MM&D November December

November/December 2016

HCL LOGISTICS KEEPS IT SIMPLE

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MANAGING HOLIDAY RETURNS

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THE PROMISE & PERILS OF TAG TECHNOLOGY

TAKING THE RISK OUT OF RACK SELECTION

WAYS WMS CAN SAVE YOU $$

Publication mail agreement #40063170

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ALSO INSIDE 3 4 21 31 33 35 37

TAKING STOCK SUPPLY CHAIN SCAN DOCK DOORS LEARNING CURVE IT MATTERS LEADING EDGE MATERIALS HANDLING

Optimize. Execute. Align. Synchronize labor and automation in real-time with Dematic iQ Warehouse Execution System (WES), a modular logistics software platform, responsible for the control and alignment of workflows within your facility. Discover how Dematic iQ WES enables users to simultaneously manage processes, orders, inventory, labor and material handling to: • Prioritize workload for OnDemand order fulfillment • Increase order and inventory accuracy • Facilitate labor productivity and processing speed • Reduce order cycle time

Optimize your supply chain from receiving to shipping. Visit dematic.com or call 1-877-725-7500 for more information.

TAKING STOCK

www.mmdonline.com EDITOR: Emily Atkins (416) 510-5130 emily@newcom.ca CREATIVE DIRECTOR: Tim Norton (416) 510-5223 tim@newcom.ca ART DIRECTOR: Barbara Burrows PUBLISHER: Nick Krukowski (416) 510-5108 nick@newcom.ca PRODUCTION MANAGER: Kimberly Collins (416) 510-6779 kim@newcom.ca CIRCULATION MANAGER: Mary Garufi (416) 614 5831 mary@newcom.ca

NEWCOM BUSINESS MEDIA INC. Chairman & Founder • Jim Glionna President • Joe Glionna HOW TO REACH US: MM&D (Materials Management & Distribution), established in 1956, is published six times a year by Newcom Business Media Inc. EDITORIAL AND ADVERTISING OFFICES: 80 Valleybrook Drive, Toronto, ON, M3B 2S9; Tel: (416) 442-5600; Fax (416) 510-5140. SUBSCRIBER SERVICES: To subscribe, renew your subscription or to change your address or information, contact us at 416-510-5113 or 1-866-543-7888 ext. 3258, or visit our website: www.mmdonline.com/subscribe SUBSCRIPTION PRICE PER YEAR: Canada $84.95 per year, Outside Canada $159.95 US per year. Single copy price: Canada $15.00, Outside Canada $32.65 CDN MM&D is published 6 times per year except for occasional combined, expanded or premium issues, which count as two subscription issues. ©Contents of this publication are protected by copyright and must not be reprinted in whole or in part without permission of the publisher. DISCLAIMER: This publication is for informational purposes only. You should not act on information contained in this publication without seeking specific advice from qualified professionals. MM&D accepts no responsibility or liability for claims made for any product or service reported or advertised in this issue. MM&D receives unsolicited materials, (including letters to the editor, press releases, promotional items and images) from time to time. MM&D, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such unsolicited submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. PRIVACY NOTICE: From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374, Fax: 416-442-2191 Email: vmoore@annexnewcom.ca Mail to: Privacy Office, 80 Valleybrook Drive, Toronto, ON M3B 2S9 Printed in Canada Publications Mail Agreement #43008019, ISSN: 0025-5343 (Print) ISSN: 1929-6460 (Digital). We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage. MM&D is indexed in the Canadian Magazine Index by Micromedia Limited. Back copies are available in microform from Macromedia Ltd., 158 Pearl St., Toronto, ON M5H 1L3

Social freight O

ften at the end of the year we look at patterns in our industry, hoping for a glimpse into the crystal ball that will tell us the future. This is a useful exercise, as it makes you look back at what has changed and emerged over the past year, and what is about to burst from latency into a full-blown trend. This issue of MM&D has brought one topic to the spotlight—the so-called ‘Uberization’ of logistics or freight services. It’s mentioned three times in our news section—in our coverage of the CITT annual conference on page 6, in a report on its growth on page 14 and in our story about an Ontario-based package delivery service on page 11. Learning Curve columnist Tracy Clayson also discusses it on page 31. But really, there is not much new in this concept, which relies on removing the middleman from the purchase of transportation services, theoretically making it simpler and faster to find capacity to move your goods—just as an Uber ride moves you cheaply from point A to point B by facilitating direct contact with private drivers. Freight-matching websites have been around for a long time, with varying degrees of success. What’s different here is the technology being used to make the match. The ubiquity of mobile technology is what makes these new services viable. There is no delay when you ask for a pickup and the driver is using a smartphone-based app to respond. It seems plausible that this type of service will work for small shippers with limited volume. The entrepreneur sending a couple parcels a day might opt to try it out, especially if it’s cheaper than the mainstream options, and can offer some guarantees of shipment and payment security. But it seems a stretch to expect larger organizations with high volumes, corporate mandates or shareholders to engage in relatively casual and risky transportation procurement. There’s too much at stake, and besides, they don’t need it if they have enough volume to negotiate rates. It will be interesting to watch and see if these services gain traction with the small shipper over the next year. As I look back over 2016, I’d like to thank all the contributors who helped make MM&D great this year, along with our team at Newcom Business Media. As the editor of this uniquely Canadian magazine, I am really proud to work with such creative and industrious folks, covering a dynamic and endlessly fascinating industry. I hope to hear from you with your ideas for stories in thee new year.

November/December 2016 Volume 61 Numberr 06 0 16

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RFID: Promise and Perils

Lift and shuttle

WMS as change agent

Returned inventory

From cost centre to profit centre

How to get rid of it without restocking or throwing it out

What works and what doesn’t

HCL Logistics found simplicity is the best solution in its DC

Cover image: Opla; iStockphoto.com

www.mmdonline.com | November/December 2016

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CITT

CETA

OPTIMISTIC SMBS

PALLETS

Annual conference report, p 6

Free trade with Europe, p 8

Canadian small businesses who export are more positive about their outlook, p 11

Block pallets help cut costs, p 13

Canadian students tops in APICS contest HEC Montreal takes first place, McGill second as 14 finalists out of more than 500 schools from around the globe vied for scholarships and industry recognition By Emily Atkins

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eam ReFresh from HEC Montreal is the winner of the third annual APICS/TFC Global Student Final. Fourteen universities, who won their regions surpassing hundreds of universities across the globe via The Fresh Connection APICS Global Student Challenge, competed in the final event at APICS 2016. “Supply chain, logistics, and operations management are among the fastest growing career fields,” said APICS CEO Abe Eshkenazi. “The APICS/TFC Global Student Final is an opportunity for students to showcase their knowledge and build their skills for the future. All of the teams displayed an impressive knowledge and understanding of supply chain management and we hope the experience has been a rewarding one for them. Congratulations to everyone involved, especially our winning team, ReFresh.” Student teams competed in a business simulation based on the fictional juice company, Fresh Connection. The teams were challenged to overcome business problems by making strategic supply chain decisions that would positively or negatively impact business results. Teams accumulated points by enabling Fresh Connection to build a high-performing supply chain that improved efficiencies and increased revenue by tearing down functional silos and adopting a collaborative mindset. The APICS/TFC Global Student Final was held throughout the APICS 2016 event, giving participants the opportunity to participate in the conference’s educational sessions and keynotes covering end-to-end supply chain topics, and networking opportunities 4

APICS Canadian district teams and coaches: Vladimir Babii (McGill), Sabine Signor (HEC), Nicolai Rassolov (coach for both teams), Julie Soriano (HEC), Andy Zeitz (District Manager APICS Canada), Ahmed Mahmoudi (McGill), Humphrey Vernaus (APICS Canada), Camilla Gellerth (McGill), Amélia Di Liello-Roberge (HEC), Grace Fu (McGill), Cathy Pak (HEC), Sean Baker (APICS Canada), Louise Beauchamp (APICS Canada).

with industry experts from around the globe. The competition aims to introduce students to innovative new tools, products, and services shaping the fields of supply chain, logistics, and operations management. Along with ReFresh, second place winner, GCAV from McGill University, and third place winner, The Order Of The Phoenix from Universidad del Pacifico, were also awarded with cash prizes. Teams from Binghamton University;

California State University San Marcos; Duke University; San Diego State University; University of Pittsburgh; University of Wisconsin – Milwaukee; and Western Illinois University, as well as international teams from HEC Montreal; McGill University; Nationale des Sciences Appliquees de Tetouan; Shanghai University; Technologico de Monterrey; University of Southern Denmark; and, Universidad del Pacifico, completed the challenge. MM&D MM&D | November/December 2016

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More than 80 percent of Canadians will shop online this Christmas

59%

of Canadians cite shopping for gifts at the mall as their least favourite part of getting ready for the holidays. As a result, more Canadians are turning to online shopping to avoid the chaos, with 82 percent saying they will do at least some holiday shopping online (up from 76 percent last year). Whether they’ve been naughty or nice, the vast majority of Canadians (86 percent) plan to be more generous this holiday season, with anticipated spend up almost $200 over last year, according to a recent poll by Ebates.ca. Roughly half plan to shop on the three biggest shopping days of the year: 45 per-

cent will shop on Black Friday, 43 percent on Cyber Monday and 53 percent on Boxing Day. They expect to save an average of 24 percent versus shopping in stores. Overall, convenience, the ability to find things not available in stores and better prices are cited as the top reasons that make online shopping appealing. Women are more likely to cite convenience as a benefit of online shopping (28 percent vs. 21 percent for men) while men are more likely to cite price as a benefit (21 percent vs. 12 percent). Spending is expected to be up across nearly all categories as compared to last year.

The top items that Canadians are shopping for this holiday season, in-person or online, include clothing and accessories (76 vs. 67 percent in 2015), electronics (61 vs. 55 percent), books (56 vs. 54 percent), toys (53 vs. 46 percent), health and beauty (52 vs. 43 percent) and sports and exercise gear (31 vs. 21 percent). On average, Canadians plan to spend around $600, compared to $402 last year. About the survey The Ebates Canada survey was conducted online in October 2016 with a nationally representative sample of 1,000 Canadians. A sample of this size is accurate to within +/-3 percentage points, 19 times out of 20.

We make a big deal over the tiniest items. Old Dominion’s focus on premium service means every item arrives with one of the lowest claims ratios and one of the best on-time records in the industry. OD Domestic offers: • More than 220 service centers nationwide • Competitive transit times and pricing • Proactive shipping solutions

For more information, visit odfl.com or call 1-800-235-5569. Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2016 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.

SUPPLY CHAIN SCAN

CITT conference makes a splash in Saint John

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50 percentt of Canadian shippers are spending over $1 million a year on supply chain costs and potential impacts of the ‘Uberization’ of freight. This one was moderated by Joel MacKay, president of Mactrans Logistics Inc. He was joined by Justin Bailee, cofounder & CEO of FR8NEX, and Dwayne Johnson, director of omni-channel retail solutions with SCI, Canada Post. The entrance of Uber and Uber-style freight carriers, into the market is “a little worrying” according to Johnson, with their ability to undercut established players and run at a loss. Bailee, on the other hand, felt there could be big advantages for the logistics industry, from making it possible to avoid empty backhaul to providing cheaper, faster transport. “Good technology solves hard, big problems, and there’s a lot of those in transportation,” he said. Regardless, it was agreed that logistics will not be a holdout from the penetration of technology that has transformed so many industries in recent years. Closing off the transportation-specific sessions was Lou Smyrlis, editorial director, Trucking Group at Newcom Business Media with the annual Transportation Buying Trends survey results. He looked at economic trends affecting transportation, including, freight volume expectations for

2017 segmented by region; GDP forecasts; manufacturing output, and new order trajectories. He noted that 50 percent of Canadian shippers are spending over $1 million a year on supply chain costs. He also examined expectations on core pricing and the main factors that are expected to drive rates, including: capacity, legislation and equipment renewal plans. Some of the longer-term trends that Smyrlis identified are: 3D printing, autonomous vehicles, omni-channel retailing, the ‘Uberization’ of freight and the carbon economy. Additional sessions covered non-transportation related topics. Ten rules of making a pitch was presented by communication coach and strategist Jim Gray. The session covered indispensible ways to help persuade peers, managers, and customers by earning trust and demonstrating the mutual benefits of proposals. Warren Sarafinchan, CCLP, vice president, sales and supply chain at Sun-Rype, presented on succession planning. He covered how to approach proactive and crossfunctional succession planning and talent development for yourself and your company. MM&D MM&D | November/December 2016

Photo: alex5248; iStockimages.com

ITT presented its annual Canada Logistics Conference from October 26 to 28. An audience of 200 shippers, carriers and ancillary service providers from all sectors and across the country took part. They came together to network and learn about the most important issues facing supply chains, businesses and the people who run them. Learning sessions covered topics such as: succession planning, improving the RFP process, the ‘Uberization’ of trucking, the economic & freight level outlook, practical tips for power pitching, as well as insights and projections from a C-Suite modal panel. Participants also took part in site tours of the Mispec Crude Terminal and the Canaport Liquefied Natural Gas Terminal on the Bay of Fundy. This was a rare opportunity to see massive fuel facilities that handle crude oil and liquid natural gas from around the globe before distribution into Canada and the US. The Current State of Transportation panel was moderated by Andrew Dixon, CCLP, senior vp trade and business development at Port Saint John. He led a lively discussion among panelists Matthieu Casey, general sales manager - Canada, Air Canada Cargo; Matthew Hoag, operations and commercial director, Americas Region - DP World; Patrick Lacroix, manager of stakeholder relations, Energy East New Brunswick; Wayne Power, group VP, transportation and logistics division—JD Irving Limited; and Ryan Ratledge, COO—Central Maine & Quebec Railway. The executives, who represented all modes, shared their analysis and insights on the pressing commercial issues that impact today’s movement of goods and raw materials. A session on RFPs presented by Larry Mitchell, CCLP, director of government services and corporate accounts, United Van Lines, and Laurie Turnbull, CCLP, supply chain consultant—Cole International explained in very clear terms what shippers and carriers need to do to have a more effective RFP process that results in a transparent and mutually beneficial relationship. Another panel examined the implications

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BENCHMARKS DMLogic, LLC, experts in warehouse management systems (WMS) software and implementation, and its customer Johnson & Johnson Supply Chain (JJSC), were first runners up in the Council of Supply Chain Management Professionals (CSCMP) 2016 Supply Chain Innovation Award competition. JJSC and DMLogic has built and implemented one of the first systems to comply with new federal and global regulations that will protect the JJSC drug supply, years ahead of the mandated schedule. UniCarriers Americas Corporation (UCA) named dealership Vegusa Maquinaria, located in Aguascalientes, Mexico, as its President’s Award winner. In November, UCA celebrated the top ten dealers with the first ever UniCarriers Americas’ President’s Club Award Dinner, which replaced the Nissan Nine. This is the first time in 26 years the President’s Award has been presented to a dealer in Latin America. At Ford’s Top Management annual meeting in São Paulo, Brazil CEVA was named 2016’s Top Supplier in the Category Logistics and Transportation. The award is based on criteria such as service performance, cost reductions, and commercial relationship. Old Dominion Freight Line, Inc was awarded the ATA 2016 President’s Trophy in the “Over 100 Million Miles” category. The trophy is the highest safety award available to motor carriers in the United States. The honour is determined by overall safety record, safety programs and community outreach activities.

Staples eyes delivery by drone Drone Delivery Canada (DDC) is working with Staples to explore the feasibility of developing, implementing and commercializing a drone delivery logistics platform for Staples’s commercial requirements in Canada. With this agreement in place, DDC will work under Transport Canada’s framework to advance its testing at a test site in Southern Ontario. Afterwards, DDC expects to travel to Foremost, Alberta and Alma, Quebec to test beyond visual line of sight (BVLOS). “The work Staples is doing with DDC will let us provide innovative solutions to meet our customers’ needs,” said Mike Bhaskaran, executive vp of supply chain at Staples, Inc. “We are the first and only drone delivery company in Canada,” said Tony Di Benedetto, CEO of DDC. “With our new SFOC (Special Flight Operating Certificate) from Transport Canada, companies we were in contract discussions with are accelerating talks to develop their own drone delivery solution.”

We’re on time when time is scarce. When you need something shipped immediately, Old Dominion Expedited delivers. Our focus on premium service means every shipment arrives with one of the lowest claims ratios and one of the best on-time records in the industry. OD Expedited offers: • Next-day arrival • Delivery at a guaranteed time • Weekend Promise: guaranteed Friday to Monday delivery

For more information, visit odfl.com or call 1-866-637-7333. Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2016 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.

SUPPLY CHAIN SCAN

CETA: Canada’s Free Trade Agreement with the European Union By Christian Sivière

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F iindustrial For d products, 100 percent of the tariff lines on industrial products for both sides will be fully eliminated.

of $19.96 trillion, compared to the US population of 319 million and GDP of $16.77 trillion. Clearly, the EU market has great potential for Canadian exporters. Canada and the EU have agreed to eliminate customs duties (also called tariffs) on imports of most goods originating in the EU and Canada, either immediately when CETA comes into force, or gradually within three, five or seven years. Only some sensitive agricultural products will be excluded from tariff reduction and overall, duties will be eliminated for 98.6 percent of all Canadian tariff lines and 98.7 percent of all EU tariff lines. Respective product rules and regulations, be they technical, sanitary or phytosanitary, rules for security, consumer protection or the environment, and food safety and labelling requirements, remain untouched by CETA and continue to apply on both sides of the Atlantic.

Industry rules

For industrial products, 100 percent of the tariff lines on industrial products for both sides will be fully eliminated and of these, 99.4 percent will happen immediately, whereas for some automotive products, it will be phased in over three, five or seven years. For the fishing industry, the EU agreed to eliminate 95.5 percent of its tariffs upon entry into force of CETA and the remaining 4.5 percent within three, five or seven years, with transitional duty-free quotas for shrimps and cod. For agricultural products, the EU will eliminate 92.2 percent of its agricultural tariffs immediately. After seven years, 93.8 percent of the agricultural tariffs will be eliminated. The remaining sensitive products are either subject to quotas (beef, pork, canned sweetcorn) or excluded from tariff reductions altogether (chicken and turkey meat, eggs and egg products). On the quota front, the most significant ones are mentioned earlier (European cheese and Canadian beef). MM&D | November/December 2016

Photo: Rawpixel; iStockimages.com

rime Minister Trudeau inked Canada’s Free Trade Agreement (FTA) with the European Union in Brussels on October 30, 2016. It is often referred to as CETA (Comprehensive Economic and Trade Agreement). CETA was several years in the making, as negotiations were launched in May 2009. The next steps now are approval by the European Parliament in Strasbourg, followed by ratification by the 28 national parliaments of EU member countries and some regional parliaments as well. On the Canadian side, the process will be easier and faster: it will just require an Act of Parliament. Why will it be easier in Canada? Because the federal government involved our provinces in the process right from the beginning, so there is a broad federal/provincial consensus on the issue. Before going into the benefits for Canadian exporters, let’s define the European Union (EU). It’s not the European Free Trade Association (EFTA), made up of four non-EU countries: Liechtenstein, Iceland, Norway and Switzerland. Canada has had an FTA with the EFTA since 2009. The EU was founded in 1961 by six countries (Belgium, France, Italy, Luxemburg, Germany and Netherlands) and has since grown into the largest trading bloc in the world. It currently has twenty-eight members: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. It’s often referred to as the EU28. If and when Brexit happens and the UK leaves, it will then be called the EU27. Looking at statistics, we can immediately get an idea of the size of the EU market versus our biggest trading partner the US. The EU has a population of 508 million and a GDP

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Rules of Origin

Regarding rules of origin (RoOs) setting the conditions under which a product qualifies as ‘European’ or ‘Canadian’ and benefits from the tariff preferences of CETA, some compromises had to be found. Both the horizontal and the specific RoOs are generally based on the standard EU rules. However, for cars, textiles, fish and some agricultural/processed agricultural products where Canadian exporters could have difficulties meeting the rules, derogations for more relaxed RoOs were agreed upon for limited quantities. For the future, CETA also leaves open the possibility of cumulation of origin with third countries with which both the EU and Canada have a free trade agreement. To facilitate trade, both parties agreed to provide traders with advance rulings relating to origin and tariff classification. Geographic Indicators (GIs)

A geographic indicator is a distinctive sign

The EU and Canada have agreed to cooperate closely in the field of technical regulations via their standard-setting bodies.

used to identify a product as originating in the territory of a particular country, region or locality where its quality, reputation or other characteristic is linked to its geographical origin. This is new to Canada, as this notion does it exist here, but is very important in Europe, where almost 3,000 food products are protected, more than eight percent of which are registered in Italy, France, Spain, Greece, Portugal and Germany. Canada has granted GI protection to 145 such European products ranging from

Prosciutto di Parma, Feta, Manchego, Scotch Whisky, Roquefort and Munster to Jambon de Bayonne. Some cases will involve “grandfathering” the use of these names by existing producers, coupled with a phase-out period for others. In other cases, new producers will only be able to sell their products when they are accompanied by indications such as “style”, “type”, “kind” or “imitation”. An exception is Beaufort cheese from France and producers in the proximity of the “Beaufort Range” on Vancouver Island can continue to use the name. Canada on the other hand, did not request any such GI protection from the Europeans. Technical Barriers to Trade

Regarding Technical Barriers to Trade, the EU and Canada have agreed to cooperate closely in the field of technical regulations via their standard-setting bodies as well as continued on page 10

When you’re driven by details, the world is a smaller place. Old Dominion simplifies global shipping by doing more than delivering freight. Our focus on premium service means every shipment arrives with one of the lowest claims ratios and one of the best on-time records in the industry. OD Global offers: • Personalized, single point of contact for status on all shipments • Nationwide Container Drayage from most major rails and ports • Direct service to or from Canada, Mexico, Puerto Rico, Alaska and Hawaii

For more information, visit odfl.com or call 1-800-432-6335. Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners. © 2016 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.

SUPPLY CHAIN SCAN CETA: Canada’s Free Trade Agreement with the European Union, continued from page 9

their testing, certification and accreditation organizations. There will be mechanisms by which Canadian certification bodies will be allowed to certify products for the EU market according to EU technical regulations and vice-versa. This will reduce the costs of testing and obtaining product certification for exporters, particularly benefitting small and medium size enterprises. Professional qualifications & procurement

CETA also establishes a framework for the mutual recognition of professional qualifications for regulated professions like architects or lawyers. This will take time. Laws regarding intellectual property rights as well as have been harmonized, and cooperation to fight counterfeited trademarks, pirated copyright goods and counterfeit geographical indication

goods will be strengthened. CETA also opens government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and viceversa. CETA goes further than NAFTA, as Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport in Ontario and Québec. The chapters on sustainable development, the environment, services and investment are more controversial. In fact, they are the ones that faced some last-minute opposition and they may need to be renegotiated before CETA is fully implemented. Of particular importance is the investment protection and Investor-to-State-Dispute Settlement mechanism. Several hurdles must

Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice-versa. still be overcome on the European side for CETA to be fully implemented. But we expect a provisional implementation in early 2017, enabling the immediate reduction of customs duties, as customs issues are fully harmonized within the EU. Full implementation would follow at a later stage, following the conclusion of issues that impact the laws of individual EU countries. MM&D

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MM&D | November/December 2016

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Canadian SMBs optimistic Survey shows exporters the most positive By MM&D Staff

Photo: eternalcreative; iStockimages.com

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anadian small and medium-sized business (SMBs) are optimistic about their future, according to eBay Canada’s first SMB Optimism Index. Scored out of 100, from very pessimistic to very optimistic, Canadian retail SMBs averaged a 74 on the Index. However, those who export indexed notably higher at 79 points, while non-exporting SMBs are significantly less optimistic at 72 points. SMBs who export reported an average of nearly 60 percent more in sales than those who don’t. They are also more likely than non-exporters to believe there are new market opportunities for them (70 percent versus 36 percent) and that technologies and innovations will positively impact their business (56 percent versus 41 percent). “Given the relatively small size of the Canadian market, it stands to reason that business optimism in our country would be linked to exporting,” says Andrea Stairs, managing director, eBay Canada. “A critical success factor to scaling a Canadian business is the ability to tap into international demand. E-commerce has helped democratize international trade, and global online marketplaces like eBay are enabling SMBs to reach buyers beyond their borders and fulfill their potential.” Another contributing factor to SMB opti-

mism is the variety of sales channels used by a business. Omni-channel businesses indexed at 77 compared to 72 for single-channel enterprises. Further, omni-channel SMBs who use digital channels scored higher on the Index (77) than those who don’t (73). As for impediments to optimism, the top worries reported by Canadian SMBs include the value of the Canadian dollar for purchasing business inputs, low margins and tough domestic competition. And, though more than half of SMBs (56 percent) agreed that Canada is a good country in which to run a business, only 38 percent believe the Canadian government makes decisions that help their business. Additional key findings from the eBay Canada SMB Optimism Index include: • More than half (54 percent) of SMBs surveyed felt optimistic about 2017, with one in five (19 percent) feeling very optimistic • Quebec SMBs are overall the most optimistic scoring 79 on the Index; SMBs from the Atlantic are the least optimistic with a score of 72 • Two in three (66 percent) SMBs that have been in business for less than five years are optimistic about their business prospects for 2017, compared to 47 percent of SMBs that have been operating for 20+ years • More than one in four (28 percent) SMBs

expect to increase their number of sales channels in 2017—this number grows to 38 per cent for exporting SMBs and drops to 22 percent for non-exporting SMBs • 16 percent of SMBs expect to increase employees in 2017—26 percent of expor ing SMBs expect an increase, compared to 11 percent of non-exporting SMBs. SMB sample respondents were sourced from The Angus Reid Forum panel, while eBay Canada SMBs were sourced directly through the company. The sample consisted of 427 SMBs as well as 117 commercial eBay sellers from across Canada. The margin of error for the sample of SMB’s is +/- 4.7 percent. The margin of error for the sample of eBay sellers is +/- 9.7 percent. To qualify for the survey, SMBs had to indicate a minimum revenue of $13,000 CAD annually, and indicate that they don’t have more than 99 employees. eBay sellers had to indicate a minimum revenue of $13,000 CAD annually, but no parameters were set for number of employees. MM&D

Ontario start-up offering Uber-style package delivery

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oadWages, an online shipping portal that connects customers directly with available drivers, is now offering services in Southern Ontario. The website’s founder, Stuart Englander says, “RoadWages’ mission is to bring a more ‘human-to-human’ approach to small package delivery. When a customer books a shipment online, they are contacted directly by the driver who will perform the delivery. Shippers are able to stay in touch with their parcels from pick up to destination.” Eliminating the middleman allows senders to stay in closer contact with their parcels from pick-up to end destination, and save money in the process. www.mmdonline.com | November/December 2016

Drivers have the opportunity to earn money while maintaining control of their own driving patterns. Drivers can create individualized routes wherever their willing to travel. As a result, RoadWages expects its service areas to increase over the coming year. Customers’ prepaid shipments, whether individually or with a corporate billed account, are protected by RoadWages until completion of delivery. Payments made by customers are only released to drivers once the fulfillment of the delivery contract has been completed. With this system, if there is ever any concern regarding a specific shipment, a customer need only contact the driver rather than waiting on endless hold at a dispatch service office. 11

SUPPLY CHAIN SCAN DONE DEALS ICTI CARE, an ethical supply chain program for the global toy industry, and BSR, a global nonprofit organization that works with member companies and partners to build a just and sustainable world, have partnered to advance women’s empowerment in global supply chains. As well as identifying opportunities to further strengthen ICTI CARE Certification to empower women, ICTI CARE will also work with BSR to design and implement women’s empowerment strategies and support at toy factories in India—in partnership with local toy industry associations—to foster deeper change in the country. The partnership forms part of a broader collaboration in which ICTI CARE will work with other responsible sourcing programs, to make women’s empowerment central to the strategies, guidelines and practices. CH Robinson has secured a contract renewal with Tesco, a multinational grocery and general merchandise retailer, to increase current distribution of its products throughout Poland. Since 2011, CH Robinson has handled a percentage of Tesco Poland’s business, out of Tesco’s Gliwice Distribution Centre, as part of an outsourced transport solution. Following Tesco’s decision to synchronize its Eastern European operationas, CH Robinson was awarded with an expansion of the current logistics relationship,

expanding Tesco operations to its Gliwice, Poznan, and Teresin divisions. Leroy Merlin has selected CEVA to manage its new warehouse at Castel San Giovanni in northern Italy and to handle the distribution of its products, from doors and lighting to synthetic grass. 150 employees will operate from the site to ensure the timely restocking of 48 stores across Italy as well as 20 others located in Greece, Cyprus and Romania. At 92,000 square meters (990,000 sqf), the warehouse is divided into two key areas: a dedicated cross-docking activities zone and an e-commerce fulfillment centre. Akro-Mils, a manufacturer of storage products, has partnered with Attainia, Inc, a healthcare capital equipment planning solution provider, to make information on Akro-Mils products available to members of Attainia’s capital planning solutions system. Attainia offers tools for Project Capital Planning and Routine Replacement Capital Planning solutions that allow members to create, edit and collaborate on healthcare capital equipment lists for all project types, and provides members a single, cloud-based, point of entry for all annual capital equipment requests.

Coming in the February issue of MM&D…

Survey of the Logistics Professional Salary – Education – Experience – Scope of Operations How do you stack up? 7>ÌV v À Ì i iLÀÕ>ÀÞ ÃÃÕi v E Ì w ` ÕÌ° i>ÌÕÀ } `>Ì> V iVÌi` vÀ Õ `Ài`Ã v ÃÕ«« Þ V > «À viÃÃ > Ã i Þ ÕÀÃi v] Ì i -ÕÀÛiÞ v Ì i } ÃÌ VÃ *À viÃÃ > Ü Li Ì i Õ Ì >Ìi L>À iÌiÀ v À Ì i ÃÌ>Ìi v Ì i «À viÃÃ > >`>° / > Þ Õ v À Þ ÕÀ «>ÀÌ V «>Ì ] > ` Ãii Þ Õ Ì i iÜ 9i>Àt

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MM&D | November/December 2016

SUPPLY CHAIN SCAN

Study shows block pallets save costs MM&D Staff

A single distribution centre can save an estimated $500,000 every year simply by using block pallets instead of traditional Canadian pooled stringer pallets.

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ccording to an independent study conducted by The Poirier Group (TPG) in Canada, a single distribution centre can save an estimated $500,000 every year simply by using block pallets instead of traditional Canadian pooled stringer pallets. The five-week study estimated total annual savings for a Sobey’s warehouse location at $497,500, which included $441,100 in transportation savings and $56,400 savings in operational efficiency. In April and May 2016, PECO Pallet hired The Poirier Group (TPG), a business consulting firm, to conduct a five-week independent study on block pallet utilization in a selected Sobeys distribution centre. TPG conducted exploratory and factfinding interviews at the Sobeys warehouse, collected data, and recorded their observations. TPG then analyzed the data and modeled potential annualized benefits in both time and cost savings. PECO Pallet funded the study and collaborated on the overall approach and timeline, but otherwise had no involvement during the evaluation process.

The most dramatic cost savings were related to transportation efficiency. The average weight of a typical Canadian pooled stringer pallet is 90 pounds, versus 65 pounds for a PECO or similar block pallet. TPG calculated the additional fuel costs that are incurred for transporting the additional weight of stringer pallets. Even more significant savings were identified due to the increased cube utilization possible with four-way block pallets. With stringer pallets, the average number of pallets per truckload is between 24 and 28. Block pallets allow for up to 30 pallets to be loaded on the floor of the trailer. The combined transportation savings from increasing the cube and reducing pallet weight was estimated at $441,100 per year. “We are very pleased to have clear proof of what we knew already: using block pallets can

lead to improved efficiencies and substantial cost savings throughout the supply chain,” said Lisa Vegso, PECO Pallet’s general manager for Canada. “We hope this study helps more distributors throughout Canada and the US to understand the significant benefits of using four-way block pallets like PECO.” Additional cost savings were identified in operational efficiency. At the Sobeys warehouse, researchers observed that stringer pallets cause issues and delays during loading. While the true four-way entry of a block pallet enables easy access and the ability to pinwheel with a standard pallet jack, stringer pallets require the use of dock stockers, which leads to additional capital and equipment maintenance costs. The estimated savings in operational efficiency in using block instead of stringer pallets was estimated at $56,400. MM&D

GLOBAL FOCUS Mobile phones open Africa to commercial opportunities The growth of mobile phones and services across the African continent has instantly brought many Africans into the digital age and connected them to worldwide knowledge and services. Home to one of the world’s fastest growing middle classes, Africa has seen multiple opportunities emerge for both local and global retailers from this digital growth. “Currently, more than 60 percent of individuals in sub-Saharan Africa have access to a mobile phone. As the adoption of mobile technology and increasing internet penetration in these countries continue to grow, so does the opportunity for retailers to reach new customers in the region,” says Hennie Heymans, CEO, DHL Express Sub Saharan Africa. The World Bank’s 2016 World Development Report, Digital Dividends, notes that the increased access to digital technologies brings more choice and greater convenience, and that through inclusion, efficiency and innovation, access to mobile provides

www.mmdonline.com | November/December 2016

opportunities that were previously out of reach. Heymans also adds that the market opportunities in Africa are ripe. With the rise of mobile commerce and increased competition, this drives the demand for advances in technology and logistics, to ensure real-time supply chain visibility and improved quality, speed and precision of delivery services within African markets. DHL is meeting demand with the addition of Android-powered mobile scanners in 26 sub-Saharan African countries. “As a network business, it is essential that our shipment data is captured accurately and in real-time,” Heymans says. This data can also be used to measure customer satisfaction against company KPIs, as well as for process improvements or route adjustments to increase efficiency and improve customer service. With this new technology, local and global retailers can increase the speed at which shipments are processed and delivered to their clients, thus improving efficiency along the value chain.

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SUPPLY CHAIN SCAN

‘Uberization’ of freight services set to explode By MM&D Staff

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BI Research forecasts Freight as a Service (FaaS) will represent 30 percent of total goods transportation revenues by 2030. Its benefits, similar to Mobility as a Service (MaaS), include cost reductions, resource utilization improvements, and convergence of market landscapes through adoption of a sharing economy business model. FaaS streamlines freight and parcel delivery services through new advancements in cargo market places, on-demand transportation, freight brokerage, and ridesharing. With IoT applications fueling its current growth rate, FaaS revenues are on track to exceed $900 billion by 2030. “With an average global air cargo Freight Load Factor of as low as 44 percent and a structural 20 percent long-haul truck cargo capacity utilization deficit in the US, the freight industry

needs to act,” said Dominique Bonte, managing director and VP at ABI Research. “The last-mile freight delivery segment will experience the largest upheaval due to the rapid adoption of e-commerce and the need for faster, cheaper, on-demand delivery through new transportation modes and technologies.” Uber already offers the UberRUSH and UberEATS delivery services and recently invested in truck platooning startup Otto. The industry is also testing drone-based delivery with companies like Amazon, FedEx, Flirtey, Google, and UPS all on board. Audi and Daimler, both partnering with Amazon and DHL, are using telematics to test direct-to-car delivery, and Volvo launched its commercial in-car delivery service just one year ago. Daimler and Workhorse, meanwhile, are considering hybrid models, integrating autonomous vehicles, drones, and/or robots with smart home technologies. The aim is

to provide end-to-end delivery of parcels inside homes and commercial sites by using indoor navigation and remote electronic door unlock technologies. However, transportation efficiency improvements can be taken to yet another level by leveraging synergies between FaaS and MaaS. Repurposing excess MaaS capacity of driverless vehicles or shuttles during off-peak hours for freight transport and delivery will allow ultra-high utilization rates and very low costs per mile. “Both FaaS and MaaS are seen by governments as strong engines for economic growth,” concluded Bonte. “Governments need to move forward with new legislation to allow for the deployment of delivery technologies like UAVs and create frameworks for the underlying business models.” These findings are from ABI Research’s report “Freight as a Service”. MM&D

What’s the most rewarding career decision you’ll ever make? CCLP® designation holders rank among the world’s most wellrounded supply chain logistics professionals. Don’t be left behind. Earn the designation people pick 3:1. From CITT, your best choice IRU FRPSOHWH FDUHHU ORQJ OHDUQLQJ DQG FHUWL¿FDWLRQ LQ VXSSO\ FKDLQ logistics. You may be only 5 courses away from the credibility you really want. Find out if you qualify for advanced standing and watch an online info session. Or just get started.

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MM&D | November/December 2016

SUPPLY CHAIN SCAN MOVERS + SHAKERS CITT president & CEO Catherine Viglas will retire from her post in one year, at the end of October 2017. Viglas has served as president of the CITT for over 17 years, and will continue with her usual functions and duties as well as support the seamless transition to the new president. “The board would like to take this Catherine Viglas opportunity to publicly express our deepest thanks and appreciation for Catherine’s tireless energy and commitment to CITT,” said Ginnie Venslovaitis, CITTCertified Logistics Professional and current Chair of the CITT Board of Directors. “I am not sure we would be where we are today as an organization without her in the role.” A succession planning committee has been formed to recruit a successor. Stephen Laskowski will become the next president and CEO of the Canadian Trucking Alliance on January 1st, 2018, after the alliance’s current chief, David Bradley, retires. Laskowski, who is currently CTA’s senior vice-president and Bradley’s number two in charge, has over 22 years of experience representing the industry and is well-respected in policy circles. Laskowski will hold the top job at both CTA and the Ontario Trucking Association. He earned a Masters of Public Administration from the University of Western Ontario. Guido De Ciccio, senior vice-president, Operations Western Region, is retiring from CP after four decades of dedicated service. De Ciccio joined CP in May, 1976, first working as a labourer in Montreal. Prior to becoming SVP Operations Western Region, De Ciccio served as General Manager East, Assistant Vice-President East, and VicePresident, CP. Taking on De Ciccio’s day-to-day responsibilities is Mark Redd. Redd joined CP in October 2013 and has worked as General Manager Operations US West, General Manager Operations Central Division, and was appointed to Vice-President Operations West Region in April of this year. Prior to joining CP, Redd had more than 20 years at Kansas City Southern Railway. The Toronto Area Council (TAC) of the CITT elected a new executive Council. The Council for 2017 will be Chair: Duane Chiasson, Business Development, Effective Logistical SolutionsIndependent Contractor of Yusen Logistics (Americas) Inc; Vice-

Chair: Michael Upwood Director of Sales, Dedicated Accounts for Tandet Dedicated; Treasurer: Grace Di Marca, National Manager, Customs Consulting, Kuehne + Nagel Ltd; Secretary: Bill Carter, Yusen Logistics (Canada) Inc., Export Supervisor; Events Co-ordinator: Demi Todorov, (CA/US)|Manager Client Services and Solutions, Thompson Ahern International; Member at large; Tom Pauls, Managing Director of SCL Search, Supply Chain and Logistics Recruitment; Member at large; Denise Ponte, Business Development Professional, Effective Logistical SolutionsIndependent Contractor of Yusen Logistics (Americas) Inc. All hold the CCLP designation. Cimcorp, a manufacturer and integrator of robotic gantry-based order fulfillment and tire handling solutions, has transferred Vesa Hakanen from its headquarters in Ulvila, Finland to Norcross, Georgia in order to lead the new US-based office, Cimcorp USA, Inc, as general manager. Hakanen has been a part of Cimcorp since 1998, starting off as a software engineer. Angela Collins of Willson International Ltd is the new chair of the board of the Canadian Society of Customs Brokers (CSCB). A senior Customs and logistics professional with over 38 years of experience, Collins has spent over 28 of those years rising through the ranks at Willson International, from manager Angela Collins through director to now vice-president of Canadian and US Brokerage Operations & Regulatory Affairs. She has been active within the CSCB for many years, first as an elected member of the Toronto Region chapter and since 2011 as part of the National Board of Directors. SYSPRO appointed James Weir vice-president of sales, reporting to president James Moffatt. Weir joins SYSPRO Canada from IDENTOS Inc, an organization focused on platform as a service (PaaS) offering end-point security and mobile encryption technologies, where he was vice-president of sales for the Americas. Weir will be based out of SYSPRO Canada’s central office location in Mississauga, Ontario. He replaces David Doyle, who has been appointed customer success director. In his most recent role Doyle oversaw revenue achievement and growth from new customer acquisitions.

Food warehouse under consideration for Hamilton port

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he City of Hamilton and the Hamilton Port Authority (HPA) are studying the feasibility of a full-service food and beverage warehouse located at the Port of Hamilton, Ontario. The potential logistics facility would support a variety of food and beverage producers within the Hamilton region, and foster stronger export connections to the US consumer market. Such a facility could offer food-grade warehousing, packing and shipping options, along with other services, while taking advantage of the Port’s location and transportation connections. www.mmdonline.com | November/December 2016

The study will explore the possibility of providing on-site Customs functions like Canadian Food Inspection Agency inspections and USDA Food Safety and Inspection Service (FSIS) pre-clearance. It will also look at the market for potential operators and users, and spinoff business opportunities for Hamilton-area food manufacturers and processors. More than $200 million in agri-food sector investment has been recently attracted to the Port of Hamilton, which is 45 minutes from the US border and a day’s drive to 100 million consumers. 15

A game of tags Winning and losing with

RFID It’s fair to say that “Peak RFID” in supply chain occurred just after 2005, the year that retail giant Wal-Mart began requiring its suppliers to have the tags on inbound shipments. Since then the technology has not proved to be the hoped-for inventory-control panacea. Emily Atkins looks at the promise and perils of RFID over the past 10+ years.

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hen Wal-Mart made it mandatory for suppliers to tag incoming product, the supply chain world paid attention. If the big brains running that massive supply chain operation had determined that RFID (Radio Frequency IDentification) was the way to achieve inventory visibility, then maybe they should too. Companies quickly hopped on the new technology bandwagon, hoping its promise would bear out. But while RFID has been influential in supply chain management and is key to current market trends, there are places where it just doesn’t add value.

A long history RFID goes way back, to around the time of WWII. Radar operators in the German air force discovered that if incoming planes rolled on approach, the radar signal reflected differently, effectively allowing the pilots to let the base know they were ‘friendlies’ about to land, not enemy planes on the attack. After the war scientists saw further potential in radio waves, and developed small radio transponders that could transmit a signal either independently—pow16

MM&D | November/December 2016

ered by a battery (now know as active RFID)—or passively, only responding when hit by a signal (passive RFID). In the 1970s the technology was further developed and commercialized for numerous applications, including anti-theft tags on expensive retail merchandise, proximity cards to unlock doors and tracking whether farm animals had received proper doses of medication. These RFID applications are ubiquitous now. In the early 1990s IBM developed an UHF (ultra high frequency) RFID system that could be read from as much as 20 feet away. Although it did some trials with Walmart, IBM did not commercialize the technology and sold the patents to Intermec, which was a bar code provider at the time. Intermec developed it, but was unable to get much traction thanks to the high costs of the product and the lack of common standards. In the late 1990s RFID began to blossom into a supply chain technology, largely thanks to two MIT researchers, David Brock and Sanjay Sarma. Brock and Sarma worked at the university’s newly established Auto-ID Center, which was created and funded by the Uniform Code Council, EAN International, Procter & Gamble and Gillette. Until their innovation RFID was cumbersome and the tags needed to be quite large to carry enough data to be useful. Brock and Sarma proved RFID tags could be made small enough to be used for tracking inventory in the supply chain if they were simply encoded with a serial number. That number linked back to the full information about the object the tag was attached to in a database.

Photo: Big Ryan, servopuff; iStockphoto.com

The Internet of Things Thus the Internet of things was born—RFID-enabled items—from pallets, to containers to individual products—could communicate their whereabouts to a network, which could then transmit that data anywhere it needed to go. A tag on an inbound pallet would key back to the database, letting supply chain managers know exactly what was on it and where it was. In the first few years, RFID technology was much hyped, benefitting largely from the Wal-Mart mandate that drove its suppliers to quickly adopt “slap and ship” applications. These were relatively easy-to-implement passive solutions that used self-generated printed labels embedded with tags and required readers to be strategically located in the warehouse to ping them as tagged pallets or cases passed by. At the time, analyst firm Gartner predicted that by 2012 most enterprises would have to redesign supply chain processes thanks to RFID’s influence. Its benefits over older data capture methods, such as barcode scanning, were its ability to automate what was previously a manual process of scanning codes on each item needing tracking. Pallets full of tagged cases could be scanned all at once, automatically, reducing labour requirements, speeding up receiving, improving visibility and increasing the accuracy of inventory management. Benefits included the ability to reduce inventories by as much as five percent; up to 7.5 percent reduction in labour; stock-outs cut by as much as seven percent of revenue; increased inventory accuracy; and automatic replenishment. Envisioned applications ranged from tracking consumer goods through the supply chain, to asset management, origin tracking and product recall. www.mmdonline.com | November/December 2016

Murky and unclear But while at the time RFID was touted as “the must-have technology for the next five years” even in this magazine (“Radio Daze: Is RFID making your head spin”, MM&D July-August 2004), it was not a good investment for most. The ROI for a slap-and-ship scenario was considered to be negative for plant or warehouse, unless the opportunity cost of losing a client or incurring penalties because of failing to comply with a mandate was factored in. In 2007 a Computing Technology Industry Association (CompTIA) survey found that while 84 percent of its member resellers and service providers were offering or planning to offer the tech for sale, uptake was dismal. The association noted: “…rosy forecasts have given way to the reality of dealing with a technology whose deployment has been challenged by equipment and tagging costs, murky and unclear returnon-investment for supply chain applications and a skills shortage.” Additional concerns included privacy issues, lack of standardization and the paucity of developers creating end-to-end solutions. On top of that, it was immediately recognized that the amount of information created by RFID tags would overwhelm existing The technology works for apparel ERP and WMS systems, forcing the development of better more robust methbecause of the ods for handling the pending “big data” wide range of colours, sizes and tsunami.

styles, which are incredibly hard to track through the supply chain any other way. Stock accuracy can be as high as 95 percent, minimizing costly out of stock situations, which in the world of ‘fast fashion’ can be deadly to a brand.

The promise

As with any new technology, RFID has areas of tremendous success and places where it may not be as functional. One success story is in the apparel industry, where research firm IDTechEx predicts 4.6 billion RFID labels will be used in 2016. And that’s a market penetration of only 15 percent. The technology works for clothing because of the wide range of colours, sizes and styles, which are incredibly hard to track through the supply chain any other way. Stock accuracy can be as high as 95 percent, minimizing costly out of stock situations, which in the world of ‘fast fashion’ can be deadly to a brand. Global retailer Zara offers an example of the successful implementation of item-level tagging for fashion. The company is able to re-use chips by embedding them in removable security tags, saving millions of dollars in costs, while speeding up inventory taking and enabling instant replenishment.

Pitfalls And yet inside most large DCs and warehouses today you’ll still see bar codes being scanned. RFID has not yet achieved the wide17

A GAME OF TAGS, continued from page 17 spread adoption that early analysts expected, largely thanks to its continuing high cost. Nonetheless many optimistically believe the technology can be applied in a variety of ways. Unfortunately, they are not always right. One area where RFID is not living up to the promise seems to be in the increasingly important function of yard management. In 2005 a report on “The pros and cons of RFID in supply chain management” by two University of Wollagong, Australia researchers glowingly anticipated its application in yard management. The report correctly notes that large amounts of capital are tied up in yards and need to be efficiently managed. “It is often difficult for these organizations to know what goods are on which truck without first unloading the truck, which also makes it complicated to direct the truck to the right drop off or parking yard location,” the report states. “RFID tags can be placed on truck trailers and RFID readers placed at entry and exit points of yards allowing management systems to log the incoming and outgoing data in real-time. The incoming truck driver can then be directed to the most efficient drop-off location. Items are unloaded faster with the yard being managed in the most resourceful manner, maximizing an organization’s utilization of the asset and order fulfillment capabilities.”

Theory vs. reality It’s lovely in theory, and with ever-larger DCs and third-party logistics operations with fantastic volumes of vehicles arriving and departing each day, the ability to track and monitor their whereabouts with pinpoint accuracy would indeed make operations smoother and less costly. However, reality looks a little different. For James Noseworthy, a ‘busy’ yard means keeping track of between 1,200 and 1,800 trailers at any one time at one of the biggest DCs in North America. He is a senior process improvement leader with 3PL ES3, and it’s been his job to make sure that all those trailers are where they need to be when they need to be there. He took over the systems at the DC in York, Pennsylvania when his company acquired it. They were using RFID for real-time location of trailers, in a process where big tags were affixed to the incoming boxes. The problem, Noseworthy says, is the variety of equipment and the nature of the tags themselves. The tags don’t always fit in the right place and end up obscured, or they fail, or their range dwindles as the batteries lose power. Ultimately the result was the accuracy of locating the trailers was low. “You don’t know where they are in the yard and it could take hours to find them,” he says. “Somewhere in the world RFID seems to be working very well, but when you put it on a sixty-foot metal box, I just don’t see it at this point being reliable enough to be the only thing out in the yard,” Noseworthy says. Likewise for Jaret Willis, a project manager with Penske Logistics in Ontario, the use of RFID in the yard has not increased efficiency. In fact, he notes that in his experience, RFID has increased costs, not only through the direct expense of the technology itself (tags and readers) but also in the time needed to manage tags as well as inefficiencies created when drivers believe they can leave a trailer anywhere since it’s got a tag on it and they think it can be instantly found. www.mmdonline.com | November/December 2016

“Drivers tend to park wherever is most convenient, rather than follow the instruction given to them,” he says. Both managers believe that RFID is just not accurate enough in this context to reliably keep track of containers in the yard.

Technology can’t fix disorganization It’s a point that Greg Braun finds interesting. His company, C3 Solutions, produces yard management solutions that can integrate with RFID—or not—depending on a client’s specifications. “No one can deliver 100 percent accuracy,” he says. “And without that you need a backup plan, an alternative in case the technology fails.” It’s unfortunate, he notes, that an RFID solution is brought in to help—to automate manual processes—but in reality the problem is simply disorganization. If you apply general business logic to the problem of yard management, “that initial problem you had goes away substantially,” Braun adds. It takes smart process planning. Noseworthy took seven months to rewrite the processes for his yard, seeing what worked and what didn’t, fine tuning the orchestration of yard jockeys, pad locations, improving lighting, and training staff. In the end, just by improving processes, he doubled moves in the yard from four per hour to almost eight. “Any errors or exceptions that do occur are far easier to identify and resolve with strong process and good focus on compliance and individual accountability, rather than relying on the false sense of security created by tag tracking systems,” Willis says.

A single source of truth Thanks to Wal-Mart’s early adoption, RFID was clearly over-hyped in the early 2000s. Its great promise of streamlining inventory control across the supply chain has just not materialized as expected. Demand for the technology is growing, however, and as costs decline there will no doubt be increasing uptake. Additional sectors will find ways to make use of what can be an astonishingly useful tool. In 2015, the total RFID market was worth $10.1 billion, up from $9.5 billion in 2014 and $8.8 billion in 2013, according to IDTechEx. In total, IDTechEx expected that 8.9 billion tags would be sold in 2015 and 10.4 billion in 2016. It’s expected to reach $13.2 billion in 2020, with most of that growth is from passive UHF RFID (the cheap tags used for fashion). Oracle analyst Melanie Massel told MM&D back in 2005, “In the long term, RFID turns the supply chain into a powerful, demanddriven fulfillment system that links customer behaviour back into inventory planning, logistics and even product design.” E-commerce operations are increasingly adopting the technology, particularly in the apparel industry, as the Zara example demonstrates. Online shopping, with its fast pace, immediate deliveries and pinpoint-accurate inventory information offers plenty of ways to utilize for the technology. The true test, as with any technology, is the ability to use it to make a profit. As Massel said 11 years ago: “The value of an RFID system will only be realized by an organization if it can use the information RFID provides to gain competitive advantage—through performing analytics on relevant data, streamlining and integrating RFID information into business processes and empowering decision makers with information to make timely and profitable decisions from a quality, single point of truth.” MM&D 19

Loading dock safety Securing food products can be just as important as worker safety at the dock door By Walt Swietlik

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he most important aspect of shipping and receiving operations at any food facility is maintaining the integrity of the food being handled. This boils down to two critical challenges. First is maintaining a clean dock devoid of contaminants. Second is securing the supply chain by mitigating the opportunities for theft or tampering of product. While training staff in proper food safety protocols is an essential part of the equation, there are several new dock enhancements that can also help.

Be mindful of FSMA Aspects of the Food Safety Modernization Act (FSMA) regulations that were recently made into law in the United States, also affect how Canadian food facilities can go about their business. For starters, Canadian food suppliers will need to adhere to US FDA standards through the Foreign Suppliers Verification Rule. If a US facility cannot verify FDA-sanctioned practices were followed by a Canadian facility, it cannot accept food from it. FSMA regulations notwithstanding, all Canadian facilities should follow best practices when it comes to cleanliness and security.

Contaminant-free zone It isn’t always easy to maintain a clean loading dock. One of the best ways to do it is to minimize how many contaminants sneak in around the perimeter of the dock door. A loading dock seal or shelter creates an environmental barrier between the back end of the semi-trailer and the perimeter of the dock opening. Seals and shelters help keep wind, rain, snow, dust, bugs and other contaminants outside the building. Some of the newest dock shelters have been specifically designed with the food industry in mind by complementing vertical storing dock levelers, which allow trailer doors to be opened inside the building, as part of a security-enhancing “drive-through” application. Special design features ensure tight sealing against trailer sides, across the full width of the trailer top and at the corners, without

interfering with trailer door movements after the trailer has been locked to the dock.

The “Gold Standard” Drive-through dock configurations utilizing vertical-storing levelers are considered the gold standard for maintaining cold chain integrity, environmental control and security. This is because security seals and trailer doors can be opened and closed inside the loading dock, eliminating exposure to the outside environment or thieves. Vertical levelers also have maintenance advantages. Unlike pit-style levelers, vertical levelers store up and out of the way, making it easier to clean and wash down the floor. Moreover, vertical levelers (when in the stored position) allow the dock door to close directly onto the pit floor for a tight seal.

Prevent theft and tampering Vehicle restraints are usually thought of as dock safety equipment. But they also play a role in reducing cargo theft and tampering. Many of them are now automatic, using a rotating hook to secure a trailer by its rear impact guard (RIG) to the loading dock. However, intermodal containers are often transported on specialized chassis that have an obstructed RIG, making it nearly impossible for the locking mechanism to fully engage with them. As intermodal traffic continues to increase, it is important for facilities to consider advanced restraints that use “shadow” hook technology. It provides an additional pivot point capable of securing trailer chassis with obstructed RIGs. Some automatic restraints also have a control panel that can be integrated into building management or security systems, providing another level of protection against external tampering. The most advanced restraints will actually re-fire if there is tampering or the trailer attempts to pull away when in the locked position. MM&D Walt Swietlik is director of customer relations and sales support for Rite-Hite, a manufacturer of loading dock equipment, industrial doors, safety barriers and HVLS industrial fans.

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IN

defence OF SIMPLICITY

HCL Logistics uses a holistic approach to warehouse automation to achieve significant efficiencies and scale up to meet its customers’ needs By MM&D Staff

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upplying defence contractors with critical equipment and parts has been the challenge for HCL Logistics, Inc, of London, Ontario over the last eight years. Handling about 26,000 SKUs that include everything from tiny washers, to 20-foot-long steel sheets, to complete engines, the company supplies key components its customers use to manufacture land-based military vehicles used by Canadian and allied forces around the world. In 2012, HCL Logistics found itself in need of a more efficient and streamlined warehouse operation. Intent on improving flexibility, efficiency, and accuracy in its 500,000 square feet of warehouse space, the company shopped around for an automated solution that would help it to achieve those goals. “We have one major customer in the defence industry that we service, and we had recently won a larger contract that was previously being handled by a different provider,” says Tim Van Holst, president. “We were using conventional racking systems in our warehouse, and felt that new equipment like narrow-aisle racking and vertical lift modules would help us get to the ‘next level’ with our contracts.”

Searching for a better way Since inception, HCL Logistics has been providing warehousing, transportation, and just-in-time delivery in a secure defence environment. Like many growing companies, HCL Logistics reached a point where its existing warehouse setup was no longer meeting its needs. But instead of a piecemeal approach to solving the problem, using a mix of old and new, 22

the company went in search of a strategic, end-to-end material handling solution. Van Holst says the initiative was driven by the need for better picking efficiency and improved material and people flow on the warehouse floor. “With the way the warehouse was laid out, we were moving large products (i.e., vehicle engines) long distances for staging and shipping,” he says. The company also wanted to reduce the number of forklifts on the warehouse floor, improve picking accuracy, and create a more streamlined process overall. As a starting point, they considered narrowaisle racking systems that would support the company’s efficiency goals. Working with Brian Rodway of Johnston Equipment, the company also explored material handling and AS/RS options on the market. During the selection process, Van Holst says the company also had its eye on maximizing its current warehouse space, better utilizing

Above: The VLMs operate on the “goods to person” model. Right: The radio shuttle is located about 30 feet from the receiving area.

the facility’s vertical space, and installing equipment that could be used to batch multiple orders for different customers. “We started by integrating narrow-aisle racking and that led to our testing vertical lift modules and then moving to radio shuttles,” he says. “We wanted a complete solution that would integrate these various components into a more streamlined setup.”

The right solution HCL Logistics pilot tested two Kardex Remstar Shuttle XP vertical lift modules (VLMs). Automated high-bay warehousing systems with modular designs that operate on the “goods to person” principle, the VLMs handled the kitting portion of a specific customer’s contract. MM&D | November/December 2016

“Our radio shuttle is positioned about 30 feet away from our receiving area,” Van Holst notes. “Our larger products now occupy a four-foot by four-foot skid, which equates to about a 50-percent space savings for the area where we store our larger materials.”

More efficient handling

Right: HCL employees are now working in a cleaner, safer environment. Below: Once the VLM trial was over, HCL went from two of the shuttle units to 21.

“Once the two units were installed, we used a ‘wait and see’ strategy to see how they would work for us,” says Van Holst, who began to notice positive results soon after installation. Automating a manual picking environment, for example, has made employees 10 times more efficient, while data entry control is nearly perfect. “Based on the efficiencies and the space savings that we gained [in the trial], we grew the system from two units to 21 VLMs,” Van Holst says. Combined with a high-density pallet system and narrow-aisle racking, the setup also cut HCL Logistics’s required warehouse space down by about 100,000 square feet. In one section of the facility, for example, the company saved about 30,000 square feet simply by installing the VLMs that now take up just 1,000 square feet of space. To round out its end-to-end solution, HCL Logistics also installed a radio shuttle system that it uses to move large items that once required much navigation and logistical coordination.

When shopping around for a holistic warehouse solution four years ago, HCL Logistics wanted a platform that would help better manage the small parts it was handling on a day-to-day basis across multiple customers. More specifically, the company wanted to be able to take parts that had to be kept separate while on the shelves and batch them during the picking process. The company found what it was looking for in Kardex Remstar’s Power Pick Global inventory management software client handling module. “With fixed, static shelving, you basically dedicate aisles to different customers and then move through the various zones to pick orders—even if the armored vehicle parts are the same across those zones,” Johnston Equipment’s Rodway explains. “With client handling, HCL Logistics was able to keep each customer’s inventory separate, but not physically separate. That allows them to get the benefits of storage density in their VLMs.” This capability also helps HCL Logistics expand its customers’ material profiles without the need for additional, physical shelving space. Instead, it can simply define more trays for a specific customer, and within a certain tower. “It gives them flexibility and agility to grow,” says Rodway, “and makes it much easier to serve multiple customers.”

Measuring the results From its investment in an end-to-end automated warehousing solution, HCL Logistics has gained a state-of-the-art warehouse environment that includes vertical space-saving storage systems, modern condensed racking systems, wireless handheld scanners, and a real-time inventory management system. “Our goals of flexibility, efficiency, and accuracy have been met and exceeded, and we are now well positioned for growth and expansion into new markets,” says Van Holst. HCL Logistics has also exceeded its picking

www.mmdonline.com | November/December 2016

efficiency goals and is now fulfilling orders much faster than it once did. “We’ve seen a 15 percent efficiency improvement as a result of the VLMs and the wire guidance system that’s incorporated into them,” Van Holst notes. “For large products, the radio shuttle system has doubled our efficiency in terms of shortening up the amount of driving and material-handling time.” Other key gains include inventory accuracy improvement—from the previous 98 percent to the current 99.5 percent. Cumulatively, Van Holst estimates that the solution could potentially save the company $3 million a year on adjustments and inventory alone. “It’s not just about the picks, puts, and inventory accuracy,” says Van Holst. “Cycle counts and physical inventory are also much faster now.” Finally, he says HCL Logistics’ employees are now working in a safer, cleaner, more ergonomic environment and it’s a benefit that can’t be overstated. “When you’re storing this volume of parts for so long, it’s easy for them to gather dust and for labels to become unreadable,” says Van Holst. “With our new system, the overall cleanliness of the facility has definitely improved.”

Keeping it simple As he looks around HCL Logistics’s warehouse today, Van Holst is pleased to see that all parts and equipment have their designated “spaces” and that the flow of material through the facility has become more streamlined, organized, and predictable. To other companies considering a similar, end-to-end approach, he says, “Keep it simple at first and test out the strategy; then grow from there.” In sticking to this “keep it simple” philosophy, HCL Logistics was also careful not to overcomplicate its new, end-to-end warehouse management strategy. Within its 21 VLMs, for example, it stuck to just a few different bin sizes in order to keep the process manageable—and to make sure it wasn’t wasting any tray space. “We didn’t want our operators looking through 120 different bins to try and figure out where to put something,” says Van Holst. “Even though we’re dealing with complex, state-ofthe-art AS/RS machines, when it comes to the setup and binning, we kept it as simple as possible and it has paid off for us.” MM&D 23

WMS as change agent

How software can transform the warehouse from cost centre to profit centre

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By Eric Allais

Eric Allais, president and CEO of Washingtonbased PathGuide Technologies, Inc, has over 30 years of experience in product management, sector analysis and marketing in the automated data collection industry, including warehouse management practices in wholesale distribution. 24

ow is your warehouse or distribution centre perceived within your organization? Is it seen as a costly overhead, a drag on the P&L statement, a necessary evil? There are many parts of a distribution operation that do not make an obvious revenue contribution. Let’s put this into the correct perspective. There’s certainly an investment in employees to ensure that a warehouse runs efficiently. And of course, there are physical space challenges that come with a growing, changing business. Introducing a suitable Warehouse Management System (WMS) can help drive the productivity of a given warehouse and provide managers with muchneeded visibility about what’s happening in their operation. With the right leadership, warehouse throughput (eg lines shipped per person) can greatly increase, leading to improved profitability. As in most things today, technology is driving a great deal of change. Choosing and deploying the right technology in the right places can contribute just as much to the success of a company as recruiting the right people. With warehouse operations, there is enormous pressure to improve productivity and meet or exceed customer expectations. Investment in IT solutions is also trending upward. So how can a WMS help? Implementing a WMS most often results in streamlining processes, finding efficiencies and sharply reducing shipping errors. Most distributors are seeing new opportunities thanks to e-commerce, but it goes beyond just finding new ways to sell. The ability to tightly manage inventory needs to start well before the product hits the receiving dock and must continue until the customer gets their order.

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Receiving, storage and inventory management.

One of the key features of any effective WMS is its ability to track and manage resources within the warehouse. If you’ve ever done a manual cycle count using pen, paper and clipboards, then you’ll appreciate what a time-consuming, disruptive and non-value-add task it is. Having to shut a facility for a cycle count seems ludicrous, but it is still a fact of life for many warehouses. The lingering problem with manual cycle counts is that the numbers aren’t always reliable, leading to potentially inflated values, possible write-downs or the accumulation of unnecessary stock. Today there is a growing awareness that a WMS can actually help warehouse employees cycle count more efficiently and systematically. It is possible to ‘interleave’ cycle counts by combining them with other day-to-day activities in the warehouse, such as slotting or picking. An employee may simply be prompted by a handheld terminal to confirm the number of items in a certain bin, which then allows the WMS to validate or update its figures for that SKU. To give you an example, one of our newer clients, PaulB Wholesale, uses a cycle-count module for inventory control. At last count their warehouse had an inventory error rate of just 0.06 percent in 2016, an almost tenfold improvement since implementing the module. Speaking of slotting and picking, these processes are becoming more automated and flexible. And that’s an important consideration, because up to 70 percent of a warehouse’s operating costs are spent on order picking and replenishment tasks alone, according to a recent Zebra Technologies white paper. Ensuring that employees have the right tools for the job goes a long way to making teams faster and better suited to the needs of that specific warehouse environment and its inventory. Helping employees work MM&D | November/December 2016

Left: Cycle count operations can be interleaved with day-to-day picking and replenishment activities. Below: Employee training can often be reduced from weeks to days through the use of WMS technologies.

smarter and more efficiently sets up the company to absorb temporary spikes in volume, and allows each employee to generate more revenue for the business.

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Better shipping and outbound processes

As items get ready for shipping to a customer, a WMS offers many advanced features that can greatly improve the packing, staging and loading processes. The best WMS solutions integrate with ERP systems, providing greater synergies between the warehouse, the yard and the transportation links of the supply chain. As an example, the WMS can help reduce transportation costs by automating the choice of carrier based on the item being sent, its shipping address and other available services from the carrier. This can be a relief for warehouses that are already experiencing huge growth in the number of smaller, individual parcels thanks to the popularity of direct-to-customer e-commerce. The WMS will help ensure that the shipping errors are minimized to protect their customer service reputation.

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Streamlining inbound transportation

A whiteboard and an Excel spreadsheet are useful for a lot of things, but they aren’t great tools when it comes to managing inbound transportation. When you consider how many separate moving parts there are in a warehouse, it is little wonder that schedules are constantly being adjusted. That’s why streamlining warehouse operations starts with the ability to properly manage and direct the flow of inventory in receiving. This requires intelligent inbound transportation management tools that work seamlessly with your WMS, allowing for easy scheduling and rescheduling deliveries, and the assignment of the right people at the right bays to unload quickly and efficiently. Putting a WMS in charge of inbound transportation www.mmdonline.com | November/December 2016

allows managers to track the performance of their various shipping companies. Does a particular vendor arrive habitually late? Is inventory often damaged when it arrives? This information not only helps a warehouse save money, it can also help it optimize the use of material handling equipment as well as staffing when and where employees are needed.

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Reducing training time while increasing labour visibility

As we’ve seen, a WMS makes a lot of sense for inventory management, shipping and inbound transportation, but it can also contribute to faster employee training times and provide a window into employee performance. In fact, it is common for companies to reduce training time for new employees from two weeks of supervision down to only one day of training using RF scanners. This is especially beneficial for warehouses with a high turnover of employees due to seasonality. Workers can easily be trained to cover multiple tasks within the warehouse, and management can reduce costs by not having employees idling. This ties directly to the final benefit.

The result: exceptional customer satisfaction At the end of the day, the customer is the one paying the bills. Having a well-run warehouse that facilitates delivery of the right items to the right place, on time, goes a long way to ensuring happy customers and repeat business. As the demand for personalized orders through ecommerce continues to grow, warehouses are naturally being forced to carry a larger number of SKUs, which in turn puts pressure on operations to increase space efficiency and fulfillment accuracy. The visibility and accountability offered by a WMS is the only surefire way to keep all of the trains running on time, and making a profit. MM&D 25

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Ryder and the Ryder logo are registered trademarks of Ryder System, Inc. Copyright ©2016 Ryder System, Inc.

Selecting a storage solution Six ways to reduce the risks Consult

By David Baturin

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Design & Engineer vital to partner with an organization very decision made has an Project Management element of risk. While the that makes large investments in nature of some choices means design and engineering infrastructhey will have more far-reachture. This storage partner will be able TOTAL ing consequences than others, to both navigate legislation while ACCOUNTABILITY Standards risk is always present to some providing the optimum storage soluLeadership degree. tion, allowing you to focus on your Your material handling system core business. Manufacture & Distribution is an integral part of your business, and your choice of a strategic MANUFACTURE AND DISTRIBUTION – supply partner to provide one can Partnering with an organization that both Service & Support impact your customers and reputation designs and manufactures the product ensures either positively or negatively. accountability and minimizes risk. The vendor So how can we mitigate the risks associated will have direct communication throughout the manuwith selecting the right storage solutions partner? facturing process with the goal of providing quality products, What attributes should be considered? services and value. A focus on total accountability will allow you to choose a partner that can take full responsibility for the products and services they SERVICE & SUPPORT – A customer-focused storage soluoffer. Providing the right solution requires precision skills and tions partner will provide top-quality service from a project’s teamwork to meet your specific requirements, as outlined in the design concept, to manufacture, project management, installation diagram above. and finally, follow-up locally, nationally and beyond. A knowledgeLet’s explore in further detail the six key areas in delivering a suc- able and experienced sales team that provides service by investing cessful solution. in design, engineering and manufacturing support will be responsive to your needs throughout the process. CONSULT – It is the responsibility of the supplier to consult with you and your team in order to understand your business, STANDARDS LEADERSHIP – Is the supplier a member of challenges in storage and material handling, and current needs as the RMI (Rack Manufacturer’s Institute)? More importantly, well as what they want to achieve moving forward. The chosen are the products offered R–Mark Certified? This designation is given partner will ask strategic questions that will help you think outside under license to those organizations that have met specific requirethe box to discover the blend of storage systems that will suit the ments. Selecting a partner who has these designations provides unique needs of your business. assurance of product quality.

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DESIGN AND ENGINEER – A solid foundation of knowledge

and skills are essential in order to manage the many facets of storage design. To begin with there are a myriad of choices facing you regarding storage design type, including selective, double-deep, drive-in, push-back, pallet-flow, carton-flow, pick modules, shelving, and automated systems, to name a few. Designing the right storage solution focuses on warehouse space optimization to increase efficiencies—“Maximizing the Cube”. This will often require a mix of different storage types, so it is necessary to select a partner with the capabilities to cover all project types and sizes from small to large and complex. Legislation governs the design and engineering of storage systems, beginning with the tedious and often challenging process of obtaining a building permit. Planning must be done with a clear understanding of the regulations that govern racking structures, including egress, seismic factors, fire safety and building codes. Given the sheer number and complexity of these regulations, it is www.mmdonline.com | November/December 2016

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PROJECT MANAGEMENT – A good project management

team must possess the expertise to manage the most complex projects, ensuring you receive what was promised. The right partner will consult with you to define project goals and objectives and then plan the resources required for the installation and successful completion of the project. Most importantly, the project management team will work closely with your team throughout to ensure your satisfaction. The best warehouse solutions partner will possess the infrastructure that offers total accountability for the products and services provided. There will be no “broken links” in the chain. Choosing a partner that is strong in all six of these categories will mitigate risk and set the foundation for a solution that best meets your requirements. MM&D David Baturin is Sales Manager - Ontario General Sales at Oakville, Ontario-based Konstant.

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TACKLING

returns WITH TECHNOLOGY

Paul Busch leads business development and sales in Canada for B-Stock Solutions, a technology-enabled service company powering the largest network of private-label B2B liquidation marketplaces. 28

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holiday hangover, buyer’s remorse or impulse buying gone bad—no matter what you call it, around 10 to 15 percent of merchandise, once purchased/gifted/unwrapped, will be heading back to Canadian retailers and manufacturers this holiday season. Holiday sales can account for as much as 30 percent of total annual revenue for most retailers. But on the heels of the biggest shopping season of the year—which runs from the end of October through Boxing Day— comes a rush of returned merchandise that will end up significantly cutting into the bottom line (while simultaneously putting a damper on your holiday cheer). This season, in particular, will bring higher return rates as more consumers than ever are expected to shop online (e-commerce return rates are almost double that of bricks and mortar stores). Heightened consumer expectations of relaxed cross-channel returned policies and gift-recipient dislike will also play a role in the reason for return. Though lots of it will be in functionally and cosmetically perfect condition, much of the product won’t be put back on store or virtual shelves due to the high cost of restocking or rerouting individual items. In most cases it’s more efficient to mark the inventory for liquidation and sell it into the secondary market. Having a proper liquidation solution in place, especially one that recoups top dollar for the merchandise is crucial. So, how can an organization update its liquidation program in order to achieve maximum recovery for returns and other overstock merchandise slated for liquidation (post holiday and all year round)? The answer is really quite simple (and likely involves something you are already doing in your forward supply chain). By applying technology and data-driven meth-

ods to your liquidation program, you can increase recovery, in some cases by double digits.

Ditching the middleman broker Let’s first take a look at why conventional methods of dealing with customer returns and excess inventory are—like the inventory itself—obsolete. Consider this: Z If you’ve historically sold your inventory to one or two brokers, your recovery value will remain low because brokers are experts at negotiating prices down in order to maximize their own profits. They make money by buying at lower prices, not by selling at higher prices. Z Selling directly to a broker can mean a lack of control over who is eventually buying your inventory and how your brand enters the secondary market. Z Time spent negotiating deals for every lot of merchandise you have to sell (phone, fax, email), takes you away from core, strategic business activities.

Applying technology to liquidation Over the past few years a shift has taken place in how organizations manage their returned and overstock inventory. Many are bypassing layers of middlemen and incorporating technology-based liquidation programs into their overall business strategy. This type of solution allows thousands of buyers to compete for the inventory, pushing prices up (versus a broker negotiating them down). Most likely there is already a robust secondary market and buyer base for your product(s). In every major city around the globe there are businesses that purchase excess and returned inventory for resale. The secret to success is the ability to gain access to this buyer base. A web-based solution is one way to make this happen. MM&D | November/December 2016

Photo: ia_64, iStockphoto.com

By Paul Busch

maximizing recovery. By segmenting buyers by product category, condition code and ability to participate (financial ability, geographic location, etc.) you can properly drive demand. Whether you handle it in-house or via a solutions provider, developing effective, robust demand generation campaigns can increase recovery significantly.

Sustain bidder competition More bidder competition, among the right buyers, means higher prices every time, so continually investing in attracting new buyers through targeted demand generation programs is critical. Consider this: there is up to a 300 percent increase in recovery rates as competition grows from under five bidders to more than 15 bidders. This could entail launching an online auction liquidation marketplace that can be customized, integrated, and marketed based on your unique inventory needs, or leveraging an established B2B liquidation marketplace. Either way, you are automating the process, ensuring a faster sales cycle and proprietary market intelligence in the form of real data on market prices. What’s more, you can recover substantially more with less work, which will positively impact your bottom line. Many of the world’s top retailers, including the world’s largest retailer and e-retailer, along with Canada’s biggest appliance manufacturer, are using a web-based, automated auction approach and increasing recovery for their returned and excess merchandise by 30 to 80 percent and sometimes much more.

Solutions for success Keep in mind, having the technology and/or leveraging the web-based solution is the first step, but to deliver optimal results requires specific skills and expertise. With liquidation auctions, knowing how to assemble the inventory as well as how to target, drive and sustain the right buyers will substantially increase recovery. Furthermore you should be prepared to analyze the data the platform generates and know how to react to those results. Data-driven strategies, when applied to an online liquidation marketplace can often increase recovery by 50 percent and sometimes much more. With that, let’s take look at how to build a formula for success through bidder acquisition and retention, sustained bidder competition, and inventory optimization.

Find the right buyers Having the right buyers is a critical first step to www.mmdonline.com | November/December 2016

Generate repeat buyers Repeat buyers create a foundation on which to build a successful marketplace and can result in a triple digit increase in recovery. There are many operational elements that contribute to success here including: building customer loyalty programs that reward repeat purchases or marketing campaigns that target buyers based on their past bidding and buying history.

Optimize your inventory How auction lots are assembled is also extremely important to maximizing recovery numbers. What works best here is unique to every situation, and there are many variables to be tweaked and tested. This might include segmenting by product type, original MSRP per item, overall lot size and even taking the time of year into consideration (eg: recovery on your cold-weather holiday returns will be higher in the winter/fall versus summer). It can take a while to figure out what optimal configurations look like, but the best-optimized lots can have a double-digit impact on recovery rate.

Many of the world’s top retailers, are using a web-based, automated auction approach and increasing recovery for their returned and excess merchandise.

Many happy returns In today’s return-happy landscape, it literally pays to rethink whatever program(s) you have in place for the handling and remarketing of this merchandise—after December 26 and all year long. Every dollar increase in recovery value, or reduction in expense, equals another dollar of profit. By facing returned and excess merchandise head on and applying fresh thinking to the liquidation process, it can become a strategic asset rather than a dreaded afterthought. MM&D 29

LEARNING CURVE

Passing the plateau How successful entrepreneurs keep on innovating

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rofessional development is critical for business owners who tend to get bogged down in the dayto-day and need re-invigorating to spur them to improve the organizations they run. I count myself among such owners. As a result, I make sure to attend events as often as I can, and to read and learn from the best. At a TEC Canada event last month, I gained knowledge that was both powerful and daunting. Sometimes significant negative events can shape us into much more powerful human beings than if we had won absolutely everything, every time. As Bill Gates said, success is a lousy teacher. Even the most ambitious and successful business people can plateau after reaching great heights, then requiring a reboot. My recent boost came from one of Richard Branson’s advisors, Mark Thompson, who runs a highly successful venture capital firm. Thompson has a particular interest in business leaders who take risks and don’t settle, follow trends or copy others. He believes in those who use their creative energy to differentiate themselves from the mainstream. You could certainly argue that his colleagues, including Charles Schwab, Steve Jobs and Branson, represent the type of business innovators well known for breaking from the status quo. Thompson was raised by a mom with polio and had to help care for a brother with developmental delay and a young sister. With such high stakes—meeting and managing the living costs and household requirements of his family and ensuring its survival as a preteen—how could he not at least learn the importance of good planning and organization? Thompson eventually got into Stanford University, where he spent time with classmate Charles Schwab. He would eventually become Schwab’s chief of staff. Thompson’s talk focused on the characteristics and personality traits that top leaders in emerging businesses share. These disruptors, Thompson explained, often stay ahead of the curve and create their own rules because they are not satisfied to simply adapt to the ebbs and flows of consumer preferences. They map out ideas, working to predict people’s known desires and expectations. Virgin Airlines, Uber, Airbnb, Netflix, Amazon and Alibaba are examples of companies creating solutions to problems the known market leaders in travel, taxi, hotels, TV networks and retailers failed to see. We see disruptors of supply chain functions galvanizing with great momentum, such as www.mmdonline.com | November/December 2016

the Uber/Otto self-driving truck, UberRush Shipments, OpenMarket Mobile engagement for logistics and Transportation and Convoy, an open market freight brokerage funded by Amazon’s Jeff Bezos. In his book, Success Built to Last, Thompson lists five factors that differentiate successful entrepreneurs: Paranoia, Pivot, People, Position and Performance. Leaders like Larry Page, Elon Musk, and Richard Branson use their paranoia instinct to be vigilant in their market leadership. They use it to tirelessly seek out new ideas, solutions, start-ups and unarticulated needs to capitalize on. Every business aims to triumph in its market by staying ahead of the competition through innovation. Nimble, creative business leaders share an ability to pivot their business strategy and switch direction briskly and seamlessly. These traits can be found in companies that generate technically advanced individuals able to convert ideas into marketable products and services. The best companies know how to create highly desirable work environments and cultures for the best people. Google and Virgin attract highly skilled professionals who are driven to develop new things. They are keenly aware of the risks and rewards of launching disruptive emerging technologies like Fitbit and Airbnb. Finally, the Internet of things is clearly the ultimate position response to the growing expectation and demand for convenience and connectivity. Performance is perhaps most self-evident. Many of the leading inventions we now take for granted came at the cost of many failed attempts. Thompson argues the higher the risk ratio, the better the chance for success. Einstein said for every problem he was trying to solve, 55 minutes out of an hour would be spent thinking about strategies, conducting experiments or finding ways to understand the problem; only the last five minutes were generally used to conclude the findings. But you don’t have to be the one who risks the failures, like Richard Branson and Larry Page. They are known for waiting and watching to see when established businesses could benefit from their intervention, positioning themselves to offer new ideas and suggest markets others risk entering. We can all learn something from these leaders, applying their lessons to our own careers. If we don’t, we risk getting stranded on that dreaded plateau with achievements in hand but nowhere left to go. MM&D

Tracy Clayson

Tracy Clayson is managing partner, business development of Mississauga, Ontario-based In Transit Personnel. tracy@in-transit.com 31

MAXIMIZE IT

Your firm’s most important data Using it to differentiate products and services

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Photo: fandijki, iStockphoto.com

s the landscape within the manufacturing sector faces even more competition, it is evident that companies can no longer afford to compete on price alone. Newcomers with little overhead can easily duplicate many products and offer them at prices established companies can’t come close to matching. Pricing is no longer a sustainable competitive advantage and will only significantly erode the profit margins over the long term.

So how can a company Engage your compete? There is one thing you have that other customers companies do not— on topics unique information on important the customers you deal to them and with. Companies usually have customer feedback, you have customer transaction created a data and other distinctive data that nobody else differentiator has. This data is gold! Organizations can use this customer data to gather insights and develop a segmentation strategy that provides their customers with a unique, relevant experience that talks to the areas important to the customer. Why talk to customers exclusively about capacity when their real interest lies with the safety of your www.mmdonline.com | November/December 2016

product? Engage your customers on topics important to them and you have created a differentiator. According to Gartner, in 2016 89 percent of companies expect to compete primarily on the basis of customer experience. IT leaders are in a great position to exploit this data since they see where all the customer data touch points are in the organization and the various channels. By combining these data repositories across the company, it is possible to obtain a full spectrum view of each customer; to establish a profile or segment that can be used by the various business units to put the company in a prime position to utilize the data effectively and drive business growth. For example, many companies gather customer feedback on how they are doing but fail to share that with the sales and marketing groups to arm them with key information levers the sales representative can use when visiting with the customer next—to show the company listens and/or to possibly create up-sell or cross-sell opportunities. IT leaders can also help the organization by using business intelligence tools and analytics to identify customer hurdles that may be present, and assisting the organization in addressing them so the customer has no obstacles standing in the way of making a purchase or resolving any issues. Looking at the different customer channel behaviors can also help uncover the impact of targeted marketing campaigns on various customer segments, allowing marketing to better optimize the strategic mix between physical and digital advertising. In the end, it is about using what tools you can to help increase the company-customer bond that extends well beyond who offers the best price. Fulfilling the expectations of your customer goes far beyond selling to them for the best price. It is about what else you can provide that helps differentiate you from your competition and it is about how well you can establish a meaningful and relevant rapport with your customer base. Using your customer data can help bring multiple strategies to light on how to do this, especially when you look across all of the data channels. And the best part is, once you establish that customer bond, that customer is usually yours for the long term despite what might be the higher price they pay. And isn’t that what it’s all about? MM&D

Kevin Squires

With over 28 years of experience, Kevin is Vice President, Business Technology for the Econo-Rack Group of companies (Konstant, EconoRack, Technirack.) 33

SURFACE TRANSPORTATION 2017

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#sts17

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LEADING EDGE

Advice or confirmation? The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.” – LEO TOLSTOY

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ecently a long-time friend asked me for advice about a business decision he was contemplating. He told me he had spent a significant amount of time working on an idea to grow his already successful business. It felt good to be asked my opinion, so I studied the material he shared with me and offered my honest feedback. To my surprise, he didn’t react as I expected. After asking for my insights and suggestions, he actually pushed back, questioning my ideas and pretty much knocking down my suggestions. Why was he being defensive? Why was he not accepting the honest opinion he asked for? Over lunch, he said to me, rather sheepishly, “I told myself I wanted your opinion, Ross, but I realize now that what I was looking for was confirmation that my business idea was brilliant. What I wanted to hear was absolute agreement that my idea was a finished product, ready to launch. After all, I had put a lot of time, thought and effort into this idea already.” I smiled. Yes, there’s a big difference between seeking confirmation instead of advice. This is called confirmation bias. It’s the tendency to search for, interpret and favour information in a way that confirms our pre-existing beliefs, while giving disproportionately less consideration to alternative possibilities. It’s a normal human tendency that affects even experienced professionals like scientists and researchers. Many people probably experienced confirmation bias as it relates to the recent US election. They might have had a tendency to seek out news stories and opinion pieces that reaffirm the opinions they already held about one candidate or the other. Or, look at a contentious issue like gun control. If a hypothetical person, Bob, supports gun control, he might be more likely to look for stories in the TV news or editorials in the newspaper that reaffirm the need for limitations on gun ownership. And when Bob hears stories about shootings in the news, he interprets them www.mmdonline.com | November/December 2016

in a way that supports his already existing beliefs. Suzy, on the other hand, opposes gun control. So she seeks out news sources that are aligned with her longheld position. When she encounters news items about shootings, she interprets them in a way that supports her point of view. This is a simple, but effective, example. As the good book says, “As iron sharpens iron, so one man sharpens another.” This is easier said than done, even though we know in our hearts that it’s the very crux of improving an idea, plan or business venture. In the world of business, when we seek genuine advice, it usually means we are not quite sure of the course we are charting. Therefore, we should seriously consider the feedback we receive when we ask for it from someone we trust. Sometimes we have to swallow our pride and open our minds a little wider to accomplish this. My friend admitted to me that he is rather impatient. And he really felt that his idea was spot on. He expected me to agree 100 percent and not come back with ideas for adjustments and improvements. Fortunately he was able to come around and take another look at my advice. At that point he told me he “realized the error” of his ways, and then went back—mostly happily—to the drawing board. Since then, he has told me he’s grateful I was willing to share my thoughts honestly with him. This experience made me reflect on my own confirmation biases. Have I ever looked for confirmation when I was ostensibly asking for solid advice? Sure. Like most busy people with many irons in the fire I like to be efficient and get things done as quickly as possible. There is merit in this. However, there’s also a time and place to slow down and open your mind to receive input regardless of how it makes you feel, or what it does to your schedule. In business and in life, we’re better off if we can recognize our own confirmation bias, and take seriously the advice we seek. MM&D

Ross Reimer

Ross Reimer has over 30 years of experience in transportation/ supply chain. For the last 15 years he has been President of Reimer Associates, a recruitment firm within supply chain. rreimer@reimer.ca 35

Print is Not Dead... In Fact

BORN: Germany, 1439 DIED: Circa 2000 ... or Did It?

It’s Growing

Consider The Following... • 2015 reversed a decade of decline, with a projected 0.2% YOY growth. (FIPP Trends Report)

‘‘

Print is not hanging on by its fingernails, IT’S GROWING. FIPP World Magazine Trends 2014-2015 Report

• Printed UK magazine advertising delivered the highest ROI of all media channels, 11% higher than TV and 22% higher than online. (PPA Magonomics)

• In the US alone, 234 new titles made their debut, up 21% from 2013. (Guide to New Magazines, USA) • FOLIO Magazine’s annual survey of US city and regional magazines said 2015 featured more new launches than any year since 2009.

Publications Serving Niche Markets (like B2B) Provide Unique Content Readers Cannot Get Anywhere Else.* * Skip Zimbalist, chairman and CEO of Active Interest Media (AIM), which publishes titles like Backpacker, Black Belt, Arts & Crafts Homes, Better Nutrition, Ski Magazine, Vegetarian Times, Power & Motor Yacht, and Yoga Journal, told FOLIO’s recent Growth Summit that AIM is investing in circulation marketing including direct mail. “We have not found declining yields in mail over the last 10-15 years,” he said.

In Case You Weren’t Convinced Before, You Can Confidently Say:

is Far From Dead. It’s Alive!

MATERIALS HANDLING

Warehousing – It’s all about the cube M

any factors make it sensible to increase the cube of your warehouse. The high cost of real estate, energy costs and building envelope costs all can be reduced with a smaller footprint and taller building. In refrigerated warehousing, conventional (single deep) selective racking is a poor design option, except in unusual cases. Pallet storage is the dominant type of system used. In a conventional, single-deep, selective racking system, storage aisles account for about half the usable space. Use of a properly designed high-density storage system can significantly reduce the space needed. As a starting point, the system designer should remember that most of these systems achieve their success by eliminating storage aisles to greatly increase the amount of usable storage capacity. However, this increase in capacity comes at a price, because as the storage capacity is increased the accessibility of the product for order picking is inevitably decreased. There is an ongoing conflict between the need for product access and the need to maximize storage capacity. This inverse relationship between storage density and accessibility, often means that the successful deployment of most high-density storage systems is restricted to only part of the inventory items to be stored. Those items with the largest proportion of product per SKU in terms of pallets are the best candidates for a high-density storage system. A related design issue is the amount and type of order picking that must be done. If only full-pallet order selection or handling is required, there is limited need for designated order-picking slots. However in most full-case order selection systems, the efficiency of using picking locations accessible both at ground level and located right at the aisle is an important system design objective. Thus, many of these systems have order-picking at ground level with reserve storage at upper levels. Alternatively a forward picking area maybe used, in which the picking area is separated from reserve storage.

High-density storage Common types of high density storage systems include: Bulk Pile or Block Storage; Double Deep Racking; Drive-in or Drive-Through Racking; Pushback Racking; and Flow Racking. For a new or retrofit storage system, a designer should www.mmdonline.com | November/December 2016

determine the number of standard unit loads high that can be stored vertically in the system. This vertical unit load or pallet piling capacity in turn establishes the maximum potential vertical cube design capacity of all available high-density storage systems. Note that the vertical capacity varies between systems as two of them— pushback and flow racking—use a sloped rail to Use of a convey the pallet to the front of the rack face. properly Double-deep pallet racks designed also require more clearhigh-density ance for damage-free hanstorage dling, which may result in system can reduced vertical capacity. significantly While most high-density storage systems can use reduce the high-height warehouses space because they rely on the needed. racking, block or bulk pile systems are dependent on the stacking capacity of the pallets and the unit load contents. This usually limits the application to ceilings of 20 feet or less. Fundamental differences between the way various kinds of high-density storage systems operate affect the practical capacity and selectivity of each system type. In double-deep, pushback and flow racking the lift truck remains at the access aisle. For double-deep racking, a specialized lift truck with an extensible fork places the pallet into the second storage position. However the storage system is limited to a maximum of two pallets deep. Pushback and flow racking are sometimes called ‘live storage’. These storage systems automatically index a pallet to the storage aisle once another is removed. In block storage and drive-in racking the lift truck must make a right angle turn to the storage aisle and enter the storage lane or tunnel to retrieve stored pallets. This limits them to full pallet handling applications unless only a very shallow depth (two to three pallets deep) is used. Both the intended function of the high-density stor-

Dave Luton

Dave Luton is a consultant in the Greater Toronto Area. dluton@cogeco.ca. 37

MATERIALS HANDLING

age system and its type influence the selectivity that can be accommodated. For drive-in and bulk-pile storage the channel is the entire vertical tower that a lane or tunnel forms. For the other three systems, selectivity is increased by the number of vertical levels because each vertical storage level functions as a separate storage channel.

b. The tradeoff between the accessibility of stored c. d. e. f.

loads and the storage density you require. The best means for replenishing bulk products. Maximum unit load stability and stacking heights. Order-picking requirements. Handling remnant or out-of-season lots.

Planning SKU analysis For a high-density system used for case order-picking selection, determination of capacity focuses on the number of pallets of reserve storage compared to that required for order picking. A more refined SKU analysis is beneficial to see if part of the inventory would qualify for high-density storage. Two data analysis principles can facilitate determining which items are logical candidates for deployment in a high-density storage system. In both, the key design output is the ratio of the amount of reserve storage to the required number of pallet pick face positions. The first analysis employs “Pareto’s Law”, or the 80:20 rule. This focuses on the 20 percent of fastest moving items which make up 80 percent of storage requirements. An ‘ABC’ analysis divides SKUs into classes; “A” items—the fastest movers; “B” items—the intermediate movers; and, “C” items—the slow movers. For highdensity storage systems we are normally interested in the fastest movers. One risk of deep storage lanes is honeycombing— unused space for pallets within the channels. To reduce this problem there should be three storage channels per SKU. This principle is true for all high-density storage systems and is used to help determine the proper depth of the high-density storage for each application—sometimes called the ‘rule of three’.

Block storage Each high-density system offers a advantages and disadvantages. As an example, we will look at block storage, in which pallets or unit loads are stored directly on top of each other, without the use of support racking. Block storage is a practical alternative in particularly if you have an older warehouse with relatively low ceiling height. The capital equipment needs are among the lowest of any storage system, but the building and operational costs are among highest. Even so, there are a number of factors to be considered in optimizing a block storage layout. The chief factors include: a. Determining your unit load handling needs internally and within the overall supply chain and selecting a design unit load size. 38

We will illustrate how your planning might proceed with the first two considerations. Unit load handling needs have an impact on travel aisle width and storage row clearance requirements. For standard pallet handling, the dominant influences are set by the turning and clearance needs of the lift trucks you’ll be using. If your lift trucks handle large non-standard unit loads (for example, lawn or garden tractors), or in cases where load handling requires use of forklift attachments like carton clamps or forkless, top-handling (Basiloid) devices, special clearances for the lift truck and attachment combined are needed. In these cases check with your attachment supplier and/or lift truck dealer. You should also run an ABC and Pareto analysis of SKUs to determine if a combination of short rows and longer storage rows gives you the most efficient layout. An advantage with a block is that short storage rows can be created adjacent to major cross aisles by turning the rows at right angles to the main aisle layout. The big problem with block storage is changing trends in packaging and building design in recent years. Changing packaging design has reduced the use of rigid inner packaging—such as metal cans—which provided reasonable stacking heights, while at the same time warehouse building design has emphasized higher ceiling heights. Thus the potential for wasted space if no racking support is used has increased. As well, the increasing use of recycled corrugated has resulted in sensitivity to high humidity periods where corrugated can lose half its stacking strength. In addition to limited warehouse height, block storage—like most high-density storage systems—has the disadvantage of being a Last In first Out (LIFO) system. All other high-density systems, with the exception of flow racking, are also LIFO. That is why sizing of the system is important to ensure proper stock rotation. Design of the order-picking logic in the WMS system also requires careful consideration. Like all high-density storage systems, block storage provides a variety of advantages and disadvantages to a warehouse designer. Collectively this variety gives good flexibility to reduce the cube needed to achieve a given storage capacity. MM&D MM&D | November/December 2016

Whether it’s across town or halfway around the world, with every shipment and every project, our customers place their trust in our hands. My hands. Because at some point, every piece of business I touch becomes a personal responsibility. It’s up to me to keep costs down, performance on schedule, and quality at a premium. Someone’s business is riding on it. And I won’t let them down. I am

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©2016