When it Comes to Replacing your Vehicle, 11 is the new 5

Next time you go to start your 11-year old car or light truck, you can find comfort in knowing that roughly half the vehicles on the road are older than yours.  As reported on CNN, 2013 data from Polk market research firm found the average age of vehicles on the nation’s highways reached a record 11.4 years.  This represents a marked increase from ten years ago, when the average age was 9.8 years.  The upward trend is expected to continue, with the number of vehicles 12 years of age or older expected to increase by more than 20% by 2018.

According to Polk’s research, fallout from the economic recession caused many people to hang on to their existing vehicles longer than they normally would.  In addition, overall auto quality has gotten better, meaning fewer breakdowns and less need to purchase a new vehicle.

The growing age of the nation’s fleet has impacted the nation’s $318 billion automobile aftermarket.  The aftermarket is generally defined as all products and services purchased for light, medium and heavy-duty vehicles after the original sale.  This includes replacement parts, accessories, lubricants, appearance products, tires and collision repair parts.

Aftermarket suppliers maintain replacement parts for all vehicles, regardless of obscurity.  But with more than 2 million SKUs to manage, the trick is to manage inventory so that the correct part can be identified and installed into a customer’s vehicle in the shortest amount of time possible – generally within 24 hours.

The nation’s aging fleet is good news for aftermarket suppliers, since older vehicles tend to require more trips to the repair shop than newer models.  At the same time, newer models – hybrids and electronic vehicles – have introduced completely new product lines.  Managing the extensive inventory adds a new twist to the already complicated aftermarket supply chain.

Many aftermarket businesses have found technology and “better thinking” to be lifesavers.  As reported in IndustryWeek, Discount Auto Parts turned to technology as a way to manage scheduling and distribution issues, along with its SKU inventory.  The result?  $106 million in cost reductions over four years.

At the same time, new concepts for inventory and warehouse management are getting serious attention as supply chain managers search for greater efficiency in an increasingly competitive environment.  One concept gaining attention is the idea of “horizontal collaboration” whereby businesses with products headed to the same retailer or distribution center share truck space as a way to reduce transportation costs.

Taking advantage of new supply chain processes is the subject of a new white paper from Purolator International:  “Using Best Practices and Innovation to Drive Your Automotive Aftermarket Supply Chain.”

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Visibility Still Lacking in Many Supply Chains

The newly-released 2014 Smart Manufacturing Technologies Survey found 40 percent of manufacturers say they have no real-time visibility into their supply chains, with nearly 10 percent admitting their factories spend a considerable amount of time “looking for” equipment and products.

The survey results confirm research from past surveys, which also found a lack of supply chain visibility among U.S. businesses.  These findings are surprising, alarming even, given the proven positive impact improved visibility can have, and the widely available technology solutions that can help a business improve its processes.

A new white paper from Purolator International:  “Supply Chain Visibility is Key to Improved Efficiency and Reduced Costs” provides an in-depth look at the benefits visibility can bring to a business, and also discusses the specific considerations a business will need to take into account.

For example, an operations manager is told by senior management to cut costs by 10 percent.  But how can the manager do that without understanding how a cutback in one area will reverberate across the rest of the production process?  Instructing Vendor A to change a process without understanding that Vendor B relies on Vendor A’s output, could uproot the whole process.

Allowing the manager to have insight into the entire process – greater visibility — would avoid potentially disastrous scenarios such as this from playing out.

This then, is a key objective of all businesses:  360-degree insight and awareness of all processes to ensure synchronization, awareness among all stakeholders, and maximum efficiency.

To start, the operations manager would need to work with senior management to consider three core questions:

1)     Who do we want to share information with?

2)     What information do we want to share?

3)     How do we want to share that information?

Determining the who, what and how will drive a business’ approach to visibility.  The more stakeholders “in the loop,” the greater the likelihood for collaboration and efficiency.  But, that collaboration will come with increased exposure to risk.  Finding the right balance is key.

To download a copy of Purolator International’s new white paper, please click here.

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Businesses Find B2B Returns can be Opportunities for New Revenue, Customer Satisfaction

A report last year from Forrester Research found that spending by U.S. businesses on B2B eCommerce during 2013 was more than twice the amount spent on B2C online sales.  B2B eCommerce reached $559 billion, versus $252 billion spent on B2C transactions.

These numbers reveal a fundamental change taking place in the world of B2B transactions.  Purchasing managers are increasingly putting down the thick catalogues that traditionally served as their “bibles,” and instead looking online for the same access to product and pricing information they access for their own personal shopping needs.

The reality that the B2B eCommerce market is twice the size of the B2C market is causing many businesses to retool their B2B marketing and “outreach” efforts, with many companies redesigning their websites and mobile outreach to provide B2B shoppers with retail experiences that more closely resemble B2C transactions.

So too is eCommerce changing the face of B2B product returns.  A recent article in Forbes discussed how managers who place B2B orders online, expect the same high quality service they receive when they shop for themselves.  This extends to expectations that B2B returns will be easy and hassle free.

Changes in B2B returns management is the focus of a new white paper from Purolator International:  “B2B Returns:  Finding Value and Opportunity in a Well-Managed Returns Process.”

As the paper discusses, while B2B returns generally fall within one of the same “buckets” that have always defined B2B returns:  Defective Products, Product Recalls, End-of-Life Merchandise, Obsolete/Unsold Merchandise, or Warranty Returns, manufacturers are realizing new ways of evaluating those returns.  Whereas returns were traditionally seen as a drag on the bottom line, businesses today are committed to capturing value from those returns.

Undamaged products, for example, can be sold in an outlet store or via eBay.  Useable parts and components can be salvaged and made available for resale.  Other goods may be remarketed and sold overseas.

Businesses that cater to the B2B market are enlisting the services of their logistics partners to help better understand their opportunities, and to develop customized approaches to fit their unique situations.

To find out if your business might benefit from a new B2B returns process, please click here to download Purolator’s new white paper.

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Better Options for Expedited Air Service to Address Capacity/Congestion Issues

Despite its leading role in global manufacturing, China has a first-rate problem when it comes to reliable air service options.  Namely, that its two major airports, Beijing and Shanghai, rank dead last and next-to-dead last in terms of on time departures.  Flights taking off from Beijing were delayed 82 percent of the time during 2013, with a 71 percent late departure rate for Shanghai.

While many factors are at play in causing the delays – poor infrastructure, tightly-controlled air space, increased regulatory and security mandates, and overcapacity – the impact is taking a toll on supply chains dependent on goods arriving from China.

This is especially true for urgent, time-sensitive products traveling as “expedited” shipments, for which a premium price has been paid to ensure an on-time arrival.  Expedited shipments range from machinery parts that must arrive at a North American factory in time to avert an assembly line shutdown, to a shipment of desperately-needed temperature-controlled vaccines, to any range of reasons a shipment needs to be delivered as fast as humanly possible.

But as the China example makes clear, external factors are affecting expedited service providers’ ability to guarantee delivery times.

The good news though, is that innovative expeditors are finding ways to offer creative options to circumvent those external factors.  A new white paper from Purolator International, “Expedited Air Service:  Innovative Logistics Solutions for High-Value, Most-Urgent Shipments,” discusses some of the more compelling new options.

For example, many businesses are finding air charter services, generally thought of as cost-prohibitive, to be a highly efficient alternative.  Air charters allow an expeditor to customize a flight plan, so that busy, notoriously congested airports can be avoided.  Instead, a shipment can travel via a less congested alternative, such as a regional airport.  Or, a shipment can travel through a country with a more efficient customs clearance process, or that has a favorable trade agreement in place with the United States.

Expedited air service is a premium solution that offers on-time, seamless delivery.  As Purolator’s white paper makes clear, new solutions can help a service provider facilitate delivery of those high levels of performance.

Please click here to download a complimentary copy of “Expedited Air Service:  Innovative Logistics Solutions for High-Value, Most-Urgent Shipments.”

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U.S. Businesses Fail to Claim more than $2.4 Billion Annually in Drawback Reimbursements

U.S. businesses are legally entitled for reimbursement of up to 99 percent of duties paid on qualified goods that are imported into the U.S., but then subsequently exported or destroyed.

So why do more than $2.4 billion in eligible reimbursements go unclaimed each year?

It’s complicated.  That is to say the process for seeking reimbursement is complicated, so most businesses don’t even try to claim the monies to which they are legally entitled.

The process for seeking duty reimbursement is called “duty drawback,” and is administered by U.S. Customs and Border Protection (CBP).  Drawback has actually existed in the United States since 1789, when the first session of the U.S. Congress sought to encourage manufacturing within the young nation.

A new white paper from Purolator International, “Duty Drawback:  Could your Business be Eligible for a Duty Reimbursement?,” offers a detailed overview of the drawback process, and helps make sense of what is generally regarded as a highly complicated application and qualification process.

Any business that imports materials into the United States must pay duty on those goods.  If those materials are then used in the manufacture of products that are subsequently exported – they are taxed again.  For example:   A U.S. manufacturer imports a quantity of zippers from Canada, and those zippers are used in the production of jackets that are subsequently exported.  Well, the U.S. manufacturer would pay a duty on the zippers when they arrived from Canada, and again upon export from the U.S.

Through drawback, the manufacturer could be eligible for a refund of up to 99 percent of duties paid on the zippers when they were initially imported.

To qualify, a business must maintain meticulous records and be able to provide a clear “trail” that a product initially imported into the U.S. is the same – or in some cases nearly the same – as the product subsequently exported (or destroyed).  In addition, a business must demonstrate that a product meets CBP’s strict conditions for qualification.

As Purolator’s new white paper makes clear, most businesses rely on a third party logistics expert or customs broker to manage the drawback process on their behalf.  And with good reason, since CBP’s own website acknowledges:  “[T]he process of filing for drawback can be involved and the time it takes to receive refunds can be lengthy.”

Despite the apparent bureaucratic hassle involved, an experienced logistics provider will be well versed in understanding the process.  With billions of dollars waiting to be claimed, what do you have to lose?

A good first step is to download Purolator’s white paper, which can be accessed here.

 

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Logistics Clusters are Helping Businesses Innovate Supply Chains and find Efficiencies and Cost Savings

The nation’s top freight carriers record an annual empty miles percentage of roughly 12.5 percent.  That is to say that trucks are forced to make the return trip to their point of origin empty, because no additional conveyances are available along the route.  And the figure is much higher – as much as 25 percent – for private carriers that only carry loads for a single shipper, and thus have fewer reloading opportunities.

Clearly this is a waste of good cargo space, and a lost opportunity for carriers to profit from miles that are already included in a shipping route.  Yossi Sheffi, director of the MIT Center for Transportation and Logistics theorizes that empty miles are something that can be largely avoided through migration to “logistics clusters.”  As Sheffi notes in an excerpt from his new book Logistics Clusters:  Delivering Value and Driving Growth that appears in the Sept/Oct 2012 issue of Supply Chain Brain magazine:  “Delivering freight into a logistics cluster means that there is a high likelihood that there will be a follow-on load going out of the cluster.  This is due both to the large number of logistics operators in such a cluster and to the interchangeable nature of freight flows.”

What exactly is a logistics cluster?  As reported in Industrial Distribution magazine, a logistics cluster refers to a “geographically concentrated set of logistics-related business activities.”

Dr. Sheffi illustrates the positive impact of a logistics cluster by citing two manufacturers – competitors in some product categories – that decided to join forces and share logistics services in order to more efficiently serve a shared customer via its Vero Beach, FL distribution center.  One of the manufacturers, a leading producer of batteries, was sending 9,000 pounds each week to the DC using an LTL carrier.  The other, a manufacturer of home cleaning, air care and other products, was averaging 20,000 pounds of freight per shipment with a truckload carrier.

The two manufacturers approached their common customer – a national retail chain – and asked to have its ordering system modified so that the manufacturers’ shipping schedules would be the same.  As a result, the two manufacturers are now able to share a single truckload carrier.  The results have been win-win:  reduced transportation costs, improved carbon footprint, improved on-time delivery and reduced shortages and deliveries.  In fact, the customer has been so pleased, it has approached other manufacturers within the cluster area to arrange similar arrangements.

As businesses increasingly search for “out of the box” ways to streamline operations and tweak their supply chains, logistics clusters are increasingly proving to be a valuable way to achieve synergies and savings.

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What Exactly do Canada and the U.S. Buy from Each Other?

It’s no surprise to most that Canada is the United States’ top trading partner, with almost $1.7 billion in goods crossing the border each day. But what exactly are U.S. businesses sending to Canada? And what are U.S. businesses and consumers purchasing from our northern neighbor?

According to the U.S. Census Bureau, which tracks imports and exports, top sales to Canada through October 2013 included:

Product Category Value (in billions)
Transportation Equipment $54.01
Machinery, except Electrical $27.29
Chemicals $25.51
Computer & Electronic Products $22.28
Food and Kindred Products $12.50
Petroleum & Coal Products $12.18
Primary Metal Mfg. $12.07
Fabricated Metal Products $10.68

Top purchases from Canada included:

Product Category Value (in billions)
Oil & Gas $73.53
Transportation Equipment $56.58
Chemicals $22.11
Primary Metal Mfg. $18.70
Petroleum & Coal Products $15.70
Food and Kindred Products $11.79
Machinery, except Electrical $11.37
Paper $8.42

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Supply Chain Top Jobs Increasingly Held by Women

When the President hosted a White House ceremony in June to mark the 50th anniversary of the Equal Pay Act, included among the invited guests was Ellen Voie, president and CEO of a non-profit group called Women in Trucking.  While that day’s ceremony was called to celebrate progress of women in achieving pay equity across all industries, Voie’s presence signified the tremendous progress women have made in the traditionally male-dominated world of transportation and supply chain management.  The trucking industry, for example, counts almost 170,000 women among its corps of drivers.

In fact, at a time when the supply chain industry continues to be an overwhelmingly male-dominated sector, women are increasingly breaking new ground by attaining senior management positions and setting new standards for innovative thinking.  Rosemary Coates, president of Blue Silk Consulting in Los Gatos, CA suggested to Logistics Management magazine that women’s ability to problem solve is at least in part responsible for their success.  “The supply chain and logistics arena is a place where there are a lot of existing problems,” she said.  “Women are problem-solvers.  We have traditionally had to deal with family budgets and evaluating risk and reward in our family lives, so when it comes to bringing value to employers, we can draw from that discipline and experience.”

A “Women in Supply Chain” venue launched by Canadian think tank Van Horne Institute, notes a strong uptick in the number of females enrolled in post-secondary supply chain management degree programs,  and that “soft skills” such as collaboration, creativity and problem solving are in high demand throughout the industry.

These sentiments seem to be echoed by Ann Drake, chairman and CEO of DSC Logistics, who recently launched an initiative called Advancing Women’s Excellence in Supply Chain Operations, Management and Education (AWESOME).  In a news release announcing the new group, Drake noted:  “Now that the field of logistics and supply chain management is more about strategic thinking and collaboration, we should be seeing women as leaders in every aspect of the profession.  What we’ve found is that women are rising to new levels, but there is still much untapped potential.

Through AWESOME, Drake hopes to bring together leading women from across a broad category of supply chain professions, ranging from manufacturing to retail to third party logistics to space and aviation, and has compiled a list of nearly 400 women as potential group members.

The rise of women to top supply chain professions has generated much attention from leading industry publications.  Logistics Quarterly launched a Women in Supply Chain Management feature, that provides insights and analysis from women in senior management professions.  One contributor, Dianne Mollenkopf, assistant professor in the Department of Marketing and Logistics at the University of Tennessee, was quite direct when asked what advice she had for young women considering a career in logistics:  “Go For It!,” she advised.  “Those in logistics roles get to see across multiple organizations,” she added.  “Because women tend to be relationally focused, this cross-function vision and influence provides a great opportunity for women to add value….”

Similarly, in March 2013 Supply Chain Demand magazine published  its “first ever” list of “Top Female Leaders of the Supply Chain,” focusing on 28 individuals at the peak of their fields.

Speaking at a Logistics Quarterly Spring 2013 “Women in Supply Chain Management” symposium, Facebook COO Sheryl Sandberg argued that a major obstacle in climbing the corporate ladder is the tendency by women to underestimate their capabilities.  “If you ask men why they did a good job they say ‘I’m awesome,’” Sandberg told her audience.  “If you ask women, what they say is that someone helped them, they got lucky, they worked really hard.”  And this matters, she says, because no one will get the promotion by not believing in herself.

While no one is suggesting that women are going to overtake men among the ranks of supply chain professionals — a 2012 Career Patterns in Logistics and Supply Chain Management study  found that only 27 percent of survey respondents were women – women are increasingly assuming top-level positions.  As Ellen Voie and her team of 170,000 female truckers are demonstrating, the days of supply chain management being regarded as a “man’s world” are rapidly coming to an end.

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New Opportunities via Cloud Services

Remember the children’s game Jenga?  Players would place wooden blocks atop each other in a criss-cross pattern until inevitably, the tower would come crashing down, as the delicate balancing act became unsustainable.

The Jenga concept is a good way to describe the increasingly complex supply chains that have come to define today’s global and diversified businesses.  Businesses must manage the activities of multiple moving parts, all focused on the same objective, but not necessarily all on the same page with how to reach that objective.  Unless steps are taken to bring all those parts together, a Jenga outcome is likely.

Until now that is.  In the last few years cloud technology has helped businesses better manage and synchronize processes, achieve cost savings and maximize efficiencies in ways previously not even considered.  Cloud services have been gamechangers in providing businesses with new options for integrating technology into their processes and allowing transparency and visibility to employees.

A summer 2012 survey by Everest Group and Cloud Connect of almost 350 business executives found that 95 percent were already using either Software as a Service (SaaS) applications, or Platform as a Service (PaaS) cloud solutions.  The survey also found that 54 percent were using the cloud for application development/test environments, 45 percent for disaster recovery and storage, 41 percent for email/collaboration, and 35 percent for business intelligence/analytics.

Now that the cloud concept has moved beyond its infancy, businesses are finding more and better ways to meld its capabilities to fit their precise needs.

Cost Savings:  The Wall Street Journal profiled an Omaha-based property storage business that is saving almost $85K annually as the result of moving certain functions to a cloud server.  On a larger scale, a Massachusetts-based global supplier of electronics components saved more than $500K by moving its employee email platform to the cloud.  And a report by McKinsey technology consultants found that cloud computing can save a business 20 to 30 percent in total IT costs.

Productivity:  One California plastics company was able to transform operations by implementing a cloud –based videoconferencing application.  Now, employees who previously spent days on the road repairing customers’ equipment are able to show remote workers how to make the repairs themselves.  The net result is a considerable savings in employee time, as well as a reduction in travel costs.

Scalability:  A huge appeal of cloud services is the ability to adjust service levels based on expected needs.  A retailer that sees most of its sales during the holiday rush, for example, can contract with a cloud service provider to meet expected need.  But during the summer down period, that level of service can be ramped down.

Regulatory Compliance:  A 2010 Harris Interactive survey found that 81 percent of IT professionals said that maintaining regulatory compliance via the cloud was an issue for them.  Many of these businesses opted to build their own “private” clouds, complete with dedicated servers and systems.  But more recently, public clouds have proven adept at offering adequate compliance capabilities.  Amazon, a leading provider of cloud services, is compliant with credit card data standards.  And cloud servers allow businesses to store records and data often required to meet regulatory mandates.

Capacity Procurement:  When a nationwide provider of “rent-to-own” products turned to the cloud to help streamline processes and gain visibility into procurement and spending practices, its management team was shocked at the efficiencies achieved via a cloud-based management system.  With all employees and suppliers operating from the same system and following the same procedures, the company achieved a multi-million dollar savings

As these examples make clear, cloud technology, although still relatively new, is significantly changing business’ modus operandi.

Consider, for example spending on cloud services worldwide topped $91 billion during 2011, and is expected to more than double to $207 billion by 2016, according to analysis by Gartner.  And here in the U.S., small businesses (businesses with fewer than 100 employees) are investing in cloud services – more than $3.5 billion during 2011, a figure that the Wall Street Journal expected would grow by 25 percent last year.

So it seems the sky is the limit as businesses increasingly look to the cloud for business solutions.  And while certain “kinks” do remain – security concerns, risk of server failures – the cloud is bringing capabilities and options to businesses that were previously cost prohibitive.

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Changes to Driver Rules Likely to Cause Higher Trucking Rates

New rule changes took effect on July 1 that directly impact truckers and trucking companies.  But the effect of the rule changes are expected to reverberate throughout the economy, with analysts predicting truck rate increases of as much as ten percent.

The rule changes, which were finalized late in 2011 by the Federal Motor Carrier Safety Administration (FMCSA) will require drivers to take a break of at least 30-minutes within an eight hour shift, and will also amend the “34 –hour restart” provision, to require two periods from 1a.m. to 5 a.m. within the restart, and limit restarts to no more than one per week.

Although FMCSA officials say the changes are intended to “prevent fatigue-related truck crashed and save lives,” industry officials predict the rules will instead result in a litany of unintended consequences, including higher rates and additional strains on an already severe driver shortage.

As reported in Logistics Management, truckers and industry professionals continue to oppose the new rules, much as they mounted strong campaigns against the changes during FMCSA’s lengthy rulemaking process.  “It may not sound like much and Washington bureaucrats within the Federal Motor Carrier Safety Administration say the change is both necessary and slight, but truckers and operations personnel working the day-to-day matrix of building full truckloads with sufficient numbers of drivers say the change is meaningful – and costly,” the magazine noted.

Todd Spencer, executive vice president of the Owner-Operator Independent Driver Association (OOIDA), called the new rules “probably well-intentioned,” but said the impact would likely be a five-to-ten percent decrease in productivity.  “Most truckers believe that the rules eliminate some of the flexibility drivers need to respond to what their brains and bodies are telling them,” he said at a mid-May gathering of industry professionals hosted by Wall Street investment firm Stifel Nicolaus.  “The new 34-hour restart is the most troubling as it requires that each driver’s weekly schedules be reset once a week – and each resetting must include two consecutive nights of sleep each inclusive of the hours from 1 a.m. through 5 a.m. within the context of the relevant time-zone at their home terminal.

“That means,” he added, “that West Coast domiciled drivers cannot start out after their weekly rest while on the East Coast until 8 a.m. eastern standard time.”

Mark Rourke of Schneider National estimated that the rules could result in a rate increase of as much as four percent, adding that “It’s a big deal, it changes our work configurations.”

Richard Mikes of Transport Capital Partners echoed that sentiment, citing the impact the tightened driver hours will have on capacity.  “Whether the lost productivity costs are two or four percent, that’s a big number when you are in as close a balance as we are.”

While no one can predict with certainty what impact the rule changes will have, it is noteworthy that the trucking industry continues to present a united front in opposing the new rules.  Several groups including the American Trucking Associations filed a lawsuit to delay implementation of the rule changes.  In addition, members of the U.S. House of Representatives Transportation Committee have weighed in, by sending FMCSA a letter asking that implementation be delayed until that lawsuit is resolved.

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