The Friday Report July 6, 2018

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

Artificial Intelligence Invades the Food and Beverage Industry

Food and beverage companies are turning to artificial intelligence to improve fast-moving consumer goods (FMCG).  Using artificial intelligence and machine learning, food and beverage companies are gaining insight into ways that FMCG can be produced, packaged, warehoused, distributed and consumed.  With the huge amount of data that is available for analysis today, supply chain businesses are obtaining a more thorough understanding of what consumers want and expect.

Industry surveys reveal that consumer tastes have changed, sometimes dramatically.  Gone is the preference for “household name” brands that seemed to ensure trust in the home.

Today’s consumer is interested in local, artisanal providers.  Have you noticed how frequently the word “handcrafted” has been appearing in advertising recently?  From beers to McDonald’s, consumers have demonstrated that they are willing to pay more for a “handcrafted” experience.
Consumers value personalized products and better services.  CPG companies are struggling to keep pace with the new long list of challenges posed by changing consumer tastes and high expectations.  Using artificial intelligence, companies can learn from data analytics, gain vital insight into their operations and use data on consumer behavior and market trends to produce and market better products.

Online Sales Fuels Growth of Modern Warehouses for E-Commerce

On average, U.S. warehouses are 34 years old, built to handle the rigors of another type of operation.  Today’s fast paced online retail industry requires immediate, fast fulfillment and older warehouses are struggling to handle the pace and volume of operations.  Antiquated warehouses tend to have uneven flooring, low ceilings and lack the expansive space needed.  The way industrial space is used has changed and warehouses need to be outfitted to be used as strategic weapons.

3PL and warehouse operators today are looking for taller, modernized space and warehouse remodeling often is not practical or cost effective.  New construction of warehouses tends to be in the West and South including the hot markets of Las Vegas, Phoenix, Atlanta and California’s Inland Empire.
According to CBRE, although over 1 billion square feet of modern warehouse space has been constructed within the past ten years, this is only 11% of U.S. total warehouse inventory.

Use of Required Electronic Logging Devices (ELD) Causes Bump in Trucking Prices

Between the U.S. trucking shortage and the new regulation requiring large trucks to use electronic logging devices to record truck driver hours, freight costs have escalated and are likely to continue to increase.  With the truck driver shortage, increased demand and recent weather challenges, spot rates have increased 28% this year through March 23rd.  Longer term contract rates are anticipated to increase 12% in 2018, the highest in a decade.

Regulations mandating the use of ELD divided big trucking companies from independent owner-operators.  Years ago, most of the larger trucking companies in order to ensure compliance with the limits on hours and eliminate cumbersome paperwork related to truck drivers. Independent and smaller truck drivers resisted the ELD regulation but were not supported by the American Trucking Association as the change was viewed as helping to make truck drivers safer.
ELD devices keep track of truck driver hours.  The data is required to be turned over to regulators and can be reviewed by authorities during routine inspections or traffic stops.  For public safety purposes, drivers are required to rest for 10 hours after being on the road for 11 hours.  Industry studies indicate that approximately 70% of truckers reported earning less money when using ELDs and 65% reported that they were forced to drive less miles.

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