Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Supply Chain Trends and Issues

Detailed Recap of Outstanding MHI Conference Panel - Focus on Supply Chain and the Consumer

 

Efulfillment is Upending Logistics, Making for Challenges but Exciting Times, Panelists Agree, though Some Companies Define the Problem too Narrowly

 

A few weeks ago, SCDigest editor Dan Gilmore moderated an outstanding panel discussion at the annual conference of MHI, held for 2016 in the Hilton el Conquistador hotel near Tucson, AZ.

You can find Gilmore's overall review of the conference here: Trip Report - MHI 2016 Conference: Time to Cross the Chasm?

The panel discussion moderated by Gilmore was loosely connected to MHI's upcoming Materials Handling Roadmap, scheduled to be released in 2017. The first Roadmap was released in 2014, and was a solid piece of work, presenting a broad overview of the issues and technologies that will be central to logistics in coming years.

To produce the new report, MHI once again is holding a series of conclaves across the US (four in total) where 40-50 practitioners of all sorts gather for a day and a half to talk through a variety of issues, and that feedback then becomes core content to the final Roadmap.

Supply Chain Digest Says...

Most existing supply chain were built for scale, Brasca said, moving pallets of goods in full truckloads whenever possible - and now you have to handle eaches.


What do you say?

Click here to send us your comments
Click here to see reader feedback

This year, those discussions are oriented around four main themes: workforce issues, technology, the consumer, and infrastructure - all obviously very big and broad topics.

The conference panel moderated by Gilmore was then also organized along those same four themes. The discussion by the panel was so excellent, SCDigest wanted to report on the conversation in more detail. Given that the full session lasted 90 minutes, we are breaking our summary up, with one article each on the four themes over coming weeks.

 

Two weeks ago, SCDigest detailed the discussion related to workforce (see Detailed Recap of Outstanding MHI Conference Panel - Focus on Workforce). Last week, the focus was on the discussion around the very broad subject of supply chain technology. (See Detailed Recap of Outstanding MHI Conference Panel - Focus on Supply Chain Technology.)

The panelists at the MHI were: Jonathon Rader, FedEx; Mike Regan, TranzAct Technologies; Bill Ferrell, Clemson University; Fab Brasca, JDA Software; and Mike Kotecki, Dematic, and Gary Forger, MHI.

Gilmore started out by stating that "As big as we all know ecommerce is, in many ways we are actually underestimating what is actually going on here."

He began data from the US Commerce Department showing that ecommerce sales continue to grow about 15% year over year, quarter after quarter, meaning they will double about every four and a half years or so.

He then showed that while other data from the Commerce Department puts ecommerce sales as about 7.5% of total US retail sales, that ratio includes categories such as restaurant revenue and gasoline sales that don't really apply to ecommerce. When SCDigest calculates the numbers by eliminating those categories, ecommerce already represents about 11% of total retail sales - and again that could double to more than 20% within five years.

He noted we are already seeing the impact, as a number of retail chains such as Macy's and JC Penny announced major stores closings in 2016, and others are likely to follow.

"That will change retail distribution networks, and thus the consumer goods supply chain networks that serve the retailers," Gilmore said. He noted that in Walmart's recently announced capital investment plan, dollars going to new store openings in the US have been cut back significantly from the levels of recent years, while spending on efulfillment will receive the majority of the investment capital.

MHI's Forger again summarized feedback from the first two Roadmap discussion sessions. He said key themes from those meetings relative to "consumer" included:

• Managing returns/reverse logistics
• Traditional forecasting must change
• How to think about the value of time
• The need to explain more about supply chain to consumers
• The need to rebuild supply chains more truly from the consumer back

Gilmore noted how innovation is really taking place in efulfillment, citing the example of Home Depot, which fulfills many of its order on-line, pick up in store business by sending goods in full truckload shipments (even if the trailer is only partially full) from its three ecommerce DCs to the local DC serving a cluster of stores. There, the goods are crossdocked and merged with regular merchandise being sent on Home Depot trucks to the stores. This sophisticated process has saved Home Depot big money versus shipping the on-line orders to stores via parcel or LTL shipments, as Home Depot did at first.

"Ecommerce is really standing the industry on its ear right now," FedEx's Rader said. "The expectations for service now just weren't there a few weeks ago. ‘I want it here, I want it there, and I want it now.' What that's going to mean is that eventually the supply chain to support that is going to have to be radically different from what we have today."

He said there some are actually almost contradictory trends. First, there is a trend towards extremely large ecommerce DCs to handle the huge numbers of SKUs for on-line orders. But at the same time, there is the emerging trend of small urban warehouses developed to speed local deliveries now often made in just a matter of hours.

"These are often buildings that use the vertical pace, so the technology inside those buildings really needs to change," Rader added.

Dematic's Kotecki noted that it's tough for others "when you can have a company like Amazon that doesn't need to be very profitable setting the bar" in terms of fulfillment and more. "Amazon is setting the expectations of the customer," he added. "You see free shipping, you want free shipping. You see one hour delivery, you want one hour delivery."

He noted that you can really segment retailers into different groups relative to how aggressive they are investing in efulfillment and how they approach the process.

There are late adopters that are just trying to perform efulfillment in existing DCs with relatively little investment, or just outsource the process to third parties.


(See More Below)

CATEGORY SPONSOR: SOFTEON

Learn More about Softeon's Innovative Supply Chain Solutions

 

There is also a group in the middle that says "We're all in on this," and are building dedicated ecommerce DCs, but hasn't fully embraced omnichannel.

There is then a third group that has really adopted an omnichannel mentality, and are building capabilities to source orders from anywhere across the extended network, "based on what is happening at this specific moment in time."

He said there is no question that efulfillment has been good for the materials handling industry, saying Dematic is seeing a lot of investment in DC automation generally, especially in so-called "goods to person" technology (e.g., shuttle systems), Voice and pick-to-light, such as is generally used in what are called "put walls."

Clemson's Ferrel said the trend towards urbanization "can't be ignored," and that "we are now competing on cycle time." He told the story of a friend whose wife was working at home on a Saturday. She need some paper for her printer, and asked the man to run out to the store for her. He was watching a basketball game. The decision: order on-line and have the paper delivered to their home in under two hours.

"This is how the world is changing, Ferrel added.

He also noted the huge volumes of returns many etailers are seeing, saying that in the end "we're getting urban, a lot of it is coming back, we're getting dense [in the DC], we have to go vertical - and oh by the way, we need to do it in two hours."

JDA's Brasca noted that he had primarily been involved in transportation management system for the past 20 years before more recently expanding his focused, and for most of that time, the issues remained fairly constant: capacity, fuel, freight consolidation, etc.

But that world is changing now, with the focus on efulfillment and last mile deliveries.

"These are some exciting times right now for transportation," Brasca said.

He added that "It's important to note there is no one size fits all, no solver bullet to solve the problem. You simply can't assume that something that worked for somebody else will work for you. You have different assets, different product portfolios, and different customer segments."

Brasca also said that it was really important that companies understand two key points. First, "You don't have an ecommerce problem - you have a supply chain problem." He noted that many companies started out by separating the ecommerce group off in its own silo, perhaps in an understandable strategy to promote speed of execution.

"The problem is when you do that, you lose your scale," Brasca said.

But at the same, most existing supply chain were built for scale, Brasca said, moving pallets of goods in full truckloads whenever possible - and now you have to handle eaches.

"But you can't just handle eaches and ignore the potential for scale, because then you aren't going to make any money," Brasca said.

With regard to the "Amazon effect," Brasca said "It is my contention that eventually money must be made" in ecommerce channels, implying that ruinous free shipping must have to be reined in at some point.

But he said there really are companies that are redesigning their supply chains from the consumer back, and not just consumer "but from that intersection of customer and product," because the service needed will vary based on that combination.

He added that the changes in ecommerce are highlighting the need to better integrate supply chain planning and execution, saying that even today "in most organizations those are still very siloed functions.

"That has to change," he said.

Another outstanding discussion from the MHI Roadmap panel.

 

Next week we conclude with a summary of the panel discussion around the topic of infrastructure.


What strikes you relative to this discussion of consumer issues? What was left out? Let us know your thoughts at the Feedback section below or the link above to send an email.

 

Your Comments/Feedback

 

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2013 - All rights reserved
.