Why should you use a Freight Forwarder?

Most business today have customers spread across vast geographical area even within the country, if not internationally. Hence for success of any business, it is important that the product reaches its customers unharmed, in timely manner and at a reasonable cost. If this does not happen, the business will fail, even if it has a great product.

Now imagine that a company has to ship a large package across the Atlantic Ocean (Say from the USA to some land lock country in Europe). For it, the business has to first send it to the port via truck then choose between air or sea route to cross the Atlantic. Further, it must get the product onto the ship or aircraft, (after clearing all the customs and regulatory requirements), get the delivery at the landing port across the Atlantic, clear the customs of the landing country and then again move the package by road (or another means) to the customer. For a small business, this is very daunting. This is where freight forwarders come in.

 

What is a freight forwarding business.

 

A freight forwarder is simply a business that arranges the movement of the goods for a customer from the manufacturer to the end distribution point, or to the end customer. They are the intermediary between the business and the point of delivery (end customer or distribution point). They do not move the cargo themselves; they arrange for the shipment to be picked up, transported through various modes and by different transportation providers, customs and clearing houses till it reaches the endpoint. They specialize in coordinating between various such agencies for minimum cost and speediest movement of cargo. In a way, they orchestrate between multiple service providers. They have established relationships with transporters, ocean liners and the likes, which they use to negotiate the best possible price for their clients. They use their relationship network to identify the shipping options, find the standard shipping routes and cost associated with each and select the best possible combination of available options for the shipment. All these tasks may look as formidable or complex for a simple business who just wants to get his product across, to the customer.

 

 

Services Offered by freight Forwarders

The freight forwarders generally offer a few more associated services required for the freight, which require specialized skill which may not be available with the business.

Packaging. If the cargo is going to be loaded and unloaded at several points, it needs robust packaging that can take rough handling. If the cargo is taking sea route, then the packaging must protect the cargo from sea corrosion. When shipping through air, the low air pressure and low temperatures may be a cause of concern for some of the products, and they will need sealed packaging for same. Many such specialized packaging requirements come with the transportation and other logistical options. Since freight forwarder understands the requirements and risks associated with the chosen mode of transport, they also provide (usually), the packaging that is most suitable for that mode of transport. The shipper does not have to manage additional packaging needs. This is most helpful, when there are several types of products destined for several locations with multiple modes of transportation.

 

Labeling. Cargo passing through various checkpoints usually has strict regulatory labeling requirement. Typically a cargo label would indicate following:

  •  Type and quantity of product.
  •   Handling instructions
  •   Hazardous material information
  •   Country of origin
  •   Destination
  •   Hazard and handling instructions in local language (at source and destination)

 

The freight forwarder would generally know the labeling requirements and can fulfill them more easily and precisely.

 

Documentation. Domestic and international cargo requires lot of documentation that may be daunting for a regular business. Freight forwarders have developed their expertise in knowing exactly what kind of documentation is needed for which kind of product and destination and from where and how to procure it. Some of the typical documents required for international shipping are:

  •   Bill of Landing. The contract between the shipper and the owner of the goods.
  •   Invoice. The regular commercial invoice for the product
  •   Inspection certificate. (clearance from required agency to ensure that product meets the quality as required)
  •   Insurance.
  •   Export License.
  •   Customs documents. To ensure that product can be legally sent out from the origin country and received at the destination country and is not prohibited by either of the countries.
  •   Tax papers. To ensure all the required taxes have been paid

Freight forwarders typically don’t have any capital equipment of their own. But the service they bring in can be quite valuable even for established players. They run the supply chain show, holding all the thread of various sections of the chain. The business can leave all the transportation and its related handling, packaging, documentation and other requirements to be handled by the freight forwarder and focus on what they do the best, That is making a quality product.

Use 3PL services for a growing business

More and more businesses are using third-party logistics service providers. Building an in-house supply chain is expensive, slow and a learning process riddled with mistakes. On the other hand, outsourcing the supply chain is efficient, quick and adaptable. The benefits of using 3PL are more than just reduced initial capital outflow or getting expertise. With ever-increasing competition, businesses need to focus more and more on their core activity and reduce or divert resources from non-core activities while extracting the best out of them. Managing supply chain is one such activity that can be efficiently outsourced. In fact outsourcing such non-core activity can be strategically beneficial in the long run for a business. Here are a few advantages that a growing business can get from outsourcing its logistics.

 

Scalability – Building a supply chain requires time and investment. Underutilized supply chain represents locked capital which is bad for a growing business. On the other hand, peak utilization limits the growth that operations can achieve. However, with outsourcing, the supply chain capacity can quickly increased or reduced without much impact on scale. Quick scalability is one of the biggest advantages an outsourced supply chain can offer to a growing business. Third-party providers are geared to scale their operations depending on their client’s requirements. They invest their capital in spare capacity and clients don’t need to make any capital investment. Further, if the scale of operations reduces for a client, the extra capacity is simply sold to another customer with no impact on the first client.

 

Optimization – Logistics is frequently about optimization of the resources such as packaging, transportation, route and delivery time for most efficient use of resources with minimum time. This planning and coordination requires special skills that are expensive and hard to find. Further using the skilled and costly planners only for one business may not be the cost-efficient. 3PLs bring in planning and optimization as their core skill. They plan for most optimal warehouse locations, delivery modes and routes and club cargo from multiple clients to bring the costs down. High priority deliveries are also clubbed together to bring down their costs (as compared to individual high priority delivery). This degree of optimization is difficult to achieve for a small business without significant investment and dedication of resources, which can burn quite a hole in the pocket, as the company grows.

 

Constant innovation – Supply chain requires continuous innovation in terms of packaging, equipment, processes and even transportation vehicles. For example, newer material for pallets keeps making them stronger and lighter, new methods of merchandise scanning makes tracking more efficient, more modern robots make stacking and picking of products much faster and more comfortable. Similarly, new transport vehicles (newer trucks) keep reducing the cost of transportation. The problem is that all such innovation requires an upfront investment and business cannot make any new investment until ROI from the previous investment is realized. But with higher utilization, 3PL have faster ROI cycles and can bring in capital-intensive innovation much quicker. Besides logistics being their core business, 3PLs thrive on constant innovation in supply chain to reduce costs and improve service.

 

Quick movement between supplier – While it is a good idea to maintain long relationships, business realities sometimes require to change the vendors. This need for change could be for many reasons such as better rates, larger scale of operations, wider network spread, or simply a kind of service that is not being offered by current supplier (even today many 3PL suppliers do not offer cold storage chains). As the business grows, the supply chain requirements will also change. The scale of material handling will increase. The variety of products being sold will also increase, and this will need different logistics skills. In house logistics department will need time to change and may even put up resistance to change. Improving the skill set of the whole department is not possible in a matter of few days (or even few weeks). But changing supplier is just a matter of negotiation (apart from identification of-course). The business operations are not vastly disrupted while the change of supplier happens. As is well known, changing or upgrading a department of the business is extremely slow and tiresome process, but changing a vendor is easier.

 

Lowering of Costs – Development of supply chain needs space, warehouses, packing machines, moving and stacking machines and vehicles (as large as up to trucks and lorries) making them capital intensive investments. Also, logistic operations are equally expensive, if not more. Many times, the supply chain capacity is not fully utilized leading to a high wastage of money. The 3PL absorbs the capital investment and can depreciate the equipment much faster owing to its higher utilization. The capital cycle (for supply chain) is much more efficient for 3PL as compared to in-house supply chain investment. There is no doubt that unless the volumes are huge, 3PL makes a lot more sense regarding costs and investment for any business.

Further, as the product moves through regions, various agencies or external companies come in picture. A product moving across the border will interact with customs, excise, clearance house, export regulators. Businesses need working relationships with all of them for its cargo to move quickly and efficiently through these agencies. Developing and maintaining these relationships needs resources which cost money. As business volumes grow, the interactions with agencies also increase and need more resources. A 3PL maintains these relationships for its customers so that the businesses do not have to it themselves, and they do it more efficiently.

 

Developing supply chain is a slow and costly process and often requires changes that are expensive. As the business grows, the inefficiencies of the supply chain start to glare out. The growth phase is precisely the time when companies need an efficient supply chain. An outsourced, third party supply chain will not only eliminate the inefficiencies, but it will also bring in innovation to handle the large volumes of growing business, that may provide the edge, that a growing business needs.

service provider relationship

A general logistics service provider or a specialized one- What to choose?

The number of 3PL service providers is growing rapidly. There are many small and big specialized logistics service providers for almost every specific need and then there are providers who will meet all generic requirements. The challenge is which one should you pick for your business? The one who provides every kind (or many kinds) of service or a one who offers a specific type (or just a few kinds) of service. A wrong 3PL will either fall short of the requirement or eat into the capital eroding the margins of the business. Choosing the right sort of 3PL can make or break a business. So, the question comes: How does one select the right type of 3PL provider for his company. We will run through some parameters that can be used to decide the type of 3PL that a company should hire.

 

Services required – Before selecting any 3PL provider, one must understand the services that are needed for one’s business. While it is not complicated, many new companies don’t fully understand the supply chain of their own business. They make mistakes while defining what kind of services they need for their supply chain operations. For example, the grocery startups may typically think that they will be served better with cold delivery chain (for vegetables, milk, meat and other similar products). They often overestimate the amount of cold food that needs to be delivered as part of a grocery order (for delivery- based grocery). In another kind of business, such as apparel business, ease of return of merchandise could be far more critical than other parameters. If a 3PL who specializes in delivery only (and not return pickups) is selected for such business, the logistics alone can eat into all the margins of the company. Some businesses hugely overestimate the volumes they will achieve and end up overpaying for specialized 3PL service providers (think of utilizing only 50% of the contracted capacity of cold storage chain and paying for 100% of it)

Many times, new businesses don’t really understand their customers and end up with under-utilized resources at disposal and thus decrease their capital and cost efficiency. It may be wise for new businesses to start with generalized service providers and gradually move onto specialized ones as they grow their volumes and develop better insights into their requirements.

 

Specialized expertise – Businesses today have to carve their niche to stay relevant in the market. Within groceries business, some specialize in fresh food products, while others specialize in quick delivery. In apparel, some may specialize sending multiple items and then return all except what customer wants to buy, while another may concentrate on quick delivery but with no returns. There may be yet another apparel business which may have carved a niche in ‘made to order’ clothing (this is delivered from factory to customer, directly without any warehousing). All these services need specialized 3PL skills that should be in-line with the business’s chosen specialization. One needs to ensure that the right logistics skills – as required by the business and offered by the 3PL are identified and matched to avoid any disaster.

 

Costs – If a business provides an excellent service but incurs massive costs, it may not be able to sustain. Imagine, providing a rush delivery as standard for a $10 item (which has $5 margin ) and absorbing a $5 delivery charge for it. The customers will love it, the volumes will be huge, but this kind of delivery charges will eat up all the margins. Contrary to the popular wisdom, the high volumes will kill this business. Logistics costs are of great importance to any business and must be kept under control at all times. If they cannot be passed onto the customer, they must form a small a part of expenses, as possible. Here again, there is no saying which type of 3PL will be better suited. Spending $5 on the cold delivery of $10 or $15 grocery (e.g., vegetables) may not be sensible. But if you have a truck-full of deliveries of vegetables, then the specialized cold delivery chain will be more cost efficient, and the value proposition will be higher.

 

Volumes – If a business has larger volumes, it makes sense for it go for specialized 3PL provider. With high volumes, it is possible to cut a deal with the specialized 3PL provider for getting good rates. For smaller quantities, one may want to settle with a general service provider. However, today many specialize players club the delivery from multiple vendors to increase their utilization. A new trend is emerging where multiple businesses join hands and negotiate with 3PL providers to get better value for each one of them.

 

The decision to choose a 3PL provider is never straightforward. Multiple factors need to be borne in mind before making a choice. As a general rule of thumb, it is recommended that one should start with general provider and move to the specialized one as the business grows and there is clarity of requirements.

A key advantages of choosing a general service provider from the start is that as the business grows, the service provider’s volumes also grow and he will make investment specifically for your growing needs. This, in turn, makes him specialized provider for your requirements. In fact, he would develop services for your specific needs making it a strategic fit for your business.

How to Shape up the Future of Trucking?

Although the transportation industry has evolved, trucks continue to play a major role in carrying and delivering freight from one point to another. That said, the emphasis has always been on taking the pressure off the trucks, in order to conserve fuel, maximize overall capacity and even reduce the underlining costs. Even then, the trends have largely been in favor of truckload transportation with these vehicles accounting for almost 81 percent of the entire expenditure module. With truckload transportation and trucking continuing to rule the roost, we actually need to look at what future holds for this industry, regardless of the booming changes. 2018 is already upon us and it’s time we embrace the new changes which are expected to stay with us for the next few years.

Recruiting a more Functional Set of Drivers

Until the trucks start plying by themselves, we would be requiring drivers. However, quite recently the transportation industry has started seeing a dearth of efficient drivers which in turn is raising some important questions. The future of truckload transportation will see the companies’ focus more on exceptional driving skills, especially for the long-hauls. Needless to say, truck drivers will be the limiting factors in the long term and the lack of skills might minimize the overall growth of trucking capacity. Moreover, once the driver conundrum is taken care of, it would be easier for the companies to increase the freight volume at a steady pace.

Growth of Dedicated Trucking Services

In the next few years, industries will witness a massive growth in the adoption of dedicated trucking services. This would involve acceptance towards a host of macro factors including the likes of capacity tightening and dedicated operations. Moreover, this approach will guarantee that customers get the exact product they have signed up for. The companies are eventually realizing the fact that customers are always on the lookout for cost-effective deliveries and that too within a reasonable period of time. Over a period of time, truckload transportation will start concentrating on the same by securing prices and the underlining capacities.

Improved Capacities

Shipping containers which are half-full can lead to higher transportation costs; thereby accentuating worries for the concerned businesses. The future of truckload transportation will make sure that containers are shipped at full capacity by using sophisticated methodologies, higher load efficiencies and cross-docking techniques. Some of the other intuitive strategies include minimizing certain one-way routes and even deploying experienced third-party logistics.

Relying on Technology

Although businesses are already concentrating on technology, it is only a matter of time that supply chains and logistics managers make it their first line of defense. Be it gauging the uncertainties of economy and workforce, technology-driven ideologies and concepts are expected to last way more than the usual ones. Moreover, truckload transportation will see continued adoption of different supply chain technologies, inventory management approaches, consolidated route tracking systems and driver tracking options courtesy the growth of technology. Each one of these techniques can help improve driver safety, performance and even fuel efficiency.

Reliance on 3PL Vendors

Truckload transportation is expected to thrive only if the companies start shifting excess baggage to trusted 3PL services. That said, outsourcing certain tasks can easily increase the overall efficiency as businesses can then concentrate more on productivity and accountability. In addition to that, partnering with certain functional 3PL companies allows businesses to express themselves in a much better way as the former eliminates additional costs and also helps deliver the goods in an efficient manner. Moreover, the 3PL service providers render additional levels of safety to the fleets and concerned commodities.

Inference

The future of truckload transportation will be dictated by how well the organizations make use of the resources in hand. While keeping up with the industrial requirements is a prerequisite, it automatically boils down to how companies express themselves in terms of logistics and fulfillment. At the end, it’s all about delivering the products efficiently to the customers while minimizing overhead costs, associated intricacies and product damages. Needless to say, the quality of drivers and fleet with determine the fate of trucking and truckload transportation and 3PL services will surely play an important role in shaping up the same. Be it outsourcing select services pertaining to transportation or adopting the best technologies for the job, future of trucking will thrive on a proactive approach.

Warehouse Distribution , Logistics 3PL

How Distribution Warehousing via 3PL Services Improve the Market Conditions?

Enterprises focusing solely on the retail sector usually have a lot of things to worry about. While direct sales can be initiated via contract and owned warehouses, certain companies prefer third party logistics companies for distributing their products, in an efficient manner. The concept of Distribution Warehouse takes us back to the time when product distribution used to happen via retail outlets. Manufacturers would first assemble or create a product and then send over the same to shops for retail purposes. However, with a massive increase in product volume and amplified online exposure, it became imperative for the manufacturers to opt for a second line of defense.

Distribution Warehouse signifies a facility that is dedicated towards storing manufacturer’s product before the same is packed and distributed to the retail customers. The concept of Distribution warehouse actually brings the distributor into the picture, in addition to the manufacturer and customer. Not just product distribution, these warehouses also assist companies with pick & pack and efficient order fulfillment.

How Holistic is a Distribution Warehouse?

Unlike a logistics company that offers warehouses for sale and even on lease, a distribution warehouse is the brainchild of product distributors who act as the connecting link between manufacturers and retail customers. However, when it comes to reaping the benefits, every section of the sales funnel is taken into account.

For the manufacturers, distribution warehouse is a blessing in disguise. While the profit share gets compromised to a certain extent with distributors taking their cut, the flexibility on offer certainly outweighs this minor pitfall. These warehouses have also improved the market condition for third party distributors as they are the ones who invest money, workforce and time in order to amplify the storage options for manufacturers.

The last cog in this retail-centric wheel happens to be the retail outlets. With distribution warehouses supplying products to the offline and online retail stores, the credibility quotient is always maintained. The retail stores directly place product requirements and requests to these warehouses and stocks are released upon the availability.

Therefore, a distribution warehouse impacts every part of the sales funnel and comes forth as an integral part of the overall, entrepreneurial logistics arrangement.

Advantages on Offer

Distribution warehouses actually cut the clutter and simply things for the manufacturers and customers alike. Put simply, a product goes straight into a warehouse after it’s manufactured. The workers, synonymous to the distribution warehouse, pack and expedite the products via reliable courier services. Not just the mentioned perk but a distribution warehouse usually has a host of functional advantages.

  1. Timeliness

It is the duty of distributors to pack and dispatch products to customers and even select offline retailers. Most of these facilities are equipped with warehouse storage systems which keep a track of products and their desired dispatch points. Overall, the distribution warehouse offers a cohesive outlook to how the products are stored and how they need to be dispatched. This organized approach saves a lot of effort and even time— especially when the workers are concerned.

  1. Budget Friendliness
Cost friendly Logistics
Forklift with cardboxes on calculator. Calculation of shipping delivery costs concept. 3d illustration

The best part of having a distribution warehouse is that products are stored in a secured environment. Be it inclement weather conditions or the influx of rodents, a properly managed distribution warehouse is probably the best possible solution for storing the manufactured goods. This eventually cuts additional costs and the retail chains get the products in the best possible condition. Specialized packing and management services within the warehouse help amplify the revenue generation process. Be it temperature-specific storage units or something on the lines of a cold storage system— a distribution warehouse is loaded with technological innovations, precisely for preserving the condition and quality of products. This approach minimizes product damages and therefore reduces additional overhead costs.

  1. Reliability

More than the sales figures, it is the peace of mind that excites a manufacturer. While sending out products for retail purposes is quite a taxing job, distribution warehouses simplify things for the manufacturers. Since the products are sheltered in an organized and secured place, manufacturers are well assured that their business will move forward.

Bottom-Line

A distribution warehouse is probably the most important link between demand and supply chain management. Moreover, with an increase in the number of manufactures and retail products, it literally becomes inevitable to have a storage facility solely dedicated towards distribution. However, warehouse safety and management standards must also be looked at before moving ahead with any 3PL service provider.

 

 

 

3pl third party logistics social media impact

Impact of social media on 3PL industry

The logistics industry has already been massively impacted by myriad technological advancements. As the innovative measures and technical aspects continue to prosper, the opportunities surrounding supply and demand have also amplified in the best possible manner. While the customers are cognizant of the processing requirements and available options, the suppliers are finding it easier to address user queries, concerns and even opinions. Social media platforms are instrumental in driving sales as the social profiles, insights and any relatable information can now procured with considerable ease.

Why Social Media is an Important Determinant?

3pl social media

Looking closely at the 3PL industry we can infer that consumers are still optimistic regarding traditional marketing approaches and corporate relationships. Moreover, direct customers and retail-specific companies have already leveraged the power and functionality of social media; thereby enhancing the overall presence of 3rd party fulfillment services. In simpler words, organizations are readily partnering with 3PL service providers for keeping up with their logistical requirements. That said, every aspect of an outsourced service— including 3PL— is readily influenced by the social presence of the concerned customers. Based on a study conducted by Go-Gulf, almost 74 percent of the existing customer base researched the social media before moving any further with the purchases. Apart from that, around 89 percent of organizations have also been using social platforms for amplifying their presence. Overall, every individual within the demand-supply hierarchy is embracing social media and its high time organizations start using the same with immediate effect.

Social Media Impact: A Step-Pronged Approach

Regardless of the business type, Social media analysis is an approach that increases sales and assists companies with customer retention. Therefore, understanding the segregation of client data is probably the first step towards harnessing the power of social media. Enterprises must be quick to identify the best platform for a particular cause and work towards offering content over the same. Based on diverse aspects and results, it can be inferred that social presence is arguably the most efficient tool for connecting brands to the expansive audience base via relevant content.

The 3PL industry is surely one of the more progressive service providers thriving on selective content creation. According to a study conducted by Forbes, almost 78 percent of purchases are actually influenced by the active social media posts. In addition to that, third-party logistics is certainly an industry that requires a constant influx of innovative ideas. Therefore, unhindered social presence is surely a relatable metric.

While content can easily drive in exposure and brand equity, social media activity is instrumental when it comes to creating dialogues with clients and prospective customers. The 3PL industry requires constant interaction with customers and therefore it is advisable to work alongside LinkedIn and Twitter for gathering responses and answering queries. This approach, concerning social platforms, works both ways as customers can also get an idea of services, in the form of online reviews. Apart from that, consumer feedback can also be gathered across myriad social platforms— including the likes of Facebook, Google and many more. Third party logistics seamlessly connect the demand and supply chains and therefore it is important that service providers take it upon themselves for answering queries and related questions related to warehousing, order fulfillment and what not. An extensive study conducted by PeopleClaim suggests that websites and companies that have reviews and ratings validating their presence are 63 percent more likely to generate sales. In addition to that, almost 74 percent of sales amplification can be generated via service conversions provided there are positive online reviews to look at. At the end, it all comes down to leveraging an educated and engaged audience base for driving conversions within an entrepreneurial hierarchy. 3PL industry and related service providers have a host of e-fulfillment centers to take care of and having an online presence surely enhances the operations and overall image of the concerned organization.

Bottom-Line

As technological advancements galore, customers are now selectively choosing the preferred 3PL service provider by taking several things in consideration. However, majority of these determinants involve social media activities and the overall presence. Logistical considerations can either make or break a supply chain management system and it is exceedingly important to value the third-party service providers— depending upon the online credibility.

6 ways to Reduce Food Wastage in Supply Chain

Each year more than 80 million tons of food is discarded in Europe alone. The overall cost of this wastage is more than 140 billion Euros.  Globally it is estimated that a third of all the food produced, is wasted. Most of this wastage happens before the food item even reaches the market. These figures assume higher significance when more than 750 million people around the world face food insecurity. In countries with abundance of food, people tend to throw away what they do not require or consume. This wastage not only has the environmental impact but it impacts the environment (In terms of energy and resources consumed in producing and packing the food that is thrown away). The Food supply chain along with its three stages i.e. Production, wholesaling and retailing has a significant contribution in this wastage. The cost of disposal of unutilized food adds to the cost of food wasted due reasons such as wrong or bad storage, no demand, wrong transportation, expiry before sale etc . Let us look at some of the ways that the food wastage can be reduced in the supply chain.

  1. Intelligent Packaging. Lot of food is sensitive to environmental factors such as temperature. A smart packing such as Time temperature indicator that tells how long an item has remained at a particular (generally high) temperature can indicate how soon the item will go bad and thus prioritize its sale/consumptions. Many fresh foods (many fruits) respire even after harvest. When packed, they can change the environment inside the packaging due to respiration and thus can go stale. Gas indicators built into packaging can indicate the level of gas harmful to the product. Similarly biosensors can be used to indicate the level of pathogens in the food and transmit the data to control centre. All such indicators and information about the level of freshness of food can be used to prioritize its sale and consumption before it’s spoilt and thus reduce the wastage.
  2. Packaging Considerations. Packaging of the food product has very high impact on it’s shelf life. A vacuum packed meat product stayed fresh without any significant pathogens for long time. Similarly a cling film wrapped cucumber stays fresh for over two weeks, while an unwrapped one loses moisture and becomes dull in 3 to 4 days. Apart from freshness, Fruits and vegetables packed in trays and bags reduce their wastage due to handling anywhere between 5 to 20 percent depending on the food item. Well designed packaging also speeds up the movement of the product, due to easy handling. There is a lot of innovation in packaging that food supply chain companies should look into.
  3. Transportation. Cold transportation is not new. There are active cooling trucks (with actual refrigeration and passive cooling trucks that are basically thermally sealed. Wha’ts interesting however is the temperature gradient inside the trucks, once they are loaded. Most transporters simply ‘stuff’ the truck with products without much thought to placement of product to maximize its shelf life. Even in regular trucks the temperature of food right in the centre of the truck is different than the temperature at periphery. This can have large impact on the life of the product. Even in cold trucks if they are stuffed and the center is not cool enough, the food loaded in the centre has higher chance of being spoiled. Not only the temperature, but the way fruits and vegetables are loaded can have large impact on their life. Can you imagine berries at the bottom and potatoes at the top, going over a bumpy ride?
  4. Increasing decision points in Supply Chain. Most products don’t go from point of production direct to retail shelf. There are multiple hubs and distribution points between the point of production and point of final sale. However with technology, more and more decisions are being centrally. The decision points need to be decentralized and local intelligence specific to the distribution point needs to be utilized for maximum utilization of product. Products with shorter shelf life should be sent to high turnover outlets so that they can be sold before they expire. The principle of ‘First Expiry First out’ should be followed rigorously. Smarter decisions about product movement can be taken locally depending on local conditions such as weather. If the weather is nice and sunny, the demand for barbeque related products will increase. If its cold, the juicy fruits (e.g. watermelon) would be expected to move slowly and can be shipped to other warmer areas.
  5. Cost factors. Food industry often operates on low profit margins. Subsequently all the processes are designed for cost optimization. However lower cost may not always be the best solution. For example, organic food needs to be delivered quickly. The demand for organic food is increasing and it also has higher margin. So supply chain invests a little more in quick delivery of organic food, it can capture both, the volume and the higher margin, thus offsetting the cost and making more money.  A retailer in USA capitalized on this model by making quick deliveries of Organic, less processed oils. The retailed made express deliveries right from the production point and thus maximized the shelf life of oil available to the consumer (about 3-4 months). it’s competitor’s distribution processes itself took 3 to 4 months and thus could not compete.
  6. Production Location. Point of production is also a key factor in supply chain. The closer it is to the consumer, the smaller the chain and lesser the chance of waste. Many organization prefer to have production plants closer to the source of raw material. It reduces the transportation cost of raw material, but increases the waste in subsequent supply chain. With modern technology and transportation options, it is easier to transport bulk raw material to the more distant plant. It also provides for the maximum shelf and storage life once the product is leaves the production plant.

 

Some Food wastage is inevitable. Food will rot, get spoilt and will face some logistical issues. However the amount of food that is wasted currently is unsustainable. The higher environmental cost of this waste will be borne by the next generation; all while there still 700 million hungry people around the globe. If nothing else, the economic cost of the food wastage in itself makes a great business case to stop the wastage as soon as possible.

Top 5 trends in Packaging Industry

Consumers today are more conscious and more aware. They care not only about the product they need, but also how using that product is made more convenient for them. And packaging plays a very important role in that. The primary reason of packaging always has been the protection of the product that is being delivered. But today packaging does a lot more than that. Packaging is used as a canvas where the brand communicates with the consumer. It not only attracts the customer, but based on the information that is printed, the material that is used for packaging and the shape and size of packaging; it conveys your brand values to the customer. It tell the customer what your brand stands for, creating a unique impression about your brand, even before your product has a chance to be seen by the customer. Needless to say, packaging in itself has become a key differentiator.  Here are some of the top trends in packaging industry.

  1. Sustainability: Consumers are becoming increasingly aware of environmental issues. They are changing their buying habits to be more environmental friendly. They are increasingly looking for signs on the packaging that manufacturer has a green conscience and increasingly wary of greenwashing. And expert white paper by PWC goes on to explain how sustainable practices have become essential to the perception and identity of the brand. A top sports company has also produced an environmental profit and loss statement highlighting the impact of their sustainable practices on environment, in dollar value. It has become imperative that brands continue to carry businesses based on sustainable practices and also communicate them to the consumer. Sustainability is no longer just an add on. It has become an essential part of the packaging industry. The complete story of where the product comes from, how it was made, is becoming an essential factor in buying decisions of the consumer.
  2. Healthy living: Just like environment, consumers are increasingly adopting healthy lifestyle and practices. They are more conscious of health quotient of the products they consume. In fact there is a whole segment dedicated to products that promote healthy consumptions habits. Packaging is not immune to this. In food and beverage industry, the ingredients’ were always listed as required by regulation. But that is no longer enough. The health benefits of the product also need to be communicated to the customer. Is it organic? It is low in sodium, does have daily dose of essential vitamins that will help to boost the performance while playing the sport? The packaging must focus on communicating the unique benefits of the product and offer transparency in the label. Innovative methods of preserving and displaying fresh food will become the key to long term success. The size of the product, the smaller servings for snacks, which reduce the  intake of sodium, fat and other things to just the required amount, while satisfying the hunger pangs of the consumer will become standard. After all when you are hungry you reach for the box says cookies even if it’s just 2 cookies inside.
  3. Convenience: The way the products are being used by the mobile consumer is very different than how it was consumed at home. The standard box packing of food is not longer suitable for on the go consumption. Be it a beverage, or a sandwich, more and more people are consuming these while walking, or while driving, or when they are simply sitting on the bench in the open park. The design of packaging makes it an important factor in a buying decision is such cases. The smaller, lighter and easily disposable packaging makes the consumption on the go, easier. For other product categories, the ease of transportation and ease of use becomes important factor. Innovations such as dispensers and no mess applicators eliminate the need for additional packaging and make disposal easy. In supermarkets, in food section, many product now coming in reseal able packs. Many producers are moving from plastic to paper based packaging for food items, which is more environment friendly and easier to dispose off. When the competing products are more or less similar, the convenient packing goes a long way in aiding the impulse purchase decision of the consumer.
  4. Cost –effectiveness: This one seems to be a no brainer. However, it has wider connotation than just base packing. Global economic uncertainty is increasing. Consumers don’t want to pay more than what they have to for their goods. And as consumers get savier, they are looking at all costs, the base packing of the product, the transportation, storage and disposal of the packing material. The paper based packaging may look good and meet initial ‘eco friendly’ criteria, but if the consumer needs additional packaging for its transportation and storage, then it’s no good for the consumer. If the packaging is strong and will last longer, much longer than the product itself, again it is of no good to the consumer, if it cannot be reused in some way at home. If consumer is getting his peas in reseal able bags, which he can use for storing other things, after consuming peas, then that’s a very good value proposition for the consumer. The complete cost effectiveness of packaging should be looked at from the point of view of the consumer. After all if he doesn’t purchase the product, the whole value chain is pointless.
  5. Authenticity and trust: There have been several scandals around food industry. Discovery of undesirable meat (eg. Meat of another animal in beef products), Pathogens and foreign elements and inorganic items being sold as organic etc. These deplete the consumer trust for not only the guilty producer, but also for industry as whole.  The origins of the product must be traceable to the source to re establish the trust. Advertising the place of origin on the packaging increases the perception of credibility and authenticity. Packaging should be used to reassure the customer of high quality and truthfulness about product and brand claims.

 

The retail market is changing. Consumers are getting savvy, more eco friendly and more cost conscious than before. They are more demanding on all these fronts. They now understand that the overall cost of the product is not just retail purchase price they pay. Packaging plays an important role to clam the customer and reassure them that the product as a whole will meet their expectation.

KPI for Warehouse

Why Are KPIs Important in Warehousing & Fulfillment?

Warehouse business is a back-end operations business. You don’t control sales, only deliveries. The efficiency of the operations is the key to extracting maximum profits from a warehouse. So you need to know that you are getting maximum return on your investment in this business, just like any other business. But since most of it is a fixed model, B2B business with caveats of B2C (retail deliveries), you need to understand and measure the nitty gritty of the warehouse operations and fine tune them. That’s where the KPI or Key Performance Indicators come in.

A right det of KPIs tells you the detailed performance of your warehouse. Couple it with past indicators, your forecast of business growth and you can figure out where you are heading in future. For example if you are already at maximum space utilization, you cannot expand. A client whose business is growing very fast will need more space. If you can not offer him more space, he will go to someone who has more space. That will reduce you space utilization and also your revenue. Not to mention, you now need to get your sales to run and find a client who can utilize the now freed up space. So while on the face of it a full utilization of warehouse space sounds good, it is not good for a growing business. That is why, it is not only important to have the right KPI, but you also needs to set the right standards for those KPIs. Standards should be the ones that work for you. (Is 80% space utilization good for you, or you prefer 95%?)

Similarly, KPI also help you in benchmarking. benchmarking tells you how good you are doing as compared to others in the same industry. If your KPI is below the industry standard, that means you are not utilizing your warehouse to the best possible extent. You might be making money, but lower KPI means that you are leaving money on the table. You could get more profits by improving those KPIs. On the other hand if you are beating industry KPI but still not making money, something else is wrong somewhere. A well designed set of KPI itself would direct you to where to look. If you are beating the KPI and making money, it looks like a good sign. But it can also mean you are stretching yourself. If you are extracting higher productivity from your machines and spending less on maintenance, you might have to bear a high depreciation and replace the machines faster. If your order cycle time is very less, you might not have any contingency built into the process. That is risky.

Whether you want to stay with the industry benchmarks or set your own benchmark standards, is entirely up to you. While industry benchmarks are there for a good reason, (most of the industry works at those levels) you don’t have to be bound by them. Your KPIs will vary depending on your niche value proposition and your operating model. For example if you specialize in handling delicate products that need more space for storage, your floor utilization will be lower. Also, the KPIs for 2PL warehouse will be very different from the KPIs for 3PL warehouse.

The Supply Chain Operational Reference Model (the SCOR Model), created by Supply Chain Council, provides for over 200 KPIs for monitoring the overall performance of a supply chain. These are broken into various levels to get more granular picture of the business. Some of these could be used for measuring performance of a warehouse as well. Research them to identify which one are suitable for you. Now that we understand what KPIs means and why we should measure them, let’s look at some of the key KPIs for warehousing business.

The main KPIs for a warehouse should focus on Receiving, put away, storage, pick and pack and shipping.

Inventory Accuracy: What is the accuracy of the workers when preparing the product (or order). It is measured by taking the headcount of the items in the stock and comparing it with what’s recorded in the books. This one has direct impact on your working capital and order fulfilment capacity.

Perfect Order Rate: This measures the number of orders shipped to the customer without any incident. The incident could be damaged goods, inaccurate orders, late shipment etc. Needless to say, this one tells you how well is your warehouse operating where it matters the most, the final fulfilment of order, shipped out of the warehouse.

Productivity: This measure tells how many orders are ready to be picked up by the shipper, per hour. Depending on your warehouse business model, it could the number of orders per hour, or total line items per house or it could be the total dollar value of the orders per hour.

Equipment utilization: This one tells about how well your equipment is being utilized. Underutilization of the equipment means you should stretch it more and achieve more. Overutilization mean higher maintenance and replacement costs. Idle equipment depreciates without giving any return. Over utilized equipment can lead to breakdowns and stop the whole chain, leading to higher losses. Your equipment must be running at the optimum rated utilization to extract maximum value from it.

Cycle time: This KPI measures the total time taken since the material came in as inventory and was picked up by the shipper for delivery, as a part of the order. The shorter the cycle time, the lesser the money tied up in working capital. An end to end cycle time would include the transit and transportation time taken by the shippers for the final delivery to the customer’s premises.

Average cost per order: This KPI measures how much are you spending in running the warehouse. It is calculated as total orders fulfilled divided by the total cost incurred for the warehousing operations. The costs include the manpower costs, cost of rejects and returns absorbed by warehouse, cost of damaged products that are absorbed by warehouse, variable costs for running the warehouse (utilities, taxes, rents, insurance,), equipment cost (consumables and depreciation for large equipment) and all other costs. This should be always be as low as possible, as it eats straight into your profits.

There are many other KPI that you can measure to understand the efficiency of your warehouse operations. The finer the KPI, the deeper the control it can provide. However, at a bare minimum, you must keep an eye out for the top line (revenue), the bottom line (profits) and ROI (return on Investment).

Explaining Micro-Reduction and Processing

Seeds are great food. They are great additives to salads and other food items. They are not only a great source of nutrition; they also add a great flavour and crunchy texture to the food they are added to. But seeds are difficult to process from supply chain point of view. They are live. They are the source of life of new plant and contain the essentials for growth and nutrition of seedlings. They are designed by nature to sustain harsh conditions and yet grow into a plant when conditions are right.  However, this very advantage of theirs is the reason that they are favourite of bacteria (such as salmonella) and fungus as well. Seeds can develop pathogens at any time during their transportation and storage. The long duration of storage before they are consumed, makes them susceptible to develop pathogens at any time during their journey from the plant to the table. Not only that, during their journey there is a risk that the seed may die, losing essential enzymes and proteins and thus changing its taste. Because of these reasons seed processing and packaging requires a special setup for their supply chain management. An experienced 3PL would have a separate processing for seeds and grains to ensure high yield and high viability of the seeds, when it reaches to the table of the end consumer.

 

Seeds are grown and transported across thousands of kilometres. They move from the places where nature intended them to reproduce to places where human intend to consume them. The transportation to the place of consumption and place of consumption itself are harsh for the seeds and full of pathogens that seeds are not designed to sustain. Not only that, seeds collect waste, stones and sometimes metal pieces while being processed by machines. The net effect is that the yield of useful, edible, high quality seed is very low. There are numerous incidents when the whole batch of seeds has been rejected due to health considerations. The sterilization process controls the pathogens in the seed and enables the batch to meet the health and safety standards by following the below mentioned steps.

 

Large screening: The heavy contamination particles (stones, metal, droppings) are easier to remove. Filtering the seed through right mesh size and passing through a metal screen usual does a great work of removing these. However, for finer contamination, such as bird droppings, feathers, light weed seeds etc. the process is little tricky. The blow air technique is used to filter these. The seeds are passed through of flow of air. The air pressure is just right so that everything except the seed is blown away and just the seeds drop in the collection bin or for very light seeds, just the seeds are blown and collected and everything else drops in the waste collection.

 

Sterilization: There are various processes that reduce the bacteria, mould and general infectious substances in the seed. For example, fumigation is passing antibacterial fumes through the seed. While it kills the bacteria, it leaves small amount of chemical on the seed. These can be cleaned with water, but that brings its own challenges.  Dry heat processing kills the germs very effectively. Process the seed through very high heat for little time. However, this process is known to alter the taste of the seed. The seeds tend to retain the heat and get cooked (even if by a very small amount). Some seeds even die and change the texture completely due to heat. Dry steam processing is another technique that claims to give good results, but suffers from drawback of exposing the seed to very high temperatures and it also leaves some residual water on the seed. Though all the techniques are excellent, none of them offer high yield assurance with little or no change to the flavour and texture of the seed. Pasteurization, fumigation, irradiation etc. have not really met the expectation that customers have from a sterilization process.

 

A newer technique of organic micro reduction which involves using oxygen to kill bacteria like salmonella has much higher yield. The seed is coated with a liquid solution. The solution harnesses the power of oxygen to neutralize the pathogens and provides total coverage. The liquid then biodegrades leaving the seed unaltered. The seed is completely safe, sterilized, organic, raw and viable, just as nature intended it to be. The validated intervention system ensures application to every individual seed. The complete commercial system such as NEO PURE also includes the option of a dryer, where the seeds are coated with solutions that dry off faster to ensure completely dry consistent seeds, leaving a completely dry and viable seed. The process is used by many suppliers for almost any kind of non-sprouted grain and non-sprouted seed.

 

Repackaging and screening: The processed seeds are then packed into small quantity packing as required for retail. The care must be taken that the packing material is itself sterilized and free of all micro bacterial culture, and does not allow any water or air to pass into the packing, to the seeds during shipping and storage. The retail packs are then passed through a final metal screening to ensure that there is no metal piece that has escaped into the final outgoing product. This screening is usually done using x-ray technique which is harmless to the seeds.

 

 

So, as we see that seeds and grains are gaining popularity as food toppings, right from breads to salads; it is imperative that vendors adapt to newer sterilization techniques for better business results. With newer techniques of sterilization, the vendor can ensure that his seeds are safe, healthy and nutritious, when they reach the consumer and we all know that Happy Customers mean Happy Business!