Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
For multi-channel retailers competing in the cutthroat direct-to-consumer market, the key to success lies in creating a positive delivery experience for the customer. Make deliveries cheap, fast, and reliable, and the retailer is one step ahead of the game.
That's not as simple as it might sound. Mastering the delivery challenge requires not only getting the transportation part right, but also the fulfillment part. And as Bob Monti, senior vice president of supply chain operations for St. Petersburg, Fla.-based Home Shopping Network, will tell you, labor management software and process improvements have a lot to do with it as well.
Founded in 1977 as the nation's first television network devoted to shopping, the company now known as HSN has built a $3 billion-a-year brand through its ubiquitous presence on the tube and the Web. It broadcasts 364 days a year, reaches 96 million homes, and represents one of the top 10 sites for e-commerce traffic.
Behind the smiles of the celebrities and the almost-famous hawking virtually anything imaginable beats the heart of the HSN operation: a fulfillment network consisting of three distribution centers, located in Roanoke, Va.; Piney Flats, Tenn.; and Fontana, Calif. The DCs, which combined total more than 1 million square feet of space, are overseen by the no-nonsense Monti.
Monti is only as demanding as the environment he works in. HSN guarantees deliveries within 10 calendar days of a customer's order, but nearly 70 percent of its deliveries are made within six calendar days. At the same time, HSN, like its rivals, has been aggressively pushing such customer promotions as free or reduced-cost shipping and handling (S&H) to boost its value proposition. While this has pleased HSN's customers, it puts pressure on Monti and his staff to continue to drive out costs while improving its fulfillment and delivery standards.
Because HSN's top brass plans to expand its shipping and handling promotional efforts—and given that S&H accounts for two-thirds of his operation's expenses—Monti doesn't expect his job to get any easier.
A push to slash labor costs
With the pressure to contain costs mounting, in mid-2008, Monti and his chief assistant, Caroline Dreyer, vice president of fulfillment operations, decided it was time to act. They began exploring ways to improve efficiencies in HSN's three DCs to reduce operating costs and free up cash flow so HSN could fund more delivery-related promotions.
They focused on a plan to improve DC worker productivity and slash what Monti calls "variable labor spend." The goal was an 18-percent improvement in productivity and a 10-percent reduction in operating expenses.
Given the fulfillment-heavy nature of HSN's work, Monti and Dreyer believed the company was further along than most in understanding the nuances of DC work-force issues. However, because they didn't have automated productivity tools or sophisticated engineered labor standards to measure workplace output, they were forced to measure present and future results by past performance metrics. While this yielded reasonably accurate data, Monti felt it didn't give HSN the maximum visibility needed to unearth even greater efficiencies and cost-savings.
Monti proposed to engage TZA, a Long Grove, Ill.-based consultancy specializing in the design and implementation of labor-management software and supporting it with a deep knowledge of best practices and engineered standards. But consummating the marriage wasn't easy. HSN's executive suite, in hunkered-down mode as the financial crisis and recession took hold, twice rejected the proposal. On the third try, in January 2009 with the downturn in full fury, it was green-lighted.
A 20-percent boost in productivity
The project took two years to complete and required a major change in how the DCs and their workers functioned. But when the dust settled, the results surprised even the hard-to-impress Monti. The operation met its operational savings goals, and worker productivity rose by more than 20 percent, exceeding HSN's original objectives. HSN recouped its entire investment in less than 15 months, according to Monti.
Meanwhile, the savings enabled Monti's unit to help HSN defray the rising cost of shipping & handling-related promotions it considered so critical to building customer loyalty.
As part of the project, HSN installed TZA's labor management software, a program that runs on a stand-alone basis but functions in close concert with the company's warehouse management system. For the first time, HSN had the visibility to track DC performance at the individual employee level and to reward workers—as well as hold them accountable—for meeting the engineered standards. In addition, the program helped HSN determine best practices for each of the operation's functional areas. Through it, the company was able to eliminate steps impacting its product returns function, through which 6.5 million units move per year.
To Monti and Dreyer, seasoned logisticians who felt they already ran an efficient shop, it was an eye-opener to have a specialist in DC work-force issues apply high-level labor standards to the HSN operation. "You don't know what you don't know until you put these tools in and run with them," Monti said.
Monti said that without the TZA toolkit, "we couldn't have achieved this level of improvement." Leveraging the visibility provided by TZA's labor management software and applying it to the engineered labor standards, "made all the difference in the world for us," he added.
$10 million in transportation savings
With the fulfillment project behind them, Monti and Dreyer turned to revamping HSN's delivery network. For years, UPS Inc. had been HSN's main shipping vendor, mostly managing end-to-end deliveries from the three DCs to the consumer. But Monti and Dreyer decided to tap into a joint venture between UPS and the U.S. Postal Service (USPS), under which UPS hands off HSN's packages to the USPS system for "last-mile" deliveries to any U.S. address.
By relying more heavily on the lower-cost postal network, HSN cut its annualized shipping spend by $10 million. It also developed a broad-based logistics program with UPS that included, among other things, volume-based incentives for customers and an enhanced returns solution.
Monti acknowledges that expanding HSN's use of the USPS system and introducing a physical exchange of packages between the two carriers "slowed down" the retailer's delivery schedules by half a day, on average. However, he said that the newly streamlined picking and packing operations allow the DCs to push packages out the door faster, offsetting the impact of the slower delivery timetables.
Monetary incentives
As for the transition, Monti and Dreyer said many members of the DC work force were apprehensive about what the new efficiency standards would mean to them. To quell uncertainty and motivate workers, they instituted a plan to give workers half of the proceeds from productivity gains above a certain baseline called for by the engineering standards implemented by TZA.
About 70 percent of the workers have achieved more than what Monti termed "baseline productivity" metrics and have pocketed what can be considered performance bonuses. Monti and Dreyer said DC employee turnover is currently at an all-time low.
Based on his conversations with TZA, Monti believes companies in and out of the multi-channel retailing category can achieve productivity gains of up to 30 percent through implementing a mix of DC labor-management software and processes. HSN's improvements were lower on a percentage scale, he said, because the company has already worked for years to improve labor productivity and was not starting from scratch.
C. Dwight Klappich, vice president of research at consultancy Gartner Inc., said the use of labor-management software and engineering standards to measure DC worker performance is gaining momentum as companies focus more on productivity improvements than cost-cutting to drive efficiencies. The declining costs of software implementation and ongoing support will further boost demand as the tools become more affordable to a wider customer base, he added.
Klappich said Gartner's research shows that firms have "already slashed costs about as far as brute force will allow, so now they need tools like [labor-management software] to help drive efficiency, to keep costs where they are, and lower costs more intelligently wherever possible." The consultant added that labor-management software is an area of "potential low-hanging fruit, and typically these investments have strong financial returns" for its users.
Comments like those are music to the ears of companies like TZA, which has positioned itself as both software vendor and consultant to capitalize on what it sees as a wide-open market opportunity. "The labor-management software market is today where the WMS market was 10 years ago," said Steve Simmerman, the consultancy's senior vice president of business development.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.