Warehousing and Distribution
Article | June 27, 2023
Even though there are distinct differences between demurrage, detention and port charges, many are still oblivious to these differences and there have been several questions on this blog relating to these charges.
This article is about how demurrage, detention, and port charges work.
International Trade and CostsWhen it comes to international trade, majority of the buyers and sellers use Incoterms to decide what each other’s responsibilities and liabilities are in terms of the business, especially related to costs.
Generally, there is very little room to manoeuvre in terms of additional and unbudgeted costs incurred on the shipment and therefore in their own interest it is important that the buyers and sellers take necessary precautions to ensure that all known costs relating to the business are discussed and finalised before the shipment commences.
There are many entities involved in the process of shipping a container from Point A to Point B, each with their own cost component, all of which have to be covered either by the seller or the buyer.
Demurrage, detention and port charges are just some of these costs that may be applicable in a shipment.
While some of the port charges are valid and unavoidable, demurrage, detention and some of the port charges (like port storage, early arrival, late arrival, amendment, shifting etc) are entirely avoidable if everyone in the chain follows the process that they need to follow.
What are port charges?
Port charges, as the name suggests are a set of charges levied by the port or terminal which the container passes through.In terms of container shipments, port charges may include but not limited to below :
Terminal Handling Charge (THC)
Is quite simply the charge levied by the port for the loading and discharging of a container from the ship.. THC differs from port to port, terminal to terminal around the world and is charged both by the load port and discharge port.If the cargo is transhipped anywhere along the route, then the transhipment port also charges this THC but that is paid by the shipping line directly to the port and this quantum is usually included in the ocean freight charged by the line.
Early Arrival Charge
A charge levied by some of the ports/terminals for a container that arrives in the terminal BEFORE the stacks into which it is to be taken has been opened.. Early arrival can happen due to various reasons like a container missed the stacks for the previous vessel narrowly, but since the container is packed, it needs to be taken to the port, The acceptance of containers prior to the stacks/gate open is at the discretion of the Port/Terminal Operator and on the circumstances surrounding the operation of the vessels.
Late Arrival Charge
A late arrival charge is a charge levied by the port for a container that arrives in the terminal AFTER the stacks into which it is to be taken has been closed.. This could be due to delays in documentation, packing delays, inspection, trucking delays and many other situations.The acceptance of containers after the closing of stacks/gate is at the discretion of the Port/Terminal Operator and on the circumstances surrounding the operation of the vessels and if the containers can be accepted without disrupting the schedule of the vessel and ports.
Stuffing/Destuffing of Containers
Some ports/terminals allow the stuffing (packing)/de-stuffing (unpacking) of the containers within the port area and charge customers based on the port tariff.This activity may happen at ports that provide CFS services and allow containers to be packed or unpacked in the port or due to some mistakes when the cargo was originally packed – say incompatible hazardous cargoes packed together.Depending on the port/terminal/country, the port charges may be charged directly to the customer (importer or exporter) or to the shipping line, who in turn will charge this to the customer.
Of course, this is not the full list of port charges but these charges have been mentioned as it relates to the subject under discussion,Demurrage and DetentionWhile some of these port charges may be unavoidable, demurrage and detention charges on the other hand are avoidable charges, but in a lot of cases due to mishandling, miscommunication, misunderstandings and not following the proper protocols, these charges occur..When they do occur, these charges may create quite a financial impact on the whole business and sometimes these costs could be so prohibitive that some customers abandon their cargoes at the destination due to these costs.
Although the most common market practice is to combine demurrage and detention, there are several cases where these are charged separately, and therefore it is important to know the difference between demurrage and detention.
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Transportation
Article | April 26, 2023
The unsurprising investment eagerness of venture capital funds is manifesting in an automation tech glut in the distribution center space. Motivated by enabling trends like labor and land shortages, DCs are amid an automation transformation. Never has defining an automation strategy been more important.
There’s no shortage of VC cash available to logistics tech startups
With a brightly shining spotlight centered on supply chains for the past two years, it’s no surprise that total funding in logistics startups has seen a dramatic increase – growing at over 70% CAGR (Compound Annual Growth Rate). Logistics technology startups raked in over $25 billion in the first three quarters of 2021. That’s more than half of the total amount raised in the whole of 2020, and the incentives for continuing investment persist.
The rise of the of the “micro” DC
“Micro” is a relative term. The size of a micro fulfillment center (MFC) can range from 5,000 to 50,000 square feet. Those reduced square footages allow location in dense urban areas, typically within 40 miles of most of their intended customers. In addition, smaller footprints lead to reduced rents compared to a standard customer fulfillment center (CFC), and the proximity to consumers makes for lower final mile delivery costs. It’s no wonder that MFCs accounted for more than half of the logistics real estate leasing activity in the third quarter of 2021. The “urban logistics” trend is fueling demand for these highly automated, smaller locations.
Vertical logistics integration grows ever more fashionable among retailers
It’s a very “in” thing right now, these acquisitions and partnerships, and they won’t be going out of fashion soon. For example, American Eagle took in Airterra and its parcel optimization tech and third-party logistics (3PL) provider Quiet Logistics.
Target started early. They bought Grand Junction, a software platform that helps retailers determine the best delivery method and track carrier performance, in 2017. Their 2020 acquisition of Deliv brought with it same-day delivery routing technology that they’re now applying to their 2021 purchase, on-demand delivery service Shipt. Target uses Delivs’ tech to generate more efficient routes for Shipt.
Kroger has partnered with UK’s e-grocery specialist Ocado to build automated CFCs across the US and expand their retail footprint. The first CFC opened last spring in Ohio and their second in Florida later that year. They plan to open 20 CFCs over the next three years.
“The proliferation of DC automation solutions and modalities, the rise of MFCs in high-density urban areas, the increasingly automated vertical integration of logistics, and the need to rapidly expand order fulfillment capacity have all, in combination, advanced the need for and application of clearly defined strategies concerning the implementation of automation technology. Do not operate without one.”
Vikas Argod, Principal, Supply Chains Operations practice at Chainalytics
Coping with shortages in warehouse space and labor availability
Third quarter, 2021 US demand for industrial real estate exceeded supply by 41 million square feet. This pushed the national vacancy rate in the fourth quarter down to a record 3.7% in the Cushman & Wakefield US National Industrial MarketBeat report for Q4 2021. Who knows what the record might be when the Q1 2022 report breaks in a few weeks?
On the labor side, the December 2021 US unemployment rate was 3.9%, lower than in December 2019 (3.6%) yet reflecting a tighter labor market. Labor force participation rates are at 61.9%, nearly 2% below February 2020 levels, because of lingering effects of the COVID-19 pandemic. The rising wages and signing bonuses of the past year offer silent testimony to the ongoing constraints in today’s labor market.
Both trends will remain with us for the near- and mid-term, making an automation strategy a necessary part of your DC operations as you attempt to mitigate the effects of both. In addition, warehouse labor shortages are most pronounced in markets with high distribution center densities – Greater Memphis, In-land Empire, Allentown, PA, et al.)
Building the capability to rapidly open DCs at scale
No other factor drives home the need for a coherent DC automation strategy like this one. Let’s explore it with an example.
We’ll call this “A Tale of Two Companies.” One jumped on the automation bandwagon without hesitation – not a bad thing – but applied no strategic groundwork. The other is, well, Amazon.
Company one responded to increasing demand by creating DCs in their usual, strategically located fashion. However, with automation, the lack of a logical strategy led to adopting “the best that money could buy.” So, while these DCs work fine on their own (most of the time), each employs unique implementations from a variety of vendors, with little to no overlap of methods, capabilities, and management procedures between DCs. It’s functional, but a needlessly complicated hodgepodge.
On the other hand, it definitely looks like Amazon has a standardized automation strategy. One that can easily adapt to exploit the individual physical specifications of any space. This makes it simple to arrive and equip it with a standard package of automation solutions. That’s probably how Amazon blanketed the US with over 400 new DCs in just the last two years. They waste no time or money on repeating unnecessary decisions along the way.
Now, we all can’t have the resources of an Amazon. However, the rise of on-demand warehousing companies like Stord and Flexe allow organizations to dramatically decrease the cycle time of standing up additional fulfillment capability.
Developing an automation strategy will feel familiar. It begins with benchmarking, order profiling, current performance drivers, EBIT targets, and theoretical evaluations of newer technology options. All this leads to the creation of a decision framework for DC automation. The goal here is achieving alignment among the leadership on critical capabilities to focus on. These include rapid fulfillment, labor shortage, capacity constraints, safety challenges, or sustainability. Those that commit to this process will start slowly but finish with a strategy that will underpin thousands of decisions and enable sustained rapid growth.
If, in the end, you decide that automation is not right for your operation, that’s a perfectly valid strategy as well. So long as you have a method to evaluate all of your options, and you base your decision on cost-service-sustainability trade-offs, the right strategy for your organization may be no automation at all.
There’s no point in chasing shiny robotic objects if automation makes little sense.
The rise of automation and the multitude of technologies to choose from require the development of a strategic decision framework. Contact us and see how Chainalytics – an NTT DATA company – can be your guide in developing this critical part of your foundation for growth. Our top supply chain talent, enabled by proven, leading-edge digital assets – tools, methods, and content – deliver actionable insights and measurable outcomes to some of today’s largest and most complex supply chains.
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Management
Article | June 21, 2023
Warehouse Management System
In Supply Chain, warehouse management acts as the bridge between the supplier and customer. The warehouse facility utilized to consolidate or accumulate products and reduce the transportation cost to achieve economy. Warehouse Management System (WMS) refers to the movement and storage of materials within a warehouse. WMS is part of the Supply Chain Management and concerned with the receipt, shipping and picking of materials.
To effectively monitor the flow of products, WMS utilizes technology devices such as Barcode scanners, Bio-Metrics, and RFID to name a few. A seamless link created between the warehouse facility, order processing and logistics management till shipment. Warehouse management just not limited to the warehouse; it can also a component of Supply Chain Management (SCM) and, when done well, provides a competitive advantage to the business or organization.Supply Chain Management is the management of flow of goods and services including raw materials, work-in-process inventory and finished goods. The markets these days are transcending borders and managing the demand-supply quotient is increasingly getting complex. Production centers are setup at locations where the raw materials and labour are cheaper. Raw materials sourcing and finish goods distribution are done globally.
Supply Chain Management
Thus Supply Chain Management refers to all business processes and activities involved from the procurement of raw materials to the manufacturing and distribution of finished products. SCM in short is the art of providing the right product at the right time, place and cost. As inferred, SCM gets much wider in scope than WMS. However, WMS is perhaps the last mile in the Supply Chain Management system and any hitch in the efficacy of WMS system hampers SCM too.
Conclusion
The primary aim of Supply Chain Management is to match supply with demand. For this to work, the supply chain should be free from bottlenecks such as errant supplies, difficulty in sourcing etc. There seemed significant confusion about the phrases SCM and WMS until recently, and both frequently used interchangeably. However, it been generally accepted that warehouse management refers to the logistics of warehouse, storing, stocking, and also movement of goods. The term Supply Chain has a much broader focus involving suppliers, manufacturers and retailers.By providing customer centric operations in warehousing, companies gain competitive advantage. SCM tools help manage the supplies effectively keeping inventory at optimum levels. The efficiency of SCM relies to a large extent upon the efficiency of WMS. The SCM’s primary concern is to find out the best storage levels, which the WMS attempts to address. Therefore, it is seen that the SCM & WMS are only complementary in nature and not competing. Warehouse Management system also complements the Sales Management System by shortening the sales cycle through quick data access and delivery of quality service, every time.
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Management
Article | June 21, 2023
Enhance operational efficiency by implementing industry-approved methods for multi-channel inventory management. Taking a holistic approach to control inventory helps multiple sales channels grow.
Multi-channel inventory management is a crucial aspect of the supply chain process that ensures the goods are available to customers through different sales channels. However, with growing penetration of ecommerce technologies and the increasing complexity of supply chain networks, managing inventory across multiple channels has become daunting for businesses. The ability to accurately track inventory levels, ensure stock availability across channels, and optimize fulfillment processes has become critical to achieve success in today's competitive business landscape.
Managing inventory across multiple channels require real-time visibility and tracking of inventory levels which further streamlines the complex process. Inaccurate inventory data can lead to stockouts, overstocking, and lost sales, negatively impacting the business's bottom line. To combat these challenges, businesses must implement a robust multi-channel inventory management system to track inventory across all channels, synchronize stock levels, and automate order fulfillment processes.
An inventory management system can offer businesses a consolidated view of inventory at various locations, such as warehouses, stores, and even online channels. An organized approach is crucial while managing multi-channel inventory or keeping track of moving inventory. Implementing an effective inventory management procedure, managing multi-channel inventory becomes more streamlined and simplified, as well as provides a comprehensive overview.
In addition, as businesses continue to expand their sales channels, multi-channel inventory management has become a vital component of supply chain management. By adopting best practices in multi-channel inventory management, businesses can ensure on-demand access, accurate inventory data, and seamless order fulfilment processes. Additionally, implementing the right procedures will allow organizations to observe an increase in customer satisfaction and experience significant business growth.
The article takes an in-depth look at key benefits, potential challenges, procedural considerations, and the significance of multi-channel inventory management. It delves into the impact of this approach on supply chain performance while providing valuable insights into best practices.
1. Centralize Inventory Management Process
Centralizing multi-channel inventory helps manage supply chain businesses across various channels and locations. Businesses can gain better visibility and control over their inventory processes by consolidating inventory data. However, centralizing inventory management is not without its challenges. One of the major obstacles faced by organizations is ensuring the accuracy and consistency of data across different locations and channels.
Another barrier is integrating various inventory management tools and technologies into a single system. Despite these challenges, centralizing inventory management offers significant benefits, including improved efficiency and reduced costs. In addition, businesses can leverage cloud-based inventory management software and standard operating procedures to centralize and optimize inventory management processes effectively.
2. Adopt Lean Inventory Management Approach
The lean inventory management approach is adequate for managing multi-channel inventory in supply chain businesses. This approach involves reducing excess inventory and only stocking items in demand. While implementation of the approach is complex due to the need for accurate demand forecasting and inventory tracking, it offers multiple advantages, such as reduced inventory carrying costs, improved cash flow, and increased customer satisfaction. To implement a lean inventory management approach in the supply chain business, follow these steps:
Conduct inventory analysis
Categorize items based on value and demand
Implement just-in-time (JIT) replenishment
Leverage forecasting tools
Establish cycle counting and monitoring procedures
Strive for continuous process improvement
This approach helps businesses achieve better inventory accuracy, increase operational agility, and meet customer demands across multiple channels.
3. Utilize ABC Inventory Analysis
ABC inventory analysis is a widely used best practice for multi-channel inventory management in the supply chain. This method categorizes inventory based on its level of importance to the business. ABC inventory analysis categorizes goods into A, B, and C categories based on their impact on overall inventory cost. Category A consists of the most valuable products, category B includes items that fall in between, and category C covers small transactions that are vital for overall profit but have less individual impact. Supply chain businesses can prioritize their resources and make informed decisions by focusing on high-value inventory.
However, implementing this method can be challenging, especially when dealing with extensive inventory data. To successfully address challenges associated with implementing ABC inventory analysis for multi-channel inventory management, businesses must focus on accurate data classification, utilization of advanced analytics tools, and fostering effective team collaboration.
4. Optimize Order Management Process
Optimizing order management involves automating and streamlining order fulfilment for efficient and accurate processing across sales channels. The process ensures optimal inventory control, minimizes fulfilment time, and enhances customer satisfaction, providing a competitive advantage. Aligning inventory levels with actual demand prevents overstocking and reduces holding costs. Additionally, businesses can efficiently allocate inventory from various sources to fulfil orders, reducing the need for excess storage and transportation. The optimization is achieved by adopting automation, system integration, and data analysis. In addition, comprehensive multi-channel order management system offers multiple benefits, including native e-commerce integrations, flexible order fulfilment options, multi-location inventory management, integrated POS capabilities, data-driven inventory planning, and workflow automation, among others.
5. Integrate Sales Channels
Integrating sales channels provides businesses with a unified view of inventory, sales, and customer data, enabling informed decision-making based on real-time information. It helps accurately track products across channels as well as adjust inventory levels based on individual selling rates. The process involves synchronizing channels through a centralized system, ensuring seamless data flow and consistent product information. It includes setting up API integrations, mapping inventory, and conducting thorough testing for smooth order processing. To implement the integration, businesses must utilize technology solutions like inventory management software and enterprise resource planning (ERP) systems. Additionally, it establishes clear communication channels among teams managing different sales channels.
6. Set Cross-Channel Metrics
Cross-channel metrics measure and analyze each sales channel's performance, including online & offline sales, and identify areas for improvement. To set cross-channel metrics for multi-channel inventory, businesses must identify relevant metrics, establish benchmarks, and regularly monitor and evaluate performance. Implementing cross-channel metrics allows businesses to make data-driven decisions based on actual performance rather than relying on assumptions or incomplete data. In addition, supply chain businesses can leverage technology solutions, such as cloud-based inventory management software, to manage and consolidate their data sources effectively. Enforcing cross-channel metrics in multi-channel inventory management helps overcome several challenges, such as lack of visibility across sales channels, difficulty in identifying slow-moving products, and inefficiencies in resource allocation.
7. Automate Supply chain
Automating the supply chain and implementing advanced software systems helps businesses to optimize supply chain processes. Automation reduces manual errors, enhances efficiency, and improves overall productivity. It enables real-time inventory tracking, seamless order processing, and accurate demand forecasting. Businesses can easily overcome manual inefficiencies, bottlenecks, and data discrepancies by automating the supply chain process. The process includes integration of automation tools like inventory management software, order management systems, and warehouse management systems. The systems integrate with sales channels, suppliers, and logistics partners to automate order processing, inventory tracking, and shipment management tasks. Ultimately, businesses achieve better inventory control, faster order fulfilment, and increased customer satisfaction by automating supply chain operations.
Final Thoughts
As the supply chain market evolves, businesses must adopt innovative approaches for multi-channel inventory management. Incorporating additional sales channels into conventional brick-and-mortar operations presents a valuable opportunity to expand customer reach, boost sales, and enhance the overall customer experience. To effectively implement multi-channel sales and inventory management within a retail organization, acquiring a robust retail management system capable of efficiently monitoring inventory levels and facilitating business growth becomes essential. The adoption of an effective system can assist businesses to ensure seamless inventory control and propel sustained success in the competitive market.
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