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Category Archives: Ocean Freight

C.H. Robinson Announces Bob Biesterfeld to Replace John Wiehoff as CEO

February 13, 2019 · By Jeff Berman · 

C.H. Robinson Chief Executive Officer

A change at the top is coming soon for Minneapolis, Minn.-based global logistics services provider, and freight forwarder C.H. Robinson.

The company announced that as part of a “long-planned succession process”, effective May 9, Chief Operating Officer Robert (“Bob”) Biesterfeld, will become Chief Executive Officer, as well as being nominated to stand for election to the company’s board of directors.

Biesterfeld will replace C.H. Robinson Chairman and CEO John Wiehoff, who will continue as Chairman of the Board when Biesterfeld becomes CEO.

C.H. Robinson also announced that Scott Anderson, current C.H. Robinson Board member, will become the Lead Independent Director, also effective May 9.

“Our success at Robinson has always been driven by our people, processes, and technology,” Wiehoff said in a statement.

“The Board and I are confident Bob is the right person to lead our accelerating investments in each of these areas. During his almost two decades at Robinson, Bob has consistently demonstrated deep industry knowledge, strategic vision, and a passion for delivering results. He has been the driving force behind our digital transformation efforts, accelerating the pace of innovation and technology deployment across our platform. He is an established leader with the right experiences and skills for the next chapter of Robinson.”

Chief Operating Officer Robert (“Bob”) Biesterfeld

Biesterfeld will have large shoes to fill, as, under Wiehoff’s leadership at C.H. Robinson CEO over the last 17 years, total company revenues have increased more than 500% to $16.6 billion, with annualized total shareholder returns of 13% over the past 17 years.

An accomplished industry veteran, Biesterfeld has been with C.H. Robinson for 20 years. Before being named COO in March 2018, he served as President, North America Surface Transportation and prior to that he served as Vice President, Truckload and Vice President, Robinson Fresh, where he started his logistics career path in 1999.

Biesterfeld is a graduate of Winona State University and serves on Board of Winona State University Foundation in addition to the board of the Transportation Intermediaries Association.

Earlier, Logistics Management/Peerless Media Group News Editor Jeff Berman caught up with Biesterfeld to discuss his new role as CEO and industry trends and themes. A transcript of their conversation follows below.

What are your expectations and objectives in your pending new role as C.H. Robinson CEO?

We have had a senior leader in John Wiehoff, who has been in the CEO chair for most of the past 20 years or so.

As for what looks different on May 9, I think the really good news for our people and organization is that John’s tenure as CEO has been nothing short of spectacular. In the industry changes that have occurred over the last 17 years, with competitive and macro forces and the cyclical and secular changes of our history, C.H. Robinson started in a leadership position, at the beginning of John’s tenure as CEO, and will end his tenure as CEO in a leadership position as well.

Over the last four years or so that I have served as the company’s president of North America Surface Transportation or COO, with accountability for the company’s five business units and shared services as well, John and I and the rest of the senior leadership team have really been co-developing and co-owning the strategic direction of C.H. Robinson.

As John exits in May, there will not be a sharp left or right turn, in terms of our strategic priorities or how we invest our capital or how we show up in the marketplace. There have been a few chapters of the company’s history over the last 115 years, and one of the interesting things is that John is not the only long-tenured CEOs.

Going back to 1963, prior to my being appointed in this role, we have only had three senior leaders since then. I think it really shows the stability of our company and that we have continued to invest across multiple generations of supply chains, as we established our foundation and determined what we ‘want to be when we grow up’ so to speak.

Our roots began as a production company, evolving into being more of a full logistics provider in North America post-deregulation. We then got into the next chapter of international and global expansion, where we invested heavily in growth overseas in Asia and Europe, as well as the first instances of Navisphere, our technology platform.

When thinking about where we sit today, we have this great combination of North America and have spent more than $1.5 billion on M&A and investment into our global forwarding network. It was really about streamlining that investment and bringing it all together. 

Where do things go from there?

A lot of it has to do with turning the page to a more digital future, where we are very focused on the three core components of people, process, and technology, with technology continuing to be a more important piece of that overall puzzle.

That is how I am thinking about it directionally, and our senior leadership team is focused on that strategy.

Staying with technology, given all the attention to logistics technology in the form of things like blockchain, AI, IoT, Cloud, and others, how would you describe the state of supply chain and logistics technology?

There is no doubt that the logistics technology space is growing faster than ever, with change never slower than it is today.

The way that I think about it is that everyone has algorithms, and, years ago, everybody talked about proprietary technology and now everybody has it in some way, shape, or form. And all the leading companies in the logistics space have their own data scientists and algorithms. There is kind of this level set across technology, and there can only be so many differentiators, with everyone pursuing the same goals.Collaborative Supply Chain Intelligence

June 24 – 26, 2019 • The Broadmoor • Colorado Springs, CO

Collaborative Supply Chain Intelligence

Keep up-to-date

Full details coming soon!

Technology on its own is, really, I don’t think, the solution. We think about our investments in technology, and they really support the two other pillars, people and process, and where we think those three things come together, and what separates us in that space…is experience and scale. When we think about that fact that we have had 115 years of experience, we have learned a lot of things along that journey.

That experience does not come with just time; it comes across multiple industry verticals, continents, and modes and services. When we aggregate those experiences, the other thing we are aggregating is data, and we have all these data points that we are able to bring together on a global basis across what is viewed as the world’s largest supply chain platform.

That really starts to become scale, and our IT people that are building programs and cool algorithms have a really big competitive advantage, because we have more data, and we have more data because we have more loads. 

How does that data translate into the market?

When a small motor carrier comes to us, 15%-to-20% of its miles are driven empty and are non-revenue-generating miles. The biggest thing a small motor carrier wants is more miles to get more money, and, chances are, we have a load closer to that carrier than anybody else does.

If a shipper comes to us, we can offer them a broader base of capacity than anyone else does and we are more likely able to provide a service for them that is on time and meets their needs.

Another thing specifically around technology is that many of the new technology entrants, or tech-enabled brokers, or disruptors, disruptors, are really pushing customers to integrate and operate only on their platform.

What is C.H. Robinson’s approach?

We want Navisphere to be the easiest supply chain platform to use in the industry.

If you would like to operate in Oracle or SAP or whatever your ERP system is as a shipper, or JDA as a carrier, or use your off-the-shelf Transportation Management System, we can work with you, rather than pushing customers only on to our systems.

We want to meet our customers where and how they want to buy, as opposed to pushing them.

Shifting gears, C.H. Robinson is a very big player in a very competitive and crowded brokerage market. In this environment, what are you trying to do as a company to distance yourselves from the competition, given such a finite carrier base?

Looking at the customer lens is where we try to start all of our conversations.

We serve such a broad and diverse group of customers, from the smallest micro shipper making something in a garage and doing a residence pick up and shipping a parcel, to the world’s largest companies that are fully integrated with Navisphere, like Microsoft, for example, that uses our technology to power their supply chain.

We have a whole continuum of customers, from the smallest of the small to the largest of the large, and I think what has been important for our customer go-to-market strategy is to ensure that we have aligned our value to the needs of those customers.

Can you provide an example of that?

We are not going to go to a small manufacturer and ship once a month and sell them on our data and analytics capabilities or our robust reporting.

So, for that small shipper, we will ensure they have the easiest system to access and have access to the best rates for parcel, LTL, and truckload and that they can come online, get a quote, book a shipment, swipe a credit card, and within an hour have someone there picking that shipment up to bring it to the final destination in full.

But a Microsoft does not want to deal with using a credit card. They need robust reporting and real-time visibility through things like IoT and sensors and the Cloud, which shows them where their entire inventory is, in motion or at rest, to be able to ensure there are no supply chain disruptions for something like the next launch of an Xbox.

We are focused on providing value for a wide variety of segments. If you think about specific verticals like oil and gas, they have very specific needs…so we really work to customize that solution for that sector. It takes smart people and supply chain engineers to do that, and it goes back to having the people, process, and technology to do that.    

Looking at the current state of the market, what is different now compared to a year ago?

What is different now compared to a year ago is the cycle repeats itself again and again and again. It started with the hurricanes, which drove capacity constraints and things [were crazy], with very few trucks and many loads and that led to an industry reset and everyone re-priced.

In our Managed Services business last year, I think our average tender for a truckload shipment was 3.5, meaning that loads went through the routing guide to the third or fourth carrier before it was bid on and this is for the $4 billion worth of freight in our industry.

Today, it is now about 1.4, so what happened was that everyone went out to market…and people locked in capacity at higher rates and when that happens the spot market dries up, as it is comprised of unplanned demand. Loads that were supposed to go through the tracking process fall back in and that drives spot market pricing down and resets rates at a higher rate.

If you look at public motor carrier earnings, they are talking about mid-to-high single digit rate increases for 2019, which I believe to be an effect of the rate pricing they did in 2018. The rates now are a combination of a mixed shift with contractual freight making up a higher percentage of our portfolio combined with declining annual spot market rates.

How do you view the last-mile logistics and the e-commerce driven supply chain?

There is no question that e-commerce and omnichannel fulfillment have changed a lot about the supply chain, in terms of inventory position, order cycles, and other things.

Beyond that, the experience we have on our mobile devices that we get used to when we order something online, or the personal experience, is now transferring into our business experience. We now need to know where everything is all of the time.

In terms of our position, there are a couple of things that have driven change to our model. One thing is that we are working with a lot of shippers in Asia that want to position inventory through things like Fulfillment by Amazon and other seller networks to move products out of Asia, and that works really well for our ocean and air business. We certainly are not one of the largest providers of the inside home delivery type of business.

The biggest part of our business directly related to e-commerce exists with our managed services business, where we are using Navisphere to provide large global shippers with complete supply chain visibility across everything from ocean freight to parcel shipments.

We are touching it in a lot of different ways, and in the last few years or so we are seeing it in the average length of our truckload movements.

How is that?

In 2013, the average mileage per truckload was about 780 miles and it is now 620 or so.

The impact through the shortening of the length of haul is a function of inventory being placed in different parts of the country.

It allows for the order cycle to be shorter and enables us to move things when and where we want it in a different way.

What are some of the key things happening in the ocean market from a C.H. Robinson perspective?

When we look at our ocean business as a forwarder, we are a much bigger player there than we are on the air side.

Our focus in ocean has been to continue to strengthen our TransPacific eastbound business, as we are the largest NVO in that lane and also into Australia.

When we acquired Phoenix International in 2012, we really doubled the size of our overall global forwarding business and somewhat turned the keys over to the Phoenix leadership to continue to build on their model.

In the ocean business, we are continuing to build out density in our trade lanes and we will continue to look for ways to grow in that space both organically and through acquisition.

What about the air forwarding market?

2018 was a really important year for us in that space as we invested heavily into it. It is a complex market.

You cannot just sit on a trade lane; you need to focus on gateways, assets, and people, and it continues to be a strong growth vehicle for us.

Related ArticleC.H. Robinson CEO John Wiehoff Talks Transportation Trends

C.H. Robinson CEO John Wiehoff Talks Transportation Trends

Related Resources

Download the Paper

Why eShipping Selected the SMC³ Platform for Transactional LTL API Connectivity New!
In this case study, Chad Earwood, CEO of eShipping, describes how they integrated the SMC³ platform for transactional LTL API connectivity, and by using the analytical APIs RateWare XL and CarrierConnect XL they are able to obtain immediate LTL rates and audit LTL pricing. Download Now!


Download the Paper

Strategic LTL Bidding for Minimum Cost & Maximum Efficiency
This paper details how SMC³ designed Bid$ense for complete procurement transparency, and how you’ll move ahead with ease and confidence toward best-choice carrier qualification and truly strategic LTL procurement. Download Now!


Download the Paper

The Case for a Re-Indexed LTL Benchmark Pricing System
This paper takes a deep dive into SMC³’s CzarLite XL, an advanced pricing system solution that gives shippers, logistics service providers and carriers a new neutral benchmark choice when negotiating LTL shipping rates. Download Now!


Download the Paper

The Single Source for LTL Pricing & Transit Information
The SMC³ Platform empowers 3PLs and Shippers of any size to successfully navigate and optimize the LTL shipment arena, choose the level of computing power based on your specific needs and operating environment with a technology platform offering the best of all worlds. Download Now!


More Resources from SMC³

Article Topics Trends  Business  Leadership Leadership Logistics Services Provider Transportation Management Systems All topics

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About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics ManagementModern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman Latest Business NewsC.H. Robinson Announces Bob Biesterfeld to Replace John Wiehoff as CEOFebruary 13, 2019 ·         C.H. Robinson has announced that as part of a “long-planned succession process”, effective May 9, Chief Operating Officer Robert (“Bob”) Biesterfeld, will become Chief Executive Officer, as well as…
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February 13, 2019 · By Jeff Berman · 

C.H. Robinson Chief Executive Officer

A change at the top is coming soon for Minneapolis, Minn.-based global logistics services provider, and freight forwarder C.H. Robinson.

The company announced that as part of a “long-planned succession process”, effective May 9, Chief Operating Officer Robert (“Bob”) Biesterfeld, will become Chief Executive Officer, as well as being nominated to stand for election to the company’s board of directors.

Biesterfeld will replace C.H. Robinson Chairman and CEO John Wiehoff, who will continue as Chairman of the Board when Biesterfeld becomes CEO.

C.H. Robinson also announced that Scott Anderson, current C.H. Robinson Board member, will become the Lead Independent Director, also effective May 9.

“Our success at Robinson has always been driven by our people, processes, and technology,” Wiehoff said in a statement.

“The Board and I are confident Bob is the right person to lead our accelerating investments in each of these areas. During his almost two decades at Robinson, Bob has consistently demonstrated deep industry knowledge, strategic vision, and a passion for delivering results. He has been the driving force behind our digital transformation efforts, accelerating the pace of innovation and technology deployment across our platform. He is an established leader with the right experiences and skills for the next chapter of Robinson.”

Chief Operating Officer Robert (“Bob”) Biesterfeld

Biesterfeld will have large shoes to fill, as, under Wiehoff’s leadership at C.H. Robinson CEO over the last 17 years, total company revenues have increased more than 500% to $16.6 billion, with annualized total shareholder returns of 13% over the past 17 years.

An accomplished industry veteran, Biesterfeld has been with C.H. Robinson for 20 years. Before being named COO in March 2018, he served as President, North America Surface Transportation and prior to that he served as Vice President, Truckload and Vice President, Robinson Fresh, where he started his logistics career path in 1999.

Biesterfeld is a graduate of Winona State University and serves on Board of Winona State University Foundation in addition to the board of the Transportation Intermediaries Association.

Earlier, Logistics Management/Peerless Media Group News Editor Jeff Berman caught up with Biesterfeld to discuss his new role as CEO and industry trends and themes. A transcript of their conversation follows below.

What are your expectations and objectives in your pending new role as C.H. Robinson CEO?

We have had a senior leader in John Wiehoff, who has been in the CEO chair for most of the past 20 years or so.

As for what looks different on May 9, I think the really good news for our people and organization is that John’s tenure as CEO has been nothing short of spectacular. In the industry changes that have occurred over the last 17 years, with competitive and macro forces and the cyclical and secular changes of our history, C.H. Robinson started in a leadership position, at the beginning of John’s tenure as CEO, and will end his tenure as CEO in a leadership position as well.

Over the last four years or so that I have served as the company’s president of North America Surface Transportation or COO, with accountability for the company’s five business units and shared services as well, John and I and the rest of the senior leadership team have really been co-developing and co-owning the strategic direction of C.H. Robinson.

As John exits in May, there will not be a sharp left or right turn, in terms of our strategic priorities or how we invest our capital or how we show up in the marketplace. There have been a few chapters of the company’s history over the last 115 years, and one of the interesting things is that John is not the only long-tenured CEOs.

Going back to 1963, prior to my being appointed in this role, we have only had three senior leaders since then. I think it really shows the stability of our company and that we have continued to invest across multiple generations of supply chains, as we established our foundation and determined what we ‘want to be when we grow up’ so to speak.

Our roots began as a production company, evolving into being more of a full logistics provider in North America post-deregulation. We then got into the next chapter of international and global expansion, where we invested heavily in growth overseas in Asia and Europe, as well as the first instances of Navisphere, our technology platform.

When thinking about where we sit today, we have this great combination of North America and have spent more than $1.5 billion on M&A and investment into our global forwarding network. It was really about streamlining that investment and bringing it all together. 

Where do things go from there?

A lot of it has to do with turning the page to a more digital future, where we are very focused on the three core components of people, process, and technology, with technology continuing to be a more important piece of that overall puzzle.

That is how I am thinking about it directionally, and our senior leadership team is focused on that strategy.

Staying with technology, given all the attention to logistics technology in the form of things like blockchain, AI, IoT, Cloud, and others, how would you describe the state of supply chain and logistics technology?

There is no doubt that the logistics technology space is growing faster than ever, with change never slower than it is today.

The way that I think about it is that everyone has algorithms, and, years ago, everybody talked about proprietary technology and now everybody has it in some way, shape, or form. And all the leading companies in the logistics space have their own data scientists and algorithms. There is kind of this level set across technology, and there can only be so many differentiators, with everyone pursuing the same goals.Collaborative Supply Chain Intelligence

June 24 – 26, 2019 • The Broadmoor • Colorado Springs, CO

Collaborative Supply Chain Intelligence

Keep up-to-date

Full details coming soon!

Technology on its own is, really, I don’t think, the solution. We think about our investments in technology, and they really support the two other pillars, people and process, and where we think those three things come together, and what separates us in that space…is experience and scale. When we think about that fact that we have had 115 years of experience, we have learned a lot of things along that journey.

That experience does not come with just time; it comes across multiple industry verticals, continents, and modes and services. When we aggregate those experiences, the other thing we are aggregating is data, and we have all these data points that we are able to bring together on a global basis across what is viewed as the world’s largest supply chain platform.

That really starts to become scale, and our IT people that are building programs and cool algorithms have a really big competitive advantage, because we have more data, and we have more data because we have more loads. 

How does that data translate into the market?

When a small motor carrier comes to us, 15%-to-20% of its miles are driven empty and are non-revenue-generating miles. The biggest thing a small motor carrier wants is more miles to get more money, and, chances are, we have a load closer to that carrier than anybody else does.

If a shipper comes to us, we can offer them a broader base of capacity than anyone else does and we are more likely able to provide a service for them that is on time and meets their needs.

Another thing specifically around technology is that many of the new technology entrants, or tech-enabled brokers, or disruptors, disruptors, are really pushing customers to integrate and operate only on their platform.

What is C.H. Robinson’s approach?

We want Navisphere to be the easiest supply chain platform to use in the industry.

If you would like to operate in Oracle or SAP or whatever your ERP system is as a shipper, or JDA as a carrier, or use your off-the-shelf Transportation Management System, we can work with you, rather than pushing customers only on to our systems.

We want to meet our customers where and how they want to buy, as opposed to pushing them.

Shifting gears, C.H. Robinson is a very big player in a very competitive and crowded brokerage market. In this environment, what are you trying to do as a company to distance yourselves from the competition, given such a finite carrier base?

Looking at the customer lens is where we try to start all of our conversations.

We serve such a broad and diverse group of customers, from the smallest micro shipper making something in a garage and doing a residence pick up and shipping a parcel, to the world’s largest companies that are fully integrated with Navisphere, like Microsoft, for example, that uses our technology to power their supply chain.

We have a whole continuum of customers, from the smallest of the small to the largest of the large, and I think what has been important for our customer go-to-market strategy is to ensure that we have aligned our value to the needs of those customers.

Can you provide an example of that?

We are not going to go to a small manufacturer and ship once a month and sell them on our data and analytics capabilities or our robust reporting.

So, for that small shipper, we will ensure they have the easiest system to access and have access to the best rates for parcel, LTL, and truckload and that they can come online, get a quote, book a shipment, swipe a credit card, and within an hour have someone there picking that shipment up to bring it to the final destination in full.

But a Microsoft does not want to deal with using a credit card. They need robust reporting and real-time visibility through things like IoT and sensors and the Cloud, which shows them where their entire inventory is, in motion or at rest, to be able to ensure there are no supply chain disruptions for something like the next launch of an Xbox.

We are focused on providing value for a wide variety of segments. If you think about specific verticals like oil and gas, they have very specific needs…so we really work to customize that solution for that sector. It takes smart people and supply chain engineers to do that, and it goes back to having the people, process, and technology to do that.    

Looking at the current state of the market, what is different now compared to a year ago?

What is different now compared to a year ago is the cycle repeats itself again and again and again. It started with the hurricanes, which drove capacity constraints and things [were crazy], with very few trucks and many loads and that led to an industry reset and everyone re-priced.

In our Managed Services business last year, I think our average tender for a truckload shipment was 3.5, meaning that loads went through the routing guide to the third or fourth carrier before it was bid on and this is for the $4 billion worth of freight in our industry.

Today, it is now about 1.4, so what happened was that everyone went out to market…and people locked in capacity at higher rates and when that happens the spot market dries up, as it is comprised of unplanned demand. Loads that were supposed to go through the tracking process fall back in and that drives spot market pricing down and resets rates at a higher rate.

If you look at public motor carrier earnings, they are talking about mid-to-high single digit rate increases for 2019, which I believe to be an effect of the rate pricing they did in 2018. The rates now are a combination of a mixed shift with contractual freight making up a higher percentage of our portfolio combined with declining annual spot market rates.

How do you view the last-mile logistics and the e-commerce driven supply chain?

There is no question that e-commerce and omnichannel fulfillment have changed a lot about the supply chain, in terms of inventory position, order cycles, and other things.

Beyond that, the experience we have on our mobile devices that we get used to when we order something online, or the personal experience, is now transferring into our business experience. We now need to know where everything is all of the time.

In terms of our position, there are a couple of things that have driven change to our model. One thing is that we are working with a lot of shippers in Asia that want to position inventory through things like Fulfillment by Amazon and other seller networks to move products out of Asia, and that works really well for our ocean and air business. We certainly are not one of the largest providers of the inside home delivery type of business.

The biggest part of our business directly related to e-commerce exists with our managed services business, where we are using Navisphere to provide large global shippers with complete supply chain visibility across everything from ocean freight to parcel shipments.

We are touching it in a lot of different ways, and in the last few years or so we are seeing it in the average length of our truckload movements.

How is that?

In 2013, the average mileage per truckload was about 780 miles and it is now 620 or so.

The impact through the shortening of the length of haul is a function of inventory being placed in different parts of the country.

It allows for the order cycle to be shorter and enables us to move things when and where we want it in a different way.

What are some of the key things happening in the ocean market from a C.H. Robinson perspective?

When we look at our ocean business as a forwarder, we are a much bigger player there than we are on the air side.

Our focus in ocean has been to continue to strengthen our TransPacific eastbound business, as we are the largest NVO in that lane and also into Australia.

When we acquired Phoenix International in 2012, we really doubled the size of our overall global forwarding business and somewhat turned the keys over to the Phoenix leadership to continue to build on their model.

In the ocean business, we are continuing to build out density in our trade lanes and we will continue to look for ways to grow in that space both organically and through acquisition.

What about the air forwarding market?

2018 was a really important year for us in that space as we invested heavily into it. It is a complex market.

You cannot just sit on a trade lane; you need to focus on gateways, assets, and people, and it continues to be a strong growth vehicle for us.

Related ArticleC.H. Robinson CEO John Wiehoff Talks Transportation Trends

C.H. Robinson CEO John Wiehoff Talks Transportation Trends

Related Resources

Download the Paper

Why eShipping Selected the SMC³ Platform for Transactional LTL API Connectivity New!
In this case study, Chad Earwood, CEO of eShipping, describes how they integrated the SMC³ platform for transactional LTL API connectivity, and by using the analytical APIs RateWare XL and CarrierConnect XL they are able to obtain immediate LTL rates and audit LTL pricing. Download Now!


Download the Paper

Strategic LTL Bidding for Minimum Cost & Maximum Efficiency
This paper details how SMC³ designed Bid$ense for complete procurement transparency, and how you’ll move ahead with ease and confidence toward best-choice carrier qualification and truly strategic LTL procurement. Download Now!


Download the Paper

The Case for a Re-Indexed LTL Benchmark Pricing System
This paper takes a deep dive into SMC³’s CzarLite XL, an advanced pricing system solution that gives shippers, logistics service providers and carriers a new neutral benchmark choice when negotiating LTL shipping rates. Download Now!


Download the Paper

The Single Source for LTL Pricing & Transit Information
The SMC³ Platform empowers 3PLs and Shippers of any size to successfully navigate and optimize the LTL shipment arena, choose the level of computing power based on your specific needs and operating environment with a technology platform offering the best of all worlds. Download Now!


More Resources from SMC³

Article Topics Trends  Business  Leadership Leadership Logistics Services Provider Transportation Management Systems All topics

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Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics ManagementModern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman Latest Business NewsC.H. Robinson Announces Bob Biesterfeld to Replace John Wiehoff as CEOFebruary 13, 2019 ·         C.H. Robinson has announced that as part of a “long-planned succession process”, effective May 9, Chief Operating Officer Robert (“Bob”) Biesterfeld, will become Chief Executive Officer, as well as…
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It’s Almost October and the Holiday Hiring Has Arrived for the Transportation & Logistics Sector

The Holiday Hiring Season

The time for holiday hiring has arrived, with three of the biggest households in the freight transportation and logistics sectors-UPSFedEx, and XPO Logistics, each making announcements to that effect over the last few days.

The need for extra help, in form of staffing, is not a new, or novel, approach by any stretch of the imagination.

Instead, it is something that is required and needed, in order to keep up with the heightened demand that this new age of e-commerceand related last-mile logistics efforts, brings with it.

And when you factor in the holidays, well, it becomes quickly apparent that every one of these additional hires, even if temporary for the most part, are truly needed and serve as vital cogs in the fulfillment, distribution, warehousing, and delivery processes for each of these three companies.

Greenwich, Conn.-based XPO Logistics said it plans to hire 8,000 North American-based logistics staffers for the peak holiday season.

This looks to be a good decision at a good time, as the company said that its retail logistics volume through August is up around 20% compared to 2017, with the gains paced by consumer-demand for e-commerce and omnichannel retail fulfillment.

“We’re ramping up for the holiday season and another significant increase in e-commerce activity,” said Troy Cooper, XPO president, in a statement.

“We expect to add 8,000 seasonal jobs before November – a significant increase over last year’s holiday hiring. Our modern warehouses are filled with automation that is an attractive choice for workers and helps us to be as productive as possible for our customers.”

UPS, as usual, announced a significant seasonal staffing increase, with an expected 100,000 seasonal staffers to support what it described as its anticipated package volume increase from November through next January.

Big Brown said these seasonal positions are both full- and part-time, mainly for package handlers, drivers, and driver-helpers.

What’s more, it noted that these seasonal roles have long served as a springboard to full-time employment, as was as the case for UPS CEO David Abney and other senior UPS executives as well. UPS also said that over the last three years, 35% of the seasonal staffers it brought on became full-time staffers once the holiday season wrapped up.

“Every year, we deliver the holidays for millions of customers,” said Jim Barber, UPS chief operating officer, in a statement.

Jim Barber, UPS Chief Operating Officer

“Every year, we deliver the holidays for millions of customers”Jim Barber, UPS COO

“In order to make that happen, we also deliver thousands of great seasonal jobs at our facilities across the country.”

Lastly, when announcing the move for its FedEx Ground subsidiary to up its U.S. operations to six days a week, Memphis-based FedEx announced it plans to increase hours for some existing staffers and hire roughly 55,000 positions for the holiday season.

It also noted that FedEx Ground again plans to run six- and seven-day operations through the holiday season and also continue six-day operations throughout its U.S. network on a year-round basis.

FedEx said it expects a record influx of volume for this year’s holiday season and beyond, too, due to (you guessed it) increasing e-commerce demand. And FedEx made it clear that the rise in demand for e-commerce goes beyond peak, observing it is a “year-round phenomenon” and FedEx is prepared to meet that demand.

No matter how these companies word it, the fact remains that more e-commerce activity means more package volume, which means more staffers are needed to fill.

While unemployment is low, it stands to reason that these seasonal jobs may not be as easy to fill as they may have been in the past. But the opportunities are there, to be sure, and as in the case of UPS CEO Abney can potentially open the door to a bright future in the logistics field.

Buoyed by decent economic fundamentals and people shopping more than ever from the “virtual mall,” it is clear this is more than a trend and has been that way for more than a while, too. That will likely play out in the form of growing package volumes and the constant need for seasonal help.

6 Ways Companies Can Ready Their Supply Chains for the Holidays

“Because of the rise in the number of e-commerce orders during the holiday season, there is a big increase in transportation requirements for everything from last-mile packages delivered to a consumer’s home to inbound shipments coming into a distribution center,” said Dan Clark, Founder and President of Kuebix.

Read: It’s Almost October – Time To Get Ready For the Holidays!

  1. Give customers visibility to their orders. Using technology, retailers can provide Amazon-like experiences by tracking shipments in real-time and alerting customers if orders will be delayed. Carriers can house shipment information letting suppliers and customers know where their goods are and when to expect them to arrive at the next destination. With complete visibility, businesses can get more details on bottlenecks or specific incidents if there is an issue such as product damage or late delivery.
  2. Prepare to use the spot market to make up for excess demand not covered by carriers. Shippers can leverage their negotiated rates from their existing carrier relationships, and compare the full depth of market pricing across the spot bidding marketplace to find the best rates for the best service or to find the extra capacity to meet excess demand.
  3. Get more rates by connecting with more carriers. Connect to a global community with thousands of carriers, then compare all their rates side-by-side and choose the best carrier for each shipment, leading to substantial cost savings and better customer service.
  4. Get products as local to customers as possible. Many retailers are acquiring new, smaller warehouse space closer to their customers to shorten delivery times and journeys. Also, orders can be fulfilled from storefronts with end-to-end visibility of inventory. The shorter the distance from where inventory resides to the end customer, the faster the delivery and the lower the cost.
  5. Integrate internal systems like ERPs with transportation management platforms. The ability to integrate purchase orders automatically from an ERP system directly into the TMS cuts out paperwork and admin hours. Since the integration is two-way, shipment data is populated back into the ERP system for record-keeping and to provide stakeholders with complete visibility. This enables information down to the SKU level to be leveraged in claims management, meaning the shipper always has the information they need to protect their company’s interests. Shippers can also better understand the true landed cost of goods to make smarter decisions regarding their company’s bottom line when they integrate purchase orders directly from an ERP system.
  6. Get a TMS or replace legacy TMS platforms. Look for a TMS system that is modular and scalable so that it can expand as needs change during the busy holiday season. A cloud-based platform means faster implementation before the busy season and will have lower support costs. Actionable analytics from the TMS will help businesses make smarter shipping decisions and foster continuous improvements ahead of the holidays to ensure the supply chain is fully optimized.

“Black Friday, Cyber Monday and numerous holiday promotions all add to the huge spike in demand. Shippers need to keep operations flowing and use tools to handle the upsurge while keeping customers satisfied” said Clark.

Getting ready for the demand spikes imminent with the holiday season will keep businesses on track to meet customer expectations. Rising demand during the holiday season will ‘make or break’ businesses; a little preparation will separate those with winning strategies from those without.

Source: Kuebix

 

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Kuehne + Nagel Deploys Blockchain Technology for VGM Portal and Container Weighing Requirements

Kuehne + Nagel for the first time leverages the benefits of blockchain technology in a large scale operational environment with 800,000 transactions per month while upgrading its well-established Verified Gross Mass (VGM) Portal.

The enhanced solution provides shippers with new features that improve the ease of doing business as well as the degree of transparency on the VGM status of all customer shipments and the history of persisted information.

All information submitted via the portal is stored on-chain, which allows for using native blockchain interfaces for data exchange with third parties, removing the need for additional off-chain communication channels.

Kuehne + Nagel designed the solution to strictly fulfil industry requirements of confidentiality and data privacy, adding to blockchain’s natural features of immutability and traceability.

Martin Kolbe, Chief Information Officer Kuehne + Nagel International AG said:

“The list of promises related to the use of blockchain in the logistics industry is long, but actual real-world applications are hard to find. The Kuehne + Nagel VGM Portal solution jointly developed by our seafreight experts and our IT team allows us to get a true hands-on experience with blockchain technology in an on-premise production environment and with a high number of transactions. Our customers benefit from a tamper-proof solution for information exchange with third parties with improved efficiency and higher transparency. Kuehne + Nagel engages in a number of blockchain projects with customers, suppliers and governmental bodies addressing industry challenges in various domains, as the full potential of blockchain can only be exploited when collaboratively working together with business partners. Our involvement in a consortium engaged in the digitalisation of bill of ladings for seafreight is the best example. Operating the VGM Portal on blockchain in an operational high volume environment delivers valuable learnings and expertise for the development of joint blockchain applications.”

The first version of the Kuehne + Nagel VGM Portal went live in 2016 to give shippers a convenient solution for filing their VGM declarations as being required for seafreight shipments in consequence of the International Convention for the Safety of Life at Sea (SOLAS).

Now, the use of blockchain technology further facilitates data exchange between the different partners.

FreightWaves reported that the International Maritime Organisation, the main regulatory body for shipping, introduced VGM just over two years ago. The rule requires that the weight of loaded containers must be verified before being placed on a ship.

It was put into effect after several marine accidents were believed to have stemmed from mislabeled container weights and cargo shifting during voyages.

In 2013, the Mitsui O.S.K. Lines-owned MOL Comfort suffered a crack that eventually led to a fire and the ship’s sinking, along with the loss of over 4,000 containers. Container weights were said to have been a factor in the casualty.

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Stop Manually Auditing Your Transportation Freight Bills

Auditing freight bills

Freight pay and audit can be a very tedious and expensive function.

Money is wasted when companies pay outside firms by the invoice while the company may still be left dealing with difficult exceptions directly with the carrier.

With the help of technology, the entire process can be streamlined and automated.

This makes auditing invoices and handling exceptions highly efficient.

Automation means never accidentally overpaying for freight

Did you know that 15% of carrier invoices are incorrect and, more often than not, those erroneous bills are not in the shipper’s favor?

Manually using carriers’ paper or email invoices to validate billed amounts can result in errors or even approvals without proper research.

Overcharges can occur when all invoices are generically approved for remittance simply because the effort involved to research discrepancies is too time-consuming.

Automation makes auditing faster

By integrating carrier invoices directly with a TMS, carrier bills can be automatically audited against the approved rate quote for each shipment.

If an invoice doesn’t match the agreed upon rate or falls outside an acceptable threshold, a rate exception claim can be created. Rate exception claims should include details of the actual discrepancy to make it easy to dispute.

Then, the ERP system can be automatically updated with the new invoice information and payments can be made with confidence.

When manual freight pay and audit functions are replaced with automatic ones, shippers only spend time looking at the invoices that are incorrect and always know where the discrepancies lay for easy disputing.

Automation helps to better manage cash flow

Paying invoices too early can reduce cash flow for the company. Kuebix keeps track of the payment terms with carriers and helps ERP systems pay carrier invoices on time, ensuring that invoices are not paid too early.

The Kuebix platform automatically alerts the user which invoices to process for payment and on what date, ensuring cash-flow is managed correctly.

Automation provides more accurate financials

With technology, shippers have the ability to add important GL codes to the invoice so that their accounting teams can properly classify the financial information for every line item on every shipment.

Enabling the smooth exchange of all associated financial data helps the company keep track of specific expenses by various product lines and business functions. By leveraging automation technology, opportunities to squeeze savings from shipping operations can be identified and implemented as well.

Kuebix TMS offers out-of-the-box solutions to automate Freight Pay and Audit functions. This means that detailed rate exceptions can be viewed in one place instead of painstakingly researching discrepancies on each mismatching invoice.

By collaborating with Kuebix’s experienced team of implementation experts, a customized carrier invoice auditing integration can be created to fit any company’s specific needs.

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US GDP Q2 Growth Highest in Almost 4 Years

July 27, 2018 · By Joana Taborda

Personal consumption expenditure (PCE) contributed 2.69 percentage points to growth (0.36 percentage points in the first quarter) and rose 4 percent (0.5 percent in the first quarter).

Spending of durable goods rebounded (9.3 percent compared to -2 percent) and rose faster for nondurable goods (4.2 percent compared to 0.1 percent) and services (3.1 percent compared to 1 percent).

Fixed investment added 0.94 percentage points to growth (1.34 percentage points in the first quarter) and increased 5.4 percent (8 percent in the first quarter).

Investment rose less for equipment (3.9 percent compared to 8.5 percent), intellectual property products (8.2 percent compared to 14.1 percent) and structures (13.3 percent compared to 13.9 percent) and continued to fall for residential (-1.1 percent compared to a -3.4 percent).

The contribution from private inventories was negative (-1 percent), compared to +0.27 in the first quarter.

Meanwhile, exports jumped 9.3 percent (3.6 percent in the previous quarter) and imports rose at a much slower pace (0.5 percent compared to 3 percent). As a result, the impact from trade was 1.06 percent, much better than -0.02 percent in the first quarter and the highest contribution since the last three months of 2013.

Government spending and investment added 0.37 percentage points to growth, slightly higher than 0.27 percentage points in the first quarter. It increased 2.1 percent, above 1.5 percent in the previous quarter.

GDP growth figures for the previous years were revised due to comprehensive updates of the National Income and Product Accounts (NIPAs), which are carried out about every five years.

The updates incorporate newly available and more comprehensive source data, as well as improved estimation methodologies. The GDP growth for 2017 was revised slightly lower to 2.2 percent from 2.3 percent.

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Tariffs Present Different Supply Chain Challenges for Shippers

Well, that time is now officially here, with the White House saying it’s moving forward with a 25% tariff on $50 billion of goods imported from China, as well as focusing on: protecting domestic property and intellectual property; stopping noneconomic transfers of industrially significant technology and intellectual property to China; and enhancing access to the Chinese market.

So instead of the “what if” scenarios that had been floated and discussed, we are instead in a “what now” scenario. And, to be sure, that scenario is fairly open-ended at this point.

For nearly 18 months, or even longer, there have been steady gains in United States-bound imports from China, with much of it due to the pending, now actual, tariffs, which have been by viewed by many as protectionist measures.

What happens now remains to be seen on myriad fronts, but one thing for certain is that these new tariffs are not catching anyone by surprise, as the very real possibility of them taking effect has been really going back to early March when the White House first floated the possibility.

Much of what is driving the White House’s tariff endgame is the need to compete on a global basis, which requires the U.S. being able to grow its global exports, according to Walter Kemmsies, Managing Director, Economist and Chief Strategist for JLL’s U.S. Ports, Airports, and Global Infrastructure Group.

“It is important, as the U.S. [collectively] is not the youngest or most vibrant consumer group in the world,” Kemmsies said.

“While there are a lot of millennials out there, it is going to be a while before they become ‘hardcore’ consumers like their parents are. If you are really going to grow, you want to tie your economy to where the consumers are spending and the consumer is global and spending on things like food, where we are really well positioned, clothing, automobiles, and appliances. We are also the world’s most efficient plastics producer….we need to leave the markets open for that and also to compete on an equal basis. In the end, what the U.S. really is asking the world is to ‘let our companies compete with yours on an equal basis.’”

And in order for global shippers to weather whatever tariff storms that may be coming, taking a longer view of trade beyond just the U.S. and China is a good step to take.

That requires looking into setting up production and distribution operations in places like Vietnam and India, as well as parts of Africa, which Kemmsies said are emerging.

“If you are going to operate as a global company, you need to make your decisions that way, too,” he noted.

“When you look across certain products, you can see how bad some supply chains are actually managed if they are not. It makes no sense not to truly diversify globally. If you source stuff in one country and sell it in another, you are extremely vulnerable.”

What’s more, even if these tariffs do not lay out the possibility of a full-on trade war, Kemmsies said there is no benefit for shippers to be so concentrated on one country, even though China has the capacity and manpower to meet the needs of many shippers. But for products and designs that can change on the fly, he said China is not optimal, as it is more large scale-focused.

While Kemmsies stresses shippers look beyond China, Ben Hackett, founder of maritime shipping consultancy Hackett Associates, made the case that implementing tariffs will result in retaliation from major U.S. trading partners, calling it a “shoot yourself in the foot” strategy.

Panjiva research director Chris Rogers

“In a world with no President Trump and President Xi shouting at each other, we are feeling pretty optimistic about things”Chris Rogers, Research Director, Panjiva

“How is that good for America? If the steep tariffs are put into place expect higher producer costs and lower exports,” said Hackett. “Again, neither good for the American economy nor the consumer. Nothing is certain anymore in Washington, D.C.”

And Panjiva research director Chris Rogers noted that despite the back and forth between the U.S. and China regarding tariffs and related protectionist measures, things overall are in a pretty decent place, as it relates to global trade.

“Trade fundamentals remain solid,” explained Rogers.

“In a world with no President Trump and President Xi shouting at each other, we are feeling pretty optimistic about things. Consumer confidence and business confidence are down a little bit but still remain at high levels. Most products [categories] are seeing solid growth, but there remains an overhanging worry about tariffs finally arriving, with the ones for metals already intact. But once others kick in, there could be a sense of the wheels coming off the wagon.”

And he also noted that there has recently been a step back in shipments from China that is not directly related to tariffs on shipments from China being implemented but rather to concerns that tariffs ‘might’ be implemented.

“One could argue that the mixture of nervousness, coupled with sensible supply chain strategies, could lead to less growth,” he said.

“But things are a long ways from not growing as much as in the past, as opposed to [shipment levels] actually falling. It is possibly a sign of more to come, with signs of a summer slowdown, much like what has occurred over the past two years.”

It’s a brave new trade world now, and it looks like it will be quite the ride.

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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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How to Build a Supply Chain Champion Following Chicago Cubs Theo Epstein’s 5R Strategy

On November 2, 2016, the Chicago Cubs did the unthinkable:

They won the World Series after coming back from a 1-3 deficit to the Cleveland Indians.

For Cubs fans, the victory marked the end of a 108-year streak of competitive futility.

Although the Cubs game seven, extra-inning victory is inspirational, you may be wondering: “As a supply chain professional, why should I care?”

Answer: Because of Theo Epstein, the Cubs President of Baseball Operations, knows how to build a championship team, a task that is likely high on your to-do list.

Vitally, Epstein’s role in the Cubs turnaround wasn’t a fluke.

In 2004, Epstein, as Red Sox General Manager, helped Boston vanquish the Curse of the Bambino and end an 86-year title drought.

Deciphering how Theo Epstein took the Cubs, a perennial loser, to a World Series championship has been a hot topic in the sports world.

Based on our 20-plus years working with supply chain leaders, we argue that Theo Epstein’s job assembling a champion on the field is a model for the supply chain leader’s quest to build a winning supply chain.

Let’s take a closer look at how Epstein transformed the Cubs into champions.

His approach highlights five principles of supply chain design that we call the 5Rs (Figure 1). The 5Rs have enabled companies from Amazon to Zara to win on the world’s toughest playing field – today’s global marketplace.

Figure 1
The 5Rs of Supply Chain Excellence

Strategic Supply Chain Management: The Five Disciplines for Top Performance

Know the Rules and Break Them When Necessary

If you want to win on the baseball field – or in the marketplace – you need to know the rules of the game. The rules define not just your strategy and value-added capabilities, but also your team’s composition.

Rules, however, change and disrupt industries and dethrone champions. For proof, look no further than A&P, Compaq, and Pan Am. Thus, it’s not enough to know the rules; you also need to pay attention to how they are changing. Spotting inflection points before rivals – and responding effectively – can give you a competitive edge.

Andy Grove modeled this reality when he made the case for Intel to make the leap from RAM/DRAM to CPUs before the memory market crashed. Grove’s anticipation of a threat before it was widely discerned is a big reason you know the phrase “Intel Inside.”

Of course, sometimes the rules aren’t fair, which is a plus if they favor you and a travesty if they don’t. When you find your team disadvantaged, your job is to change the rules.

This is the scenario Billy Bean, general manager of the Oakland Athletics, faced in 2001. The A’s $40 million payroll couldn’t compete with the New York Yankees $115 million player budget. Not only did the Yankees beat the A’s in the divisional championship series but they signed the A’s Jason Giambi to a big-budget free agent contract.

To compete, Bean needed to build a different type of team. He stepped away from traditional approaches to player evaluation and embraced sabermetrics, a novel statistical approach that became known as “Moneyball.” His goal: Identify players undervalued by other teams. Bill Henry, the new owner of the Boston Red Sox, saw value in Bean’s approach and offered him the Sox’ GM job.

When Bean declined, Theo Epstein stepped in. He levered Boston’s big payroll with sabermetrics to assemble a team that won the World Series in 2004, followed by two more championships in 2007 and 2013.

Great companies do the same thing. They execute within the rules better than rivals, or they exploit opportunities to change the rules.

Search Amazon

Consider Amazon, the poster child for e-commerce. Launched in 1995 as the “Earth’s largest bookstore,” Amazon began life as a pure-play e-tailer, with no inventory or brick and mortar presence.

It acted as a broker, linking customers to publishers. Amazon went public in 1997 and immediately began to rewrite the rules of online retailing and expand its product line. At a time when other organizations were outsourcing fulfillment operations, Amazon invested in its own distribution network.

By 2016, Amazon operated 383 fulfillment centers worldwide, supporting sales of $136 billion. Amazon even began to build out an in-house network of trucks and planes to “own” the delivery experience all the way to the customer door.

Today, Amazon sports a market capitalization of $400 billion. Its allure is a willingness to push boundaries and redefines rules. Amazon made two-day “Prime” delivery an industry standard that customers were willing to subscribe to. Amazon also enabled eager consumers and intrigued investors to envision the day when drones, predictive shipping, and check-out free shopping will be common.

The result: Amazon is forecast to reach half a trillion in sales over the next decade. More amazing, Amazon achieved this unparalleled success without ever making a meaningful profit on operations. According to The Economist, 92% of Amazon’s value is due to profits that won’t be earned until after 2020. Amazon’s story stresses a point that you need to remember.

To build a winning team, you must change the competitive rules even as you execute the daylights out of existing rules. The remaining four Rs of supply chain design can help.

Assess Readiness; Your Own and That of Potential Partners

By winning the World Series, the Cubs proved their greatness. Nonetheless, you wouldn’t bet on the Cubs to win the Rugby World Cup. After all, the Cubs weren’t built to play rugby. Yet, many companies try to do the equivalent every day. They come to market with the wrong supply chain. How do smart managers get stuck in such a predicament? Two explanations persist.

Wrong focus. Great ideas spawn companies. But, source, make and deliver decisions are often an afterthought, following marketing, engineering or finance. No one asks whether, or how, SCM can confer a competitive edge. Market mediocrity is the result.

Poor scanning. Even cutting-edge supply chains can fall behind the obsolescence curve. You’ve read, for instance, about the woes of some high-profile brick-and-mortar retailers. As the Internet changed the rules of retail, they didn’t adapt. Now, they are dying. The readiness assessment is a key weapon in Theo Epstein’s arsenal. By conducting a two-step readiness assessment – the second R – you can avoid these losing outcomes.

Step 1 is an honest self-appraisal of the team’s current competencies. Simply put, ask: “Do we have the skills we need to play, and win, our industry’s competitive game?” If not, ask two questions:

1. Which skills are you missing?

2. What do the gaps look like?

By making capability gaps visible, you can prioritize your skill-acquisition efforts.

Step 2 is to assess potential partner competencies. Your job, like Epstein’s, is to close the gaps by building or buying the right capabilities.

Now, let’s take a peek into how Epstein leveraged the second R to turn the Cubs into champions.

The key to winning a baseball game is to score more runs than the other team. The emphasis on runs scored has always placed a premium on two player-evaluation metrics: Batting average and RBIs (runs batted in).

Sabermetrics argues you should set these metrics aside in favor of on-base percentage. After all, you can’t score unless you get on base, and it doesn’t matter whether you get on base via a hit or a walk. The logic of sabermetrics is simple: By using more-valid-but-less-used metrics, you can acquire the right skills at a lower price.

Of course, winning attracts benchmarking, and rivals quickly copied Epstein’s approach. Epstein’s response: Keep refining the readiness-assessment process.

Neuroscouting. Neuroscouting uses a computer simulation to make the connection between a player’s cognitive function (recognizing a pitch) and motor skills (swinging a bat). A player who picks up a pitch five feet out of the pitcher’s hand will get on base more frequently than a player who doesn’t read the pitch until 20 feet or 30 feet out. Neuroscouting helped Epstein identify Mookie Betts as a top prospect in the 2011 draft. Betts is now a rising star.

Wins above replacement (WAR). Epstein has grown fond of WAR, a metric that estimates how many wins a player contributes to above a replacement player at the same position. Going into the 2016 season, WAR indicated that the Cubs excelled in starting pitching, first base, and third base. But, right field was identified as a liability. To fill the gap, Epstein acquired Jason Heyward in free agency.

Predictive analytics. Epstein is now experimenting with simulations to predict how a given team composition will fare in each game throughout the season. Inputs can be quite detailed and include things like ballpark where the game is played, time of day and pitcher-versus-batter matchups.

Beyond closing capability gaps, readiness assessment serves another purpose. In 2011, as Epstein’s tenure with the team began, Cubs owner Tom Ricketts asked when the Cubs would be ready to compete for a championship.

Epstein’s response: The Cubs would get worse before things could get better. Building a strong farm system and young talent meant that the Cub faithful would need to be patient. Epstein’s plan, however, leveraged the “rules” of the collective bargaining agreement, one that allocated larger draft budgets to losing teams. Losing early to win later enabled the Cubs to acquire players like Kris Bryant and Kyle Schwarber, who were key contributors to the 2016 championship run.

The readiness assessment is a pivotal part of Zara’s story. Zara, like Amazon, is a rule breaker; its fast-fashion business model is truly game-changing. So too are the supply chain capabilities needed to make fast-fashion work. Compare the Zara way to Gap’s approach (see Table 1).

Table 1
Zara Has Built Unique Capabilities to Change the Rules

The backstory: Amancio Ortega, Zara’s founder, got his start in the apparel industry as a 14-year old errand boy. A decade later, Ortega began developing his own designs, reproducing popular styles, but with his own twists. He soon realized that if he could bring trendy designs to market quickly and inexpensively he could wow consumers. Ortega simply needed to convert the concept into capabilities. Readiness assessment provided Ortega the insight needed to build the capabilities that would fuel Zara’s fast-fashion strategy. Let’s highlight two points here.

Infrastructure. Capabilities derive from infrastructure. For instance, Zara brings its 30,000 distinct designs from concept to rack in only 14-24 days (a 10X advantage over rivals). To reliably hit this target, Zara sources over 50% of all items from local subcontractors in Spain (over 75% in Europe) and preps all product to be rack ready in its 400,000 square meter DC called the Cube. Zara’s infrastructure links supply to demand.

Decision processes. At Zara, decision makers evaluate every investment based on how it will enhance Zara’s capabilities. For instance, Xan Salgado Badas, Zara’s head of IT, stuck with an outdated, DOS-based point of sales system (POS) for years because newer systems didn’t offer any strategic capability upgrade. Yet, when Zara figured out how to use RFID to gain insight into fashion trends and hasten replenishment, it rolled out the technology at a scale and speed that startled rivals (in 2016, Zara bought 500 million RFID chips, 16% of that year’s total RFID sales).

Being fast and driving trends pays serious dividends. Customers visit Zara stores 17 times a year, compared to three times to five times for rivals. That’s because they know if a trendy new outfit sells out, it may not be back. In effect, Zara has turned customers into treasure hunters, transforming stockouts into a sales pitch.

Along the way, Zara became the world’s largest fashion retailer and Amancio Ortega the world’s second richest person. But, Zara’s team also knows that readiness assessment and capability development must be a lifestyle, not an event. If Zara isn’t always getting better, a rival like BooHoo or ASOS might make Zara’s version of fast-fashion obsolete. Just like the Cubs and Zara, you are only as good as you are ready.

Assemble the Right Players; Build or Buy Needed Competencies

Redefining rules and assessing readiness are tough tasks. But, the outputs – a capability-development matrix and a talent-acquisition map – are critical to devising a winning game plan.

Bringing all of the right pieces together and molding them into a champion is equally daunting. Emotional fortitude is needed. Executives like Theo Epstein, however, embrace the team-building challenge. Team ego results when you holistically progress through the remaining 3Rs – right players, right roles and right relationships. Let’s explore how Epstein brings these Rs together.

Through experience or intuition, Epstein knows the best players aren’t always the right players. Many so-called super teams never hoist the Commissioner’s Trophy at season’s end. So, what type of player does Epstein look for?

Talent is critical, but even more so, Epstein seeks a mix of athleticism and positional skill backed up by EQ and a team-first mindset. After all, when a crisis arises – and it will during the course of a 162-game regular season – team ego decides whether the team steps up or collapses.

The better question is, perhaps, how does Epstein put the right mix of skills on the field? Like you, Epstein has two options. He can build competencies or he can buy them. To field a consistent contender, he must do both exceptionally well. Figure 2 depicts Epstein’s method.

Figure 2
Assembling the Right Players

Phase 1: Long game. The core of an Epstein team emerges from the draft. Young talent like Javier Baez (2011) and Kris Bryant (2013) is identified and developed. The process takes time, but it provides a big bang for the buck. Baez and Bryant both made pivotal contributions to the Cubs’ World Series run. Of note, when Epstein arrived in 2011, he began to trade valuable players that didn’t fit his vision and culture, giving the Cubs more draft picks.

Phase 2: Close key gaps. Epstein opportunistically closes key skill gaps by acquiring proven talent via free agency or a well-timed trade. Consider Jake Arrieta, a starting pitcher acquired from the Baltimore Orioles just before the 2013 trading deadline. Arrieta won the 2015 NL Cy Young Award and was the ace of the Cubs’ 2016 pitching staff.

Phase 3: Win now. By July 25, 2016, the Cubs had the best record in MLB. But, by Epstein’s estimation, the Cubs still lacked a critical piece: a hard-throwing lefty closer. To bring Aroldis Chapman, the hardest thrower in baseball (105-MPH fastball), to Chicago, Epstein traded four up-and-coming prospects – a steep price Epstein was willing to pay to win it all in 2016.

One more point: Epstein knows that the concept of right “players” extends beyond the playing field. To help make things click, Epstein brought on Joe Maddon, former manager of the Tampa Bay Rays. Maddon’s keen sense of strategy and a sabermetrics-driven willingness to tweak the batting order and defensive alignment helped position the Cubs to win a league-leading 103 games.

Simply summarized, getting ready to compete means bringing the right players on board, whether drafting undervalued prospects, signing free agents, making pivotal trades or signing a manager whose true talents are being underutilized.

Apple has shown an uncanny ability to bring the right players together to develop and deliver hit products and services. Figure 3 shows how Apple uses Epstein’s playbook.

Figure3
Apple’s Path to Developing the HomePod

Phase 1 – Long Game: At the turn of the millennium, Apple began to invest in what has become the source of its success – software. The iTunes Music Store, paired with iOS, set in place the foundation for Apple’s ecosystem, which consists of over one billion active devices worldwide and includes services such as App Store, Apple Pay, Apple Music and iCloud. Apple touches its owners’ lives every day – and in an increasing variety of ways.

Phase 2 – Close key gaps: By buying Siri in 2010, Apple forged into both the search and mobile “assistant” markets. More recently, in 2014, Apple acquired Beats Electronics, quickly integrating Beats Music into its own streaming service, Apple Music. Pundits, nevertheless, questioned Beat’s $3 billion price tag. But, Apple appeared to have a compelling goal: To close gaps that powered Google Android’s foray into Apple’s turf.

Phase 3 – Win now: In August 2016, Apple quietly acquired Turi, an artificial intelligence startup, for $200 million. Less than a year later, on June 5, 2017, Apple introduced HomePod, a device designed to “reinvent music in our homes.” The Beats acquisition now made sense. But, that’s not all. HomePod is a home assistant – Apple’s answer to Amazon’s Echo and Google Home. Turi’s machine learning makes Siri smarter, giving Apple the win-now capability needed for HomePod to become the central nervous system for the IoT-enabled home, a nascent market with fantastic growth potential.

Apple is seldom first to market, but the design, user-friendly interface and massive ecosystem that support Apple products and services make it a game changer. The result: Apple’s market capitalization hit $800 billion in 2017 – 2X Amazon’s. Consider two facts: Despite owning only 30% of the mobile operating system market, Apple earned 90% of the industry’s 2015 profits. And Apple earns developer loyalty by delivering 75% more revenue vis-à-vis Google Play, making App Store the go-to place for the latest and greatest apps. Bringing the right players to the game has made Apple a perennial industry champion.

Put Players in the Right Roles; Shift As Needed

Getting the right players is just one step in the team-building process. Jim Collins described what comes next: “Get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” Matching players to roles is critical. Yet, the way most companies do this won’t deliver a true – i.e., inimitable – competitive edge.

To be a supply chain champion, you have to think differently about how to mix and match key capabilities. With Epstein at the helm, the Cubs tinker incessantly with player roles. That’s one reason Epstein hired Maddon: His teams led the league in distinct batting lineups and in-game positional shifts every year from 2006 to 2014.

The goal: Tweak the lineup to improve the Cubs’ chance to win any given game. Imagine sending your catcher out to pitch. Maddon did just that, inserting David Ross to pitch against the Milwaukee Brewers. Ross had never pitched in the MLB, but he recorded a perfect inning. Maddon’s penchant for moving players around led the Cubs to acquire Ben Zobrist. Maddon called Zobrist a “super-U,” someone who can play multiple positions.

In fact, during his career, Zobrist has played every position except pitcher and catcher. Proactive role shifting made the Cubs improbable season possible.

Best Buy

In 2015, many pundits had already written Best Buy’s obituary, claiming the electronics retailer couldn’t survive Amazon’s assault and consumers’ affinity for “showrooming.”

Yet, Best Buy did survive, showing how role shifting can create a competitive edge even against Amazon.

How did Best Buy do it? Consider three pivot points that enabled Best Buy to become an experienced retailer.

Reduced costs. To contest showrooming, Best Buy began matching prices. To reduce costs and make price matching economically viable, Best Buy deepened collaborative relationships with suppliers, especially in the areas of merchandising, forecasting and replenishment.

Repurposed bricks. For brick-and-mortar retailers, Amazon’s onslaught turned what once was an asset into a liability. Yet by shipping online orders direct from local stores and encouraging in-store pickup of online orders, Best Buy can deliver with Amazon-like speed, turning its 1,600 physical stores back into an asset.

Reimagined roles. Clicks and mortar wasn’t Best Buy’s only proactive role shift. Best Buy invited top suppliers like Samsung, Apple, LG, Microsoft, Sony and Google to set up shops within its cavernous stores. Best Buy charges rent and benefits from high-margin sales of high-end appliances and electronics.

What’s in it for suppliers? The opportunity to create immersive customer experiences without the cost of owning stores. Google Guides, full-time Google staff, offer tutorials and tech classes, helping customers discover, play and have fun. Samsung Experience shops are located in every Best Buy store.

The result of role shifting: In 2017, Best Buy shares surged to an all-time high. However, as the Cubs know from first-hand experience, some role shifts backfire. Boeing discovered this the hard way with the launch of its vaunted 787 Dreamliner. Poorly conceived and managed shifts cost Boeing five years in first-mover advantage and, by some estimates, $20 billion in design, production and launch costs.

To avoid such misfires, you really do need to do the work entailed by all five Rs. Despite the risks, as Table 2 highlights, game changers from rivals’ strategic moves to disruptive technologies dictate that you begin to experiment with proactive role shifting.

Table 2
Forces Driving Role Shifting

The Future of the Supply Chain Workforce Will Be Determined By Technology Talent

Cultivate the Right Relationships; Build Identity and Trust

Having the right players in the right roles does guarantee that your team looks good on paper. Sadly, looking good on paper is no guarantee your team will win once the game begins. What separates paper tigers from competitive champions, both on the sporting field and in the boardroom? Champions possess chemistry; that is, a common vision backed by a willingness to work together to achieve strategic goals – even if someone has to play a less visible role.

Critically, chemistry derives from trust. To fully sense the value of trust, consider this key fact from the auto industry: The most trusted automakers are also the most profitable. Your takeaway: Ultimate success requires that you invest in a culture of trust.

Theo Epstein is a culture guy. Organizational culture, after all, endures beyond the departure of talent. So, what are the core tenets of an Epstein-inspired culture? For starters, Epstein believes people perform best, especially under pressure, when they are part of something bigger than themselves. He also believes that environment matters. That’s why the Cubs’ new $300 million stadium renovation included a round clubhouse – 60 feet, 6 inches in diameter (the exact distance from the pitcher’s mound to home plate). Epstein wanted to promote collaboration by putting everyone within eyesight of each other and encouraging serendipitous conversations. The space eliminated hierarchy, engendering camaraderie and team identity. David Ross, the Cubs catcher, described the design as, “a subliminal message they’re sending.”

Beyond facilities, Epstein cultivates “lever points”other people who help drive the culture. Epstein then steps back and lets them do some heavy lifting. Joe Maddon, the Cubs manager, is an ideal lever for an Epstein-built team. “Try not to suck,” a key Maddonism, communicates big-time expectations without big-time pressure. Madden helped nurture the Cubs culture: Trust each other; do the right things consistently, including stretching for better results; have fun, but hold each other accountable; expect greatness. Epstein and Maddon know that if you build the right culture, that comes crunch time, someone will step up.

And that’s exactly what happened in game seven of the World Series. After digging out of a 1-3 deficit and building a commanding three-run lead going into the bottom of the 8th inning, the Cubs did the unimaginable – they gave up the lead and gave away the momentum. The 103 wins didn’t matter anymore; the dream was slipping away. Then, it began to rain – and culture took over. As the grounds crew came on the field, the Cubs exited toward the locker room.

Jason Heyward impulsively called his teammates into a weight room for a player’s only meeting. Never the outspoken leader, and struggling at the plate throughout the playoffs, Heyward reminded his teammates just who the Cubs were. David Ross recounted Heyward’s message: “He just said: ‘We’re the best team in baseball for a reason. Continue to play our game, support one another. These are your brothers here, fight for your brothers, lift them up, continue to stay positive. We’ve been doing this all year so continue to be us.’”

What would’ve happened if Heyward hadn’t spoken up? The Cubs may still have won. But, Epstein knows that you leave less to chance when you invest in the right culture.

Honda

Honda is a Cubs type of culture warrior.

More reliant on suppliers than rival carmakers, Honda’s buyer-supplier culture is truly unique, even a little quirky. Honda treats strategic suppliers as an extension of Honda itself.

Simply put, Honda invests in supply partners as if it is buying their capacity and capabilities, not just their parts. By the way, 90% of Honda’s spend is with strategic partners.

To help these partners succeed, Honda sends engineering teams to work on-site at suppliers for three months – and as long as 24 months – at no cost to the supplier.

The goal: Help suppliers optimize manufacturing and business processes. A typical best practices (BP) improvement initiative improves quality by 30% and labor productivity by 50%. More importantly, under Honda’s coaching, suppliers develop critical skills. Honda, in turn, gains stronger supply partners. Cost savings are shared 50/50 with the supplier.

Honda’s investments aren’t limited to BP projects. Honda expects supply partners to participate in corporate training, senior-leader business reviews and new product and target costing programs.

You may be wondering why Honda invests so much in its suppliers instead of switching to more capable suppliers. Honda’s response: Other suppliers would have similar problems. The nuanced answer, however, runs deeper.

Like Epstein, Honda is playing the long game, building a trusted team that can compete the “Honda Way.” Identity is critical.

One result: Honda is the most trusted carmaker among suppliers. Almost 40 years after launching U.S. operations, nearly all of Honda’s original supply team remains intact. The trust also shows up in Honda’s profitability.

Despite Toyota’s superior scale – producing twice as many cars per year – Honda has consistently delivered higher profit margins.

General Motors

Now, let’s go back to the early 1990s. J. Ignacio Lopez, General Motor’s purchasing czar, tore up supplier contracts, putting everything out to bid.

By saving $4 billion dollars, Lopez saved GM from bankruptcy. But, Lopez alienated suppliers, solidifying a culture of mistrust.

Over a decade later, supplier resentment still ran hot. Suppliers scored GM a 114 on the 2005 Supplier Working Relations Index(the lowest score ever – 300 points behind Toyota’s 415).

The real cost: Suppliers were holding back on GM, dedicating their best engineers and sharing their latest technology with more trusted partners like Honda and Toyota.

The rise of autonomous vehicles, however, forced GM in 2015 to acknowledge an existential threat, that its future depended on supplier innovation.

Compelled to change, GM began offering longer-term contracts to urge suppliers to more openly share their best ideas. Two years later, GM’s 2017 WRI score reached its all-time high of 290, lagging behind only Toyota and Honda.

The Journey Continues

The Cubs faithful view Epstein as a miracle worker. In truth, Epstein simply embraced core tenets supply chain champions put to work every day as they design and manage world-class value-creation teams. What then is your key takeaway?

Epstein succeeded by executing each R as part of an integrated 5Rs strategy.

In Epstein’s words:

“Acquiring the talent is only half the battle. The other half of the Cubs’ rebuilding required the organization to establish a winning culture. This meant devising a ‘Cubs Way.’”

In our experience, putting all five pieces of a 5Rs strategy together is quite a feat. Even supply chain champions struggle to implement all five Rs.

But, Maddon offers a word of advice: “The process is fearless.”

If you continue to work the process, the 5Rs will help you break whatever supply chain curse you’re facing.

About the Authors
Stanley E. Fawcett, Ph.D., is the Goddard Professor of global supply chain management at the Goddard School of Business at Weber State University. He can be reached at stan.e.fawcett@gmail.com.

A. Michael Knemeyer, Ph.D., is a professor of logistics at Fisher College of Business at The Ohio State University. He can be reached at knemeyer.4@osu.edu.

Amydee M. Fawcett, Ph.D., is an assistant professor of supply chain management at the Goddard School of Business and Weber State University. She can be reached at amydeefawcett@weber.edu.

Sebastian Brockhaus, Ph.D., is an assistant professor of supply chain management at the Boler School of Business at John Carroll University. He can be reached at sbrockhaus@jcu.edu.

Image Credit: Dan Vasconcellos

Related: How The Chicago Cubs Baseball Team Brought Data-Driven Decision Making to Wrigley Field

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Today’s Millennial Supply Chain Professionals

APICS, the professional association for supply chain management, has published the results of its Millennials in Supply Chain research report, conducted by Peerless Research Group in conjunction with Supply Chain Management Review(SCMR) and the American Productivity & Quality Center (APQC).

A survey carried out in April 2017 was designed to gain insight into millennials as a critical segment of the supply chain workforce.

The report finds that millennials are focused, engaged, enthused and committed to working in supply chain management, and reveals that supply chain represents a sought-after, dynamic and rewarding long-term career choice for professionals in their 20s and 30s.

“The results of the report are eye-opening, especially when compared to the more senior supply chain professionals in leadership positions, who were part of a previous study from APICS and SCMR in 2016,” said APICS CEO, Abe Eshkenazi, CSCP, CAE, CPA.

“We see that more millennials started their career in supply chain, are moving around less, are highly satisfied with their jobs and see more opportunities for advancement in the field.”

APICS CEO Abe Eshkenazi

“Despite some noted frustrations, millennials are continuous learners and fast movers who are eager to advance”APICS CEO Abe Eshkenazi

The report shows millennials have a diverse interest in activities that span the end-to-end supply chain. Notably, the area that holds most appeal, supply chain design, and planning, is a role that touches all areas of supply chain.

The millennials surveyed also said they find their careers personally rewarding. Eighty-one percent feel they can make a difference in the supply chain field, 87 percent believe working in the field will help with their personal growth and development, and 88 percent agree that there are opportunities for advancement within the field.

Diversity topped the list of what millennials consider most important about the field and the companies for which they work. Eighty-five percent noted that supply chain involves a diverse workforce and encompasses people of all types, which additional findings that more women are now entering the field also reflect.

Respondents were roughly two-thirds male (61 percent) and one-third female (39 percent), compared to the 2016 survey of senior supply chain leaders, in which 76 percent of respondents were men while only 24 percent were women.

However, just as earlier research of senior managers in 2016 showed a pay gap between males and females, there is a gender wage gap among millennials. Men and women start at roughly the same salary, but the disparity grows larger as they move up the career ladder.

This disparity is chief among complaints from millennials surveyed, along with frustration around the attitude towards millennials by older generations in their organizations and a disconnected feeling from the big picture or a lack of purpose in the workplace.

“Despite some noted frustrations, millennials are continuous learners and fast movers who are eager to advance,” Eshkenazi concluded.

“To address the ongoing skills gap, industry expectations, priorities and communication styles must adapt to and embrace the different needs of this younger generation. Millennials are growing and learning on the job in an era of lean, optimized, end-to-end supply chains and are critical to the ongoing transformation of the industry.”

SC24/7 Search Term: Millennials

Millennials Don’t Just “Fall Into” Supply Chain

This generation comes to the field with early and prolonged commitment

A generation ago – or even a decade or two ago – if you asked a group of students about their career goals, the field of supply chain management probably wouldn’t rank highly, if at all, among their responses. Most Gen X and baby boomer supply chain professionals didn’t plan for, prepare for, and intend to work in supply chain. It was a field they found themselves in, having landed there as they evolved from previous roles in engineering, finance, planning or management.

Millennials in Supply Chain research report

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Ocean Cargo Carriers Must Optimize Networks

Owing to the structural overcapacity in the container industry, shippers have essentially had most of the pricing power since the financial crisis, says industry consultant Lars Jensen, CEO and partner of SeaIntelligence Consulting in Denmark.

As a consequence, this has enabled shippers to benefit financially from the cost saving measures brought about by slow steaming, mega-vessels, vessel sharing and “skipped sailings.”

In his new book titled “Liner Shipping 2025,” Jensen observes that vessels ordered in 2014 and 2015 will continue to be delivered over the next two years, meaning high levels of scrapping are likely to continue.

However, Jensen also notes that in 2019 and beyond, a disproportionate share of feeder-sized vessels will be reaching the end of their lifespan, and orders for their replacements are likely to surge.

“The good news is that their relatively small size means the impact on the overall global market will be limited,” adds Jensen.

In the meantime, carriers will still have to make some hard decisions for the remainder of 2017, says Esben Christensen, managing director of the international consultancy AlixPartners.

“They’ve already taken steps to relieve their financial woes, including slashing expenditures,” he says.

“They must continue to drive down costs through effective post-merger integration and fleet rationalization to bring supply and demand into balance.”

Fortunately, spot rates have improved in the wake of last year’s Hanjin bankruptcy, and carriers seem to realize that they must do everything they can to maintain that trend, adds Christensen.

“The carrier community’s ability to drive rate levels higher into future contract negotiations will likely decide whether 2017 will be the turning point the industry desperately needs – or just another bad year in a growing string of losses.”

Ritzau Finans, an analyst with the Paris-based consultancy Alphaliner, maintains that the reduction in idling container ships has been driven by the rollout of new alliance networks, adding that with reduced availability of spot tonnage, the charter market is kept upbeat.

“The container shipping industry is expected to continuously optimize networks and make them more efficient,” he adds.

Analysts for the Baltic and International Maritime Council (BIMCO) in Copenhagen, agree, noting in their “Shipping Market Outlook” that cutting costs where it’s still possible and making the most of the fleet available remains essential to reaping the benefit of the individual alliance members.

Above all, add BIMCO analysts, the implementation of new alliances remains the one thing to watch carefully in 2017. The three ocean shipping alliances – which replaced the previous four – now control 77% of global container ship capacity and as much as 96% of all east-west trades.

“Before getting carried away, we should remember that 57% of all demand, as measured by twenty-foot equivalent unit [TEU] miles, is generated by non-east-west trades that are particularly impacted by the recent years’ cascading of tonnage,” says BIMCO President Anastasios Papagiannopoulos. “Another two-tier market is in the making.”

BIMCO expects the container ship fleet to grow by 2.9% in 2017, under the assumptions that 450,000 TEU will be demolished and 1 million TEU will be delivered. For that to happen, the current demolition interest must cool somewhat and the delivery pace must pick up, analysts conclude.

Russ Romine, Vice President of International Transportation at LEGACY Supply Chain Services in his article “Keeping Ocean Freight Moving This Peak Season,” states that ocean transportation is becoming more of a transaction-driven business, but it should never be done transactionally.

Romine further states that by sacrificing service for the lowest price, a shipper runs the risk of reducing visibility and predictability in their supply chain, increases supply chain risk, limits the ability to come up with proactive solutions to problems that occur during transit, and decreases the efficiency and productivity of their internal operations and customer service teams and, it actually increases their true logistics costs.

“Filling this service gap is something importers and shippers must face the reality of as carriers and low-price forwarders continue to absolve themselves of responsibility for service-based activities”

Read the Article: Keeping Ocean Freight Moving This Peak Season

Article Image: Speed Trans Logistics

Related White Paper & Infographic Resources

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International Transportation: Price Matters, But At What Cost?
This paper is a comprehensive guide to international transportation, that will help logistics managers better evaluate and plan their; supply chain strategy, logistics infrastructure, and risk mitigation strategy. Download Now!


Download the Guide

Infographic: 2017 Peak Season Ocean Freight Market
Although no one can predict what this year’s peak season will look like, we can use current pricing and capacity indicators, as well as the past to make educated projections. Download Now!


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