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Archives for July 2018

Is a Tightened Labor Market Driving Up Your Operational Costs? Consider Exploring Warehouse Incentive Programs to Increase Retention

By Contributing Author | 07/18/2018 | 6:02 AM

By Tom Stretar, Vice President and Labor Management Practice Leader, enVista

 

The speed of today’s supply chains, coupled with macro behaviors, are causing organizations to seriously consider incentive compensation as part of their overall associate compensation strategies. The Bureau of Labor Statistics recently reported that warehousing jobs experienced year-over-year uptick in the number of quits, making it one of the top industries having to cope and plan for unemployment. Just last year, there were 25,000 more quits in the industry itself [1], and some companies are even having to retrain 50 plus percent of their workforce to lessen the amount of quits.

We are seeing three key contributing issues to this trend.

Companies in large metropolitan cities are appearing in the lower percentiles of wage rates.

Bigger metropolitan areas and some of the tightest labor markets, such as Seattle, San Francisco and Minneapolis, are currently building in mandatory minimum wage increases to payroll, with amounts being adjusted based on employee headcount. These much-anticipated improvements in incomes are expected to take effect by 2022 and 2024.

By raising wages, cities are hoping to attract employees, because let’s face it, with an unemployment level that is the lowest it’s been in many years, it’s hard to motivate people to look for work other than presenting a decent number attached to the dollar sign.

The Amazon effect is causing a need for flexible workforces, including temporary and seasonal associates.

The Amazon effect is comprised of two parts. Yes, it offers employment opportunities, but at what cost? Amazon has long been known for its ability to attract employees from some of today’s largest and longest-standing retail operations.

As one of the few retailers that can afford to cut overhead costs, offer savings to customers, operate same day shipping all while decreasing profit margins, it’s a recipe for traditional retail disruption.  

Traditional retailers can’t afford to keep up with Amazon’s operations and what it’s able to pay and promise its employees in wages and growth potential. This is exactly what contributes to the key stakeholder’s decision to either cut hours and reduce payroll or even completely close the doors on brick-and-mortar and other online retail operations all together, giving into the “Amazon effect.”

Increase in omnichannel operations

Increased omni-channel capabilities mean increased complexity and activity. The window of order orchestration is getting shorter and shorter to meet customer expectations and provide the positive buying experiences customers expect. Combined with holiday shipping and continued e-commerce growth, the increase in need for labor programs will continue to be a strategic issue that logistics and human capital professionals will need to address as part of the recruitment, retention, and compensation programs of the future to compete.

In conclusion, whether you’re finding or retaining warehouse workers, the costs add up from departure costs, to additional advertising and recruiting and new training once onboard. Make it easier on your entire workforce and consider a warehouse incentive program. The programs have been proven to be a popular option for improving productivity and retention by as much at 15 to 30 percent, with labor expense ranging from 20 to 70 percent of a company’s operational costs [2], every company should avoid absorbing those costs by any means necessary.

 

Tom Stretar_headshotTom Stretar is Vice President and Labor Management Practice Leader at enVista, bringing more than 20 years of supply chain consulting experience in marketing, sales and implementation of complex supply chain improvement programs. Tom joined the enVista team in June 2009, following more than 16 years of service at JDA (formerly RedPrairie Corporation). During Tom’s career, he has personally developed or managed the delivery of more than 250 labor performance management programs across North America and Australia and is Green Belt certified in Lean Six Sigma. 

 

 

 

 

[1] Economic News Release: Job Openings and Labor Turnover, Bureau of Labor Statistics, DECEMBER 2017 https://www.bls.gov/news.release/jolts.nr0.htm

[2] Economic News Release: Employer Costs for Employee Compensation, Bureau of Labor Statistics, September 2017 https://www.bls.gov/news.release/ecec.nr0.htm

U.S. Infrastructure Needs the Tools of Logistics

By Contributing Author | 07/16/2018 | 6:30 AM

By Dr. John Brown Miller, past professor of civil engineering at MIT, chair of the ABA Section of Public Contract Law, and is an expert on infrastructure procurement.

 

In 1987, Hong Kong burst onto the world’s infrastructure stage with a series of 30-35 year build/operate (life cycle) projects for tunnels, rail, water, and ports. When Hong Kong rejoined China in 1997, much of the colony’s core assets had been rebuilt, with dramatic life cycle cost savings and higher levels of service. Procurement contracts put the risks of producing and operating these facilities on the private sector provider. For many projects in the program, Hong Kong also put revenue risk on the private sector provider (and its lenders and investors).[1] 

The results shattered American infrastructure dogma in three ways:

  • On-time, on-budget results are more likely when private sector capital is at risk;
  • Competitive life-cycle procurement attracts new technologies and methods that produce savings of 30-40%; and
  • Governments should avoid committing massive amounts of funds on large, complex projects without allowing the private sector to independently verify (through competition) that such projects make technical and economic (life-cycle) sense.

Hong Kong ran a Chinese bull through America’s infrastructure shop. The contrasts were stark. Here, publicly funded projects are routinely late and over budget—yet, only taxpayer dollars are at risk. Here, federal policy requires separate, full design before a separate competition for construction—while new technologies and methods are pushed away. In the United States, designers have no contractual obligation to the cost of operation—even though that’s when 90% of life-cycle costs are incurred. The result: Large, complex projects—like California’s High-Speed Rail—are not verified through competition in the private sector. Private sector teams do not independently verify that the large public projects make technical and/or economic sense.

Since Hong Kong’s success, the proper role of American government in public infrastructure is contested. The Life Cycle Cost Influence Curve below summarizes lessons learned from thirty (30) years’ experience with competitive life cycle delivery.[2]

First, early thinking about of Life Cycle Cost and long-term Levels of Service has a profound impact on outcomes. The blue line tracks Level of Influence on Life Cycle Cost over Time. Infrastructure owners have one opportunity, beforeDesign begins, to exert Very High Influenceat a Very Low Cost. The impact of this influence is shown as the difference (35% at the end of the cycle) between the red and green lines that compare High and Low Range Life Cycle Cost. Costs between the red and green lines are Avoidable. These funds need not be spent if the project is properly configured and controlled. Costs below the green line are Unavoidable – and will be spent once construction begins. Then, it is very hard to influence life cycle costs.

 

Dr. Miller chart1

Second, the quality of the Configuration process in the first few months determines the Life Cycle Cost Curve. Poor Configuration will produce Avoidable Costs that are three (3) times the total cost of initial Design and Construction. Pennies spent during Configuration, and nickels spent during design save dollars over the life cycle. There is always room for better design, better equipment, and high-quality materials, once life cycle performance is in view.

Third, the range of outcomes—between good and poor stewardship—is surprising. This is where the tools of Enterprise Risk Management[3](ERM)—“open system logistics”—are urgently needed to help public owners deliver high levels of infrastructure service at low life-cycle cost. In Hong Kong, teams used logistics to plan across the life cycle. Logistics can supply the tools necessary for Owners to use asset condition, as well as revenue and expense history, to properly configure projects. Public owners need new tools to be in position to perform the right activities, at the right time, in the right place, at a competitively verified price.

 

Dr. John Brown Miller HeadshotDr. John B. Miller is a global expert on infrastructure with an eye on efficiency and value. He has a thirty-five year focus on bringing practical business, legislative, and contractual solutions to the world’s burgeoning public infrastructure needs.

He was a reporter on the American Bar Association’s 2007 Model Code for Public Infrastructure Procurement project (MCPIP), which provides “best practices” in procurement to America’s 90,000 state and local governments. The Code is designed to help officials, vendors, and contractors ensure integrity in infrastructure delivery and finance, while helping taxpayers receive real value for money. The competitive principles in the Code have been adopted by many hundreds of state and local jurisdictions. He has consulted for the United Nations on best procurement practices.

Dr. Miller offers a practical combination of good procurement practices with enterprise risk management (ERM) to produce unique opportunities for massive gains in value for money. This combination creates the flexibility governments, vendors, and contractors need to get effective action, at the right time, in the right place, at the right cost – across entire public infrastructure networks.

Dr. Miller was professor of construction management and civil and environmental engineering at MIT, writing two textbooks in the field of infrastructure delivery and finance. He and his clients have been involved in some of the largest public infrastructure projects/networks in the world. He is an elected fellow of the American Bar Association, its Section of Public Contract Law, and the American College of Construction Lawyers, in which he has served in leadership positions. He is a prolific writer in this space, with more than 100 scholarly articles and case studies, and numerous invited presentations in every corner of the world.

 

[1]Hong Kong’s success renewed interest in much older project delivery and finance practices. My MIT textbook, Principles of Public and Private Infrastructure Delivery, covers America’s 200-year experience with life cycle delivery and the Hong Kong experience in Chapters 3 and 5, respectively.

[2]The Life Cycle Cost Influence Curve is based on our research program at MIT’s Civil Engineering Department between 1995 and 2003. The Curve extends the work of Prof. Boyd Paulsen (on design and construction) by adding Operations, Maintenance, and Repair – to cover the entire Life Cycle.

[3]By ERM, I mean the processes and logic of ISO 31000_2009(EN) Risk management – Principles and guidelines. Risk management includes the coordination of activities that direct and control the effect of uncertainty on complex collections of facilities, equipment, and supplies, involving ongoing operations, multiple people and firms, over long periods of time. ERM is “open-system” logistics (or supply chain management).

The Retail Revolution Starts with a Revolutionized Supply Chain

By Contributing Author | 07/13/2018 | 8:00 AM

By Guy Courtin, VP Industry & Solution Strategy, Infor Retail

 

The industry-wide integration of smart technologies has drastically altered e-commerce. No longer is the online shopping experience limited to Safari or Chrome platforms. Now, AI-enabled products such as Alexa and Siri allow the consumer to browse and purchase goods, hands free. Welcome to the age of voice commerce.

Recent announcements show that voice-driven technology will soon become commonplace in a myriad of industries. Wireless speaker company Sonos recently partnered with Amazon to insert Alexa’s AI capabilities into its product. Apple TV embedded voice commands, via Siri, into its latest remote control capabilities, allowing users to scan Netflix or Hulu’s massive libraries with a simple ask. And the latest versions of cars have included voice recognition capabilities to play, stop, or skip a song, call a friend, and even find a better traffic route. While the market may seem saturated with AI and machine learning-driven products, the trend is just beginning.

Machine learning technologies, and specifically voice-recognition capabilities, have the ability to revolutionize industries. So, how will they alter the retail supply chain?

  • Mastering the game of product placement: A recent article fromHarvard Business Review discusses how voice-commanded digital assistants will affect product marketing, as this smart tech will likely recommend products from its own brand. Go ahead, ask Alexa to order paper plates and disposable cutlery for that upcoming family reunion. Amazon-branded instead of generic products will most likely end up on your doorstep. Similar to when businesses listed their organization’s title with “AAA” to increase visibility in the yellow pages, companies now need to ensure their AI engines work with digital assistants to be top of mind for user orders. As these orders become more complex – moving from “please order me carpet cleaner” to “how do I remove stains from my rug?” – a more strategic AI engine should recognize the ask and still promote its product for purchases. The power of a good AI engine will prove vital in getting better placements, as the role of digital assistants increases in importance for consumer buying behavior.
  • A more intelligent supply chain: The ability of smart technology to connect the dots between a customer’s spoken, open-ended question and an order will jump start the supply chain in new ways. A constant difficulty for supply chain professionals is identifying the point of demand – and this will only get harder as customer questions become less pointed, focusing less on the words themselves and more on the intention behind them. Oftentimes, the easiest point of demand to recognize is the transaction, which can set off the supply chain process. But, AI engines can classify intention as demand, starting the process much earlier. When the consumer asks the above question about rug stains, the supply chain can get started on gathering the potential products he or she may order: stain remover, rug protector, maybe even a new rug! The more that consumers rely on these digital assistants for everyday tasks, the more data the technology can gather – data that can be used to predict future behaviors and identify purchasing patterns.
  • It is all about the context:An enhanced and smart AI engine is especially vital when retailers take into account the context in which consumers purchase their products. Items cannot have simple and bare-bones descriptions as to their ingredients, materials, etc.; the more thorough and detailed the description the AI engine has access to, the better for ensuring each product is matched correctly to the consumer’s needs and past purchases. Consider the previous example for a rug cleaner: has this customer ordered a rug cleaner in the past, and if so, was it an organic solution, or the cheapest product available? Does the consumer need a specific rug solution, which likely would be higher priced? Should they be buying a rug protector in tandem with the cleansing solution, as this is a repeat purchase? Companies must use smart, machine learning technology to engage with the information surrounding the customer’s ask, especially as this sort of contextualized understanding becomes the norm in connecting the consumer with the product.
  • With great information comes great responsibility: Of course, as much as gathering this data benefits the supply chain and the consumer, it also places greater responsibility on companies to guard it. This is exemplified by the fact that the customer subconsciously submits data to the digital assistant, typically within the privacy of their own home. Data issues have been a hot topic lately, as companies such as Equifax and Facebook deal with security breaches of the customer data they have collected. When companies are consistently gathering user data, they are creating an environment easily targeted by outside forces. Companies need to be strategic in how they manage this information, and balance gathering data to contextualize orders with ensuring confidentiality. Once retailers identify the line that cannot be crossed, being transparent with consumers about how information is being used will be key to creating brand loyalty and building trust in the company-customer relationship.

Voice commerce is a critical step for retailers, as they continue to reduce friction for e customers. This road has been traveled before – order online and pick up in store, two-day shipping, and one-click shopping have all proven successful in making life easier for the consumer while increasing brand loyalty. Voice commerce is the obvious next step in the modern retail revolution. But, as we continue to leverage existing and new technologies to improve the shopping experience, we must respect the great power that brands are beginning to harness and ensure that it produces only positive results.   

 

Guy CourtinGuy Courtin is Vice President of Industry & Solution Strategy for Infor Retail and Fashion, a role in which he also drives thought leadership for the team. Guy has more than 15 years of experience in the high-tech industry, with expertise in the supply chain arena. Prior to Infor, he was a vice president and principal analyst at Constellation Research, covering how digital disruption was impacting supply chains. Previously, Guy was vice president of research for SCM World, where he spearheaded coverage of supply chain service providers.

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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