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July 27, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet A Materials Handling Roadmap 2.0, Part 2 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 Extended bullet Trivia      bullet Feedback
bullet New Expert Column bullet On Demand Videocasts
  The State of Retail and Vendor Supply Chain Relations 2017

Example Chart from 2015 Report 



Are We Getting More Integrated and Collaborative - 
Or Heading in the Other Direction? Help Needed from 
Retailers and Vendors/Brand Companies.


first thought


Supply Chain Graphic of the Week
It's not Just eCommerce that's Causing Woes for Retailers


Amazon on Massive Hiring Spree

The UK to Ban Gas-Powered Cars
Walmart has Plan for Reshoring US Manufacturing
New Foxconn Factory to Bring Thousands of US Jobs


June 26, 2017 Contest

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

Holste's Blog: Understanding Key Drivers For DC Automation

Supply Chain Executive Brief: How Distributed Order Management (DOM)  and WMS Work Together to Power Omnichannel Supply Chains

Satish Kumar from Softeon and Kevin Hume from Tompkins International
Answer Key Questions on DOM and WMS


Weekly On-Target Newsletter:
July 26, 2017 Edition

Cartoon, Felon Truck Drivers? Cool Elastic WMS, Autonomous Ships and more

Great Expectations: End-to-End Visibility

by Nick Boland
Global Product Marketing
Amber Road

The Two Levers of Inventory Optimization

by Henry Canitz
Product Marketing & Business Development Director

WMS Vendors - the Walking Dead

by Mark Fralick


What is oil’s share of total global energy consumption?

Answer Found at the
Bottom of the Page

A Materials Handling Roadmap 2.0, Part 2

I am finally back this week with part 2 of my review of the Materials Handling Roadmap 2017 from MHI.

In 2014, MHI (formerly the Material Handling Industry of American, an industry trade association), released what it called a "Roadmap for Materials Handling 2025."

That future-looking report was noteworthy for a couple of reasons, starting with it was really the first major initiative from MHI to expand beyond its traditional and primarily "four-wall" oriented roots to associate itself with broader supply chain themes and topics.


Maybe hyperloops will solve part of the problem? The report seems optimistic.


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This transition, of which the change in the organization's name to just MHI emblematic, has been accelerated greatly since George Prest took over as CEO in 2011, and has manifest itself in many ways, including: (1) partially successful efforts to make its biannual MODEX tradeshow in Atlanta more of a supply chain, not just materials handling, event; (2) dramatically revamped "annual report," which was transformed from a mostly inside baseball review of the materials handling marketplace to a supply chain thought leadership piece, co-authored for the last few years with Deloitte; (3) attempts to transition its annual conference from a members-only event to a broader supply chain forum that would attract non-member practitioners - a effort that is still a work in progress.

If you want more of the history of the Roadmap, how it is created, etc., go to my part 1 review here: A Materials Handling Roadmap 2.0

The 2.0 Roadmap is organized around four key mega-themes: technology, consumers, workforce issues, and infrastructure. I covered the first two in part 1, now the second two here.

The third theme of the 2017 Roadmap around "Workforce" is certainly a very important topic. There are clearly concerns in many circles relative to a "talent" shortage in supply chain, though I have noted for years this is really a bifurcated issue along white collar and blue collar (distribution center workers, truck drivers) lines.

Relative to each of those two vectors, just this week, a DHL study found that demand for supply chain talent exceeds supply by an amazing 6 to 1 ratio (good news if you are a supply chain manager), while Amazon announced plans to hire some 50,000 fulfillment center workers in the next few months in a period of low unemployment and major challenges recruiting and retaining DC workers in most markets.

Then again, of course, there are predictions that robotics on the blue collar side and artificial intelligence on the white collar side will eliminate supply chain jobs by the millions, making any current talent shortage that exists a moot point before too many years.

The Roadmap, for example, notes that "Many current material handling and logistics jobs likely won't exist by 2030. Consider the threat to freight forwarders of today," from digital technologies that can do the job without a human needed.

All that said, the report lays down a number of markers relative to workforce issues:

The supply of new workers will be unable to keep up with the mass exodus of aging workers, resulting in a growing vacuum of qualified workers in all functional material handling, logistics and supply chain roles.

In 2015, the Millennials surpassed Generation X as the largest portion of the human workforce.

Job growth in supply chain-related professions has remained strong, even as overall job growth has slowed in the United States.

Despite declining unemployment and underemployment, it has become harder for available workers to be hired for supply chain jobs because employers demand more qualified people with different and better skills.

Collaborative labor sharing and crowdsourcing of freelance/contract workers through social media platforms and peer-to-peer networks of people will continue to increase.

Use of automation continues to expand as it becomes more reliable and readily available.

I am not sure how to put all that in a coherent framework, but it's safe to say major change is underway.

The key question across the entire supply chain workforce is this, the report says: "What will be the rate of adoption of labor-saving and people-replacing technologies and practices? The short answer is: No one knows."

The report says that workshop participants generally agreed that demand for grey-collar workers - people who install, configure and maintain the equipment and automation - could well exceed the demand for blue- and white-collar workers as 2030 approaches.

Expansion of workforce diversity is a given, the report notes, citing a distribution facility in New England today that employs more than 1,000 workers who speak 15 different primary languages, the most common of which is Mandarin Chinese.

In the end, the report recommends that to find enough people for supply chain operations, the profession should adopt four key capabilities:

1. A thorough understanding of the changing labor market
2. Alignment of work with workers (rather than vice versa)
3. A commitment to the flexible workforce
4. An improved image and greater visibility for material handling and logistics.

I will just end this section by noting that of course, to the extent there is a true shortage of white and blue collar employees, this is will only propel various forms of automation forward at an even faster trajectory than would occur if the only driver was cutting costs. Did you see this week yet another robot announcement, a new one one that can stock grocery shelves? 

While there are clearly major workforce issues right now across the spectrum, alas I believe that in not too many years automation of all sorts will take care of all of that and then some.

On the "Logistics Infrastructure" topic, the report says that "Fundamental change is afoot from the physical movement of goods to the digitization of information about them. By 2030, these changes will transform large segments of air, sea, rail and highway logistics."

There are many factors to consider here, the report adds, noting customer demands for visibility about what's in a product, it's path to the shelf or receiving dock, and where it is all along that journey.

The physical world of material movement will have be married at the hip to its digital side, creating new forms of logistics infrastructure.

Supply chain networks are also changing, the report says.

"To be competitive on the future logistics landscape, large-scale distribution and fulfillment centers will require data-driven networks of smaller centers strategically located closer to the consumer, especially in urban areas," the report notes.

Relative to more traditional infrastructure, the report makes the interesting observation that "We are at an interesting nexus of needing to upgrade what we have just as new technologies change how logistics operates."

To take an obvious example, do you need more roads if someday drones make a majority of package deliveries? How would autonomous cars and trucks impact how you might spend dollars on infrastructure? I don't know the answer to those questions, but they sure ought to be part of the planning process before the concrete starts getting poured.

The report notes the generally accepted view that US logistics infrastructure is a mess, though as I have said in the past I believe that view is overstated (more on that soon), and the report notes that numerous trillions are supposedly needed to get US infrastructure up to some modern level.

I will say starkly that that kind of money is simply not coming. Maybe hyperloops will solve part of the problem? The report seems optimistic.

I think the report is right on in including cyber security as a component of logistics infrastructure. Did you see in recent weeks debilitating attacks on Maersk Lines, FedEx (TNT), and several factories in Europe? The hackers were clearly targeting the supply chain, in what many viewed as a test run. 

I wish the report had been more specific about where scarce dollars could best be spent on infrastructure – a complaint I have noted for other infrastructure hand wringing – but MHI is hopeful that technology and collaboration across shippers will improve logistics efficiency, reducing to an extent the need for infrastructure.

OK, that's it. The report is interesting if in my opinion a bit rambling, and not prescriptive enough, but a good read nevertheless.

Full report can be found here: Material Handling & Logistics US Roadmap 2.0

What is your reaction to Gilmore's Part 2 summary of MHI's 2017 Roadmap? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

On Demand 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.

Available On Demand

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


Some more of the many emails we received on SCDigest Editor Dan Gilmore's column on Irrational Shipping Prices and the Demise of Brick and Mortar Retail and Reader Respond - Irrational Shipping Prices and the Demise of Brick and Mortar Retail.


Feedback on Irrational Shipping Prices and the Demise of Brick and Mortar Retail Parts 1 and 2


Another great discussion. Keep up the great work of tabling interesting issues like this! I am surprised that no one has highlighted the cost-to-serve differential.

There is a common upstream sourcing organization that ensures available supply that can serve any downstream demand, so we can consider that cost neutral.

From the consumer's perspective, there are store replenishment costs that will include replenishment, inventory planning, order (and payment) processing, picking, packing & shipping, freight, delivery, store shelf replenishment, cashier, store supplies and maintenance, return, and distressed sales costs, as well as the fixed costs of rental, utilities, insurance, security and so on. These can be performed in an organized and productive way, with use of consolidation techniques that drive marginal costs down. If ecommerce operates out of retail stores, the efulfillment costs come in addition to the store costs above. This cost model is clearly higher than the classic retail go to the store and shop. I guess many retailers adopted it so they could offer ecommerce without disorganizing their bulk-optimized facilities or creating green-field operations with the ensuing fixed costs. I hope theses operations were never intended to be as profitable as the store itself, which is a high fixed cost model.

Where things get complicated is when there is an efulfillment operation that is optimized for piece picks and appropriately automated, with effective delivery route optimization. It seems obvious that this is a more expensive operating model than the pure retail setup as shipment volumes are simply smaller, delivery is less dense, and operations are more difficult to predict and therefore plan. But they are a largely proportional to volume.

So the crux of the cost discussion comes down to break even points between the two operating models. The largest cost element is delivery freight, or the last mile. Hence the discussion about who pays the true cost of delivery.

I think the convenience of piece picking and home delivery has value and that it must be remunerated (it costs you tie and expense to do it yourself), so ecommerce orders should capture a higher price. I remain baffled by the ecommerce business model end game. In the meantime, enjoy the battle at the margins where you can obtain superior value for money - as long as it lasts.

On another but related thought, I read recently that ecommerce deliveries are sucking up all the traffic congestion gains that were obtained through the massive tolls charged to enter downtown London (UK) - average speeds are lower than before the toll was introduced, even though the car traffic has fallen as expected. So there are also hidden costs to the ecommerce model that we have yet to understand.

Nick Seiersen


I sell a fair amount of items on EBAY as a "Top-Rated Seller". While we do enjoy some discounts from FedEx and the USPS, they are nowhere near what a large online retailer would receive. In fact, the recent price increases from all of them (UPS as well) in my opinion, can only be attributed to the growth of Amazon.

If you have to keep upgrading your delivery infrastructure (trucks, DC's, drivers, warehouse workers) and you cannot raise your prices on your biggest customer, you have to fund it somehow. That falls on the back of everyone else. Of course, everybody expects free shipping, so any price increase comes right out of your pocket.

Gary Hemmingstad




The dot-com bubble was heavily fueled by customer acquisition at all costs. Since then, Amazon and others have been acquiring customers at a lesser cost and that investment/cash flow has sustained, enabling them to slowly and steadily habitualize customers to e-commerce shopping. Bolstered by convenience as well, the tactic has worked and slowly web-only players are growing their profits. Help from carriers in the form of discounts also makes the strategy possible.

One day however, when physical retail is damaged enough, the market conditions allow it and the desire for bigger profits is vocal enough, "free shipping" is certain to be reflected in pricing that exhibits the true costs of e-commerce. A good measure of this can be gleaned today: Amazon is quite often not the lowest-priced vendor for many goods, even with shipping factored in, but with their dominant market position they make it work. It's a telling sign for the future, especially the future of "free shipping."

Ken Lonyai




What is important is for today's retailer to compete online — and to market and emphasize to customers that they have click and collect capabilities. Going omnichannel and promoting it vigorously means more customers will pick up in-store, which cuts shipping costs. As online is pressured into increasing order sizes for free shipping, or is forced to charge for shipping, the opportunity for omnichannel retail will grow.|

Omnichannel retailers are just NOT promoting their in-store pickup services enough. There is a big opportunity to both cut costs and to grow sales as in-store pickups result in around 59% more purchases.

Actually charging for what it cost to pick, pack and ship will be a boon for brick-and-mortar, and omnichannel retail is the way thrive.

Charles Dimov
Director of Marketing



Q: What is oil’s share of total global energy consumption?

A: 33.2% in 2016, according to the just released BP Statistical Review of World Energy – up for the second year due to low prices after 15 years of decline.

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