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Friends with Benefits: Secret business advantages to new pharmaceutical manufacturers from logistics services providers

By Contributing Author | 04/06/2018 | 5:42 AM

By Lawrence Hotz, WDSrx – Woodfield Distribution LLC

FRIENDS WITH BENEFITS

New conventional and virtual manufacturers focus on developing commercial products and often under-estimate the complexity of bringing their medications to market. 

Smaller manufacturers unacquainted with logistics that take it upon themselves to deliver their products to retailers and wholesalers soon discover the process is more costly and difficult than they imagined, particularly when retailers impose financial penalties for rejected or late deliveries.

It may seem counter-intuitive for young companies to select a Logistics Services Provider (“LSP”) for healthcare supply chain solutions that minimize cost, however partnering with an experienced pharmaceutical LSP streamlines the fulfillment process, minimizes supply chain disruptions, helps assure product is properly received, reduces potential penalties and enables faster payment and re-orders.

Reputable LSP partners place a high priority on service to clients.  The best LSP firms consider the word ‘service’ to mean ‘capability’ and also ‘to support.’  This article highlights four key LSP services of special interest to newly-commercialized manufacturers that elevate the partnership to ‘friends with benefits’ status:   GS1-128 labeling; Customs Bond warehousing; extensive retailer relationships; and Sortation and Segmentation.

OFF-LABEL USE: GS1-128

Hotz 1 - Friends With BenefitsBiopharma and other manufacturers beginning commercialization often treat shipping as an afterthought until they realize that retailers pay invoices only when the product is received into their inventory.

New players in the pharmaceutical industry that place a standard shipping label on boxes and believe a tracking number is sufficient to document delivery are making mistakes that will result in financial hardship from lost and rejected  shipments.  Superior Logistics Services Providers treat labeling with extreme precision, using current GS1-128 shipping labels with EDI information transfer to move packages within the pharmaceutical supply chain.

(Figure 1: GS1-128 labels conform to international standards for efficient fulfillment. ©WDSrx)

YOUR EDI IS IN MY GS1

 Shipping labels must meet current technical standards and guidelines set by             
authorities and consignees including GS1 which is the international standard                  
for companies to identify, capture and share this supply chain data.  The
GS1-128 label is a standard label format printed with codes to reveal package contents eliminating the need to open the container.                                                                                                                           
                                                                                                                             
Electronic Data Interchange (“EDI”) systems enable business documents to be shared between different computer systems.  The ASN-856 (Advanced Ship Notice) is an electronic file shared between EDI systems that alerts recipients to expect a delivery. EDI systems gather data from GS1-128 labels for accurate reporting.

The GS1-128 label is a vital component of EDI transactions because it satisfies requirements established by the receiving party for shipment details including origin, destination, contents, purchase order and additional data.  These labels can be affixed to pallets and packages and enable consignees to route packages efficiently within their own distribution network without opening them. In some cases, the LSP must break down secondary packaging or remove non-compliant labels from manufacturer deliveries, then re-package them with GS1-128 labels to avoid shipping disruption.

According to Adam Runsdorf, President of WDSrx – Woodfield Distribution, LLC, a pharmaceutical logistics services provider, “Sharing our knowledge with new clients improves everyone’s efficiency and fosters long-term relationships that promote business growth.”

Advanced labeling and data transmission technology are necessary steps for efficient shipping and receiving.  Logistics Services Providers perform labeling services for start-ups as a standard benefit that scales up as their deliveries increase. 

Labeling and EDI are not enough to assure shipments are properly received.  Experienced Logistics Services Providers take additional steps to assure shipments move efficiently between manufacturers and their retailer accounts, even managing shipments arriving from international points of origin.

SITTIN’ ON THE DOCK OF THE BAY: THE CUSTOMS CLEARANCE PROCESS

Hotz 2 - GS1 128 LabelOtis Redding’s classic song “Sittin’ On The Dock Of The Bay” is a common refrain for international manufacturers and suppliers of raw materials, API or finished goods that are unaccustomed with government requirements when they learn their shipments are detained on receiving docks at U.S. Ports of Entry. 

Manufacturers from outside the United States often realize cost savings when shipping raw materials in bulk to our shores instead of finished goods.  Those savings can disappear however, when the shipment fails to clear U.S Customs or other regulatory checks upon arrival. 

(Figure 2: Detained shipments may be stored safely at an LSP with a Customs bond. ©WDSrx).

CHECK AND DOUBLE-CHECK

When a pharmaceutical shipment arrives at a U.S. port, contents must be examined and documentation reviewed by three separate regulatory authorities
before the product is approved for clearance:  U.S. Customs and Border Protection, the United States Department of Agriculture (USDA) and the Federal Drug Administration (FDA).

When things go wrong in the United States for a company based in another country, the situation can quickly spiral out of control.  Manufacturers working with reputable Logistics Services Providers based in the United States can more easily navigate customs procedures and can correct problems expeditiously if and when they occur.

USE BLUE OR BLACK INK

Improper completion of the Bill of Lading is a common reason that shipments into the U.S. are detained by U.S. Customs inspectors.  For example, if the Importer of Record or Consignee listed on the form is not known or missing, the entire shipment can be transferred to a U.S. Customs warehouse on site for further action.  These temporary facilities do not accommodate special handling requirements, resulting in temperature excursions and greater risk of contamination.  A similar scenario can play out if the FDA or USDA delays clearance.

If the shipper fails to be notified of a problem, the situation may last for an extended period, causing significant financial consequences. Expenses may include the cost of the initial shipment, warehousing and storage fees in the temporary customs warehouse, broker fees, production of a new order and shipment, destruction of the initial shipment and lost revenue from products that could not be manufactured and marketed in a timely manner.

FAMILIAR CUSTOMS

When international manufacturers coordinate shipping efforts with a U.S.-based pharmaceutical Logistics Services Provider, clearance issues are handled on the ground at the Port of Entry, reducing delays and facilitating on-time delivery to the designated recipient.

A hidden benefit of relying on an experienced LSP within the United States for international shipments is their ability to secure a Customs Bond in case of a Customs clearance delay.  The Customs Bond enables the LSP to move the shipment within a 50-mile radius from the unsecure non-compliant temporary Customs warehouse at the Port of Entry to a secure temperature-regulated pharmaceutical-grade warehouse facility operated by the LSP. Once received, the shipment is properly stored and handled until clearance is granted. 

A few of the best pharmaceutical Logistics Services Providers are also Registered DEA Importers and Exporters, recognized by the U.S. Government to handle Controlled Substances as they enter and leave the country.

Logistics Services Providers benefit companies unfamiliar with transport regulations by keeping current with requirements for proper labeling and technical issues and by facilitating shipments entering U.S. ports.  

There is another hidden benefit to fledgling manufacturers that the right LSP can use to speed delivery…but it’s a secret!

KISS AND TELL: RETAILER SECRETS REVEALED

An important hidden benefit for budding manufacturers working with an experienced Logistics Services Provider is profiting from established relationships with retailers that the LSP has nurtured over time. 

Retailers are more comfortable conducting business with companies they already know.  Companies that are new to the industry must develop relationships with business partners from scratch.  Young companies trying to conserve expenses by fulfilling their own orders may end up paying a steep cost in lost orders, rejected deliveries and missed opportunities.

Relationships between LSP firms and retailers are constantly evolving because both parties have a mutual interest in maintaining efficient business operations.  Information is often shared to speed deliveries.  Novice manufacturers with the right LSP partner receive the benefit of this communication at no additional charge. 

TAKING THE LEAD

One example of an LSP gaining extensive knowledge about retailers they ship to is called the Lead Time Analysis report. This research document is compiled by the LSP and details the optimal timeframes to prepare, pack, ship and deliver an order from the original warehouse location to the retailer distribution center.  The results of the Lead Time Analysis provide consistency for order placement and shipping according to the specific retailer requirements.

In addition to the facts of the Lead Time Analysis shared with clients by their LSP, there are more subtle hints provided by retailers that help LSP firms to satisfy clients unacquainted with retailer relationships.  A particular distribution center for one retailer may prefer that deliveries be made by a specific freight forwarder or courier.  Time is money in every business.  Understanding the unique preferences of individual retailers demonstrates how superior LSP firms service their clients.

When the order finally reaches the receiving dock at the retailer distribution center, another hidden benefit called Sortation and Segmentation provides evidence for young manufacturers that their shipment was received by the Consignee.

SEPARATE BUT EQUAL: SORT AND SEG

Hotz 3 - Customs BondReceiving docks can be chaotic workspaces.  Multiple trucks and trailers arrive simultaneously.  Pallets, cartons and boxes cover the floor.  Warehouse technicians move among deliveries, drivers and other personnel while scales, scanners, forklifts and other equipment crowd the area. 

What are the odds that a retail distribution center will treat a shipment from a new account with the same attention as a full truckload arriving from an established manufacturer?  Actually, they are very favorable utilizing a service called Sortation and Segregation, or “Sort and Seg.”

Sortation and Segregation is a white glove service that involves locating each package on the vehicle that makes up a single order.  When located, the packages are organized and separated from remaining deliveries.  The order is then segregated from other deliveries on the receiving dock.  The Consignee processes the order quickly because preliminary work is completed. Finally, the Consignee signs documentation confirming receipt of the complete order.

With Sortation and Segregation, retailers gain confidence in new accounts because their product is consistently delivered on time, allowing the manufacturer to concentrate on business growth. The start-up receives notice in real-time their delivery was received.  High-fives all around.

(Figure 3: Sortation and Segmentation organizes valuable shipments at active receiving docks. ©WDSrx)

 

FROM UNDERSTUDY TO LEADING PLAYER

Hotz 4 - Sortation and SegregationBusiness success favors companies that spend strategically to gain competitive advantage.  Pharmaceutical manufacturers new to the commercial market that select a specialized Logistics Services Provider profit from the relationship. 

Often the support is hidden from view and occurs behind-the-scenes.  Attention to packaging and labeling compliance, Customs clearance services, retailer shipping preferences and white glove delivery procedures represent some of the tools available from LSP partners transforming progressive young manufacturers from understudies into leading players within their sales network.

Behind each package is the accumulated knowledge of the LSP partner at every step within the pharmaceutical supply chain. 

     (Figure 4: Newly commercial manufacturers benefit from expertise of reputable Logistics Services Providers © WDSrx)

 

Larry headshot

 

 

 

 

Lawrence Hotz is the Marketing Director at WDSrx – Woodfield Distribution, LL

 

Upgrade Your Delivery Strategy with an Environmentally Friendly Approach

By Contributing Author | 03/30/2018 | 7:41 AM

By Inbal Axelrod, MyRouteOnline

 

With Earth Day coming up in April, it’s a good time to upgrade your delivery methods in support of greener approaches. Here are some areas where you can cut carbon emissions to achieve a more eco-friendly strategy:

Use recycled packaging
Begin your efforts toward a more environmentally friendly approach by seeking out new packaging materials. Look for a Forestry Stewardship Council (FSC) certification on your boxes to ensure that the paper is from sustainably managed forests, and use boxes made from 100% recycled paper.

You can also find boxes with environmentally responsible ink. Check to see whether your boxes are Cradle to Cradle (C2C) certified, meaning that they use biodegradable inks and adhesives.

While eco-friendly shipping boxes can be a bit more expensive, it’s made up for by other cost-saving eco-friendly strategies, like using less fuel and taking more efficient routes. As an added plus, consumers are more discerning than ever in their buying habits, and using environmentally responsible packaging gives your brand extra appeal.

Forget the foam
Foam packing peanuts are particularly harmful to the environment. They’re typically made from polystyrene, which takes hundreds or even thousands of years to decompose. And because they’re so small and light, they’re easily blown away from landfills and into the oceans, polluting the water and harming the small animals that consume the tiny styrofoam pieces.

While recycled polystyrene foam is already common, packing peanuts made from biodegradable products is even better. Rather than use the styrofoam peanuts, opt for ones that are made from starch or recycled paper.

Reduce size and volume
Reducing the size and volume of your packages has several environmental benefits. First, it reduces the amount of packaging itself--and the disposable waste that comes with it. Second, it reduces the weight of the package, meaning that less fuel will be used to transport each one.

Finally, having small package sizes reduces fuel emissions even further by allowing you to pack each vehicle more efficiently. This maximizes the number of packages per delivery vehicle and minimizes the number of vehicles on the road. 

Use environmentally friendly vehicles
When it comes to your delivery vehicles, think beyond cars and trucks. While the use of cars and trucks is sometimes unavoidable for long drives or in suburban environments, other transportation methods, such as walking, biking, and the use of small electric vehicles, work well within small scale environments or congested urban areas.

The key is to think about which vehicles best suit your unique environment. Particularly bike-friendly cities, such as Portland, Oregon, are perfect locations for bicycle delivery. Centuries-old cities with crowded, narrow streets, like the city of Basel, Switzerland, are already making use of small electric vehicles.  Other cities, like London, are cutting emissions using electric bikes with trailers.

Crowded downtown areas can have centralized distribution hubs scattered around the city where small, low-emissions vehicles can pick up the items to be delivered. The items can then be transported to central locations from which they can be delivered to specific addresses by bike or foot.

Plan a carbon efficient route
In addition to reducing your fuel emissions by decreasing package sizes and using alternate forms of transport, you can also come up with a delivery strategy that makes your route more efficient. If your delivery vehicles are taking roundabout routes, if they’re backtracking as they move between stops, or if you’re using more vehicles than you need to, your delivery strategy will have an unnecessarily high carbon footprint. You can easily reduce this footprint by analyzing your delivery routes and cutting out excess driving.

Choose low-emissions transportation companies
If your business must use a truck or car but doesn’t have delivery services of its own, the delivery company you choose should still be low-emission. You can determine which transportation companies are the most environmentally friendly by checking to see whether they’re government certified by the Environmental Protection Agency. The website of the EPA’s SmartWay program displays relevant information about low-emission transportation companies and updated company emissions data.

Conclusion
Opting for an environmentally friendly delivery strategy is increasingly necessary in today’s world. As proven by successes with urban-friendly delivery vehicles and other fuel-saving strategies, eco-friendly approaches and cost-saving strategies are not mutually exclusive. If we want to combat climate change, all of us--including those in the delivery industry--are responsible for adopting a greener approach.

 

 

Photo_Inbal AxelrodInbal Axelrod is the co-founder and CMO at MyRouteOnline, a multiple stop route planner that helps make our world greener. Individuals visiting multiple locations can plan their routes online, optimize their route, and spend less fuel and time on the road. This means fewer greenhouse gas emissions, a reduced carbon footprint, and better air quality

4 Ways Autonomous Ships Can “Save” The Shipping Industry

By Contributing Author | 03/23/2018 | 8:34 AM
By Gary Cardenas, President of TOC Logistics International

While self-driving cars seem to be the latest technology buzz on everyone’s mind, even more likely to make a break into the market sooner rather than later are autonomous ships. These ships are no longer just a pipe-dream as numerous companies and organizations are undertaking the design and implementation of this technology.

With so many organizations working to put this technology into place, these futuristic vehicles could make their way into the industry in 10-15 years time and could “save” the industry in many ways.

While there are obvious challenges associated with the introduction of ships sailing the ocean without a captain or crew, these are the ways autonomous vehicles could save the shipping industry money, time, and more.

From Piracy: 

While reports of maritime piracy continued to decline in 2017, the second half of the year did show a total of 87 incidents reported to the International Maritime Bureau (IMB). Unmanned ships could cut back on these numbers even more as an unmanned ship is significantly less appealing to pirates. When there is no crew, there is no crew to hold ransom.

If those with ill intent do try to board an unmanned vessel, the design of these ships will make it difficult. If they were to make it on board, they would have no access to controls and the computer powering the ship could take over and either change course, drive in a circle until help arrived, or shut down.

Money:

Autonomous ships will not only be a game-changer when it comes to safety, but to budgets as well. Once these ships hit the ocean, they can save money on fuel and pack more cargo for more productive trips. With no crew on board, certain aspects of the ship’s design, like crew quarters and sewage systems, can be removed to create more cargo space.

Their sleek designs cut back on wind resistance allowing them to move faster through the water. These changes will cut construction costs, reduce operating costs and make for more efficient trips.

From A Talent Shortage: 

As technological-savvy millennials enter the workforce, they are attracted to digitally-geared jobs. Seafaring as a career, spending weeks or months away from homes and families, is becoming less appealing but powering these massive machines from home through electronic and digital systems are the careers that will appeal to the incoming generations.

From Accidents:

In a report published by the Munich-based insurance company Allianz in 2012, between 75 and 96 percent of marine accidents are caused by human error. A vessel not operated by humans will cut back on these errors and hopefully on accidents.

While there will be regulatory and operating challenges to face, these ships present numerous opportunities to an ever-changing industry.

(This blog original appeared on the TOC Logistics International website. To learn more about trends within the industry, you can sign up for blog update on the company's page.)

 
Gary CardenasGary Cardenas, President of TOC Logistics International, is an accomplished logistics management professional with nearly thirty years of increasing responsibility in the International/Domestic logistics industry. He has a strong background in operating environments and is proficient in establishing continuous improvement processes and quality-based problem-solving. He also has a keen understanding of, and can effectively penetrate internal and external business practices and industrial processes to maximize revenues, improve operations, and strengthen business relationships. Gary received his education in International Marketing from William Rainey Harper College and National-Louis University.

The Keys to Successful Implementation of IoT in Supply Chain

By Contributing Author | 03/16/2018 | 6:26 AM

 

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

Part III of III

IoT; a trendy buzzword, yet a very real presence that is set to disrupt all industries, including the supply chain. The benefits it has to offer complex industries in which data is indispensable and tracking is increasingly paramount are undeniable (see part one of this blog series The Future of IoT in the Supply Chain: It’s Complicated). However, as with all new technologies, the future of its implementation is precarious. In the previous blog post, Roadblocks for IoT Implementation, you learned that for every benefit IoT has to offer, there is a barrier or two (or three) standing in its way. You now know both sides of the IoT barrage and you have the pros and cons to weigh on each side of the scale. But what will you do with that information?

 

The last post of this series will break down that information into actionable insights providing an IoT adoption strategy and the keys to successful implementation of this novel and revolutionary network.

The Keys to IoT Implementation:

A Thoughtful Approach

The rollout of IoT technologies will have widespread impact and could require structural reorganization. It is a decision that carries significant weight, affecting many parts of your organization from budget, to management, and IT to the warehouse floor. With such a heavy lift, it is critical that your choice to implement is aligned with your company’s strategy. Refer to the major objectives of your organization and ensure that they are at the core of all decisions. If part of your organization’s objective is to be at the forefront of smart technological adoption, then IoT is an intelligent opportunity for you.

However, IoT is not something to adopt simply to stay ahead of the curve, or to jump on the latest trend. You don’t want to build a solution in search of a problem, and you certainly don’t want to reinvent the wheel only to see it fall flat. Consider the challenges you are hoping to address and ensure that the technology will achieve what you’ve set out to solve. This task may require external resources to help you complete and maintain.

With such new and complex technology, you and your employees may not be equipped to adopt it without outside expertise and guidance. It’s important to analyze the core strengths of your organization and understand where you will need help to obtain clear and positive results.

A Strategic Execution

Approaching the idea of IoT is the tip of the iceberg, but the magnitude of the task is revealed with execution and implementation. Meticulous examination of all elements that IoT involves and affects in your organization is pertinent to its eventual success. A strategy for this process is not one-size fits all, however, the below outlines key elements and considerations to keep in mind for your specific execution plan. Even if in your thoughtful approach you felt certain that the IoT technology you hope to adopt will be a wise and worthwhile investment, continue your deliberations.

Choosing a Vendor:

Understand that there will be numerous companies and vendors vying for your business – and that some vendors are more credible than others. One way to ensure you’ve chosen a dependable vendor is to look for references. Even more important is to contact those references and discuss the successes (or lack there-of) that they’ve seen since onboarding that particular partner.

Maybe your analysis for adopting IoT into your business model was not entirely conclusive, and you are simply looking to dip your toes in the IoT waters. You may want to consider engaging with a start up for a paid pilot. This is a fantastic way to prove the concept in an inexpensive manner and potentially play a role in shaping the future of the product line.

Getting the Desired Data:

If you’ve gotten this far in the process, then it’s likely that one of your biggest draws to the IoT product is its capability to collect or produce critical big data. These metrics are undeniably valuable, but any product can promise results. What you must consider is the type of data you will need to extract from the device. Push the vendor to explain and ensure exactly the kind of information you can expect to receive from the product and be certain that the way the data is presented will be easily translated into actionable insights.

Realizing Bandwidth and Resources

As discussed in the previous blog, one of the great challenges that IoT products often present is the requirement for additional resources post-implementation. It is essential to know exactly the power and the bandwidth that the product will require from both your facilities and your workforce. From an infrastructure perspective, you must be adequately prepared to handle the new devices. Do you have the capacity to store all the data from “always-on” devices? Will massive influxes of numbers overload your systems? The last thing you want is a failed project due to resource constraints or staff unequipped to handle the needs of the new technology.

Centralizing Communication

Another major issue addressed in the previous article is compatibility. Will the smart devices connect seamlessly with your current platform? Even if you have the manpower and the resources needed to execute IoT technology, you will still require a centralized communication platform to handle the inevitable maintenance and problem-solving situations that arise out of its deployment. It is wise to select a singular outlet, preferably cloud-based, to create more controlled and secure communications when implementing the technology.

Adaptability

The most successful organizations are open to the latest in tech and welcome change to their business systems. Waiting to see what your competitors do is dangerous — you don’t want to be seen as Blockbuster when Netflix starts gaining ground. So, if you’re open to adopting such revolutionary technology as IoT then you are halfway there. But, you also must acknowledge that these devices will require frequent updates to remain relevant. You must be able to adapt with the technology and change with the times. Flexibility with the system and openness to software improvements will be the principles to live by, and having a back-up plan will be a golden rule. The biggest precarity involved with IoT is its complete reliance on internet connectivity. If IoT tech is even an idea for your organization, you absolutely must have a plan for what to do when the internet goes out.

My Recommendation:

If you and your organization have considered all of the above (and likely some more), and you have conducted thorough research and weighed all your options; if you have the necessary manpower and resources; and you are prepared to invest, restructure, and change, then choose your product wisely from a trusted vendor. Once you have chosen your product and worked through the keys to success, then proceed cautiously and continue to iterate as you go.

The adoption process will be the beginning of a journey and you’ll adapt throughout. It’s important to remain open to modern ways of analyzing data and using data as you may be surprised at what can be gleaned and how it can be used to enhance your business model. Learn to recognize patterns, correlate what seems to be disparate data, and, as you continue learning from the data you gain as well as from others in the supply chain make sure you’re sharing the information with peers. Collaboration truly breeds innovation across industries and it starts with each of us.

 

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.

E-commerce Challenges in Online Retail and How to Conquer Them

By Contributing Author | 03/09/2018 | 8:00 AM

By Erhan Musaoglu, CEO and co-founder, Logiwa Corp.


E-commerce is a highly competitive space for most retailers. If they don’t have enough capital to spend on sales and marketing, they end up not only losing sales, but trailing behind the competition as well. Being an online retailer is a difficult, headache-inducing business; you have to often juggle multiple sales channels, manage your inventory levels, and increase customer satisfaction at the same time. Worse, the rise of duplicates and fake stores nowadays cause your customers to view your ecommerce business with even more scrutiny, making gaining repeat customers hard to achieve.

A few of the challenges of working in e-commerce:

Each Delivery

A traditional warehouse usually ships products directly to another business – mostly in higher quantities and in bulk. Unlike B2B businesses, B2C warehousing involves a higher number of individual orders and smaller quantities within the order. B2B businesses, on the other hand, rely on each delivery, meaning they often ship one product at a time. This can be time consuming, and often reduce productivity when compared with larger businesses.

Scalability and Temporary Workers

The fluctuations in demand from season to season require a temporary workforce, which can mean additional licenses, industrial scanners and training. Additionally, temporary workers need to be entered into whatever record-keeping system you currently use, resulting in a productivity loss due to wrongly assigned or nonfunctional scanners and input systems.

Single Items

In e-commerce, the average number of single-item orders is around 30%-50%. A traditional warehouse management system is familiar with and good at picking pallets and boxes from the warehouse, but not picking single items. This means that picking a single order can take longer than it would otherwise.

Missing sales opportunities can be as painful as overselling. You might have items received into your warehouse or have cancelled orders or have items that can be drop shipped from your supplier during the day. You need to add these into your inventory on all your stores in Amazon, Ebay, Walmart, 3dcart.

By using a proper inventory management software, you can build API connection to all your sales channels and update your inventory in real-time.

So how do you break even?

One way to help combat the daily struggles of online retail business is by investing in Inventory management software. Inventory management or warehouse management software (WMS) for e-commerce gives companies access to real-time and accurate inventory, order, and shipment data. When this data is pushed back to marketplaces and shopping carts, your company can avoid overselling and missing sales opportunities. Having this data at your fingertips gives you the ability to create demand forecasting models and optimize your shipment processes, and thus save you money.

Here are a few ways that inventory management software can help overcome the challenges of online retail inventory management:

Accuracy

Inventory Management Systems are designed to help your business increase its accuracy in regards to inventory. This means that the system is designed to help you by doing things like predicting inventory levels and reorder points, keeping track of inventory and returns, and managing individual orders through technologies like barcodes. The most common and affordable technology is barcode and voice technologies. By scanning the product barcode and location barcode, inventory management software ensures the right product is picked from or put away to the right location.

Using barcode technology provides greater productivity and accuracy to the business than traditional inventory management methods.  

Productivity

The different SKUs in an e-commerce warehouse usually can be overwhelming to keep track of, especially when your warehouse has hundreds or thousands of products. A picker can spend hours walking around the warehouse, sometimes walking up to 10 miles a day! Unorganized inventory will lead to major productivity losses compared to your competition, and can be detrimental to keeping your business competitive. One way you can minimize this is by optimizing the walking path of your picker in the warehouse. By reducing walking distance through techniques such as batch picking and optimized routes, you can reduce walking distance more than 30%.

Another way to increase productivity is by handling backorders. The average backorder ratio is 15% percent in an e-commerce warehouse. A next generation inventory management software can help you identify the backorders during receipt and allocate products to backorders. This way, the products are transferred directly to packing stations without put-away.

Finally, a third way to increase productivity is by planning the workload for each shift ahead of time. This ensures that no one shift is overloaded with extra work, and that they all have the resources they need to succeed.

Customer Satisfaction

Inventory management software also benefits customers because they are provided with on-time and accurate data of their orders and shipments. This allows your customer service level to improve drastically, and first-time customers become returning customers.

E-commerce businesses using a sophisticated WMS can easily keep track of all orders in the warehouse, including returns. By tracking everything automatically, you can recover a lost customer by returning their money promptly, or sending the correct item right away. This is one of the real gains of an inventory management system for an e-commerce business, because you not only add value to the business through automation, but add value to your customer service approach as well.

 

Erhan Musaoglu

Erhan Musaoglu is the CEO and co-founder of Logiwa Corp., a supply chain management systems company. Erhan has over 20 years of experience in the warehouse management industry, and has used his experience in industrial engineering and consulting to create multiple companies, including Unitec and IFS. In order to share his knowledge with larger crowds, he has lectured at various universities on e-commerce supply chains and warehousing. His expertise and leadership in navigating the enterprise and B2B industry has lead Logiwa to grow exponentially.  He can be followed on Twitter at @ErhanMusaoglu or on LinkedIn.

Blockchain is Disrupting Business for the Better

By Contributing Author | 03/02/2018 | 2:15 PM

By Avery T. Phillips

The world of supply logistics has seen many changes over the decades. These include worldwide distribution, the evolution of paper invoices to electronic statements, and the internet bringing end users and manufacturers closer together than ever before. One of the latest developments shaking up the business world is the blockchain. The technology powering Bitcoin has a wealth of uses outside of the cryptocurrency world, and it could make a huge difference for supply-chain managers in the coming years.

Invoicing

Invoicing is one of the most likely candidates for blockchain emergence over the next few years. Blockchains rely on distributed ledger technology (DLT), which ensures that everyone involved in the process has a copy of the ledger that updates automatically and has built-in security protections. The advantages of blockchain for logistics and supply chains include exceptional transparency and the ability to track changes to pricing or secure offers in seconds without having to use a middleman to guarantee transactions.

Removing the middlemen, which are typically banks or credit institutions, allows invoices to be updated in real time. This reduces or eliminates the inherent frustrations that can result from recipients failing to update their accounts receivable or transaction invoices in a timely fashion. It also removes the extra time needed, and the costs associated with, relying on a third party to process funds and handle transactions.

Tracking

The logistics world is moving towards greater visibility every day, and with the near-exponential growth of asset-tracking devices, it’s likely that we will continue to see that visibility continue to expand in the future. Blockchain technology allows for instant updates at each stop along the way, ensuring that shippers, transporters and receivers all know where an item is at any given point in time.

The availability of these updates can save money not only in preventing lost or stolen product but also in eliminating much of the legwork and labor costs associated with recovering missing deliverables. In the case of high-valued asset tracking, the savings could be in the thousands or hundreds of thousands of dollars for each package tracked.

Inventory

Using DLT to track inventory seems simple, and distributed ledgers are a natural choice for such operations. The overwhelming number of tracking, scanning and storage systems out there may complicate matters, however. Supply-chain managers can benefit by taking a cue from school networks and instituting a standard “bring-your-own-device” policy (BYOD). Blockchains are simple enough to work with many different types of equipment, including barcode scanners and basic tracking software, allowing for a quick upgrade to a DLT-compliant setup.

With a BYOD policy in place, a company can mandate that any equipment used for tracking inventory, whether the goods are stored in-house or at a distant logistics center, meets the requirements for the DLT setup the organization uses. Even if your company doesn’t plan to move to blockchain-enforced transactions at this time, being ready for DLT implementation can save time and money in the years to come.

Blockchains remain an emergent technology that is likely to continue to transform in the years to come. Keeping an eye on development in the future can ensure supply and logistics companies are ready to meet the challenge and provide the visibility and service that customers expect.

 

Avery-Phillips-bio
Avery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.

Effortless Drop Shipment: A Seven-Step Program for E-Commerce Success

By Contributing Author | 02/23/2018 | 6:03 AM

By Peter Edlund,  DiCentral

The habits of today’s consumer have shifted rapidly over the last ten years. The long days of shopping at malls or placing orders inside a retail store seem obsolete, even during peak shopping seasons like Black Friday weekend. Today’s consumers expect to be able to order almost anything online and have it shipped immediately.

As a result of this new paradigm, retail e-commerce has ballooned while traditional brick-and-mortar stores have been failing to grow. E-commerce is a $220 billion market and is expected to grow by as much as 17 percent each year, according to AmeriCommerce. Retailers are keenly aware that, in order to survive in today’s retail reality, they need to partner with more suppliers to support direct-to-consumer fulfillment—or drop shipping.

Nonetheless, many retailers still struggle with drop shipment, with concerns ranging from difficulties in forecasting and return on investment to supply chain visibility and control of the customer experience. Getting every step of the drop ship process right is critical because, when a customer shops on your website, you will ultimately be judged for how accurately and timely a dropship vendor handles a transaction.

Your reputation and your connection with customers are on the line with every transaction, even if you never touched the package that arrives at someone’s door. The last thing you want is to hear is a complaint from an angry customer that hasn’t received an item from a dropship vendor. That conversation usually means there won’t be any repeat business.

Drop shipment doesn’t need to be complicated or problematic. There is a seven-step process you can follow that begins long before a package is ever shipped from a supplier’s warehouse. We’ve outlined the steps below, beginning with knowing you might need some help.

Step 1: Use A Complete Dropship Solution

Retailers have plenty to worry about before things like e-commerce and drop shipment are even considered. Before you get started, it’s best to consider a third-party dropship solution. Most retailers were not built to handle direct-to-consumer fulfillment and the volume of single SKU order fulfillment that comes with it. One thing you don’t want to do is shirk on customer service or the core tenets of your business.

A better solution is an end-to-end dropship solution that ensures control over the direct-to-consumer order fulfillment process. You also might want to seek a complete outsourced solution that provides the visibility and tools to manage both your bulk fulfillment and direct-to-consumer order fulfillment processes.

Step 2. Set Expectations With Vendors:

Before you get to the nuts and bolts of online sales, you need to have frank conversations with your vendors. Be explicit about your requirements and timelines and specific dropship requirements, such as scheduled inventory updates and private-label packing slips.

Step 3: Ensure Product Information Is Accurate:

The best dropship programs start with accurate product information, everything from price to weight to product images. Make sure you add e-commerce extended attributes for the product catalog to your Vendor Standards Manual to receive all the information necessary to populate your e-commerce website.

Step 4:  Integrate Available Inventory in Real Time

Accurate inventory is essential if you plan to take orders from e-commerce customers and have them fulfilled by a dropship vendor. Most retailers should plan to update inventory multiple times daily. Also, consider how third-party providers can assist vendors with maintaining and communicating inventory so it’s available for your website.

Step Five: Understand The Critical Dropship KPIs

So, you have a dropship solution, you’ve talked to your vendors and you have accurate product information on your website. Great! You’re almost there. The next step is to look at the KPIs (key performance indicators).

First, make sure vendors send inventory feeds per their SLA (service level agreement) to give you an up-to-date view of what’s available. Second, create a reporting dashboard using transaction data to see how fast the vendors confirmed an order and ensure that the acknowledgement came within a mandated time frame. Also, add order fulfillment to your reporting dashboard to see how quickly an order went out the door and if the vendor shipped an item within the agreed upon timeframe. Third, make sure the vendor’s order fill rate is within acceptable range. Finally, seamless order-to-small-parcel-shipment tracking to invoice documentation should be standard throughout the dropship process.

Step 6: Rigorous Shipment Standards

Errors are a given with the high volume of e-commerce, particularly during peak times, such as the holiday season. However,customers now have full visibility into the shipping process. Keep consumers updated on the status by integrating small-parcel-carrier package shipment tracking. Take shipment documents from your vendor, grab the carrier tracking number and update your e-commerce website with up-to-date shipping information.

Step 7: Follow Up:

Having real-time dashboards, a score-carding program, and a comprehensive view of shared inventory will ensure your trading partners are fulfilling orders as promised. You want a view of available inventory at a vendor site that is comparable to your view of internal inventory to minimize customer service issues or lost sales opportunities.

Peter Edlund
Peter Edlund | Senior Vice President of Global Product Marketing 
Peter is a founding member of DiCentral and responsible for leading the company's global marketing initiatives. He is the host of DiCentral's Connected, a video podcast that discusses current EDI trends with leading supply chain experts. Peter has over 20 years of sales and marketing management experience with a focus on supply chain solutions. He has held executive management positions with several technology firms. Peter is a veteran of the U.S. Navy and attended Central Texas College and Embry Riddle Aeronautical University where he studied aviation business management. For more information, please visit www.dicentral.com.

Infographic: How will smart technology impact manufacturing?

By Contributing Author | 02/16/2018 | 6:40 AM

Roadblocks for IoT Implementation

By Contributing Author | 02/09/2018 | 6:40 AM

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

Part II of III 

The Internet of Things (IoT) technology is disrupting all industries – from retail to healthcare and even the supply chain, but for all the benefits outlined in the first blog post, “The Future of IoT in the Supply Chain: It’s Complicated,” there are many roadblocks keeping IoT implementation in the supply chain from happening today.

These roadblocks are far reaching and very real – and they hinder the ability for IoT technologies to become widely and successfully adopted within the supply chain. However, by recognizing what these limitations are today, it will give us, supply chain leaders, an opportunity to set plans in place to overcome these challenges for IoT implementation in the future.

Roadblocks of IoT Implementation:

Standardization: One of the biggest challenges of implementing IoT devices within the supply chain is having a unified way for this technology to be integrated. Currently, there are no technology standards defined for how IoT devices will communicate – this includes network protocols, communication protocols, and data-aggregation. Without defined standards, we’re unable to figure out how data will be collected, processed, handled, stored, and summarized, leaving the industry wondering how these devices will handle unstructured data. And, once that data is collected, the next question will be: how will it deliver the data to tools that can analyze and store it? While nothing has emerged yet, it should be noted that there are several companies actively working on a regulatory standard. As we look at new IoT devices to implement, we should also consider how the standards and protocols may change in the future.

Security: Security continues to be a main concern for integrating and implementing emerging technologies. The fear around the ability to hack an IoT device is real, particularly because there is such a rush to bring emerging technology to the market that vendors often favor functionality over security. In addition to preventing access to the device itself, there are concerns about the security around the data being transmitted from the device. Questions we need to consider ensuring data is secure includes: Is it encrypted – if so, is the encryption strong enough? And, are industry standard best practices already built into the device around access control, authentication, and confidentiality? Of course, these aren’t the only questions to ask, but can set the basis for how we think about security and what steps we’re taking to protect our IoT devices as well as the data we obtain.

Privacy: Often, the promise of IoT is the ability for a single device to communicate with other internet-enabled devices, combining data and transmitting information to various parties. However, the collection of this information can also reveal data that may be sensitive to employees – like a truck driver’s location. While an employer may see it as a way to know exactly when deliveries will be made, but an employee may see it as an invasion of his privacy. In fact, beyond the data combination and transmission issue, there are legal requirements around such issues such as Personally Identifiable Information (PII) that require careful consideration before implementation. Some of these devices can be so small that an individual may not know that they are being tracked or assessed – a violation of privacy. And consider if the device is manufactured internationally – how can you be sure your company’s data is not being transmitted to the cloud and retrieved in an unfriendly country? The moral concerns around who is collecting data and for what purpose must be resolved before the widespread adoption of the technology.

Connectivity/Interoperability: With the overwhelming amount of data to be generated and transmitted through IoT devices as they gain popularity, the current communication infrastructure is another concern. Many devices are managed today through a centralized server-based network. But, when the number of IoT devices online reach the hundreds of billions, this will become a bottleneck and could cause entire systems to shut down for extended periods of time. Interoperability is another common roadblock the industry is facing. Device manufacturers are creating proprietary devices to limit the ability to connect these devices to brands other than their own; And with that, the data is inaccessible except through the closed system developed by the manufacturer. This creates an issue for companies to invest in IoT devices as they’re forced to work with one vendor, with no option to switch vendors or to seek enhancements to the existing functionality. Without the standards in place, devices can be designed poorly, even behave badly when exposed to the open network in an organization.

Compatibility: Many of today’s IoT devices communicate through a Web API, a much newer technology that is not available or compatible with legacy systems running on mainframes or industry-specific environments. Without the protocols for machine-to-machine communications in place, organizations are forced to spend on additional hardware or software to create channels between different IoT devices that have been manufactured by different vendors. The inability to directly communicate ultimately complicates the network’s capacity, speed and will increase downtime issues. Ensuring widespread capability of all IoT devices with the organization’s older technologies and systems will require an intermediary system that can help translate transmissions from devices to legacy systems.

Longevity: IoT, smart devices, and the like are today’s buzzword, but how long will these technologies actually stand the test of time? Given there are no standards in place for implementing emerging technologies, how much of the IoT infrastructure created will be rendered obsolete? Moreover, many device manufacturers are creating their own proprietary devices that only connect within its brand, but what if the manufacturer no longer exists? How will that affect your business? These questions are important to think through as your organization makes decisions about implementing devices as well as changing devices. There must be a secure way to decommission the devices and ensure that your data is not exposed nor are your networks compromised by devices that become obsolete. 

Data Usage: In larger enterprises, the amount of data collected and stored is already staggering, but IoT may increase that problem by a thousand-fold. With the nature of always-on devices collecting data in real-time and transmitting that data to another system, the issue of storing that data and the capacity required will quickly get out of hand. The investment in storage, whether internal or on the cloud can be prohibitive – the more devices that are online, the amount of data grows exponentially. Most organizations are not prepared for the glut of data that will result and are not considering the impact on existing infrastructure, system operations, and speed to operate – but they need to begin thinking about this for their IoT adoption to be successful.

Risk – Outages/Equipment Failures: Organizations today are mainly concerned with implementing and deploying IoT devices, but many have not considered the impact the need for internet connectivity will bring once devices are deployed. Unlike internal systems that can operate in a silo of your organization, these devices will require persistent internet connection to deliver on the promise of the real-time data analytics that drive decision making. But, what happens when the internet connection to your organization goes down?  Would your organization be able to function without those devices? If you are relying on them for mission critical business delivery, then the answer is likely no, requiring significant investment in backup systems and connections to ensure limitation of failure.

Conclusion:

With any new, innovative technology or device, organizations will always be interested in ways to implement and leverage the time savings or improved communication opportunities those devices may bring. However, there are many concerns to address and roadblocks to overcome to ensure these emerging technologies are more than just a trend. Instead, it’s identifying standards or industry-wide best practices that everyone follows so it goes beyond a trend and into the mainstream business routine.

 

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.

What the World Would Look like Without Freight Brokers

By Contributing Author | 02/02/2018 | 8:22 AM

By Chandler Magann, Founder, Next Exit Logistics

As of October 2017, 83% – just a bit over four-fifths – of all shippers outsource their domestic transportation needs, according to the Council of Supply Chain Management Professionals. In the council’s 2018 22nd Annual Third-Party Logistics Study, researchers also found that a quarter of all shippers are using a 3PL to plan and manage transportation logistics, both foreign and domestic.

So consider, for just a short moment, what a world without freight brokers would look like for your bottom line, employee retention, and indeed for the long-term well-being of your organization. No doubt, it would not be a season of The Walking Dead, but a world without freight brokers would be slower, more expensive, and populated by a horde of very grumpy and dissatisfied customers, who are not zombies.

Put aside the fact that planning and managing transportation would be an additional logistics position. Instead imagine using your current personnel to take on the additional responsibility that is outside of their current expertise. The individual or team will need to learn a whole new set of required skills; they will need time to find, create and foster relationships with multiple carriers; and understand efficient routing, permitting, and more.

That person must remain continuously read-in to what freight is available when and to what location.  That staffer then must harmonize those data points to your supply chain processes, or else shipments will sit at the loading dock. If your employee cannot execute the transportation and delivery of your products, the result will be delays – the third rail in the age of e-commerce.

Without freight brokers, overhead costs will definitely increase. Remembering that 83% of shippers outsource their domestic transportation needs, same report states that current transportation expenditures cost roughly 11% of revenue. What’s more, shippers are spending just over half of their transportation budget on outsourced transportation services.

So, let’s reverse-engineer this equation. A single logistics planner’s annual salary, before benefits, according to Glass Door, averages $57,105 but can run as high as $80,000. If your needs dictate building out a transportation department, the overhead costs will exponentially grow, and encompass hiring costs, space, and management systems to incorporate tasks into the overall supply chain operation.

Shippers will also need to invest in a routing and scheduling software solution that can find and communicate with carriers; track and organize pick-up and delivery windows, truck capacities, and various load configurations (LDL, intermodular, etc.), and provide access to the carriers’ current safety records. This is important to reduce fuel costs, to negotiate the best rate possible, and to mitigate legal vulnerabilities through compliance, on top of getting the cargo to its destination on time.

I recently stumbled across a blog describing freight brokers as close cousins to the Devil himself. Funnily enough, at the top of the freight broker’s Seven Deadly Sins was lowering costs. As a freight broker myself, I am not ashamed in the least about finding transportation efficiencies for my clients, because my job is to represent the interests of my clients.

That said, there is a balance to be struck. The best freight brokers work with shippers and carriers to promote close, dependable and cross-functional relationships, wherein the outsourced services are integrated into the supply chain, just more efficiently and at a lower cost.

 

Chandler Magann opened a Texas sales office of his father’s company and worked out of a spare bedroom in his house. In January 2009, Chandler’s father sold his entire business to investors. It was then that Chandler founded the freight brokerage Magann Texas, LLC, which later changed to Next Exit Logistics in July 2009.

 

 

The next game changer? How crowdsourcing is transforming the face of final mile delivery

By Contributing Author | 01/26/2018 | 8:21 AM

By Itamar Zur, Veho Technologies and John Brown, Droppoint

 

The rapid growth of ecommerce and fast-changing consumer expectations require delivery companies to think and act out of the box. To win in tomorrow’s final-mile market, carriers will not only need to handle record peak volumes, but also master same-day, on-demand, and night-time delivery. How can delivery companies best capitalize on these trends while protecting their market shares from disruptive new entrants? We believe the answer lies in crowdsourcing.

While crowdsourcing is not a completely new phenomenon, few carriers other than Amazon have so far harnessed the model to final-mile delivery. A common conventional wisdom is that crowdsourcing works well in ride-sharing or point-to-point deliveries (as with restaurant delivery apps UberEats and Deliveroo), but that the model is unfit for large-volume distribution. We, however, hold a different view. Based on Amazon’s success with the model as well as our own experience, we believe that crowdsourcing presents one of the largest opportunities for package-delivery companies today. When properly understood and leveraged, crowdsourcing can yield major operational benefits, help provide exceptional customer experience, and enable delivery companies to better capitalize on the growing demand for final mile delivery.

 

The Economics of Crowdsourcing

Let us begin by addressing two misconceptions around the crowdsourcing model: First, that crowdsourcing is more cost-effective than traditional distribution models, since market rates for crowdsourced drivers are lower than those of professional drivers; and second, that crowdsourcing is disruptive to traditional delivery companies because it allows shippers to "cut the middleman" and connect directly with the driver. In reality, neither of these arguments is accurate.

In the U.S., ride-sharing platforms Uber and Lyft, or delivery platform Flex (Amazon’s final-mile crowdsourcing app) typically pay their drivers $18–25 per hour, depending on the market. Most on-demand restaurant delivery platforms pay about the same. While these rates are certainly lower than the hourly income of a unionized UPS or DHL driver, they are surprisingly comparable to what most regional carriers or local delivery businesses pay. Moreover, the competition for crowdsourced drivers — who are increasingly becoming the bottleneck for growth in the on-demand space — has constantly been on the rise. As a result, companies like Uber must spend heavily on marketing, referral fees, and other driver-retention bonuses to maintain and grow the size of their fleets. Crowdsourcing, in other words, is not always cheaper.

What about "cutting the middleman"? It is true that most crowdsourcing platforms have eliminated, at least to some extent, the role of the flesh-and-blood operator. However, the truth is that this has nothing to do with crowdsourcing itself, but everything to do with the automation technology that these companies have developed. For example, by leveraging machine learning algorithms, crowdsourcing platforms are able to automatically assign delivery tasks to drivers based on each driver’s real-time location and availability. These smart algorithms can also bundle delivery addresses to routes, determine the fastest way to complete a route, and provide the consignee with an accurate ETA and real-time visibility. All these tasks have been traditionally conducted by a dispatcher or operator, and their automation translates into higher productivity and margins. However, one does not need to run a crowdsourced operation to benefit from these technologies — as they work just as well with an employee-based delivery model.

 

Leveraging a Flexible Capacity Model

If cost savings or increased productivity are not the key benefits of crowdsourcing, then what makes it so attractive to Amazon and its retail rivals? the answer lies in the incredibly flexible nature of the model, and its scalability potential.

Compare carriers who utilize a "fixed" pool of professional full-time drivers, with Amazon Flex who utilizes a "flexible" pool of crowdsourced, part-time drives. When parcel volume spikes — as usually occurs during the holiday season — fixed-capacity carriers must extend their fleet and undertake the cumbersome process of recruiting and on-boarding temporary employees or contractors, who are not easy to find. Driver shortage has in fact become a major challenge for common carriers in recent years, not only during the holidays, but also on a weekly basis, as parcel volume and capacity needs tend to constantly fluctuate. Often this results in delivery delays, disappointed customers, and lost business opportunities. Amazon, on the hand, can instantly scale its capacity in times of high demand, simply by posting more routes on its Flex app to drivers who have already been vetted and are available for single-day tasks. This benefit also works at times of low demand: since Amazon does not have a contractual obligation to use its crowdsourced drivers, it can easily drop the number of active drivers whenever needed, and avoid the cost of underutilization. In other words, Amazon is much better positioned to "flex" its capacity and perfectly match its supply of drivers with demand for deliveries.

There are two other important benefits that make the flexible-capacity model highly attractive to Amazon. First, from a service-level standpoint, crowdsourcing allows Amazon to protect itself from last-minute dropout of drivers, and ensure that there is always a driver available for any delivery task. Amazon can do so because it only pays its crowdsourced drivers when assigning a route. Therefore, it can practically recruit and on-board an unlimited number of drivers without bearing high employment costs (and indeed — in the U.S. alone, Amazon has already on-boarded more than 100,000 crowdsourced drivers in only two years since launching Flex). Second, from a scalability standpoint, Amazon can easily launch new delivery markets, simply by turning on its app and enrolling new drivers, while circumventing lengthy recruiting processes. This is how Amazon has rolled out Flex to over 50 U.S. markets (and more recently — 7 new UK markets) in only two years. The scalability of crowdsourcing gives Amazon an immense competitive advantage over fixed-capacity carriers when capitalizing on the fast growth of ecommerce and need for final mile delivery.

 

The Customer Experience Advantage

Perhaps of the highest importance to Amazon, owning a flexible fleet allows the company to offer customers a variety of delivery services that fixed-fleet carriers traditionally found expensive to provide. Two-hour, same-day, and night-time deliveries are all made possible with crowdsourcing: Amazon can always find an available driver at any hour of the day, and enable the customer to choose her preferred delivery window while minimizing the likelihood (and cost) of failed delivery attempts. This gives Amazon another powerful way to delight its customers and further increase trust, loyalty, and customer lifetime value.

 

Can Crowdsourcing Be Harnessed by Traditional Delivery Businesses?

In light of these benefits, we believe that crowdsourcing should not be the sole domain of disruptive technology companies such as Uber and Amazon. Yet, implementing the model in more traditional delivery companies requires a change in mindset and proper investments in technology. The key to harnessing final-mile crowdsourcing is the need to simplify and standardize delivery tasks such that almost anyone could complete them in their own vehicle, just as well as a professional driver.

To demonstrate this latter point, take ride-sharing platforms, for example. Companies like Uber were able to replace taxi drivers with "anyone in their own vehicle" by leveraging the proliferation of GPS apps such as Google Maps and Waze. With GPS technology, an Uber driver does not need to know every street and shortcut like a professional taxi driver, yet she can still drive passengers to their destination just as effectively.

The implementation of crowdsourcing to final-mile delivery requires additional considerations. For one thing, GPS locations are not always accurate, especially outside of city centers. While an Uber driver can ask her passenger to show her the exact drop-off location, delivery drivers cannot do the same with packages. Second, delivery drivers must also learn how to enter buildings that require an access code; where to park the car on a busy street; and which commercial deliveries should be prioritized. To become efficient at running a delivery route, most drivers need a few weeks to learn and adjust. Unfortunately, this "adjustment period" is far too long for any gig-economy driver, who could simply opt to drive with Uber and start making money from day one.

                    To truly enable final-mile crowdsourcing, delivery companies must help
                    
drivers jump over the lengthy "learning curve." Rather than give the driver
                    
a manifest and expect her to figure out the route on her own, carriers
                    should provide the driver with technology that takes her step by step
                    through the delivery process and eliminates any opportunity for error.

The good news is that such technologies already exist in the market. Dynamic routing, geofencing, an online routebook to correct any GPS errors, and a photo database of all drop-off locations — are all features of smart mobile apps that provide drivers with easy step-by-step instructions. Live tracking, chat tools, and an instant settlement system can help operators gain control over any crowdsourced operation while removing unnecessary friction. These technologies can also be adapted for any kind of operation regardless of crowdsourcing. It is only a question of whether one is willing to make the investment, and there has never been a better time to make it.

 

The Bottom Line: It is time to re-think innovation

The benefits of crowdsourcing do not lead to the conclusion that companies should completely replace their existing fleets with crowdsourced drivers. After all, the cost of maintaining a large crowdsourced fleet can be cumbersome, and experienced delivery drivers will still perform better at customized, bulky, or "white glove" deliveries. Yet, we believe that carriers can no longer afford to ignore the success of crowdsourced programs like Amazon Flex, or else they risk being left behind. By understanding the economics, key benefits, and the technology required to harness crowdsourcing, carriers too can use the model as a means to complement their existing fleets, differentiate on customer experience, and better capitalize on the growing demand for drivers in the final mile.

 

About the writers 

John_Brown
John Brown is a former director of strategy and marketing at UPS, and the co-founder of Droppoint, with over 40 years of in logistics and supply chain management.

 

Itamar_Zur
Itamar Zur is the founder and CEO of Veho Technologies – a technology and crowdsourcing platform for final mile delivery. Veho is winner of the 2017 Harvard Business School New Venture Competition.

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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