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August 3, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Shipper and 3PL Supply Chain Innovation - Who Should Do What? 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 Winners bullet Trivia      bullet Feedback
bullet Expert Columns bullet On Demand Videocasts
  The Retail Vendor Performance Management Bulletin

This Month:

• SCDigest Launches Second Benchmark Study on Retail- Vendor Supply Chain Relationships


• Compliance Networks Corner: It Really is All about the PO Lifecycle


• Walmart Getting Tough on Vendors to Reduce Variability


• Another Factor in Retail Sales Woes


• Amazon Is Buying Products from Some US Brands at Full Price To Build Global Inventory
first thought


Supply Chain Graphic of the Week
What is the Real Story on Tariffs for US, EU and China?


Walmart Putting More Pressure on Vendors for Green Supply Chain

Retail Grocery Space in US Reaching Saturation?
Charleston Says Let Barges Move Containers
Air Freight Volumes Continue Surge


June 26, 2017 Contest

See Who Took Home the Prize!

Holste's Blog: DC Automation – Utilizing Augmented Reality (AR), and Virtual Reality (VR) Technologies Lowers Project Cost & Risk

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.


Weekly On-Target Newsletter:
August 2, 2017 Edition

Last Chance Cartoon, WMT CSR Report, Fuel Cell Lift Truck Boost, I/O Levers 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 the percent of US freight transportation spent on trucking (including private fleets but excluding parcel)?

Answer Found at the
Bottom of the Page

Shipper and 3PL Supply Chain Innovation - Who Should Do What?

It seems to me we are at the juncture of two very powerful trends: 

1. Continued growth in the use of outsourced logistics: study after study finds the percentage of logistics spending going to outsourcing continues to grow. For example, the annual 3PL study from Dr. John Langley released last fall found that 58% of shippers indicated they planned to increase their use of outsourced logistics services in 2017, versus just 26% of shippers saying that they were returning to insourcing of logistics activities.


But given the trends of a growing percent of logistics being outsourced and the need for innovation, doesn't that status quo have to change?


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2. A focus on supply chain innovation: CEOs increasingly understand innovation is where the money is. That means innovation in the supply chain as well, both to improve processes and service to customers and to support innovation coming from elsewhere in the company. This is of course most notable in efulfillment (drones, etc.) but far beyond that as well, and the Internet of Things is likely to create many opportunities for companies to develop new products and services that require supply chain support.

Earlier in 2017, with sponsorship from JDA, SCDigest conducted a survey of shippers and 3PLs, hoping to get some insight into how each side thinks about innovation. It is some of the best survey data we have ever generated. 

I wrote a column then summarizing some of the key findings (See Thoughts on Supply Chain Innovation in Shipper-3PL Relationships) and promised then to do a part 2. That time has finally come.

As I reported in part 1, shippers definitely see innovation as an important component of what a 3PL brings to the table.

"3PLs need to anticipate where the market and logistics trends will be and work to develop services and innovative solutions around those trends that are sustainable and replicable," one shipper commented.

But shipper views of 3PL innovation capabilities are not strong. As shown in the chart below, just 2% of shipper respondents view 3PLs overall as having high process innovation capabilities, and just 7% view 3PL technology innovation capabilities as high. 

"Although we're 14 months into our relationship, I find that, many times, I have to lead the 3PL horse to water - AND make him drink," one shipper wittily commented relative to 3PL innovation capabilities.

Another noted that "We really need 3PLs to innovate on technology to lower the transactional cost of fulfillment activities."

All that said, 3PLs can only innovate, obviously, in relationships that are supportive of them doing so. The would it seem most likely to be in gainsharing or the even more advanced "vested outsourcing" types of relationships, and as I reported last time I was surprise at the very small percentages of these types of arrangements that are currently being used.

On a similar vein, 41% of shippers say they are highly prescriptive with 3PLs - in other words, "just do what we tell you," with 26% of shippers saying they welcome 3PL innovation and 33% saying it varies by specific relationship (see chart below).

One shipper commented that "We want them [3PLs] to learn and understand our business; then we seek out suggestions to improve and innovate."

One 3PL respondent was very positive on this topic, commenting that "Client relationships vary greatly, but the trend is for more collaborative relationships in both procurement and supply chain strategy." 

That's good to hear.

An interesting question on this innovation topic is what should be the role of 3PLs in bringing emerging technologies (robotics, drones, IoT, 3D printing, etc.) to the market. This is actually a more interesting and nuanced issue than some may consider, and is not un-related to the relative lack of 3PL use of automated distribution facilities.

Why is that the case? Because the contacts with shippers are generally not long enough to ensure a payback from that investment in materials handling systems. And in general, 3PLs are not much interested with bringing costly new technologies to market without a client that has committed to paying for it.

But given the trends of a growing percent of logistics being outsourced and the need for innovation, doesn't that status quo have to change? Should shipper-3PL contracts really be the barrier to more robotics in the DC?

As shown in the chart below, 50% of shippers do not see 3PLs as a driver of advanced technology adoption, versus just under a quarter who would like to see 3PLs do more in this area, and 26% who say it just depends on whether it will impact cost or service.

I will note there are some signs of change going on, notably the investment DHL has been making in things like augmented reality via smart glasses and use of robots in the DC.

There is a lot more, but think I will end it here.

There are several ways to access this excellent data and insight. The best is actually all the data and comments in sort of Excel form, which will give you the full breadth of all the responses. That can be found here.

Or you can download the slides we used during a Videocast announcing results of the research, which have the pretty charts but only cover a subset of the data. You can find that here. Or better yet, download both.

Overall, I think we need a new model that better encourages 3PL innovation, which means evolving the nature of contracts - but I am not optimistic that will happen any time soon. I also believe 3PLs themselves must put more dollars in an innovation budget. 

What do you think?

What are your thoughts on innovation between shippers and 3PLs? Are contracts a major issue? What needs to change? 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


We received a number of emails on our piece on a consultant saying Walmart has been pressuring carriers not to also haul freight for rival Amazon - after the Wall Street Journal reported Walmart would not let its software vendors use Amazon's popular web services platform for their systems. Walmart strongly denied the news relative to the carrier pressure.

A sampling of Feedback below, some from our partner RetailWire, which carried our article.

Feedback on Walmart on Carriers and Software Vendors not to Use Amazon


Walmart likes to exert influence. This should surprise no one that they would try to use their influence on their transportation providers. It’s a slippery slope and hopefully it truly is a false report or Walmart will ultimately suffer the consequences for this.

On the other hand, with respect to AWS — the real question is, why do ANY retailers support using AWS directly or indirectly through their technology suppliers? Why feed the beast its most profitable business?

Ricardo Belmar
Sr Director, Worldwide Enterprise Product Marketing



Walmart put the trucking issue to bed with a denial and an admission that doing so would be illegal. They would lose badly in attempting such a scheme.

The more interesting issue is AWS. Data sensitivity is a bonafide concern, and Walmart’s move can encourage other retailers to follow suit with their technology vendors.

I hope Microsoft Azure is listening, as they can grab business with value -added solutions for retailers, such as customer history machine learning for better service and recommendations, better kiosk and tablet support for associates, and less time maintaining servers than AWS requires.

Dan Frechtling
SVP Product and Marketing
G2 Web Services




Amazon Web Services and the issue of carrier limits when working with Amazon are two completely different issues.

There are many reasons why Walmart and other businesses should be extremely cautious about having their sensitive, competitive data residing on AWS cloud servers.

The business of hauling freight is an independent contractor decision that does not involve sensitive data or security. Walmart has the volume and resources to compete for carrier space. It is the smaller retailer who will be squeezed out during peak holiday seasons.

Chris Petersen
Integrated Marketing Solutions




Q: What is the percent of US freight transportation spent on trucking (including private fleets but excluding parcel)?

A: 66.6% in 2016, according to the State of Logistics Report released in June.

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