When the military expanded its online PX shopping privileges last fall, eager customers flooded its website with orders. New warehouse software and automated equipment helped its DCs cope with the deluge.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
One of the largest retailers in the country is a 123-year-old operation with a highly exclusive customer list—to shop at this store, you must have served in the U.S. armed forces.
Despite that stipulation, the Army & Air Force Exchange Service (AAFES)—also known as the "Exchange" or the PX (an Army abbreviation for "post exchange")—has grown to become the 56th largest retailer in the country, operating some 2,700 stores on Army and Air Force bases in all 50 states and more than 30 countries worldwide.
"We spent the last year and a half making changes in our DCs to handle the increase in e-commerce," said Alan French, the the Army & Air Force Exchange Service's vice president of logistics operations.
The Exchange no longer does all its business through stores, however. In 2014, AAFES launched an e-commerce website in an effort to keep pace with an increasingly omnichannel world. Although that move proved popular with customers, it created problems for the back end of the operation. The Dallas-based Exchange quickly realized that its existing distribution process, which was geared toward store replenishment, would need a serious overhaul to meet the demands of e-commerce. As the volume of direct-to-consumer orders grew, it began investing in automated material handling systems.
Twenty-two months ago, that process shifted into high gear when AAFES CEO Tom Shull began laying the groundwork to open up the Exchange's e-commerce business, ShopMyExchange.com, to a much wider audience. Defense officials had decided to extend online shopping privileges to all honorably discharged veterans as well as its traditional customer base of active-duty and retired service members and their families. The change expanded the ranks of potential e-commerce customers overnight to 30 million from 11 million.
To handle the flood of shoppers eager to access the site's tax-free deals, the Exchange launched a major overhaul of its three main U.S. distribution centers, making changes at the various sites that included adding voice-directed picking technology, and installing new conveyors and a put-to-light wall. The keystone of the upgrade was swapping out its 30-year-old warehouse management system (WMS) for JDA Software Group Inc.'s latest WMS. The upgrade has enabled new capabilities like giving customers greater visibility into their order status, optimizing outbound shipments, and processing e-commerce orders through a shared-inventory single-WMS environment in order to cut inventory-carrying costs, Exchange officials said.
Many of those upgrades are familiar strategies to any e-tailer looking to provide swift omnichannel fulfillment service at an affordable cost. However, the Exchange has many unique attributes that made its e-commerce makeover unique.
FAMILY SERVING FAMILY
Unlike niche websites that specialize in specific types of inventory, the Exchange sells a nearly universal range of goods in order to satisfy its mission "to bring troops a taste of home." It carries everything from Michael Kors sunglasses to Vera Bradley handbags to razor blades to diapers, along with dishwashers, flatscreen TVs, and saltwater fishing rods.
In return, military members who have served foreign deployments thousands of miles from U.S. shores often feel a deep loyalty to the Exchange. A visit to an AAFES store in a foreign port offers a connection to American culture and community that goes far beyond checking off items on a shopping list.
One former Marine interviewed for this story fondly recalls visits to "the land of the big PX" as a near-Disneyland experience—a stark contrast to the rigors of life on an active military base. For someone like him stationed a long way from home, PX privileges meant instant access to cherished items like Cheerios in Germany or a Nintendo videogame console in Panama.
That relationship creates a far tighter bond between the store and its customers than you'd see with a typical big box retailer and its clients. In fact, the Exchange describes its business model as "family serving family," noting that about 85 percent of its 34,000 employees are connected to the military in some way, whether they're retired veterans or National Guard or Reserve personnel themselves or the spouses and relatives of those service members.
Shopping at the Exchange even supports fellow military members financially, with roughly two-thirds of earnings reinvested in programs such as Army child development and childcare centers, fitness centers, Air Force outdoor recreation programs, and school meals for warfighters' children overseas. With 2016 revenue of $8.3 billion and earnings of $384 million, the Exchange provides significant support for military families worldwide.
READY FOR SHOWTIME
With such a loyal following, leaders of the Exchange knew their revamped e-commerce operation had to be ready to handle a surge of orders from the first day the expanded eligibility requirements took effect.
"We spent the last year and a half making changes in our DCs to handle the increase in e-commerce. Among other things, we revamped our systems and carved out space for a consolidation area, a pack station, and a shipping area," said Alan French, the Exchange's vice president of logistics operations.
The updates affected the Exchange's three main U.S. DCs: the 1.4 million-square-foot Dan Daniel Distribution Center in Newport News, Va.; the 707,000-square-foot Waco Distribution Center in Texas; and the 849,000-square-foot West Coast Distribution Center outside Sacramento, Calif., along with its satellite facility, a 240,000-square-foot building at the nearby Sharpe Army Depot.
To obtain the capabilities it needed, the operation embarked on a project to upgrade its WMS software platform to JDA's WMS 2013.2 product. The Exchange has now installed the system in its West Coast and Waco facilities as well as a new distribution center in Germany. It is currently working to roll out the new WMS at its flagship DC in Newport News, according to JDA.
As a result of the upgrades, the three facilities are now the most efficient of the 11 DCs operated by AAFES, according to the Exchange. That efficiency is the result of new processes enabled by the WMS. For instance, unlike the legacy system, which assigned employees to jobs based on static warehouse functions, the new software lists the tasks each worker can perform, then sets a priority for each task, compares that with a worker's proximity to the task location, and assigns jobs accordingly. The result is a more effective work flow because the system directs the closest and best-qualified workers to the tasks that are most pressing at any given moment, according to the Exchange.
At the same time, the software has pulled back the curtain on the fulfillment process, giving customers greater visibility into the status of their orders. With the previous platform, customers couldn't obtain updates until the DC shipped the merchandise. But now, thanks to the implementation of a warehouse order management system (WOM), they're able to see the status of each order as it makes its way through the DC.
Modernizing the WMS allowed the Exchange to make other technology updates as well, including the addition of a Vocollect voice-directed picking system from Honeywell Intelligrated. The Exchange also worked with Honeywell Intelligrated to install advanced conveyors and a put-to-light wall in its Newport News site, according to Honeywell.
Honeywell Intelligrated had previously worked with the Exchange to replace the aging conveyor system in its Waco DC with a faster, higher-capacity version, Honeywell said. That new, wider accumulation conveyor at Waco also features upgraded controls that replaced dated mechanical sensors with electric sensors and servo drives, as well as a sliding shoe sorter and upgraded pick modules.
According to Morgan Meeks, the Exchange's vice president of transportation, the Exchange's flagship Dan Daniel facility recorded a 30.42-percent productivity increase over 2016,
The Exchange is confident these and other technology updates will allow it to accommodate the increase in online order volume. For example, the Dan Daniel DC is now equipped with a carousel retrieval system from Kardex Remstar that provides high-density storage, using flat trays to handle small items, said Morgan Meeks, the Exchange's vice president of transportation. (You can view clips of the automated equipment below.)
Choosing commercially available material handling equipment was a novel approach for a unit of the Department of Defense, which has a reputation for buying expensive specialized hardware from defense contractors. "As a government agency, we tend to move slowly, as contracts need to be signed and then we need to get government funding," French acknowledged. "But we have the intention to upgrade quickly and make changes fast in the future. We need to use [commercial off-the-shelf] products to stay up-to-date and stay current because e-commerce is changing so quickly."
DELIVERING RESULTS
When the Exchange opened the electronic doors of its website to an expanded audience last Veterans Day—Nov. 11, 2017—the orders came pouring in as expected. In fact, the number of orders placed on ShopMyExchange.com over Veterans Day weekend was nearly triple the number from the previous year, as newly eligible military shoppers logged in to take advantage of the tax-free deals and the "family connection."
In raw numbers, the website logged 172,396 orders over a period that included Veterans Day weekend, Thanksgiving, Black Friday, the Saturday after Thanksgiving, and Cyber Monday, which represented a 132-percent increase from 2016 levels, according to the Exchange. Measured by units shipped, the website handled 351,175 items of inventory over that period, notching a 202-percent increase from the year before.
As for how the new systems worked out, the Exchange's e-commerce operation weathered the storm, executives said. The flagship Dan Daniel facility recorded a 30.42-percent productivity increase over its performance in 2016, measured by units shipped per day, while using the same number of workers, Meeks said.
"We see ourselves as very unique," said Julie Mitchell, the Exchange's public relations specialist, Executive Group (EG). "This is different from a commercial business; our customers are our family. We serve a special type of customer who raises their right hand and takes an oath to serve their nation, so we consider it a privilege and honor to serve them."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."