Posts in category: News Coverage

When Luxottica Group S.p.A. decided to build a new 713,000-square-foot distribution centre in McDonough, Ga., the Italian manufacturer and retailer of eyewear, accessories and fashion had three primary goals, according to Massimo Sapone, the senior vice president of logistics and planning for North America.

The first was to consolidate locations in Georgia, Ohio and California into one North American hub that handled all of Luxottica’s brands and provided one face to the customer. But, it wasn’t just a consolidation of Luxottica’s order fulfilment operations.

Take an inside look into Luxottica’s new fulfilment center

In addition to the distribution hub, the McDonough campus features four buildings totaling 1.1 million square feet, including a 50,000-square-foot aftersales distribution centre for processing returns and a centre for sourcing and planning. In all, 2,000 employees support the logistics and ophthalmic manufacturing operations.

The second was to improve speed to market. “The idea is that we want to be simpler and faster, and we can do that through consolidation of our facilities and the simplification of our processes,” Sapone says.

Third, they put in one place manufacturing and distribution processes, a move that would position Luxottica as the industry leader in customer service. “Our ambition is to gain the No. 1 operation in our industry, and I believe we are already pulling away from our competitors,” Sapone notes.

It is a unique facility, essentially three 238,000-square-foot facilities with 12-foot ceilings stacked on top of one another. The three levels—unusual in North America but more common in Europe—connect with a high-speed elevator and conveyor for lighter weight loads and two heavy-duty freight elevators for heavier pallet loads. Putaway, replenishment and picking operations are directed by a warehouse management system (WMS), RF scanning and lights, depending on the process. The facility also features an extensive conveyor and sortation system, a put wall area and automated packaging for small and medium-sized orders. As part of this project, Luxottica also implemented SAP in McDonough—its global enterprise resource planning (ERP) platform.

At the moment, the ground floor handles receiving and shipping along with order fulfilment processes for a common pool of frames for Luxottica’s wholesale and e-commerce eyewear businesses. The second floor is the manufacturing lab, where prescription lenses are created and married with frames that are stored there to support the lens business. The third floor is reserved for Oakley branded apparel, footwear and accessories—Luxottica and Oakley eyewear are on the first floor.

A facility with 12-foot ceilings might seem unusual in an era when most DCs are more than 30 feet tall or higher. But Vince Pusateri, the senior director of engineering and network strategy for North America, notes that given the size of the products handled in the eyewear business, the ability to efficiently store and pick about 55,000 SKUs in the facility is more important than ceiling height.

“This was a giant project that we launched in 2016, building the campus from scratch,” adds Sapone. “But we now have a distribution facility that enables our business model and allows us to service almost 6,000 stores from one location.”

Made in Luxottica
Luxottica is a leader in the design, manufacture and distribution of fashion, luxury and sports eyewear. According to the company, its portfolio includes proprietary brands such as Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples and Alain Mikli. It also licences brands, including Giorgio Armani, Burberry, Bulgari, Chanel, Coach, Dolce&Gabbana, Ferrari, Michael Kors, Prada, Ralph Lauren, Tiffany & Co., Valentino and Versace.

The group’s global wholesale distribution network covers more than 150 countries and is complemented by a global retail network of approximately 9,000 stores, with LensCrafters and Pearle Vision in North America; OPSM and LensCrafters in Asia-Pacific; GMO and Óticas Carol in Latin America; Salmoiraghi & Viganò in Italy; and Sunglass Hut worldwide. In 2017, with approximately 85,000 employees, Luxottica posted net sales of more than $10.4 billion.

The head of Daimler Trucks has questioned, but not completely written off, the business case for heavy-duty truck platooning in light of other emerging technologies and fuel gains from new combination vehicles operating independently.

Tests using combinations of the latest aerodynamic tractors and trailers showed the gains in miles per gallon were “not as high as expected,” said Martin Daum, head of Daimler AG’s trucks and buses divisions. He delivered his comments during the recent IAA Commercial Vehicles show in Hanover, Germany.

“When it comes to automated vehicle technology, there is a very compelling business case for these systems,” Daum said. “However, platooning might not be the holy grail we initially thought. Therefore, I am a little bit critical of platooning today.

“But at Daimler, we will continue testing this technology and see where it eventually leads us.”

The earliest tests of two closely spaced Class 8 trucks and trailers in a platoon — whose braking and acceleration are linked through software and wireless communications, while steering remains manual — showed gains in fuel efficiencies of about 4% for the lead vehicle and about 10% for the trailing truck.

Meanwhile, in the United States, one group of researchers is looking into an autonomously controlled platoon.

The American Centre for Mobility at Willow Run announced organisations representing defence, academia and the public sector will research and test automated convoy platooning during a two-year study that will feature military and commercial trucks in a closed environment and on public roads.

The study will analyse controlling vehicles’ throttle, brake and steering autonomously while maximizing fuel efficiency and safety, according to the Ypsilanti Township, Mich.-based nonprofit, which is one of 10 U.S. Department of Transportation-designated automated vehicle proving grounds.

“Truck platooning will pay safety and environmental benefits that we can only begin to imagine,” Kirk Steudle, director of the Michigan Department of Transportation, said in a statement. Steudle also is ACM’s interim CEO.

At the same time, a European consortium called Ensemble is getting underway to demonstrate multibrand truck platooning on public roads in 2021.

DAF, Daimler Trucks, Iveco, Man and Scania, and Volvo Trucks and Renault Trucks, are involved in the project, according to Ertico, the European intelligent transportation systems public-private partnership.

Significant advances in platooning technology have been made in the past decade; however, a multibrand approach is now required, according to Brussels-based Ertico.

The main benefits from platooning are the cost savings in fuel and some relatively easy miles for the driver in the trailing truck, said Eric Grice, project manager of transportation solutions consulting for enVista, a supply chain consulting and IT services firm, based in Carmel, Ind.

For a shipper with a private fleet or dedicated contract carrier covering long distances, platooning makes sense, he said.

“There will definitely be a perceived operational cost from planning and coordination of drivers and routes to get them traveling together at the same time within service hours and having the same breaks, etc.,” he said.

“As far as shippers choosing from the common carrier pool, in the end it comes down to pricing in most cases. If carriers are able to effectively use platooning to reduce their overall costs and pass those along to shippers, then they will have a competitive advantage and be able to acquire additional business,” Grice said.

In the meantime, if it makes sense to platoon two trucks over a long distance, it also might make sense to run double or triple trailers pulled by a single truck over a long distance — an option blocked in many areas by regulations, another consultant said.

“You can find an argument in there for something that is less technologically challenging,” said Rick Mihelic, president of Mihelic Vehicle Consulting in Lewisville, Texas. “But there is more of an investing sexiness to platooning, which is on the verge of becoming a reality. There are prototypes out already, but production use of it is still a little ways off.

“I was kind of surprised that Daimler came out and said that. I would agree it is getting harder and harder to make a single tractor-trailer combination better aerodynamically. We have had 10 to 15 years of refinement in the aerodynamics.”

But Mihelic said data he collected when involved in tests that platooned the ultra-sleek Super Trucks developed in a U.S. Department of Energy programme showed double-digit gains in fuel efficiency were possible.

Other companies involved in commercializing platooning did not respond to a request for comment.

As peak season nears, EnVista’s Senior Project Manager Mark Taylor gave FUEL 2018 attendees his best tips to navigate the sea of surcharges that lies ahead.

As FreightWaves reported in September, the parcel market has largely been focused on commercial shipments between businesses. However, the last 15 years has seen a dramatic shift in the industry, as the emergence of e-commerce within retail has forced parcel delivery companies like UPS (NYSE: UPS) and FedEx (NYSE: FDX) to rethink their delivery network. The majority of the growth in the parcel industry is now being driven by rising demand for e-commerce, bringing along with it added demand for last-mile residential deliveries.

Retail and e-commerce activity peaks during the holiday months of November and December, and has posed challenges to parcel carriers as they attempt to make tight delivery deadlines during this time period. Last year, UPS alone delivered roughly 700 million packages during peak season, so it’s safe to say that surcharges can add up quickly.

“Even if you’ve negotiated your residential or handling surcharges, that’s invalid during peak season,” Taylor warned. “Surcharges are additive to regular surcharges of the same name. For example, there is both an additional handling surcharge and a peak additional handling surcharge,” he noted.

Incentives on non-peak surcharges also do not carry over to their corresponding peak charges, i.e. a 30% incentive on additional handling does not mean 30% on peak additional handling, Taylor explained.

Additionally, Taylor noted that, for a second year in a row, FedEx will not apply peak season surcharges for residential shipments. The company’s executive vice president and chief marketing and communications officer, Raj Subramaniam stated that “FedEx is demonstrating support for these loyal customers during this critical time frame by not adding additional residential peak surcharges, except for situations where the shipments are oversized, unauthorized or necessitate additional handling.”

Just last month, UPS announced that it expects to hire about 100,000 seasonal employees to support the anticipated surge in package volume that will begin in November and continue through January 2019. E-commerce is projected to continue its strong growth during the holiday season, and the company regularly ramps up hiring to accommodate the peak months.

To facilitate this, UPS brings on additional workers during the peak season to help with sorting and delivering packages.

“Every year, we deliver the holidays for millions of customers,” said Jim Barber, chief operating officer. “In order to make that happen, we also deliver thousands of great seasonal jobs at our facilities across the country.”

Taylor advised audience members to offer a special discount on e-commerce for shipping prior to peak or to hold a Cyber Monday event in order to shift demand outside of peak shipping windows. In negotiating prices, Taylor suggested evaluating by analyzing the costs of your programme by service level and surcharges, sorting by the highest costs in your program, and ultimately trying to determine your specific impact for peak surcharges ahead of the holiday season.

For the second year, consulting firm enVista held its Fuel client conference last week in Chicago, expanding beyond its transportation focus in the inaugural event to more general supply chain topics, drawing some 130 attendees.

That’s a very impressive number for a show in just its second year, especially in the consulting world where such client conferences are uncommon. Hard charging enVista CEO Jim Barnes has seen rapid growth of the company over many years now, and this event was a manifestation of that success.

I was there for just one day of the two-day event, but moderated a panel discussion (see below) and attended some good sessions, which I will summarize here.
Gilmore Says….

CSCMP CEO Rick Blasgen kicked off the first day as he did for Fuel 2017 with a highlights of the 2018 State of Logistics report, released in June by CSCMP and consulting firm ATKearney.

Blasgen walked past me on the way up to the podium, and joked he hoped he wouldn’t put me to sleep. No need to worry there – CSCMP and Kearney have put together a winning presentation that Blasgen moves through swiftly, bordering on too quickly but not quite crossing that line, with the result being entertaining and effective.

Of course, we covered the report in detail when it was released (see State of the Logistics Union 2018), but it’s worth covering some of Blasgen’s presentation as a refresher and for some updated info.

I like Blasgen’s metaphor (or is it a simile?) that the supply chain acts like a shock absorber, buffering companies between what the plan is and what actually happens, moving smoothly through the unavoidable pot holes along the journey.

We all know freight costs are soaring, and Blasgen noted spot market truckload rates were up an incredible 30% by the end of 2017, a spike we simply haven’t seen before. Is one answer finally some more collaboration on freight moves? Maybe, Blasgen said, but noted one dictionary definition of collaboration is “cooperating with an enemy that has invaded your country.” You know, that might just summarize the state of things.

US logistics cost were 7.7% of GDP in 2017. That compares to about 18% of GDP in China, 13% in Europe, and 11% in Japan, so the US is doing something right despite obviously aging infrastructure. Costs as a percent of GDP are down 10% versus 2006, and an amazing 30% since 1990. That is real progress.

Blasgen cited a factoid I had not had not ever heard: a Bain & Co. analysis that found companies with sophisticated supply chains generate profits 12 times greater than average companies do. Can that be right? Will dig into that one later.

Next up was a panel discussion on “unified commerce” led by Barnes, with panelists Carey Lowry of Spencer’s, Mike Racer of Sephora, Jeff Starecheski of CVS, and Colin Yankee of Tractor Supply Company – all supply chain and logistics execs of one kind or another.

Panel discussions are very difficult to summarize, especially when the topics of discussion are wide ranging, as was the case here. I’ll do my best to pick out some highlights.

I will start with this: when Tractor Supply’s Yankee wanted to improve the retailer’s efulfilment process, he want down and worked like an associate in the packing/shipping area for a few hours. That’s the kind of hands on approach probably a lot more supply chain execs should take from time to time, if not regularly.

Weekends are shrinking for employees of parcel carriers, another disruption wrought by the inexorable momentum of e-commerce.

This month FedEx Ground announced its US operations were now running six days a week, with management pointing to growing e-commerce demand and record volumes anticipated for the coming holiday season and beyond.

FedEx has run weekend operations during previous peak seasons and will increase hours for some employees while planning to take on about 55,000 more to cope with the peak season volume. But it sees a need to extend service hours past the peak surge.

“The rise in demand for e-commerce goes beyond peak. It’s a year-round phenomenon, and we are ready to meet that demand,” said Raj Subramaniam, executive vice-president and chief marketing and communications officer of FedEx Corp.

“FedEx Ground has operated six- and seven-day operations through the holidays for several years as e-commerce has grown and, thanks to strategic investments in our network, we are now well-positioned to operate six days a week in the US all year.”

Greg Merz, senior analyst, transportation solutions consulting, at enVista, said the push towards a six-day delivery operation had been building for years. It started with residential weekend deliveries of the SmartPost and SurePost offerings of FexEx and UPS utilising the US Postal Service’s Saturday delivery service.

UPS has had six-day transport capability in place since 2017, a company spokesperson said.

“Saturday ground pick-ups enable online retail shippers utilising a ship-from-store strategy to achieve Monday deliveries for the vast majority of the US population,” she said. “Additionally, shippers across multiple industries ranging from automotive to healthcare stand to benefit from this additional operating day.”

A spokesperson for DHL Express in the US reported that the company was doing some weekend deliveries, taking international express shipments to consumers’ homes.

“Because of the higher e-commerce volume, our major hub in Cincinnati is also adding shifts on the weekends. We did that last year during the holiday season,” she added.

Mr Merz said the extension of service to six days was designed to capture and lock-in business from retailers, many of which are interested in weekend delivery.

Higher pay and lower density on weekends increase costs for operators, but the residential delivery fees they charge makes up for this, Mr Merz said. Moreover, the companies are trying to reduce overtime costs by shifting work schedules to Sunday-to-Thursday or Monday-to-Friday patterns.

Jim Barnes started Envista with his partner, John Stitz, back in 2002—and at the time, it was the two of them and a few subcontractors. Today, the supply chain consulting and e-commerce services company has more than 600 associates and $100 million in revenue.

“We [received] no equity. No venture capital. we’ve done it through, quite frankly, with a lot of grit, a lot of passion, a lot of effort for the business, and we have continued just to reinvest in ourselves and expand the business beyond just our core supply chain services and systems integration business,” says Barnes.

Barnes spoke with Chief Executive about challenges companies in the retail sector are facing with supply chain, how to compete against Amazon, and more. Below are excerpts from that interview.

What are the big challenges your clients are facing in the supply chain today?

What’s happening is that for many, many years, brands and manufacturers controlled the experience of that the consumer had, right? So they influenced the consumer and they drove the consumer behaviour. What’s happening now is obviously mobile devices, the speed of information, the speed of data, the information overload that we have, is [control has] moved from the brand to the consumer.

The consumer’s much smarter today about how they buy and how they acquire products. There are a number of searches you could do in terms of educating yourself to become a smart, educated buyer, both on price, product, performance, [and various feedback]. We’re going to this personalization model where most supply chains have been, right or wrong, developed in a linear fashion of one to many. So it’s a one-to-many, so I pick one and I push it out. Well now what’s happening, from a supply chain perspective, is that we’re moving more to one-to-one.

Back in my days at Johnson and Johnson, we were trying to move to a just-in-time approach, where I could actually make one product… I’d have the demand signal for one and I made one. Now did we ever get there? No. But the mindset was, “How do you go to a one-to-one relationship?” And so that’s what retailers and distributors need to be thinking, “How do I create a one-to-one relationship with the consumer, but my supply chain also has to be optimised and has to be effective to also support that one-to-one relationship?”

We’re going to see, regardless of what Trump does from a tariff perspective, you’re starting to see people trying to compress time. And so by compressing time, it allows you to move to more that one-to-one relationship. Now if I’ve got lead times of 90 to 180 days, it’s very, very difficult. The reality is that we need to compress time. And so retailers are sort of starting to wake up saying, “Wow, how do I compress time?”

It seems like a Herculean task to compete against Amazon because it’s like everything, anywhere anytime, and you can get it in about two days. What do you say to your clients who are trying to win that battle?

I gave a speech on “How to Compete Against Amazon,” at a conference in Nashville. Look, you’re not going to beat Amazon. You’re not going to go pop up 50 distribution centers, you’re not going to go bring up AWS. But the reality is that Amazon today, their e-commerce business, it’s a loss. They’re not making money on retail, they’re making money on AWS versus really making money on e-commerce fulfilment. But what they’re doing is, their AWS, they’re creating brand adapters. I mean, the reality is that Amazon today has… look, let’s just call it rough-and-tough, a $6 billion Prime business. And for what? They haven’t sold you anything yet. They’ve just set an expectation that they’re going to deliver to you in two days, and they’ve got your money. Think about it. That’s a $6 billion business. That ranks Amazon in the top 100 retailers in the world, and they haven’t yet done anything. They just managed an expectation, or they created an expectation for you.