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 a routine repeated daily in distribution centers across the country: A worker runs out of packaging tape (or some other item) and heads off to the supply room. Along the way he stops to discuss last night's Cubs game with a buddy. He visits the restroom, then makes a detour to the vending machine. When he finally reports back to his station, tape in hand, it's time for his mid-morning coffee break.
It may not sound like a big deal, but that lost time adds up. One major North American retailer figures it lost 30 minutes of production time on each shift due to employees' leaving their assignments early and coming back late. Before it took corrective action, the retailer estimates it lost the time it would take to process about 3,000 case shipments a day.
And that retailer may well have underestimated the problem. Time off task has proved notoriously tough to quantify. Just ask John Guy. When his company, engine-maker Briggs & Stratton, commissioned a labor analysis a couple years back, Guy, who's vice president of distribution supply and supply chain management, figured workers at the parts DC near Milwaukee were operating at about 80 to 85 percent efficiency. But he was in for a shock. When results of the study (performed by software vendor RedPrairie) came back, he learned the actual figure was closer to 67 percent.
When managers realized workers were wasting about one-third of their time on the clock, they moved swiftly. But not in the ways you might expect. The Briggs & Stratton executives rejected the more conventional remedies—replacing staff or hiring more supervisors. Instead, they installed software.
Software? Yes, indeed. Though software may seem an unlikely tool for boosting productivity and motivating workers, this wasn't just any software. What Briggs & Stratton installed was a labor productivity system that tracks individual employees' work performance in real time, providing both immediate feedback and daily reports that supervisors can scan at the end of a shift.
The move paid off: Today, just 18 months after the software was rolled out, Briggs & Stratton ships 30 percent more product each day than it did in the presoftware era. And it does so with seven fewer fulfillment department employees.
Briggs & Stratton's experience isn't an isolated case. A survey conducted last summer by ARC Advisory Group (which, we should note, was co-sponsored by RedPrairie) showed that four out of 10 respondents using labor management systems (LMS) enhanced productivity by 15 percent or more. At the same time, 62 percent reduced labor costs by up to 15 percent. What's more, they found the software to be surprisingly affordable. Half of the respondents said they achieved payback on their labor management system within one year of implementation.
Culture shock
It goes without saying that those companies didn't achieve those kinds of results simply by buying a software package and sitting back to watch the savings roll in. As with any change, this type of initiative needs to be driven from the top down. Any effort that lacks top-level support is doomed to failure.
"It's a big culture change," says Dara Gault, business development leader at RedPrairie. "If you don't incorporate this into the way you manage your people, you won't see the savings. It requires commitment all the way down the management chain."
If getting senior management's support is important, getting buy-in at the supervisor level is crucial. It's almost a given that workers will resist change because it disrupts their routines and raises fears of job loss. The burden of alleviating their concerns will fall to the supervisors within the DC. And that means those supervisors must be both well trained and motivated.
How do you get employees to buy into the program? First, you have to make sure there's something in it for them, that they will share whatever benefits the new technology brings. That can be as simple as creating an employee incentive program that rewards workers for high performance. For example, employees who perform at 105 to 109 percent of standard performance levels might qualify for a wage increase of 50 cents an hour.
It also means keeping the communication channels open. "Management and their supervisors must set up a line of communication that encourages the labor force to make suggestions that can be discussed in an open forum," says Don Jacobson, a senior partner at LogiPros, a firm that specializes in the placement of logistics management personnel. "Some of the best ideas will come from the floor. If the workers see that management is involved, you'll have a much better chance to succeed."
No complaints
The productivity benefits notwithstanding, labor software has yet to become a fixture in America's DCs. Many companies still hesitate to broach the subject with their staffs for fear it will erode morale—and increase turnover—at a time when DC labor is already in short supply.
However, the evidence suggests their fears are unfounded. To be sure, introducing LMS may hasten the departure of a few employees who feel threatened by the new system. But that's not necessarily a bad thing. The attrition at Briggs & Stratton, for example, turned out to be concentrated among several former manufacturing workers who were unhappy working in a DC environment. "Some of them weren't real enthusiastic, and a lot of those people transferred out," reports Guy. "They didn't want to work where there was a way people could measure what they were doing." With the complainers gone, the atmosphere lightened up noticeably. "The [remaining] workers were thrilled when those people left," says Guy. "That was a benefit we hadn't even thought about."
Another unforeseen benefit can be the labor management systems' ability to improve planning and scheduling. Once a system is in place, managers can use it to set target completion times for an activity such as a pick wave and to calculate the labor resources required. The system becomes even more valuable if the company has forward visibility into orders scheduled to drop into the distribution center, which allows managers to calculate how many workers will be needed to complete a day's work.
Though many users have yet to avail themselves of this feature—the ARC survey shows that only 43 percent of companies using labor software use it to facilitate planning —Briggs & Stratton has gone ahead and incorporated the capability into its workforce scheduling with great success. "We can move workers from the order fulfillment side into our parts kitting operation and then vice-versa," says Guy. "If we see a big spike in orders coming up, we can adjust our work staff accordingly." In fact, the company no longer has to hire temp workers during peak periods.
Guy notes that on-time shipping rates improved from 97 percent to 99.8 percent, and that customers are benefiting from better service. Company policy dictates that emergency orders received at the DC by 5 p.m. must be shipped from the DC by 7: 30 p.m. The DC receives emergency orders every day, and in the past that deadline often presented problems: "Sometimes we struggled to get that done,"Guy admits. "But now that we've increased throughput and picks get done faster, emergency orders aren't such a big issue anymore."
union dos (and a don't)
Any logistics manager who oversees a union operation will tell you the same thing: If you're going to walk into a union meeting with a proposal to, say, introduce labor management software, you'd better be prepared for a big show of resistance. You could hardly expect any selfrespecting labor union to accept a program that asks members to lift more boxes in less time than they currently do without a struggle, right?
Actually, managers who think that way may be gearing up for a fight that never comes. In reality, most unions embrace labor productivity software and engineered labor standards once they're fully educated about the goals of the program.
"The union actually likes it now," reports John Guy, vice president of distribution supply and supply chain management at Briggs & Stratton, which installed labor productivity software in 2003. "They … perceive it as a fair measurement. None of our employees feel [they're expected to meet] an unattainable goal."
That's not to say that Guy didn't encounter a few speed bumps early on. "We ran into an issue with the union because they didn't understand what engineered standards really meant," he admits. But even that didn't turn out to be a deal-breaker. As Guy learned, gaining union acceptance can be a fairly straightforward process if you keep some dos and don'ts in mind:
Do explain the program in full. Guy says his company solved the union's acceptance problem by hiring a specialist in union issues to address employees and union officials during a one-day company meeting. By the end of the day, both groups were on board.
Do use discrete, engineered standards. Many companies that measure DC labor productivity do so at an aggregate level across multiple employees. Others, in the interests of expedience, will calculate times for multi-step tasks—not for each of their component steps. Tempting as they may be, these shortcuts will only undermine your efforts.
For best results, take the time to capture and measure the precise time needed for one person to complete each step of a specific task—for example, the time needed to obtain a pick assignment, the time it takes to travel to a given aisle, the time required to locate a pallet, and so forth. To be truly effective, labor software must be able to recognize that a piece pick from a chest-high zone is easier (and quicker) than one that requires the employee to stoop to floor level and that heavy cases will take longer to handle than lighter ones. If workers are measured according to the task's complexity, they're less likely to jockey for the easiest assignments to boost individual performance.
Don't let rumors go unchallenged. The mere mention of labor management software will almost inevitably spark rumors that the company's looking for an excuse for getting rid of employees. If that happens, squelch those rumors right away. "There are many safeguards built into union contracts that allow employees quite a bit of leeway as it relates to job retention," says David Russ, vice president of distribution at U.S. Foodservice. "In a union environment the built-in safeguards create a number of steps to go through before you can deal with a problem employee, whereas it's much easier to let an individual go for unacceptable production or quality in a [non-union] environment." All this does is put management in union shops on a more equal footing with non-union shops when it comes to disciplining employees who try to buck the system.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."