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THE FUTURE OF SELF-DRIVING VEHICLES

NEW LIFT TRUCK POSSIBILITIES

WATCH YOUR WMS

Food Logistics

®

Global Supply Chain Solutions for the Food and Beverage Industry

THE CASE FOR AUTOMATION INDUSTRY EXPERTS WEIGH IN ON THE BENEFITS OF GREATER WAREHOUSE AUTOMATION • Warehouse automation solutions from WITRON are among those helping take the food supply chain to the next level.

Issue No. 183 JANUARY/FEBRUARY 2017

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ON THE MENU

OCTOBER 2015 ISSUE NO. 171

ON THE MENU

JANUARY/FEBRUARY 2017 ISSUE NO. 183 COOL INSIGHTS

COVER STORY

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The Case for Automation

Industry experts weigh in on the steps to take and the benefits of greater warehouse automation.

T  hermal Energy Storage Provides Significant Cost Savings

Thermal energy storage using phase change material and intelligent controls provides significant cost savings, enhanced facility monitoring, and product protection for cold storage operators and supermarkets. FOOD (AND MORE) FOR THOUGHT

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T  he Future of Self-Driving Vehicles

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SOFTWARE & TECHNOLOGY

Watch Your WMS

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THIRD-PARTY & REFRIGERATED LOGISTICS

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 he Fleet T Manager’s Forecast for 2017

The complexities of today’s food and beverage supply chain make a best-of-breed WMS indispensable. OCEAN CARRIERS & PORTS

S  hipping Industry Rides the Waves in a Sea of Change

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Five trends and challenges are leading the charge in the New Year.

Experts predict positive outcomes as the container shipping industry ebbs and flows with the tides of change.

SECTOR REPORTS WAREHOUSING

COLUMNS

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L ifting the Curtain on New Lift Truck Possibilities

New lift truck capabilities can help fork over more productivity, safety and efficiency for warehouse and distribution operations.

Video-based safety solutions improve safety and efficiency, and have a positive impact on the bottom line.

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TRANSPORTATION

Taking numerous shapes and forms, what does the future of autonomous vehicles look like for the food and beverage industry?

FEATURES

B  etter Safe than Sorry

FOR STARTERS

T  he Ever-Ready Food & Beverage Supply Chain

The requirements of the B2Me model are pushing the food and beverage industry to become ever-ready to meet today’s demands for immediate availability, product personalization and SKU proliferation.

DEPARTMENTS 10 12 57

Supply Scan Food on the Move Ad Index

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Published and copyrighted 2017 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Food Logistics (USPS 015-667; ISSN 1094-7450 print; ISSN 1930-7527 online) is published 10 times per year in January/February, March, April, May, June, July, August, September, October and November/December by AC Business Media Inc., 201 N. Main Street, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, WI 53538 and additional mailing offices. POSTMASTER: Send address changes to Food Logistics, P.O. Box 3605, Northbrook, IL 60065-3605. Canada Post PM40612608. Return undeliverable Canadian addresses to: Food Logistics, Station A, P. O. Box 25542, London, ON N6C 6B2. Subscriptions: U.S., one year, $45; two years, $85; Canada & Mexico, one year, $65; two years, $120; international, one year, $95; two years, $180. All subscriptions must be paid in U.S. funds, drawn from a U.S. bank. Printed in the USA.

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FOOD LOGISTICS | JANUARY/FEBRUARY 2017

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FOR STARTERS

FROM THE EDITOR’S DESK

THE EVER-READY FOOD & BEVERAGE SUPPLY CHAIN BY LARA L. SOWINSKI

R

SOWINSKI

The requirements of the B2Me model are pushing the food and beverage industry to become ever-ready to meet today’s demands for immediate availability, product personalization and SKU proliferation.

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ecently, I was talking with ing enable real-time data visibility Srini Muthusrinivasan, and exchange, and also reducing the senior industry strategies latency of information and data that director at JDA Software Group, existed previously—in turn, putting about trends in the global food and even more pressure on execution. beverage supply chain. He emWhat does this mean for warephasized that, while the food and house operators, 3PLs, transporbeverage industry generally lags tation and logistics providers, behind other industries—such as equipment manufacturers and automotive and high-tech—when it others in our industry? It means comes to supply chain complexity that the embrace of automation and and excellence, the requirements of supply chain digitization, including the business-to-me (B2Me) model the IoT and machine learning, are are pushing the food and beverage mandatory. industry to become “ever-ready” This issue’s cover story on to meet today’s demands, includwarehouse automation reveals ing consumers’ how this sector is To support an ever-ready expectations for imstaying ahead of food and beverage mediate availability these requirements. supply chain, and one and personalization Meanwhile, our that guarantees the right of products to the coverage on fleet product is available at the ongoing prolifermanagers, lift trucks, right time, planning ation of SKUs and autonomous vehicles perishables. and the ocean carrier must occur in To support an industry also reflect real time and ever-ready food simultaneously be this new paradigm. and beverage Not that long ago, customer-centric. supply chain, and the world’s leading one that guarantees companies were the right product is available at the measured on the excellence of their right time, planning must occur supply chains. While that is still true in real time and simultaneously today, the adoption and application be customer-centric. He calls this of technology is becoming an undeintegrated business planning, which niable part of that measurement. is characterized by a culture of Enjoy the read. transparency and collaboration that extends throughout the ecosystem. As expected, integrated business planning also delivers higher profits and mitigates risk. Furthermore, the Internet of LARA L. SOWINSKI, EDITORIAL DIRECTOR Things (IoT) and the cloud are helpLSOWINSKI@ACBUSINESSMEDIA.COM

FOOD LOGISTICS | JANUARY/FEBRUARY 2017

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DETAILS

Published by AC BUSINESS MEDIA INC. 201 N. Main Street, Fort Atkinson, WI 53538 (800) 538-5544 • www.ACBusinessMedia.com

WWW.FOODLOGISTICS.COM PRINT AND DIGITAL STAFF Group Publisher Jolene Gulley Associate Publisher Judy Welp Editorial Director Lara L. Sowinski lsowinski@ACBusinessMedia.com Editor Ronnie Garrett rgarrett@ACBusinessMedia.com Managing Editor Carrie Mantey cmantey@ACBusinessMedia.com Assistant Editor Amy Wunderlin awunderlin@ACBusinessMedia.com Senior Production Manager Cindy Rusch crusch@ACBusinessMedia.com Creative Director Kirsten Crock Sr. Audience Development Manager Wendy Chady Audience Development Manager Angela Kelty ADVERTISING SALES (800) 538-5544 Associate Publisher (East Coast) Judy Welp (480) 821-1093 jwelp@ACBusinessMedia.com Sales Manager (Midwest and West Coast) Carrie Konopacki (920) 542-1236 ckonopacki@ACBusinessMedia.com National Automotive Sales Tom Lutzke (630) 484-8040, tlutzke@ACBusinessMedia.com EDITORIAL ADVISORY BOARD Jaymie Forrest, Chief Supply Chain and Commercial Officer, ScanTech Sciences Inc. John Haggerty, Vice President of Business Development, Burris Logistics Robert A. Norton, Ph.D., Professor of Veterinary Microbiology, Public Health and Biosecurity, Auburn University; Coordinator of National Security Initiatives, The Futures Laboratory Jon Shaw, Director of Sustainability and Global Marketing Communications, UTC Climate, Controls & Security Smitha G. Stansbury, Partner, FDA & Life Sciences Practice, King & Spalding CIRCULATION & SUBSCRIPTIONS P.O. Box 3605, Northbrook, IL 60065-3605 (877) 201-3915, Fax: (800) 543-5055 circ.FoodLogistics@omeda.com LIST RENTAL Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18; Fax: (847) 492-0085 ejackson@meritdirect.com REPRINT SERVICES Carrie Konopacki (920) 542-1236 Fax: (920) 542-1133 ckonopacki@ACBusinessMedia.com AC BUSINESS MEDIA INC. Chairman Anil Narang President and CEO Carl Wistreich Executive Vice President Kris Flitcroft CFO JoAnn Breuchel Vice President of Content Greg Udelhofen Vice President of Marketing Debbie George Digital Operations Manager Nick Raether Digital Sales Manager Monique Terrazas Published and copyrighted 2017 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage or retrieval system, without written permission from the publisher.

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SUPPLY SCAN

NEWS FROM ACROSS THE FOOD SUPPLY CHAIN Daily Updates at FoodLogistics.com

Descartes Systems Group and MyWebGrocer (MWG) partnered on an e-commerce solution for grocery retailers that helps support the customer e-commerce experience from online purchase through home delivery. “E-commerce is transforming the grocery industry and creating tremendous opportunities for grocers to drive higher share of wallet and increased customer loyalty,” says Eric Healy, president of MWG. “However, it’s an incredibly demanding business model and requires an intense focus on efficiency. MWG’s order fulfillment and picking optimization capabilities, combined with Descartes’ home delivery solution, help grocers’ e-commerce initiatives reach full profit potential.” A new study from The NPD Group shows 52 million Americans currently grocery shop online. Furthermore, more than 60 percent are completely satisfied by Americans currently grocery shop online the experiSource: NPD Group ence, while only 6 percent are neutral or dissatisfied, and the others are somewhat satisfied. Convenience is the top driver of satisfaction, but online grocery shoppers also like the delivery options and shipping deals, like Amazon Prime, along with the infinite assortment and tax advantages.

52 million

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THE COMMON MARKET EARNS COVETED SAFE QUALITY FOOD CERTIFICATION

The Common Market, a Philadelphia, Pennsylvania-based nonprofit sustainable local farm food distributor, became the first and only food hub in the U.S. to earn Safe Quality Food (SQF) Level 2 certification by the Safe Quality Food Institute. As a distributor for highly regulated hospitals, schools and grocery stores, meeting stringent food safety requirements is essential. Level 2 “This certification demonstrates our commitment to food safety and puts us on the cutting edge of this issue for a local food hub,” notes Tatiana Garcia-Granados, The Common Market’s founder and COO. “It also proves that locally sourced, sustainable farm food can meet the highest global food safety standards, even as it positively impacts local environments, economies and health.”

COLD CHAIN MONITORING MARKET POISED FOR RAPID EXPANSION

A report from MarketsandMarkets shows the cold chain monitoring market is projected to grow by 9.84 percent year over year in the next five years, from $3.11 billion in 2015 to $6.23 billion by 2022. The growing demand for quality food, less food waste and the strict regulatory environment are all driving interest in cold chain monitoring technology. Among those companies that are expected to benefit from the expanding cold chain monitoring market are makers of hardware components, such as NXP Semiconductors N.V. (Netherlands), NEC Corporation (Japan), Sensitech Inc. (U.S.), ORBCOMM Inc. (U.S.) and Berlinger & Co. AG (Switzerland). Storage logistics providers also are likely to see steep growth, says the research firm, as they represent a key support in the global cold chain.

POWERSHELF SMART SHELVES DEBUT IN OHIO SUPERMARKETS

Mexico is one of the top three markets for U.S. agricultural products, but American food exporters are worried that relations between the two countries are beginning to spoil following President Trump’s calls to build a wall along the U.S.-Mexico border and pledge to renegotiate the North American Free Trade Agreement (NAFTA). Diplomatic relations were strained further in January after the new administration suggested a 20 percent tax on Mexican imports, and a meeting between the two presidents was canceled. In response, some U.S. producers of corn, soybean meal and distillers dried grains are trying to accelerate sales to Mexico over concerns of rising tariffs or a trade dispute. Although the U.S. ag community largely supported Trump during the election, some are growing worried that Mexico could use tariffs to hurt U.S. farm exports.

Powershelf, a shelf automation technology that detects and automatically alerts store personnel in real time on the status of inventory, recently was installed in 15 supermarkets in the Columbus, Ohio area. The Powershelf smart shelf units consist of a series of shelves that hold and display products. Built-in Powershelf technology tracks product availability, and when a shelf is empty, a restocking alert automatically is sent to store personnel. The solution utilizes Microsoft’s Azure and Power BI to analyze when, where and why products sell so fast, allowing retailers and consumer product companies to identify trends and avoid out-of-stocks before they even happen. “Retailers are increasingly able to leverage Internet of Things (IoT) sensors and data to enhance their businesses, and solutions like Powershelf have the potential to vastly transform a retailer’s ability to meet customer demand,” says Brendan O’Meara, senior director, worldwide retail, at Microsoft.

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U.S. AG EXPORTERS CONCERNED ABOUT NAFTA’S FUTURE

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FOOD ON THE MOVE

LOGISTICS TRENDS IN OUR INDUSTRY

PORT OF WILMINGTON COLD STORAGE TO SUPPORT AG EXPORTS

The newly opened Port of Wilmington Cold Storage (PWCS), the only in-port cold storage in North Carolina, is set to play a key supporting role for the state’s agricultural exports. According to the North Carolina Department of Agriculture, the total value of ag exports exceeded $4.1 billion in 2014, an increase of more than 200 percent from 2005. Ag exports are a huge economic driver in North Carolina. Not only do they help boost farm prices and income, but they also create more than 1.2 million jobs on and off the farm in food processing, storage and transportation. The state’s top ag exports include sweet potatoes, poultry and pork, all of which require refrigerated storage and transportation. It’s expected that PWCS will attract new ag export business to the port and make it more competitive against ports in neighboring states. The PWCS facility is a refrigerated warehouse, with nearly 3 million cubic feet of freezer and cooler space and 10,600 pallet positions. The warehouse is divided into three primary areas: a convertible room that can be used for refrigerated or frozen products, depending on customer needs; a freezer room where temps are maintained below zero degrees; and a blast-freezing room where products like chicken and pork can be frozen to zero degrees within 24 hours. United States Department of Agriculture (USDA) inspection also is provided on site, with a dedicated office for USDA personnel.

SEALAND LAUNCHES MOBILE APP

In December, SeaLand, the intra-Americas regional ocean carrier of the Maersk Group, unveiled a mobile app that offers real-time visibility into import and export shipments between the Americas. The SeaLand app offers a host of features, including live freight tracking (sailing schedules, port calls, vessels, transit times, estimated time of arrivals), push notifications with live cargo status updates, the ability to share shipment data with customers and colleagues, local North and Latin America SeaLand office contact information, and a shipping guide that covers the basics of shipping. “Our customers are on the move and like the convenience and ease of managing their shipments in the palm of their hand. Making freight information more accessible and easy to share is an important capability for today’s supply chains,” notes Craig Mygatt, CEO of SeaLand. “Moreover, I’m pleased that SeaLand is now digitally connecting the Americas to provide customers with a solution that will strengthen their business transactions.”

DAT SOLUTIONS’ MONTHLY FREIGHT REPORT

A Hot Winter for Spot Freight By Mark Montague Mark Montague is an industry rate analyst for DAT Solutions, which operates the DAT Network of load boards and RateView rate analysis tool. He has applied his expertise to logistics, rates and routing for more than 30 years. He is based in Portland, Oregon. For more information, please visit www.dat.com.

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Truckload volumes rose 8 percent in December 2016, capping off six straight months of increases on the spot market. After two years of sluggish volume, a turnaround began last May, and year-over-year volume comparisons turned positive in August and never really let up. Reefer freight availability increased 10 percent in December compared to November, primarily due to demand for fresh and frozen foods at Christmas. The reefer load-to-truck ratio of 8.2 was the highest monthly ratio in the past 21 months, meaning there were 8.2 available loads for every truck posted on the DAT Network of load boards. Compared to December 2015, reefer volume was up 55 percent in December. The national average spot rate in December was $1.98 per mile for reefers,

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up 2 cents from November and equal to the June peak-season average. Compared to December 2015, the average rate was 2 cents per mile higher. The trend continued through mid-January, with the national average rate hovering around $2 a mile. Prices were mixed on key produce lanes, but for predictable reasons. In California, heavy weather in the first three weeks of the year put a damper on freight move-

ments, and along the southern border, a high volume of produce imports kept trucks in demand. The average outbound spot reefer rate from McAllen, Texas, was $2.05 a mile, up 4 cents during the week ending January 14. Spot prices will be interesting to watch in 2017. Capacity may tighten, especially as the industry prepares for the mandate on electronic logging devices (ELDs). Many small fleets and owner-operators have yet to switch from paper logs, and the prevailing wisdom is they may exit the business rather than use ELDs. Those smaller carriers—the ones most affected by regulatory and economic shifts and changes in fuel prices—comprise the bulk of spot-market capacity. If capacity shrinks, prices could get more interesting.

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COOL INSIGHTS

BY JAMES BELL

THERMAL ENERGY STORAGE PROVIDES SIGNIFICANT COST SAVINGS

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TES is gaining traction in the low temperature market due to new technological synerSTUDIES SHOW gies. In fact, BELL VIKING COLD SOLUTIONS’ according TES SYSTEM CAN to a recent reduce electricity report on BusinessWire. consumption by com, demand up to 39 percent IN for efficient LOW TEMPERATURE COLD customized PCM at night, STORAGE FACILITIES. energy leading to a 39 percent storage sysnet energy savings. tems is projected to grow to a $1.8 The study assessed the patented billion market by 2020. And utilities TES technology’s effectiveness in are taking notice. Most recently, cold storage freezer applications San Diego Gas & Electric to validate this passive, non-me(SDG&E), in partnership chanical system as a cost-effective with independent thirdway to reduce energy consumption party energy management across the cold chain, from walkfirm ASWB Engineering, in freezers to large distribution completed a field demonwarehouses. stration study of the Viking “Electricity costs are one of Cold Solutions’ TES system. the top two expenses in the cold The study, known as the storage industry, and this study “Phase Change Material demonstrates the value of using an Safety is always top of mind and Controls Field Demonintelligent thermal energy storage stration Study, ” verified system to reduce energy conWhen you have the very best peoplein the cold chain reductions in electricity sumption in freezers,” says Corey business, you keep them well guarded. consumption in two sepaRosenbusch, president and CEO of rate low temperature cold the Global Cold Chain Alliance. We have daily pre-shift safety meetings, smart docks that storage facilities in the San While TES technology historlock trucks in place until Diego area. ically has eased grid demand for everyone is clear, protected The first test site, a walkcommercial HVAC applications, the pick tunnels, and high in freezer at Camp Pendleglobal evolution toward a low-carvisibility blue light ton in southern California, bon energy generation in the future technology on our lifts. showed a net facility energy is why Viking Cold Solutions is exsavings of 30 percent. The panding into cold food storage. Learn more at uscold.com or call us second test site, a commerat: (856) 354-8181 cial freezer warehouse at James Bell joined Viking Cold the Jacobs & Cushman San Solutions in 2014 as president and was Diego Food Bank, leverages appointed CEO in 2015. His success the food bank’s existing PV in building businesses spans the energy system to run the refrigand investment banking industries, and eration during the day and his leadership stems from his career as uses TES technology with a Marine officer.

vikingcold.com

nergy costs are one of the highest operational expenses in the cold chain, especially for warehouse operators with low temperature facilities. They are looking for ways to cut energy bills, and many are turning to a thermal energy storage (TES) solution with as much as 30 percent energy savings, as demonstrated by a third-party study. The technology helps shift demand and shed load while stabilizing product temperature, an important component of the Food Safety Modernization Act (FSMA) that is going into full effect this year.

BEST IN COLD

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REDUCE COSTS & IMPROVE WAREHOUSE OPERATIONS

Intelligent Automation Makes the Difference Automation solutions from SICK help you meet increasing demands for food and beverage supply chain improvements. Our broad portfolio of sensors, automatic identification systems and safety solutions are flexible, scalable and help make your operations more intelligent. Implementing automation solutions from SICK can reduce supply chain costs, improve transparency, and enhance food and beverage distribution processes. You’ll find SICK transforming logistics operations in all supply chains...from retail, to parcel, and food and beverage - for 70 years and counting. SICK is a global solutions provider located in your corner of the world. From cold storage, sortation, order fulfillment, packaging and palletizing, you’ll improve food distribution through our flexible and cost-effective automation solutions. We think that’s intelligent. www.sickusa.com

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COVER STORY

BY LARA L. SOWINSKI

THE CASE FOR AUTOMATION Industry experts weigh in on the steps to take and the benefits of greater warehouse automation.

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mnichannel. E-commerce. Labor and workforce issues that run the gamut from dealing with an aging workforce to safety and ergonomics to increasing labor costs and a shortage of manpower. All of these things added together create a climate ripe for change, especially in the area of warehouse automation. Food Logistics reached out to companies heavily involved in the food and beverage warehouse and distribution center (DC) industry to get their take on things like the integration of automated storage and retrieval systems (ASRS), the barriers to investing in warehouse automation, the return on investment (ROI) of such automation, things to consider as they design facilities and operations with the ultimate flexibility and scalability in mind, and the technologies that can help facilities support the cold chain and multi-temperature zones. The following is what these industry experts had to say about where the industry is headed in terms of warehouse automation.

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What is the impact of omnichannel and e-commerce on the food and beverage warehouse or DC? The food and beverage industry has been impacted by the explosion in e-commerce orders, just like other industries. BI Intelligence, a research service, predicts that, through 2018, online grocery sales will grow at a compound annual growth rate (CAGR) of 21.1 percent, reaching nearly $18 billion by the end of the forecast period. In comparison, offline grocery sales will rise by 3.1 percent annually during the same period. With a rise in online grocery shopping, retailers are looking at different fulfillment methods for filling orders. For example, Instacart, which promises to deliver groceries from local stores within two hours, hires college students to fill orders, giving them mobile tools to speed order fulfillment. Other retailers Vice PAUL President use a dark-store concept, LAMAN of Food and which is a big grocery wareBeverage house with no customers, DMW&H Group but order pickers who fill www.dmwandh.com orders from there. Still other retailers use the traditional grocery store for fulfilling orders, while allowing consumers to pick up orders at stores instead of delivering them to their homes. With the demand for gluten-free, Paleo, vegetarian or other specialty products that cannot be found in traditional food stores, distributors are adding more and more SKUs to their online offerings. Because of the Amazon effect, most consumers expect these items to arrive the next day. Fulfillment processes have to be updated for distributors to keep up with demand and the increase in orders of specialty items. Plus, new vendors are popping up that offer meal kits or prepared meals for delivery. These instant-dinner vendors must use refrigerated warehouses and trucks to keep food from spoiling. For the beverage industry, craft beers and unique liquors are exploding in popularity, which means wine and spirits distributors must find room within their warehouse operations to carry these items. Then, they must deploy material-handling equipment, from conveyors to sortation units to ASRSs to move the products from storage to the consum-

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er’s home, storefront or other pick-up location. What labor and workforce issues are you seeing among distributors in the food and beverage industry? Distributors are facing increased pressure from customers who want to place smaller and more frequent orders. SKU proliferation is extending the tail of slow-movers, resulting in significant volumes of split-case bottle picking. So, facilities are handling various SKU ranges differently with varying degrees of automation. Picking orders is one of the biggest consumers of labor in the warehouse. As order volume grows, more and more labor must be added for picking and packing. Voice-picking systems come in handy when it comes to case picking as workers are hands-free, and able to carry boxes, cases or bottles more easily. What are the barriers to investing in warehouse automation? Conversely, what’s the ROI? In the grocery industry, margins are very slim, which may deter some food and beverage distributors from adding automation. But because it often is hard to find skilled labor, adding automation may be the only way to keep up with demand. How can facilities optimize design and operations for ultimate flexibility and scalability? Utilizing data collected across multiple supply chain processes can create a data pool of warehouse fulfillment analysis so that businesses can understand their current operations, then plan for future operations that need to incorporate flexibility and scalability. Designing a DC that is both flexible and scalable requires careful analysis of the data, and then the creation of a multi-year expansion plan. Instead of buying everything at once, it is better to expand for incremental growth by using flexible components. Add a conveyor that can be moved or install a sortation system that can be used in other areas of the facility at other times. By buying equipment incrementally, businesses prevent overinvesting and keep capital costs within check.

JANUARY/FEBRUARY 2017 | FOOD LOGISTICS

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June 22 March 22

Warehouse Automation

April 19

May 24

3PLs I

Cold Chain I

Warehouse automation is key to supporting the food and beverage industry as it confronts SKU proliferation, rising labor costs and the ongoing quest to wring more efficiency out of the supply chain.

Third-party logistics providers are forging deeper partnerships with their food and beverage customers to boost competitiveness, enhance regulatory compliance and more quickly respond to changing marketplace demands.

A well-managed cold chain equates to improved shelf life, better food safety and higher profits. Experts discuss how logistics providers, technology companies and others are contributing to cold chain success.

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Ocean Carriers & Ports

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With U.S. food imports and exports on the rise, the role of ocean carriers and ports is key in supporting timeand temperaturesensitive perishable food products.

Software & Technology

September 20

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Software & technology is a fastevolving sector that is delivering myriad benefits to the global food supply chain. A diverse panel of experts examines the newest innovations and the pay-offs.

An integrated global cold chain requires high-level performance from ports, 3PLs, cold storage operators, transportation providers, software and technology vendors and others. Expert panelists reveal the ultimate benefits for shippers and manufacturers.

How is the food/ beverage industry optimizing their relationships with 3PLs and what are the pay offs? Executives offer candid insights and practical tips that produce measurable results to the bottom line. 

Join a panel of industry executives for one of our most popular events —a roundtable discussion covering the most important trends, opportunities and challenges facing the food supply chain in 2018.

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WHY AUTOMATE? Warehouse automation in all industry sectors is experiencing a surge in demand due to multiple trends in the warehouse labor market. In many regions of the United States, the workforce is aging rapidly. Since warehouse jobs often are physically demanding, the pool of eligible workers becomes limited. At the same time, lower birth rates resulted in fewer young people entering the labor market and those who do usually see warehouse jobs as unattractive. Another key factor is the increase in labor costs. Higher wages for warehouse workers particularly derive from two major causes. One is the establishment of new minimum wages in various states over the next few years. At the start of 2017, 19 states increased their respective minimum wage. The second cause is the increased demand for warehouse labor due to the booming e-commerce business. Companies like Amazon hire thousands of warehouse workers (full time and temporary), forcing other companies to increase their wages to remain attractive for new and existing employees. Subsequently, companies are looking for solutions to be more independent from increasing labor costs and an aging labor force, which makes investing in software and mechanized solutions and even fully automated warehouses very appealing. Another factor initially disregarded Director of NORMAN Business when looking at automation technoloLEONHARDT Development gy is the additional quality brought to WITRON the workplace. WITRON experienced www.witron.com positive factors, such as better worker retention and more pride among workers for their jobs when automation comes into place. Higher quality jobs are created in the areas of software and electromechanical engineering, while at the same time, improved ergonomics and software-supported picking makes jobs, such as picking and replenishment, a lot more attractive. Especially in freezer and cooler warehouses, food producers and retailers are looking for automation solutions. Labor hours in freezer chambers usually are limited as workers can only stay in the cold for a short time. Apart from freezers being an unpopular area to work, there often is a surcharge on wages in these areas, which makes looking for alternatives found in automation even

$

more attractive. Automated warehouse solutions oftentimes have a stigma of being inflexible, and thus, a risky investment if throughput is either higher or lower than initially predicted. Quite the opposite is true, as automation can create a lot of new flexibility, especially when it comes to throughput volume and SKU numbers. Many automated solutions do not need a classic pick front in which all goods have to be presented to a human picker at all times. Dynamic pick slots, goods-to-person picking stations, or even fully automated pick, pack or palletizing processes are a great alternative. Because they do not need a pick front, large amounts of SKUs easily can be added to a warehouse assortment without any need for reconfiguration or reconstruction. The same goes for throughput volume. Automation technology does not sleep, so it can be used 24 hours a day. Thus, adding another shift can increase the throughput without additional investment.

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What labor and workforce issues are you seeing among distributors in the food and beverage industry? Looking forward, companies will continue to have trouble attracting and retaining workers. This is especially true for JOHN Director material-handling of North CLARK American and supply chain Marketing Egemin Automation Inc. jobs. When you add in the difficult www.egeminusa.com environment of cold and frozen storage jobs, retention is even harder. Warehouse automation solutions allow companies to get workers out of harsh conditions and reallocate them to more value-added positions. An automatic guided vehicle (AGV), for example, can replace the action of a worker who simply picked up a load from Location A and moved it to Location B all day long. Automation allows companies to focus on having their people add value and not just do stuff. What are the barriers to investing in warehouse automation? Conversely, what’s the ROI? Automation solutions for food and beverage may need climate-controlled solutions. Depending on the solution, the ROI can range from months to years. An AGV-based solution, for example, can offer payback in as little as one year. AGVs allow for incremental automation and faster ROI. Oftentimes, full-blown lights-out automation isn’t the right solution for a company. An AGV solution can be easily and quickly implemented, and deliver a faster ROI. They can operate in deep-freeze environments and also can be adapted for multi-zone climates.

Automation allows companies to focus on having their people add value and not just do stuff.” John Clark, Egemin Automation

What do you see AGVs helping with in the future? Another area that we are seeing more traction for the use of AGVs is in automatic trailer loading and unloading of product. An AGV can drive product into a trailer, and load or unload it without human intervention. This can include stacking the product to completely fill the trailer.

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COVER STORY continued

What is the impact of omnichannel and e-commerce on the food and beverage warehouse or DC? In an industry in which the majority of shoppers prefer to view and touch an item prior to purchase, grocery retail is not embracing the omnichannel philosophy as fast as softline and hardline retailers. However, with 60 of percent LUTHER Director OperaWEBB tions and or more of Solutions shoppers Intelligrated Consulting willing www.intelligrated.com to buy groceries online, the industry is poised to take advantage of lessons learned by others. The omnichannel strategy for food and beverage will change the operation and automation of the traditional grocery DC, in which large orders of predominantly case quantities are picked to satisfy store shelves. This includes the breadth of product offerings segregated by niche consumer habits (i.e., boutique brands, organic, etc.) and high-velocity staple goods for online purchases; specific subsets of daily staple stock items ready for fast, convenient customer pickup at neighborhood shops and convenience stores; and manufacturers/ suppliers providing direct-to-consumer (D2C) service for specialty sizes and flavors. These effects will be far-reaching, and will affect even the superand hypermarkets as they begin to operate as hubs for pick-packship orders destined for homes, lockers and other local destinations. As the distribution network morphs through these changes, more automation is necessary, such as pick-to-light systems to handle additional volumes of each

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What labor and workforce issues are you seeing among distributors in the food and beverage industry? Whether it be baby boomers exiting the labor pool, a younger generation that hasn’t found interest in the supply chain and distribution industry, or increases in wages and benefits, the primary concern of most clients is the availability and cost of labor. Add to this How can facilities optimize situation the extreme volume peaks design and operations for that occur across as few as 15 to 35 ultimate flexibility and days during the e-commerce holscalability? iday season and the spikes driven In today’s world of digital by shortened delivery promises, commerce, optimization beand fulfillment centers can find gins at the supply chain level, as themselves unable to satisfy cuspush philosophies give way to tomer demand. In order to remain demand-driven models in which competitive, clients are starting to instability becomes a key design extend their ROI models from 18 driver. Demand-driven supply chain to 36 months to 60 to 84 months. operations and solutions need the They also are changing their tradiflexibility to account for dynamic tionally labor-centric ROI models consumer behaviors, to include the soft, yet very real, evolving technologies, financial implications of not an unpredictable shipping orders on time. marketplace and To reduce their the importance bottomline costs and of resource agilavoid the risk of labor ity. Traditionalavailability, clients are ly, DC designs investing in higher were based levels of automation. are willing to These include: almost entirely buy groceries • Shuttle systems on analyzing online. capable of storing thouhistorical receipts, order information sands of SKUs, and making and inventory data to them readily available for develop a baseline, and then applyreplenishment and picking. ing peaking, seasonal factors, sales • Goods-to-operator solutions growth and SKU growth over a that eliminate walk time and doufive- to 10-year design horizon. ble, or sometimes triple, productiviSome key factors to look for in a ty per associate. flexible and scalable design are: • Vision systems that can quickly • A storage system that can and accurately identify products, adapt to changing inventories and and reduce or eliminate the need different purchasing habits. for costly labels. • The ability of the warehouse • Robotic picking technologies. execution system (WES) to collect • Autonomous vehicles that and report on the right data. can transport products between • The limitation of bottlenecks processes. and throughput throttles. The key is integrating the • The modularity of subsystems technologies with the right WES and implementation. software, and applying them in a • An adaptive WES with user manner that has the flexibility to variable rules, and real-time access accommodate changes in order to dynamic conditions and status. profiles and inventories. picks, goods-to-operator solutions to improve throughput among the dilution of order profiles, and high-speed shipping and sortation systems that can accommodate the complexity of myriad deliveries and service levels. Quality, quality, quality will be the mantra among operations to ensure customers are delivered the best and freshest products.

60 % or more shoppers

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COVER STORY continued

system (WCS). the order packer’s TODD Account Manager, AdvanceDE VRIES Food and hands, and makBeverage ments and ing it a linear and Retrotech What is the impact of increased intuitive process. www.retrotech.com omnichannel and e-commerce popularity in This provides on the food and beverage ware- omnichannel order fulfillment house or DC? and e-commerce are putting presefficiency, as well as a positive Popularity for online purchases sure on warehouses and DCs to be consumer experience. of food and beverage products is even more precise with their ability For store fulfillment operations, significantly on the rise. Even if the to fulfill small, complex orders. As automation can have a major purchase is created online without consumers lean on e-commerce influence on not only the pick-andany delivery service (buy online, rather than brick-and-mortar pack process, but also inventory pick up in store), there still is an shopping, food and beverage DCs management capabilities that can order fulfillment process that needs similarly have to lean on automaximize the utilization of space, to take place. mation to coordinate everything minimize shrinkage and loss, reduce Software integration across varifrom order picking and packaging labor, and effectively regulate and ous islands of automation and sites to traceability. Different products manage inventory levels. Full case can be necessary to fulfill replenish- have different packaging and delivpicking too often is overlooked and ment demands for a store shelf or ery needs, and those all have to be there are significant gains to be to complete a shopping cart order. accounted for. had with the right technology for a Raw materials, as well as finished particular part of the store fulfillgoods, to support e-commerce What labor and workforce ment process. A good example is vending of food and beverages issues are you seeing among automated palletizing of mixed case can be stored and retrieved distributors in the food and goods for truck loading. Done right, very efficiently in automated beverage industry? the ROI can be very positive when storage-type environments, but Human intervention can be a looking at not only labor reduction, must be managed and optimized problem in any order fulfillment but also improved operations at the with a solid warehouse control operation, whether it be an order dock and daily throughput. for store fulfillment, or an online order for a household What are the barriers to investor person. When dealing ing in warehouse automation? with food and beverages Conversely, what’s the ROI? through e-commerce order Thin profit margins and expenfulfillment to the consumer, sive capital projects don’t go hand additional care must be takin hand very well. Up-front cost is en when picking and packing almost always the biggest barrier someone’s grocery or meal to investing in warehouse autoorder. mation. However, if funding can be It’s important to have a worked out, a strong ROI case can picking process and quality be made to improve profits while control process in place that maintaining competitiveness. As is arrayed across the prodconsumer buying practices evolve, uct flow path that ensure forcing a much different fulfillment the order is accurate, is put process, opportunities are exposed. into its shipping container Look for the positive market trends, with care, and gets a last then embrace automation that can look before it goes out the leapfrog the initiative. Often, a good door to make certain the integrator can develop automation customer doesn’t get their solutions through live retrofits that groceries with the milk don’t impact production. Addiplaced on the eggs. tionally, simulation and emulation In terms of how the prodprograms can prove a system, and ucts are faced in the wareaddress changes and tweaks in house and then ultimately advance of a go-live. By getting are picked, automation the bugs out in advance, risks can must be driven by intelligent be reduced, as well as potential 1-800-628-4065 order fulfillment software, hiccups during go-live that could www.loadtransfer.net taking the decision out of cost money.

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How can facilities optimize design and operations for ultimate flexibility and scalability? The first step to improving a facility is to gain an accurate evaluation of current operations. When you walk through your facility, what observations can be made that are glaring opportunities for improvement? Do you have an apparent bottleneck that clearly is compromising the overall performance of the operation? Define the need, then vet the solution. Can it be

addressed with technology, or maybe just an operational and flow path improvement? Is there an automation opportunity, or is it automated already, but needs to be optimized with a software improvement? Once you identify the problem, you can vet options to design and integrate the right-fit solution, giving caution to scale it for your business in a way that the solution can be leveraged as close to 100 percent as possible.

3

THE TOP WAREHOUSE TRENDS As the food and beverage marketplace becomes more complex and fragmented, distributors are being forced to pay careful attention to three key trends and their associated implications: The Changing Labor Landscape. Warehouse labor continues to be problematic for food and beverage distributors, and the trend is expected to continue throughout 2017 and beyond. The pool of quality labor is shrinking and GEORGE Vice millennials are not stepping up President SWARTZ of Sales to fill the void. This situation is and Client Fortna Inc. Services creating a need to reduce diswww.fortna.com tributors’ dependence on labor, which is making warehouse automation more attractive and easier to justify regarding cost. In the past, technology additions like ASRSs traditionally took many years to pay back, but with the high cost of attracting, recruiting and training associates, these complex solutions now can be paid back in as little as three to four years, based on reduced headcount, improved productivity and the avoidance of costs associated with high associate turnover. Investments in Enterprise Resource Planning (ERP) and Warehouse Management System (WMS) Solutions. After a long spending drought, food and beverage distributors are beginning to upgrade, and replace aging operating systems with state-of-the-art systems from SAP, Oracle and other providers. In addition, these distributors are upgrading their WMSs. Both of these systems are enabling food and beverage distributors to add automation, enabled by WCSs or WESs. The Embrace of Omnichannel. Omnichannel fulfillment is having a trickle-down effect on food and beverage distributors, as consumers increasingly order these items online. As this trend grows, food and beverage retailers are turning to distributors to fulfill D2C orders. This is changing the face of distributors as they scramble to reconfigure DCs to handle small pick orders.

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COVER STORY continued

The main barrier is determining

whether or not order volumes are stable and high enough

to justify the investment. Even bigger players, like Amazon, are struggling to answer this question.” Matthias Merze, SSI Schaefer

What is the impact of omnichannel and e-commerce on the food and beverage warehouse or DC? The original, traditional food and beverage DCs were designed for store delivery. The new requirements due to the omnichannel and e-commerce revolution are changing things MATTHIAS Vice President of MERZ Food Retail radically. Now Group successful DCs SSI SCHAEFER must be able to www.ssi-schaefer.com handle such things as much lower order sizes and dynamic ranges of shipping containers. These factors have a much bigger impact on automation logistics in the food and beverage market than it has on other merchandise, like electronics or fashion products. What labor and workforce issues are you seeing among distributors in the food and beverage industry? Due to the mostly manual processes used in food and beverage logistics, there is a lot of room for improvement in regard to topics like

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ergonomics and safety. The demographic challenges are similar to other e-commerce areas; there are no special issues for food e-commerce. What are the barriers to investing in warehouse automation? Conversely, what’s the ROI? The ROI in this market is actually

very good. Many operations are currently manual due to the young age of the business model. We are not in a situation yet when you replace older automation concepts and products with newer ones. Many companies started the business with very labor-intensive (but flexible) processes to check out

ASRS PUSHES AUTOMATION IN U.S.

ASRS integration in the food and beverage distribution arena has been heavily implemented in Europe for years. In Europe, ASRSs helped reduce labor needs and led to smaller footprints—the largest ROI contributors. In the United States, ASRS installations MARK Account are being implemented more and more, and BusiDIEHL ness Deoften for the same reasons—to drive velopment BEUMER Group Manager decreased costs from less labor and a smaller footprint. Lack of available labor www.beumergroup.com and greater service-level requirements are driving this marketplace down the road to higher levels of automation. Many new applications, with ASRS shuttles and mini loads, are using crossbelt sorters as a means of transportation (in lieu of standard conveyors). The crossbelt solution seamlessly connects receiving, static storage, ASRS buffer storage and shipping to provide high throughput, increase accuracy and use less labor. It requires less land and provides faster turnaround of customer orders for retail or D2C.

www.foodlogistics.com © 2016 Swisslog

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FOOD AND BEVERAGE DISTRIBUTION THRIVES WITH THE RIGHT AUTOMATION.

Growing your food or beverage business starts with improving storage, retrieval and delivery efficiency. And with PAS PowerStore®, the deep lane pallet storage system from Swisslog, you benefit from the most flexible and scalable automation of its kind. PowerStore is designed to fully leverage your existing facility to provide optimum density, the highest throughput and ultimate reliability. Every warehouse — regardless of shape or size — deserves automation. Discover where the right automation can take you at swisslog.com/GrowWithAutomation. © 2016 Swisslog

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COVER STORY continued

FILLING THE TALENT GAP Contrary to the commonly held belief that warehouse automation is destroying job opportunities, today’s job market isn’t vanishing, but rather evolving. While some jobs (such as manual order picking) are being rendered obsolete due to automation, workers are still needed—for higher-level, more tech-related jobs used to properly maintain and operate these sophisticated systems. One of the problems that companies, including those in the food and beverage industry, are facing is that it is becoming increasingly difficult to fill warehouse positions due to the limited skillset of today’s talent pool. In fact, in the 2016 Material Handling Institute (MHI) Industry Report, 58 percent of survey respondents cited hiring and retaining a skilled workforce as the No. 1 challenge in their supply chains. MHI IN THE UNITED STATES also reported that approximately 600,000 manufacturing positions in the United States went unfilled in 2016 due to a lack of qualified workers. To bridge IN 2016 DUE TO A LACK OF BOB Service this talent gap, companies need to educate the next generation of Manager QUALIFIED WORKERS. DOUGLAS job seekers, so that they have the skills needed to fill these new Source: MHI high-tech positions. Westfalia Technologies Further complicating the talent gap issue is the changing demographic of today’s workforce. Baby www.westfaliausa.com boomers who received proper training are retiring, and without readily available resources and educational opportunities, new graduates are displaying a lack of interest in the logistics and supply chain industries. Therefore, companies need to reach out to young potential employees, and ensure the proper resources and training are available to prepare them for increasingly high-tech supply chain jobs. In the end, the right automation technology paired with the right workers will position companies for a successful future.

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MATTHIAS MERZ, SSI Schaefer (continued)

the customers’ expectations and acceptance. As the business model matures and the order numbers rise, automation can provide exceptional ROIs. The main barrier is determining whether or not order volumes are stable and high enough to justify the investment. Even bigger players, like Amazon, are struggling to answer this question. How can facilities optimize design and operations for ultimate flexibility and scalability? The first requirement is a fast and easy individual picking solution for the different areas. The number of areas for products that need special attention is increasing. With these rising numbers, the key challenge is going to be administering a smart and highly automated way to consolidate the orders from the various areas at the shipping dock. This means not only different temperature zones, but also special products like misted or tropical. What about supporting the cold chain? Or multi-temperature zones? Automation is an extremely important factor in facility design when it comes to the cold chain and multi-temp zones because it allows items to be quickly traced, as well as handled faster than in manual operations. This limits the exposure time to warmer temperatures, which is critical when dealing with perishable foods and beverages.

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SUPPORTING THE COLD CHAIN

DAVE WILLIAMS

Director of Software and Solutions Delivery

Westfalia Technologies

Humans are not designed to work in sub-zero temperatures, yet the majority of refrigerated www.westfaliausa.com and frozen food facilities employ manual operations that require workers to withstand frigid conditions. This not only is risky for employees, but for warehouse operations as a whole. With workers needing frequent warm-up breaks when working in coolers and/or freezers, the organization is quick to realize the inefficiencies in time, labor and energy usage. To help mitigate these inefficiencies, forward-thinking food companies are turning to warehouse automation to decouple their order fulfillment workforce from sub-zero environments. Technologies, such as a high-density ASRS, can pick products in cold environments without the need to stop for breaks, thereby promoting greater efficiencies in warehouse operations and order fulfillment in the cold chain, and safer work conditions for all. With an ASRS, refrigerated and frozen food facilities also can store more product in the same (and REDUCE THE often smaller) building footprint. In many cases, an ASRS can reduce the overall building footprint by as OVERALL BUILDING much as 50 percent and/or enable increased storage capacity of an existing facility by 30 to 50 percent. By FOOTPRINT BY improving space utilization, there is less area to cool, and often, fewer refrigeration units are needed. Also, by retrofitting an existing warehouse with an ASRS, food and beverage companies can eliminate the need for new construction, while providing room for growth of inventory. The efficiency of an ASRS also allows companies to employ more just-in-time (JIT) order fulfillment strategies to bring products out for staging and loading closer to when the trucks arrive. This keeps the WHILE INCREASING product in the proper climate-controlled environment as long as possible, which helps to STORAGE CAPACITY reduce possible product quality degeneration and spoilage. Truck turnaround at the dock is dramatically improved, which also adds efficiencies to the entire cold chain.

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COVER STORY continued

the proliferation of SKUs in many product categories, is forcing some food and beverage distributors to deliver more layered and rainbow pallets, which requires case picking. What is the impact of These value-added services can omnichannel and e-commerce be addressed in a limited manner on the food and beverage through automation, but typically warehouse or DC? require additional personnel, which Food and beverage distribution, and e-commerce fulfillment are two adds to costs. So, while e-commerce fulfillment centers are aggresdistinct segments of the market sively implementing automation with different business models and warehouse rethat allows them to increase pick quirements. Food efficiency and throughput, food and beverage and beverage distribution is DCs have BRIAN C. Vice President of more focused on NEUWIRTH Marketing fewer options and Sales maintaining invento cost-efUNEX Manufacturing tory, while e-comfectively www.unex.com merce is focused on automate moving product as case picking. quickly as possible. As a result, food As the industry continues to evolve, and beverage distribution processnew case picking automation es are optimized for pallet handling, solutions will emerge that allow while e-commerce operations are distributors to more efficiently optimized for case picking. deliver value-added services, but The growth of omnichannel and for now, distributors are forced e-commerce fulfillment, along with to either pass increased costs

•

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onto their customers or find other ways to improve efficiency in their operations. What labor and workforce issues are you seeing among distributors in the food and beverage industry? The labor challenge facing the industry is real and well-documented. The drug-testing provisions of the Food Safety Modernization Act (FSMA) could intensify the challenge of attracting workers. However, there is another trend in the industry that does not get as much attention: On the management level, the generation of decision-makers who were skeptical of technology are aging out of the workforce. They are being replaced by a new generation of managers who are much more comfortable with technology, and are seeking out automation to address labor force and other challenges. Increasingly, warehouse management recognizes that there is

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technology out there that can improve conditions in the workplace and are necessary to stay competitive. There not only is a declining resistance to automation, but also a genuine willingness to explore ways to use automation to improve operations. This represents a major shift in the market. The result is increased demand for solutions that get the most out of the current workforce, while also minimizing the tasks that can make warehouse work particularly demanding. One example is temperature-controlled storage. With cold-storage temperatures regulated at -20 degrees Fahrenheit (F), cold storage operators are deploying ASRSs that eliminate the need for personnel to spend time in extremely cold environments. This has benefits to the business in terms of efficiency and costs, but also protects workers from harsh cold storage environments.

What’s new in ASRSs? The trend in ASRS is toward more dynamic systems. This applies to light goods and pallet-based systems. We are seeing increased demand for fully automated solutions from automated storage to mixed case orders dispatch. What are the barriers to investing in warehouse automation? Conversely, what’s the ROI? The barriers that limited deployment of automation are being overcome by the combination of new approaches and a new attitude by management that recognizes the value automation can deliver to the business. The people rising to management positions today are being more aggressive in finding ways to overcome previous obstacles, including the longer ROIs that were difficult to justify. In particular, we are seeing more warehouses adopt a hybrid or semi-automated approach in which automation is deployed to support average

IMPROVED ORDER PROCESSING

throughputs with manual processes being used to handle peak demands. This minimizes initial investment and accelerates ROI. A similar approach is gaining traction in beverage distribution, which was especially hard hit by SKU proliferation. Here, fast- and slow-moving SKUs are stored in separate zones. Picking of fast-moving SKUs is supported by limited automation, while slower-moving SKUs, because they are consolidated, can be efficiently picked manually. A third factor is the challenge 3PLs face in deploying automation. They work on limited contracts, which can make it difficult to justify long-term investments in automation. However, with automation now recognized as essential to efficient warehouse management, we are seeing some manufacturers enter into much longer-term contracts with their supply chain partners to enable those partners to make investments in automation.

There is not only a

declining resistance to automation, but also a genuine willingness to explore ways to use automation to improve operations.” Randy Jennings, Swisslog

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BETTER WAREHOUSE PLANNING

The challenges and opportunities in the food and beverage industry seem endless. And while it can be confusing to sift through the plethora of automation and technology choices, readying the warehouse for the future is not insurmountable with the right planning and foresight. The challenges before us all point to opportunities that involve automation—not automation for automation’s sake, but well-thought-out, cost-effective implementations that can bring benefits to food and beverage companies now and scale to their needs in the future. As you plan for the future of your warehouse and DC, consider the following: • Omnichannel distribution requires systems that can predict changes to the SKU mix and anticipate TOM Market Development how to migrate from a pallet to a case to an each lot size. STEININGER Director • Meeting FSMA requirements requires the use of systems with software that integrates seamlessly Dematic into the customer networks. www.dematic.com • The constant growth in shopper expectations necessitates systems that improve order accuracy and maximize precious shelf space. • Labor challenges require systems that enhance picking efficiency by reducing product touches. • Future growth depends on systems that can accommodate new technologies, such as blockchain, the Internet of Things (IoT) and advanced analytics, as well as the enhancements of proven technologies like radio frequency identification (RFID). Most importantly, food and beverage companies need the right partner with the expertise to help determine automation solutions that are right for them.

BRIAN C. NEUWIRTH, UNEX Manufacturing (continued)

How can facilities optimize design and operations for 16_1557FoodLogistics_FEB_GT01 Mod:December15,201611:57AM Print:12/29/16 4:34:14P ultimate flexibility and scalability? The first step is to gain an understanding of facility requirements down to the SKU level. How does demand vary by time of day and season? What SKUs move fastest, and what SKUs move slowest? In addition, it’s important to understand, as much as possible, what future requirements might be. This analysis can provide the foundation for a smart approach to automation that minimizes risk of investment through a moduFOOD SERVICE lar approach that focuses automation where it can deliver the ESSENTIALS most value. Another aspect of this is business intelligence. WMS can now provide visibility into operations through standardized INGREDIENT data aggregations and appropriate visualization, allowing BINS managers to proactively plan strategies to flex their operations with changes in demand. The combination of careful planning, focused use of automation and ongoing visibility into operations provide food and beverage distributors the tools to optimize design and operations for ultimate flexibility and scalability.

π

What about supporting the cold chain? Or multi-temperature zones? Cold chain distribution is a distinct segment of the food and beverage industry with unique requirements. As mentioned previously, automation has an additional benefit in these applications by protecting workers from harsh environments. Automated storage and retrieval in temperature-controlled facilities keeps forklift drivers from having to enter sub-zero storage areas, while still maintaining full compliance with cold chain storage regulations.

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COVER STORY continued

And because each lane is labeled, it minimizes the chance of a mispick and reduces overall operating cost by reducing incorrect orders.

sive force, compression or contact stress, etc.). • Control risk factors with ergonomic solutions (adjustable height workstations, anti-fatigue mats, What is the impact of What labor and workforce lifts or hoists to reduce awkward omnichannel and e-commerce issues are you seeing among positions, etc.). on the food and beverage ware- distributors in the food and • Understand how to make the house or DC? beverage industry? workplace work ergonomically. According to the National Beer In the DC, workplace injuries Issues frequently encountered Wholesalers Association (NBWA), aren’t just detrimental to employee include work surfaces that are the in 1996, the average beer distribuhealth and safety; they also can wrong size or at the wrong height, tor carried 190 unique SKUs from have a significant impact on prouncomfortable chairs, shelves and an average of nine different beer ductivity. With workers sidelined bins that are too high or out of suppliers. By 2011, and unable to work, companies face reach, and awkward hand tools. of that number balserious productivity losses—not to • Continually monitor workflow RANDY Director Food and looned to 536 SKUs mention costly workers’ compenand make ergonomic improvements Beverage JENNINGS Sales from 18 different sation insurance premiums. In addi- as necessary. Swisslog beer suppliers. Most tion to serious injuries, such as falls, Aside from making ergonomic www.swisslog.com estimates place the slips and trips, warehouse workers adjustments to workstations while average SKUs today run the risk of developing musculoworkers are standing in place, it’s in the thousands. SKU proliferation skeletal disorders (MSDs), including also critical to factor in how much is having a widespread impact on muscle strains, lower back injuries, a worker needs to move around warehouse operations and is leavcarpal tunnel syndrome, tendinitis the warehouse in order to perform ing beer wholesalers asking what and more. U.S. Bureau of Labor Staindustrial tasks. can be done to accommoIn a distribution or date this tenfold increase in warehousing operation, SKUs. There is the opportuthe most common working nity for increased revenue concept is person-to-goods derived from a larger prodorder picking, which means uct offering, but that comes that order pickers move with the challenge of being to storage locations, often PROLIFERATION able to store these products pushing or pulling carts, efficiently in a warehouse and reading orders off that was originally designed paper. These pickers spend to house 190 SKUs. significant amounts of time Storing kegs in and of it(up to 60 percent) walking self is not easy. The awkward between storage, so reducshape, combined with the ing that time-spend is an weight of the kegs, made excellent idea. Automated storing and flowing kegs a solutions (ASRSs, robotic long-standing issue in the picking systems, etc.) and world of beer wholesaling. manual systems (cartonThe UNEX keg-flow Span and gravity-flow systems, 1996 2003 2007 2009 2011 2016 2015 Track addresses the flowing pallet flow systems, etc.) challenges that many wholecan help to make accuracy Source: NBWA Distributor Productivity Report salers are familiar with, but and productivity improveit also saves wholesalers ments in these cases. valuable space as an alternative to tistics data shows MSDs are twice palletized storage. A 1/6 keg can be as common in the warehousing and What are the barriers to investstored in much the same manner distribution sector as they are in ing in warehouse automation? as you would store cases on a flow other private-sector industries. Conversely, what’s the ROI? rack. Keg flow helps consolidate Here are a few tips for DCs There are many mom-and-pop floor space and improve stock to drive productivity gains with warehouses today, and often, cost rotation with first in, first out (FIFO) ergonomics: is a huge barrier for automation storage. When you pull a keg out • Review worker tasks for risk for them. They can get by without for distribution, there is another factors (awkward/static postures, automation by using gravity-flow one that slides in right behind it. repetitive/quick motions, excesconveyors that move products from

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657

536

470

262

200

190

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place to place within the warehouse. However, many variables affect the efficiency of a carton-flow solution: Load characteristics, operating conditions and many other factors play a part in designing the proper conveyor solution for your specific operation. First, let’s tackle load characteristics. The size, weight and conveying surface are all variables that must be considered. Firm, flat bottoms are recommended for use with skatewheel. If your cartons are susceptible to imprinting, you may want to consider roller options or increase the amount of wheels per axle in the conveyor. Some items may not carry at all on skatewheel. Skatewheel performs best when flowing cartons or totes with solid, uniform surfaces. Operating conditions are another major factor. Gravity conveyors work best in clean and dry indoor applications. Humid conditions can affect your cardboard cartons, so if you’re looking to outfit your facility in Orlando, an increase in the amount of wheels per axle may be required. Some skatewheels have bearings that are lightly lubricated and are effective in environments as cold as -20 degrees F. Load capacity can change based on which selection you make. Steel is a great option for permanent conveyor lines that require a tough, durable frame. Aluminum works best when flowing lighter product and allows for more portability due to its light weight. Load capacity also can be impacted by the distance between supports. For example, a steel frame supported every 5 feet has more than three times the load capacity than a steel frame supported every 10 feet. How can facilities optimize design and operations for ultimate flexibility and scalability? Using a dynamic storage unit, such as UNEX Flow Cells, can increase space utilization by 50 percent and pick rates by up www.foodlogistics.com

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to 30 percent. Flow Cell units decrease reach distance, while simultaneously increasing pick access, shaving valuable seconds off of the order picking process. Flow Cell’s FIFO design allows the unit to be replenished without interfering with the order picker’s work. The return lanes allow for the order picker to dispose of or move

totes and cartons without stepping away from their workstations. What about supporting the cold chain? Or multi-temperature zones? Adding a new freezer or cooler space for grocery distribution operations is expensive, so if you can optimize storage within your existing space more efficiently, you can pick faster and hold more product in the same amount of space.

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3PL: FLEET MANAGER’S FORCAST 2017

BY MARY SHACKLETT

THE FLEET MANAGER’S

FORECAST FOR 2017 Five trends and challenges are leading the charge in the New Year.

I

n 2017, fleet managers and others in the transportation sector will continue to wrestle with the challenges they dealt with in the recent past, such as tight capacities and a driver shortage— but they’ll also face a few new challenges in the form of rising fuel prices, rate pressures and regulatory measures. How fleet managers respond will likely involve a mix of technology, changes to operations and business processes, and strategic innovation. Here are five trends and challenges that are leading the way.

#1

The Capacity Crunch Aging highway infrastructures, such as potholes and bumpy roads, can dam-

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age goods in transit. When added to an ongoing shortage of drivers; more regulations to comply with; aging trucks; and the inability of shippers, transportation companies, third-party logistics providers (3PLs) and logistics providers with supply chain management capabilities (4PLs) to seamlessly work with each other, these factors are coalescing into a looming capacity crisis that will be felt in 2017. “If the many components in logistics and supply chain management do not engage effectively with the transport workforce and manufacturing skills gap of the U.S., crisis may be an understatement rather than an overstatement,” reports Adam Robinson, director of marketing for Cerasis, a provider of transportation management solutions, in an article titled,

“Transportation Industry Braces for a Looming Transportation Capacity Crunch Crisis in 2017.” In many cases, technology can help. New analytics applications can assess routes with data feeds that provide updates on highway construction and detours, weather, traffic and more. The analytics software acts on this information, and can then optimize routes for the fastest and safest travel times. Transportation management systems (TMSs) that interact with sensors placed on vehicles and at various locations in distribution networks also can track logistics operations, monitoring that trucks are promptly loaded and unloaded, and real-time collaboration is occurring between the different parties in a logistical chain. However, not all companies have, or can afford, these technologies, so when one participant in a logistics chain doesn’t have the software, it breaks the chain. This management and communications

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problem is further exacerbated for fleet managers, who must then manage many vehicles and logistics operational chains with many different business partners at once. This asset management problem manifests itself at the shipper-customer level, and the consequence may be not finding enough trucks or containers to handle your goods when and where you need the help—and then finding an excess of trucking and container capacity at geographical locations where you don’t need it.

Higher Rates

#2

The Institute of Energy Research, in a report titled, “Congressional Budget Office (CBO) Analyzes Renewable Fuels Standard (RFS): Expect Higher Gasoline and Diesel Prices,” projects that, in 2017, gasoline prices will increase 4 to 9 percent or between 13 and 26 cents per gallon. It also projects increases in the cost of diesel fuel of between 9 to 14 percent or from 30 to 51 cents per gallon. “What is going to differentiate 2017 from 2016 is the combination of tight trucking capacity and significantly higher transportation costs due to the electronic logging device (ELD) mandate later this year,” says John Gaudet, vice president of business development at RLS Logistics, which provides temperature-controlled transportation, warehousing and packaging services. Cerasis’ Robinson estimates that the current per-mileage fuel costs for full-truckload (FTL) and lessthan-truckload (LTL) carriers are 39 percent of total carrier costs. This also makes fuel a significant cost driver, given that only 26 percent of total per-mile costs go for driver wages. For fleet managers, the cost of fuel gets multiplied exponentially, based on the number of trucks they have in the fleet. This likely will result in higher transportation costs for shippers and, ultimately, higher costs for consumer goods. Unlike Robinson, RLS’s Gaudet doesn’t necessarily www.foodlogistics.com

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see a significant impact on rates from rising fuel prices in 2017, since these prices were already climbing in 2016. “At the end of 2016, the national average price for diesel fuel was $2.307,” says Gaudet. “This average was the lowest since 2004, which averaged $1.809 for the year and jumped to $2.401 in 2005. Fuel prices are always difficult to predict, especially with a new administration that is pledging energy independence. However, I

feel fuel prices will have little effect on rates; shippers benefited by lower fuel surcharges in 2016. I do not anticipate fuel to impact rates as much as capacity will. When ELDs are in play, shippers should pay close attention to possible detention and other accessorial charges. These have more potential to impact budgets.” Despite the difference in opinion about fuel price impact, both Gaudet and Robinson see a

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3PL

continued

For fleet and transportation managers, it is important that they begin

transportation capacity crunch affecting fleet managers, as well as shippers that are trying to find ways to get their goods to the markets they serve. When the impacts of investing in technology for new regulations like ELDs are added to this, pressures will push rates upward.

preparing for the FSMA and ELD mandates New Regulations now.” When the Obama John Gaudet, RLS Logistics

#3

administration signed the Food and Drug Administration (FDA) Food Safety Modernization Act (FSMA) in 2011, it was the most sweeping reform of U.S. food safety laws in more than 70 years. The goal was to ensure the safety of the U.S. food supply by shifting the focus from responding to food contamination to preventing it. The transportation industry is still struggling to meet the mandate, which requires the design and maintenance of vehicles and transportation equipment for cold storage that

includes temperature and contamination controls during the transport of food, personnel training, and records on training in safe food practices conducted with workers, so that carriers don’t contribute to conditions that could cause food they transport to become unsafe. FSMA compliance waivers were given to smaller companies with the understanding they have limited resources and need more time to meet the mandate, but in most cases, these time extensions only extend for two years. Unless the regulatory climate changes, these companies are up against hard deadlines that could challenge their ability to continue operations. Of equal significance is the ELD mandate from the Federal Motor Carrier Safety Administration (FMCSA), which requires the installation of ELDs in interstate commercial trucks and buses. According to “FMCSA Proposes ELD Mandate for Nearly All Trucks” in Transport Topics, the requirement helps enforce hours-of-service

rules intended to limit driver hours and improve driver safety. Automatic logging of truck activities also reduces paperwork for carriers and ensures that drivers are not forced by carriers to drive excessive hours. “These are regulations that have major impact,” says Gaudet. “For fleet and transportation managers, it is important that they begin preparing for the FSMA and ELD mandates now. It will be imperative for them to ensure that their vendors and partners are in compliance with the rule on Sanitary Transportation of Human and Animal Food to ensure they maintain the cold chain throughout the supply chain.” Gaudet feels the largest impact from the ELD mandate, which limits truckers to a 12-hour day and requires electronic logging equipment to keep track of every moment that is spent in the truck, will be on trucking operations. He says that, because of this continuous ELD tracking, it will be important to maximize productivity and avoid wasteful stops.

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“I believe that the ELD [mandate] could have a dramatic impact in the freight consolidation realm with a traditional hub-and-spoke model,” says Gaudet. “Multi-stop truck loads will be challenged and regional deconsolidators could flourish … As a company that consolidates temperature-controlled LTL and ships as FTL, we are preparing and building relationships with strong regional providers, as well as marketing our regional service to those companies needing a solution into the Northeast.” The ELD compliance deadline is set for December 2017, which puts pressure on transportation and fleet managers. “Carriers are experiencing lost productivity in the range of 10 to 20 percent on truckload traffic when they implement ELDs,” says Gaudet. “It is still unclear what the productivity loss in the LTL arena will be with ELD,

What is going to differentiate 2017 from 2016 is the combination of tight trucking capacity

and significantly higher transportation costs due to the ELD (electronic logging devices) mandate later this year.” John Gaudet, RLS Logistics

but we expect lost productivity to land in the 10 to 15 percent range. The results will be a tightening in capacity, and upward pressure on both LTL and TL rates.” “[With the ELD mandate], you lose 10 to 20 percent of your ability to run miles. Essentially, it’s like taking 200,000 to 300,000 trucks off the road,” Todd Amen, president of owner-operator financial services provider ATBS, told www. overdrive.com in “Prediction: Rates Will Jump with ELD Transition.”

Smart Logistics and the Internet of Things (IoT)

#4

For many companies, ELDs are just a first step into sensor-based logistics. Fleet and transportation managers also are attaching Internet of Things (IoT) sensors to braking and engine systems. These sensors relay real-time information on how fast a truck is traveling, how energy- and safety-conscious a driver’s habits are, whether the vehicle is taking the most optimal

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3PL

continued

route to its destination and whether the vehicle is traveling at an optimal speed for road conditions. Sensors also can be attached to each individual container of perishable goods in the truck, where they continuously monitor elements inside

the container—issuing real-time warnings to a central software system whenever there is detection of an environmental failure within a container or the breaking of a container seal. “The technology keeps improving

and we are exploring it now,” says Gaudet. “GPS tracking that monitors actual temperatures in the trailer is a great solution for the FSMA; however, it is also an expense that someone must bear. Unfortunately, that will be the consumer.”

FLEET MANAGERS’ PLAYBOOK FOR 2017

Mary Shacklett is the president of Transworld Data, a technology analytics, market research and consulting firm. Prior to founding the company, she was vice president of product research and software development at Summit Information Systems. She may be reached at mshacklett@ twdtransworld.com.

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The transportation industry in 2017 will be anything but stagnant. Tight capacities and upwardly trending rates will be driven by increasing fuel, operating and compliance costs. All of this will challenge fleet managers and logistics operators to design optimal transit routes, and actively manage these routes and their logistics, along with their vehicle assets. In this environment, there are several approaches that fleet and transportation managers should consider. Recast electronic logging device (ELD) and Food Safety Modernization Act (FSMA) regulation perception from a nuisance into measures of return on investment. In initial analyses, measures like the ELD mandate appear to be reducing carrier and fleet capacity and performance—partly because driver hours are now limited and partly because there is always a cost to compliance, which comes in the form of hard-dollar investments into technology, and the reworking of business operations and training of employees to support the new compliance technology. Fleet and transportation managers can take a page out of technology investors’ playbooks: When you make a hard-cost technology investment, you should have a means of measuring your return on investment. For example, the ELD mandate has a chance to reduce the number of highway accidents due to driver fatigue. This could bring down, or at least stabilize, the costs of liability insurance. By building on the capabilities for electronic tracking and logging that

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ELDs provide, companies also will be better positioned to save on fuel costs, and incent drivers who exhibit safe and fuel-efficient driving practices. This helps driver retention. The ELD mandate, which initially was perceived negatively by many drivers, also has the ability to change that perception. As drivers get used to the new technology and lose their fear of it, they will begin to see that their manual paperwork is dramatically reduced and will like it. The end result is that the ELD mandate ultimately could help carriers retain drivers. Consider cloud-based transportation management systems (TMSs) and analytics. This generation of TMSs come with integration capabilities for ELD sensors, and sensors that monitor food safety and control the cold chain. The same systems offer real-time GPS tracking and mapping, which enables fleet and transportation managers at a glance to see where every one of their vehicles is at any given point in time. Additionally, most TMSs come with analytics that can help plan what-if fleet transportation scenarios, as well as automatically take into account factors like weather, and road conditions and repairs, while automatically optimizing travel routes. All of this is great news for large enterprises with plenty of spend available to them—but what about smaller mom-and-pop carriers? The solution is a TMS that is hosted in the cloud by a software-as-a-service (SaaS) company that you pay for through a monthly subscription, or in some cases, on a per-use basis. In this way, you won’t outlay dollars you can’t afford for hardware and software. SaaS solu-

tions also are nice because the vendor not only gives you the system, but also specialized expertise in logistics and how the technology can be used to the best advantage. Address the driver shortage. Late in 2016, at the Canadian Recruiting and Retention Conference in Toronto, focus was placed on more transportation companies improving their driver recruiting. Among the strategies suggested were using more Internet-based application processes, getting back to applicants sooner by speeding the interview process and circling back to applicants you might have lost to competitors 90 days later, since most turnover occurs during the first 90 days of employment. Equally important is conducting efficient and effective background checks, offering employment opportunities that drivers find attractive and providing a culture within the company that makes drivers want to stay. Most of these practices are low-tech due diligence that internal human resource staffs can take on—if a company has the internal personnel to do it. In other cases, companies should consider when it makes sense to outsource some of their fleet operations to a 3PL or a 4PL. These larger logistics companies can supplement your fleet and driver pools if you are having difficulty meeting your needs. Cultivate a corporate culture. Beyond technology, it is important to create a corporate culture within the company that enables your employees and your customers to succeed. This requires timely, transparent and continuous communications to all stakeholders, so that at the end of the day, your fleet is delivering the quality service your customers expect.

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#5

The Driver Shortage

In October 2016, the American Trucking Associations (ATA) released its report, “U.S. Freight Transportation Forecast to 2027,” which projected that, between 2016 and 2027, overall freight tonnage will grow 35 percent, with the amount of freight moved by trucks growing slightly less at 27 percent. These trends aren’t matched by corresponding increases in drivers: The ATA estimates a shortfall of 35,000 to 40,000 drivers nationwide. Smaller transportation carriers will feel the most pressure from the driver shortage because of the need to compete against larger firms that can offer better compensation, reports the Wall Street Journal in “Driver Shortage Ripples across Trucking Industry.” One element that is driving the shortage is the fact that many baby boomer-generation drivers are retiring and younger people are opting for better-paying jobs that enable them to stay at home. Fleet managers can tackle some of these problems in creative, low-tech ways. A 1,000-mile route that involves stops in cities A to the north, C to the south and B in the middle, would historically require a driver to stop for one overnight. An alternative approach would be to use two drivers in a relay team—with Driver One (who lives in City C) making a round trip from City C to midpoint City B and back, enabling him to be at home with his family in City C. For the second part of the relay team, Driver Two, who lives in City A, makes the trip to pick up the goods in midpoint City B and then completes goods transport to the final destination in City A, where that driver lives. The net result is an improvement in both drivers’ quality of life, which facilitates driver retention. Of course, this strategy doesn’t work for longer routes. In these cases, trucking companies must aggressively recruit, train and retain drivers. In other cases, fleet managers are using intermodal transporwww.foodlogistics.com

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tation, with trucks picking up and dropping off goods locally that are then carried by rail over the long distances and at lower fuel costs. Progressive and leading-edge fleet managers also are starting to think about driverless trucks, which are already being used in remote mining operations by mining company Rio Tinto. The driverless trucks that Rio Tinto employs are able to run on a nonstop, 24/7

basis, which optimizes the assets. On the commercial shipping front, Daimler began testing its driverless Freightliner trucks in Nevada as early as 2015. “It’s not too early at all to start looking at driverless trucks,” says Gaudet. “Self-driving trucks are coming and will be critical to combat the looming driver shortage that the industry faces in the 2020s.”

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Photo Credit: The Raymond Corporation

SECTOR REPORTS WAREHOUSING

New lift truck capabilities can help fork over more productivity, safety and efficiency for warehouse and distribution operations.

There is no such thing as a one-sizefits-all lift truck.

40

BY CARRIE MANTEY

LIFTING THE CURTAIN ON NEW LIFT TRUCK

POSSIBILITIES W

hether it’s a counterbalance forklift truck, reach truck or hand pallet truck, it is imperative that, in order to select the ideal lift truck, you must first sketch out the specifications and features necessary for its intended application—in other words, there is no such thing as a one-size-fits-all lift truck. You must determine what your operations call for in terms of the type and configuration of lift truck, quantities of product to be moved, categories of inventory, product flows, and options that may improve the productivity, safety and efficiency of the tasks at hand. They also must work well in the environment in which they are operating. Do you need a lift truck that functions in a cold chain or otherwise harsh environment? Requires telematics? Is fully or semi-automated? Aligns with the estimated total cost of ownership allocated for procurement? Ensures consistent performance, while needing little maintenance? All of that is on the market and more, not to mention many solution providers are performing their own custom lift truck engineering for even more targeted applications. The trick is to find the right combination of form and function. It can be daunting when determining application requirements for the food and beverage industry, particularly when dealing with refrigerated, frozen, organic and other products that require special attention due to freshness and quality thresholds. Mick McCormick, vice

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president of warehouse solutions at Yale Materials Handling Corporation, suggests having a detailed dialog with potential lift truck solution providers to pinpoint the demands of each application. He offers an example: “Cold environments present special maintenance and ergonomic challenges. Equipping trucks with the proper ergonomic features like heated floors and handles and spacious operator compartments that account for bulky clothes and gloves, provides a higher level of comfort for operators and allows them to be more productive for longer periods.” “By understanding short- and long-term goals for growth in either inventory and product movement (or both), and then working with a material-handling supplier that can help quantify the type of lift truck and quantities needed, the supplier should have the tools to effectively analyze the customer’s needs using its experiences and resources to develop a solution that will benefit the end user by providing proven alternatives and technology choices,” elaborates Perry Ardito, general manager of warehouse product at Mitsubishi Caterpillar Forklift America (MCFA) Inc. Therefore, it behooves food and beverage organizations to enlist prospective solution providers as early as possible. They can help speed the vetting process by establishing concrete short- and long-term supply chain goals earlier, while ensuring a better alignment of lift truck performance to the application and environment.

Greater Storage Densities Drive Lift Trucks to New Heights Due to social media, the 24/7 news cycle and ever-expanding delivery services, contemporary consumers are more informed and demanding than ever. They know what they want, and how and when they want it. For instance, consumers now demand a bottle of artisan blueberry-infused seltzer instead of a bottle of water. This product stratification translates into the need for more SKUs, but also more ways of efficiently storing and moving those SKUs in a constrained space, and more channels to sell and distribute those SKUs. More and more, food and beverage organizations are meeting the need for more SKUs by adding capacity to warehouse and distribution centers vertically as opposed to horizontally—up instead of out. Jim Gaskell, director of global technology business development at Crown Equipment Corporation, notes, “Industry research shows that it is less expensive to gain pallet positions by going up rather than expanding the warehouse footprint. To give customers the ability to place heavier loads at higher heights, [Crown] introduced a number of lift trucks that offer faster speeds, more capacities, higher elevations and greater operator control.” With SKUs literally reaching new heights, so must lift trucks. Ardito confirms that, with the deluge of SKUs, the food and beverage industry is redesigning racking systems to increase storage density to deal

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Photo Credit: MCFA

Shelf-height selectors automatically stop the forks at preselected heights.”

Labor Shortage to Spur Automation The chronic shortage of labor in the food and beverage industry is boosting interest in automation, including automated lift trucks, also known as automated guided vehicles (AGVs). Removing labor from the equation not only saves on costs, but also reduces the safety risks that comes with employing people, especially those performing dangerous or repetitive tasks that threaten or strain the body. Every three days someone is killed in a lift truck-related accident, according to Jeff Christensen, vice president of products at Seegrid Corporation, who likes the burgeoning technology because it not only takes humans out of harm’s way, but also eradicates 72 percent of the total cost of lift truck ownership. Christensen continues, “Companies in the food and beverage industry need to remove costs from the distribution system, and reinvest those savings into prices on the shelf to remain competitive. Employing automated lift trucks is advantageous because they simplify processes, thereby making tasks more efficient, which drives down

operational costs and allows for operators to be off the floor more, reducing accidents and driving value-added work.” Although AGVs were invented in 1953, according to Christensen, the technology is evolving. While infrastructure, such as the use of magnets, wires, sensors and lasers on and under warehouse floors, is still in vogue to guide the autonomous lift trucks, advanced vision technology is quickly becoming the new norm. Because this advanced technology doesn’t require any infrastructure, AGVs are free to move wherever they need to without having to follow rigid pre-determined guidelines. McCormick explains, “[Many] robotic

Photo Credit: Crown Equipment

with the extra inventory. This translates into the need for narrower lift trucks with the capacity to reach higher racking levels. He says food and beverage companies must be able “to access most SKU locations and, therefore, are using order picking forklifts, or order pickers, to get personnel elevated into the racking to select cases of product. The capabilities of the lift truck should include the required capacity to handle the picked products, the lift heights needed for access, and technologies that would make the operation and operators more productive and safe.” To accommodate these heights, lift trucks intended for this specific use need to be extra stable, not only for employee safety, but also employee confidence in their safety, so they can be as productive as possible. Ardito says, “The stability of the lift truck is really dependent upon the design and engineering, and in Europe, where lift heights typically exceed North American markets (although we are catching up), there has always been a strong focus on ensuring that the truck and operator have the capability, at any height, of feeling secure due to enhanced stability.” In addition to stabilizing employees so they feel secure, lift trucks going the proverbial extra vertical mile in the warehouse also should offer a wider range of visibility, so operators can better see what they’re doing. According to Sue Rice, pallet trucks and stackers product manager, and Susan Comfort, narrow-aisle products manager, The Raymond Corporation, “With taller buildings and racking systems, many customers rely on cameras and laser guidance systems on the forks for more precise product placement in racking. Laser lines directed into the pallet opening help the operator see where the forks must go.

JANUARY/FEBRUARY 2017 | FOOD LOGISTICS

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While the vision of a food and beverage warehouse with all tasks being performed by automated vehicles is still in its infancy, there are some tasks that automated vehicles can deliver

an acceptable return on investment today.” Jim Gaskell, Crown Equipment Corporation

lift trucks leverage advanced sensor technology for guidance, creating an internal map of their surroundings and comparing it to what their vision systems see. This infrastructure-free navigation enables reduced startup time and cost, and easy adjustment to changing layout configurations. Ideal for a range of load transportation applications, these robotic lift trucks independently pick up, transport and drop off pallets anywhere on the floor, improving labor productivity by executing low value-added tasks and minimizing unnecessary stops.” With the newfound freedom of movement of autonomous lift trucks, however, comes the responsibility of personnel and equipment safety. Since there are no visual markers or infrastructure to avoid, the onus of safety shifts from the employees to the AGVs. Christensen notes that these AGVs typically are equipped with sensor technology that detect obstacles and halt the lift truck when necessary, while also being “programmed to move at a calculated speed, which prevents spilling or damag-

Photo Credit: Seegrid

SR: WAREHOUSING continued

ing goods if the vehicle detects an obstacle and is forced to stop.” If you think that, because this technology is so advanced, it’s forever out of your price range, you may want to reconsider. Gaskell notes, “We are starting to see new lower cost sensors and other improvements in technology that should make AGVs more practical for a wider range of applications in warehousing and distribution in the near future. While the vision of a food and beverage warehouse with all tasks being performed by automated vehicles is still in its infancy, there are some tasks that automated vehicles can deliver an acceptable return on investment today.” Some of the tasks AGVs excel at or environments that may be good candidates for AGVs include: • Picking product that would require an operator to get on and off the truck multiple times in the same aisle. • Repetitive, horizontal or longhaul travel along the same route. • Distribution centers with a three-shift operation. Instead of hiring more employees to work multiple shifts or peak seasons, AGVs can accomplish the work without needing to stop. • Larger, more complex environments where flexibility is a must.

Photo Credit: Yale Materials Handling Corporation

Better Connectivity Is Better DecisionMaking The future of the lift truck is now. These vehicles not only are moving product from Point A to B, but also evolving to become a more critical component of the warehouse as a vessel for data, with the use of the

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Internet of Things (IoT) propelling it even more rapidly. Gaskell says, “Because of its role and close proximity to warehouse activity, the lift truck is one of the primary data collectors in the warehouse. Crown envisions a connected warehouse in which the forklift becomes not only a roving sensor that reaches parts of the warehouse no other system is reaching, but is also a hub that collects data from various other devices, acts on this data, and consolidates and analyzes it for other systems.” Many lift truck solution providers are already implementing this technology to varying degrees. For example, Crown is beginning to deliver interactive dashboards that provide fleet-wide visibility into myriad data, such as battery usage, impact history, truck utilization, maintenance needs and more. Similarly, Yale Materials Handling put its data to use when a client “noticed a high frequency of impact alerts in the same location at a common time of day. Management discovered condensation accumulated on the floor during those hours, causing a slippery surface conducive to a loss of traction and impacts. This insight gleaned from telemetry data led to a layout adjustment in response to real-time environmental conditions,” alludes McCormick. Expect this kind of insight to occur more frequently in the years to come as you upgrade your lift truck fleet. Not only can new lift truck capabilities help fork over more productivity, safety and efficiency for warehouse and distribution operations, but they also can help you make better business decisions. www.foodlogistics.com

2/3/17 2:03 PM


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SECTOR REPORTS TRANSPORTATION

BY AMY WUNDERLIN

THE FUTURE OF SELF-DRIVING VEHICLES T he future is here and it looks driverless. But are autonomous vehicles really set to replace humans on our roadways? According to the report, “Identifying Autonomous Vehicle Technology Impacts on the Trucking Industry,” released by the American Transportation Research Institute (ATRI) in November 2016, the deployment of autonomous vehicles in the trucking industry will rely heavily on the role the federal government chooses to take. “The industry relies on an interstate highway system that facilitates the free flow of goods ATRI SUGGESTS THAT, between the IF 90 PERCENT OF CARS ON states. As AMERICAN ROADS WERE autonomous FULLY AUTONOMOUS, technology THE NUMBER OF ACCIDENTS is commerAND FATALITIES PER YEAR COULD FALL: cialized, it is critical that Accidents: Fatalities: the state and 6 MILLION 33,000 local laws do not create disparities that limit 1.3 MILLION 11,300 commerce 21.6% 34.2% and obstruct LESS LESS the successful adoption of these potentially safety- and productivity-boosting technologies. It is critical that the federal government takes a clear leadership role in autonomous technology deployment,” the report states. It is clear the development of autonomous vehicle technology

Taking numerous shapes and forms, what does the future of autonomous vehicles look like for the food and beverage industry?

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and the regulations that go along with it are a top priority, as the Obama administration, during its final days in office, announced the creation of an advisory committee that will be tasked with setting rules for how self-driving cars and drones will operate on public roads and airways. The committee will include leaders of major automotive and technology companies, including General Motors Chief Executive Officer Mary Barra as co-chairman, and executives at Amazon, Uber, Alphabet and FedEx among the 25 members.

Demand Is Growing OTTO Motors, a division of Clearpath Robotics, predicts the market for self-driving vehicles to exceed $80 billion by 2030. Several factors are influencing the demand for autonomous vehicles, including a rapidly changing consumer market and an anticipated shortage of more than 2 million skilled workers in the U.S. over the next decade. Industrial outlets that maintain labor in America are encountering higher turnover rates, while at the same time, are having difficulty attracting talent to take the jobs within the warehouses. “It’s a bit of a double-edged sword, and self-driving vehicles

Self-driving materials-handling vehicles are just the beginning for autonomous vehicle technology.

are able to fill this gap, and enable people to complete complex tasks and do the things that they tend to enjoy,” says Meghan Hennessey, marketing communications manager at OTTO Motors. “There’s a competitive landscape to consider—constant cost pressures for manufacturers, and the fact that customers want product faster and cheaper than ever before. To achieve higher levels of productivity, they realized that we need to automate.” IHS Automotive, a provider of detailed automotive market coverage, predicts that autonomous vehicles could reach 60,000 annually by 2035 or make up 15 percent of sales in the big Class 8 weight segment. Currently, there are about 3.46 million Class 8 trucks in the U.S., so if 60,000 autonomous trucks were added annually starting today, it would take more than five years to reach 10 percent of the fleet. Looking at this estimate, it is fair to say that the widespread adoption of autonomous vehicles in the trucking industry remains in the distance. And though that means products may still be delivered www.foodlogistics.com


SR: TRANSPORTATION continued

• Autonomous

vehicles already are used in warehouse settings every day. OTTO Motors currently is working toward a transition to roadways.

by a human being, autonomous vehicles already are being used in various ways throughout the supply chain. Clearpath recently completed a $30 million investment in its industrial division, OTTO Motors, which it launched in 2015 to focus on self-driving vehicles for material transport inside manufacturing and warehouse operations. Matt Rendall, CEO and co-founder of Clearpath, explains this investment: “Unlike city streets, a factory floor is a controlled environment, which makes it an ideal place to introduce self-driving vehicles at scale.” Companies, such as General Electric (GE) and John Deere, already implemented OTTO’s material-handling equipment in their facilities. “GE is using the OTTO solution in its repair center to transport parts to work station cells, while John Deere is using OTTO for assembly line conveyance,” Hennessey notes. OTTO offers two forms of self-driving vehicles designed exclusively for material transport at industrial sites. One is the OTTO 1500, which is made for heavyload material transport, and the

other, OTTO 100, is made for lightload material transport. Not to be confused with OTTO Motors, the Uber-owned Otto also has made great strides in the development of autonomous technology. The ATRI identified several pieces of technology typically associated with autonomous vehicles, which when combined, have been used to produce autonomous systems. They include: radar, Autonomous laser imaging vehicles could detection and ranging (LIDAR), reach 60,000 annually video camby 2035 or era systems, make up 15 dedicated percent of short-range sales in the big communicaClass 8 weight tions, long-term segment. evolution and differential GPS. An aftermarket autonomous system created by Otto utilizes a variety of the abovementioned technologies to retrofit existing vehicles. During an October 2016 demonstration of the system, a truck entered an interstate highway in Colorado, while the driver of the truck placed the vehicle in self-driving mode, using Otto’s system. He then spent the remainder of the 120-mile trip in the truck’s sleeper cabin, thus establishing how the technology works and could be used in the near future. In November 2016, a self-driving truck produced by Otto made a 35-mile trip along what Ohio Governor John Kasich deemed the Smart Mobility Corridor. The socalled smart road stretches along U.S. 33 in central Ohio and is said to be an area where autonomous technology can be safely tested in real-life traffic. A fiberoptic cable network and sensor system is slated for installation this summer.

Why Self-Driving? The impact autonomous technology could have on the food and beverage industry remains to be seen. One area of interest is overall

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productivity in the warehouse. Factories, distribution centers and warehouses always focus on continuous improvement, and in order to gain those advances in productivity, the industry learned that robotics and automation can provide those benefits, especially when it comes to material transport. “Yes, people can absolutely transport materials. They can use forklifts, they can use bikes, they can use tuggers. But OTTO does it more efficiently to provide higher output and higher productivity for the organization,” says Hennessey. And despite the capability of the technology currently available, many manufacturers or warehouses have not yet taken hold of this solution because, until this point in time, they were only able to automate very specific tasks. Hennessey points out that anything that needs to be moved in a facility has the potential to be automated by a self-driving vehicle. “Why not put people in more high-value roles and have OTTO do that mundane travel for you?” Besides higher productivity, automation has obvious cost benefits. Because manufacturers don’t need as many people to run the plant with the implementation of robotic vehicles or industrial robotics in general, it allows the ability to locate operations in more rural areas. “If they are operating in more rural locations, that’s going to impact their overhead costs and decrease them,” Hennessey notes. “When you’re looking at taxes in Chicago versus the greater area of Illinois, there’s going to be a significant difference.” The benefits of automation in a industrial setting have long been proven, but the impact on the trucking industry remains speculative. An area likely to be impacted by self-driving vehicles, though, is the trucking industry’s driver shortage. Interstate transport companies that are struggling with a shortage of skilled drivers are www.foodlogistics.com


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SR: TRANSPORTATION continued

• In November 2016, a self-driving truck produced by OTTO Motors made a 35-mile trip along Ohio’s so-called Smart Mobility Corridor. It’s an area where autonomous technology can be safely tested in the future.

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likely to be early adopters of the technology, as well as large-scale logistics companies, such as DHL, that have massive warehouses and port facilities, where testing of the technology could reduce the risk of injury. An annual study conducted by the ATRI found the top 10 issues concerning commercial drivers in 2015. The list included: hours of service; compliance, safety and accountability; driver shortage; driver retention; parking; electronic logging device mandate; driver health and wellness; economy; infrastructure; and driver distraction. Self-driving vehicles, to a degree, likely could solve many of these challenges. Hours of service regulates the time a driver can work or drive. Drivers may be on duty for up to 14 consecutive hours, drive up to 11 of those hours and must rest at least 10 hours before returning to duty. These regulations drew a lot of criticism from drivers for their lack of flexibility. The ATRI’s November report concludes that the implementation of automated systems could be cause for a revision of the regulation, as they would “allow for increased flexibility and better rest for drivers” by permitting rest and productivity to occur simultaneously. Speeding, reckless driving and

FOOD LOGISTICS | JANUARY/FEBRUARY 2017

LEVEL UP While the trucking industry likely will see the rise of autonomous vehicles sooner than the consumer market, many questions still remain about just how autonomous they should be. The National Highway Traffic Safety Administration identified five levels of automation. At each level, more functions become automated, eliminating the need for the driver to perform them. Current technology is somewhere between Level 3 and Level 4. The levels of automation recognized are as follows: Level 0—The human driver is in complete control of all functions of the car. Level 1—One function is automated. Level 2—More than one function is automated at the same time, but the driver must remain constantly attentive. Level 3—The driving functions are sufficiently automated that the driver can safely engage in other activities. Level 4—The car can drive itself without a human driver.

improper lane change are safety issues autonomous vehicles can address. Though ATRI doesn’t predict the complete eradication of unsafe driving violations, “autonomous technology can be programmed not to violate traffic laws.” This would improve driver scores on the Federal Motor Carrier Safety Administration’s Behavior Analysis and Safety Improvement Categories scoring system, which monitors a company’s driver safety, for those who utilize autonomous systems.

Causes for Concern Research points to safer American highways if autonomous vehicles are used, according to Rendall. Vehicle crashes result in nearly 30,000 deaths in the U.S. each year

at a cost of $836 billion in relation to property damage and personal injury. The majority of crashes is due to human error. The National Highway Safety Traffic Administration (NHSTA) estimates 94 percent of crashes in 2015 are attributed to drivers. Semi-autonomous technologies, such as electronic stability control and forward collision systems, already have proven to improve a driver’s awareness and ability to operate safely. The ATRI suggests that, if 90 percent of cars on American roads were fully autonomous, the number of accidents per year could fall from 6 million to 1.3 million and fatalities could decrease from 33,000 per year to 11,300. “While these statistics do not specifically cite truck automation, it is likely that truck-car crashes would decrease as a result of car automation,” the report notes. Concerns that still are debated also include maintenance and repairs. “System failure could be catastrophic, particularly in systems where it is possible no human is present to take control of the vehicle,” says the report. Additionally, regulations will be required not only for the use of autonomous vehicles, but also for law enforcement that will require further tools and training.

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SECTOR REPORTS SOFTWARE & TECHNOLOGY

BY JOE KUERSCHNER

WATCH YOUR WMS

The complexities of today’s food and beverage supply chain make a best-ofbreed WMS indispensable.

The warehouse management system (WMS) market is predicted to reach

$3,112 million by 2022,

with the food and beverage industry being one of the top adopters of this technology.” Allied Market Research

50

T

he omnichannel revolution may have struck the retail world first, but it also left an indelible impact on the food and beverage industry. The modern consumer has become accustomed to having numerous options for purchasing and receiving products, whether it’s groceries or apparel. For the food and beverage industry, this business climate has introduced unique challenges that come with the handling and tracking of these sensitive items. For years, customers had one real option for buying food and beverages: the grocery store. But that changed as other channels surfaced and subsequently gained momentum (similar to how online sales now account for an increasingly large percentage of retail sales). In-store pickup, kiosk pick-up and home delivery all have gained popularity because of their convenience. Why make a trip to the supermarket if you can select all of your usual items online, then have someone else deliver them to your car, your front door or a drop box? And consumers want these products quickly (and

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without additional fees)—a product of the get-it-now benchmark established by e-commerce leaders. Additionally, the types of items consumers want has changed. There is more demand for specialized food products, especially natural, local and/or organic items. The rapid emergence of these new product lines has led to inventory complexities that impact the entire food and beverage supply chain. Not only are there more items, but certain goods—like organic foods— may come with unique requirements related to storage, tracking and last-mile delivery. But not all the hurdles facing the food and beverage supply chain are driven by consumers. As fundamental consumer buying patterns have changed, federally mandated regulations also have become more stringent. Hazard Analysis and Critical Control Point (HACCP) programs set by the United States federal government and similar standards from the Canadian Food Inspection Agency (CFIA) have made product traceability and recall capabilities far more important. So, what is the most effective way to manage these challenges? A top-tier warehouse management system (WMS) and supporting

supply chain technology (i.e., delivery, reservation and supplier enablement systems) help food and beverage distributors rise to the demands of this challenging (but opportunistic) business climate.

How Will a WMS Transform Your Business? A best-of-breed WMS may have once been a luxury, but considering the issues presented above, it’s an absolute necessity for any distribution operation in order to maintain its top and bottom lines. First and foremost, a modern WMS offers an accurate, real-time view of inventory right out of the box. As food and beverage providers deal with a larger and more diverse selection of products, that visibility is more important than ever before. This inventory often is temperature-sensitive, which adds another wrinkle—think manufacturer/lot/date/ temperature/country of origin-type data that needs to be maintained at every step of the process. A best-of-breed WMS will execute fulfillment workflows that account for the sensitivity of those goods and manage the process and data accordingly. For example, products stored in a refrigerator in a grocery distribution center (DC) will be picked near www.foodlogistics.com

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Keynote: Harry Kraemer, Clinical Professor of Strategy at Northwestern University’s Kellogg School of Management Don’t miss Harry Kraemer: This partner at a private-equity firm, professor, and bestselling author uses his experience to motivate business professionals to balance values with achieving results. As the former chairman and CEO of Baxter International, Kraemer leaves audiences with a new way of thinking and inspired for more purpose and conviction in their roles. General Session: Fireside Chat with Scott McWilliams, EVP Strategic Development, GEODIS Scott McWilliams spent 27 years with OHL, now GEODIS, as site manager, vice president of operations, president, CEO, and chief customer officer. He has personal and professional stories to share. You won’t want to miss this his unique insights. General Session: PriceWaterhouse Coopers Presents Warehouse Economic Impact Report The 3PL warehouse industry is a vital part of the U.S. and Canadian economies in the form of jobs, labor, income, GDP, and taxes. The total economic contribution of the industry extends beyond its own employment of direct, indirect and induced contributions. Explore the results of this IWLA-sponsored study of economic impact of the warehouse logistics industry at the national, state, and provincial levels.

Register online and learn more at www.IWLA.com. FLOG0117_50-53_SoftwareSECTORReport AW RG.indd 51

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SR: SOFTWARE & TECHNOLOGY continued

A best-of-breed WMS may have once been a luxury. Today, it’s an

absolute necessity for

any distribution operation in order to maintain its top and bottom lines.

the end of that order’s route, then directed to the appropriate trailer compartment to ensure the product stays as fresh as possible. The right solution also will support automated data capture, tracking and maintenance (i.e., lot and batch expiration date tracking). Reliable systems track the inbound entry/manufacturing date and expiration date to ensure date-sensitive items do not sit in the warehouse for longer than they should. And, more often than not, this is not just a matter of guaranteeing it ships before the expiration date—it’s more intricate than that. Distributors want foods as fresh as possible to keep customers happy. This means being able to deliver products to customers based on their date requirements (i.e., no less than 14 days of expiration remaining). It also drives fulfillment decisions for warehouse processes,

such as exports (i.e., always pick the youngest products for international shipments to ensure expiration remains upon arrival). The software also should maintain a detailed history of every material movement from arrival through shipment. Detailed tracking is extremely valuable during recalls, when a company must know in short order which products from which dates need to be returned. A WMS should enable users to sort by lot, supplier lot, dates, job, customer order, etc. In situations where the manufacturer is the distributor, backward lot traceability also is relevant. You must know what ingredients went into finished goods and be able to initiate steps to recall products based on that knowledge. Finally, the food industry operates on very tight margins. The ability to configure specific workflows within the WMS will increase the efficiency of each employee and help control costs.

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When implementing a WMS solution, it’s often important to support it with a top-tier data management/EDI system. These systems ensure that inbound orders are properly placed and managed in the procureto-pay cycle, and provide the basis for communicating accurate order data to customers in the order-tocash cycle. One primary area of attention is ASNs (advanced ship notices). ASNs are a best practice receiving process that simplify inbound reconciliation and increase labor savings. The data required to receive those inbound ASNs is created through EDI/supplier enablement solutions. Suppliers create the re-

quired data and labels at the origin and pass that data to the WMS to execute the receipts quickly but with all the required foodrelevant data still intact. This technology pairing also creates a more digitized process on the outbound side. The WMS optimizes the flow of inventory through the warehouse. After the WMS has picked and shipped the product, the EDI solution delivers the expected order data (i.e., outbound ASNs) to the appropriate outbound supply chain constituents (i.e., carriers, 3PLs, customers). This helps your supply chain partners execute their supply chain “next” processes and ensure the appropriate foodrelevant data passes to the next node in the supply chain. Your supply chain is poised for future success when your EDI systems and WMS are in constant communication. Rapid growth is a non-issue because the distribution and electronic workflows are built for any order volumes (this is particularly valuable for companies with seasonal order spikes). The right solution also will make onboarding new trading partners a simple, painless process. The best solutions have the scalability to allow food and beverage distributors to embrace new business opportunities instead of worrying about the logistical issues presented by them. That drives return on investment and quickly justifies the upfront costs.

What to Look for in a WMS Selecting a WMS vendor is a momentous decision for any food and beverage provider since it can have a lasting impact on the success of an www.foodlogistics.com

2/3/17 3:19 PM


organization. You need a functionally robust solution and one with the scalability and flexibility to keep up with your business’ prosperity. This is a long-term investment. Choosing the wrong provider could be painful—and expensive. A WMS for food and beverage vendors should have or support these capabilities: • Provide workflow tools to adapt to changing consumer and regulatory requirements. • Synchronize all market channels for inbound/outbound electronic commerce and fulfillment. • Support supplier drop shipment,

in-store order fulfillment and DC fulfillment processes. • Integrate with material handling equipment to be the master database of all inventory. • Optimize fulfillment strategies based on inventory position and customer-based rules. • Integrate easily with other business systems. • Provide real-time supply chain inventory information. • Provide technical scalability to grow with your business. • Track key food and beverage-related datasets with a robust data model.

• Facilitate warehouse process execution on mobile devices. It’s smart to choose a vendor that offers a comprehensive supply chain execution suite rather than just a WMS. Since integrations are so critical to supply chain optimization, a software provider that can offer an array of pre-integrated solutions gives your company a bright future. Best-of-breed WMS and supporting supply chain technology, while a significant organizational investment, holds the key to success for food and beverage distributors in today’s omnichannel world. Simply put, it’s impossible to satisfy the complexities created by emerging distribution channels, new regulatory requirements and demanding consumers without these technology solutions.

Selecting a WMS vendor is a momentous decision for any food and beverage provider since it can have a lasting impact on the success of an organization. You need not only a

functionally robust solution, but one with the scalability and flexibility to keep up with your business’ prosperity.

Jon Kuerschner is the vice president of product management and consulting at HighJump. He can be reached at jon. kuerschner@highjump.com.

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SECTOR REPORTS OCEAN PORTS & CARRIERS

BY RONNIE GARRETT

SHIPPING INDUSTRY RIDES THE WAVES IN A

SEA OF CHANGE Experts predict positive outcomes as the container shipping industry ebbs and flows with the tides of change.

CONTAINER FACTS:

T

he container shipping industry saw a sea of change in 2016: One operator went under; mergers and acquisitions (M&As) pared the number of alliances from four to three; carriers further consolidated, increasing risk profiles in shipping supply chains; and ship capacities escalated with more Triple Es (ships capable of carrying more than 18,000 TEUs) crossing the ocean. As the industry wrestles with the aftershocks of 2016, Lars Jensen, CEO of SeaIntelligence Consulting, which provides market intelligence to the container shipping industry, predicts the oceans of change will continue well into 2020, when he suggests there won’t be 20 global carriers but rather six to eight. “We are down to 11, so we are CONTAINER SHIPPING: ESTIMATED WORTH ANNUALLY

1 trillion

$

IN 2016: THE CONTAINER TURNED

60 YEARS OLD TODAY:

17 MILLION SHIPPING CONTAINERS IN THE WORLD

WORLD’S CARGO:

95% MOVES BY

SHIP

Source: Billie Box: Facts About Shipping Containers

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well on our way,” Jensen says. “But, most of the M&A activity is done—for now. The next M&A activity won’t happen for three to four years, and that’s for the major global carriers.” What will happen now is integration; that is, phasing in the new alliances—2M, Ocean Alliance and THE Alliance. Jensen points out that any time carriers integrate, there is risk of something going wrong, which could negatively impact shippers. The arrival of more deeply interconnected container shipping networks also has industry pundits worried about the outcome of what they view as a concentration of power. Their top concerns include price fixing and increased rates, reduced services, limited choice, and continued port congestion as fewer ports handle ever-larger ships. Jensen maintains these dire predictions will not come to pass. “When you get a higher degree of consolidation, shippers might fear there will be less choice and it will impact pricing, but pricing is determined by the global supply and demand balance, and that will remain in the shippers’ favor for several more years,” he says. “And, if you have major carriers that unilaterally decide to reduce capacity, while that would make freight rates go up, it would also open up the market for new entrants to come in,

so I wouldn’t worry about that.” Likewise, if price gouging or service reductions arise, protections are set up to stop this in its tracks. “We have a monitoring process in place, and if there is an unreasonable increase in prices or decrease in services, it could lead to an injunction that could break up an alliance or lead to other necessary action,” William Doyle, a commissioner at the U.S. Federal Maritime Commission, recently told the Wall Street Journal. All that being said, Jensen suggests freight rates “should go up.” He explains that in 2016, carriers have been heavily loss-making. While this is nice for shippers, who have been saving money on their freight bills, he says it is not sustainable. “If shippers are interested in a stable supply chain, carriers have to make money. If we see freight rates going up, we cannot just attribute that to the alliances and the effects of consolidation. Even if we had no M&A activity in 2016, we would still need to see some elevation in freight rates to bring the industry back to positive levels.”

Limiting Choice? There are some who worry that consolidating into three alliances and using megaships to deliver cargo, while total capacity remains the same, will reduce sailings. The stage certainly appears to be set to

www.foodlogistics.com

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TAKE ANOTHER LOOK AT Charleston

We have added more than 400,000 sq. ft. of cold storage capacity, greater reefer capability at our terminals, and new reefer infrastructure. This is how we keep reefer moving. And it’s why you owe it to yourself to give Charleston another look. SCReeferReady.com

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SR: OCEAN PORTS & CARRIERS continued As container services have become commoditized, they have been forced to look at what they can do to improve service. This

has meant technology development in every way, shape or form.”

Lars Jensen, SeaIntelligence Consulting

• The Port of New Orleans has invested in technology and infrastructure updates to attract new business from the alliances.

56

head in that direction, with cargo owners reporting 20 percent fewer containership sailings across major trade routes and a 10 percent drop in port calls since Triple Es took to the ocean. Here, Jensen also puts forth a differing point of view. “Going from four alliances to three might actually give shippers more choice, not less,” he says. He explains that it’s all about scale, and scale does not just cover the size of the vessel. Rather, it also involves the size of a carrier’s network. “If I’m a carrier with one service on the Trans-Pacific, there is a very limited number of ports I can call at either end,” he says. “I will have to do a transshipment, which is not favored by any of the shippers.” But if two carriers merge their services, they can now cover a wider array of port pairs between the two. “Having an alliance of two carriers, with one service each, provides more choice for shippers not less,” he explains. “If we look at the preliminary networks that have started to come out, that is exactly the effect we are seeing. When

FOOD LOGISTICS | JANUARY/FEBRUARY 2017

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designing these networks, there is an increased emphasis on getting more direct port coverage.” Maersk Line Strategic Communications Manager Katherine Mosquera echoes Jensen’s sentiments—at least where Maersk Line is concerned. “While we cannot speak for the industry, we can say that for our customers, not least reefer customers, would benefit from our most recent acquisition. They would benefit from unmatched transit times and port coverage in Latin America, and Hamburg Süd customers will gain access to Maersk Line’s second-tonone global network.” She adds, “The majority of the efficiencies we expect to gain will come from a more effective use of the combined network, which will provide exciting opportunities to develop new competitive products and leverage operational strategies.” Port impacts, at least insofar as the Port of New Orleans is concerned, will be positive, not negative, predicts Janine Mansour, commercial director for the Port of New Orleans, which has as its top export, poultry; and as its top import, coffee, bananas and fresh produce from Central and South

America. “We actually fared really well in the mergers and then the alliances. We have had calls announced by all of the major alliances, but one of the most exciting announcements of 2017 is that we have a new direct Asia service with CMA CGM Group, and that service will become an Ocean Alliance service.”

A Technology Push Temperature and traceability go hand-in-hand in a tougher legal environment brought forth by the adoption of the Food Safety Modernization Act (FSMA). In this arena, shippers will be held liable for compliance, and cold chain visibility and chain-of-custody data will increase in importance. Because of this, the use of machine-to-machine (M2M) telematics and sensors will become more common. M2M will help container assets, cargo and shipments make the move from “dark, dumb and disconnected” to “visible, smart and connected,” according to a ORBCOMM white paper titled, “Transforming Container Supply Chains with M2M and IoT Connectivity.” Jensen predicts carriers now will invest in the technology needed to remotely monitor and control reefer boxes, and GSM-enabled ships will enable them to monitor M2M-equipped reefer boxes at sea. “The carriers will try to improve services, not just for food products, but for all types of products,” Jensen says. “As container services have become commoditized, they have been forced to look at what they can do to improve service. This has meant technology development in every way, shape or form.” Technology, he says, can be used to automate the shipment itself, and the paperwork that goes with it, but also can help address the what ifs of something going wrong. “If you ship thousands of reefer boxes a year, there will be something that goes wrong. There may be equipment malfunctions or ships out on delay, and a whole range of things that are outside a shippers’ control,” he says. www.foodlogistics.com

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More TripleEs, ships capable of carrying more than 18,000 TEUs, than ever are crossing the ocean. Depicted above is a computer-generated image of the Maersk Trip E Class 1.

“One way carriers will try to different themselves is not just on the automation but on the exception handling.” Maersk Line expects technology to further advance with its recent acquisition. The company, which has more than 80 years of experience shipping fresh produce, offers a modern reefer fleet equipped with the technology customers need to monitor their cargo. “Since investing in 14,800 new units last year, the [average] age of our reefer fleet has dropped to 7.9 years, more than four years younger than the industry average,” says Mosquera. “We have also invested in a number of programs to enhance cargo care for our customers. StarCare for example allows Maersk Line to maintain the correct blend of oxygen and carbon dioxide within refrigerated containers, which is vital for some fruits to reach further markets by extending the shelf life of the fruit. Another new development provides data on container conditions, including its location, humidity, air supply and other measurements.” Jensen predicts that “allowing shippers to monitor cargo in real time and taking precautions if something goes wrong along the way” will keep picking up steam. Mansour agrees, stating three has been “a lot of investment” in the www.foodlogistics.com

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real-time monitoring of containers. She notes MSC and CMA CGM have invested in new technology for monitoring refrigerated containers, and adds, “we are working with the port’s terminal operators to enable a customer to log in, enter their container number and see its location. In the near future, they’ll also be able to see the temperature inside the container and other variables they want to monitor.” The good news is “the cost of developing new information technology tools, such as remote monitoring is the same, whether you are a big or a small carrier. That means the costs of doing this are going down as the carriers become larger,” says Jensen. Ports, like New Orleans, are investing in technology and updates to attract new business from the

alliances, adds Mansour. The Port of New Orleans spent $8 million to add 450 new refrigerated reefer plugs to beef up its reefer plug capacity at the terminal. And, they work closely with the U.S. Department of Agriculture as well as U.S. Customs and Border Protection to make inspection services readily available at the container terminal. While much remains to be worked out, it appears that in the end, the outcome of 2016’s shipping industry changes will be improved reliability, better cargo monitoring HOW MANY freight claims and increased do you file per month? food freshness. If it’s more than 10, MyEZClaim Freight Claim Software can reduce your filing costs:

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Ford Motor Company............................ 6, 7

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South Carolina Ports Authority................55

Honeywell........................................................ 5

Swisslog.......................................................... 25

Interlink Technologies............................. 52

System Logistics......................................... 28

International Warehouse Logistics Association (IWLA)................................... 51

TMW Systems Inc...................................... 35

KINEXO.......................................................... 33 Landoll Corporation................................. 27 LeanLogistics Inc........................................ 13 Mitsubishi Caterpillar Forklift America Inc.................................. 21 MSC Mediterranean Shipping Company....................................... 9

TranSolutions Inc....................................... 57 Uline................................................................. 31 United States Cold Storage.................. 14 Utility Trailer Manufacturing............. 2, 3 Viastore Systems....................................... 29

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Vormittag Associates Inc. (VAI)........... 53 Yale Materials Handling Corp.............. 43

Old Dominion Freight Line............ 36, 37

JANUARY/FEBRUARY 2017 | FOOD LOGISTICS

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FOOD (AND MORE) FOR THOUGHT

BY MATT DRAKE & HOWARD ROGERS

Video-based safety solutions improve safety and efficiency, and have a positive impact on the bottom line.

Matt Drake is a program manager at SmartDrive Systems, where he is focused on developing and managing project plans for clients. Howard Rogers, a regional sales manager at SmartDrive Systems, is a results-driven leader with nearly 10 years of experience.

58

W

hen it comes to today’s food and beverage supply chains, transportation safety and efficiency are among the top concerns for fleet managers. Companies face a number of threats and taking proactive steps to mitigate risk is vital to a company’s success. In the case of collisions, the impact extends well beyond physical damage to the vehicle. Often, accidents on the road result in legal setbacks and liability claims, damage to brand reputation, personal injury or worse, in addition to the cost to repair or replace fleet assets. In data released earlier this year, the National Highway Traffic Safety Administration found that, in 2014, an estimated 111,000 people were injured in crashes involving large trucks—an increase of 17 percent from the year prior. This statistic suggests a likely increase in claims filed against commercial fleets, negatively impacting the fleets’ bottom lines and overall business reputation. However, statistics from the U.S. Department of Transportation tell us that approximately 80 percent of crashes involving heavy trucks are not the truck driver’s fault. With video-based safety technology, fleets can protect and exonerate drivers, alleviate other risks to fleet assets and brand reputation, and improve the bottom line.

See the Big Picture Today’s leading video-based driving analytics solutions offer fleets the ability to implement a road-facing camera only, road- and cab-facing cameras, or a solution of up to four cameras for 360-degree visibility around the vehicle. The most advanced solutions enable fleets to identify, score and analyze risky behaviors and actions, such as

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2 MILLION TRACTOR-TRAILERS TRAVEL THE NATION’S HIGHWAYS.

AN ESTIMATED

111,000 PEOPLE WERE INJURED

Source: www.truckinfo.net

Better SAFE than SORRY IN CRASHES INVOLVING LARGE TRUCKS.

80%

OF CRASHES

INVOLVING HEAVY TRUCKS ARE

NOT THE TRUCK DRIVER’S FAULT

THE HIGHEST NUMBER OF TRUCK ACCIDENTS OCCUR IN

CALIFORNIA, TEXAS, GEORGIA AND PENNSYLVANIA. hard braking, speeding, following too closely to other vehicles on the road and U-turn detection. Video capture initiates upon specific triggering events as determined by fleet management. Immediately following the incident, the video is saved and uploaded to a company-specific database and analyzed by fleet safety experts. The video serves as a single source of truth as to what actually occurred on the road and allows fleet managers to identify specific risky behaviors. Accompanying coaching workflows in the most advanced solutions enable managers to work with drivers one on one to collaboratively and productively improve safety and operational efficiency. Once drivers fully understand that video-based safety programs protect individual drivers as well as companies, any initial resistance generally subsides. One driver of a leading food service industry supplier stated, “At first, you think the system is there to critique you and point out faults in your driving. But it’s not there for that purpose. It’s there to help us be

a better, safer company. It makes me feel a lot more secure and made me a better driver.” Relying on advanced driving analytics, the best video-based systems provide fleet managers the unique capability to see not only a true view of what’s occurring on the road, but risks that surround the vehicle as well. This is particularly important as the challenges facing food and beverage distribution companies frequently involve the location of deliveries. Often, these drivers are hauling massive trailers that need to exit the highway, and navigate residential and dense commercial areas. This poses a new set of risks, such as passenger vehicle collisions, parking difficulties and pedestrian-related incidents. The use of video, with configurations of up to four cameras to provide 360-degree visibility around the vehicle, gives managers transparent insight into what is taking place, and allows them to determine whether their drivers are taking the proper precautions to protect themselves, the products they are hauling and others on the road. www.foodlogistics.com

2/3/17 11:09 AM


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L E T ’S CHILL

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Food Logistics January February 2017  

Food Logistics is the only publication exclusively dedicated to covering the movement of product through the global food and beverage supply...

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