There is much speculation about the impact that artificial intelligence (AI) will have on the transportation industry, though as yet there is not much implementation. The benefit of its application will be in filling the shortage of workers in the logistics industry. Now is the time to make a new strategy for distribution networks as part of the ongoing digital revolution.

E-commerce is extending into B2B transactions, nano stores are becoming popular and we now have a circular economy. Due to these factors, the flow of goods will gain speed, increasing in frequency and intricacy. Over the next ten years, packing density, which is the amount of order lines per meter cubed, will grow by five to ten times. The cost of transport or storage will not be the major influence on the organization of distribution networks. This will rely on how efficiently goods can be handled, and the logistics industry is changing due to developing technologies.

There are three such developments that will have a major impact upon distribution networks, they are: Trans-European Transport Networks (TEN-T), autonomous transport, which will transport goods over these networks, and the developments in warehousing technology.

TEN-T is a group of ten designated transport links which cross national borders which will be built and developed by the European Commission until 2030, and will include innovation over railways, roads and water. The objective is to firm up the transport infrastructure in Europe by implementing intelligent management systems to the transport network, in the hope that costs will come down. The new network will be safe and robust, and will carry goods uninterrupted and reliably along it’s corridors between Europe’s major hubs.

Autonomous transport in the form of unmanned trucks is becoming more possible with developments in AI. Wireless technology will be used to interconnect ‘road trains’ with a manually controlled truck at the front. They will need to have the capacity for enough volume and frequency; therefore distribution centers will need to be enormous in order for logistics companies to combine the flow of transport across chains in order to deliver more frequency & reliability.

Distribution centers are also becoming what is known as ‘dark stores’, where robots, RFID chips, automated case picking, GS1 pallet labels, dock & roll and pick by voice are the technologies which are combining to handle the increased intricacy and frequency of deliveries, and DC productivity has been increasing exponentially as a result of their implementation.

The ever-expanding UK distribution and logistics sector is a significant slice of the economy as a whole, providing a large amount of employment. The challenge is to meet the needs of the industry in terms of skilled workers in order to continue expanding and provide the service customers require.

This article is aimed at establishing the skills requirement of the distribution and logistics industry, and it is also intended to establish the reasons for investing in skills education. In order to do this, the example of a couple of skills and training providers from Sheffield City will be used to establish how training providers work with the industry to meet their skills requirements.

The UK’s distribution and logistics industry encompasses over 187,000 businesses and is worth £93 billion per annum to the national economy and it provides employment for 2.25 million workers—approximately 8% of the entire workforce. During this decade, these numbers are predicted to increase. Data from Skills for Logistics, which is the industries skills sector, estimates that an additional 917,000 workers will need to found during the decade from 2010 to 2020.

Further data from the National Skills Academy suggests that a shortage in skills is having a negative impact upon logistics and warehousing operations. These shortages are undoubtedly bad for business and have a detrimental effect on the balance sheets. For example;

  • 47% of respondents claim to have difficulty recruiting because they can’t find applicants who meet their skills requirements
  • 20% claim that applicants didn’t meet their qualification requirements
  • 54% claim that the failure to fill vacancies increased their operating costs
  • 47% claim that the failure to fill vacancies made achieving customer satisfaction more difficult
  • 39% claim that the failure to fill vacancies mad it more difficult to achieve standards in quality

The Sheffield City Region is a national hotspot for logistics companies, where the sector has grown by 29.5 % in the period since 2009. This growth brings with it an increased need to invest in skills and training for the industry. In the region it is provided by Barnsley and Doncaster colleges, whom work closely with companies such as Aldi, Amazon and DHL in order to provide the training they expect their employees to have.

Both colleges have a dedicated sector specializing in Warehouse Logistics and Retail to counter the growing demand, and are considering a development comprising of two completely new Warehouse Academies close to their respective campuses. These colleges clearly have both the capabilities and funding available to meet the need for training, skills development and qualifications required by the distribution and logistics sector, leading to more profit for all concerned.

3d printingThe progress of 3D printing technology has been rapid. It has moved from it’s initial state as a tool for making simple polymer objects as the invention of Charles Hull in the 80’s, to building complex parts for race cars, aircrafts and even human organs and prosthetics.

The business community is starting to embrace the potential of 3D printing as a tool for more efficient and environmentally friendly manufacturing processes. Canalys, an analysis company, anticipates that the worldwide market for 3D printing will be worth $16.2 billion by the year 2018. With an increase in adoption, 3D printing will bring a revolution in manufacturing, including the supply chain and everything that involves—including logistics.

Manufacturing can be outsourced to locations where it can be completed for a low-cost. However, the global logistics process is not due to the cost of transport. This problem can be addressed using 3D printing to locate manufacturing plants closer to the intended market. This will reduce the geographical distance covered by the supply chain and also have a positive impact on the carbon footprint.

The new manufacturing plants can also help companies to deal with inventory problems, specifically the industrial parts and consumer based sectors that provide specialist products. 3D printers will help manufacturers to efficiently produce bespoke goods, saving money and reducing waste.

As the 3D printing processes become more efficient, new businesses based on a quick turnaround will emerge and traditional manufacturers will move to produce more technical and specialized components. More common products will be made by 3D shops and inexpensive one-off products will eventually be made by consumers themselves. By simply purchasing and downloading a program for the 3D printer, consumers will be able to purchase items such as plastic toys, smart-phone cases, and more!

These developments are not imminent, but they will happen eventually. What needs to be understood at this stage is the potential for an increase in the speed of trade brought about by 3D printing. Companies will need to re-evaluate supply chain management processes in order to handle the impact of 3D printing.

There are legitimate concerns that this type of manufacturing will lead to more consumption, and therefore, more waste. However, the materials used in 3D printing processes are largely recyclable plastics that have been through a heat treatment process. This brings the possibility to reverse the supply chain approach—consumers will be able to recycle old unwanted plastic goods by returning them to a local 3D printing outlet, where they will be sent to be re-processed into a plastic filament for 3D printers.

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As part of his mission to gain a better understanding of out-of-stocks (OOS), Dan Gilmore, president and editor-in-chief of Supply Chain Digest, has held a recent discussion on how extra inventory can be driven by lead time variability. For those who do not protect themselves from lead time variability, there is the prospect of more out-of-stock (OOS) occurrences. In each occurrence of variability in the supply chain, it is important to protect it with increasing inventory, capacity, or time, by making customers wait or an increase in OOS.

Gilmore also released an online inventory calculator to make the concepts more clear and demonstrates the impact of a reduced lead time. The math of the calculation is difficult, but the underlying intuition is less so—a late shipment means that you must have the inventory in reserve in order to meet demand in the meantime. Therefore, reducing lead-time variability has a significant impact on OOS or inventory.

He also states that in spite of the evidence pointing to how important lead time variability is, only a very small amount of companies track it.

Problems arise from the fact that it’s not always easy to get insight into lead time and variability. Existing systems are not yet equipped to track it. Here are three areas defined as those to measure in order to be able to measure lead time and variability. Each should be measured separately, as they display different characteristics:

Transit Time
The first is transit time. Transit time is measured from when a product departs the suppliers’ dock and arrives at your companies dock. This is the most straight-forward area as the data is accessible. A calculation can be made between all of the transit times by calculating an average and standard amount of deviation. It’s made slightly more difficult by shipping via a variety of platforms and these should be taken into account, e.g. the difference between ocean shipping and air freight must be taken into account, and a decision whether to calculate the dominant method or a blend must be taken.

Order to Ship Time
The second is the order to ship time—the time between when the order is placed and when it is shipped. For suppliers, this is comparatively easy, by measuring when the order was placed, having visibility of the shipment data and knowing when the item shipped. It gets more complex if the order changes frequently or the PO is open. In this case it could be tough to decipher when the order was placed. It’s even harder if you are dealing with your own plant, in this case it is the time from when you made another batch until the item ships.

Replenishment Frequency
The third is replenishment frequency—the extra time occurring from periodical production. If you place an order once a week, that’s an extra week of lead-time. Even daily orders are subject to how often they are shipped. Unless the production schedule is fixed this can lead to difficulty, variations in production must be factored into lead-time calculations.

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It has become apparent to companies in all sectors that their supply chain is more than just making sure products get into the hands of consumers. Supply chains have become an indicator of the overall health of a business by reflecting corporate strategy applied to everyday interactions from within and outside of the company. The supply chain is crucial in achieving customer satisfaction. Successful companies see it in a broader way, by including information sharing, planning and other value adding activities. The supply chain must cover everything from the raw materials used in production, to the final distribution of products, as well as logistical concerns.

Successful companies have invested wisely in their supply chains— this investment can go a long way and is one of the most cost effective strategies any company can apply to their growth portfolio. The execution of an effective supply chain operation can have a multitude of benefits and move business performance forward. Here are three interventions that senior company executives can carry out in order to achieve the full potential of their companies supply chain operation.

Think Separately About the Supply Chain and Other Corporate Strategies

Regardless of whether it is the goal of your company to provide superior service, cost leadership, or product innovation, it is of the upmost importance to make sure the supply chain is contributing to the key points of your strategy. Consult the leaders of your business to help define how to make the supply chain work for the company. For example, the marketing department should be able to describe what the customer values by analyzing and providing data relating to their needs and thus, providing the ability to differentiate from the strategies of your competitors. The commercial arm of your business should be able to identify which of your customers are worthy of the cost of an enhanced service and which you should attribute the standard service to.

Develop End-to-End, Up-to-Date Supply Chain Protocols

It is no longer effective to manage different supply chain tiers separately. The ability to analyze data in a sophisticated manner means companies are able to manage their supply chains from end-to-end and in an up-to-date manner, especially in the retail sector. Companies should dedicate a manager to ensuring that end-to-end performance is at a premium level across all departments.

Outline Performance Standards Across the Organization

Incentivize the supply chain to work towards defining ways to deliver more value for the company and protect it against the larger risks at the same time. In order to achieve this, the company must look to analyze beyond the traditional outlooks on capital, cost, and service. The performance indicators that should be looked at depend on what the needs of the business are, which segment of the market you are aiming for, and the product. Besides this, it is important to understand the production costs attributed to valuable clients, the stability of key suppliers, and being agile in volatile markets.

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Most of the worlds top companies understand how important it is to have a supply chain management system in place in order to remain competitive.

Chief executives are beginning to realize that supply chains have become a strategic asset to their company—both for the purpose of fulfilling customer expectations and creating a more efficient operation. IBM has recently published a study via their Institute for Business Value, which contains information to support these claims.

According to the study, executives who preside over high performing enterprises attribute a lot of their success to their supply chain management systems. Of all those surveyed, 65% claim that their supply chain is a great help when it comes to customer satisfaction and 62% say that the supply chain is very effective as a tool for generating more revenue.

The findings of the study are supported by recent interviews of two executives from leading companies who are not directly responsible for supply chain logistics. In the interviews, the executives were asked questions about how they viewed the role of a supply chain as part of their wider operation and as part of their specific enterprise. In addition, they were asked how the role of the supply chain has changed over the last number of years and how it enhances their balance sheet, ability to innovate, please their customers and provide a competitive advantage.

Kees Kruythoff, president of Unilever in North America, claimed that the supply chain is absolutely crucial in Unilever’s success, mostly because of it’s role in providing value for customers. As the environment begins to resemble an omni-channel one, need for a modular, flexible and responsive supply chain management system at a low cost becomes more pressing.

Kruythoff claims that as the business environment becomes increasingly digitized and interconnected, the role of the supply chain will become more prominent. His colleague Salwan Sumeet, who is senior vice president of human resources, claims that it creates value across three important areas; firstly and most obviously, as a tool for delivering cost effectiveness, secondly, in service of brand preference by providing quality of product and service and finally, as a device for enhancing growth. All three are part of a response to customer needs and demands.

Another example of a CEO who is seeing the benefits of a supply chain management system is Edward Cooper, VP of PR and communications at Total Wine & More. He is convinced that the supply chain is vital to his company as it strives to succeed in the heavily regulated alcoholic beverage industry. Cooper claims that besides helping his company succeed, supply chain actually delivers profitably and growth as well, and re-enforces the companies position for the future.

For Total Wine & More, the supply chain team is responsible for facilitating the movement of products between their suppliers and retail outlets. The team is concerned with ensuring that the right product is in the right place at the right time for their customers, and it does this by keeping an eye on inventory, orders and re-stocking functions.

The amount of regulation from the tax authorities in the U.S applied to the distributors of alcohol make protecting these areas of the business absolutely crucial. Total Wine & More sees this situation from the perspective of a company whom wants to grow along with their wholesalers and producers. They are big enough to build brands that benefits wholesalers, producers and customers alike, and their efficient supply chain is helping them to consistently deliver.

Does your organization see efficient supply chain management as a pathway to success? Share your thoughts by commenting on this post.

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Over the past few years, there has been an observable diversification in consumer habits, and retailers are under pressure to evolve in time to meet these developing demands. There is no blanket approach for retailers to take towards their distribution systems in these circumstances.

Their approach is largely grounded in developing their facilities using automation and a number of other new technologies as they come online. This is a given for larger retailers, who distribute their products in a great number of directions. It is also apparent that the rest of the field needs to make similar adjustments in order to keep up and fulfill their orders on time.

A lot of the change in the retail landscape is driven by ecommerce, which has put pressure on warehouse managers to evaluate and integrate relevant types of automation into their operation. One system that can be of great help is a warehouse control system (WCS). A WCS can help to automate processes, systems and material handling equipment and goes a long way to solving a warehouses automation problems.

Implementing modular WCS lets companies automate the most pressing segments of their warehousing operations or distribution centers in order to provide a first class service to customers without getting bogged down with cost. The modular approach makes integration seamless with both operatives and processes enabling even small operations to enter into direct competition with the biggest and best.

The benefits of a companies response to customer expectations by utilizing WCS is best understood when broken down into three segments; by responding to orders of a high volume, by sharpening their business processes and by improving their overall competitiveness.

There are many different types of distribution businesses out there—there is no single fix when it comes to dealing with high volume orders. This situation is made more acute by increasingly varied demands from customers. Implementing a WCS allows companies to direct handling equipment to where it is needed most, meaning that small and high volume orders can be shipped to a variety of destinations with a consistent level of success. The modularity of the system allows companies to select exactly which elements are appropriate for their product portfolios. This type of versatile system allows companies to maximize output without ripping out their existing ones.

Another great benefit of a WCS is that it allows companies to improve their business processes by providing real-time, product specific information about their systems. This means reactive maintenance can be carried out on processes as they run. In what is a truly interactive practice, operators can receive information and implement any necessary improvements to the process enabling the cycle to continue and be improved by increments in every round.

WCS makes companies much more competitive by allowing them to ship and process both small and large orders form a single hub. The software makes decisions on orders by determining the most efficient logistical approach to each one based on factors including size and destination. It also does away with a certain amount of dependence on people within the warehouse environment, reducing the collateral losses, which come along with employees. As WCS evolves it can only serve to benefit companies by saving money time and space.

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Inventory management is a crucial aspect of any business within the retail industry. As we move towards the winter holiday season, financiers, market analysts and retailers are keeping a close eye on the wider economic environment and are considering how it will impact consumer behavior. There is much uncertainty in the markets at this time of increased volatility. To combat this, retailers must implement inventory management practices strategically in order to flesh out their balance sheets in this crucial quarter and provide extra insulation from extraneous market factors.

Companies have been fighting a long battle when it comes to inventory management. Prior to the 2008 crash when the markets were extremely bullish, a lot of companies took a laissez faire approach to inventory management practices. The age of austerity that has followed the financial crash means that companies have been under increasing pressure to improve how they manage their inventories. While some have been doing this with increasing success, others are finding it difficult to move away from their prior practices. Problems for organizations in the latter category will become more acute as the holiday season approaches.

These two categories of retailers can be further defined as those who are “open to buy” and those who are “open to sell” in their respective outlooks. Open to buy is the classic approach to retail, which dictates a backward-looking and formulaic approach to inventory acquisition and is often ignorant to developing trends. A retailer will look at what they did during a composite period previously and attempt to modify their approach using this information in conjunction with any other qualitative data they can generate.

The second category of open to sell retailers encompasses an approach which is much more focused and analytical in its basis. This group looks at what is moving off of the shelves and the relative market value of these items in real-time. These retailers are able to observe their margins in real time, providing an opportunity to increase margins and ultimately, enhance their trading capacity.

Technologies such as big data and cloud computing provide the basis for the open to sell approach, and the capacity to implement these technological improvements is what separates the winners from the losers in a contemporary retail environment. Practices such as trend monitoring and inventory analytics give retailers the opportunity to respond to new trends as they occur. This is critical in order to remain relevant as young consumers come online and competition increases. Businesses can improve their practice via an analytical approach, which is centered around ecommerce and social media analytics, data strategy and taking affirmative action where needed.

Social media and ecommerce can provide a huge amount of data for analysis and businesses can observe what their customers respond to online—they can even track the behavior of the customers of their competitors. If this research is carried out with an intensely systematic approach, it can provide real insight into developing consumer habits. Companies who look long and hard at the data they generate via website analytics on their ecommerce outlets can gain insight on customer responses to their products, allowing them to plan strategically and invest in the right areas of their business for the coming seasons.

Further investment must be directed towards strategic data analysis, even where budget is hard to find, this is a must for any retail operation. Even taking the relatively small step of increasing access for an industry intelligence unit within an operation can enhance seasonal planning. Once the company has generated sufficient data, it is imperative that it is acted upon to stay ahead of the curve this holiday season. This means that lines to suppliers must always be open and that inventory management practices must be upgraded where necessary. Moving from an open to buy approach towards an open sell strategy means that retailers can meet demand wherever and however it occurs.

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The definition of supply chain involves a network of trading partners engaging in the exchange of information and goods. People and organizations within a supply chain are often spread out over the globe and across various organizations, so it makes sense that cloud computing is the resource of choice when establishing a well-networked supply chain.

Support for this theory is evidenced from a study recently authorized by SCM World entitled “Supply Chain and the Future of Applications“. Claims made within the study notably includes that 46% of participants in the study claim that more collaboration within a supply chain means that problems will be solved in half the time. Further to this, the report claims that the larger supply chains are becoming more dependent on platforms within the cloud in order to achieve faster and more accurate problem solving by harnessing the enhanced capability for collaboration.

The main benefits of using cloud computing to enhance the capability of the supply chain include a higher visibility of items as they move through it, faster and more consistent sharing of information with global partners and more capacity for the automation of components within the supply chain.

Higher visibility of goods as they travel through the supply chain is achieved via hosting in the cloud as their status can be distributed throughout the supply network. For example, the exact time goods will arrive can be revealed in order to ease the organization of delivery processes. There are many working parts to a logistical system, these include suppliers, manufacturers, distribution centers, retailers and finally customers. With so many components, greater visibility within the supply chain of goods as they pass through is essential in order to inform the interested parties about the whereabouts of specific products, potential re-networking and other specific needs to ease the passage of goods.

The capacity the cloud provides for information sharing in real time between interested parties means that supply chains now have more in common with social media networks than the former platforms for enterprise communications, due to the currency and speed of information. By harnessing the potential of the cloud, partners within the supply chain have the capacity to give up to date reports on shipments, products and factory and logistical challenges for example. All of this information is available in real time via one update from the holder of specific information. This is an astounding progression in the capability for the sharing of information provided by the ascension and availability of cloud computing.

Automation of the supply chain within the cloud means an increase in reliability, responsiveness and efficiency. The former cumbersome method of using paper documentation to chart payments and the status of products and deliveries is done away with. As a further advantage, less hands in the supply chain process means that margins for error are all but eliminated. As interactions are increasingly handled electronically the potential causes for consternation of the former labor intensive and error prone supply chain processes are eliminated.

A report by Gartner predicts that the value of the supply chain market will reach $3.8 billion some time in 2016. The main challenge to this predicted growth is the growing complexity of the technology involved. Many of these complexities will be solved by cloud computing’s capacity to provide greater visibility of goods in transit, the ability to share information instantaneously throughout the supply chain network and greater facilities for automation among other potential benefits. These three factors combined with the potential for more development provided by the cloud mean that the challenges posed by supply chain communications and logistics are more easily remedied, leading to more efficient operations.

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The management of returns is usually not considered to be among the most costly aspects of an enterprise. However, a combination of competition, pressure from customers and increasingly more stringent environmental policies and regulations mean that the management of returns is being identified as a rising priority for a growing number of companies.

The processes involved in the management of returns are numerous and evolving. They include recycling, waste disposal, substituting materials and reusing them. The American Productivity & Quality Center (APQC) created a report entitled “Open Standards Benchmarking Logistics,” which states that 78% of companies who responded to the report have varying degrees of policy relating the return of goods in place.

The report is broken down into three categories of policy for comparison by the APQC including: no implementation (23%), some implementation (31%) and extensive implementation (47%). From the results, it is apparent that companies believe formalizing returns policy leads to higher costs, however, they might be prudent to consider generating revenue from reuse and refurbishment practices.

Data generated by the APQC points to a trend for organizations without a policy for the management of returns spending less than their counterparts whose costs are inflated by logistical costs arising the from handling returns. The actual difference amounts to $20 out of every $1000 of revenue.

Other indications from the APQC’s data bring to light the implication that organizations who have policies for the management of returns have a greater amount of money being spent in order to manage and process the return of products. This same group also has comparatively higher costs associated with warehousing and logistics.

The amount of difference in costs generated by those who have policies and those who haven’t is not insignificant. However, perhaps a longer-term view is needed when considering whether a return of goods management policy is worthwhile. If the potential for generating additional revenue is harnessed, these policies could pay for themselves and even return a profit. This would be subject to industrial regulatory requirements. At the moment, the management of returns is indisputably an additional cost, which may be worth investing in for the future.

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