Close connections with your 3PLs—and the inventory they manage—is more critical than ever in the age of omnichannel retailing, e-commerce, and fast cycle times.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Businesses of all sorts entrust third-party logistics service providers (3PLs) with much of their inventory for a host of reasons. It can help them extend their geographic reach into new markets. It keeps brick and mortar off the balance sheet. Third parties can provide specialized services and technologies that it makes no sense to develop in house. They can give clients the flexibility to scale up or down as business requirements shift.
Today, outsourcing may make more sense than ever. "When you look at the speed of change and the level of uncertainty, specifically when you look at things like omnichannel and e-commerce, growth rates are hard to predict. Leveraging 3PLs makes sense," says Mark Wheeler, director of supply chain solutions - North America for Motorola Solutions, which provides bar-code scanners, mobile computers, and other communications equipment and technology.
That same emphasis on speed, though, means that fast and accurate communication between 3PLs and the customer is crucial.
Bruce Stubbs, director of industry marketing for distribution at Honeywell, which supplies a variety of data capture technologies, adds, "As omnichannel becomes more prevalent, that's driving a lot of pressure in the DC environment. A lot of distribution networks can handle delivery to the box stores. But there are many people who don't have the internal expertise or right infrastructure to handle omnichannel. It takes a different type of operation for picking, packing, and shipping direct to consumer. We've seen a lot of people take that portion of their operations as they move into the multichannel arena and give it to a 3PL."
Those same challenges make close integration between customer and 3PL systems imperative. "When you are operating that much faster and going to direct-to-consumer fulfillment, you have to look at how you handle that integration," Wheeler says.
A WINDOW ON THE SUPPLY CHAIN
Yet despite decades of development of track and trace tools, getting good visibility into inventory that's in the hands of a third party can still be a challenge. "Visibility and control is an area that both parties continue to struggle with," says Adrian Gonzalez, president of Adelante SCM, a research firm that specializes in third-party logistics.
The ideal for a shipper who owns the goods, Gonzalez says, is to have systems that make it appear as if he is managing it himself—having all your goods in a single view. But that's easier said than done, Gonzalez acknowledges. "And the more 3PLs you have, the more of a challenge it becomes. You have multiple relationships to manage, multiple systems to integrate with."
These days, it's pretty common for shippers to be working with multiple providers, according to Gonzalez. For most companies, using a single 3PL for all outsourced operations isn't realistic, he explains. "For years, they have tried to consolidate as much as they can, but at the end of the day, it's like technology—you go with the best of breed."
The question of how many 3PL partners a shipper might have aside, the fact remains that working with one of more 3PLs adds a level of complexity to tracking and managing your goods. So what can shippers do to make the process as seamless as possible?
Gonzalez says there are three key considerations. The first is the technical aspect—the integration of 3PL systems with the customer's internal systems.
"Another element is getting alignment around the key metrics that will be guideposts for making sure on a day-to-day basis, you are moving in the direction you need to be moving in," Gonzalez says. "And those metrics will change over time. The main thing is, you don't want to drown in data. You want to focus a relationship on a core set of metrics aligned with the desired outcomes.
"The third thing is the reality that at the end of the day, it is people that get things done," he adds. "You cannot underestimate the influence of people-to-people relationships."
OUT OF MANY, ONE VIEW
Of those three considerations, historically, it's been that first aspect—the technology—that has proved to be the biggest hurdle, creating problems on both sides. For 3PLs, working with multiple customers once meant employing multiple warehouse management systems (WMS) and transportation management systems (TMS). "We've seen a migration away from that," Gonzalez says. Many 3PLs have developed standard platforms to serve all their customers, making the technology more scalable and manageable.
For businesses making use of multiple 3PLs, the issue can be fragmentation of data. That very real problem leads some companies to assign a lead logistics provider to consolidate and orchestrate information flowing to and from all third parties. But not every company has the resources to do that. "More commonly, the onus is on the shipper to have a technology platform that is able to take information from across trading partners and aggregate the data," Gonzalez says. "The challenge becomes aggregating the data from different sources and making sure it is accurate, timely, and complete. The objective is to have a single view of the supply chain."
The technology to enable that has improved steadily. Stubbs says visibility between the 3PLs and the owners of the inventory can come via linking inventory in the 3PL's possession directly into the customer's WMS, or if the 3PL has a robust enough WMS itself, giving each customer access to its own data through secure nodes in that system. He says several WMS providers specialize in the 3PL market just to provide that kind of visibility.
Best-practice 3PLs, he says, work off advance ship notices (ASNs), which provide information from the client's suppliers on what's actually coming—which may not match what was ordered. "As soon as the ASN is sent by the supplier, it becomes visible to all in the WMS system. It becomes visible to the 3PL, and at the same time, becomes visible to the client. It is all about visibility and having real-time information to act upon."
Of course, the information in any system is only as good as the information provided, and that's where the tools for capturing information as goods move from the yard to receiving to putaway to picking to shipping are so critical. As Stubbs says, "Certainly, you need to be able to capture information not only accurately but in real time and present it to the system of record to provide real-time visibility to balance on hand, shipment status, receipt status, those types of things. That's critical to managing the separate inventory buckets. The way to do that is through electronic capture, whether that be through mobile computing, scanning, or voice. Typically, it's a combination of all of those."
BETTER STANDARDS?
What's likely to make that work much more seamlessly in the future is the use of data capture standards that can provide end-to-end traceability. The development of such standards, at least in theory, would have all parties in a supply chain working with the same sets of data. The goal, Wheeler says, is to have one way of encoding product for an industry that would allow anyone in the supply chain to scan and capture data. A single bar code could work from original source to final destination. "That will be a huge change that a lot of industries can use," he says. Producers and distributors of perishable foods are leading the way, driven by traceability requirements embedded in law. But more industries are certain to follow, Wheeler believes.
That sort of standardization has a ways to go before it sees widespread adoption. For one thing, Gonzalez says, standards are often that in name only, as companies adopt standards and then fine-tune them to their own needs. And Stubbs expects many companies will resist adopting standards, seeing the need to purchase systems and equipment to enable their use as a cost burden. He says widespread adoption of standards is likely to happen only as a result of pressure from either government regulations, as now exist for food shippers, or from big end customers such as Walmart, which is mandating compliance with food traceability initiatives by the end of June. "That should have a domino effect with other retailers," he says.
Greater adoption of technology like bar codes and radio-frequency identification (RFID) tags will also aid in capturing the data needed for tracking and tracing. A survey Motorola conducted last year among 3PLs, retailers, wholesalers, and manufacturers indicated that about two-thirds of goods inbound to distribution centers and plants carry bar codes today. The study projected that the number would rise to 83 percent by 2018. And RFID usage rates are expected to jump to 38 percent from the current 21 percent.
Wheeler expects pressure will mount on suppliers to tag goods as omnichannel and direct-to-consumer business models develop. "As you go to omnichannel and you want a single set of inventory, you almost have to be source tagged," he says. "You want to be able to do no-touch item-level receiving, no-touch order verification. That's somewhat forward looking, but it is definitely a trend."
Should that trend become reality, it promises to provide companies that use 3PLs with an even clearer, more timely view of just what's happening to their inventory.
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."