No, we're not talking about canine logistics, but rather, Denmark's leading retailer, which slashed distribution costs 9 percent by automating its operations.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Denmark may seem like a small country, but from a logistics standpoint, it can be a challenge. Most of its population lives on the Jutland peninsula, which extends northward from Germany, or on the main islands of Zealand and Funen. But the country also includes over 400 other islands, some inhabited and some not. Adding to that are denizens of distant Greenland and the Faroe Islands.
For Coop, Denmark's largest retailer, serving that diverse geography is not easy.
Coop is similar in scope to Wal-Mart in the United States. It sells a mix of grocery and general merchandise, with retail outlets varying in size from large department stores to compact convenience shops in the smaller towns. Overall, the chain consists of 1,200 stores over five brands, which are located on Denmark's home islands, Greenland, and the Faroe Islands.
Up until a few years ago, Coop used a regional approach to distribution to its many stores. But it has since consolidated seven mostly manual operations into one automated facility for distributing its nonfood products—a move that has boosted productivity, cut costs, and reduced labor needs.
The new 51,000-square-meter (549,000-square-foot) facility is centrally located in the city of Odense, which is situated on the middle island of Funen. From this strategic location, Coop can easily reach stores in Jutland to the west and Zealand to the east by truck. Greenland and the Faroe Islands are served by ship.
The building that houses the new DC was previously a factory for AP Møller Maersk. It currently handles about 9,000 stock-keeping units (SKUs) of nonfood items, such as electronics, housewares, yard products, textiles, shoes, and clothing. (Food products are distributed from other facilities.) The site also processes all Internet-based orders for Danish customers.
ENGINEERED FOR SPEED
To design the material handling system for the new DC, Coop contracted with Schaefer Systems. When it came to the project's requirements, the retailer wanted a fulfillment system that would allow it to process orders more efficiently and accurately than was possible at the former sites. It also needed a system with the flexibility to handle a wide range of products, large and small.
Schaefer's solution was an automated system that consists of a high-bay warehouse, ergonomic picking stations, shuttle cars, and voice picking technology. The heart of the system is an automated storage and retrieval system (AS/RS) that holds most goods and provides timely replenishment to various order fulfillment areas. Schaefer also supplied the equipment as well as the management and control software.
Moving from manual facilities to a sophisticated automated operation required more than just turning on a switch. It also meant a new way of thinking about how goods are processed.
"We had to learn how to have a high bay," explains Henrik Dalsgaard, distribution manager at the Odense facility. "We had to learn how to use the technology. For us, it was like learning how to use a hammer."
A HIGH-SPEED HIGH BAY
Today, the fulfillment process unfolds swiftly with minimal human intervention. Upon arrival at the facility, all pallet loads are checked for structural integrity to ensure they can stand up to automated processing. If a problem is discovered, the load is transferred to a slave pallet, which is a non-shipping pallet reserved for internal use. Pallet conveyors then whisk most of the received goods directly to storage in the high-bay warehouse.
The rack-supported building that surrounds the high bay was added to the original factory building in 2010. The high bay itself consists of 12 aisles divided into three blocks. Twelve storage cranes travel along the aisles to gather inbound pallets and retrieve other loads needed for orders. The cranes can handle about 500 pallets an hour, moving them in and out of the more than 36,000 storage positions found on 17 rack levels.
Some of the higher-demand products from the high bay ship as full pallets to the stores. Other pallets are pulled from the high bay to restock a three-level low-bay warehouse, where case-level picking of slower-moving items is performed. Conveyors transport pallets of faster-moving SKUs to goods-to-person workstations, where case and piece picking take place. Replenishment of the various picking areas is accomplished quickly, as a pallet can be pulled from AS/RS storage and be readied for picking within six to 11 minutes, depending on the destination.
The Odense facility operates three shifts daily, five days a week. Order fulfillment is prioritized based on cut-off times, which depend on the distance the order has to travel.
NO TRAVEL REQUIRED
Approximately 600 orders are filled daily at the Odense facility. Each of the three blocks of the high-bay AR/RS warehouse has a goods-to-person picking station attached to it. Up to two workers can be assigned to each of the three stations. Source pallets containing needed items are pulled by the AS/RS and fed to six staging positions at each station.
Lights then direct the building of up to seven order pallets at a time at each station. Both full-case and piece picking are performed here. Lights and quantity indicators above the source pallet tell the worker which items to pull. Computer screens also inform the worker whether a full-case pick or a piece pick is required from a source case. Photos are taken of all new receipts, which are then displayed on the screen to help assure accuracy.
Once the items are selected, lights above the order pallets indicate which pallets need the items. The pallets rest upon ergonomically adjustable positioners that move up and down to keep the pallet at the optimal height. Between the three goods-to-person areas, six workers can build 21 order pallets at a time, at a rate of 60 pallets an hour. Pallet conveyors transport completed pallets to consolidation areas, where they are prepared for shipping.
Partially used source pallets may travel to another workstation if that SKU is required for other orders. If items still remain on the pallet after picking is completed, it heads back to storage in the AS/RS until needed. Some order pallets may be picked well before they're scheduled to ship. Picking them early helps balance workload and flow. Upon completion, the pre-picked orders are moved to the high-bay warehouse for temporary storage.
In addition to the goods-to-person pick stations, some slower-moving items are picked in a small area containing flow racks. The racks consist of three levels of flow, decked over each other but with a gap of approximately two feet between them. An operator standing in front of them can easily reach all three levels. Lights direct the selection of items into staged cartons or totes.
In the three-level low-bay warehouse, workers pick cases from the bottom rack. (The top two levels hold slow-moving store display products and supplies.) Display screens attached to walkie rider pallet trucks are used in conjunction with bar-code scanners to direct the case picking. Workers scan the bar codes on the cases as they pull them from the pallets and deposit them onto the order pallets on the walkie riders. In addition to the scanners, some workers here are equipped with voice units that direct their picks.
FASTER AND MORE EFFICIENT
When the picking process is complete, orders are dispatched to consolidation areas, where five transfer shuttle cars take them to wrapping and staging stations. Black stretch wrap is used for security purposes, as loads may contain electronics and other high-value items.
Once the pallets are wrapped, the shuttles move them to various staging positions, where they await loading onto outbound trucks. About 3,200 pallets are shipped weekly. Stores receive one to three deliveries each week, depending on the store size and brand. The majority of store orders consist of about five pallets, although some larger stores may receive as many as 25 pallets in a shipment. Vehicles hold 33 pallets each.
Since the former manual operations were consolidated into the Odense facility, Coop has seen bottom-line distribution savings of about 9 percent, while improving the quality of its processing.
"We are faster, more efficient, and cheaper," notes Dalsgaard. "Our ability to handle complexity has been raised, and we can handle a wider range of products while gaining higher productivity and shorter order cycles."
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."