With millions of fans awaiting the release of the Madden videogame each August, game-maker Electronic Arts has invested in a state-of-the-art logistics system to ensure it doesn't drop the ball.
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.
It's become an annual rite of summer, along with backyard barbecues, pennant fever and trips to the seashore. In fact, the annual release of the Madden NFL videogame every August has even spawned its own unofficial holiday—the "Madden sick day," taken by gaming devotees anxious to snatch up the new release the day it hits the stores.
This year marked the biggest Madden launch ever. The game's manufacturer, Electronic Arts, shipped 1.35 million units to retailers nationwide on Aug. 10.
But for the logistics team at Electronic Arts, the annual release is no day at the beach. A fumble anywhere in the supply chain could leave the company with thousands of unhappy customers—not just loyal gamers but also the retailers that sell Madden 05. Videogame prices typically drop a few months after the initial release. That means Electronic Arts has to go the extra mile—or should we say, the extra yard—to get Madden on the retailers' shelves right away.
"Missing an order and not getting something out to a customer would be huge, especially with a title like Madden," says Dave Niemann, director of supply chain systems at Electronic Arts, which has sold more than 37 million copies of Madden since 1989. "Madden was the best-selling football videogame last year, so having a successful launch for week one was pretty significant. But obviously, the distribution challenges of shipping 1.3 million units were pretty huge."
If volume alone weren't enough of a challenge, there's also the ultra-tight schedule.When it comes to a big release like Madden 05 (as well as releases like the new Harry Potter game), EA has a crucial three- to four-day window to download orders from its enterprise resource planning (ERP) system and then pick, pack and stage them in its DC. Complicating that is the company's commitment to releasing orders simultaneously to retailers. "We strive very hard to achieve a level playing field in terms of releasing our product and getting it out the door to our customers," says Niemann.
Fourth and long
It wasn't so long ago that just getting those orders out on time was a touch-and-go proposition. EA's logistics processes were bogged down by a manual system that taxed the company's ability to deliver its products on time. The old system printed pick tickets and batch-uploaded the order history twice a day. When the picker completed the picks, the order was sent to shipping for re-packing, manifesting and shipment.
Since a limited amount of transportation planning was done on the front end, operators had to carry out routing and customer-compliant labeling tasks after the order was packed and awaiting shipment. "We were operating in a vacuum," Niemann says. You could say EA was running its offense without a playbook.
That's when the company decided to trade in its homegrown warehouse management software for an integrated logistics solution from Irista, a division of HK Systems. Included as part of the update project was the installation of A-frame picking systems, in-line scales for carton validation and radio-frequency (RF) bar-code scanning technology.
The new WMS solution provided Electronic Arts with supply chain visibility for the first time. And the company saw results right away. Labor costs plummeted at Electronic Arts' 250,000-square-foot distribution center in Louisville, Ky. Throughput improved by approximately one-third, and EA saw an immediate drop in shipping costs. The elimination of nine steps in the fulfillment process resulted in new efficencies and allowed Electronic Arts to reduce order cycles by 24 hours.
Achieving those winning results was not easy. Like football teams that log endless hours of practice on the field before a big game, Niemann and his team logged endless hours preparing for the conversion to the new software and picking equipment. The most important issue was making sure the system would function under EA's highly seasonal business plan. The company ramps up twice a year—in August for the release of Madden and again in the fall for the crucial holiday selling season.
In preparation for the big event, Niemann's team ran through the playbook countless times to assure everything would go smoothly. They also spent hours putting together a contingency plan in case the system failed.With the install scheduled for July 2001, just weeks before the annual release of Madden, there was no room for error.
As the first step, EA's cross-functional team, with representatives from finance, IT, operations and training, met with the Irista project team to map out existing business process requirements with the proposed WMS solution. For practical reasons, the team focused on maintaining the existing operational methodology and process flows while requiring only minimal software modifications and facility design changes.
Later on, the team designed a tiered approach to acclimate warehouse workers to the new equipment and systems. Needed modifications to the conveyor system to accommodate the in-line scales and installation of the A-frames and pallet racks were completed prior to the system's going live, allowing associates to familiarize themselves with new locations and layouts. A dedicated training facilitator worked with Irista to develop a comprehensive training curriculum designed to help operators accustomed to working with a manual paper pick-ticket process learn to follow on-screen instructions.
The finance team got involved to verify inventory reporting and the integrity of the data to be shared between the new WMS and the company's Oracle ERP database. "It was very painful going through all those layers, and the challenge of the whole thing was involving the finance people," says Niemann. "But in the end, it was well worth it. The system go-live was so smooth that we had to request more orders to keep the operators busy.We have optimized our physical distribution to the level where I'm not sure if there is a lot of room for improvement."
Illegal procedure
Although there's no guarantee that the folks in finance would agree with that assessment (when are CFOs ever satisfied?), they certainly can't complain about a multimillion dollar reduction in chargeback costs. EA ships goods not only to distribution centers, but also directly to stores for customers like Wal-Mart. Before its new system went live, EA had no way to track orders. When a customer called to complain that an order wasn't packaged correctly, the company threw up its hands and paid the penalty.
Now, when a retailer claims a shipment didn't arrive on time or that the quantity was incorrect, EA can come back with data not only on who picked the product and when, but also with the weight of the box and the time it was loaded on the trailer at the dock. "Having that data is a pretty powerful tool when a proof of delivery is in question," says Niemann. The ability to harvest the data from the supply chain systems has pretty much eliminated costly chargebacks, he reports.
The software in place at the DC also allows EA to drill down deep when it comes to performance stats. For example, EA is able to determine who its most efficient pickers are, whether structured labor is in the right place at the right time, and if inventory is stored in the best location to drive the most efficient picking.
"We derive a lot of benefit from going back and analyzing historical data in our distribution center," says Niemann. "We're able to drill down to see how many seconds it takes for a particular person to complete a pick and move on to the next box. It all comes down to the bigger picture —we're always trying to decrease labor costs and increase productivity."
So far, that's proved to be a winning combination.
EA hopes to score big with RFID
Unlike many manufacturers, Electronic Arts has the option of remaining above the RFID fray. Because it's not a Top 100 supplier for either Wal-Mart or Target, it's exempt from RFID mandates both retailers imposed on their biggest suppliers last year. So why is the videogame maker moving full-speed ahead on the radio-frequency technology front?
For one thing, the company realizes that it won't be able to remain on the sidelines forever. The day will almost certainly come when it, too, will be required to use RFID tags to identify the products it ships to retailers. But more to the point, it's convinced that RFID could bring its operations to a whole new level.
That's not to say EA is unaware of the potential stumbling blocks. Like most manufacturers, Electronic Arts would like to see standards issues resolved before investing in RFID technology. And it's hoping tag prices will fall and read rates will rise in the interim. "Those challenges considered, we're pretty excited about the potential for what RFID could bring to EA," says Dave Niemann, EA's director of supply chain systems.
EA believes that at some point it will be drawn into the game. And because of the high value attached to videogames, it will probably end up tagging individual items, not pallets or cases. Though it would require a considerable investment, RFID would give EA increased visibility of its goods as they move through the supply chain, leading to better order validation as well as increased internal security. In addition, RFID tags could accomplish the same function as the weigh-in-motion scales currently used in the company's DC.
Another benefit? Better communication. "We're looking into what kind of benefits we can build into our supply chain and how we can transfer the information to our technology chain and process that information," says Niemann. He reports that the company expects to share the information not only across the supply chain, but with all divisions of EA and with suppliers and business partners as well.
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."