James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
Logistics and supply chain managers are getting smarter ... at least when it comes to using software intelligence to run their supply chains. Sixty-five percent of the respondents to this year's survey on supply chain software usage said they now use software for analysis.
That was one of the key findings of the annual study conducted jointly by the consulting firm Nucleus Research in Boston and DC Velocity. The findings are based on 167 responses received from readers of DC Velocity and its sister publication, CSCMP's Supply Chain Quarterly. The survey, now in its third year, provides a snapshot of how logistics and supply chain managers are using software to improve their operations.
The breakdown of survey respondents resembled that of previous studies. As in past surveys, manufacturers made up the largest category of survey takers, at 35 percent of respondents. Next came third-party logistics service providers (3PLs), at 15 percent. Wholesale distribution, retail, and transportation each accounted for 9 percent, while the remaining 23 percent fell into the "other" category.
A plurality of survey takers came from small companies, as was the case in past samplings. Forty-four percent of survey respondents work for companies with under $100 million in annual revenue. Sixteen percent came from companies with revenues of under $500 million, 9 percent from companies with revenues under $1 billion, 17 percent from companies with revenues between $1 billion and $5 billion, and 14 percent from companies with revenues exceeding $5 billion.
WMS STILL NUMBER ONE
So what software tools are readers using? As was the case in the past two surveys, warehouse management systems (WMS) topped the list, with 50 percent of respondents using this application. Because a WMS oversees distribution center operations, it stands to reason that this application would place first on the board with readers.
The second most commonly used application was also no surprise. Enterprise resource planning (ERP) software, which serves as the system of record for financial transactions, was used by 46 percent of the survey respondents. In third place were order management systems, used by 43 percent. Fourth on the list was transportation management software (TMS), used by 41 percent (an unsurprising result given that the software, which is used for managing carriers, is a mainstay of today's logistics operations). In fifth place on the list, cited by 35 percent, was analytics, a software category that's gaining in importance. (For the full list, see Exhibit 1.)
The ranking of the software tools in the middle also came as little surprise. Although demand planning offers value to companies selling or making thousands of stock-keeping units (SKUs), many of their smaller counterparts still aren't using sophisticated software tools for forecasting. Similarly, inventory optimization tends to be used by companies struggling to manage the inventory for thousands of SKUs across several locations.
The tools ranked on the bottom of this list are either of interest to a narrow base or are new technology. For example, distributed order management systems were used by 10 percent. This type of software is deployed specifically by omnichannel retailers to determine whether to fill an online order from a store or a warehouse/DC. Another application, the control tower system, which was also cited by 10 percent, is a nascent technology that's now only being deployed by multinational companies to manage the end-to-end supply chain. Ten percent of respondents were using trade management software, an application only of value to companies involved in cross-border trade. Finally, 8 percent were using demand sensing, an advanced application used currently by leading-edge consumer product companies to quickly discern changes in consumer buying preferences.
Thirty percent of those surveyed had bought new supply chain software in the past year. Most of the purchases were WMS packages, which were bought by 33 percent. Twenty-four percent bought a new TMS. Interestingly, the third most frequently purchased type of software was analytics, cited by 15 percent—another indication in our survey that more and more companies are interested in using software intelligence to gain insights into their operations.
THE PAYBACK STRUGGLE CONTINUES
The survey found that many companies are still struggling with the issue of payback on their software purchases. Although 43 percent of respondents said they had received the expected payback from a purchase, an equal number said they were unsure as to whether they had recouped their investment. On the other hand, 14 percent were firm in their view that their company had not received the expected return on their supply chain software investment. Given that a supply chain software license or subscription can run into the thousands of dollars and entail additional fees for consulting, training, and systems integration, many companies are clearly struggling with the issue of return on investment (ROI).
As the survey made clear, when it comes to payback, expectations vary all over the map. At one end of the spectrum were companies that expected payback within three months (7 percent). At the other were those that were willing to wait more than three years (6 percent). The remainder expected a return within one year (23 percent), within two years (10 percent), within six months (8 percent), and within three years (5 percent). It should be noted that 38 percent of survey takers said they did not know what the time frame was for expected payback at their company.
Many companies have found that cloud-based software provides a faster ROI than the traditional on-premise deployments; in fact, 49 percent of the respondents that are using cloud software said that this deployment method had shortened payback. Because cloud solutions do not entail added costs for installation, hardware, systems integration, maintenance, and custom coding, they are generally less expensive to implement than traditional on-premise applications. The lower upfront costs translate to a quicker payback.
Given those benefits, it's probably no surprise that the percentage of users moving to the cloud has increased over last year. Forty-five percent of survey respondents said that they are using cloud deployment for at least one type of supply chain software tool compared with only 33 percent in last year's survey.
GROWING USE OF ANALYSIS
The survey underscored the growing use of software intelligence to find answers to supply chain problems as well as some of the issues that come with using these tools. Sixty-five percent of respondents said they are now using software for analysis. What's interesting is that only 32 percent are using tools especially designed for analysis. That indicates that many companies doing software analysis are taking advantage of the embedded analytics that are increasingly found in more advanced TMS, WMS, and inventory optimization (IO) packages.
When it comes to using software intelligence, almost half of those doing analysis—49 percent—use their tools for diagnostics to troubleshoot the root cause of problems. Another 43 percent use software for conducting either descriptive or predictive analytics. (Descriptive analytics represents the most basic type of software intelligence as it details and compares performance, while predictive analytics generally takes the form of demand planning tools.) Surprisingly, 39 percent said they were engaging in so-called big data analysis, which involves sifting through reams of information for operational insights. Only 12 percent were making use of prescriptive analytics, in which remedies are proposed, and 13 percent were engaged in cognitive analytics, which uses self-learning and machine intelligence technologies to mine data. (See Exhibit 2.)
As for where they're applying these tools, the survey found that the majority—63 percent of those survey respondents who are using analytics—were using them for demand planning or forecasting, a critical business issue for companies trying to determine what to manufacture and distribute. Second on the list was inventory management, another important business issue as companies must balance the cost of buffer inventory against the potential loss of revenue from a missed sale. Third on the list was transportation, an area of concern as shippers seek to control shipping costs. (See Exhibit 3 for the complete list.)
Although more companies are turning to analytics, 25 percent have yet to take the plunge and another 10 percent are unsure if their companies are making use of these capabilities. When the non-users were queried about the reasons for their hesitation, the number one reason was lack of IT support, cited by 32 percent. (See Exhibit 4.) That response is not surprising given that one of the issues bedeviling analytics right now is that many of tools are not easy to use and often require the expertise of data scientists to assist in interpreting the results. The lack of data visualization capabilities (which would allow users to see the results in the form of charts and graphs) and the need to use third-party software like Tableau to provide any type of results visualization have been factors in hindering greater adoption of analytics in business disciplines like logistics and supply chain.
THE INTEGRATION CHALLENGE
Survey takers were also asked to name the biggest challenge they face to the successful deployment of a supply chain software application. As was the case last year, the number one challenge was systems integration, cited by 28 percent. Clearly, companies still find it difficult to get disparate systems to exchange information. Next on the list was the lack of information technology (IT) resources, cited by 21 percent of respondents. Inadequate support from upper management, named by 17 percent, was the third-most-frequently cited challenge. Other key hurdles were lack of good user training, cited by 12 percent, and lack of employee acceptance, also cited by 12 percent.
Finally, the survey underscores two themes in the business world in regard to information technology that, not surprisingly, are influencing supply chain software. Companies are increasingly turning to cloud deployments for software tools to receive a faster ROI and justify the expense. And despite obstacles such as the lack of data visualization, companies are starting to apply more analytics to gain insights into their operations in an effort to cut costs and boost profits.
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."