August 22, 2024: Despite the lockout of rail workers in Canada, ocean carriers are still likely to continue calling at Canadian ports and hesitate diverting ships too quickly. This is due to longer distances, spill-over congestion, and different tariffs in the United States.

Note: About 66% of cargo arriving at the Port of Vancouver is moved by rail to final destinations in Canada or in the U.S. Midwest.

Diversions may increase

However, some carriers including Hapag-Lloyd have started to review more than 4 vessels bound for Canadian ports that were supposed to arrive after August 24. Should the rail lockout not be resolved quickly, many more container ships might be under review and diversions to U.S. ports such as Seattle-Tacoma, Oakland, and Los Angeles-Long Beach will start to pick-up.

The most impacted goods shipped via rail would be fertilizer, iron ore, grain, cement, salt, potash, coal, cars, wood/timber as well as containers loaded with consumer goods or intermediate parts.

Comparison to 2023 strike in British Columbia

During the 13-day port strike on Canada’s west coast in 2023, more than 17 container ships were eventually diverted to other ports, with many more having been forced to wait at anchor, causing substantial delays. It took several months before the backlog could be cleared.

Risk of solidarity by U.S. West Coast ports

Another risk for ship diversions is that dockworker unions on the U.S. West Coast could decide to not unload Canada-bound cargo out of solidarity with a union of longshoremen in British Columbia that is also threatening to strike, pending a vote by a local of the International Longshore & Warehouse Union.

This situation happened during the port strike in 2023, causing heavy delays for Canada-bound cargo that was left in limbo for two weeks.

Here are a few high-profile examples reported by BDO in its recent retail update:

• Macy’s opened 12 small-format stores that are 30,000 to 50,000 square feet (one-fifth the size of Macy’s mall locations) and plans to add 30 more locations by the end of 2025.
• Nordstrom plans to open 23 Nordstrom Rack stores through spring 2025, in mostly suburban markets. Locations range between 23,000 and 36,000 square feet.
• IKEA opened more than 70 new, mostly small-format stores in 2023.

Store size is not the only thing retailers are experimenting with. They are also seeking new store approaches to help combat retail turmoil.

Bath & Body Works, for example, plans to locate two-thirds of its stores outside of malls as part of its long-term strategy, while Walmart aims to convert 150 locations to new concept stores featuring improved layouts, expanded product selections, and new technology by 2029.

Supporting Innovation and the Customer Experience

Regardless of which direction retailers go, it will be imperative for them to focus on designing and managing their supply chains to support innovation and greater complexity. That will likely mean relying on advanced analytics and artificial intelligence tools, which will be pivotal in forecasting demand, optimizing inventory levels, and personalizing the customer experience.

By boosting overall supply chain efficiencies, retailers can make the most of these paradigm shifts and deliver superior customer experiences across all channels. A demand-driven supply chain approach—which we’ve been championing for 40-plus years now—is still the best way to meet evolving needs while ensuring the adaptability and flexibility it takes to enact retail pivots like smaller store footprints or new concepts.

In this new retail landscape, companies that innovate and adapt by refining their operational models to be more agile and responsive will be best positioned to thrive. That formula is likely to work regardless of the shape, size, or strategy that takes hold as the new norm.

1. Provide workers the training they crave. Recent federal legislation confirms that the U.S. government is behind the manufacturing industry and has acted to bolster much of its resurgence and reshoring. However, these new provisions also set the stage for steep competition for skilled and talented employees.

While 70% of manufacturing employee respondents are largely committed to staying in the industry, they also are open to a new path for the right opportunity, according to the eBook data. Job training and advancement can help motivate them to remain loyal and stay put.

Employees are eager to advance their careers by up-leveling their skills, with 57% of respondents indicating they feel their company has an interest in their professional development. However, with just 13% reporting they are compensated for advanced training, these course opportunities could be looked upon as a job requirement rather than as a benefit.

These employees also showed interest in cultivating higher-level skills in tech- and business-focused proficiencies in data analytics, supply chain, digital operations and automation, robotics, and even softer managerial skills.

2. Help employees find work-life balance through better benefits. The shortage of skilled labor is causing manufacturing employees to work more hours—a trend noted by 60% of respondents. Most of those working prolonged shifts are clocking overtime pay, cited by 45%, which can be viewed as a positive outcome.

Yet the flip side to a bigger paycheck is more and longer work days, which can exact a toll on an employee’s work-life balance and even on-the-job productivity, performance quality, and overall employment satisfaction.

Specifically, the survey revealed that workplace stress affects employees emotionally (65%), physically (59%), mentally (57%), and financially (50%).

Beyond these day-to-day stressors, Purchasing Power’s eBook results also found, anecdotally, that the labor shortage is impacting production uptime, bringing to light quality and turnover issues, and threatening worker safety.

To address these financial stress challenges for employees, manufacturing leaders should look to their organization’s benefits programs. In today’s benefits marketplace, there are multiple resources that employers can deploy—often at low or no cost to either party—that prove impactful for employees to alleviate these stressors.

With 87% of manufacturing employees reporting benefits are just as important as salary, employers should architect these programs with sufficient scope to ensure there is something for each employee to benefit from. A weak financial wellness benefit program can negatively impact how employees view their overall compensation.

A comprehensive, well-crafted benefits package, complete with ample voluntary and short-term benefits options, can serve as a valuable tool in manufacturers’ talent acquisition and retention toolbelt.

The right compensation, training, and benefits mix will help address the labor shortage, enable manufacturers to keep and secure the best talent, and help prevent unnecessary employee turnover and job vacancies.

For 3PLs, inventory regionalization reduces shipping costs and times, and improves operational flexibility and supply chain resilience. Geographically dispersed fulfillment networks allow 3PLs to adjust quickly to demand fluctuations and maintain continuous service, no matter what’s impacting the broader logistics landscape.

Regionalization Through Tech

Optimizing operations requires the right technologies to manage distributed inventory, ensure smooth regional transfers, and optimize operations. Technologies such as warehouse management systems, order management systems, and inventory management systems enhance operations across multi-location 3PLs or 4PLs, offer a single system for managing inventory everywhere, and enable accurate data through integrations with ecommerce platforms and enterprise resource planning systems.

Using advanced analytics and AI for shipment forecasting and inventory optimization, integrating data exchange through integration platforms for better visibility, and leveraging real-time tracking for enhanced decision-making make multi-regional inventory management simple. These technologies democratize sophisticated fulfillment capabilities, enabling 3PLs of all sizes to build and manage a software-enabled fulfillment network efficiently.
To get started with inventory regionalization, consider the following best tech practices:

1. Analyze customer data and demand patterns. Knowledge is power. Teams should start by identifying optimal locations for regional warehouses by examining geographical distribution of order patterns. Reviewing historical sales/shipping data can reveal peak periods and regional preferences. Predictive analytics can help forecast future demand to optimize inventory levels and placement.

2. Lean on warehouse technology. Use advanced warehouse management systems for real-time visibility and efficient inventory allocation across the network. With observability across the warehouse network, 3PLs can disburse inventory to optimal locations without impacting tracking accuracy.

3. Automate order routing. Implement automated solutions to fulfill orders from the most suitable location, enhancing order processing speed and accuracy. Automate orders across multiple warehouses, create cross-dock locations, and provide real-time inventory levels at every point along the supply chain.

4. Build strategic partnerships. Geographically diversified 4PLs (which consist of integrated networks of 3PLs) can often provide a deep understanding of cross-border shipping requirements and trade regulations to ensure smooth product movement across regions, and can find and manage the appropriate fulfillment capacity needed for even the most complex product verticals .

For 3PLs, embracing inventory regionalization and integrating sophisticated logistics technologies are key to fulfilling consumer expectations for rapid delivery, enhancing operational resilience, and achieving scalability.

Here’s where intelligent technologies—business AI, generative AI, machine learning—can play an important role. By starting small with AI and ML capabilities, then branching into other use cases as comfort with the technology grows, companies can begin to optimize, extend, and transform key facets of their distribution business, and in doing so, strengthen margin and revenue.

How and where to begin? Because the insight AI models produce is only as good as the data that feeds them, first ensure your data is clean—standardized, trustworthy and fresh.

Due diligence to evaluate AI applications and developers also is a must. Choose intelligent tools with a proven ability to solve a business problem.

Having identified areas where AI and ML can help you solve a problem and capture new value, try solutions from multiple providers. Some may be general in application, others tailored to a specific vertical use case. The possibilities are many.

One critical area where wholesale distributors can put AI to work is in optimizing pricing. With its ability to quickly and deeply analyze customer and operational data, AI can produce highly segmented pricing recommendations that increase revenue and margin.

Optimizing Logistics

Those optimization capabilities extend to logistics, where AI can recommend optimal delivery routes, taking into account changing parameters and priorities related to the customer, the product, the route and the vehicle/driver. The benefits—customer and driver satisfaction, and fuel efficiency and emission-reduction—can be substantial.

As generative AI apps grow more powerful, chatbots become more viable to automate and enhance the customer journey, with the ability to make intelligent product recommendations and resolve more complex customer inquiries than in the past.

Distributors use AI-driven robots and cobots (collaborative robots) to help fill the labor void in the warehouse. Not only can AI-driven tools automate processes, they also can simplify and even eliminate process steps via intelligent process analysis.

Essentially, in a labor-constrained industry like ours, it’s about doing less (fewer process steps) with less (labor).

Once you’re comfortable with use cases like these, then you can explore AI’s more transformative possibilities, such as preventing customer loss. By analyzing customer buying patterns and behavior, it can alert sales reps to customers they’re at higher risk of losing and recommend the best counter.

AI’s predictive powers can also help a wholesale distributor identify and configure new value-added services to maximize their profitability to the provider and the appeal to customers.

Bringing AI into your distribution operation not only will help you create new value for your company and its customers, it will give your people new tools to do their jobs better. When it comes to the working relationship between human beings and intelligent technologies, as the adage goes, “It’s a duet, not a duel.”

Gen AI vs. AI

Artificial intelligence is the science of computers mimicking human intelligence to solve problems. In supply chain management, AI can optimize operations by predicting demand, managing inventory, and improving logistics. For instance, machine learning algorithms analyze historical data to forecast future stock needs, reducing the risk of overstocking or stockouts.

Generative AI or GenAI is one type of AI that enhances supply chains by generating synthetic data to simulate different scenarios and optimize decision-making. For example, it can create demand variations under different conditions, helping companies prepare for potential disruptions and improve resilience.

What’s the Most Impactful AI for Supply Chains?

Predictive AI and machine learning have the greatest implications on supply chain planning. ML algorithms can analyze large volumes of historical data to identify patterns, correlations, and trends.

Generative AI, especially the recent methods based on Large Language Models, is in the early stages. GenAI is useful for creative applications, data augmentation, and simulations.

However, in the enterprise business context where each decision can have millions of dollars of impact, a lot more care and attention needs to be put to make sure they work reliably, and the decisions and automations can be trusted.
GenAI will be mostly used for productivity and automation, and we will see narrow applications of GenAI here and there in the near future. However, their use in the more general setting is an open area of research and investigation.

–Behrouz Soleimani, PhD, Head AI Scientist, Kinaxis

Spelling It Out

FVL

Finished vehicle logistics refers to the processes involved once a vehicle exits the factory. Managed by an OEM or a third-party outbound logistics team, it includes final preparation, staging for pick-up, and dealer drop-off. A typical factory produces more than 1,000 vehicles per day, which are stored in immense outdoor lots. Efficiently locating and moving the correct vehicles saves fuel, reduces the possibility of damage, and improves employee satisfaction.

–Michael Ueland, Chief Revenue Officer, Cognosos

OBC

On-board couriers. A specialized air freight service for high-value products. OBC offers a hands-on approach—a courier accompanies the shipment from its origin, boards the plane, clears customs, and personally delivers it to the recipient at the final destination.

–Andrew Rossell, VP of Operations, ASF Global Logistics

Bot Talk

Machine Customer

A nonhuman entity autonomously procuring goods or services. Examples include:

• IoT-connected devices or assets that place orders independently of a human command
• Intelligent replenishment algorithms that maintain availability of consumables
• Intelligent assistants that suggest deals to consumers.

Robot Wrangler

A warehouse worker in charge of managing and leveraging robots. As more companies deploy automation in their logistics operations—approximately 21% of warehouses used some form of robotics in 2023, up from 15% in 2018, according to Interact Analysis—they seek workers who can implement robotics projects and help others work alongside robots in supply chain workflows.

Collaborate with suppliers. By working closely with suppliers, businesses can ensure that sustainability criteria are integrated into supplier selection processes and contractual agreements through conducting audits, providing training and capacity-building support, and incentivizing suppliers to improve their sustainability performance.

Integrating sustainability into procurement processes is also essential; consider sustainability criteria when selecting suppliers, negotiating contracts, and evaluating supplier performance.

Implement sustainability standards. By adopting various internationally recognized standards and certifications, businesses can demonstrate their commitment to sustainability and gain credibility with customers and stakeholders.

Invest in sustainable technologies such as adopting energy-efficient manufacturing processes, implementing renewable energy sources, and utilizing advanced waste management systems.

Blockchain technology provides transparency and traceability, allowing businesses the ability to track and verify every step of the supply chain. This helps ensure ethical sourcing, prevent counterfeiting, and reduce waste by enabling more efficient inventory management.

Internet of Things (IoT) devices can also be used to monitor and optimize various aspects of the supply chain such as energy consumption, water usage, and waste generation in real time, enabling businesses to identify areas for improvement and make data-driven decisions.

Adopt renewable energy sources. By using solar panels or other renewable energy sources, businesses can reduce their reliance on fossil fuels and lower their carbon footprint. This not only helps mitigate climate change but also provides long-term cost savings by reducing energy expenses.

Collaborate with suppliers, customers, NGOs, and government agencies. By engaging with customers and understanding their sustainability preferences, businesses can tailor their products and services to meet their needs.

Measure carbon footprint to assess the environmental impact of supply chains as it involves calculating the total greenhouse gas emissions associated with the production, transportation, and disposal of products.

Measure water usage by quantifying the amount of water consumed throughout the supply chain, including in manufacturing processes, agriculture, and product use, is another metric.

Measure waste reduction or quantify the amount of waste generated and disposed of throughout the supply chain. By measuring waste reduction, businesses can identify areas for improvement, such as implementing recycling programs, reducing packaging waste, and optimizing production processes to minimize waste generation.

As awareness of environmental and social issues grows, businesses recognize the importance of integrating sustainability into their operations, driven by consumer demand for sustainable products, investor pressure for responsible business practices, and regulatory requirements for environmental and social compliance.

You need to diversify your carrier portfolio. Here’s how:

1. Assess your situation. Diversifying starts with understanding your current situation. What’s your company’s strategic vision and what kind of service do you need from a carrier to achieve it? Over what timeline?

Next, do you know all your current carriers, across every mode? If so, what do they do well, and where are they failing? Are the businesses themselves in good shape (RIP YRC)?

Who carries your goods when you’re not paying for it? Is there a piece of your current supply chain that you don’t manage? Would you want to?

2. Prepare an RFP. The more effort you put into this stage, the better your results. It’s as simple as that.

Here are some helpful considerations:

• Who are you, as a company?
• What do you ship? Are there unique handling instructions the carriers will need to consider? (A picture can be worth 1,000 words).
• Where is your freight coming from and where is it going to?
• When do you need it picked up, and when would you like it delivered?
• How will you measure a successful carrier relationship? What KPIs do you plan to track?

Remember to include all the data you’ve got. The more assumptions the carriers make, the more your costs will go up. Provide at least 3 months of scrubbed shipping data; 6 months for seasonal companies or acquisitions.

3. Let it fly. Google, AI programs, and LinkedIn are tremendous resources for putting together a list of carriers. You can also ask your current TMS provider for a list of their carrier partners.
When looking for a good partner, be a good partner. Pick up the phone and talk to a human, like a human.

4. Evaluate and decide. After you’ve received proposals from all interested parties, it’s time to make a choice. Analyzing carrier contracts is hard work, and small changes can have a massive impact. Be prepared to go through them line by line, many times, including the accessorials.

Close the loop with the carriers who didn’t make the cut. Even if it didn’t work out this time, that doesn’t mean they won’t be the best option next time around, so keep the relationship intact.

5. Implement. Successful implementations are all about having a plan. That plan will change along the way, and that’s fine. But starting with a map makes it easier to see where you need to go.
Establish a go-live date with check-ins along the way. Give your carriers reasonable volume projections, so they’re prepared. Finally, make sure you receive the bills, the bills are correct, and you pay the bills.

6. Bask in the glory of your accomplishment. Once you’ve implemented your new carriers, all that’s left to do is to work on maintaining these new relationships going forward, and then enjoy the fruits of your labor.

At this point, you’ve put your company in the best possible position to not only handle future disruptions, but future growth opportunities as well.

1. Fulfill orders faster. The faster orders are processed, the sooner they are delivered and the quicker you get paid. Simple, right? Using 24/7 automated processes to take care of your customers’ incoming purchases cuts costs and improves productivity.

Take brewery giant Carlsberg as an example. The company used to receive client orders by email, requiring employees to read and manually enter each PO into their system. By implementing AI-powered intelligent document processing to read and process POs automatically, Carlsberg saved about eight minutes per order, which adds up to enormous cost savings when you ship beer around the world.

2. Speed customs clearance. No manufacturer or retailer wants their goods to be held up at border control. This sort of delay can lead to product spoilage, demurrage, and detention fees, or missed delivery deadlines. The most common reasons for delays are rooted in inaccurate or non-compliant paperwork.

When choosing a transport and logistics provider, it’s imperative to know that they use purpose-built AI to reliably extract data from shipping documents to populate downstream systems and can automatically submit to national customs systems without manual review.

Automated classification and validation of data—from line items on bills of lading, certificates of origin, dangerous goods declarations, commercial invoices, and more—greatly reduces errors and delays.

This was the case with frozen pie manufacturer Portumna Pastry. The Irish company was able to reduce customs clearance times at the EU/UK border from more than one hour to just five minutes by using AI to extract complex transportation and logistics documents with 100% accuracy.

3. Ensure a happier staff. With a global skills shortage expected to worsen in the coming years, companies are desperately looking for ways to both attract and retain talent. Technology is one way.

A recent survey of business leaders—including transport and logistics providers—finds that the use of AI contributed to a 62% increase in employee happiness as well as a rise in employee retention levels (49%). One-third of respondents acknowledged that smart technology helped provide a better work-life balance and reduce stress.

By relieving employees of tedious and demotivating tasks such as data input, AI allows more time for meaningful and fulfilling work. That includes building better relationships with clients, which in turn leads to superior customer service.

4. Improve the bottom line. Time is an indispensable resource, particularly when it’s directly tied to cash flow, making AI a transformative tool when strategically used to cut down on inefficiencies and bottlenecks.

Accounts payable (AP) is often one of the first areas of operation to leverage AI in automation due to the considerable amount of paperwork, manual data entry and meticulous checking for accuracy. Automating AP also provides transparency in the payment flow, reducing the risk of billing errors and suspicious charges while enabling timely and secure payment to vendors and contractors.

Ultimately, the most important factor in incorporating AI into your operations is ensuring that it solves specific business challenges. Use AI in a meaningful and deliberate way to achieve the best outcome for your company.