Simon says, "Stick RFID tags on your products," and America's biggest consumer products companies promptly fall in line? That's precisely what happened when Simon (Langford) issued Wal-Mart's now famous RFID mandate. So what will Wal- Mart want next?
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
Not since the Y2K scare five years ago has the turn of the calendar year been the object of such intense speculation. But this time around, no one was hunkered down in a basement with a stash of canned spaghetti and bottled water waiting for planes to fall from the sky. In fact, those awaiting 2005's arrival displayed more curiosity than trepidation. And rather than prophets of doom, the curious were mostly consultants, manufacturers, retailers and RFID vendors with a single question on their minds: What would happen when 52 Wal-Mart suppliers officially began shipping pallets and cases tagged with tiny RFID chips to the mega-retailer's DCs?
Now, 60 days out, the verdict on Wal-Mart's bold experiment seems to be so far, so good. At this point, Wal-Mart appears to be solidly on track with its RFID initiative, which called for its 100 largest suppliers to begin using so-called smart tags to identify incoming pallets and cases. True, the retailer didn't have all 100 of its top suppliers on board on Jan. 1, but that was never the goal to begin with. All along,Wal-Mart had asked its top 100 suppliers to meet not a Jan. 1 deadline, but a January deadline, giving them the luxury of a 31-day window to get their cargo in chip-shape. And sure enough, by the end of January, 108 suppliers were shipping products carrying RFID tags to Wal-Mart, while another 29 expected to be on board by March 1. (Those who counted a total of 137 companies are correct. Aside from the mega-retailer's top 100 suppliers, 37 companies volunteered to participate.)
"There were no surprises in January and that's precisely what Wal-Mart wanted," says Kara Romanow, a research analyst at AMR Research, who tracks many of the consumer product goods (CPG) companies subject to Wal- Mart's mandate. But compliance, of course, is only a small part of the story.What about the retailer's larger goals, like cost savings and a reduction in stock-outs? "It's still too early to tell whether Wal-Mart will meet its goals," Romanow answers. "We really don't know if [RFID] will impact [stock-outs] yet. But this is not a failure either, just by the fact that there are so many technology companies out there investing to make RFID a more mature technology. Wal-Mart has absolutely moved both the technology and the CPG industry forward."
Working out the kinks
As for the Bentonville Behemoth's own assessment, preliminary indications are that Wal-Mart's management is pleased with what it sees so far. "Things are going well and we are pleased with the progress," said Simon Langford, the retailer's director of global RFID strategy, via e-mail. Langford reported that as of Jan. 27, 92 suppliers had shipped RFID-tagged merchandise to Wal-Mart DCs in Texas. So far, Wal-Mart has received more than 7,000 tagged pallets and 210,000 tagged cases, and has recorded 1.5 million electronic product code (EPC) reads.
That's not to say there haven't been some hiccups. But Langford remains optimistic that the kinks can be worked out. "As the tagged cases start to work through the supply chain, we will start to see improvements," Langford said. "We will be measuring these improvements ongoing as we roll our changes [out] to all [RFID-equipped] sites."
Of course, that's not to suggest that all of those suppliers are tagging 100 percent of their Wal-Mart-bound products. Wal-Mart has reported that on average, participants are tagging 65 percent of their stock-keeping units (SKUs). But some observers believe that figure is a bit misleading. Some smaller suppliers may be tagging a majority (or even all) of their stock-keeping units, they say, but most companies are tagging between two and 10 products. And it's important to keep in mind that "10 SKUs" may represent one product in 10 different sizes or colors.
"What you have to realize," says Romanow, "is that most of those top suppliers are only tagging a handful of products. So the 65 percent number doesn't [adjust] for the smaller suppliers who only have three or four products and who are tagging all of them, and it doesn't account for only the handful of products from the big guys."
The road ahead
Now that the first round of RFID implementations is over, all indications are that Wal-Mart intends to stay the course. For one thing, Wal- Mart is pressing ahead with the installation of RFID-reading equipment in more distribution centers and stores. In preparation for the January rollout, Langford reports, Wal-Mart outfitted 104 retail stores with RFID equipment, deployed 14,000 pieces of hardware and ran 230 miles of cable. Now, it's barreling ahead with an expansion program. The retailer expects to have six distribution centers and 250 stores equipped with RFID readers by June, and 12 DCs and 600 stores by October.
In addition, the retailer is forging ahead with plans to bring more suppliers on board.Wal-Mart has put its next 200 biggest suppliers on notice that they'll be expected to begin tagging pallets and cases of selected products by January 2006. By the end of 2006, the retailer expects its entire supplier base (up to 20,000 suppliers) to be "engaged in RFID in some form or fashion." Langford has not revealed when Wal-Mart might start to roll out RFID internationally.
As for the 100 top suppliers, they're not off the hook yet. Wal-Mart has asked them to tag more products. But even without Wal-Mart's latest request, they'd still be facing a new set of challenges. In late December, the standards body EPCglobal ratified the Generation 2 standard for RFID tags. With the Gen 2 technology expected to become available in the second half of the year, many of the top 100 suppliers have resigned themselves to writing off their initial investments and starting over with the newer technology.
That Gen 2 rollout has thrown a wrench into the plans of others as well. Initially, industry analysts had predicted that compliance would be easier for the 200 suppliers in the second wave (which includes companies like E.&J. Gallo Winery), assuming that they could ride the coattails of the first wave of suppliers. But now, it looks like the advent of Gen 2 technology will make much of that early experience irrelevant.
Still, at least they're not starting from scratch. "For those next 200 suppliers, there are some small advantages in … that we have some standards out there now and that there is some knowledge about readers and antenna placement that they can leverage during their pilot," says Gene Alvarez, vice president at Stamford, Conn.-based Meta Group.
Has that assurance provided any consolation for the suppliers preparing for Round 2? "I've had two reactions from my clients," Alvarez says. "One wants to get on this as quickly as possible because if they can beat a competitor, maybe they gain preferred supplier status with Wal-Mart. The other client doesn't have a great deal of money to invest and wants to do the bare minimum, waiting things out until [it] can implement RFID properly. I think we'll see more people in that category."
Metro goes on the record
Wal-Mart isn't the only retailer riding the RFID wave. Metro Group, the world's third largest retailer, has also been busy deploying RFID. In fact, Metro has a bit more RFID experience under its belt at this point than its Arkansas-based counterpart does: Metro's RFID mandate carried a November 2004 deadline.
Unlike the notoriously tight-lipped Wal-Mart, which hasn't spoken much publicly about its experience, the Düsseldorf, Germany-based Metro has been publicly touting the cost savings and operations improvements it's realized from RFID. For one thing, the company says it has found that RFID-tagged shipments can be unloaded and checked in faster than their tagless counterparts, averaging just 15 to 20 minutes per truck. For another, it reports that RFID has helped it identify and eliminate weak spots in its handling processes.
According to the retailer, Metro has integrated RFID into existing operations so that RFID-tagged pallets and cases can be detected and recorded at the shipping pOréal. Tag IDs are then transmitted over a local area network (LAN) to a local server. The tag number, which functions as a serial shipping container code (SSCC), is then compared with electronic data interchange (EDI) data from the retailer's merchandise managing system on a central server. At that point, shipments can be either cleared or flagged if there is a discrepancy between the shipment and the EDI documentation or if the scanner experiences problems reading the RFID tag.
So what's next for Metro's RFID initiative? Gerd Wolfram, director of IT strategy, buying and development services for MGI Metro Group Information Technology, a Metro subsidiary that supplies the company with IT services, says that by the end of 2005, Metro expects to have 100 companies in its supply chain sending it RFID-tagged shipments. Next year, Metro expects to receive tagged shipments from its top 300 suppliers, which provide the retailer with merchandise that accounts for 60 to 80 percent of its total revenue.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."