Many supply chain managers think their forecasting problems would be solved if they could only get good point-of-sale (POS) data. But it's not that simple.
The plight of today's supply chain manager could be fairly compared to that of Tantalus from Greek mythology. Trapped in the underworld and parked by a pool overhung with boughs laden with luscious fruit, Tantalus was doomed to spend eternity tortured by hunger and thirst in the midst of plenty. Each time he tried to drink, the pool drained away; each time he reached for a pomegranate or fig, the boughs receded. So it is for the average supply chain or distribution center manager yearning not for a sip of water or a pear, but for accurate data on the actual demand for the goods in his warehouse.
In theory, gathering demand data should be a matter of feeding all sales, tracking and inventory information gathered throughout the supply chain into a great ravening machine that links every party in the supply chain to every other party. But right now, there's a piece missing—the point of sale (POS) information gathered in retail outlets is almost never fed into that machine.
Why not? The main problem is that POS information is some of the least accurate you're likely to come across in the supply chain, answers Mark Johnson, vice president of marketing at G-Log, a vendor of supply chain management software in Shelton, Conn. "It's very nervous data, which is not very good for supply chain operations," he says. "The raw POS data still requires a lot of manual intervention before it can be digested into the supply chain."
Johnson gives this example: If a customer gets to the checkout counter and notices a defect in an item, often the clerk will swipe only the replacement item's bar code, although both items have come off the shelf. Multiply that over thousands of retail outlets over 90 days, and the result is a heavily distorted picture of stock on hand.
The other problem is that even perfect POS data will never be an absolute predictor of future demand. "Customers are notoriously fickle and their past demand patterns are less valuable in an era of rapid change in products, distribution and sales strategies," says John Fontanella, vice president of research at AMR Research in Boston, in a report titled The Demand Driven Supply Network: Striving for Supply Chain Transparency. For that reason, the data gathered as bar-coded items are swiped through the cashier's station will never be more than a part of the picture.
As good as it gets
Yet the fallibility of POS data hasn't discouraged Al Giunchi, director of distribution logistics at pet products manufacturer Hartz Mountain Group in Secaucus, N.J. For 10 years now, he's been extracting sales information from his company's main customer—Wal-Mart—and feeding it back into his own supply chain.
Every day, through the Internet, Hartz receives POS information on its products from thousands of Wal-Mart stores around the country and the 36 distribution centers that serve them. Through that mechanism,Hartz Mountain learns which products are selling, how much inventory is on hand in the individual stores, and what's available to top up the stock from nearby DCs. "We see inventory levels in stores and in the 36 DCs. We see what product needs replenishing and where that product is—on the East Coast or the West Coast.And it's in real time.You're looking at the product come off the shelf and out the store instead of out the DC," says Giunchi.
The Wal-Mart POS information isn't monitored directly by the logistics division. It's in the hands of a customer service team consisting of three people in Secaucus, and three in Bentonville, Ark., where Wal-Mart is headquartered. They, in turn, feed information about fluctuations in inventory levels and demand to the logistics group. When Giunchi wants to look at the data, he goes through a password-protected part of the World Wide Web (a step up from the early days when he used an EDI system).
Wal-Mart's sales forecasts tend to be almost uncannily accurate, says Giunchi. "Their computer system is second only to the government's. They know that a Wal-Mart in the Northeast is not going to need the same items as one in Arkansas. When 9/11 hit, they knew they'd sell more guns in Bentonville, Ark., than in Secaucus, N.J. Plus all of a sudden, there was a spike in gas can sales because people were hoarding gas.Wal-Mart knew all that. All that information started flowing through the system very quickly."
Responding to Wal-Mart's rapidly changing forecasts and constantly monitoring in-store inventory requires a lot of hard work, Giunchi says. "It takes a lot of maintenance, because there might be discontinued items or special promotions or delays for items coming in from, say, Asia or Brazil," he says. Returns, alone, occupy two members of the six-person team monitoring POS information. "The data does need scrutinizing and that's why you need six people looking at screens every day."
Aside from dirty data and shipment delays, the sheer size and nature of the consumer market means POS information is never going to allow anyone to stay exactly abreast of demand. "The problem is the vast number of variables in the system," says Giunchi. "You may think that a particular dog chew is going to knock people's socks off, but it doesn't. Or one product will unexpectedly take off and Wal-Mart will say 'I ordered 5,000 originally, but now I need 45,000 on the same day I wanted the 5,000'—and then the panic starts to set in. Or they order something in September and need it in time for Christmas," Giunchi continues. "So POS information helps maintain the flow to the stores of items that are already there. But it still doesn't help you if you're trying to push an item and you don't know if the customer is going to want it or not. There's no software in the world that's going to smooth that out."
All the same, Giunchi would welcome the opportunity to work with POS information from other major customers, instead of relying on vendor-managed inventory techniques, as Hartz Mountain does with Kmart,Walgreens and Winn-Dixie. Though popular, vendor-managed inventory programs, in which the products' supplier decides how much stock to put in the customer's distribution centers, don't get into the same detail as POS data. "VMI stops at the warehouse," says Giunchi.
Not imPOSsible
Given the number of kinks that have yet to be worked out, it's no surprise that G-Log's Johnson says few companies are currently using POS data well. The ones that have mastered it include computer company Dell Inc. and Tesco, the British supermarket chain. Dell's selling structure, where customers order direct, typing their own information into a Web site, means its POS data are clean. Matters get a bit trickier when it comes to supermarket retail, where there are hundreds of thousands of SKUs to keep track of and more opportunities for mistakes. And it will be tougher yet to attain that level of sophistication in the retail sector.
Johnson says it's clear that feeding POS data into sales and manufacturing decisions works, because it's happening in industries like computer supply. But, in consumer retail, you're talking about adding an extra couple of zeros to the number of transactions, he says. "When you add dirty data, the complexity just takes off," Johnson says. "Transferring that into clean data and then translating it into orders that are digestible in the supply chain is a challenge, but it's not impossible. Absolutely not."
Despite the difficulties, there's still a lot to be said for feeding POS data into the system, Johnson adds. "The better the data you have, spanning the entire supply chain from factory to point of sale, the better you're able to reduce inventory and exposure to damage."
For Giunchi, the benefits of using POS information far outweigh the tribulations. "It gives us more intelligence. Whether we're able to perform with that intelligence is the key, and that's when we come into the real world," he says. "Planning and forecasting is so difficult. The weatherman doesn't get fired if he gets the weather wrong—it's Mother Nature's fault. But we don't have Mother Nature to blame in the world of business."
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."