine living in a world where you go to bed every night with no system to alert you to a fire. It may sound crazy, but if you are shipping your temperature-sensitive products using only temperature loggers, you’re still living in the Eisenhower era.

Temperature-Sensitive Shipments Need “Smoke Alarms”

 Many products, like drugs, need to be transported in narrow temperature bands. If the product experiences temperatures outside that band for more than a set period of time, it can lose effectiveness or even become dangerous. Since the early 1990s companies have used simple data loggers to capture temperature data during the journey. At the end of the trip, the logger data is downloaded and examined to determine whether a temperature excursion has occurred. If it has, the manufacturer has to decide what to do with the product, and is often forced to dispose of goods that are no longer safe to sell. 

If a temperature excursion is like a fire, what role does a logger play? The closest analogy would be the insurance adjuster who arrives after the fire has occurred and helps the homeowner understand what is salvageable from the fire. This is a valuable service, but if your house has burned down, you probably wish you had something more. You wish you had a smoke alarm to alert you as soon as something went wrong so you can react before the damage is done.

Real-time trackers can do for supply chains what smoke alarms do for house fires. A cellular-connected tracker that travels with the goods reacts in real time to temperature excursions or other damage. In the past these trackers were too expensive to use widely and their batteries too limited to last the duration of a normal shipment, but falling hardware costs and improved power consumption have enabled a new generation of trackers that can last for months and are economical to attach to shipments. These trackers constantly monitor conditions such as temperature, shock, humidity, and other factors, and generate an immediate alert when a problem occurs.

A Smoke Alarm in Action

Here’s a real-life example of a “smoke alarm” in action: a European pharmaceutical company ships products from production sites in Europe to distribution centers in North America via ocean freight. Shipments require a temperature controlled environment between 15 and 25 degrees C, so the company uses a real-time tracker with each shipment. Earlier this year the customer shipped the first delivery of a new product to North America. Because this was a new product launch, any delay in getting product to market would result in meaningful lost revenue. On the day the product departed, the customer checked the status of the shipment via the tracker’s cloud-hosted software and found that the refrigerated container temperature was set to 6 degrees C, not 20 C. 

The customer immediately called the shipping company and had them set the container to the correct temperature, which they confirmed through their inventory monitoring system. They also ordered replacement product in case the shipment proved to be compromised.


Because of their “smoke alarm,” the pharmaceutical company avoided the cost and delay of retesting six products, as well as the lost revenue and market impact of having two new products late to market (in this case, revenues of up to $1.5 million).

Going Beyond the Smoke Alarm to Fire Prevention 

But let’s stretch this metaphor a bit further -- when it comes to house fires, you don’t just want to know if there’s a fire. What you really want is to prevent fires in the first place. This means understanding and preventing the conditions that are likely to cause a fire. This is the role of the fire inspector, who develops a set of rules that reduce the likelihood of a fire. 

How can shippers “prevent fires”? For one thing, they can use appropriately-certified shippers and containers to reduce the chances of a temperature excursion. But, like a fire inspector, they can go beyond passive measures to use data to identify the conditions that tend to lead to problems. This is where terms like “IoT” (Internet of Things) and “Big Data” come in. Using internet-enabled sensors (IoT) to gather data on temperature excursions for all shipments, it’s possible to build a very large database of shipments, including variables like carrier, mode, time of day, location, humidity, and so on. This “big data” can then be used to detect trends and warning signs that a temperature excursion is imminent. These warning signs can be used to change operations and reduce the risk of a temperature excursion.

Only You Can Prevent Temperature Excursions

This may all sound a little like science fiction, but it’s happening today. Internet-connected sensors are traveling the world by train, ship, plane, and truck, feeding data back to central servers and generating alerts. Companies are beginning to use the resulting data to build predictive models that will enable them to improve operations and reduce damages of all sorts.

More and more companies are sleeping safely at night, knowing that if the worst happens and a “fire” breaks out, they will have the warning they need to respond before it’s too late.

If your company one of them?

 

Headshot_Rob_Stevens

Rob Stevens is Co-Founder and Chief Revenue Officer at
Tive, provider of sensor-driven tracking solutions to deliver full visibility into products as they move through the supply chain.

 

 

Are Integrations the Way of the Future?

By Contributing Author | 10/24/2017 | 7:12 AM

A Chat with Truckstop.com and Industry Partners

By Joel Bartron, Marketing Content & Editorial Director, Truckstop.com

The Wall Street Journal recently reported that as few as 40% of companies have transitioned to digital systems. At the same time, the trucking and logistics trade pubs are lighting up with news of integrations between established TMS’s, ERP’s, and large brokerages’ proprietary platforms. Additionally, with the arrival of Silicon-backed ventures like Convoy, Uber Freight, and others, businesses are scrambling not only to streamline and simplify their operations, but protect their margins and market share. A paper-log-and-rubber-tire-driven industry is suddenly stuck with more and more analog debt when the name of the game is automate and integrate.

Against this backdrop, a few of the players at Truckstop.com sat down and talked shop about integrations: Trent Broberg, General Manager of Truckstop.com, Brett Webb, VP of Integrations, Nick Wynkoop, Product Marketing Manager of Rates and TMS, and a surprise industry influencer, who popped by during the chat.

Wynkoop: All right, integration experts. API, EDI, FTP…generally speaking, what is an integration? What’s happening in the systems?

Webb: From a high-level perspective, it’s a way to marry data and/or services from one source to another. Our goal is to streamline our customers’ workflow so they can get Truckstop.com data and services into their TMS or any other software they use to run their business.

Broberg: Nailed it, Brett. I’ll say too: the industry as a whole has been a laggard with technology – EDI still remains the more prolific means of digital "integration" across systems. This is due, in part, to the large investments of time and money to move off the legacy systems and platforms.

Wynkoop: But, if we back things up a bit, why are integrations so important for transportation organizations? How does it benefit them?

Broberg: When you look at the complexity in transportation, goods change hands from raw materials, manufacturing, warehousing, to the store or home delivery. Each of those touchpoints have a myriad of systems to manage the freight execution.

Webb: Integrations are important on multiple fronts. First, a business can streamline their workflow and gain efficiencies in the system on how their people work. Second, integration provides data (or intelligence) to decision-making and can positively impact the bottom line. Third, even going one step further, integrations might even remove work that exists in the current organization (such as payment systems) and allow those orgs to move people to more strategic growth areas.

Broberg: In order to flow smoothly from one hand to another, an integration or paperwork hand off must happen at each touchpoint. This is adoption of more technology platforms and the integrations of these platforms the freight execution can move faster with less waste. For example: Carrier invoices are manually-processed, overwhelmingly across the industry. Typically, a carrier that is not integrated will email, fax, or snail mail a paper invoice for their accounts receivable. This means heavy, manual data entry on the accounts payable side. An integration to the carrier's accounting or fleet management system to pass this information can easily automate the entire process. Furthermore, the simple questions of "where's my truck" can easily be solved through integration as opposed to a phone call.

[At this point in our chat, we were surprised by a visit from Robert Voltmann, President & CEO of TIA, the industry’s premier 3PL association. Bob gamely sat in for a few questions.]

Wynkoop: And it’s not just the biggest players, right? Where are you seeing smaller organization use integrations?

Webb: It’s definitely not just the big guys. We had an experience just this year with a small brokerage that integrated into their homegrown software, built around their daily processes. The integration was quickly completed and the impact to their workflow was pretty substantial. They suddenly went from delayed feedback to real-time data availability. It sped up the way in which they worked and also helped with the customers they were working with because the data was timely and accurate.

Broberg: Previously, the larger players in the industry had the capital to invest in technology stacks that make integration easy. With companies like Truckstop.com focusing on the broader market, the small and mid-sized players increasingly have an equal playing field. We often see the small, mid-market organizations moving faster as they have more control and are more nimble with integrations. The API economy is growing significantly in transportation – it's no longer a luxury but a necessity to all players in the market.

Voltmann: We always tell new businesses or those looking to enter the industry, “There are three things you need to worry about: cash flow, cash flow, cash flow.” If you’re going to start a brokerage business, you need $150,000-200,000 in working capital. You need to float cash 28 days a month. But with integrations, and the right software, the small guys can play on the same field as the bigger guys. And they can target smaller segments. The bigger players have the advantage early on…but that gap shrinks over time.

Wynkoop: What would you say to a smaller organization with a homegrown system who has never shopped integration options?

Webb: Reach out to us and ask!

Broberg: What she said! In reality, it's not about the integration, it's about the result.  Look at what you’re trying to accomplish. Is it a reduction in manual data entry? Increased efficiency? New functionality? From there, reach out to folks like Truckstop.com for our take. We’re always here to help steer you in the right direction, whether or not it's with us.

Webb: Agreed. We have a portfolio of integration points we can walk users through, so a small org could understand and evaluate the impact it could have on their daily workflow and, ultimately, their bottom line. As Trent said, we’re working hard to level the playing field, to increase accessibility to data and services. We’re striving to make our integration products intuitive and easy to integrate in a short amount of time.

Wynkoop: Okay, final lob: What are some of the issues our industry faces, particularly regarding integration? Trent, you mentioned legacy systems and EDI; any others jump out at you?

Webb: I’d have to say: there isn’t just one thing that stands out anymore. We’re getting asked for integration points across capacity, rates, payments, insurance, and tracking on a daily basis.

Broberg: Fragmentation. The industry isn't standardized, plain and simple. Systems, fields, even terminology isn't standardized. Planning up front, and having the resources to plan up front, is always a challenge as well. Two-thirds of the success of an integration is in the planning stages, not the development. Another challenge with integration remains all the new start-ups in the industry. Silicon Valley has produced some great technology but the design and development was completed by those with limited transportation experience, in many cases. This creates adoption and mapping challenges throughout the systems.

Voltmann: Well, the economy isn’t helping. Right now, we’re bouncing along the bottom, so to speak, so businesses have to find ways to cut costs. You can only squeeze so much margin from your carriers or build so much into your shipper relationships without losing their capacity or their business. You have to find other ways to reduce costs. I think the most disruption in the market is going to come from back-office automation and integration.

Webb: Lastly, one of the things that jumps out at me is how many new players are jumping into the transportation industry on certain fronts and, for them to be successful, they require integration. This is putting a demand on the TMS community to do many more integrations and possibly bet on players who might not be around in the future. Not to honk our horn too loudly but I like to think the value Truckstop.com brings is the breadth of our integration products, the fact that we’ve been around 22 years, and our position as the most secure and well-vetted marketplace out there.

Wynkoop: Thanks, team. And a special thanks to you, Bob, for stopping by and giving your take.

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Robert A. Voltmann
In June of 1997, Bob was named President & CEO of the Transportation Intermediaries Association. TIA is the only organization representing the interests of North American transportation intermediaries of all disciplines: brokers, domestic freight forwarders, air forwarders, international forwarders, logistics management companies, intermodal marketing companies, and perishable commodity brokers.

Trent Broberg
Trent Broberg is the General Manager, Truckstop.com and Vice President of Customer Success. Broberg’s background includes more than 13 years of logistics leadership experience with the likes of Swift Transportation and DB Schenker. 

Brett Webb
Brett Webb serves as the Vice President of Integration Services at Truckstop.com. Webb comes from a diverse development and product delivery background. Brett began her career as a developer before holding various leadership positions in development, quality, and product delivery. She spent 17 years at HP and in her last role, moving to Product Marketing to extend her breadth.

Nick Wynkoop
Nick Wynkoop is Truckstop.com’s Product Marketing Manager for Freight Matching and Rates.

 

The Future of IoT in the Supply Chain: It’s Complicated

By Contributing Author | 10/17/2017 | 11:18 AM

By, Kristi Montgomery, VP of Innovation, Kenco Logistics.

Part I of III

Constant connectivity; real-time insights; the ability to interact immediately and automatically with remote technology; the promise of IoT is disrupting all industries – and it seems like the future is bright. According to IDC, worldwide spending on the Internet of Things (IoT) is projected to grow 16.7% year over year in 2017, reaching just over $800 billion. By 2021, global IoT spending is expected to total nearly $1.4 trillion as organizations continue to invest in the hardware, software, services, and connectivity that enable the IoT.

This potential for a truly connected reality is especially alluring for the supply chain, where so much can be gained from constant connectivity and insights. Previously, once a load left a warehouse, there was no way of knowing its exact state until it arrived at the next location – but, with technologies like sensors and RFID tags, a company can keep complete tabs on it at every step of the journey. This is an amazing thing for supply chain execs – and especially exciting as the enabling technology is becoming both less expensive and more readily available, meaning that full-scale deployments are much more viable now. Indeed, Business Insider predicts similar growth in this sector, anticipating that the global spending on connected logistics solutions will grow steadily form a current spend of $9B annually in 2017 to $20B in 2020.

But – for all the excitement and possibilities – some real roadblocks remain: namely, that IoT technology is like the wild west; there are no existing tech standards. And while that doesn’t seem like a big problem now, it’s going to become one very soon.

This article is the first of a three-part series examining the possible opportunities and impact of IoT rollout in the supply chain: first, a deeper look at the benefits; the next will consider the very real roadblocks that will keep IoT technologies from becoming widely and successfully adopted; and the final will lay out guidelines that companies should consider for a successful rollout.

Let’s start with the upside: the benefits of IoT technologies on the supple chain are massive, exciting and very close to realization.

  • Reduced Costs: This is the clear driver for most companies. IoT devices, such as RFID and WIFI tags, can provide significant savings in the inventory management arena: from providing real-time visibility to where inventory is physically located inside the warehouse, which can improve labor costs and inventory accuracy; to a constant stream of data derived from the devices, which can provide insight into movement within the facility, potentially helping to identify wasted trips, unnecessary touches, and process improvements. In addition, IoT devices can provide detailed, real-time asset management, which, in a global setting, provides an entirely new level of visibility. Transportation cost improvements can also be realized by having notification of actual time of arrival versus estimations.  On-board IoT devices can help with optimal routing around traffic issues, avoiding costly delays and improving on-time deliveries.  This reduction of traffic delays and idle time can also save companies with fuel costs, provide more usable drive time, and improve customer satisfaction.

  • Safety: With the ability to monitor and alert before a situation becomes dangerous, IoT technologies have great potential to improve quality and safety in the logistics industry. For food or medical shipments, for example, sensors can manage by exception for temperature controlled shipments, providing alerts when tolerances are out of compliance. Sensors and IoT devices mounted on equipment like forklifts or conveyor systems can provide real-time data on the status of maintenance or potential failures that could result in injuries.  As the technology evolves, real-time location of equipment utilizing IoT devices can eliminate traffic jams, near-misses, and accidents by ensuring the powered equipment is always aware of other devices. IoT equipment can even help with employee development: the real-time feedback provided by the devices can alert supervisors of coaching opportunities for non-compliant activities and result in improving processes in both quality and safety.

  • Regulatory Compliance: IoT technologies will offer direct benefits in regulation compliance beyond just temperature tolerance assurances. With enhanced track and trace capabilities and real-time visibility, a company with a full IoT deployment would be able to to quickly recall defective product and notify the audience with a higher level of accuracy and efficiency. The ability to narrow the focus of a recall will also enable greater cost savings and less wasted product. 

But despite all of these clear benefits – and coupled with the reality that technologies like sensors are advancing, and deployment costs are decreasing – why aren’t we seeing greater increase in IoT implementation? It turns out, the roadblocks are more complicated that they might originally seem – from obvious concerns around security to the massive issue of the lack of technology standards. Stay tuned for my next blog, where I dig into each of these challenges in turn.

KristiMontgomery

Kristi Montgomery, Vice President of Innovation, Kenco Logistics

Promoting transformational change in supply chain through delivery of innovation for customer-centric solutions

Like you, Kristi knows that innovation cannot just be a buzzword.  She is a dynamic explorer of strategic innovation that drives revolutionary change.  With 27 years of logistics and supply chain experience, she leads a dedicated team of specialists in Kenco Innovation Labs who identify, research, and prototype creative ideas with the potential to impact the supply chain. Collaborating with customers, entrepreneurs, and vendors from multiple industries enables Kenco to think “inside” the supply chain box and create unique, customer-driven solutions.  As the senior innovation officer, recognizing that no single approach works for every customer, Kristi leads research and development utilizing design thinking and open innovation to deliver business value for the 200+ customers that Kenco serves in North America.  Kristi is passionate about the relentless pursuit of innovation as an enabler of business growth and driver of strategic advantage. Executing on the innovation promise compels her to be a transformational agent of change.

Kristi received her BS in Organizational Management from Covenant College She is a certified Specialist in Design Thinking and Innovation as awarded by the Darden School of Business, University of Virginia.  She also received her Certified Information Executive designation from the Institute of CIO Excellence at the University of South Carolina.

Kristi serves on the Board of Directors for ChaTech, a non-profit dedicated to the promotion of technology and STEM education, is the Co-Chairman of the International Warehouse and Logistics Association Education Committee, and serves the industry speaking, participating as a panelist, and publishing articles promoting supply chain innovation.

Delivering Drones? More Subscription Boxes? 4 Things to Expect in Shipping and Fulfillment in Upcoming Years

By Contributing Author | 09/29/2017 | 4:13 PM

By Jake Rheude, Red Stag Fulfillment

We just ordered a crystal ball to look into the future of fulfillment, and our handy little app told us it should be here by now, but it’s out on some truck, on some road, at some other point in its journey.

Not knowing exactly where and only finding out about issues after the fact is the current state of affairs. However, it probably won’t stay that way long. The true future of shipping is the future of information and sharing data in real-time in innovative ways.

Here is a look at four trends we think will be huge in near future, changing the way we do business and satisfy customers. At their core, each involves data used to make selections, run systems, track devices like drones, and make every element of business more transparent.

Automation Before All Else

If we started with anything besides automation, you probably would stop reading. Every logistics, supply chain, and DC professional knows that the robots are coming to change our jobs. The biggest difference for the future is that we expect it to take on an exponential growth feeling.

Fulfillment is already embracing automation in warehouses, route optimization, how containers and pallets are loaded, and much more. It’s going to push to become better at every aspect, cutting time and cost while maintaining reliability.

One of “the next big things” will likely involve automation of supply chain management concerns, especially returns. Overall, still about one-third of ecommerce items are returned. That process still has a lot of manual components, especially for the consumer and the warehouse.

It’ll be especially interesting to see what advances come in the realm of automating the processes used to verify returns and check for product defects. If someone develops that machine, they’ll have a home in nearly every major e-commerce hub.

Automation is also going to be key to what happens with products. We think that more subscriptions to get rid of random inventory and kiting to make use of refillable items will be big, but what’s in those items and what is tested will likely be driven by analytics and marketing automation that tracks customer preferences.

For companies looking to move products in an innovative way, automation is going to be a significant cost driven and reduction technique, with varying levels of business intelligence and final decision-making power.

Airships and Ocean Beds

Patents often show us what’s coming next and, if you take the latest round seriously, it means the sky and the ocean are our next delivery mechanisms, just not in ways that we typically see.

Drones have a relatively small delivery area, especially as the things they carry get heavier or vary greater in dimensions. So, to bolster drone delivery, Amazon and Walmart are looking at making the warehouse float with the drones in the form of an airship warehouse.

Walmart is taking the lead on this new arena with a recent patent on a system that will track drones as they move to and from the airship warehouse and delivery points, with ground stations supplying some assistance.

Amazon already holds a patent for a flying warehouse and both retailers are said to be considering methods of control via on-site or remote teams. We’re likely to see some dueling warehouses in the skies because Walmart’s patents focus significantly on operation and logistics, which gives them a better chance of being granted as well.

On the other end of the spectrum is a patent from Amazon that relies on the ocean and acoustic tones to make a delivery. The “aquatic fulfillment center” would move waterproof goods through a rather complex system that could make use of our sky-warehouses because it supports re-stocking via parachute drops into the ocean.

These are a bit of fun, and there’s a good chance that’s all they’ll be in the near future. Air deliveries are going to face significant regulation, especially if drones are making deliveries to homes instead of static lockers or stores (more on those later).

Companies like Amazon and Walmart typically hold onto a variety of patents they don’t use or can’t currently implement. It sparks some innovation and a little enjoyment, but may also be a way to try and stop competitors.

Figuring out the logistics of floating or sunken warehouses will be difficult and costly, as will the technology and technicians to keep it all running, so, for now, this is half question mark and half remarkable story to share online and make everyone think a company is innovative.

What’s Old Is New Again

One big trend that is more likely to be real — though it will play a role in those two interesting warehouse options — is a return to shipping and fulfillment that doesn’t go right to the customer.

Amazon has been at it with lockers. And, many years ago we had to order clothes that weren’t in our size or furniture that would then be delivered to the store for us to pick up. Now, we’re doing this via app instead of over the phone or in person.

Consumers want their orders ASAP and are discovering many options that will allow them to get same-day “delivery” when they go into a store and pick it up. The main difference here is the time shift. We’re now shopping on our own time (or our employer’s) and then picking up when it’s convenient for us.

In cases where the store had a traditional brick-and-mortar location, there isn’t any real shift of inventory or logistics yet. People are shown what’s currently in stock and these orders are treated as a direct purchase, which can often integrate with existing point-of-sale systems. In essence, it’s just another channel for a sale with minimal adjustments.

Jumping back to the locker concept, this is expected to grow to more retailers and distribution pick-up points. Some conversations have even included the possibility of co-located points because it would be easier for drop shippers as well as larger brands to manage together.

We’ve come full circle to the local post office, holding your package for you until you come and pick it up. The significant difference here is that you get a digital slip letting you know things are ready, instead of a note on your door or in your mailbox.

Retailers have found that customers tend to care most about speed and there’s not always the need to look for a brand-new model if you can hasten an old one. That’s the data play here: analyze and focus on what matters most for your investment.

The New Fulfillment Heartbeat: Visibility

On the supply chain side of things, there is one major shift to pay attention to: visibility.

Vendors now provide greater levels and their customers demand it. We’ll see it play out in a variety of ways with systems that track and share information. The one piece of this that we’re excited to see comes in the form of everyone’s favorite buzzword: blockchain.

In the logistics space, blockchains are going to be more about the ledger capabilities and less about cryptocurrencies. At its core, a blockchain could create an immutable record of goods, tracking them and who has access to them, from the point of manufacturing all the way through vendor purchase, movement, warehousing, customer sales, distribution, and final delivery.

The current status of the items can be altered as it moves, but there is a core layer in blockchain that cannot. It provides a clear audit trail to quickly root out potential causes of damage, loss, or theft. Depending on the item, you can also track important data like temperature of the reefer truck and keep this as part of the permanent record.

Customers drove visibility by demanding that we can know where our package is right at this very moment. Industry is making it their own by using it to be better partners and, in the near future, to reduce the risks they face with each order.

 

Jake_Photo

Jake Rheude is the Director of Business Development 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.

Expanding Markets, Innovative Technologies and New Tax Incentive Opportunities for the Material Handling Industry

By Contributing Author | 08/18/2017 | 8:21 AM

By Tracy Lustyan, alliantgroup

The material handling and logistics industry has become one of the fastest growing sectors of the economy. System integrators and other material handling businesses support the manufacturing industry by making its processes more efficient and its fragmented supply chains easier to manage. In the future, there will be an increased need for global supply chains and distribution.  As a result of businesses incorporating new technologies to more efficiently handle and distribute goods, the material handling market will continue to surge as businesses spend more money on logistics systems each year.

Recent data estimates that the consumption of material handling and logistics equipment and systems exceeds $156 billion in the United States alone and employs over 700,000 workers. According to the Council of Supply Chain Management Professionals (CSCMP), the costs of U.S. business logistics were almost $1.5 trillion—or about 8 percent of our country’s GDP—in 2013. Clearly, the numbers point to a booming industry that will be a key driver for broad economic growth in the future.

The material handling sector’s growth could be further accelerated by a powerful tax incentive opportunity known as the Research and Development Tax Credit. Recent regulatory and legislative changes have expanded the number of businesses that can claim this credit as well as the value of the credit itself.

The Research and Development Tax Credit

The name of this tax credit is something of a misnomer. To qualify for the credit, businesses do not have to experiment with beakers and test tubes. Rather, the R&D Tax Credit rewards businesses for keeping technical jobs in the United States. The R&D credit is wage-based, which means the dollar amount of the credit is primarily based on employee and contractor wages in addition to supply costs.

When Congress recently expanded this incentive, its intention was to encourage companies to keep production and distribution in the United States. The credit rewards businesses that use American components in their products or hire American contractors to handle the fabrication, controls and automation of material handling systems. The credit is now permanent and one of the largest incentives offered at the federal level. Many states have their own versions of this federal credit as well.

Any company or contractor that designs, engineers or builds material handling equipment or processes is a great candidate for the R&D credit. To give a real-world example, a conveyor systems solutions provider received over $1 million in federal and state credits for designing a heavy-weight conveyor belt system for a frac sand mining operation. This company tested various conveyor belt designs and also evaluated different substances to build the conveyor belt itself (such as Kevlar, rubber or polyvinyl chloride).

Businesses in the material handling industry are already conducting activities that qualify for the R&D Tax Credit each day. To name a few qualifying activities:

  • Developing, designing, programming, manufacturing, testing or fabricating equipment or material handling systems
  • Performing retrofits or other system modernizations
  • Developing or programming guiding systems software for automatic guided vehicle systems (AVGS) or automated storage / retrieval systems (AS/RS)
  • Designing, developing or programming robotic systems
  • Developing logistics, order fulfillment or tracking software
  • Manufacturing or integrating motion controls or motor systems
  • Developing overhead material handling solutions (i.e. cranes, hoists, monorails)

Recent Changes to the Credit

In 2014, regulatory changes expanded the type of supply costs that are eligible for this credit. Eligible supply costs now include components and material costs consumed in the development of a first article that is delivered to customers. By counting these supply costs, businesses are now finding that their credit amount can be two to ten times the size of their previous credits. If a business that engineers and builds solutions for the material handling industry has examined the credit in the past, this same business could now be eligible for a significantly larger credit.

Beginning in the 2016 tax year, businesses with less than $50 million in gross receipts can now claim this credit against their alternative minimum tax (AMT). Traditionally, the AMT barrier was why many small and mid-sized businesses could not claim the credit. With the AMT turn off, businesses of every size can stand to benefit from this powerful tax incentive.

There have been many other regulatory and legislative changes that have expanded the credit to reward businesses for conducting qualified applied research in the United States. The credit now rewards companies that solve a technical problem on a factory floor or improve an assembly line or distribution process.

These modifications to the credit should not be overlooked. The credit’s expansion combined with the shift towards automated technology means that businesses in this industry will have ample opportunity to claim the credit.

New Technologies, New Opportunities for Growth

As consumers expect goods to be delivered at a moment’s notice, businesses are not only opening more distribution centers but also investing in new equipment and distribution processes. These new innovative technologies are part of a larger automation trend in the manufacturing industry.

A report by Global Industry Analysts, Inc. stated:

Material handling equipment manufacturers are increasingly incorporating advanced technologies, mechanisms and solutions such as robots, and automated guiding vehicles, among others, for enhanced productivity and safety. Technologies that are poised to benefit material handling businesses in the near term include the Internet of Things, cloud computing, data analytics and machine-to-machine (M2M) communications.

The continued adoption of automation systems will create more efficient multichannel distribution and other material handling processes. These shifts to new automated technologies will continue having a significant impact on businesses. For example, a material handling company received $596,000 in federal and state R&D credits for designing improvements to an existing industrial system. This company determined the optimal layout for the automated system by testing different designs and response times. They redesigned existing components to ensure compatibility with the improved system and rewired the communication system.

Material handling businesses will continue to invest in automated solutions to stay competitive in an increasingly technological space. Tax incentive opportunities that can significantly reduce businesses’ tax liabilities such as the R&D Tax Credit will be crucial. At alliantgroup, we highly encourage manufacturers, systems integrators and other material handling businesses to see if they qualify for this credit. The R&D Tax Credit is a great opportunity for this advancing industry.

Tracy
Tracy Lustyan is a Managing Director based in alliantgroup’s Chicago office. Tracy offers a vast knowledge of government-sponsored programs, with concentrated expertise in the business application of the R&D Tax Credit, IC-DISC, energy credits, and tax controversy services.

The Importance of Free Shipping and How to Afford It

By Contributing Author | 08/04/2017 | 9:40 AM

By Jake Rheude, Red Stag Fulfillment

It’s hard to find a website that doesn’t offer some sort of free shipping these days. Most put it up as a default to protect themselves against ecommerce giants like Amazon, and the default posture works well for some but harms the business of others.

It’s a difficult balancing act, but it’s one that almost every business will need to make in order to stay competitive. Let’s take a quick look into why it is a requirement from the customer standpoint and how to see if your business can make the practice affordable and fruitful.

Why Is Free Shipping Necessary?

There are studies from Invesp that point to 90% of online purchases saying that free shipping is their no. 1 incentive to shop online, orders with free shipping are 30% higher than the average order, and 61% of people claim they are “somewhat likely” to cancel an order if the shipping isn’t free.

There is a lot of similar data, and while the effectiveness has a range of about 15% — typically 75% to 90% of people desire free shipping — the bigger number that you should be aware of is how many Amazon Prime members there are: the latest data suggests between 80 and 85 million in the U.S.

These are people willing to pay $99 per year predominantly for “free” two-day shipping. Their desire for free shipping is so great that they are willing to pay an upfront fee just to ensure that they have access to free shipping on the goods they want.

Here’s an informal study of one that you can do to see how powerful this free shipping desire is. Think of a recent Amazon search you made (pretending you’re a Prime member if you aren’t already). Did you even look at non-Prime items or did you automatically click the search results filter that excluded them before digging into products?

Free shipping has become such a powerful force, and arguable an ecommerce norm, that we are actively filtering out potential purchases that don’t fit.

Who Can Pay for It, Reasonably?

Almost any business can afford to offer free shipping on most, if not all, of its sales. The trick is to find a value in the free shipping offer that makes it worthwhile and cost-effective.

As we noted earlier, orders where the customer knows ahead of time that shipping is free tend to be 30% larger than a store’s average order. For high-value goods, that 30% increase in the aggregate can offset the costs you incur when eating shipping fees.

When you’re working with lower-cost goods, it’s important to look for other value and offer free shipping when you can take advantage of that value. Here are a few common areas where you can reasonably make a trade:

  • Provide free shipping in exchange for a customer creating a profile and agreeing to receive marketing messages from you. The goal here is to create repeat sale and up-sell opportunities as well as generate overall customer data and insight.
  • Time free-shipping offers to beat abandonment. If a customer starts to abandon a shopping cart, especially if this is done right after filling out the shipping details and getting the price, offer a one-time coupon to eliminate those costs. You’re working to encourage the first purchase and establish a relationship.
  • Go a step further and offer free shipping to all first-time customers. It’s a more direct approach and can take advantage of the first two items in this list.
  • Set deals so that free shipping applies only if some specific items are in a cart. This is more about moving inventory and establishing a new market for goods.

Tie your free shipping to a larger business objective and it will feel like something you can afford and use to grow your company. Stick to metrics that are easy to define and you’ll feel more comfortable both with starting the initiative and with your ROI.

Okay, So How Can I Find the Money for It?

The plan to implement a free-shipping offer is great, but often you need to have a way to capitalize on potential to make it an affordable long-term prospect. Start by considering ways you can save on the shipping itself, areas where you can impact order and its value, and methods to turn data into direct revenue.

Most business start with cost-reduction techniques. These options can include moving to standard-sized boxes with minimal branding and fuss. Amazon provides a fitting example with boxes that now tend to have very little information or branding on them, but with tape that notes deals, special days, and more. The experience inside the box is minimal, as items usually sit near brown paper and plastic bags of air.

Unless your selling specifically on the experience of opening the box, customers are going to care most that the products they receive are not damaged.

You can also look to negotiate rates directly with carriers if you have a high-volume operation. If your volume is too low, many 3PLs and private warehouses can meet volume requirements and may offer you an overall savings if you move your warehouse operations to their facilities.

Impacting order value comes at the problem from the other side, before the order is finalized. You can look to generate specific order value by increasing the amount required to receive free shipping — A/B testing is recommended here to see how much your average customer is willing to spend to get free shipping.

Essentially, you’re setting conditions around the “free” aspect. These can be minimum costs, select items, promotional weekends, or limiting what you offer as free. Make slower delivery times free while offering paid options for faster delivery.

Or, you have the option of trying to make customer data work for you. This is the trickiest option because it’s success isn’t guaranteed. You’re looking to convert information into actionable, profitable intelligence.

Exchanging free shipping for a customer profile and information will allow you to deliver marketing and promotional information to them. However, there is no guarantee that read it.

You also may require a social action, such as sharing their purchase online across social media to get their shipping costs refunded. Those messages may generate some awareness, but are only helpful if your shopper’s friends are also in your target market.

If you trade free shipping for an online review, will customers trust the veracity of these reviews? In many cases, it’s “yes, they will,” but you have no guarantee of that.

At the end of the day, your free-shipping offer must generate value. Where you find that value and how you execute on it depends on the rest of your operations, your technical capabilities, and the time you have to invest in this aspect of growing your business.

You can offer it and you can afford it. How you best capitalize on it is the primary question to answer.

 

Jake_Photo

Jake Rheude is the Director of Business Development 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. 

No Space for Error: Avoid These Six Reasons for Bulk Pharmaceutical Returns

By Contributing Author | 07/18/2017 | 11:27 AM

By: Larry Hotz, Marketing Manager, WDSrx – Woodfield Distribution, LLC

Companies within the pharmaceutical supply chain must consistently deliver the correct product at the right time to the proper person. Patient lives depend on the efficient collaboration between manufacturers, wholesalers, logistics service providers and dispensers.

Stakes are equally high when products are removed from sale or prevented from entering the commercial market. There is no room for error when manufacturers designate goods for the reverse distribution pipeline.

STRICT RULES FOR PHARMACEUTICAL RETURNS

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Pharmaceutical warehouses operate under strict guidelines from government and other authorities.

The pharmaceutical industry adheres to strict guidelines imposed by government and other regulatory authorities. To maintain operations, warehouses and distribution centers are regularly audited for compliance. Reverse logistics procedures and forward logistics procedures are equally stringent, with constant monitoring and reporting to assure accuracy.

According to Jason Solomon, Reverse Logistics Manager at WDSrx, a pharmaceutical logistics service provider, “Manufacturers invest heavily in bringing product to market, so when items are flagged for reverse logistics process, each step is highly scrutinized.”

SIX REASONS WHY

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Damage to products in transit must be assessed and documented before determining disposition.

There are six primary reasons manufacturers take medications out of regular distribution channels:

Outdated Product. Products that are past their expiration date cannot be sold. In 1979, the Federal Food and Drug Administration required an expiration date on all prescription and over-the-counter medicines. Expired medical products can be less effective or risky.

Certain drugs may experience a change in their chemical composition. Others are at risk of acquiring bacterial growth, which may lead to serious illness.

Expired product cannot be sold and must be destroyed to neutralize any possibility of them entering the commercial market. In the warehouse, expired product situations can be minimized with improved record-keeping to identify the cause of the problem.

R&D Product-Failed Batches. Laboratory testing of medications is regularly conducted for the entire product life cycle from formulation and development through manufacturing, and periodically after production. These tests are conducted to assure the effectiveness of the product according to label specifications.

When results indicate a failed test, the lot is isolated in the warehouse and marked for destruction.

Recalls. The Food and Drug Administration (FDA) has jurisdiction over recalls involving drugs, medical devices, blood and plasma products, vaccines, other biologics and veterinary products. Recalls are actions that remove a product from the market. They may be initiated by FDA request or order or on the manufacturer’s own initiative.

The main causes of recalls are failed specifications, sterility issues and product mislabeling.

New Federal regulations being implemented during the next six years as part of the DSCSA (Drug Supply Chain Security Act) are increasing the safety of medications by requiring detailed tracking down to each individual sales unit, which is currently not required.

Recalls in future will be less disruptive to the supply chain because the technology will make it possible to remove only affected products from shelves.

Withdrawals. The Food and Drug Administration is recognized internationally for their industry-leading practices, designed to assure the safety of drug products for Americans.

Post-market withdrawals of medications are rare and occur in cases where previously-approved products are shown to cause adverse patient reactions. Withdrawals are initiated by the FDA for voluntary action by the manufacturer or by FDA order when required.

During a ten-year period from 2001–2010, three drugs were withdrawn[1] out of 222 prescription drugs approved by the FDA during that time.

Damages. The wrapping is as important as the present in the pharmaceutical industry. Primary and secondary packaging protects medications on their journey within the supply chain. Rules vary by manufacturer, however damages to packaging may result in the affected goods being flagged for destruction.

Goods may be damaged during transit, while conveying from one location to another within the warehouse or if handled improperly. According to WDSrx Reverse Logistics Manager Jason Solomon, “Damage we can see is visually archived and noted in shipping documents before notifying the brand owner who determines how to move forward.”

In some instances, damages are not visible and result from transport mix-ups. When pharmaceutical drug products are stored with fruits and vegetables or other potential contaminants, they may be adversely affected by transfer of odors and impurities.

Although packaging is intact, the stock is accepted at the dock but does not enter active inventory. The manufacturer determines whether the goods are re-packaged for sale or consigned for destruction.

Short-Dated Product. Medications nearing their expiration date and are not yet consigned to a buyer are often marked for reverse logistics services. The process may begin anywhere from less than six months to 18 months from expiration date, depending on manufacturer requirements for the specific drug.

Warehouses that handle pharmaceuticals operate on a First-In-First-Out schedule, with products shipped according to the proximity of their expiration dates. This assures older inventory is moved first and also creates an efficient stock rotation system. Distributors normally ship product with at least six months remaining until the expiration date.

There is a second option for short-dated products in addition to destruction.

Charitable organizations collect and distribute short-dated pharmaceuticals donated by manufacturers to low income, uninsured patients. The only difference between short-dated product and the identical product in retail pharmacies is the expiration date.

The preference for medications in retail environments to have a longer timeframe before expiration is a benefit to many in the most vulnerable communities who can receive treatment. The Dispensary of Hope, a prominent charitable medication distributor, helps thousands of patients with treatment made possible by corporate donations.

PREPARING FOR THE END

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Products marked for disposal are de-commissioned in the WMS and placed in a secure area.

When items are designated for reverse distribution, the warehouse technician accesses the warehouse management system to re-classify the product status from an active picking location to "non-active" status in preparation for disposition. When in "non-active" status, the system will not allocate those items for order picking.

Pharmaceutical warehouses operate according to strict regulatory requirements mandating specific temperature control, security protocols, vaults and cages for Controlled Substances, heightened cleaning and maintenance procedures and monitoring for temperature, humidity, motion and vibration.
These circumstances sometimes trigger additional steps in order to properly handle products in the reverse distribution channel.

The affected product is then collected and moved to a segregated location within the warehouse. This could be a dedicated space reserved for product disposition or an area that is clearly separated from active product aisles.

With final approval, the stock is either held for donation if it is short-dated, or enters the destruction process.

CONFIRMING DESTRUCTION

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Destruction of pharmaceutical drug products requires detailed documentation to verify drugs are properly handled.

Stringent regulations are in place to monitor pharmaceutical drug products throughout the destruction process. Items for destruction are accompanied to a facility where they are incinerated. Some logistics providers utilize special recycling operations that convert waste into electric power, which may be returned to the surrounding community.

Items set for destruction at WDSrx are accompanied to a special facility run by Covanta Environmental Solutions that is authorized by the DEA to convert pharmaceutical drug products and Controlled Substances (Schedules I-V) from waste into energy. The Covanta Lake County Resource Recovery Facility functions as a power plant producing clean electric power generated from waste.

The WDSrx headquarters facility in Boca Raton, FL, recycled 378,380 pounds of pharmaceutical drug products with Covanta in 2016, creating 368 megawatt-hours of electricity able to power 33 homes for an entire year. “The pharmaceutical reverse logistics process is environmentally conscious and socially responsible. Our team and our supply chain partners, including Covanta, take our responsibilities seriously, helping maintain the integrity of the entire pharmaceutical supply chain,” asserts Solomon.

A Certificate of Destruction is issued after the product is destroyed. The procedures for destruction of Controlled Substances require an additional document, called a DEA Form 41. This form includes a witness statement to corroborate the product was destroyed according to proper procedures.

Manufacturers and other companies that handle large quantities of pharmaceutical drug products may outsource disposition to a Logistics Services Provider.

Pharmaceutical logistics services providers hold special licensing from the FDA and DEA to perform this special function. When contacted, these specialists will determine whether the product includes any Controlled Substances or hazardous materials.

When specific product details are received, arrangements are made to transport the goods directly to the logistics services provider facility. After arrival, the cargo is delivered to the reverse logistics department, where each item is carefully inventoried to verify quantities and products.

Once inventory is confirmed, the items are incinerated on site or transported to a destruction facility for final disposal, where a Certificate of Destruction and, if required, a DEA Form 222, is signed and registered.

RECOMMENDATIONS ASSURING COMPLIANCE

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Correct labeling on packaging helps avoid costly delays during the reverse distribution process.

Disposing of pharmaceutical drug products is a complex task involving multiple steps to conform to regulatory requirements. When circumstances call for product disposal, pay attention to three important situations in order to avoid unnecessary delay.

First, pay close attention to packaging and labeling of goods marked for destruction. Mislabeled boxes, pallets or drums will be flagged during the inventory process when every item is checked for accuracy.

Jason Solomon from WDSrx recalls one instance when drums that were labeled “Biohazard” were withheld from destruction, delaying the job even though the contents did not contain hazardous material. According to Solomon, “The drums marked as biohazardous materials were removed from the area and quarantined until the situation was resolved later in the day.”

Second, because products and their packaging are incinerated, consider using packaging materials that burn more effectively. For example, plastic or fiber drums are more easily disposed than stainless or other steel drums.

Third, maintain an accurate inventory of all products to be destroyed. Details about product description, strength, delivery form and package size are required prior to delivery and are confirmed before destruction. Diversion from procedures or incorrect inventory documentation will result in potential costly delays.

BULK DESTRUCTION MADE EASY

Under certain situations, pharmaceutical drug products must be removed from the commercial market or taken out of active inventory from warehouses prior to distribution. In most cases, these products are destroyed to keep them out of the supply chain.

The reverse logistics process for bulk pharmaceuticals is conducted under strict regulations to assure patient safety. Specialized procedures handled by expert technicians move goods through multiple steps until their ultimate destruction.

Manufacturers can avoid potential delays by following guidelines and contracting with a reputable logistics services provider authorized to handle, and familiar with regulations surrounding, pharmaceutical drug products.

[1] Press, Associated. "The Odds of a Drug Having a Significant Safety Issue after Winning FDA Approval Are Nearly 1 in 3, Study Finds." Los Angeles Times. N.p., 09 May 2017. Web. http://www.latimes.com/science/sciencenow/la-sci-sn-fda-drugs-safety-20170509-story.html.

For further information contact: Larry Hotz, WDSrx Marketing Manager at lhotz@wdsrx.com

Larry headshot

Larry Hotz is the Marketing Manager for WDSrx—Woodfield Distribution, LLC, a logistics services provider exclusively for the healthcare industry. WDSrx offers warehousing and fulfillment, e-commerce solutions, inbound and outbound call center, transportation management, packaging and labeling, financial services and regulatory compliant reverse logistics. Product returns and destruction are initiated online at www.wdsrx.com for efficiency and completed directly with a WDSrx technician in a few simple steps.

 

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About One-Off Sound-Off

Welcome to "One-Off Sound-Off," a blog page devoted to guest commentary on all things supply chain. This is a space where industry leaders can share their opinions and expertise with the logistics and supply chain community. If you have an article or commentary you'd like to share, please consider sending a guest blog proposal to feedback@dcvelocity.com.



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