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Category Archives: Digital Logistics

The Data Analytics Revolution in LAST-MILE Delivery

Urbanization is Progressing at a Rapid Pace

The United Nations projects that by 2030 the number of so-called megacities of over 10 million inhabitants will rise to well above 40.

About two-thirds of the global population is expected to reside in cities by 2050.

Without a doubt, cities represent the epicenters of future global economic growth as well as the social, technological and cultural advancement of humanity.

The supply chain implications of these trends are profound. To remain competitive, companies across all sectors, industries, and markets need to succeed at serving urban customers and consumers.

This is particularly true in retail, where the battle over future consumer markets is largely a battle over who excels at managing the urban last mile of physical distribution.

Strategies for Change

As urban populations grow, cities are becoming an increasingly complex and uncertain operational environment.

The key driver of this complexity is a rapid increase in urban density. The potential of any city to grow in geographical size is naturally bounded.

At some point, cities find that to keep growing they must build upwards to accommodate more people, businesses, and activities.

However, these growth strategies also lead to rising levels of congestion across the urban transportation infrastructure and an increased likelihood of accidents and other random disruptions to urban mobility.

Planning efficient and reliable last-mile delivery operations is thus becoming more challenging and requires higher levels of operational flexibility and redundancy from urban distribution systems.

At the same time, the retail industry is facing a continuing boom in e-commerce together with rapidly rising customer expectations regarding the speed, timeliness, flexibility, and customization of last-mile delivery services.

Heavily cross-subsidized premium delivery services offered by some of the major e-commerce platforms are gradually educating consumers to further postpone their purchase decisions, as they can rely on the availability of affordable, fast-track delivery at all times.

This trend toward “on-demand consumerism” renders the last-mile performance of a company’s logistics operations a critical competitive factor.

However, it also leads to a massive increase in the spatial and temporal fragmentation of urban deliveries, making it increasingly difficult for logistics service providers to consolidate shipments into efficient delivery routes.

These trends could render the provision of delivery services to urban markets increasingly unsustainable unless companies fundamentally rethink their approach to last-mile logistics.

Without substantial paradigm shifts in the design, planning, and operation of last-mile logistics, urban goods distribution will become – and remain – economically unprofitable.

Moreover, delivery operations will burden urban environments with more traffic congestion and associated noise and emissions pollution.

One way in which companies can redefine last-mile logistics is by adopting anticipatory planning and flexible operations that allow for dynamic and pro-active adjustments to rapidly changing operational conditions and market requirements.

Another strategy is to build multi-echelon network architectures and multi-modal delivery models, integrating connected and potentially autonomous technologies into smart cyber-physical systems.

Both of these options require companies to deploy advanced analytics, powered by diverse sources of high-resolution data and supported by highly connected and sensor-equipped operations.

Mobile Data and Connectivity as Key Enablers

A number of companies, especially in the fast-moving consumer goods industry and in e-commerce, have realized that they need to challenge traditional last-mile delivery solutions in light of recent advances in data analytics and technology.

Matthias Winkenbach, Ph.D., Director, MIT Megacity Logistics Lab, Research Associate, MIT CTL

Supported by state-of-the-art research from MIT, some enterprises are leveraging their existing data sources. They are using transactional records, delivery data from individual routes, high-resolution telemetry and movement data on the level of individual vehicles to develop a more precise picture of their last-mile logistics operations.

Similarly, publicly available data sources are becoming increasingly relevant for the optimal design and planning of last-mile delivery systems and processes.

These data sources provide insights into the operational and commercial environment – from road infrastructure characteristics to traffic and congestion dynamics to sociodemographic profiles of the customer base.

These are important advances – but they have certain limitations. Most of these data sources describe urban markets in retrospect; many are even static in nature.

This information is valuable in discovering and understanding systematic patterns in how urban markets and the associated logistics services function and perform historically, and in predicting how they may evolve in the future.

However, the information is limited in its potential to improve the way companies dynamically react and proactively adapt to short-term fluctuations in the marketplace and the operational environment on tactical and operational levels.

With the rise of the Internet of Things (IoT) sensor networks, companies are now able to obtain reliable, high-resolution and real-time visibility into their transportation networks.

Moreover, this visibility is not limited to the status and location of shipments, or to the inventory levels of individual storage locations. It is now possible to obtain system-wide insights into the number, status, location and expected trajectory of products and shipments along their entire journey from their upstream source or vendor to the final recipient.

Driven by significant advances in sensor technology, mobile computing, mobile data and vehicle connectivity, real-time visibility is no longer limited to aggregate information on stationary items at distribution and warehousing facilities.

It is now possible to achieve real-time visibility for in-transit volumes down to the level of individual items or shipments. This new level of detail and dynamism enables companies to substantially reduce the number of blind spots in their distribution networks.

Previously, these blind spots prevented them from dynamically adjusting their last-mile distribution approach to changing market dynamics, or to proactively mitigate the effects of disruptions to their last-mile operations.

The Data Analytics Revolution

Another key development is the availability of advanced analytics. The recent methodological advances in this field will have a major impact on last-mile logistics on three levels.

First, advanced analytics – and in particular a group of tools commonly known as machine learning – can help companies to better understand urban markets, customers, and operational environments.

This is particularly relevant when serving a large and highly fragmented customer base.

Such tools can provide substantial business value by revealing customer-specific insights that would have otherwise remained hidden or too costly to identify.

For instance, a leading global brewing company recently partnered with researchers from the MIT Megacity Logistics Lab to use data to improve the operational efficiency of its global last-mile deliveryoperations.

Based on historic route plans and delivery records, machine learning tools helped identify customer-specific delivery constraints in a pool of hundreds of thousands of customers around the world –  from big box retailers in the U.S. to single-owner operated nano stores in emerging markets.

The analyses helped to identify those customers that are most disruptive to the efficient operation of that company’s delivery operations due to their hidden delivery constraints.

The company was then able to address these issues by re-incorporating the information into its route planning algorithms, or by reconfiguring distribution services for certain customers.

Similarly, machine learning can help reveal and exploit the local knowledge and expertise of a company’s distribution workforce.

For instance, the analysis of high-resolution GPS traces in conjunction with telemetry data and transactional records can provide relevant insights on the availability and suitability of local infrastructures such as roads and parking bays for last-mile delivery.

The data can reveal behavioral patterns of drivers and delivery crews that have local knowledge about their route territory and know better than any algorithm or data source where to park, which shortcut to take, or which congestion hotspot to avoid.

Extracting this knowledge without having to disrupt crew member workflows can achieve significant improvements in route planning and more effective delivery instructions.

Companies also can maximize service levels and minimize cost inefficiencies due to inaccurate planning.

Second, state-of-the-art analytics of the increasing amounts of readily available, high-resolution data can help predict last-mile operations at much higher levels of detail and accuracy.

In light of rapidly increasing customer expectations regarding delivery speed and responsiveness, detailed and accurate spatiotemporal demand forecasts – i.e. understanding what, where and when customers will order – are becoming indispensable.

At the same time, shorter delivery lead times give companies limited leeway to compensate for short-term fluctuations in traffic conditions or the availability and pricing of (potentially crowd-sourced) carrier capacities.

Advanced analytics can also be used to develop reliable near-term predictions of traffic dynamics and resource availabilities, taking into account historic patterns as well as real-time information on influencing factors such as the weather or other relevant events.

Such capabilities are crucially important to guaranteeing high levels of service to increasingly demanding customers.

Lastly, advanced analytics can inform a new generation of prescriptive analyses, helping companies make the right tradeoffs and decisions during the strategic design, tactical planning and day-to-day operations of fast, reliable and responsive last-mile distribution systems.

More companies across sectors, industries, and geographies are reaching out to academic partners to develop prescriptive decision support tools based on high-performance optimization and simulation techniques.

Questions and Answers

To gain an understanding of how analytics can be deployed to improve last-mile logistics, it’s helpful to look at specific questions that the technology can address.

Changing urban environments and customer needs require new approaches to the design of urban distribution networks.

They also raise several questions for supply chain managers and logisticians.

For instance, how can a company transition from a traditional, static, single-tiered, uni-modal urban distribution approach that is built around various dimensions of operational flexibility?

Especially when such a network must also allow for dynamic changes in the company’s distribution approach in response to dynamically unfolding customer requirements and operational conditions such as traffic or weather.

And, how can enterprises design, plan and operate a distribution network that is built on a combination of various vehicle technologies, delivery models and supporting distribution facilities?

Large-scale optimization models informed by descriptive and predictive analyses of both historic and real-time data can provide answers to these and other questions.

Faster, more responsive last-mile delivery services can also have major implications for inventory management – raising more questions.

How, where and in what quantities should a company allocate its inventory so that it can quickly respond to customer requests at various service levels?

What is the impact of decentralizing inventory in a network of hyper-local storage locations in order to move closer to the urban customer?

Can service levels be improved and cost reduced by sharing inventories across a network of fulfillment locations, or by making them mobile?

Simulation and analytical approximation methods can provide insights to these questions, based on an in-depth understanding of the spatiotemporal dynamics of urban demand obtained from advanced analytics of last-mile Big Data.

At the operational level, more flexible delivery models require more sophisticated route planning capabilities.

Logisticians must ask: How should delivery vehicles be dynamically routed in response to unfolding uncertainty of demand and operational conditions?

How can multi-tiered and multi-modal delivery models that rely on multiple vehicle systems that work hand-in-hand be perfectly synchronized into an efficient and reliable service?

How will the introduction of (partially) autonomous technology and unmanned aerial or terrestrial vehicles affect the design, planning, and operation of such systems?

These and other questions can only be answered by smartly combining large-scale optimization, high-resolution simulation, and detailed near-term prediction of market dynamics, environmental conditions and delivery operations.

Communicating About Data

In an increasingly customer-centric and service-oriented market environment, companies need to take a leap of faith to embrace these new methods of leveraging data and analytics for their strategic, tactical and operational decision making.

To many companies, this appears particularly challenging because the use of data and analytics is not ingrained in their corporate culture.

What’s more, many lack the internal capabilities to develop such tools on their own.

To avoid being blindsided by the analytics revolution in last-mile logistics, many companies need to build internal capabilities and collaborate with external knowledge centers such as academic institutions.

Moreover, they need to initiate a cultural change that enables them to develop and apply advanced analytics and quantitative methods both tactically and strategically.

For example, some companies – even in traditional industries – are turning advanced analytical methods from black boxes into trusted toolsets by building advanced analytics teams and centers of excellence that operate outside of their day-to-day business operations.

These teams identify issues that benefit the most from analytical approaches to problem-solving and provide the expertise that business units and, ultimately, the whole organization, need to put these solutions into practice.

Turning advanced analytics into actionable insights, however, requires a second group of people that is often neglected in companies’ efforts to build analytics expertise – the data translators.

Data translators bridge the gap between advanced analytics experts (usually referred to as data scientists) and domain experts who run the business on a daily basis.

Educational institutions such as MIT should develop graduate and professional programs that educate supply chain and logistics professionals to become data translators.

The industry needs to engage with academia to align research agendas and academic curricula with the real-world challenges faced by practitioners in making the next generation of last-mile distribution systems become a reality.

Visualization has a key role to play in achieving these goals.

Current display standards, as well as rapidly emerging technologies such as augmented and virtual reality, allow for rich, high-fidelity visual representations of complex datasets along with the mechanics and results of advanced analytical methods that are built on top of these datasets.

These visual representations are a powerful tool that enables domain experts to understand, validate and trust the data and the outcomes of sophisticated analyses.

Individuals can interact with these representations and conduct what-if analyses, or move from high-level, aggregate views of supply chains to arbitrarily granular views.

As technology evolves, interactive visualization will become an indispensable decision-making tool.

To support the logistics industry in embracing this development, the MIT Center for Transportation and Logistics has partnered with leading companies to conduct research and develop tools at the intersection of last-mile logistics, advanced data science, and interactive information visualization within the newly created Computational and Visual Education (CAVE) Lab.

Benefits from Sharing Data on a System Level

Aside from promoting the use of data and analytics within individual companies, a huge untapped potential to improve the efficiency and long-term sustainability of urban last-mile delivery operation lies in cross-vendor collaboration and data sharing.

Today’s last-mile operations are highly fragmented across multiple carriers and logistics service providers, leading to suboptimal asset utilization.

Hundreds of thousands of unnecessary miles and hours traveled are expended within already congested and polluted urban centers.

There is fierce competition for the increasingly scarce resource of urban transport infrastructure capacity.

Attempts by policymakers and legislators around the world to force vendors to collaborate, coordinate and consolidate urban shipments have largely failed.

The solution to the problem may, once again, be technology. Technological advances are enabling increasingly seamless, low-cost and platform-independent connectivity between vehicles, distribution facilities, infrastructure components, shippers, carriers, and customers.

The transaction cost, risk, and operational friction caused by sharing information and assets across players will reduce substantially over the coming years.

This trend may be reinforced by technologies such as blockchain that reduce the effort, risk and cost of validating information, executing contractual agreements and processing transactions of money, goods, and services further.

With regards to system-level connectivity and data sharing, there are four major directions in which urban last-mile delivery operations will experience transformational shifts driven by new levels of connectivity in the near future:

  • Vendor-to-vendor, carrier-to-carrier, and vendor-to-carrier connectivity will finally enable the safe, efficient and mutually beneficial sharing of transportation infrastructure, facilities and fleets; a tight coordination and consolidation of shipments across vendors and carriers; and an efficient integration of downstream last-mile delivery operations, upstream first-mile pick-up operations, and reverse logistics flows.
  • Vehicle-to-infrastructure connectivity will allow for a paradigm shift away from individual-vehicle route optimization toward a system-level optimization of overall urban mobility by jointly optimizing vehicle flows and sharing information about traffic, accidents, the availability of parking spaces and other relevant operational constraints to last-mile delivery.
  • Machine-to-machine connectivity will enable more streamlined and efficient interactions between multiple vehicle systems (e.g., trucks and cargo cycles or bike couriers) in multi-modal delivery models. It is also a crucial prerequisite for the large-scale deployment of autonomous vehicle systems for last-mile delivery.
  • Carrier-to-cloud or crowd-to-cloud connectivity will encourage the massive sharing of (potentially crowdsourced) historic and real-time information on road and traffic conditions, customer-specific delivery requirements and other defining actors of last-mile efficiency.

The latter trend will also enable new commercialization models for last-mile data and analytics as a service.

Already, some of the major express logistics and parcel delivery services are investing heavily in the analysis and commercialization of data that their vehicle and courier fleets can collect in cities around the world, every day of the year.

Future Challenges

Rising demand from consumers, who are increasingly intolerant of service failures, coupled with urbanization and more intense competition is forcing companies to rethink their last-mile delivery supply chains.

Developments in data analytics will play a key role in meeting these challenges. But first, companies must build capabilities that allow them to use analytics creatively, and, crucially, to have the confidence to implement solutions based on these analyses.

About the Author
Matthias Winkenbach, Ph.D., is director of the MIT Megacity Logistics Lab. He can be reached at mwinkenb@mit.edu.

The End of Distribution As We Know It?

In an uncertain future, one thing’s for sure: The era of the vast, single-use, single storey, plain-vanilla warehouse is over

Roadmap for Change: The Flexible Industrial Distribution Facilities Network of the FutureWarehouses of the future with on-demand additive manufacturing capabilities are co-located in multi-modal centers for efficient transfer of goods.

While businesses of all sizes and industries are scrambling to keep up, distribution is being upended entirely.

Some experts have suggested that in 30 years, the distribution industry as we know it today will disappear altogether. But that doesn’t mean that demand for warehouse space is going to go away.

In fact, demand is rising. Major population hubs are driving a marked increase in industrial absorption. The Journal of Commerce reports that as of first quarter 2017, US vacancy rates for warehouse and distribution space were at a 17-year low, with asking rents rising quarter over quarter since 2015.

“The proliferation of online retail is creating structural shifts in the industrial sector through a reconsideration of retail space needs and supply chains”

Retailers are increasingly taking advantage of major savings by maintaining inventory off-site, even as they absorb vacant or underdeveloped properties in densely populated urban areas so they can store goods closer to their end users – and get them delivered faster.

Download the Paper Roadmap for Change: The Flexible Industrial Distribution Facilities Network of the Future

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Minimizing the Impact of the Electronic Logging Device Mandate

May 4, 2018 · By Dan Clark
Electronic Logging Device Mandate
On April 1st of this year, strict regulation of the electronic logging device (ELD) rule came into effect after a 3-month grace period.

The mandate requires the use of an ELD to automatically record a truck’s driving time to more accurately record a driver’s hours of service (HoS).

The Federal Motor Carrier Safety Administration states that the restricted Hours of Service (HoS) were put in place to combat an increased risk of crashes and chronic health conditions associated with lack of sleep.

This mandate, however, which is forcing immense changes for the industry, has been met with adversity.

Trucking companies are reporting that some truckers are even going so far as to leave the industry rather than use an ELD.

In the past, many drivers were concerned about the foul weather, accidents or long detention times because of the potential to miss their next delivery or a desire to return home.

Now, any form of unexpected delay could put that driver over his HoS and force him to stop for the night. This eats steadily into productivity and profit margins for drivers being paid by the trip.

With the new ELD mandate, there is no way for drivers to omit uncontrollable delays such as Acts of Nature from their logs which could put them over their HoS.

In the past, a shipper might have taken a 5-6 hour run, made a delivery, picked up a new load and then returned home. Now, that same driver would have to secure overnight parking to avoid violating the 11-hour daily driving limit.

These mandates serve to make the roads safer for all drivers but put additional pressure on an industry already strapped for capacity.

What else is causing the capacity crisis?
The economy is requiring more trucks on the road as both e-commerce and brick-and-mortar stores’ sales continue to be strong
Gen-Xers and Millennials are not filling trucking jobs vacated by Boomers at a fast-enough rate
Inbound deliveries are often late due to congestion in the yard or at the dock
Traffic, weather, and accidents on the road result in wasted, otherwise productive, time
The ELD mandate has put a spotlight on the HoS issue for the entire industry.

Already facing a capacity crisis, it is more important than ever that shippers maintain total control over their supply chains to ensure deliveries are made on time and any issues are dealt with as soon as they occur.

There is very little an individual shipper can do to encourage younger entrants into the job market to become truckers and, of course, nothing should be done to depress the flow of goods within the marketplace. Therefore, a shipper’s only option to effectively combat the capacity crisis is to streamline their own supply chain processes.

What can shippers do to minimize the effects of the ELD mandate?
Reduce the number of inbound deliveries entering their facilities through consolidation
Speed-up driver turn-around in their yards with dock scheduling and order management tools
Communicate effectively with promise dates, notifications and issues as they arise
The ELD mandate is a new part of the shipping industry that will have a big impact on how freight is shipped. In order to comply with the regulations without being negatively impacted by HoS limitations, shippers should leverage the power of transportation technology to improve their operations.

With the help of a Transportation Management System (TMS), a shipper can identify the optimal carriers for their freight and hold those carriers to a high standard of execution.

In addition, a TMS can consolidate LTL freight into FTLs whenever possible. Time-slot appointments can be secured by leveraging a dock scheduling solution, reducing driver waiting times.

These improvements and many others can reduce the number of trucks on the road, saving money and speeding-up yard flow. Once a more streamlined operation is established, shippers can rest assured that their drivers will be set up for success.

Learn more about Kuebix’s TMS Dock Scheduler, Order and Route Optimizer, and other Premier Applications that help shippers become more efficient and minimize the impact of the ELD mandate.

Read: Calculating Less-than-Truckload Freight Rates, What Should You Be Paying?

Related White Papers & eBooks

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The Art of the Inbound: 11 Ways to Improve Your Inbound Shipping Operations New!
This ebook provides a guide to benchmark your company against best practices in the transportation and shipping industry and helps to put together a strategic approach to capitalizing on the opportunities to manage the “art of the inbound.” Download Now!

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The Complete Buyer’s Guide to Transportation Management Systems
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Effectively Managing Big Data in Your Supply Chain
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C.H. Robinson CEO John Wiehoff Talks Transportation Trends

April 27, 2018 · By 24/7 Staff ·
John Wiehoff, CEO of C.H. Robinson, is one of the keynote speakers for the Connections 2018 supply chain conference, which will take place June 25-27 at the Greenbrier Resort in West Virginia.

He recently spoke with SMC³, which has served as one of the 3PL’s long-time partners, about emerging technologies in the industry, unique supply chain opportunities, and how C.H. Robinson uses technology to optimize its business.

What are some of the major trends you’re currently seeing in the LTL marketplace?
Demand for LTL is higher than we’ve seen it in nearly 10 years. This shift is an especially significant change when paired with supply changes. Both manufacturing and e-commerce are extremely strong right now, and both have close ties to LTL.

Online orders are driving smaller shipments to the LTL space, not just in the final-mile area. Smaller orders are becoming more common for the middle mile – from one distribution center to another.

LTL capacity is tight because carriers have not added a significant amount of equipment to their fleets in recent years. But even if there was an influx of tractors, there aren’t enough drivers available.

Historically, the driver shortages that affected the truckload market remained mostly out of the LTL space, but even that is changing. Growth in other sectors that have a shared labor force with truck drivers means more LTL drivers are leaving for options that are more lucrative.

As LTL carriers look to be more productive, we are seeing them place a large emphasis on optimizing their networks. With the data, analytics, and tools like dimensionalizers available to them, LTL carriers are paying more attention to accepting the right freight in the right lanes at the right time. More isn’t absolutely better anymore.

How has the ELD mandate impacted the domestic transportation market?
Drivers are reaching their hours of service in shorter timeframes, especially given the tight capacity. Organized and efficient loading/unloading times will become even more important. Reducing driver wait time at either the origin or destination can have a significant impact in a driver’s hours of service.

Both carriers and shippers may rely more heavily on 3PLs. A 3PL can help identify and solve capacity shortages, handle potential rate increases and address other issues from the mandate.

John Wiehoff, CEO of C.H. Robinson

How does C.H. Robinson use new technology to optimize its business, and are there any emerging technologies that will be game changers for the supply chain industry?
We are using technology to reinvent what it means to be a leading 3PL for this industry, our customers, and carriers.

Our technology offering is at the center of what we do and is embedded in our services and solutions every day.

You can see the importance technology has within C.H. Robinson by the number of IT staff and investments we have made and continue to make – we’ve added more than 800 IT staff and invested over $1B in the last decade.

As our business grows – now to more than 120,000 customers who worked with us on more than 19 million global shipments last year – we increasingly rely on technology.

Technology backed by data is critical to the success of our business. As one of the largest 3PLs, we have arguably more first-party data than anyone else in the industry. But, that data doesn’t matter if we don’t use it to our and our customers’ (shippers and carriers) advantage.

That’s why we are continuing to invest in and build tools that leverage the amount of data we have available to us.

The Connections 2018 supply chain conference is perfectly positioned at the midpoint of the year, giving speakers a chance, to sum up, the first half of 2018. What themes have defined the first half of the year, and what will define the transportation market during the second half?
For the first half of the year, we saw efficiencies in utilizing capacity, as truckload utilization climbed to more than 95 percent, according to FTR Transportation Intelligence. At the same time, new trucks increasingly entered the market to replace retiring trucks.

For the second half, these factors will combine for a focus on hyper-efficiency and the most effective use of capacity. We’ll be able to see if the strong truck sales of the first half of the year will add capacity or primarily serve as replacement capacity. We’ll also be able to put our finger on the real effects of ELD.

How can shippers and 3PLs better position themselves to take advantage of supply chain opportunities in the marketplace?
As supply chains grow in both size and complexity, transportation management technology will be an important way for 3PLs to help shippers gain a competitive advantage and exceed their customers’ expectations. That’s why we are invested in delivering and implementing flexible, efficient and integrated technology solutions that connect all aspects of the supply chain.

Read: Transportation Management Systems Market 2018

It is not so much what changes are coming to the industry; it’s more important to focus on what the innovative supply chain of the future will look like and recognize that it will take people, processes, and technology to bring positive change.

Digitalization of supply chains is our opportunity to continue bringing technology to our customers and their supply chains that make them smarter and more efficient. The technology we are able to bring today and into the future has to go beyond freight matching to encompass the complexities of today’s and tomorrow’s supply chains.

An algorithm can do amazing things, but when a truck gets delayed or a delivery window changes, people are still able to provide the most effective solution.

To hear more from John Wiehoff and other industry experts, sign up today for the three-day supply chain conference Connections 2018 to learn about emerging trends, current challenges and new innovations in the supply chain.

Register here by April 30 to take advantage of early-bird pricing.

Raise Your Supply Chain IQ
Connections 2018 | June 25 – 27 | The Greenbrier, WV

Why Attend Connections 2018

To REGISTER for SMC³’s Connections 2018, visit www.smc3connections.com

Related Article: SMC³ Announces Connections 2018 Speaker Lineup

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Strategic LTL Bidding for Minimum Cost & Maximum Efficiency
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The Case for a Re-Indexed LTL Benchmark Pricing System
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The Single Source for LTL Pricing & Transit Information
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Building a Digital Supply Chain Ready for the Future

Complaints from frustrated customers were mounting at a major US retailer.

More than 20% said they could not find the company’s branded products in shops because items were out of stock.

The problem was that efforts to improve service disrupted the company’s low-cost distribution model.

It had the right infrastructure but lacked the digital tools necessary to increase supply chain reliability.

Moving quickly, the leadership team invested in digital tools to obtain real-time data, shorten replenishment cycle times, optimize deliveries and predict future demand.

As data streamed in from stores the minute shoppers purchased goods, the company rapidly restocked hot-selling items to capture sales that it previously had lost.

The shift cut retail cycle times by 20%, to four days, generating a 0.5% increase in sales (see Figure 1 below).

And that was just the first wave of improvement.

Over the next 24 months, the company aims to reduce the time needed to fill store orders to two days, for a 60% total reduction in retail cycle time.

Companies that integrate digital technologies into their supply chain can quickly improve service levels while cutting costs up to 30%.

Just as important are the options that digital technologies provide to develop new business models and new strategies.

For instance, leading-edge companies such as Adidas are deploying 3D printing to move some production closer to customers, offering greater product customization and shorter lead times.

Despite those advantages, many companies are struggling to keep pace with an onslaught of digital trends that are disrupting traditional supply chain management, slashing response times and raising customers’ expectations.

The speed of change is overwhelming, especially for those that are not digital natives.

Seventy percent of executives expect digital innovation to have a significant impact on their supply chains during the next five years, according to a recent Bain survey, up from just 63% in 2016.

Building a Digital Supply Chain Ready for the Future
One of the biggest challenges is building a comprehensive view of how performance standards are changing and what customers really want. Without that knowledge, companies risk being outmaneuvered.

Bain research shows more than one-third of CEOs are overly confident about the ability of their supply chains to anticipate swings in demand (see Figure 2).

And the risks of being blindsided are big: higher operating costs from expensive last-minute orders, a pileup of excess inventory, missed revenue opportunities and lost sales from ineffective new product rollouts.

Building a Digital Supply Chain Ready for the Future

Four Steps to a Digital Supply Chain

A good place to start when shaping a digital strategy is understanding the industry context and the company’s starting point. For example, many companies start with customized legacy IT systems. Replacing these with the latest off-the-shelf digital tools can generate new revenue, improve responsiveness, increase efficiencies and reduce the total cost of ownership for IT systems.

Leading companies develop the culture, data analytics, and IT systems to support their digital strategy and business objectives. They pursue specific goals with near-term value while adopting a clear view of their digital destination. And they remain ready to pivot as their industry evolves.

1. What’s my Ideal Future State?

The key to building supply chains that will be competitive in 5 or even 10 years is anticipating change. Leaders evaluate where the industry is going and identify the supply chain capabilities they need to get there.

True, anticipating change is a strategic leap into the future. But most leadership teams can gauge what their business may look like in 3, 5 and 10 years. The 3-year vision is likely to be more concrete, while the 5-year and 10-year visions will be more conceptual. For many retailers and consumer products companies, for instance, it is clear that e-commerce has raised consumer expectations and that traditional retail distribution and replenishment models are unable to meet the needs of their customers who are demanding shorter lead times.

Successful companies avoid incremental moves by envisioning just how extreme the future might look. For example, what would happen if the entire business moved from high margin to low margin or if it shifted from standard products to custom products? These scenarios can help supply chain teams identify what the company would need to do differently and what new capabilities any such changes would demand.

2. Spot the Gaps

Figuring out the ideal future state for a supply chain allows leadership teams to identify missing capabilities and start building them. In our experience, companies that make the right short-term investments to improve supply chain performance generate significant savings to fund long-term investments.

A leading specialty retailer put that technique to good use when an aging supply chain created problems for its direct-to-customer business. The company had underinvested in its supply chain for years, and its basic infrastructure was in poor shape. As a result, service was far inferior to that of digital-savvy competitors. More than 15% of the company’s orders arrived later than promised, and customer loyalty was eroding rapidly.

The leadership team realized it needed to replace more than half of its aging distribution centers with several high-performing ones, but it couldn’t afford to make the entire investment at once. It started instead with the five largest distribution centers, investing in digital tools and establishing best-in-class distribution processes.

The initial pilot improved service levels by 20% while decreasing costs by 20%. The company now expects to turn around its performance in these facilities within nine months, resolving many of its late-delivery problems and its reputation for poor service. Over the next three years, the leadership team plans to close additional gaps, cutting supply chain costs by 20% to 30%. Achieving that goal will create a war chest to fund future investments.

3. Design Options to Close the Gaps

Leading companies create a portfolio of near-term and longer-term options to help them close the gaps between their current supply chain and the future ideal state. For example, they may consider outsourcing elements of the supply chain to minimize the complexity of serving certain businesses or segments. Alternatively, they may consider closing multiple gaps through one common IT platform supporting multiple businesses, with additional specialized capabilities specific to certain business units supplementing this core shared system.

A national food manufacturer for groceries and convenience stores used this approach to turn around declining sales. The company’s core problem was matching demand with its manufacturing plan. It lacked information about which products were selling quickly and which ones were sitting on the shelf. As a result, it was slow to produce and replace out-of-stock items. That led retailers to shrink the shelf space they allotted to the company – a vicious circle that was eroding sales.

The company contemplated several options to improve its ability to meet consumer demand. Investing in better forecasting tools and processes could improve accuracy but would not eliminate all uncertainties. Advanced manufacturing technology could reduce its cycle time, but the company would still need to forecast item sales. The leadership team decided to invest in digital tools to connect the salesforce and delivery team with central planning and manufacturing. The new system identified products that were selling nearly in real time, giving both teams greater visibility into store demand. That, in turn, helped it manufacture the right products to quickly fill empty store shelves and increase sales.

4. Build a Balanced Roadmap

One challenge for leadership teams contemplating a supply chain upgrade is identifying near-term steps that will help pay for future innovations. Successful companies build a short-term roadmap with concrete initiatives that will start delivering benefits quickly and provide flexibility in reaching long-term supply chain goals.

One global technology company faced enormous supply chain challenges when it suddenly had to support five new multibillion-dollar businesses. The shift was part of a new market strategy to accelerate growth, but it wreaked havoc on the company’s highly customized supply chain.

Management had to make sure that the new supply chain could enable an array of new business models and balance their competing demands. That meant investing in basic IT capabilities and supporting new cross-functional business processes. For example, if the salesforce agreed to customize a product for a client, the supply chain would need to be able to validate the custom configuration with design, track the lead time of internal and external parts, follow this custom product through delivery, and forecast the resulting revenue and cost.

The leadership team’s roadmap met all these competing needs while generating quick wins and providing flexibility to accommodate future capabilities and evolving technologies. By shifting existing priorities, the roadmap helped the company fund the complex program with only a modest increase in spending beyond its baseline.

 

At the Next Executive Team Meeting

Companies eager to start down the path toward a digital supply chain can begin by debating three questions at the next executive team meeting.

  • What will our business look like in five years, and what supply chain capabilities do we need?
  • How could digital tools help us create powerful new business models?
  • What two or three high-value digital moves should we get started on?

The answers to those questions will provide valuable context for shaping a supply chain that will be competitive for years to come. Successful companies set the direction for the journey and remain nimble. Flexibility and adaptability are more important than precision.

After all, market conditions will change, and new competitors will emerge. Tomorrow’s winners will be those that can turn disruption into opportunity.

About the Authors
Sam Israelit and Peter Hanbury are partners with Bain & Company in the San Francisco office. Rodrigo Mayo is a partner with Bain in the Mexico City office. Thomas Kwasniok is a Bain partner in the firm’s London office.

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Walmart’s Key to Unlocking its Full Online Growth Potential

As reported by Business Insider, Walmart plans to reach a 40% US online growth target by 2019.

With the recent announcement that it will roll out an online grocery delivery option in over 100 cities, the retailer may get to those targets after all, Seth Sigman, an analyst at Credit Suisse, wrote in a note to clients.

This rollout will be available to around 40% of US households by the end of the year.

Around 90% of Americans live within 10 miles of Walmart’s brick-and-mortar stores, giving the company a significant advantage over its competitors.

Due to its proximity to customers, Walmart could use its physical locations as a distribution hub to leverage its supply chain and provide faster deliveries.

Moreover, Walmart’s online grocery delivery rollout will supplement the retail giant’s ongoing expansion of grocery pick-up offerings, resulting in 2,200 stores that offer this service from 1,100 stores by this year.

Sigman has been optimistic about the company’s “click and collect” option – which allows customers to shop online through its website and pick up groceries at Walmart’s physical locations – seeing it as an opportunity to drive incremental sales growth.

Coupled together, this is where the retailer can shine, Sigman says, because online grocery still remains “largely an untapped market.”

“For Walmart, given how early it is, we think it can lead the growth, and attain [online grocery] share well above their online market share today in other categories.”

Yet he admits that online grocery delivery is getting more competitive. Amazon has been testing a two-hour grocery delivery service from Whole Foods in select cities while Target has acquired the delivery platform Shipt, to help it expand its same-day delivery offerings across the US.

Still, the retailer’s acquisition of Jet.com and the launch of free two-day shipping for orders over $35 or more in January will only serve to boost its chances of hitting its targets, Sigman says.

While some investors and analysts have nearly written off Walmart after it reported a slowdown in online sales growth last quarter, Sigman believes the retailer can redeem itself through a golden opportunity in online groceries.

Read: Walmart’s Eden and Verigo’s Pod Quality: Technology to Reduce Fresh Produce Waste in Supply Chains

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U.S. Universities Sweep Top Rankings for Best Paid Master of Business Administration Degrees

As reported by Bloomberg, a new survey of the 20 best-paid graduate business schools found that the top 11 are all in the U.S.

The Sloan School of Management at the Massachusetts Institute of Technology came out on top, with a median salary and bonus of $286,000, according to a survey from Emolument.com, a crowdsourced site for benchmarking salaries.

Read: Logistics Management 33rd Annual Salary Survey

Graduate programs at Harvard and the University of Chicagofinished second and third respectively.

Europe’s highest-placed school, the INSEAD business school in Fontainebleau, France, came in 12th place overall. Its graduates earn a median pay and bonus of $185,000, the survey found.

The University of St. Gallen in Switzerland ranked 13th, and the Judge school at Cambridge University was U.K.’s best performer, ranking  14th globally. None of the top 20 were in Asia.

Source: Emolument.com

The findings are a boost for MIT Sloan, which placed third on Bloomberg Businessweek’s 2017 ranking of U.S. business schools.

Harvard topped that list for a third straight year. INSEAD was the highest-ranked international business school by Bloomberg.

Related: The 50 Smartest Companies in the World

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Walmart’s Eden and Verigo’s Pod Quality: Technology to Reduce Fresh Produce Waste in Supply Chains

 

March 1, 2018 · By 24/7 Staff ·

Walmart recently announced an intelligent quality management system is being used throughout Walmart supply chains and distribution centers to reduce waste and increase the quality of fresh produce.

The quality management system, called Eden, utilizes machine learning and temperature monitors to predict the freshness (ie. shelf life) of a variety of commodities, ranging from bananas to apples to tomatoes.

Eden aims to track freshness throughout the supply chain, which empowers informed decision making based upon the remaining freshness of a shipment of product.

The company says the technology, will save Walmart $2 billionover the next five years, mostly through a reduction in food waste.

It has already saved Walmart $86 million since it was deployed to its 43 food-distribution centers in January of last year, according to Parvez Musani, vice president of supply chain technology engineering at Walmart Labs.

“We are constantly looking at technology to serve our customers better,” Musani told Business Insider in an interview.

The technology will soon extend to the farms of Walmart’s suppliers as well.

“We’ll have drones flying over the farms” to monitor temperatures and other factors that determine the quality of the produce Walmart is getting from suppliers, Musani said.

The company said the technology will not replace workers, however, saying humans will always be involved in the process of determining food quality.

“The machines will just help speed things up,” Musani said.

Making supply chain decisions based on the freshness allows for optimal routing and rotation of fresh produce, which in turn will reduce waste and increase quality, which is a win for all stakeholders.

For example, if Eden sees that the temperature on a pallet of bananas has increased beyond an optimal threshold, the smart system can judge that the quality has degraded, and re-route that shipment to a closer distribution center or store.

The proliferation of technology to fight food waste (and increase the bottom line) has been long overdue.

The technology could also deal a blow to Amazon and Whole Foods, which has been facing customer complaints about the quality of its food produce.

Though Eden is an internal Walmart initiative, other companies provide similar products in the fight against food waste.

Read: An Inconvenient Truth About the Produce Supply Chain – Is New Tech The Solution?

Continuous Product Life Data, From Farm to Store

Verigo’s Pod Quality system operates on similar principles to Walmart’s Eden.

Pod Quality is the first temperature data logger smart enough to continually translate monitored temperature data into actionable freshness scores of produce in transit.

The key to the new Pod Quality monitoring device is the Quality Analysis engine it contains which translates raw sensor data into a single, actionable metric called Product Life.

This metric results from the analysis of a number of variables – commodity type, initial quality, and product temperature – and translates them to display the number of days of actual remaining shelf-life of that product.

Leveraging over 30 years of research from the USDA and studies with growers such as Driscolls and Berry World, Verigo has developed a growing library of unique Product Life Profiles which each characterize the degradation characteristics of a particular commodity, from Asparagus to Zucchini.

Verigo “smart” pallets will record, analyze, and continuously communicate temperature and remaining Product Life to any phone or tablet within ~15 meters.

At any point in the chain, staff can use the Verigo mobile app to view the quality and history of the products onscreen, without having to install any infrastructure of antennas, readers, or gateways. And as long as the phones and tablets used by staff have an internet connection, all data is automatically sent to the Verigo Cloud platform and is visible to management anywhere in the world.

How It Works

 

 

For the first time, it is now possible to do much more than monitor temperatures. With access to information about the shelf-life of individual pallets, stakeholders are empowered to make informed decisions that will reduce shrink by 20-40%.

Growers can now see when post-harvest, cooling, and packing operations are degrading shelf-life more than planned and take corrective action. Wholesalers can see the remaining life of pallets in the warehouse, and prioritize the inventory rotation and routing of pallets to minimize rejections. And receivers can begin evaluating the integrity of the products arriving at the dock before an inspection.

“This concept [smart shelf-life management] has been around for a long time, but it has never actually been developed and released as a usable product. Now that it’s here, we have an opportunity to change how quality is managed to prevent millions of dollars in shrink, and provide unprecedented quality to consumers. It’s truly a win-win.” states Verigo CEO Adam Kinsey.

Related: An Inconvenient Truth About the Produce Supply Chain – Is New Tech The Solution?

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Thursday, April 19, 2018, 02:00 PM EDT

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ONE Blockchain Platform to Provide Enhanced Transparency and Security for Supply Chains

One Network Enterprises, the global provider of a multi-party digital network platform, today announced a new, flexible and cross-industry Chain-of-Custody solution built on its Real Time Value Network (RTVN).

By providing serialization and tracking across complex supply chains that involve multiple parties and hand-offs, this latest offering leverages the powerful capabilities of Blockchain to help mitigate threats such as product diversion, counterfeiting, grey market distribution, spoilage, substandard products, and unauthorized introductions.

“The global implications of substandard, falsified, and counterfeit and substandard products are huge,” said Ranjit Notani, CTO of One Network.

“While some of the compromises in traditional Blockchain solutions must make the difficult choice between confidentiality, single-version-of-the-truth, and a lack of scalability, ONE Blockchain is fully integrated into One Network’s global fulfillment backbone offering a completely secure application with fine-grained confidentiality at all levels, while maintaining a single, trusted record for every transaction without requiring any expensive integration into supply chain operations.”

The new Chain-of-Custody solution was developed to deal with the realities of today’s supply chains where end-to-end serialization – from raw materials to consumers and beyond – is not an all or nothing proposition.

Accordingly, the solution is designed to increase the lengths of chain-of-custody segments until the segments merge to form a full end-to-end secure chain.

The Chain-of-Custody solution supports serial tracking, lot tracking, hybrid tracking, lot splitting, tracking through consolidation and deconsolidation, tracking through blending and discrete mixing, hierarchical IoT operations, partial chains-of-custody, and targeted recalls.

It also supports fine-grained, state-based distinct confidentiality for owners, possessors, recallers, QA, customs and other parties.

“By facilitating the mass serialization and lot tracking, the new Chain-of-Custody solution helps organizations comply with global mandates such as the recent U.S. Drug Supply Chain Security Act,” said Greg Brady, CEO of One Network.

“Because the offering is a part of our Real Time Value Network, participants can react in near-real-time to various issues in the chain-of-custody while Intelligent Agents can respond to these issues and resolve or recommend solutions as they occur.”

Related: One Network Enterprises New One Blockchain Solution

About One Network Enterprises
One Network is bringing the network to connect companies and their entire ecosystem, to serve the customer. Founded in 2002, One Network offers patented solutions to multi-party business, including supply chain management. One Network’s cloud platform, the Real Time Value Network™, eliminates the traditional divide between planning and execution and provides visibility and enables data to flow across the entire value chain of business partners – in real time. Additionally, One Network offers PaaS solutions and developer tools that allow organizations to design, build and run multi-party applications. Leading organizations from around the world from nearly every industry have joined One Network, helping to transform industries from CPG, Healthcare, Automotive, Retail, Logistics and Public Sector and Defense.

Can Blockchain Revolutionize the Supply Chain?

In a new white paper, Ranjit Notani, One Network CTO examines Blockchain’s powerful potential as well as a major problem and whether and how Blockchains can revolutionize the Supply Chain.

Notani explains exactly what Blockchain is and the unique advantages it provides.

He further identifies the major problem facing Blockchain in relation to supply chains, and proposes a solution.

“By combining Blockchain with a non-Blockchain mediator (the Backchain Initiator) to cover the majority of the revolutionary use-cases of single version-of-the-truth mediated shared state, we can realize Blockchain’s full potential in managing complex, multi-party supply networks.”

Download this white paper and learn:

  • Why the “shared ledger” view of Blockchain is a misleading and what it really is
  • The major problem when it comes to supply chains and the failed attempts to fix it
  • How the concepts of “Frontchain” and “Backchain” can provide a solution
  • Why “Deep Matrixed Permissions” are necessary for a multi-party supply chain
  • How Blockchain can use new technology to radically improve the way supply chains are managed

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Amazon’s Ever-Increasing Ecommerce Shipping Costs

Amazon is reportedly planning to launch a delivery service in the next few weeks that would put the e-commerce giant in direct competition with FedEx and UPS.

Thus far, despite operating an elaborate network of fulfillment, sortation, and delivery centers, Amazon has ceded control over the “last mile” to the companies it now looks set to start competing with.

As Amazon continues to grow, its logistics costs have skyrocketed over the past decade.

In 2017, the company’s fulfillment and shipping expenses amounted to $25.2 billion and $21.7 billion respectively, up from just over $1 billion each ten years earlier. Introducing its own shipping service would not only give Amazon the chance to keep shipping costs at bay, it would also reduce the risk associated with relying on UPS and FedEx for last-mile delivery.

In its 10-K report, Amazon notes: “We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers.

If we are not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact our operating results and customer experience.”

As the following chart shows, the relative weight of fulfillment and shipping costs on Amazon’s bottom line has increased over the past decade.

Last year, the two cost factors amounted to 26.4 percent of the company’s net sales, up from 16.6 percent in 2007.

The Growing Weight of Amazon’s Logistics Costs

Amazon’s fulfillment and shipping costs as a percentage of net sales

Using Your Logistics Expertise as a Competitive Weapon When It Comes To Ecommerce

The rules for success in ecommerce and omnichannel fulfillment are still being written, and they will likely be different tomorrow than today.

What’s clear is that customers, whether they are consumers or other businesses, are now the center of every company’s supply chain universe; they are the center of gravity that all supply chain processes must revolve around and respond to.

This new customer-centric reality is prompting retailers and manufacturers of all sizes to revisit their strategies and capabilities to succeed in this highly-dynamic, highly uncertain, and highly-competitive environment.

The first step toward success in this new era is arguably the most important: taking a broader perspective on the role and value of supply chain and logistics.

How Do You Get Started? Here Are Four Recommendations:

  1. Focus on Customers: Understand Their True Requirements and Expectations
  2. Link the Value of Supply Chain and Logistics to the Company’s Strategy and Business Plan
  3. Promote Enhanced Collaboration Between Supply Chain, Logistics, Sales, Marketing, and Customer Service
  4. Leverage the Knowledge, Expertise, and Resources of Your 3PL partners

As you begin your journey toward making logistics a competitive weapon, collaborate with your current third-party logistics partners because they already possess two critical attributes for success: they have already earned your trust by successfully managing your existing fulfillment operations and they are already very knowledgeable about your products and supply chain, as well as very knowledgeable about emerging trends and leading practices in the industry.

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Amazon Begins Grocery Delivery from Whole Foods Market

Amazon and Whole Foods Market announced the introduction of free two-hour delivery of natural and organic products from Whole Foods Market through Prime Now, with plans to expand across the U.S. in 2018.

Starting yesterday, Prime customers in neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach can shop through Prime Now for bestselling items including fresh produce, high-quality meat and seafood, everyday staples and other locally sourced items from Whole Foods Market.

John Mackey, Whole Foods Market co-founder and CEO

“We are happy to bring our customers the convenience of free two-hour delivery”John Mackey, Whole Foods Market co-founder and CEO

Customers can start shopping from Whole Foods Market selection at www.primenow.com or by using the Prime Now app available on Android and iOS devices.

“We’re happy to bring our customers the convenience of free two-hour delivery through Prime Now and access to thousands of natural and organic groceries and locally sourced favorites,” said John Mackey, Whole Foods Market co-founder and CEO.

“Together, we have already lowered prices on many items, and this offering makes Prime customers’ lives even easier.”

Prime customers can shop thousands of items across fresh and organic produce, bakery, dairy, meat and seafood, floral and everyday staples from Whole Foods Market available for free two-hour delivery.

Select alcohol is also available for delivery to customers. Prime members receive two-hour delivery for free and ultra-fast delivery within one hour for $7.99 on orders of $35 or more.

Delivery from Whole Foods Market through Prime Now is available daily from 8 a.m. to 10 p.m.

Customers can visit www.primenow.com or download the Prime Now app to enter their zip code to see if they are in the delivery area.

As reported by Bloomberg, about 7 percent of U.S. households bought groceries online last year, according to NPD Group.

Read: Growing Ecommerce Grocery Channel Will Accelerate Adoption of Meal Kit Delivery Services

Most of those – about three-quarters – get their orders delivered to their door; the rest pick it up at the store. NPD Group said it expects online grocery shopping to grow quickly, especially among young adults, who are more comfortable shopping online. And grocery chains don’t want to miss out when that happens.

Walmart, the country’s largest grocer, is making it easier for customers to order groceries online and pick them up at the store.

Target bought grocery-delivery company Shipt late last year. Kroger, the largest traditional supermarket chain, has been promoting store pickup for online orders and doing trials of home delivery.

Amazon isn’t saying where delivery will expand, but its Prime Now service is in more than 30 cities, including Chicago, Milwaukee, and San Diego.

The announcement gives Amazon yet another way to get groceries to customer’s doorsteps.

Related: Amazon Reportedly Focusing on Expanding its Delivery Trial Offering Threatening FedEx & UPS

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