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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.

 

Innovation in the Supply Chain: Yesterday, Today, Tomorrow

By Contributing Author | 07/05/2017 | 7:00 AM

Blog abstract: Innovation for today’s supply chain leaders is not always defined by the latest gadgets and gizmos. Often, its definition lies within innovating the business model and improving supply chain processes, both of which positively impact the bottom line. And, while adopting emerging technologies plays a role within innovating the supply chain, leaders are most interested in implementing proven, reliable solutions for today, not tomorrow.

This blog post will focus on what supply chain leaders are truly seeking when looking to innovate, with supporting data pulled from the Kenco State of 3PL Innovation Survey, and how those insights can help 3PL providers prepare for Innovation Today.

 

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

There is much chatter, in the supply chain world, around innovation that focuses on bleeding-edge technologies, such as package-delivering drones, driverless trucks, and collaborative robotics. For supply chain leaders, this is interesting and eye-catching; but intrigue does not always mean adoption. As the VP of Kenco Innovation Labs, I frequently work with customers who are trying to find the balance between making impactful and proven investments in new technologies, and knowing when to take a leap on piloting a promising but unproven innovation. The decision is rarely an easy one: especially when there is so much at stake in a finely tuned supply chain.

We wanted to get to the bottom of this tension, so, recently, Kenco conducted a survey with supply chain leaders from a range of industries, and from organizations of all sizes, to get a deeper understanding of how they define innovation, which technologies they think will have the greatest impact on the supply chain, and what their plans are for the future of innovation in their companies. One of our leading questions was how top executives and supply chain leaders defined the idea of “innovation” in their organization. The survey found that nearly 85% of these respondents defined it as “process improvements” or “business model innovation” – not as “adopting emerging technologies.” This is an interesting point: while most chatter in the industry suggests all companies have their eyes on flashy new technologies, this data signals that what is most important to supply chain leaders are new technologies and solutions that can have incremental but impactful changes TODAY in their supply chains.

This point continues to bear out throughout the data. An “innovation” pain point has always been around “Supply Chain Visibility” and to this day, it remains an innovation challenge for leaders. In fact, by looking at specific trends supply chain leaders are planning to invest in, the top three areas of interest are:

  1. Supply Chain Visibility (83%)
  2. Robotics and Automation (58%)
  3. Sensors and Internet of Things (42%)

On the other hand, the lowest areas of interest to currently invest in are:

  1. Driverless and Self-Driving Vehicles (14%)
  2. Drones (8%)
  3. Augmented Reality (8%)

And when asked how important each of these technologies are for their businesses, 64% of leaders deemed supply chain visibility as a high priority, while drones (42%) and driverless vehicles (40%) were equally indicated as not a priority.

These insights are not surprising to me – my customers are running a “tight ship” and, with so many moving aspects that can have great impact to the business, they can’t afford to take a gamble on a new technology that might slow down their processes or fail entirely. However, just because a supply chain leader can’t monitor the innovations for tomorrow, that doesn’t mean these innovations won’t be a priority and shouldn’t be on your radar.

Working closely with customers, my team and I investigate which emerging technologies can be utilized to better serve the supply chain industry both today and in the future. Take the LoadProof app for example – a customer was seeking ways to improve the manual process of documenting correct loading of product including labeling, pallet condition, product placement, and trailer placement/cubing. When my team looked at the landscape of this challenge, we recognized that this was one many other customers face and has impacted their finances. Without proof of compliance, customers dealt with significant financial penalties for products arriving in non-compliant conditions. With those challenges in mind, our team prototyped an application and website that was beta-tested at five Kenco locations. After a successful pilot program, we partnered with Smart Gladiator to develop a scalable, secure, enterprise-ready application for both Apple and Android devices. The creation of LoadProof was an innovative solution to the supply chain as it brought our customers one step closer to having supply chain visibility, an innovation pain point noted in Kenco’s State of the 3PL Innovation Survey.

Inevitably, the emerging technologies will start to become more reliable as they are tested and prototyped in different scenarios. And that’s where partners like 3PLs come in. 94% of respondents feel that it’s important for their 3PL provider to have a competency in technology and innovation, and more than half expect their 3PL provider to be investing in innovative technologies (another 32% want to co-invest).

The supply chain industry needs to continue thinking innovatively to create business value. As many supply chain executives are focused on the here-and-now, it’s up to the 3PL providers and supply chain partners to think ahead, prototype, and create proven results on emerging tech before their customers inquire about these technologies.

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.

9 Ways to Reduce Food Waste in the Supply Chain

By Contributing Author | 06/02/2017 | 9:04 AM

By Gavin Parnell, Go Supply Chain Consulting

In 2012, in the EU, the cost of food waste was estimated at 143 billion euros. According to the UN Food and Agriculture organization, 30-40 percent of food production is lost before reaching the market.

Food waste is a significant problem in the world, with an estimated 1 in 9 people in the world suffering from chronic undernourishment, but solving this in the supply chain also represents a significant opportunity to increase revenue for businesses.

Most information about food waste tends to focus on waste by consumers and retailers despite this significant opportunity to reduce waste in the supply chain. There are lots of ways that food waste can be reduced in the supply chain, and this infographic from Go Supply Chain covers nine of them.

One interesting area covered in the infographic is intelligent packaging.

Biosensors can be used to detect foodborne pathogens. They can then transmit this information to identify potential problems, and that data can be collected and used to reduce food waste in the supply chain.

Time Temperature Indicators can be used to determine if food products have been exposed to undesirable temperatures. An irreversible change, such as the color of a label changing, will occur if this has been the case.

Gas Indicators can be used to detect atmospheric changes due to respiration within packaging. They typically detect presence or absence of oxygen or carbon dioxide within the packaging and again this information can be used to reduce waste.

Take a look at the infographic below to find out 8 more ways that food waste can be reduced in the supply chain.

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GavinParnell

Gavin Parnell, BA (Hons) MSc. MILT MCIPS, is a Director of Go Supply Chain with over twenty years’ experience in logistics.  Since 2004 he has worked in consultancy with retail, FMCG, fashion and industrial clients.  Go Supply Chain works to improve clients’ supply chains and logistics operations through design and optimisation of distribution networks, warehouses, transport operations, inventory policies, international logistics and more.

Why DCs Should Care About The WannaCry Ransomware Attack – And Three Things To Do Now To Protect Yourself

By Contributing Author | 05/18/2017 | 10:07 AM

By Ron Kubera, Senior VP and CMO, Lucas Systems

 

The recent worldwide ransomware attack that affected computers running Windows operating systems points to a looming security risk facing many Distribution Centers. A vast proportion of the affected computers in the WannaCry attack were running an unsupported operating system, Windows XP. Those computers were not eligible to receive regular security updates, which left them particularly vulnerable to the virus. A similar situation will face DCs after 2020, when Microsoft ends support for the Windows mobile operating system that runs the vast majority of mobile computers used for RF and voice applications today.

 

Three Things To Do To Protect Yourself

1. Understand the Issue. As reported in Wired Magazine, the best protection against the WannaCry ransomware was to download and install a security patch provided by Microsoft. For most users, that patch is applied as an automatic update. However, for computer users with WindowsXP, there was no patch because Microsoft had ended support for that OS in 2014. As the article states: “With very few exceptions—including an emergency patch after the first wave of WannaCry infections and expensive, specialized service contracts—Microsoft no longer provides any security support for the OS. A computer running XP today is a castle with no moat, portcullis raised, doors flung open, greeting the ravaging hoards with wine spritzers and jam.”

The exact same situation will face DCs using devices running Windows Embedded Handheld 6.5 in 2020, the sunset date by which Microsoft will stop providing updates.  The Windows Embedded problem in the DC is even more pervasive than the Windows XP issue: Less than 10 percent of PCs in use today use XP; by contrast well more than 70% of all RF, vehicle mount and voice devices used in DCs today are running the Windows operating systems that are sunsetting in less than three years.

To be fair, many of the mobile devices used for RF or other applications in the DC do not have direct access to the Internet, making them less susceptible to attack. Nevertheless, the risk to these devices is real, and avoidable, Plus, there are risks beyond security to using devices with obsolete operating systems.

2. Know Which Devices Are At Risk. Since the late 1990s, the majority of industrial RF devices have used successive generations of Microsoft mobile operating systems, which allowed DCs to upgrade devices without changing their software applications. This Windows mobile platform was remarkably stable and reliable, by any standard. The last of this OS generation is still being sold on a wide range of warehouse hardware, including popular vehicle mount computers, traditional handheld and wearable devices, and even voice-only terminals.

Your IT organization should be aware of the following end of support dates for the OS versions that are still being shipped today (and note that older operating systems may be out of support already):

WindowsOS Sunset

Source For End of Service Dates: https://support.microsoft.com/en-us/lifecycle/search

3. Develop A Migration Plan. If you are using any devices with an outdated and unsupported OS, you should immediately upgrade the OS (if possible) or replace the device (if the OS cannot be upgraded) with a device running a supported Windows operating system. Longer-term, you will have to plan to move to a new mobile operating system platform, whether that is Windows 10 (or another new Mircosoft platform), Android, or Apple iOS. It should be noted that Zebra and Honeywell, the leading hardware providers for the DC, have each announced support for Android in many of their newest hardware devices. What many operations people don’t realize is that changing to a new OS has major implications for your warehouse software systems.

The vast majority of warehouse applications were designed to run only on current Windows mobile devices, so ask your vendor if your current voice, RF or other applications can run on other operating systems. Windows-only applications will have to be rewritten to run on a new OS. For most DCs, this would include older Web browser-based applications, Telnet/terminal emulation software, other RF applications, and voice-directed applications. Many voice applications, in fact, use speech recognition technology that is tied to the current Windows operating system, making a “port” to a new OS platform an even greater challenge.

Beyond your current applications, if you are considering any new applications for use in your DC, you should ask your software provider if they support Android or other viable, long-term operating systems. And anyone buying new Windows-based hardware devices should realize that those devices will be obsolete before they are fully depreciated.

 

The Sky Isn’t Falling

If you are using devices today that will be affected by the Windows sunset, you still have time to act. Those devices and applications will continue to run reliably and securely. However, failing to consider your alternatives may leave you in a vulnerable position in as little as three years. Given the ever-changing nature of cyber-threats, its more important than ever that these issues be addressed pro-actively.

 

Ron Kubera has more than 25 years of supply chain industry experience, including leadership roles in delivering consulting and implementation services to CPG companies, industrial manufacturers, and other distribution-intensive companies. Over the last 15 years he has held P&L responsibility for supply chain products and software solutions at Manugistics, JDA, Infor and Honeywell. At Lucas, Ron is responsible for overall commercial strategy and partnerships on a worldwide basis.    
 

Quality Talent Leads to Quality Trucking: The Technology Advantage in Attracting, Engaging, and Retaining Top Talent in Transportation

By Contributing Author | 05/03/2017 | 9:21 AM

By Malysa O’Connor, Senior Director, Logistics Practice Group, Kronos Incorporated

It may not come as a surprise that there’s a trucker shortage today, but unfortunately, it may be getting worse. Data from the American Truckers Association (ATA) shows that the U.S. is already experiencing a shortfall of approximately 50,000 drivers and that it could reach to nearly 175,000 by 2024. Yet the age distribution of the nearly 850,000 truckers currently on the road suggests that the problem will get worse in the next five to ten years as a higher number of drivers retire. This sudden shift in the workforce makes it even more crucial for the millennial and Gen Z generations to become more educated about the trucking industry and the opportunities it provides to work with many different types of technology.

There are other factors to blame, too. Truck drivers are under extreme – and constant – pressure to meet tight deadlines, comply with hours-of-service restrictions, fight off fatigue, and manage ever-increasing customer demands. Far from the allure of “the open road,” trucking can actually be a very stressful industry. If the environment becomes too difficult, employees can experience low morale or burnout, become disengaged, or in the worst case, choose to leave the industry completely. Additionally, because of the age limits young drivers face with not being able to obtain a CDL license before age 21, many potential young drivers looking for a career in trucking will move on to other industries before that day of eligibility. This is a source of frustration for companies that want to recruit non-college bound 18- or 19-year-olds before they settle in other occupations.

None of this is good news for an industry that is such an essential link in the overall supply chain. This is especially true as the need for effective last-mile transportation continues to grow along with the number of consumers who rely on trucking for at-home deliveries. Clearly, distribution and trucking companies must do all they can to minimize daily pressures, increase employee engagement, and improve the way they attract, hire, and retain top talent.

Closing the gap with millennials

As companies look to address these challenges – ultimately with an eye toward addressing the driver shortage – many of them are targeting the millennial generation. While such a strategy may seem surprising at first, it actually makes a lot of sense. Millennials have officially passed baby boomers in size and are now the largest generation. The millennial generation now represents 25 percent of the population, which makes it the largest pool of available talent. Additionally, millennials are motivated by career opportunities that give them the chance to grow, learn new technology, and apply new skills. All of these are abundant in trucking today.

These last points are important as organizations attempt to attract new employees. According to a recent survey from the Harris Poll, “the opportunity to learn new skills” and “the chance to adopt new technical skills” were the top two reasons cited when respondents were asked why they would commit to a new profession. Conversely, more than one quarter of respondents stated that their main reason for leaving a company was the chance to pursue a hot new technology.

The human capital management advantage

So, what can distribution and trucking companies do to improve the way they attract, hire, engage, and retain top talent? One of the most effective ways is with human capital management (HCM) technology, which provides powerful tools for recruiting and managing employees.

When it comes to driving employee engagement and promoting retention, HCM solutions help by automating manual systems and providing better access to critical information. For example, truckers benefit from self-service access to their schedules, especially when they can view schedules sooner, swap shifts, or select shift preferences and availability. Quick and easy access to schedules also allows drivers to better manage their work life balance when facing up against Hours of Service (HOS) regulations.

Additionally, when it comes to attracting prospective employees, trucking companies can use HCM solutions to implement the following best practices:

  • Create modern job titles and more engaging job descriptions that will appeal to millennials or another targeted demographic.
  • Highlight skill-building opportunities, training, or other programs that are offered as part of the job.
  • Promote any new technologies or transferrable technical skills employees will acquire.
  • Describe the key benefits and other ways the company values employees – and how it focuses on minimizing daily pressures and overall stress.

All of these outcomes have a positive effect on employee morale, productivity, and engagement.

One solution, many benefits

As distribution and transportation companies look to tighten the existing talent gap, they need to consider new strategies and tools to help them succeed. Whether they’re looking to hire more millennial employees, minimize daily on-the-job pressures, increase employee engagement and retention, or “all of the above,” human capital management technology can give them the edge they’re looking for.

 

Malysa OConnor

Malysa O’Connor is a senior director of the services and distribution practice group at Kronos Incorporated, a leader in human capital and workforce management software solutions. At Kronos, O’Connor leads product direction and go-to-market strategies for several target industries including field and contract services, financial services, logistics, non-profits, staffing, and transportation. She is also responsible for partnering across sales, services, product development, and customer support to achieve sales growth and customer satisfaction goals.


 

What You Should Know about the Sanitary Transportation of Food Rule

By Contributing Author | 03/31/2017 | 7:05 AM

By Jason Craig, C.H. Robinson

This year, April 1 has more meaning than just April Fool’s Day. For many in our industry, the Sanitary Transportation of Food (STF) rule goes into effect. Since this broad rule affects so many in the industry, here’s what you need to know:

  1. Commodities that fall under this rule

As part of the Food Safety Modernization Act (FSMA), the STF rule applies to human or animal food items that are shipped open to the air, temperature controlled for safety, or shipped in bulk trailers or tankers via truck or rail.

The rule differentiates items that are temperature controlled for quality versus safety. Typical products that need temperature controlled shipping for safety include fresh meat and unpasteurized beverages. Whereas items like canned beverages and chocolate are often temperature controlled for quality so they would not be subject to this rule as long as they are in closed containers.

  1. Responsible parties

The rule affects people and organizations transporting human and animal food by truck or rail. It outlines parties as shippers (including 3PLs), loaders, receivers, and carriers (specifically truck and rail). Entities can be defined as:

  • Shipper – Arranges for transportation by a carrier or multiple carriers sequentially. Could be a manufacturer, broker, warehouse, or other entity. Several parties may assume the role of a shipper for a single load.
    • Loader – A person loading the trailer.
    • Receiver – A person unloading the trailer.
    • Carrier – An entity that physically moves the food by rail or motor vehicle.

Shippers need to have written policies and procedures in place for products. Carriers are also required to have written policies and procedures about how to handle instructions from shippers; they also need to train employees on general sanitary practices and internal procedures.

  1. STF’s staggered release

Officially, business with more than $25.5 million in annual receipts or those that employ more than 500 people should be in compliance with the STF rule by April 2017; all organizations smaller than that have until April 2018 to comply. That said, many shippers are expecting compliance from all carriers, no matter their size, by April 2017.

  1. Restating current best practices

The Food and Drug Administration (FDA) has stated this rule is not intended to impose significant new requirements in the industry—in fact, the industry is already completing most steps within the rule. The rule is simply a restatement or formal recognition of industry best practices with the addition of a documentation requirement.

Because most organizations already follow these general behaviors, we don’t expect to see a lot of material change relative to the safe transportation of food in the United States. If you have questions about the rule or how it will affect your business:

  • Visit the FDA’s website.
  • Work with your logistics provider.
  • Watch this six minute video of Chris McLoughlin, risk manager at C.H. Robinson, discussing the rule.

 

Craig Jason DSC_3498
Jason Craig — Director, Government Affairs

Jason has over 20 years of industry experience and a deep understanding of government policies. He monitors regulatory and legislative issues impacting the transportation and produce industries for C.H. Robinson. Jason is member of the Minnesota Freight Advisory Committee (MFAC) and serves as an election judge in the City of Minneapolis.

Is Your BYOD Policy Keeping Up with Your Employees’ Behavior?

By Contributing Author | 03/22/2017 | 2:00 PM

By Samuel Mueller, Scandit

Not too long ago, the idea of supporting a Bring Your Own Device (BYOD) policy was a radical concept. A lot of IT managers were concerned, and rightfully so, about issues such as security and device management. While those concerns are still out there, tools and services have been designed to address them. 
 
These days, BYOD isn’t the controversial topic that it once was. In 2016, Tech Pro Research reported that 72% of organizations surveyed either already allowed the use of personal devices for work or would start to allow it within one year.
 
Since BYOD is becoming more of a standard in the enterprise, your company may already support it. But are you keeping up with it? If your company’s BYOD policy hasn’t been reviewed or changed since it was implemented, it’s likely an out-of-date approach.
 
Your employees may be able to use their own smartphones, computers, or other mobile devices. However, if you force them to use applications that are outdated or poorly designed, you’re doing them a disservice. Instead, in addition to a BYOD policy, you should also encourage a Bring Your Own Application (BYOA) policy.
 
Your employees can easily go to any app store and search for better options than company-approved apps, and they’re likely already doing this. Have you tried searching for applications that would be helpful in the supply chain? Try searching for specific categories such as inventory management and order entry. You will be amazed by how much is out there. Not everything will be a fit for your organization, but there will likely be some options to consider that you’ve never heard of before.
 
Your employees might already be using some of their new discoveries on the side to be more productive. You don’t want them to feel like they can’t share or talk about new apps because they go against company policy. Instead of being skeptical about new apps, ask employees about what they’ve found that works well for them. Whenever possible, support the apps as an official part of your BYOD policy.
 
Just like BYOD, using new apps in a corporate environment can be scary. Consider that bringing your employees’ discoveries and behaviors into your BYOD policy can make your business operations more productive and agile. Not just for one or a few employees, but for all of them.
 
Samuel
Samuel Mueller is the CEO and co-founder of Scandit and is responsible for overall strategic direction, marketing, sales and business development. Prior to Scandit, Samuel was a management consultant and project leader for multinational companies such as Swiss Airlines, Swiss Re and IBM as well as a corporate researcher at the renowned IBM Zurich Research Lab. While at IBM, Samuel was awarded an IBM Research Division Award and a total of three IBM Invention Achievement Awards. He has authored numerous patent applications and has published his research results in leading conferences and journals. Samuel holds a PhD from ETH Zurich and graduated summa cum laude with an MSc in Computer Science and an MA in Financial Economics, both from the University of Zurich, Switzerland.

7 Ways CMMS Can Transform Your Business

By Contributing Author | 03/15/2017 | 2:03 PM

By Lindsey Walker, NEXGEN Asset Management

Warehouse management is a critical part of every business. You had to manually carry out various tasks in the past, but now, you can implement computerized maintenance management system (CMMS) in the facility. With CMMS, you can automate most warehouse management tasks, simplify a complex supply chain structure, and save time and effort. Let us look at 7 ways CMMS can benefit your business.

1. Accountability Increases

With an asset management software, you can report, order spare parts and schedule preventive maintenance in an automated and a streamlined manner. You can find all the detailed records of who conducted the last repair work and all the relevant information regarding the same. You can save time, increase the validity of the reporting methods and achieve increased accountability.

2. Efficiency Increases

The integration of IoT and CMMS frees up people and takes over numerous individual jobs that were reliant on manual effort. Due to this, the standard for reliability and efficiency increases and data can be reported more accurately.

3. Ability to Integrate Technology

You can integrate technology and various mobile apps that allow your business to have a competitive edge in the market. You can utilize technology in a number of ways to enhance your  brand image too.

4. Mobility Increases

The mobile technology allows you to remotely control the processes and program the software from any location in the world. You can remotely check-in and inspect your processes and equipment. Moreover, you can receive, manage and complete work orders, regardless of where you are located, with just a click of the button. You can also access the Manufacturer Recommended Procedures and critical repair information while repairing any equipment remotely.

5. Equipment Life Increases

CMMS software ensures that you conduct timely maintenance schedule and execute work orders on time. You can make sure that the vital infrastructure is always working at its peak efficiency for a long time. It helps in preventing overlapping of preventive maintenance schedules and facilitates smooth functioning of equipment. All this results in extending the service life of vital equipment and assets.

6. Downtime is Reduced

Since the integration of IoT and CMMS allows you to stay on top of maintenance schedules, you will have fewer unplanned downtimes and unexpected service outages. CMMS will collect all the information pertaining to repair and replacements by tracking the historical maintenance trends of your equipment, empowering you to plan for predictive maintenance and schedule periodic inspections.

7. Improved Inventory Control

A maintenance management software will give you an end-to-end view of your inventory levels, shipping costs, purchase and work orders, replacements, on-hand counts and storeroom capabilities, all in real time, offering improved inventory control. The asset planning software can automatically generate the purchase requests by keeping a constant track of the minimum and maximum levels of stock. It also gives an instant access to relevant information that can help you improve the response times, accelerate work order completion and reduce downtimes.

Implementing CMMS brings more to the table than you could ever imagine. Incorporate it in your facility and it won’t be long before you reap the myriad benefits. 

Lindsey Walker

Lindsey Walker is the marketing manager for NEXGEN Asset Management. She excels at business development, project management and asset management. Her passion for writing allows her to share her knowledge on asset management, mobile geographic information systems (GIS), mobile CMMS, software implementation, training curriculum development and similar topics.

Gauge and Improve Your Freight Management Performance: Six Critical Key Performance Indicators

By Contributing Author | 03/03/2017 | 11:39 AM

By Mike Challman, VP, North American Operations for CLX Logistics

The 5 W’s: Who, What, When, Where, Why (and How) – is a guide for young journalists in writing leads and actually serves as a good rule-of-thumb for efficient supply chain management. Specifically the 5 W’s can be applied to freight management:

  1. Who is the recipient?
  2. What are you transporting?
  3. When do they need it?
  4. Where do they need it?
  5. Why are we utilizing this mode?
  6. How can we optimize the process?

With the supply chain management competitive landscape growing at a steady rate, assessing freight management performance is increasingly important. Smart companies constantly look for better and more efficient ways to manage their supply chain – the question is, where to start?

Although the entire freight management process is crucial, there are some elements you should prioritize over others. Consider the following key performance indicators when beginning your freight management assessment:

  • Timing is everything. Analyze any consistent delays or last-minute order changes that may be negatively affecting your efficiency and productivity. Add order planning lead times and shipment transit times to your monthly reports to help diagnose lags and streamline operations.
  • Freight costs may seem like an obvious KPI, but the true innovation is in the solution. If your freight costs have increased faster than average inflation, incorporate an extended rate database and a Request-for-Quotation (RFQ) tool to help drive the lowest price for your business.
  • Another aspect to consider is sustainability. The Pew Research Center recently found that 65% of Americans would like to make alternative energy source production a priority. Therefore, environmentally-conscious efforts will earn bonus points amongst the majority of U.S. customers.

Review the remaining KPIs and begin optimizing your freight management process and reporting today.

FreightManagement_Infographic

 

MikeChallman_headshot
Mr. Challman leads all of ChemLogix Managed Services in North America, including freight management operations; benchmarks, bids & carrier procurement; dedicated and rail fleet operations; and brokerage services. CLX Logistics is a global provider of transportation management, technology, and supply chain consulting services, that offers a superior combination of technologies, flexible solutions and a high-touch approach to solving logistics challenges.

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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