This Week in Logistics News (February 19-23, 2018)

This was school vacation week for my kids, which means it was a working vacation for me — with more emphasis on vacation than working. But I did manage to keep a pulse on what was happening in the supply chain and logistics industry; here are the items that caught my attention:

Logistics Outsourcing: Another Case of Being “Penny Wise, Pound Foolish”

Still think logistics is just a cost center? Still don’t see the link between logistics and brand reputation? Well, you should have a talk with the folks at KFC.

The company went with the lowest bidder and switched logistics service providers in the UK from food delivery specialists Bidvest Logistics to DHL. The switch has been disastrous, forcing KFC to close almost 900 restaurants because DHL couldn’t deliver the chicken on time.

“Why did the chicken cross the road? To go to McDonald’s” was one of countless jokes I’ve seen online related to the incident.

KFC posted the following on Twitter: “We’ve brought a new delivery partner onboard, but they’ve had a couple of teething problems — getting fresh chicken out to 900 restaurants across the country is pretty complex!”

It sure is complex, which is why treating logistics like a commodity and going with the lowest bidder is often a recipe for disaster.

(For another case study example, see The Boston Globe: A Home Delivery and Outsourcing Failure.)

I’ll just repeat what I wrote three years ago in Procuring Logistics Services is Not the Same as Buying Paper Clips:

The lesson is simple, yet many shippers still don’t get it: there is no incentive for 3PLs to be innovative and creative if your objective is to beat them down on cost, shift all the risk to them, and then put the business out to bid again in 1-3 years. Procuring logistics services is not the same as buying paper clips, yet that’s how many procurement organizations approach it. As many shippers ultimately discover, the cost and consequences of a failed 3PL-customer relationship are exponentially greater than the cost and consequences of buying cheap paper clips.

Four States Push Back on ELD Mandate

Just when you though the Electronic Logging Devices (ELD) mandate was a settled matter, legislators in South Dakota, Missouri, Tennessee and Idaho are still fighting the battle. According to a CCJ article:

Both the South Dakota House and Senate passed earlier this month a resolution “encouraging Congress and [FMCSA] to overturn the rules regarding” ELDs…

Missouri’s General Assembly has issued two ELD-related bills this year. One, like South Dakota’s resolution, asks Congress to repeal the ELD mandate, calling it “an imposition of corporate welfare that…[benefits] politically powerful large corporations at the expense of small business.”

The state’s other ELD bill forbids state personnel from enforcing the mandate and forbids them from keeping records — or transmitting any records to FMCSA — of truckers who aren’t compliant with the mandate.

Since full enforcement of the ELD mandate won’t begin until April 1, its full impact on the industry remains to be seen. For related commentary, see The Impact of Electronic Logging Devices: Separating Hype from Reality.

Too Many Cooks in the Blockchain Kitchen?

It seems like every week a new transportation and logistics company joins the Blockchain in Transport Alliance (BiTA). This week it was Transplace (a Talking Logistics sponsor) — and CTO Mike Dieter will also serve on the BiTA Standards Council Board of Directors. Here are some excerpts from the press release:

Founded in August 2017, BiTA focuses on the education, development and adoption of blockchain applications in the trucking, transportation and logistics industry. The organization’s goal is for members to discuss, create and adopt industry standard uses of blockchain applications, and to provide clarity and direction for the development of the technology in the transportation industry in a manner that will create efficiency and transparency and foster trust.

“As a leading logistics technology provider focused on innovation, it is exciting for Transplace to be part of setting a standard for an emerging technology that has the potential to provide greater visibility to the entire supply chain,” said Dieter.

BiTA’s mission is important, but I also see a catch-22 situation emerging: for blockchain to gain traction and adoption in the transportation industry, you need to develop standards. Yet the more cooks you have in the kitchen, the more challenging reaching agreement on standards will become.

Increased Demand for Real-Time Freight Visibility

The real-time freight visibility space was particularly hot in 2017, with two major acquisitions completed (Descartes acquired MacroPoint and Trimble acquired 10-4 Systems).

And it remains hot in 2018, with FourKites announcing this week that it received $35 million in Series B funding to further its geographic and product expansion.

Why the increased demand for these solutions? Because shippers want this visibility, and more importantly, they want to do something with it — that is, they want to identify and implement better ways to plan and execute their transportation and logistics operations, which is what ultimately delivers value.

Here are some customer quotes from FourKites’ press release:

“Using FourKites has improved our on-time performance by 8 percent, and helped us provide world-class customer service,” said Dennis Organ, senior vice president of supply chain at Smithfield Foods, the world’s largest manufacturer of pork. “We were one of the early adopters of FourKites, and we recognized quickly that this technology would help us transform our supply chain.”

“We partnered with FourKites to gain a real-time view of our supply chain that would enable us to deliver outstanding customer service amid tightening delivery windows,” said Craig Weiss, vice president of supply chain at Conagra Brands. “The predictive visibility we’re now getting from FourKites is driving more nimble decision-making across our supply chain.”

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

And with that, have a happy weekend!

Song of the Week: “I Hope You’re Happy” by Blue October