This Week in Logistics News (January 29 – February 2, 2018)

What is your earliest memory?

Mine is coloring with my mom. I am a toddler, maybe two years old, wearing a diaper and nothing else, sitting atop the small round kitchen table in our cramped 1970s apartment, my mom helping me sit up while I colored, crayon clutched in little hand, on a piece of paper.

Turn the faded Kodak photo over,
my mom turned 70 this week.

I am blessed to still have her in my life, the woman who gave me life, who nurtured and raised me, who continues to color my days with light and color.

Te amo Mami, feliz cumpleaños.

Moving on to this week’s supply chain and logistics news…

A couple of articles in the Wall Street Journal this week highlight the challenges shippers are facing as trucking capacity continues to tighten and customer expectations continue to get more demanding.

“A number of U.S. companies told investors that rising shipping costs in recent months have cut into earnings,” reports Austen Hufford from the WSJ. Here are some excerpts from the article:

Prestige Brands Holdings Inc…said Thursday the higher freight and warehousing costs cut into its operating margin in its most-recent quarter, and it expects the trend to continue in the current quarter.

Candy seller Hershey Co. said Thursday that higher freight, distribution and supply-chain expenses more than offset benefits from cost-savings initiatives in its fourth quarter.

Cardboard maker Packaging Corp. of America said Wednesday higher shipping costs cut into its adjusted profit by 4 cents a share in the fourth quarter.

Meanwhile, retailers like Walmart continue to tighten their On-Time In Full (OTIF) requirements. As Sarah Nassauer and Jennifer Smith report in the WSJ:

Wal-Mart executives plan to announce that large suppliers need to deliver full orders within a specified one- or two-day window 85% of the time or face a fine of 3% of the cost of delayed goods, said Steve Bratspies chief merchandising officer for Walmart U.S., in an interview Monday. Previously, suppliers had to hit a 75% threshold to avoid fines. For smaller suppliers the on-time threshold will move to 50%, up from 33%. The change will take effect in April.

(For related commentary on OTIF, see On-Time In-Full (OTIF) and the Growing Demand for Real-Time Freight Visibility)

The bottom line is that this is going to be a challenging year for transportation executives, especially those that are still relying on Excel spreadsheets to manage their transportation operations, as well as those that never adopted carrier-friendly practices to become “shippers of choice.”

Just two years ago, it seemed like we were heading toward a shipper’s market. I asked at the time, “Should shippers start squeezing their carriers for rate reductions or should they hold steady knowing the pendulum will eventually swing in the carrier’s favor down the road?”

What I concluded then still holds true today: “The better question to ask today is not whether the time is right to squeeze carriers for better rates, but whether the time is right for both shippers and carriers to examine the foundation of their relationship.”

For related commentary, see What Carriers Look For in Shippers and Time to Squeeze Carriers for Better Rates?

In technology news, Descartes announced this morning that it has acquired Aljex Software, Inc., a cloud-based provider of back-office transportation management solutions for freight brokers and transportation providers, for $32.4 million. Here are some details from the press release:

Serving freight brokers and transportation providers for over 20 years, Aljex has built a robust platform backed by deep domain expertise. Used by nearly 400 customers in North America to plan and execute nearly 3 million freight moves per year, the Aljex solutions help customers automate business processes and create electronic documents critical for executing transportation moves. Customers can manage the lifecycle of a shipment from order creation through execution, including real-time tracking with connectivity to the Descartes MacroPoint network.

It’s not surprising that the press release highlights the link between this acquisition and Descartes’ acquisition of MacroPoint last year. Many of MacroPoint’s existing customers are freight brokers, so bringing these two complementary solutions together enhances the overall value proposition for customers. It also creates the potential for Descartes to have real-time visibility to millions of additional freight moves per year. As Descartes CEO Edward J. Ryan stated, “we now have an opportunity to fully integrate Aljex into the Global Logistics Network. In doing so, we can provide customers with improved access to track shipments and the ability to better utilize increasingly scarce carrier capacity.” I look forward to learning more when I attend the Descartes Evolution User Group Conference next month.

Also this week, 3Gtms announced the release of its 3G-TM transportation management system version 17.2 with continuous pool optimization capabilities:

With continuous pool optimization, users can plan shipments to a consolidation point by pre-determining a specific location or by allowing the algorithm to dynamically determine the optimal consolidation facility. These routes can then be “split”, allowing the execution of multiple movements into consolidation while delaying the determination of the outbound routing until more freight accumulates at the pool location or time limits require the freight to be released from the pool. Outbound routing from the consolidation facility can be executed independent from (but with consideration of) the inbound movement while still maintaining a single order for each leg of the journey.

As I wrote last March in Pool Distribution Making a Comeback with Manufacturers and Retailers, a growing optimization problem today is responding to more demanding customer requirements — smaller orders and shipment sizes, more frequent and reliable deliveries — in a cost-effective and efficient manner. And that’s why pool distribution is making a comeback today with manufacturers and retailers.

And with that, have a happy weekend!

Song of the Week: “Across The Room” by ODESZA feat. Leon Bridges