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 too long ago, item-level RFID tagging was categorized as one of those futuristic notions—like hydrogen-powered cars, desaliniza- tion plants, and sending humans to Mars.
But while most of those concepts are still some years away, item-level tagging has already arrived, albeit for special applications that carry a strong value proposition. You likely won't find an RFID tag on individual cereal boxes at the grocery store (not yet, anyway). But you will find the technology on the sneakers you buy from New Balance, jeans and other apparel purchased at upscale retailers, and on books at European book stores.
Driven by falling costs for the technology as well as the arrival of long-awaited standards for item-level tagging, the practice of applying RFID tags to individual items is exploding. That fact was only accentuated early this year when Wal-Mart, owner of the Sam's Club warehouse stores, announced that Sam's Club suppliers must attach RFID tags to all products entering its distribution centers by 2010 (see RFIDWatch on page 51).
And Wal-Mart is not alone. Last summer, Levis rolled out a program for tagging individual pairs of jeans at 40 of its stores in Mexico.
Good reads
It's not hard to understand why retailers would be eager to embrace the technology. To begin with, they stand to benefit from fewer out-of-stocks (which leads to increased sales), labor productivity gains, and better inventory visibility and control. On top of that, there's the potential for improved security and less shrinkage.
All of those were motivating factors behind Portuguese bookseller Byblos' decision to build item-level RFID into the infrastructure at its first retail location in Lisbon, Portugal. The company is using RFID to help track more than 200,000 items across the 35,000-squarefoot retail outlet, which opened in December. Every item sold at the new store—with the exception of daily newspapers and magazines—is equipped with a UHF RFID tag in order to increase onshelf product availability, as well as to provide a better customer experience.
Byblos' new system also includes a series of 40 customer information kiosks located throughout the store. Customers can use the kiosks, which are embedded with RFID readers that help monitor the store's 2,000 zones, to browse products, see what's in stock, and obtain directions to the proper stock locations. "Our goal is to combine the most sophisticated means and the maximum attention to detail to provide a superior experience to the customer," said Byblos COO Rui Gaspar in a statement announcing the program's launch. "Based on what we have seen in other trials of item-level RFID, we are confident that our investment in RFID will provide the best shopping experience available and ensure that customers can always find the products they need."
In addition to the tags and kiosks, the bookseller has installed 14 RFID-enabled check-out stations that move customers quickly through the purchase process, and pOréal readers that monitor doorways and sound an alarm if they detect an unpaid-for tagged item leaving the store. Byblos also has 10 handheld RFID readers that employees use for cycle counting and inventory management.
All this high-tech equipment has come with a price, of course. Byblos spent about $350,000 (U.S.) to outfit the store with RFID technology—a figure that doesn't include the associated infrastructure and IT costs. The company, whose books carry an average price of $30, is currently sourcing its tags for 13 cents apiece. Yet Byblos is confident that it will see a significant payback on the project. It points to a previously deployed item-level project at Dutch bookseller BGN that resulted in sales increases of 10 to 15 percent. In addition, Byblos executives note that their project is scalable, meaning it will cost less to bring additional stores online. The company plans to roll out the technology in three more stores this year, which will bring the total number of items tagged to almost a million by the end of 2008.
A running start in the U.S.
Although interest in item-level tagging has generally been higher in Europe than in the United States, item-level tagging is starting to make a splash here as well. Running shoe and sports apparel retailer New Balance, for example, recently completed a rollout of RFID to help it track its topselling men's running shoes from the distribution center to the retail floor at its outlet store in Lawrence, Mass.
This spring, the company expects to start tagging every pair of men's sneakers sold at the store, which will increase tagging from the current 750 pairs of sneakers to about 22,000. The move is expected to give New Balance even greater inventory visibility, and, because the women's models will not carry RFID tags, the company will have a system for benchmarking the usefulness of RFID.
The big challenge for New Balance was finding a reader solution to handle the 22,000 items. For the first phase of the project, employees used handheld readers to perform cycle counting, which took about 20 minutes. However, handhelds would be too cumbersome to cycle count larger inventory, so Motorola has put together a mobile cart reader that should allow cycle counting to be completed in 20 minutes.
By using Vue Technology's TrueVUE Platform, combined with RFID tags from Avery Dennison and handheld and fixed RFID readers and antennas from Motorola's Enterprise Mobility business, New Balance has achieved far greater inventory visibility and improved accuracy at the item level, with read rates greater than 99.5 percent. As New Balance begins to tag more products, company execs expect this visibility to enable reductions in receiving and replenishment labor costs, reductions in inventory levels, and reduced stockroom retrievals. Frank Cornelius, director of information technology at New Balance, also expects that the data captured from RFID reads will allow the company to document sales trends and have the proper number of shoes in each size on the store shelf. The killer application for New Balance would be using item-level tagging to do away with the problem of mismatched pairs of shoes on the sales floor. That would require tagging each individual shoe, however, something New Balance execs say is probably still two years away.
Zero to sixty
At the moment, Vue Technology and other vendors, including Seattle-based Impinj, are working on a number of itemlevel applications for the retail, apparel, and pharmaceutical businesses. Gordon Adams, Vue Technology's senior vice president of sales, says that the rapid pace at which retailers are pursuing item-level tagging shows that its value is finally being recognized, especially within the apparel sector.
"We have a customer that went from simply having an interest in doing this to a deployed pilot in 60 days," says Adams. "Sixty days after that, they told us to prepare for a full enterprise deployment rollout.
"Everyone used to be afraid that the costs were too high, but we've been able to show people that the cost to deploy all this is now at the point where the … investment makes sense. There are a number of companies doing production deployments now, and if you are not on board, the train is passing you by."
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.
Chief supply chain officers (CSCOs) must proactively embrace a geopolitically elastic supply chain strategy to support their organizations’ growth objectives, according to a report from analyst group Gartner Inc.
An elastic supply chain capability, which can expand or contract supply in response to geopolitical risks, provides supply chain organizations with greater flexibility and efficacy than operating from a single geopolitical bloc, the report said.
"The natural response to recent geopolitical tensions has been to operate within ‘trust boundaries,’ which are geographical areas deemed comfortable for business operations,” Pierfrancesco Manenti, VP analyst in Gartner’s Supply Chain practice, said in a release.
“However, there is a risk that these strategies are taken too far, as maintaining access to global markets and their growth opportunities cannot be fulfilled by operating within just one geopolitical bloc. Instead, CSCOs should embrace a more flexible approach that reflects the fluid nature of geopolitical risks and positions the supply chain for new opportunities to support growth,” Manenti said.
Accordingly, Gartner recommends that CSCOs consider a strategy that is flexible enough to pursue growth amid current and future geopolitical challenges, rather than attempting to permanently shield their supply chains from these risks.
To reach that goal, Gartner outlined three key categories of action that define an elastic supply chain capability: understand trust boundaries and define operational limits; assess the elastic supply chain opportunity; and use targeted, market-specific scenario planning.
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.”