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April 27, 2017 - Supply Chain Flagship Newsletter
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This Week in SCDigest

bullet Chicken or the Egg with 3PLs and Supply Chain Innovation? bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues for Additional Week bullet Trivia      bullet Feedback
bullet Gilmore's Supply Chain Jab and Supply Chain by Design bullet New Videocast and On Demand Videocasts
  FEATURED SPONSOR: AMBER ROAD  
 
 


 
     
first thought

SUPPLY CHAIN NEWS BITES


Supply Chain Graphic of the Week
The Incredible Retail Transformation

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Amazon Team Looking at Autonomous Vehicles

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US Truckload Rates Continue their Decline
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US DC Market Remains Red Hot, as Vacancies Fall
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Walmart Turns to Suppliers for CO2 Reductions

CARTOON CAPTION CONTEST CONTINUES

April 6, 2017 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!


ABERDEEN GROUP REPORT: SUPPLY CHAIN VISIBILITY

Holste's Blog: Automated Piece Picking Evaluation Criteria
 
 

NEW WHITE PAPER PROVIDED BY AMBER ROAD

ONTARGET e-MAGAZINE
Weekly On-Target Newsletter:
April 26, 2017 Edition

Cartoon, DC Space Still Hot, Retail Transforming, Walmart's Gigaton and more

NEW MAY VIDEOCAST
How DOM and WMS Work Together to Power Omnichannel Supply Chains

Experts from Tompkins International and Softeon Set the Record Straight in Fast Paced, Q&A Format

Featuring SCDigest editor Dan Gilmore, Kevin Hume of well-known consulting firm Tompkins International and Satish Kumar, a vice president at Softeon.


Thursday, May 18, 2017

GILMORE'S SUPPLY CHAIN JAB
Did Walmart's Failed Case Tagging Program Set RFID Back or Move it Forward?
by Dan Gilmore, Editor

SUPPLY CHAIN BY DESIGN
Service Level Measures in the Supply Chain, Part 1

by Dr. Michael Watson

In 1979, business man and author Philip Crosby released what seminal book regarding manufacturing processes?

Answer Found at the
Bottom of the Page


Chicken or the Egg with 3PLs and Supply Chain Innovation?

For a variety of reasons, I was not able to make this year's JDA Software Focus user conference this week in Las Vegas, the first time I have missed the event I believe since 2003, which well may have been the longest such streak among media/analyst types.

I hope to be able to do a little catch up soon and summarize where JDA is headed under new CEO Girish Rishi, but as a somewhat poor substitute I am finally getting back around to part 2 of my summary of some recent research SCDigest has undertaken on innovation in shipper-3PL relationships, an effort that was supported by JDA.

You can find my first column on this research here: Thoughts on Supply Chain Innovation in Shipper-3PL Relationships

GILMORE SAYS:


A surprisingly low percentage of shippers and 3PLs are using gainsharing or "vested outsourcing" types of arrangements, without which it makes it tough for the 3PsL to innovate to reduce costs.

WHAT DO YOU SAY?

Send us your
Feedback here

That first column actually led to some interesting reader feedback that we haven't posted yet, such as an email from Jim Barnes, CEO of consulting and software firm enVista, who wrote in part that "You are spot on that most 3PLs don't see themselves as technology providers and hence this is an inhibitor to their growth and their ability to add value to a shipper."

There reasons for this, Barnes said, are: (1) 3PLs don't think in terms of technology first. It is an after-thought and not seen as strategic with respect to their value proposition. Or at best it is seen as a necessary evil; and (2) Lack of strategic talent and "big idea" thinkers, since "Most if not all 3PLs are very tactical in nature. They are run by operators and not strategic thinkers," Barnes added.

Agree or disagree?


As I noted in part 1, we've done many surveys here at SCDigest, but this is some of the best data from a survey I have seen, in terms of what we asked and how interesting the results are. That includes some very insightful comments offered by both shippers and 3PLs for many of the topics.

And I think this is a very important topic because we are far from any sort of consensus - let along "best practices" - as to the model for how innovation should play out between shippers and 3PLs, even as more logistics is outsourced and companies are increasingly focused on increasing the level and speed of their innovation.


You can access this excellent data in two ways. A pdf copy of the formatted report, with data and commentary, is here. We did not have room in the report for all the data collected, but we didn't want to lose that, so just the data (with comments) for all the questions is here. I recommend downloading both.

So let's get into a bit more of the charts.

As evidence of the diversity of thinking on this topic, we asked both shippers and 3PLs as to the basic framework they use and experience, respectively, when it comes to managing innovation.

As seen in the chart below, about one-quarter of shippers and 3PL say their predominant model is for shippers to set the goals and let 3PLs figure out how to get there (maybe too small to see here, click on Full Image).



But then there was some disconnect. 41% of shippers say they are highly prescriptive in their 3PL relationships, while only 14% of 3PLs said most shipper clients are highly prescriptive. I do not how to explain that dichotomy. The right answer should probably be the third choice, a hybrid approach that varies with application and specific 3PL.

Commenting on this topic, one shipper said that "We currently are prescriptive but want to focus only on just the goals. However the 3PL are not showing they are capable of using that best approach."

Meanwhile, one 3PL noted that "Fulfillment and distribution are pretty much prescribed - "Get it out the door accurately and fast." Logistics and transportation management are more open to innovative approaches driven by us." Interesting.

Next, shippers and 3PLs both agree there is a clear trend towards shippers more formally evaluating a logistics services provider's innovation capabilities as part of the selection process.

As seen in the chart below, 65% of shippers say they either always or usually do such a formal evaluation, a trend echoed on the 3PL side. I think there numbers are likely much higher than they would have been a decade ago or maybe even 5 years ago.


The bigger question, perhaps, is how do you really do that evaluation?


One shipper noted the challenge, saying "We do not yet have a strategy but will develop one as we have some upcoming contracts."

Some shippers said they check innovation with the 3PL references, while others said they ask 3PLs to present innovation case studies as part of the selection process. Another added this thoughtful response: "[We] ask for a demonstration of recent innovation and data to support that it is an actual improvement projected savings.You also need to correct for market forces that may inflate or deflate the claimed savings."

Finally for this week, a long-running issue is that 3PLs are generally reluctant - to put it mildly - to invest in distribution center automation (often a form of innovation) because contact periods are too short to ensure a payback. It is impossible to invest in a system with a 4-5 year payback when the length of the contract with a shipper is two years.

If 3PLs were more willing to make such investments, would shippers be willing to extend contractual periods? (Or should I ask that the other way around?) As seen in the chart below, 31% of shippers said they have and/or would sign longer contracts. 26% say they would not consider such a trade-off, while 41% said they would consider doing so.


My guess? 3PLs would say that in their experience the percentage of "have/would" or "might" are exaggerated from the reality.

So there you have it. I keep coming back to the central point that contractual issues - often a reflection of the type of relationship a company wants to have with a 3PL, are huge barriers to innovation, at many levels. As we noted in part 1 of this series, a surprisingly low percentage of shippers and 3PLs are using gainsharing or "vested outsourcing" types of arrangements, without which it makes it tough for the 3PsL to innovate to reduce costs - and hence often revenue.

I've just scratched the surface of the data here. Whether you are a shipper, 3PL, or other, there is some great data and insight in the formal benchmark report or the full survey response data.

What are your thoughts on innovation between shippers and 3PLs? Are contracts a major issue, at multiple levels? Let us know your thoughts at the Feedback button below.



View Web/Printable Version of this Column
   

New May Videocast:

How DOM and WMS Work Together to Power Omnichannel Supply Chains

Experts from Tompkins International and Softeon Set the Record Straight in Fast Paced, Q&A Format

This discussion will be based on an outstanding new "Executive Brief" on this same topic, developed jointly by Kevin Hume of Tompkins International and Satish Kumar, a vice president at Softeon.


Featuring SCDigest editor Dan Gilmore, Kevin Hume of well-known consulting firm Tompkins International and Satish Kumar, a vice president at Softeon.

Thursday, May 18, 2017

On Demand Videocast:

New Cloud WMS Solution is Game Changer for Warehouse Management Deployment and Flexibility


New Technology and Deployment Approach Offer a Simply Better Way to WMS Implementations - Learn How


In this outstanding Videocast, we will cover the latest in each-picking robotics, co-bots, artificial intelligence, autonomous vehicles, sensors, drones and droids.


Featuring  Dan Gilmore, Editor, along with Mark Hawksley and Bruno Dubreuil of TECSYS, a leading provider of WMS solutions.

Available On Demand

On Demand Videocast:

Innovation in Shipper-3PL Relationships Benchmark Study Results

New Research will be Unveiled from SCDigest and JDA On This Increasingly Important Topic

In this outstanding broadcast, SCDigest and JDA recently completed new research study on innovation in shipper-3PL relationships, with the goal of obtaining the perspectives of both shippers and service providers on this increasingly important topic. All registrants will be sent a copy of the report will all the data shortly after the Videocast.


Featuring SCDigest editor Dan Gilmore and Danny Halim and Lori Harner of JDA.

 

Available On Demand

YOUR FEEDBACK

We always get number of brief notes after our video coverage of event like ProMat thanking us for the effort, and we admittedly love to hear that.

 

You'll find a smattering of those below, including a very nice note from our good friend John Hill, and an interesting letter from someone with direct experience using carton lift assist systems in the DC.

Feedback on SCDigest ProMat 2017 Coverage

comma

Dan and Cliff:

Kudos for your PROMAT 2017 two-day video review. With roughly 900 exhibitors, thousands of feet to travel and traffic at our own booth that made it difficult to take a break, spending half an hour watching and listening to your recap in the comfort of my office was well worth the time!

John M. Hill
St. Onge Company



comma

I appreciate your Weekly Reviews and your recent summaries from ProMat.

You mentioned that you hadn't really seen much use of vacuum assist technology out there, other than in some heavy manufacturing environments. Just wanted to let you know that I work for a distributor in the Midwest, and we have been using vacuum assist in our warehouse for a couple years now.

Our primary application is unloading ocean containers that are stacked floor to ceiling with cartons that would be categorized as mildly heavy (5-30 lbs). But it is definitely tiring work, since the cartons are not on pallets and can't be removed that way. So we use a vacuum assist unit attached to a belt conveyor that can be extended into the container as it is worked. The cartons are then pulled off the conveyor and stacked on pallets by SKU.

It has been a success, and has eliminated a lot of back-breaking (or at least back-tiring) work.

Jeff Rech

comma


 

comma

Fantastic job as usual summarizing trends and solutions at ProMat.

Your video summaries are outstanding, and should be "must watch" for logistics professionals.

Don't know how you do it so well so fast. Keep it up!

Mike Bucher
Columbus, IN


 

comma

Great video coverage for all of us that could not make the conference.

Garth Hiles
Director, Supply Chain Logistics
Save On Foods

comma


SUPPLY CHAIN TRIVIA ANSWER

Q: In 1979, business man and author Philip Crosby released what seminal book regarding manufacturing processes?

A: Quality is Free.

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