The Marketplace Fairness Act is legislation that has been introduced that would grant state and local governments the authority to enforce existing sales tax laws by requiring online and catalog retailers to collect sales tax at the time of transaction.  Currently passed by the Senate and pending action in the House, this bill could have wide reaching implications for every on line retailer and brick and mortar merchant. Materialogic eStore shopping carts are capable of calculating sales tax down to any jurisdictional level, thus providing immediate compliance with this proposed legislation.  Small businesses should take heed of what transpires in the upcoming House debates.

Small Business Trends – On-line

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A St Louis event for Start Ups was hosted by Startup Grind and James Maes, Director of Tech / CTO for ML and CPL, gave a talk focused on helping small eCom and new media companies get started, put in place fundamental business processes and selecting partners to that can help their company move from the 1MM to the 10MM mark. See what advice he had for those listening in to the broadcast.

Watch Video: Startup grind St. Louis Hosts James Maes

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Others are starting to give St. Louis the credit it deserves as being one the best logistics hubs in the country. The infrastructure of the region gives us multiple options for moving freight, both inbound and outbound, using truck, rail and river. Did you know that St. Louis has the third largest inland port?  Combined with our proximity to the population center of the US, our St. Louis facility is ideally located to handle your regional or national inventory management and transportation needs.

DC Velocity March issue – article by Susan Lacefield

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We love reading about distribution metrics because it gives us benchmarks from which to evaluate our own operations against the best in the business. DC Velocity magazine and WERC collaborated on a 2013 study aimed at determining what metrics were most important to distribution professionals and whether progress is being made to improve operations against them.  The top three metrics  for this year were on-time shipments, internal order cycle time and internal dock-to-stock cycle time. Not surprising, but on-time shipments has been ranked number one for three years in a row. The best news is that warehouse operations continue to show steady improvement year after year. Getting orders out the door quickly is a hallmark trait of excellent operations, and Materialogic performs day in and day out for its clients in this regard. If your distribution center is not continuing to improve you should give us a call.

DC Velocity Magazine – May 2013 Issue

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Annual energy reduction from new lights equivalent to planting 97 acres of trees and saving 43,623 gallons of gasoline!

St. Louis, MO., July 8^th, 2013 – Materialogic, a leader in third party logistics services, has received Orion Energy Systems’ Environmental Stewardship Award as the result of a light-related electricity reduction project at its Earth City, MO. facilities. Orion Energy Systems, Inc. and Innovative Facilities Solutions (IFS) presents the award to companies that achieve significant environmental benefits through the use of Orion’s energy-efficient lighting technology.

Materialogic replaced its high-intensity discharge (HID) light fixtures with Orion’s Compact Modular^™ high-intensity fluorescent (HIF) technology. As a result of the lighting change, the company is expected to cut its light-related electricity costs by more than $43,000 annually and is projected to reduce light-related electricity consumption by more than 528,452 kilowatt-hours (kWh) every year. “Materialogic is extremely pleased with our new Orion lighting system. The system provides a clean white light creating a safer work environment. At the same time it has reduced our energy cost and strengthens our commitment to green initiatives” said Steve Colson, Director of Operations.

With cost savings come significant environmental benefits, as Materialogic has drastically reduced the amount of harmful greenhouse gases emitted into the atmosphere. As a result of decreased energy consumption, Materialogic is helping reduce carbon dioxide emissions by over 322 tons annually, according to Environmental Protection Agency (EPA) estimates. The reductions are the air-scrubbing equivalent of a 97-acre forest, according to the EPA. The environmental and cost benefits to Materialogic are possible because of Orion’s patented, high-efficiency technology that reduces light-related electricity use by 50 percent while producing 50 percent more light than the industry standard high-intensity discharge lights. Orion’s technology also is easy to install and maintain.

IFS, headquartered in St. Louis, acted as the general contractor for the job and worked with local utility provider Ameren on securing Materialogic an energy efficient cash incentive of over $33,000 to help fund the project. IFS also brought in United States Materials Management (USMM), a specialized recycling company, to break down the old lamps and fixtures, ensuring that the entire project had positive environmental impact. “We look forward to helping Materialogic in the future with reducing their carbon footprint while saving thousands of dollars in their operations and not compromising their performance with any of the energy efficient measures we work with them on”, stated Tom Ries, President of IFS.

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The last few years have seen data security take center stage as stories of hacking and identity theft have made front page news. (For an interesting way to see the big data breaches of the past decade, see this interactive graph.) If such violations of privacy could happen to huge corporations like Target, Home Depot, and Experian/T-mobile, it could happen to anyone… right?

Reasoning like this helps explain why we get so many questions about data and data security. As warehouse management and logistics systems become more and more integrated across organizations and even between partners, people’s fear of data breaches is also growing. Clients worry that using a 3PL (or other collaborative partner) might open them up to another avenue of attack.

When it comes to data security, it is important to look past the headlines and the hysteria and ask: What is really at risk? And what positive steps can we take to protect ourselves?

Financial Data is Not Likely at Risk

First, it is important to realize that most news stories about data breaches involve third parties scraping financial data from payment systems, usually using malware. This means that both personal information and financial information (think credit cards numbers) are stolen in mass.

This threat does not exist when using a 3PL. When an order is accepted through a shopping cart, the vendor receives all the information so the payment can be processed and the order started. When this data flows to the 3PL for fulfillment, only the recipient’s personal information gets passed – name, address, and so on. So, even if a would-be hacker intercepts the data or somehow hacks the 3PL’s systems, no financial information would be stolen.

Also keep in mind that the companies most likely to be targeted are large retail chains (like Target and Home Depot) or websites that store large amounts of user data (dating web sites, social media, etc.). These companies have tons of data and many points of access to that data, making them prime marks for hackers. Most 3PLs are not even on the radar for hackers.

Privacy Might Still be an Issue

Still, an enterprising criminal could still get away with hundreds or thousands of customer entries—including where they lived and what they have ordered. This would be a massive breach of consumers’ privacy. That information could have value on the black market, especially for spammers and other…let’s just say less than reputable business people.

So, as a vendor, you should still be concerned about data security when contracting with a 3PL. You will want to know that your customer’s data is safe and secure, at all times, so that you can guarantee their privacy when ordering.

To that end, there are certain questions you should ask your 3PL to ensure that your customer’s data is safe. Granted, you cannot simply ask about their security measures. Sharing those measures would, itself, be a security risk. But there are roundabout ways that you can ask about data security without fishing for the exact details.

For example, you should ask:

  –  Does the 3PL follow standard procedures for upgrading software, installing patches, and keeping anti-virus and anti-malware software up-to-date? (Frequent updates and documented procedures signal a tighter, more secure system.)

  –  Are security procedures routinely audited? (Audits mean that the 3PL takes security seriously, and is more likely to have best practices in place.)

  –  How many people at the 3PL’s facilities have access to the entire database of customer data? Have they had any sort of security training? (Few people should have access to all the data, and they should know how to keep it safe.)

  –  Is there an audit trail in their logistics software? (Being able to track who did what, and when, makes troubleshooting easier and prevents problems from growing out of control.)

  –  If a data breach happens, what then? (Companies should always be ready for the worst.)

  –  If credit card processing is required, is the 3PL PCI compliant? (This is important for any vendor who might process cards on your behalf.)

  –  Does the 3PL have a written, documented plan which governs all the aforementioned points? Can they provide the appropriate parts of that plan? (Certainly they should not share specifics that would compromise the program security, but having written documents readily available is a sign that a plan is in place and part of operating procedures. If those documents are difficult to obtain, the 3PL might not have a written plan.)

  –  What do you suggest we do to help keep our data secure? (Data security does not fall solely on the 3PL. But they might have some suggestions to help you keep your data secure. Again, this is a sign they take data security seriously.)

Materialogic takes data security very seriously and honors the privacy of your customers. If you would like our answers to these questions, feel free to contact us.

Bill Young – Senior Vice President / Business Development

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Our economy is increasingly being driven by logistics, and logistics has focused around data. Having the right data, right when you need it, allows you to hedge against risk, find solutions to problems, and contain costs. A good 3PL partner collects, uses, and shares that data.

Outside of these truisms, though, details get a little fuzzy for most retailers and procurement agents. What counts as the “right” data? How does real time data available “right when you need it” help hedge against risk? And how is this “data” supposed to work with your current operations?

Answering all of these  questions could fill a book, but we can begin to address them by sharing how we here at Materialogic approach the topic of “the right data, right when you need it.” To us, successfully managing your logistics and warehouse data is a matter of seeing what you need, where it is needed, and when you need it.

What You Need: Customized Dashboards for Logistics Management

Logistics data is much richer in information than a simple number of SKUs shipped in a given time period. For example, you can compare items to see which ones are moving quickly and which ones are not. You can track spikes in demand and look for patterns. (e.g., did you know that Walmart stocks extra Strawberry Pop-Tarts in its stores when a hurricane is reported in the news?) You can even allocate labor and resources efficiently given anticipated demand.

In short, logistics data gives you the business intelligence you need to run a smooth operation. But that information does not always come on a silver platter. Data visualization, custom reports/queries, data filters, and real time alerts are all critical tools for turning  your raw data into usable information. (This is why a 3PL’s choice of warehouse management software is so important.)

Where It Is Needed: Omnichannel for Your Operations

The omnichannel concept  is now common currency in retail circles. There, “Omnichannel” refers to a seamless, consistent customer experience across all channels including in-store, catalog, and online (including PC, Mac, tablet, or smartphone).

There is no reason why the concept couldn’t also apply to business operations as well. The data and dashboards accessible on your computer (possibly via the cloud) should be the same as what is accessible from your mobile device. When circumstances trigger a notification or alert, that message should go to all relevant parties regardless of which  device they happen to have on hand. Just as retail strives for a seamless customer experience, logistics should strive for a seamless operational experience.

When You Need It: Management by Exception

Having been in the logistics and shipping business for decades, we know that few business decisions are made in calm, reflective moments as a decision maker pours over carefully collected data. On the contrary, many operational decisions are made on the fly in response to ever-changing business circumstances.

This is why management by exception is so important. This method is when certain situations or a range of them are defined and flagged, setting in motion specific actions when they occur…or when they are about to occur. For example:

• When quantities of an item get low, an alert is sent to the procurement agent to source more items in order to avoid a backorder situation.
• A successful limited-time promotion causes orders to spike suddenly.  An alert is sent to the warehouse floor manager to bring in extra temporary labor to handle extra flow (thereby meeting customer expectations for quick delivery).
• A particular item is recalled by the manufacturer. You and your warehouse manager are able to trace where those items are stored and which ones have shipped, expediting the recall process.
• A different product is returned at an alarming frequency. Once alerted to this fact, you are able to verify (through carefully tracked and recorded data) that this is not due to mishandling or damage done on the warehouse floor. You can then  verify the quality of the product and possibly source a similar (but higher quality) item from a different vendor.

All of these situations could be potentially disastrous if not handled quickly. By identifying circumstances outside the range of ideal operations, you can flag potential problems and automatically set in motion appropriate solutions.

In short, raw data by itself is not useful unless you can use it to take action in a timely manner. Whether you run your own operations or go through a 3PL, you should have access to the data you need, where you need it, and when you need it. This is what enables smart business decisions.

Materialogic takes Logistics and Warehouse Data very seriously. If you have any further questions, feel free to contact us.

Bill Young – Senior Vice President / Business Development

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Our sister company Copper Peak Logistics recently published a white paper entitled “From Wine Club Promotion to Wine Club Experience: Lessons from Subscription Services.” While that paper mostly focuses on wine clubs, there are some great takeaways that apply broadly to any business wanting to maintain a subscription service:

Growth explosive, but profits still elusive. “The market for subscription services has exploded in the last few years; in fact  a list of subscription services that received start-up capital investment in 2013 had 18 different offerings, and the market continues to grow today… Still, many services are struggling to turn a consistent profit.”

Look to successful models for best practices. There is good news, however: “There are now some good models of subscription services, both within the wine industry and outside of it.” Businesses looking to get into the subscription services business can extract best practices from them. Some of these are outlined in the white paper.

Subscriptions services face common challenges. There are several reasons why consumers leave wine clubs. Many of these problems plague other subscription services as well. Copper Peak’s white paper lists:

1. Lack of variety

2. Financial considerations

3. Receiving incorrect orders

4. Receiving damaged product

5. Poor customer service

6. Low perceived value for the price

7. No “WOW” factor

There is opportunity in communicating with each shipment. “This could be something as simple as a short note from the owner to say ‘thank you,’ or something as involved as a newsletter. Better yet, take advantage of the opportunity to include a coupon for future purchases, or a catalogue… [just] make sure that each communication is an accurate and heart-felt reflection of your brand.”

You can find out more by downloading the white paper. Even if you are not in the wine industry, this is a great example of some of the challenges of moving into a new business segment in a way that drives and sustains profits. A good 3PL should be able to grow with your business in this way.

Milton Cornwell –  Chief Operating Officer – Materialogic

Materialogic has years of experience helping clients manage their subscription services. If you would like to find out more about best practices relevant to your industry, please do contact us.

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The word “hazmat” conjures images of people in radiation suits cleaning up a spill, or driving trucks of dangerous chemicals. The truth is that laws regulating hazardous materials cover a much wider range of substances, especially when it comes to shipping. Many common household items must be shipped in compliance with these laws. This situation creates a number of confusions, especially as laws and regulations change over time.

Hazmat ORM-D: What It Is, and What It Covers

Many common consumer items will need to have a designation of ORM-D for shipping. ORM-D is a label that identifies other certain potentially hazardous materials for domestic transport only (though have limited risk during transportation because of their quantity and packaging). These items are regulated by the Department of Transportation and have special requirements regarding shipping and handling.

Items that need to be identified with ORM-D include (but are not limited to):

• Aerosol cans
• Nail Polish
• Oils for personal or therapeutic use
• Self-tanning products
• Antiseptics and disinfectants
• Foot odor
• Wart treatments
• Insect repellents
• Nasal spray and inhalers
• Hairspray
• Mousse or foams
• Aftershave treatments
• Medicines
• Drain openers
• Cleansers and Detergents
• Lighters
• Most kinds of fuel
• Perfumes
• Some photographic chemicals

These items can be shipped in limited quantities and require proper labeling. If shipping Ground, they do not require additional paperwork (though you should inform any logistics partners; see below.)

Hazmat ORM-D: Current Regulations and Practices

A few years ago, regulations changed to phase out the ORM-D designation. Those regulations also changed the designation “Consumer Quantity” to “Limited Quantity.” Both labels mean the same thing, but updated documents will refer to Limited Quantity.

All such products must be appropriately marked. Effective 2014, the marking for Limited Quantities for ground transport is a 4” square on point (though it can be as small as 2” for smaller packages). A ‘Y’ is placed on labels meant for air transport. The marking must be applied on at least one side or one end of the outer packaging.

The marking must be legible, durable, and readily visible. No other markings or hazmat stickers are needed if shipping Ground.

Also, all limited quantities packaging must meet certain physical requirements. They must be capable of passing a 1.2 meter (4′ high) drop test and a 3-meter (10′) stacking test.

ORM-D, Carriers, and Logistics Partners

Carriers like FedEx and UPS have very specific requirements when it comes to Limited Quantity; these might be more restrictive than what is required by law. If you are shipping such items, you should make sure that you are following the carrier’s specific requirements or working with a 3PL that can help guide you through the process.

Not all logistics partners are pro-active about helping sellers with ORM-D materials, however. Amazon.com, for example, claims that it’s system is “not designed to recognize Hazmat until items have been manually reviewed by our Product Compliance department.” In other words, it is you, the seller, not Amazon or other retail partners, who is responsible for determining when something needs to be labeled ORM-D. If those products are shipped without being properly declared and labeled, the shipper could be liable and could face a hefty fine.

The Bottom Line

If any of the items you sell or ship might require a Limited Quantity designation, you should check in with your 3PL and/or any carriers you intend to use. If your items do in fact require this designation, you will need to make sure that your packaging adheres to regulation and that you (or your 3PL) have the appropriate stickers. Complying with the DOTs requirements is not complicated, but failing to do so can lead to excess hazmat fees, or worse, hefty fines.

Bill Young – Senior Vice President / Business Development

Materialogic has experience storing and shipping many consumer products that fall under the older ORM-D and newer Limited Quantity designations. If you have any questions or would like to discuss ways to simplify this aspect of your business, contact us.

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Cloud computing has come of age, but not because it’s a fancy piece of futuristic technology. What many people in retail and industry have not yet grasped is that cloud computing is really a model of how to do business with software. And it makes other businesses much more highly successful as a result… especially in logistics and warehousing.

In a nutshell, cloud computing is the delivery of on-demand computing resources—everything from applications to data centers—over the web. In most business cases, cloud computing supports applications and storage that companies “rent” on a pay-for-use basis. The actual applications and data sit on a server at the host company; users then access those applications and data sets from any place with an internet connection.

So what makes cloud computing such a good fit with logistics companies? More importantly, why should their clients care?

Reason #1: The Cloud Means Stability

Companies that offer cloud-based applications either own or rent large server facilities to support their software and hold client data. Because this technology is their bread and butter, they have already made the investment in infrastructure.

In fact, most cloud-based applications are hosted on the most advanced, most secure infrastructure money can buy. Everything, from servers to routers to power supplies, is redundant so as provide uninterrupted service, even if something should go wrong. And when the company reaches its capacity, it happily invests in more hardware, knowing it will be used for the foreseeable future—meaning that capacity is always available.

When a company (or its 3PL) uses a cloud-based system to manage warehousing and logistics, the software will always be readily available, and the service will be reliable and secure.

Reason #2: The Cloud Scales with You

One of the toughest challenges for a growing company is knowing when and how to scale systems. When is a new software license needed? When should the company switch to an enterprise-sized solution? How easy is it to add new users? New locations? New features?

When applications sit in the cloud, a lot of these worries melt away. Because the software is already in a physically different location and accessed via the internet, it does not matter where the user sits. As long as there is an internet connection, the software is available, anywhere around the world. Likewise, it does not matter how many locations are involved. Hundreds of teams from dozens of sites all can use the same system just as easily as a single location.

The “pay for use” model of most cloud solutions allows costs to scale as well. Most cloud-based software offers “tiers” of service depending on the number of sites or users. This means that companies won’t pay for an enterprise-sized solution unless that is specifically what they need. In fact, many companies offer a free or “lite” tier for trying the software at no cost—a great thing for startups and small companies.

Such flexibility, coupled with the fact that there is no investment in hardware on the part of the client, means scale is rarely an issue. As business grows or contracts, the same software solution can be used, allowing for consistency as well as stability.

Reason #3: The Cloud Contains Costs Like Little Else

Let’s get to the real reason businesses are loving the cloud and moving their applications there in droves: cost containment.

IT is at a place where power generation was 100 years ago. Back then, many companies had to generate their own power, especially if they owned a plant that was remote from major cities. But running one’s own power generation is costly and ties up a lot of capital. Which is precisely why companies don’t bother with their own power generation anymore—they simply get power from the grid and make it a monthly operational expense.

The same has happened with enterprise-sized IT solutions. Consider the investment that would be needed for a proprietary solution on site. A company would need the hardware for the solution (servers, workstations, uninterrupted power supplies, patch panels, and so on). And it  would need a team to manage and maintain that equipment, as well as the software. That team would be required to schedule regular updates and maintenance, as well as field user questions and troubleshoot problems.

With cloud-based solutions, these costs are already accounted for by the providing company. Clients merely pay a tiny fraction of the cost by paying their monthly bill. Not only does this save capital expenditure, it also allows the “pay for use” model described above, which means that businesses are not paying for capacity they will never use.

This is great news for companies using the services of a 3PL, too. These cost savings are traditionally passed along to the customer, meaning that 3PLs can provide better service than most companies with an in-house solution, while keeping costs manageable.

Is Your 3PL Using the Cloud?

When Materialogic developed its own cloud-based system years ago, we saw the huge potential in having a solution that was reliable, scalable, and ready to go. Since then, the department that created that solution has spun off into its own company, Infoplus.

Many 3PLs have been reluctant to embrace cloud-based solutions, however. So, when looking for a 3PL, it is worth asking if they use a cloud-based management system—and if they do not, ask why they do not.

Because the cloud means stability, scalability, and savings. In fact, Materialogic is, in effect, taking a dose of its own medicine: just as we encourage companies to outsource storage and shipping when it is not a core core-competency, we recognize the benefit of outsourcing certain IT functions for the reasons outlined above.

And this has put us on the cutting edge when it comes to software for managing your logistics.

Bill Young  |  Senior Vice President / Business Development

If you would like more information about Materialogic’s cloud-based system and the features that can save you time and money, contact us. We’d love to give you a peek.

The post 3 Big Reasons Why the Cloud is Good for Logistics appeared first on Materialogic.

The market for protective packaging has surged in the past seven years—that was a finding from a 2014 study by The Freedonia Group that looked at packaging in the light of recent trends, including consumer buying patterns.

Specifically, the market for protective packaging has grown by an average of 6.3% per year in the time period between 2009 and 2014—phenomenal growth for a mature industry with a lot of competition. This growth occurred despite the general downturn in the economy that plagued the earlier part of that period. (For reference, the average yearly growth rate for the period 2001 to 2007 was about 5.5%).

So why has this industry grown so quickly, even during some of the roughest years of the recession? The answer holds some insights for businesses that do any kind of shipping.

Reason #1: Skyrocketing online sales

Perhaps the most obvious reason that protective packaging has grown as an industry has to do with the surge in online sales over this time period. Items ordered online need to be shipped, and so need to be packaged with the appropriate protective packaging to prevent damage from shock, vibration, and abrasion.

Nowadays choosing such packaging is done increasingly by computer. Packaging must be chosen with balance in mind: Too little packaging means possible damage and returns…too much packaging means unnecessary and costly waste.

Reason #2: Caring about environmental impact

It’s a fact: Consumers throw away most of the packaging they receive with shipments. While some is recycled, much ends up in the landfill.

There has been a push to reduce this waste. The three main trends have been to 1) use less packaging, 2) use packaging that can be reused or recycled, 3) use packaging that is easily biodegradable and environmentally friendly.

All three of these trends have lead to innovations in protective packaging. Air pillows have become a common way for large shippers to tackle “void fill,” for example.

Reason #3: Cost efficiencies

Many shippers will ship products in boxes that are larger than required, simply so they do not have to carry as large an assortment of boxes. This can often mean more space to fill. The economics of shipping have conspired to make it less costly, in some situations, to use a larger box or package and fill the void space with cheap material than to simply use a smaller box!

This trend is changing, however, as protective packaging gets more expensive. Some companies are now using a wider variety of box sizes and finding more efficient ways to pack multiple items in a single box. Changes to DIM weight policies have also had an effect: Larger, lighter boxes are now not as cost-effective to ship, meaning that shippers are switching to smaller packages with more compact protective materials. If these practices continue, it means the protective packaging industry will continue to grow dollar-wise, even if we see more efficient packaging.

What Protective Packaging Trends Mean for You

It is hard to predict what the future holds for any market. But supply and demand is a core economic principle that cannot be ignored. If the demand for protective packaging that is efficient, reliable, and environmentally friendly is growing this quickly, we can expect prices will rise too…and that companies will be on the lookout for ways to be more efficient with their packaging.

Smaller companies, or ones that do less online business, have to make a choice. It is probably not in their interest to invest in the technology to optimize their protective packaging. But they can take advantage of them by going through a 3PL that has made these investments. When a company has enough shipping volume to justify outsourcing, but not so much that they can afford the bigger capital expenses that come with the latest methods, that’s when they need to consider using a 3PL.  

Want to learn more or have your questions answered?  Contact Materialogic, we’re happy to help!

The post The Market for Protective Packaging is Growing: What This Means for Shippers appeared first on Materialogic.

Almost a full year ago, we reported on the Panama Canal expansion and what it would mean for shipping and logistics nationwide. It took 40,000 workers nearly 10 years to bring that expansion to fruition, and the engineering involved was just as revolutionary as it was when the canal initially opened just over 100 years ago.

The official re-opening occurred in June of this year and we’re beginning to get some data that can tell us whether or not our predictions about the expansion—and what it would mean for shipping and commerce—are being borne out. We thought we’d share those thoughts:

Has there been new business for eastern and southern ports?

There seems to be some evidence that eastern and southern ports are getting a boost from the canal expansion. In particular, Asia-to-U.S. container traffic has begun a shift from mostly West Coast ports to more East Coast ports. One recent report by Boston Consulting Group predicts that there will be an overall 10% changeover by the year 2020. To date, nearly 136 ships that wouldn’t have fit through the pre-expansion canal have been scheduled for arrival at eastern and southern ports.

Much of this is due to the fact that the expansion makes the Panama Canal more competitive with the Suez Canal in Egypt, effectively shortening the journey from Asia to the U.S. East Coast by roughly five days (and eliminating a tough trip around Cape Horn in Africa).

Interestingly, the opening of the canal has come amid plummeting shipping costs and faltering international trade, mostly due to the slowdown in China. This means that we are not yet seeing the full potential of the canal realized. If China recovers and we see a boost in international trade again, we can expect even more Asia-to-U.S. routes taking advantage of the canal to reach eastern and midwestern ports.

Are shippers taking advantage of forward locations and centrally located warehouses?

Not yet, and not to the extent they should be. But there are signs that this is on the horizon.

Part of the issue has to do with the size of the new “Panamax” ships. While the canal has expanded to accommodate these larger ships, U.S. ports have not always expanded in lock-step. For example, Houston would be a natural port for offloading goods to ship to the South, Midwest, and beyond. But Houston’s port does not currently have the depth or size to accommodate these larger ships.

The Port of Houston Authority (PHA) is, however, in the process of dredging their channels to a depth of 45 feet to match the main ship channel depth of these larger container carriers. With this upgrade, Houston will be able to accommodate fully loaded vessels up to 8,000 TEUs.

On top of port size, business decisions are still catching up with what the expanded canal means. Shipping to a port like Houston or New Orleans means easy access to centrally located warehouses in the St. Louis region. Shipping from such a central location makes a lot of sense for some businesses. Others, however, are putting their faith in having multiple warehouse locations across the U.S.

Which approach is better? It depends on the business model. A centrally located warehouse or forward staging site means lower operating costs, reduced inbound shipping costs, consistent delivery transit times, and more centralized (and efficient) inventory management. Multiple warehouses, on the other hand, can help cut delivery times, especially for popular items.

Such considerations have had businesses sitting back and doing their homework. We predict, however, that in another 18 months, many shippers will be ready to “pull the trigger” and take advantage of forward staging in the Midwest.

Those that are first to the table will likely reap an incredible competitive advantage.

**Click the image for a high resolution version**

Is the newly expanded canal a success story?

Honestly, it is too soon to tell.

The opening, originally scheduled for 2014, comes at one of the most difficult financial times for the shipping industry. Shipping costs have plummeted, international trade is down, and Asia in particular seems to be going through some long-overdue corrections.

Not only that, but the opening of the expansion has been delayed by two years total and has gone over budget by about $150 million. Together with slower international trade, it might be a long time before investors see a return on their money.

Finally, there have been worries about the expansion’s design. Since opening, three container ships have already hit the wall of the canal. Although the damage was minor and no merchandise was lost, such news stories might make some businesses think twice before shipping with larger ships via the canal.

Although these are areas of concern, there is no doubt that the expansion was necessary for the canal to stay competitive. This project has been the canal’s first major overhaul in a century, and the upgrade was sorely needed. These factors do mean, however, that the full impact of the canal’s expansion will take some time to unfold. It won’t be seen or felt immediately.

When it does, we’ll be here, keeping you posted.

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A common question merchants have when looking for a 3PL is “Can you store and ship from multiple locations?”

Amazon.com has set a high expectation for fast two-day delivery, and many other merchants are following suit. They assume that, because Amazon has many warehouses across the country, other retailers must do the same in order to guarantee the same level of service.

This is not always the case. There are pros and cons to using multiple locations, as there are for using a single central location. Which option is best for your business depends on many factors, including your size, number of SKUs, and what you are trying to achieve. Of course, customer satisfaction is paramount…but there are different ways of achieving it.  

Let’s run through those pros and cons to illustrate what considerations should go into that decision:

Multiple locations for warehousing and shipping

The Pros:

With multiple locations, all areas of the country can be covered in a two-day shipping window. Items can ship out from the location closest to a customer, provided that location has the items needed. This means that shipments spend shorter time in transit, on average, and customers receive product more quickly.

The Cons:

Having multiple locations means having redundant stock at each location. This means keeping more inventory on hand overall. It also means that inventory can easily run out at one location, necessitating an alternative shipping arrangement or restock from another location. To avoid this, most businesses will keep an extra 15% to 20% of stock at each location as a “buffer stock” in case demand spikes for any one warehouse.

Multiple locations also mean a more complex picture when it comes to inventory management. Data from each warehouse will need to be integrated to get a full picture of your inventory, manage receiving, and so forth.

Some companies use multiple locations to save on shipping rates, because these can depend on distance the package has to travel. Too often, though, these savings are illusory. What is saved in shipping rates is often offset by increased expense in inbound shipments: Each location must receive shipments from each supplier, as opposed to all suppliers shipping to a central location. A company with just a few (less than 10) SKUs might see some savings, but companies with many SKUs will likely break even, or end up spending more on inbound freight.

Taxes are part of the equation as well. Having more warehouses in more states can potentially mean creating NEXUS in those states, which puts sellers under more sales tax obligations in those states. (Basically, NEXUS just means having a presence in a state that requires your company to comply with that state’s sales tax laws. In nearly all cases, a warehouse counts as a “presence” in a state.)

Centralized warehouse and shipping location

The Pros:

A centralized location means a single inventory for all orders, making the management of receiving, storing, and shipping goods easier. The inventory can more accurately reflect demand, and projections of that demand can be made more quickly and easily. And if you have many SKUs (more than 10), there will be savings over multiple locations when it comes to the inbound shipment of goods.

If the location is truly central, goods can reach 80% of the continental United States in just two days—the standard set by Amazon. Customers outside of this area can be given the choice of faster shipping methods (air, for example) or a slightly longer wait. Your own customers might be willing to wait a little longer for products if it means the cost of shipping is significantly lower.

And it can be lower, as single locations often achieve an economy of scale. 3PLs in particular can offer a competitive rate when using a single location, which means that savings can be passed along to the consumer.

The Cons:

Shipping from a single location does mean longer transit times on average, because areas farthest from the warehouse will need additional transit time, bringing up that average. This can become a problem if that location is not suitably close to “customer knots”—areas of the country with high concentrations of repeat customers. Thus, choosing a truly central location is key.

The Verdict:

Using a single, central location requires less of organizations, and so is ideal for growing companies. It allows them to “walk before they run,” perfecting their processes and building their customer base. Switching to multiple locations is always an option for the future—paring back to a single location after employing multiple ones is much more difficult.

A single location also makes sense for larger organizations with many SKUs (more than 10), or that wish to avoid keeping a lot of “buffer” inventory.

Multiple locations only make sense if fast, two day-shipping is an absolute necessity. Determining if this is the case will require conversation with your customers. Some industries might need this kind of fast shipping. Many customers, however, simply want a choice in shipping options. Cost savings enter the calculation only if your company has fewer than 10 SKUs.

As with any business advice, there can easily be other factors at play that are unique to your industry and business model. For example, how damaging is it to your business to have backorders? Is climate control an issue? Insurance? Do you have international vendors? What are cut-off times, and can you meet them to ensure 2-day delivery? Given the complexities involved, the best thing to do is to have a candid conversation with your 3PL (or your 3PL candidates). This way, you can get a realistic sense of costs and service before committing to a plan of action.

Materialogic helps merchants and eCommerce companies achieve their best when it comes to customer service and fulfillment. If you would like to discuss which option, multiple locations or single central location, is right for you, contact us.

Milton Cornwell – Chief Operating Officer – Materialogic

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Whether you use a 3PL for shipping and logistics or do things in house, there is a long list of issues to take care of: Order accuracy, DIM weight changes, address verification, inventory updates… and so on. So much time is spent ensuring that things go right that folks often miss ways to make things better. Multiweight shipping is a great example.

Multiple carton shipment programs allow you, the shipper, to effectively combine packages when shipping multiple pieces with a combined weight of over 200 pounds to the same location on the same day. Pricing is then based on the average weight of your packages. No special handling is required, and you get the same delivery commitments as you would for sending small parcels via ground shipment. (For this article we are using the Federal Express Multiweight service as the example. UPS has similar service called Hundredweight.)

Multiweight is a solution that sits between LTL (Less than truckload) shipping and small parcel shipping. It is ideal for B2B transactions, particularly to smaller shops and facilities, since it can save on shipping multiple items while maintaining service, consistency, and control.

Some other advantages of multiweight shipping include:

– Delivery times are comparable to ground shipping.
– Inside delivery is possible; the receiver does not need a dock to receive the goods.
– Unlike LTL, the weight of the pallet is not being added to overall weight, saving cost.
– In fact, palletization is not required at all.
– Freight class is not required
– Tracking is reliable and in real time, just as it is with ground.
– Some of the DIM weight costs that come with shipping less dense items and packages can be mitigated.
– The option may be cost effective for shipments weighing as much as 800 lbs to 1,000 lbs or even more in some situations.

Charges for multiple carton shipping will be based on actual weight or a minimum average carton weight for the shipment.  If you are working with a 3PL, it is worth seeing if they have any kind of adjusted pricing the average weight requirements when using multiweight shipping.

Of course, there are still cases where an LTL shipment is most appropriate. You will have to do an analysis to see which method costs less while still maintaining optimal levels of service. Again, consulting with your 3PL or shipping partner can help you determine whether your shipments meet the ideal parameters for one method or the other.  Contact Materialogic and we can help!

Materialogic takes pride in reducing the complexity associated with managing your logistics and shipping. For more ideas on how you can cut costs and achieve better efficiency in your operations, contact us.

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Although September has only just arrived, now really is the time that merchants need to begin planning for the holiday rush. That goes for eCommerce merchants as well as traditional brick-and-mortar stores. Most categories of goods have an ebb and flow that comes with the seasons, so the ability to scale up your business model to meet demand is critical for keeping your customers satisfied.

Here, then, are the top five questions that should be on every merchant’s checklist starting right now:

1) What will it take to be adequately staffed? Increased flow of goods means an increase in the labor needed to process them. Will you have enough sales associates on the floor for your physical location(s)? Will you have enough customer service staff to handle returns, questions, or problems? Are there people keeping up with inventory, projections, and purchasing? Holiday spikes in demand often mean taking on additional, seasonal workers—do you have a plan to find, hire, and train them? If not, you might find yourself with last-minute labor shortages (and disgruntled employees who resent having to work overtime around the holidays).

2) Do you have the inventory? Increased sales also mean increased inventory needs. Busy buying seasons are not the time for running into backorder situations. Anticipate the increase in item velocity and get your purchases in order now, before suppliers begin to feel the pinch themselves.  If you have heavy volumes of inbound goods, be sure to let your brick and mortar stores and your 3PL know what to expect.  

3) Has your customer service team been prepped/trained? If your customer team has to expand during the holidays, you will want to make sure those additional reps are adequately trained. For example, how should they handle returns, and what is the shipping policy?

4) Have you calculated new ship times? Holiday gift volume also stresses the network of carriers and delivery vehicles. Make sure you know where and when you can guarantee shipment. For example, don’t have your website promising ground shipment in two days to another state if there is a chance that time window might expand to three days. As a rule of thumb, a customer will be delighted to receive an item in two days when promised it in three—but they could be outright angry at getting an item in three days when promised it in two. (In fact, if you predict longer delivery times, there is a chance that anxious customers might be willing to pay more for expedited or air shipping.)

5) When will you communicate with your 3PL on expected volumes? This assumes, of course, that you are using a 3PL. If you are, you should communicate anticipated volumes ahead of the holiday season. This way they can prepare appropriately and head off many delays.

The stores might not be playing Christmas music yet…but that doesn’t mean that the holidays aren’t coming upon us quickly. In the logistics world, anticipating those seasonal spikes can mean the difference between happy repeat customers and a furious holiday mob.  If you have questions or would like more information on this topic or on anything else we can help you with, please contact us!

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We’re excited to present our 3PL Request for Proposal – Template. This document is designed to provide you guidance when constructing an RFP. There are certain pieces of information that 3PLs need in order to provide an accurate bid and set reasonable expectations. Having a template for your RFP guarantees that you provide the right information, and that the right kinds of information are requested from companies in return.

There are a lot of articles out there dispensing advice on how to go about the RFP process when choosing a logistics partner or 3PL. Few articles, however, show you how to do it. 

Until now!  Click here to download our template.  Also, please feel free to contact us with any questions, we’re happy to help.

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There are a lot of articles out there dispensing advice on how to go about the RFP process when choosing a logistics partner or 3PL. (In fact, we wrote some ourselves earlier this year). Few articles, however, show you how to do it. None are comprehensive in the least.

This is not because RFPs are something new, or have some sort of secret formula. Quite the contrary: Good RFPs give certain kinds of information and request certain kinds of information in return, in a very formulaic way. So much so, in fact, that we wondered why one couldn’t just build a template to simplify the construction of RFPs for companies seeking shipping and storage solutions.

We saw no reason not to. So we built one ourselves.

In fact, we here at Materialogic have found that having some guidance when constructing an RFP is incredibly helpful. There are certain pieces of information that 3PLs need in order to provide an accurate bid and set reasonable expectations. Having a template for your RFP guarantees that you provide the right information, and that the right kinds of information are requested from companies in return.

You can download our template for free here. To use it, you simply need to fill in the appropriate blue boxes with information from your company, including your business’ goals and needs. When done, save as a document, and you should have an RFP ready to go!

If you have questions about the content of the template or the RFP process in general, we would be happy to help. In the meantime, keep in mind:

1. Transparency is key. Be honest about your volumes in each channel, as well as your challenges and pain points. Give numbers in terms of highs, lows, and variation. Don’t sugar-coat anything.
2. It pays to be selective. Send RFPs to companies you think will be a good fit. You’ll have more time to go through the details of each proposal when there are fewer of them.
3. We all want to know you. Provide candidates with a little information about your business. How does it run? What are your needs? What is the culture like? What frustrates you? The best partnerships are often not a matter of price or capabilities, but of cultural fit.

We are here to answer any questions you may have. Please don’t hesitate to contact us and good luck!

The post Request for Proposal (RFP) for 3PL Services: A Template appeared first on Materialogic.

When you are not “in” logistics and fulfillment, it’s hard to appreciate how much time it consumes.

Here we’re not just talking the time it takes to locate, pick, pack, ship, and deliver an item. (Though that’s important too). But actually managing the logistics operation and maintaining control of your own data can be a daunting and time-consuming task. Few people realize this until they are in the thick of it.

To illustrate, see this blog post published by our strategic partners over at Infoplus, entitled “Seven Time Sucks in Your Logistics Operations.” In it, they outline several processes that tend to waste the time of operations managers, VPs, and COOs—things like slow reporting, stock replenishment, labor management, and good old-fashioned problem-solving (or putting out those “metaphorical fires”).

Why do such “time sucks” abound? Typically, it is because businesses are concentrating on their products—as they should. Most of their efforts go into product development and marketing. Fulfillment, if anything, is an afterthought.

But this attitude is precisely what leads to inefficient systems—or lack of any systems whatsoever. Without a good system, fulfillment, customer service, and leadership get tied up just getting the right products to the right customers.

The folks at Infoplus put it well:

“Nobody wants wasted time. But there is an even more powerful argument to be made for taking positive action to eliminate these time sucks. Each and every one gets in the way of more important strategic activities that can actually grow your business.”

That, in a nutshell, is the argument for taking a long, hard look at fulfillment.

So, if you don’t want to waste that precious time, consider doing the following:

    – Start tracking how much time is wasted. When you measure a problem, you get a true grasp of its extent. Once you start measuring, you will be floored at how much time is wasted on mistakes and old-school practices.

    – Investigate whether you have “systems” or “heroes.” In a truly resilient organization, all procedures are documented and tracked. Any qualified person can pick up where someone else left off. In contrast, some operations are lead by “heroes” who do everything themselves because they have all the knowledge in their heads. Heroes are great to have…but a problem when they quit, leave, or are otherwise unable to work. It’s only then that you realize how much was being done manually.

    – See what you can outsource. 3PLs, for example, have systems in place for fulfillment and logistics. That’s what they do. Not only can they bring tons of knowledge and know-how to fulfillment operations, they can guarantee continuity of service and economies of scale.

3PLs can free up more time than you realize. Ask us for an estimate, and we can prove to you the savings that a 3PL can bring.

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One of the bigger stories to hit the shipping world recently was the bankruptcy of Hanjin Shipping Co., one of the largest shipping companies in the world. While some in the industry are hanging on the details with bated breath, we thought it would be a good idea to take a step back and see what this story means for U.S. retailers and other businesses that depend on foreign goods.

Hanjin is not some mom-and-pop operation. Some sources estimate that it is the seventh-largest shipper in the world, with 2.9% of market share before it filed for court receivership this past summer.

In late August, Hanjin’s creditors (including the South Korean state bank) refused any further lending or support, which triggered the filing. This led to a cascade of events, including the stranding of many of Hanjin’s ships and cargo. As many as 66 of Hanjin’s container ships were denied access to ports around the world, and at least one ship was seized. This meant a cool $14 billion in cargo left stranded or moved to holding locations. An even higher dollar value of “future goods” could conceivably be held back by manufacturers.

According to an article in Forbes, Cho Yang-ho, the chairman of Hanjin Group (the company that owns Hanjin Shipping), stated in court that a failure to compete was the main cause of the company’s financial collapse. “Hanjin Shipping lost the game of chicken played among large shippers,” he said. “As a private company, we felt the limit of participating in a dumping war and asked for support, but I failed to convince.”

For the most part, this might seem to be a news story of interest to those in the global shipping industry, or for those curious as to how bankruptcies work. But it is also, in many ways, a cautionary tale—for smaller retailers, as well as larger shipping and importing companies.

Let’s take those larger companies first. If what Hanjin says is correct, competitors with government subsidies were able to offer incredibly low prices and out-sell Hanjin. But Hanjin still held on to almost 3% of market share. Which means that Hanjin was still doing some brisk business, but not enough to cover costs (and certainly not at the price they wanted). So Hanjin is a reminder to watch the competition and find ways to provide value to avoid getting into a sustained bidding war.

Beyond that, there is an even greater lesson here for U.S. retailers. The Hanjin bankruptcy is mostly a snag in the supply chain for imports coming from China and other parts of Asia, which might make exposure to risk seem limited. But that might not be the case.

Many small-to-medium retailers go through brokers for goods, parts, or even to purchase shipping and logistics services. A business going through a broker might not even know that they were contracting with Hanjin, nor that their goods are being held up because of the bankruptcy. If this is the case, it could be disastrous, as the busy holiday season is about to get under way.

So, for retailers and importers, there are two key lessons here:

1. Events like this have downwind consequences, so check with your brokers and partners when they occur. The Hanjin bankruptcy might affect you, or it might not—but, whichever is the case, it is better to know now. And that goes for any major industry events.
2. No matter what else happens, disruption is always just on the horizon. Whether it’s a natural disaster, a port worker strike or slowdown, a facility fire, or a bankruptcy, there is always a going chance that something unforeseen will occur. So plan for disruptions. Make sure you have contingency plans, and that they have been worked out well before the alarm bells go off.

Materialogic has been in the shipping and logistics industry for years, helping businesses solve problems and find accurate, cost-effective logistics solutions. If you would like to discuss how a partnership with an industry expert might help you, contact us.

The post A Cautionary Tale for U.S. Retailers: What Hanjin Means appeared first on Materialogic.

It might seem obvious: If you have a traditional brick-and-mortar store, or a chain of stores, those stores will have to carry enough inventory to supply shoppers until their next shipment arrives. But that “truism” no longer holds, thanks to the rise of omni-channel shopping.

Some stores have now adopted what might be called a “showroom” model. The idea is to carry just enough stock on the premises to provide samples of goods (and, for items like clothes, to allow customers to try on various sizes and styles). But that’s it. Ordering is done through an online system, and the purchased goods are then shipped directly to the customer’s address.

Why go through these extra steps, especially in a world where customers have that “I want it now” mentality? The hope is that it is a cost-saving measure. If a retailer stores and sells goods in the same place, it must:

• Lease more space, often in an expensive location.
• Assign staff to unpack deliveries, usually during off-hours.
• Hire more employees, because significant employee time will be spent restocking shelves (and not paying attention to customers).
• Reship items when one location runs out of stock, or has too much stock.
• Find creative ways to discount or otherwise move items that do not sell, which cuts profit margins further.

In short, retailers are discovering the cost savings that can be had storing items in a single central location, rather than in multiple locations. Given that an increasing number of customers are comfortable with ordering and delivery, thanks to a few decades of online sales, retailers are finding that inventory-less showrooms are the more cost-effective way to go.

This model is not entirely new, of course. Furniture and appliance retailers, for example, have long had floor models in a showroom with subsequent order and delivery (or pick-up) handled through a distribution center. For large, heavy items, this model was a necessity. Now, with better integration of online and in-store sales systems, inventory management systems, and mobile technology, retailers of many other kinds of goods are trying out the model.

So far, stores specializing in clothing and accessories are the most eager to try the idea out, including brands like Bonobos, Paul Evans, and Macy’s. The fit here is natural: Consumers want to shop for clothing and accessories online and get the best deals, but they still relish the experience of browsing and trying on items in a physical store. But it won’t be long before other kinds of retailers figure out how to capitalize on the trend.

Indeed, technology experts are placing their bets that this will be the future of store sales—for example, IBM’s recent Retail 2025 report predicts that more than half of all retail sales will be direct-to-consumer, with a sizeable chunk of these sales being from showroom-like stores.

But what does this mean for retailers now?

Retailers with physical stores who want to move to a showroom model will undoubtedly face a number of challenges. They will need to overhaul company technology and systems to pull this off, not to mention rethink the actual physical buildings. They will also need to think seriously about warehouse space, item handling, and shipping.

All that said, the idea will make sense to many chains as a cost-saving measure and a way to boost both their online presence and brand visibility.

And what about eCommerce sites? Are they in danger of renewed competition from showroom-like stores? To some degree—although, again, this will be more likely for some goods (clothing) than for others (electronics). Still, some larger eCommerce sites are responding by creating their own showroom sites (where no physical stores existed before). Others are partnering with existing stores, asking them to carry their brands in exchange for handling fulfillment of orders on the back-end. Again, both strategies are encouraging a re-examination of warehousing and shipping practices, not to mention data integration and analytics.

The rise of the showroom model is one example of market forces that are changing the way companies view their warehousing and logistics. For more on this and other trends, contact us. Materialogic has extensive experience in eCommerce fulfillment, as well as industry trends, and our experts would love to help you explore showroom models and other ideas.

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