SustainabilityAs mentioned in our last blog post, the logistics industry is currently trending with green and sustainability initiatives. Research from PwC has already shown that 42% of supply chain executives rank sustainability as highly important to their companies, and 67% agreed that supply chain sustainability will be even more important in the future. Apart from the notion that these projects not only attempt to reduce the potential damage to our ecosystem (via carbon footprint reductions, etc.) and promote the notion of fair trade, there are more interesting factors that also stimulate this move.

One of them is that there are indeed hints at cost-savings in the supply chain for the future. We mentioned before that companies are not only talking about nearshoring, but have already attempted to bring their supply chain ‘back home.’ This is due to the fact that recent trends have shown that China is losing its pricing power as the US and especially Mexico move to match China by 2015. Though this trend may require some watch as some industrial real estate investors have recently made a move to target logistics property in China. Another major factor is the increase of awareness campaigns in the logistics industry. Research by Smith & Associates shows that mobile technologies and social media are becoming important influencers in the supply chain world, suggesting that this is a contributing factor behind the current trend.

This week we’re going to highlight some of the sustainability initiatives that we thought to be interesting and worthy of mention, starting with a cool cloud-based project:

Enterprise Sustainability Platforms

Backed by three PhD environmental scientists and policy analysts, the EcoShift development team has created a cloud-based solution to help companies find out more about their suppliers’ sustainability information. How it works is that buyers can analyze supplier sustainability information and risk while suppliers have access to a dashboard to see where their sustainability efforts rank compared to industry peers. This information allows buyers to see who the sustainable suppliers are. Suppliers, on the other hand, get access to information on how to improve their own efforts.

Green Warehouse Projects

Warehouses consume quite a bit of energy. Apart from being a cost-saving initiative, they also lessen the harm that high energy consumption does to the environment while gaining respect from customers and the community.A great post by Maida Napolitano over at Supply Chain 24/7 offers a great summary highlighting some great attempts. Warehouse power initiatives are now attempting to have ‘net-zero’ buildings; a move to generate as much energy as it uses up over a year. This leads to companies in the industry investing in solar- and wind-powered technology for their warehouses. Another noteworthy attempt to reduce power usage is by having a ‘smarter’ warehouse. These typically consist of an energy management system that uses submetering to monitor equipment energy use and performance. These efforts, combined with energy saving fans, lights, etc. showcase a real attempt at a green warehouse.

Logistics and Supply Chain Awareness Campaigns

As mentioned above, mobile technology and social media are becoming more and more important to the world of logistics and supply chain. Efforts to show awareness through campaigns such as the UPS ‘We Love Logistics’ campaign shows not only that awareness can lead to better business, but also that people are indeed actually interested in finding out more about the logistics industry as a whole. One recent noteworthy campaign is Starbucks’ Behind the Scenes campaign. With a supply chain that spans more than 19 countries, they definitely do a good job showing how interesting it is to start from where they get their cocoa beans to serving you that steaming cup of coffee.

While there are other efforts that could be made of note, these three examples are offer a great insight into how the logistics and supply chain industry are trying to provide a clean, green business. It is nice to see that these attempts are trending because it shows that companies are becoming more and more concerned about the environmental factors of their supply chain process.

Distribution warehouse centerWe’ve reached an era today where people are becoming more and more aware of how companies move their goods and where they are manufactured. There is even a Kickstarter company that gives you the breakdown of where your shirts are coming from! We are also starting to get more and more aware of how supply chain services are affecting our environment by increasing efforts to create a more sustainable supply chain. This includes taking advantage of new technologies in order to accommodate today’s large transportation and supply chain demands. New advancements in e-commerce and the changing trends in global logistics has been a player in these shifts.

We’ve narrowed our list down to three main trends to watch for, and these trends will definitely affect the end user hopefully by being able to create a more efficient and cost-effective supply chain in the near future.

1 – Synchronizing Tracking on the Supply Chain

There is a lot of buzz in the logistics community these days on Radio-Frequency Identification (RFID) technology. Companies are starting to look into synchronizing how packages are tracked especially when it comes to services that involve global logistics or supply chains that involve multiple modes (i.e. intermodal services).

So what does this mean for both manufacturers and customers? The main benefits of RFID implementation in the supply chain are laid out quite nicely via a case study post on RFID for international supply chain management. Essentially, RFID tags can be read from a distance (with no line of site needed) and are easily tracked. This allows for a more visible supply chain that increases tracing on internal shrinkage, thereby reducing it, as well as makes it easier to detect counterfeit products (all authentic products can be given a unique ID).

For the manufacturers and distributors, the ease of tracing and tagging reduces the number of mistakes along the supply chain and the scanning process can also reduce the time it takes for shipments to move. On the customer end, there is less hassle when it comes to tracking and receiving products. While this may sound like a win-win, RFID technology is still not a perfect solution due to two main issues: reader collision and tag collision. The scanners can get easily confused when two tags overlap, so there has to be a system in place that allows for scanning tags one at a time.

2 – Creating a Sustainable Supply Chain

There is a new trend for consumers to want to be more aware of the process by which goods arrive at their door. This arose out of consumers wanting to be able to make informed decisions when purchasing with regards to both sustainability and fair trade issues, and a growing prevalence in ‘bringing products back home’ (i.e. keeping things local). So it is not surprising that companies have started to think about and even implement some changes in order to have a greener, sustainable supply chain. Concurrently, government run initiatives are being put in place to help set in motion its development such as the Clean Energy Manufacturing Initiative (CEMI).

Companies are now taking advantage of said initiatives by having wind and solar powered manufacturing plants, which in turn have been shown to not only reduce their carbon footprint but also, in some cases, cut costs for end consumer prices. This creates a win both for the environment and the consumer.

Apart from environmental concerns, part of the sustainability trend also involves fair-trade. This issue, while mostly prevalent in the food industry, is becoming critically important in consumer buying decisions. The desire to buy ethically clean products is extending to more and more products to the everyday consumer. As mentioned earlier, the Kickstarter project is one that attempts to fully focus on this for their brand imaging, but major retailers are starting to participate as well even in the luxury sector.

There are plenty of benefits on the logistics end apart from satisfying consumer buying trends that further stimulate the initiative to go for greener and more sustainable supply chain practices. It can protect market share and reduce risk premiums as well as cut costs for both manufacturers and consumers while increasing supply chain efficiency. Thus it seems like in the future we will start to see more and more companies striving for producing sustainable products at every stage of the process and promoting their initiatives to create transparent ethical business conduct and sustainable products.

3 – Nearshoring and Bringing Manufacturing Back Home

Finally, with our current globalization trends we are noticing that more and more companies have started thinking about bringing their manufacturing closer to home. Nearshoring is the transferring of business processes to nearby country, often bordering your own. It is a trend that has taken precedence in companies due to the fact that certain costs have been increasing in typically low-cost countries like China.

Recent research has shown that more and more manufacturing executives would like have the US or Mexico as their preferred location for nearshoring. This is due to the fact that these nearshoring initiatives led to a 5-10% reduction in ‘landing costs’ already. The trends suggest that by 2015, US manufacturing costs will match that of China while manufacturing in Mexico and India stay strong. These trends suggest a move out of Asia with a focus on the US and Mexico as new manufacturing hubs.

At the end of the day, there are many developments that have not been discussed as current trends for the future of logistics (but be sure to stay tuned for future posts!). But these three issues are currently trending and should be watched carefully. It will be interesting to see how these factors will tie in to manufacturers, third party logistics providers, and all other parties along the entire supply chain up to the end consumer.

If you have any questions, please feel free to give us a shout. Otherwise, feel free to see where we fit in the supply chain as a 3rd party logistics provider by checking out what we do. Otherwise, have a great rest of the week and enjoy the long weekend!

Morai-North-AmericaWhether you’re shopping around for a third party logistics (3PL) provider to take care of your transportation needs or just interested in how cost is determined for your shipments, this month we want to bring awareness to one crucial aspect: lowest rate vs. lowest total cost.

In order to describe the difference between lowest rate and lowest total cost, let’s use the example of a request for a shipment from Portland to Boston. Often transportation companies will look for the lowest available rate and quote that in order to close a deal and guarantee the business. While this sounds enticing, prospective shippers should be careful. The only information the lowest rate can get you is the cost of the shipment to transport from one place to another.

On the other hand, estimating the total cost provides a clearer picture because it includes additional considerations such as: drop and pull at origin/destination, size of equipment, mode option (intermodal or truck), lowest cost per pound, etc. That being said, what you might actually find is that the total price you pay might actually be lower with a higher initial rate estimate because it has less additional costs.

Our company believes in getting you the lowest total cost, and we believe that when it comes to 3PL providers getting a total cost analysis tells you three things:

1 – The Company is Client-Focused

Anybody can get a quote for a rate.  A great 3rd party logistics provider that offers to quote you via lowest total cost has to listen to you carefully to know your needs. This involves much more commitment from representatives of the company who interact with you. They are taking that extra step to put your needs first. Understanding your business is key!

2 – The Company is Resourceful

A company who gives you rates with lowest total cost shows that they are resourceful. They took the time to analyze your company’s needs and explored all cost options, charges, and modes of transportation available for your shipments. This additional information requires being connected to the right people and resources in the world of logistics.

3 – The Company Has a Wealth of Knowledge in the Industry

Companies that only offer the lowest rates can suggest a lack of research into the entire supply chain process. Often these ‘rates’ get a transportation company in the door yet does not allow their rate to actually pick up your freight. This means that the providers may have quoted far too low in order to grab the attention of its shipper.  But going with the lowest rate can sometimes be underestimated and you can get slapped with various additional costs.

So make sure you ask the right questions when choosing a third party logistics provider and take into account the difference between the lowest rate and the lowest total cost! If you have any questions at all feel free to contact us, our highly experienced Client Success Specialists can tell you anything you need to know about getting you the lowest total cost!