O Christmas Tree: West Coast Labor Disputes Steal Christmas from Asian Based Consumers

The ongoing labor disputes on the West Coast have threatened the US holiday retail season for many months. Fortunately, things for imports are looking promising. With a few exceptions, most of the holiday “must haves” are making it to the retail stores. Although cargo is still struggling to get through some of the nation’s largest West Coast ports; most items are making it to retail shelves.

Even with all the strife and demurrage fees stacking up, product is eventually getting to US consumers. Unfortunately, some exports are not so lucky; many exporters are seeing major loss in revenue. The US exports several perishable goods to Asia, and these are not getting to the consumer before they spoil.  Some items purchased from the US are: apples, potatoes, oranges, lettuce, and Christmas trees.

Yup. Westerners living in Asia want to decorate with Christmas trees. A LOT of trees, in fact. 8 – 10 million to be exact. It takes up to 23 days to deliver the trees to Asia from the US. If someone in Asia wanted to have a tree displayed 3 weeks before Christmas, said tree would have had to leave the US port by November 14th. Consequently many of these pre-orders have been cancelled because of the delays of getting the trees out. It takes 7 – 9 years for 1 tree to mature and now most of the inventory will literally be tossed into the harbor.

 

With the port delays and negotiation gridlock between the International Longshore & Warehouse Union and the Pacific Maritime Association, consumers and natural resources are the ones paying the big price. Talks were suspended for a couple of weeks at the end of November but they have resumed, said a spokesman for the PMA. Projections are the sides will come to a compromise in the next 2-3 weeks. If not, a possible shutdown could cripple the ports.

For instance in 2002, there was a 10 day lockout at the West Coast ports, costing the economy upwards of $1 billion a day by some estimates.

Hopefully the two sides will come to a resolve before it is too late, and consumers will get their apples, trees, and imported goods.

10 Reasons to Outsource to 3PLs

The popularity of third-party logistics providers’ (3PLs) is growing. Currently, 3PLs are a nearly $150 billion business in the U.S.and are utilized across market verticals; the big three Detroit auto makers use more than 30 3PL providers alone. And business is growing; 72% of shippers are increasing use.

The growth isn’t a surprise to those in the industry. According to Armstrong & Associates, a leader in supply chain market research and consulting, the growth is driven by globalization, a need for supply chain information technology solutions and companies who are choosing to focus on their core competencies. We know that few other relationships have such a far reaching impact. 3PLs offer the ability to design, execute and improve logistics networks through the development of processes, technology and people.

So why should you consider outsourcing with a 3PL?

The benefits of outsourcing your supply chain management and logistics will vary based on the type of customized solution you choose, but you can expect to:

  1. Save time and money. Working with a 3PL enables lower risk and higher return by eliminating the need to invest in warehouse space, technology and transportation. Not only can you meet requirements with fewer assets, 3PLs can take tasks like order management, billing and staffing off your hands so you can focus on more profitable core competencies. By integrating your strengths with those of a 3PL, you can boost efficiency and profitability.
  2. Streamline operations through vision and continued optimization. When choosing a 3PL, it’s vital to find one that has a strong vision and dedication to improving productivity, saving money and transforming processes. Through their continued optimization, you will be able to establish and measure Key Performance Indicators (KPIs), eliminate inefficiencies and streamline the supply chain. 3PLs driven by innovation can also help you develop reasonable short- and long-term objectives, and provide an effective change management and employee training program.
  3. Gain a powerful network of resources. Efficiency drives solvency for a 3PL, so they’re constantly developing relationships and processes that speed service and lower overhead. As a partner, you’re able to benefit from these resources which would otherwise be unavailable in-house or cost prohibitive to develop.
  4. Enhance environmental stewardship. For a 3PL, environmentally-friendly initiatives are good for the planet and the bottom line. Optimizing distribution networks, consolidating routes, purchasing emissions-reducing technology and training drivers in fuel-efficient behaviors are just a few ways 3PL act as stewards of the environment. As a partner, you can promote their environmental stewardship as your own.
  5. Gain access to superior technology. The rate at which technology is evolving makes it a challenge to assess and implement the most effective options. Partnering with a 3PL gives you access to updated technologies as well as built-in system maintenance without the internal capital investment.
  6. Enjoy scalability and flexibility. Seasonal fluctuations are common for manufacturers, so the ability to scale warehousing space, labor and transportation can save money and enable stress-free transitions. And if you’re trying to expand into new markets, the flexibility of a 3PL makes growth seamless.
  7. Improve quality. Outsourcing to a 3PL means you have a partner rooted in efficiency, so you can expect to improve performance at multiple levels such as fewer customer complaints, improved order accuracy, lower inventory levels and greater availability rates.
  8. Enhance security. From new security regulations to best practices for improving security policies and procedures, 3PLs have the experience to manage all facets of supply chain security.
  9. Speed growth and change. By leveraging an outsider’s existing technology, infrastructure and people, you can grow quickly without the risk of costly capital investments.
  10. Leverage expertise. A significant role for any 3PL is to stay up-to-date on industry best practices and developments in logistics, manufacturing and supporting technology—including the latest supply chain and inventory control software. By leveraging a 3PLs’ expertise of regulations and local markets, you gain a partner that provides a competitive advantage while allowing you to focus on core competencies.

Thinking Inside the Box: Dimensional Weight Pricing (DIM)

We’ve all heard the buzz regarding the major parcel carriers’ price increase on ground shipments smaller than 3 cubic feet, but you may not realize the financial impact it will have on your shipping costs.

What we will see and feel on January 1, 2015 is the industry’s single largest rate hike in 15 years (coinciding with the regular annual price increase we see in the industry). Unless shippers adequately prepare, some experts believe they can expect an average 30% cost increase.

Before we explore solutions, let’s discuss what dimensional weight measurement (DIM) is and what will change in 2015.

  1. What is DIM weight? DIM weight pricing utilizes a formula to calculate a billable weight based on a package’s volume. You calculate DIM by multiplying Length (inches) by width (inches) by height (inches) and dividing the product by a DIM Factor (166 for UPS ground and FedEx ground).
  2. What will change? Today, packages under 3 cubic feet are not subject to DIM pricing, so your shipping rate is based on actual weight. If you were shipping a 2 pound item, let’s say a football in an 8”X8”X12” box, you would be charged for the actual weight of the package. Starting in 2015, all ground shipments will be subject to DIM weight pricing, and rates will be based on the greater of a package’s actual or DIM weight. With the new DIM pricing, your 2-pound football would be billed like a 5-pound package due to its volume.

Please note: for larger zones there will be a larger increase.

If your football was going from Atlanta to Chicago, the price could increase $1.42 or more. If you manufacture footballs and ship 50,000 units per quarter…that is over a $35k increase in shipping costs in 4 months.

Below is a chart of the 25 most popular box sizes used in ground parcel. Anything under 5184 cubic inches (3 cubic feet) will be affected by this rate increase. The most widely used box sizes are highlighted in yellow. These sizes represent up to 75% of all shipments.

Manufacturers and shippers who utilize small parcel (DIM weight 2-25) will be impacted the most.

Solutions:

  • Begrudgingly go kicking and screaming into 2015 complaining about the lack of parcel shipping options, but still paying crazy rate hikes. – Not recommended.
  • Pass along all added costs to consumers and risk them shopping with another brand because brand X is more innovative and can offer better packaging and prices? – Not recommended.
  • Become more innovative than your competitor by optimizing carrier agreements and improving package design? Yup. This is the answer!
    • Manually calculate DIM weight vs. actual weight for products. Most of your products will fit into a handful of size boxes and by estimating the projected rate increase you can plan accordingly
    • Educate employees about the DIM weight changes. Education and knowledge is key in keeping your costs low
    • Properly understand your current packaging characteristics
    • Strive for smaller and more senseable packages where you can

Kenco Plans 3rd Annual Customer Summit

Purpose
Bringing together supply chain executives from Kenco customers and partners to discuss best practices, review industry trends and explore supply chain innovation. The event is invitation only to ensure an intimate and strategic setting for attendees.

Moderator
Adrian Gonzalez, founder and president of Adelante SCM, a peer-to-peer learning and networking community for supply chain and logistics professionals.

Adelante’s services include Talking Logistics, an online video talk show and blog featuring thought leaders and newsmakers in the supply chain and logistics industry, and 3PL Briefings, a research service focused on providing supply chain executives with high-quality and trusted research, analysis, and briefings about the Third-Party Logistics (3PL) industry and leading practices in logistics outsourcing.

Confirmed Attendees
Michelle VanderMeer – Whirlpool Corporation
Doug Sunkel – Cummins Inc.
Brad Schmitt – Mead Johnson Nutrition

Event Overview
Thursday October 23rd, 2014 - Social & Networking Event

Omni Nashville Hotel | Nashville, TN
Friday October 24th, 2014 – Customer Summit
Kenco would like customers to bring a “Best Practice” to share. Sharing best practices is like storytelling. Many organizations are learning storytelling is a powerful communication and business tool. The time dedicated to this exercise is 30 minutes (includes 15 min presentation and 15 min discussion).

In addition to the best practice piece, customers will plan to discuss other trends and topics of interest.

 

PRICING: It’s Space and Labor, part 2…Labor

In the January blog post (part 1 of 2) on Pricing, the topic was pricing space. The purpose of this blog post is to now discuss the other major component of pricing in our industry; labor.

The first disclaimer I must make is I believe “pricing” is a management decision, and “costing” is a calculated estimate based on assumptions and data. So, when we talk about “pricing”, everything that has gotten us up to the point of offering a price to a customer may be based on costing, but may also be influenced by other factors:

  • Market conditions
  • Goals of the company
  • Interest in obtaining a new customer

 In this blog post, we will explore both costing and pricing.

Also in the January blog post, it was mentioned the world of pricing runs the gamut. From Mom & Pop companies, who quote new business off a rate sheet that has hung on the office wall since Grandpa was in charge; to multinational 3PLs with complex pricing models tied to real-time cost data and engineered labor standards. While the range of pricing (and costing) tools can run the gamut, at the end of the day, the company that understands the cost to serve the customer (and the shareholders) uses that information in their pricing decisions have the formula for success. Myriad of questions:

  • How much does it cost to serve a potential customer?
  • How do I find out?
  • What do I need to know, and who can I ask?
  • What if the information is wrong, or changes?

Let’s break it down and look at the pieces…

What is the basic process performed on product handled by a 3PL? Receive, inspect, put away, pick, check, load. There are others, but these are the basics. Which processes will you include in your pricing? Which ones add value in the eyes of the customer?

Let’s keep it simple and look at an opportunity with full truckloads in and out, with full pallet handling (no loose cases, no pick and pack) and only 1 SKU.

We first need to understand the processes that are required in order to meet the customer’s requirements, and understand the costs related to accomplish those processes.

Now we know it will require 198 minutes per truckload for handling. We should simply be able to multiply that time by the volume of trucks we anticipate, and arrive at the annual time needed to serve this customer.

If this customer anticipates 1 truck per weekday, then we can multiply 198 minutes by 5 days per week, by 52 weeks = 51,480 minutes. Divided by 60 gives us 858 hours per year to serve this customer. If our average forklift driver earns $15 per hour, and has a benefit and tax burden of 40%, then we need to charge $21 per hour for his/her service ($15*1.40%=$21.00)

Multiply $21.00 per hour by 858 hours to get an annual labor cost of $18,018.

  • The customer wants an all-in handling price for all activities combined

$18,018 / 24 pallets per truck / 5 trucks per week / 52 weeks = $2.89 per pallet

We used observations or time studies to calculate the time to complete each task in the handling process, used our known loaded cost per hour for a forklift driver. Are we done? NO. We have only covered the cost of the forklift driver for the actual work that he/she does (direct time).

We need to account for the cost of paid time that is not worked (vacation and holidays). We need to account for indirect time at the start and end of each shift (when the driver is not actively unloading or loading) and may be performing a pre-shift inspection of the forklift, battery change, attending a start-up meeting, taking a safety class, new-hire orientation, open enrollment for benefits, taking a rest break or an extended lunch break, etc.

Additionally, it is not reasonable to assume that every person is capable of working at the same speed throughout the day, or at the same speed of every other person. What pace is the right pace? Which indirect activities add value in the eyes of the customer? How long should a battery change take?

We need to account for the general manager, operations manager, supervisor, lead person and clerical support that may not handle the pallets, but contribute to our ability to meet the customer’s requirements.

We need to consider the travel time required to put pallets away, pick and stage pallets on the dock. There may be time required to spot trailers at the dock doors with a yard driver. The cost of that driver (and his/her tractor, fuel, insurance, maintenance) may need to be considered. The cost of the forklift, and related fuel and maintenance, and utilization, and repairs…and so on.

What about the ramp-up time allowed for new associates to get up to speed while training? How do we account for that? Do we need to also consider the cost of employee turnover into our handling costs? What other costs can be allocated to the cost of handling?

It is wise to take a look at all of the costs on your general ledger to see which costs can be allocated to space, and which can be allocated to labor. Those that cannot be allocated to either should become “overhead” and allocated to your bid as a known percentage.

Let’s now assume you understand the cost to serve your potential new customer. You also know you wish to make a profit of 10%. This should be the final step in determining price, right?

If your fully loaded cost per pallet is $5.00, and you wish to make 10%, you would offer a rate of $5.50 per pallet. What price will the market bear? What are your competitors charging? Are their costs similar to yours? Might they be more aggressive in their pricing in order to ensure that you do not win the new customer? Do they have “extra” space available they are willing to take a loss (or simply break even) in order to profit from only the handling?

You cannot certainly know all of the answers to these questions. I would suggest you only try to answer those questions about your competitors if it helps you understand your business more completely. There are enough moving parts within your organization to influence cost already.

Cost is not the only consideration involved in the pricing decision. Pricing is a management decision made based on available information, an understanding of the strategic goals of the business, and how this new potential customer helps to meet those goals.

Offering your services at a margin less than your target may meet your strategic objectives if growth is a priority. Walking away from this opportunity may meet your strategic objectives if your margin targets cannot be met.

Some companies believe the price of a service is comprised of the cost to serve the customer plus the profit that is desired.

(cost + profit = price)

The flaw in this formula is revealed when a business does not manage their costs, and assumes that a customer is willing to pay for inefficiency, waste, non-value-added activities. As an alternative, companies may wish to consider price as being driven by the market, and cost being driven by the effectiveness of the service provider (company). The difference then, the profit, is achieved by reducing costs, eliminating waste and not performing non-value-added activities in the eyes of the customer.

(price – cost = profit)

PS: All the rules change when an existing customer asks for pricing on a special one-time project…but that is for another time.

Being Green: Kicking the Box vs. Kicking the Can

When it comes to Sustainable Initiatives many businesses today end up talking the talk.  The industry term for this is Greenwashing. To achieve firm Sustainability, action and results require out of the box thinking. Usually, when IN the box thinking occurs on this subject, the proverbial can gets kicked down the road. Consequently, we can either kick the sides of our box out or kick the can down the road for someone else later. When the can gets kicked down the road, the costs of the same initiative become more costly.

In 2012, a survey of Americans showed 66% of us have a preference to buy from companies that actually show evidence of sustainable behaviors. It’s illogical to expect prosperity for our business when we ignore that factoid.

At Kenco, we have embraced a renewed drive for innovation. What is innovation? I define it as opposite of doing things exactly the same without consideration for improvement for multiple years.

 Innovation Initiatives from Kenco:

The costs of resources are on the rise, and they will continue to do so; especially in this time of global unrest. It is risky business to ignore the costs of inefficiency – using more electricity, water, fuel, disposal costs, than our competitors do for the same output. Enter Lean Six Sigma (LSS). The keen skill of this process of observation is key to identify inefficiencies. We need to strive to use only what we need for the required process

 Kenco offers its own in-house training for LSS certifications in Green Belt and Black Belt levels. The training is meant to teach the required skill sets; providing the basis for a generic approach to identify and resolve “bottle necks” and wasteful and out of control work practices. Learning how to use LSS with the generic skills is great but, in regard to Sustainability, identifying wasted resources and out of control processes are not natural skills. The basic qualitative aspects of knowing something’s not right can be instinctive. The skill involved in accurately specifying an alternative, and then calculating estimated cost savings of energy efficiency gains from lighting, HVAC, solar panels, window film, alternative fuels, or even low flow flushing valve upgrades, is critical and can’t be faked.

Kenco management has cultivated our Leader of Sustainability to obtain professional certifications from the Association of Energy Engineers (AEE):

  • Certified Energy Manager (CEM)
  • Certified Energy Auditor (CEA)

An interesting and fun project Kenco is working on now is our window filming project on our corporate offices in Chattanooga, TN. Our corporate offices have many south and westward facing windows, resulting in increased solar heat gain coming through the windows and UV/IR fading on interior fixtures. The US made 3M product (Night Vision) Kenco has chosen to film the windows will reduce solar heat by 66% and UV light by 99.9%. This new initiative should have less than a 5 year payback in energy alone! There is a 15 year warranty with the product and 3M adhesive and film combo is the best quality tested in our trials. By kicking the sides of our box out, we will have created energy savings and prove Kenco doesn’t Greenwash.

The gap between actual results vs. the proposed results should approach the Six Sigma level now, shouldn’t they? Only time will tell…but last year’s Sustainability Program Value Creation wasn’t bad with $1.4MM in first year savings identified and proposed. You can either go and be green or just sit and watch your competitor do it and be green with envy.

The Large and Small of Being a Top 10 3PL

Kenco Logistic Services was named a 2013 Readers’ Choice: Top 10 3PL Excellence Award winner in the annual qualitative assessment by the editors of Inbound Logistics magazine. Kenco is ranked #7 on the prestigious third-party logistics (3PL) list.

With more than 60 years of experience, over 90 facilities totaling more than 30 million square feet, and our long standing Lean Six Sigma focus; this ranking validates the advantages we give our customers in today’s highly competitive environment.

Achieving this recognition is an accomplishment to be proud of and establishes our position against larger competition. Comparison to your competitors is the nature of this industry, and this award is another validation of Kenco’s ability to rise above much larger organizations. As our customers have been quoted to say, “Kenco is big enough to handle tough business, and small enough that the customer knows they are important to Kenco.”

I believe the dedication of our entire 4,700-member team has made this achievement possible. Our longstanding commitment to integrity over profitability empowers all of us to deliver uncommon value for our customers.

The readers who voted submitted comments, which included these observations by top Kenco customers:

“Kenco wants what is best for our company, and always tries to achieve it.”

“Kenco has never let our company down as a 3PL service provider. I trust their knowledge and dedication, and know that every load they book for us will be handled with professionalism and on-time delivery.”

According to Inbound Logistics (IL) Editor Felecia Stratton, “Tactical operational results are fundamental to 3PL value, but so is the strategic vision of experienced logistics providers. IL readers say they appreciate 3PLs that are consultative, proactive, take the lead in sharing best supply chain practices, and help to drive enterprise business process improvement. Because it demonstrates that kind of supply chain expertise and vision, IL editors recognize Kenco as a 2013 Top 10 3PL Provider.”

Kenco continues to build industry leading relationships with our customers. Whirlpool, Honeywell, Cummins, Green Mountain Coffee, and Stryker Medical are just a few of those who have been with us for many years, through multiple contracts. Our commitment to partnership ahead of profits and focus on value have fostered industry leading relationships. I would like to take this opportunity to thank our customers for their confidence and continued support.

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To learn more about Kenco Logistic Services or to find out more about how we can serve you as a third-party logistics provider, contact us today.

PRICING: It’s Space and Labor

The world of pricing in logistics runs the gamut. From Mom & Pop companies who quote new business off of a rate sheet that has hung on the office wall since Grandpa was in charge; to multinational 3PLs with complex pricing models tied to real-time cost data and engineered labor standards. What remains constant is that the costs can be broken down into two categories; space and labor. Finally, you add profit to these costs and you are finished, correct?

Pinpointing the costs to run a distribution center is often very difficult. Let’s look at an example…

Your warehouse is 10,000 square feet and you pay the landlord $0.50 per foot, per month for rent, taxes, insurance and maintenance; ergo the cost is $5,000 per month. Add to this the cost of utilities, racking, phone lines, striping, dock hardware, janitorial services, trash removal, et cetera. The variability and uncertainty of the cost of space becomes apparent. For the sake of this example, let’s assume your monthly cost of space is $7,000.

The above figures beg the questions:

  • How much do you charge your customers for the space?
  • In what manner do you quote your rate; per square foot, per pallet, or per case?

We need to understand how much of the 10,000 square foot building is capable of storing product. We can’t store pallets in the break rooms, bathrooms, conference rooms, offices, docks or drive aisles. We must pay for those common areas from the storage revenue we generate from truly “sellable” storage space. Further, we cannot run an effective operation if we use all of our storage locations. We need available space throughout the building to make room for the next truckload receipt, allow for logical storage locations adjacent to picking locations, allow for minimal traffic congestion in the aisles, and so on. When a building is “full,” every pallet position is occupied, there is no room for the next inbound truckload of product, and pallets are forced to be stored in locations that are not adjacent to their point of use.

Too full, and your building is dock-locked; too empty and you can’t afford to pay your rent. Like a hotel, who does not plan on making a profit unless the hotel is full, you should not only profit from your warehouse when it is full. You must decide how full is truly “full” and how profitable the space is and still efficient to operate.

Once you figure out how many pallet positions you can efficiently fit into your 10,000 square foot building (let’s say 650 for this example), you then have the basis for calculating your storage cost, and price.

Taking our example to a more concrete illustration — Let’s assume your building is full when it is 85% occupied. You want to ensure you are profitable when the building is 70% occupied. Whenever your building is more than 70% occupied, you are making a profit on the space, but after 85% occupied, you are hurting productivity and efficiency. If the 650 pallet positions need to be 70% full to make a profit; then you need no less than 455 pallets in the building to “pay the rent” on the entire 10,000 square feet. The cost of the space, we stated earlier, is $7,000 per month. So, you must charge $15.38 per pallet position, per month, for each of the 455 pallets stored to break even on the space.

More questions:

  • What does the market bear for storage space?
  • Is $15.38 per pallet competitive?
  • Will the above price point enable you to fill your building to the desired 70-85% capacity?
  • What if you are courting a new potential customer who needs 15,000 square feet and the only available building is 30,000 square feet?
  • Who pays for the unused space in the above situation?
  • Do you pass on the opportunity? OR work with it?
  • Do you expect to win the new customer if you charge him double just to cover the cost of the new building that is twice as big as he needs?

OK.

Let’s assume you have won new business that requires you to store an average of 500 pallets per month. This is great news! They want to use all of your space needed to make a profit and then some! They additionally agree to pay $15.38 per pallet, per month. Great! You sign the lease, and await the move-in date.

THEN they tell you they are going to move in slowly over the next 3 months while the new product is produced. They expect to use an average of 250 pallet positions during the first six months of the year, and an average of 750 pallet positions during the second half of the year…averaging 500 pallets per month.

Now you’ve got problems.

You can’t pay your rent with only 250 pallets in the building; and you cannot physically fit 750 pallets in the building either.

In the pricing world, it is not enough to thoroughly understand costs, the market, and margin expectations. It is imperative to also thoroughly understand the expectations each potential customer has, and how those expectations will impact the ability to run a profitable business that is capable of meeting their needs.

Next time we can talk about labor.

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Contact us today to learn more about how Kenco can analyze and optimize your warehouse pricing. Kenco provides integrated logistics solutions that include distribution and fulfillment, comprehensive transportation management, material handling services, real estate management and information technology.

Managing Talent in a Supply Chain: Millennials/GenX/Boomers/Traditionalists

Let’s establish the generations represented in the work place and their characteristics.

According to Sally Kane on About.com:

  • Millennials – very tech-savvy, family centric, want meaningful work and a solid learning curve, they are loyal, appreciate being included, and seek frequent praise and reassurance.
  • Generation Xers – the “latch-key” generation; subsequently are characterized by their fierce independence, resourcefulness, and self-sufficient work ethic. They dislike being micro-managed and embrace a hands off management philosophy. Xers are the first generation to grow up with computers; where technology is woven into their lives. They also are known for being ambitious and eager to learn new skills but want to accomplish things on their own terms.
  • Baby Boomers – grew up in an era of reform and believe they can change the world. They are characteristically confident, independent, and self-reliant. Boomers believe in hierarchical structure and rankism; they may have a hard time adjusting to workplace flexibility trends. They believe in “face time” at the office and may fault younger generations for working remotely.
  • Traditionalists (The Silent Generation) – this generation believes you earn your own way through hard work. Traditionalists are willing put in long, grueling hours to get ahead in their careers. Traditionalists were taught to respect authority. They favor conventional business models and a top-down chain of command.

 

The Millennials are getting a lot of negative attention regarding their place in the job market. They are regarded as having delusions of grandeur, a tendency for being increasingly narcissistic and confident in abilities they do not yet possess. It has been said, they are part of a generation that thinks they are special and therefore unable to be happy with the career opportunities they can attain. Is this a fair assessment of their work ethic or is it this is the assessment of ALL young professionals before they have the chance to prove otherwise?

This topic was discussed at Kenco’s Customer Summit held in September of 2013. Boomers and Gen Xers had thoughts and solutions on how to handle a new generation. Everything from Leadership Development Programs (LDP) that lasted up to 2 years to long term broad stroke programs that allowed new employees 5-10 years of skill cultivation. As formidable as the LDP programs have been for companies, management feels the younger generation is not using the programs to their full potential.

Unfortunately, each previous generation doesn’t see the place they started; only the current situation they hold.

I believe we are not at a stalemate. Two things need to happen.

The first solution is for the Millennials to adapt their learning style to the already established working environment. Grant Cardone, New York Times best-selling author and radio talk show host of the Cardone Zone explains the Millennials can make their mark in 5 steps:

  1. Shrug off the bad rap – prove everyone wrong and set goals with a clear list of action items for your future.
  2. Opportunity is everywhere – find the people at the top; call them, tweet them, and email them.
  3. Gain access and learn – taking less money initially to gain information/access will pay off in the end.
  4. Set the bar higher than the middle class myth dictates – don’t strive for middle. Strive for greatness.
  5. Surround yourself with big thinkers and big earners – when a runner wants to get better he/she runs with someone better than them. If you want to be more successful, then be in the successful people circle.

The second solution is for the Gen Xers and Boomers to realize there are other styles of management than the one that worked for them and to incorporate different teaching styles.

  • Communication: According to a recent Dale Carnegie Training engagement study, “One of the best ways to build a strong relationship with young employees, and help them establish their own leadership skills, is through effective communication.”
  • Delegate responsibility: Giving a junior employee more responsibility empowers them to feel like a larger part of the company. The more confidence an employee has regarding their standing within an organization, the more they will be able to feel comfortable taking on a leadership role. At the same time it is important to realize when someone is overwhelmed and needs additional guidance.
  • Self-Awareness: Another finding from the Dale Carnegie Training study was employees who believe in senior management have higher overall levels of engagement. Leading by example is one of the best forms of training a senior level employee can utilize.
  • Maintain a positive work environment: Finally, establishing a positive culture in the workplace will give junior employees a clear understanding of what is an appealing work ethic and what is not.

Realizing the status quo works for some, but not most of the employment population, is the beginning of the solution. Creating a talent management process that draws on the strong suits of each generation while recognizing the barriers within the generation gaps will cultivate a formidable education platform. By implementing these action items we can leverage the strengths of each generation.

Onshoring: Is the Time Right For You?

Onshoring for U.S. businesses appears to be gaining momentum. Though there is some disagreement about the origin and stability of stronger North American manufacturing; most experts agree it is happening. Regardless of the cause, the implications of onshoring for your supply chain can be profound.

The appeal of China used to be: limitless cheap labor, growing amount of engineers, fixed currency, inexpensive land, free infrastructure, and financial incentives.

Factors eroding China’s appeal are:

  • Rising wages – In the next five years, pay rates will rise on average by 18% to about $6.31 per hour.
  • Increasing Transpacific shipping rates -The doubling of bunker-fuel prices since early 2009 is causing rates to go up.
  • Climbing cost of land – National average for land in China is $10.22 per square foot. Average for land in US varies between $1.30 (Tennessee) to $7.43 (Alabama) per square foot.
  • Soaring utility rates – The price of operating cost (electricity) has surged by 15%. 74% of China’s electricity is consumed by the industrial sector.

Moving manufacturing outside of China to another Asian Pacifica Country (APAC) may result with lower worker productivity, corruption, and increased risk to personal safety. Additionally, overextended supply chains offshore can create problems: inventory expenses, quality control problems, unanticipated travel needs, and threat of supply chain disruptions due to port closures or natural disasters.

According to Jennifer Booton of Fox Business, “The reshoring move comes as average manufacturing costs continue to fall in the US. The Boston Consulting Group (BCG) estimates the (US) will be 8% lower than the UK, 15% lower than Germany and France, 21% lower than Japan, and 22% lower than Italy. China will still be 7% cheaper than the US, but that doesn’t include the high cost of shipping and duties/taxes.”

Manufacturing in North America gives U.S. businesses faster shipping times, allowing for a more rapid response to changing market conditions by either deploying products or modifying products more quickly. It is estimated North American manufacturers will decrease in-transit time for U.S. markets by up to 25 days when compared to Asian manufacturing locations.

David Luhnow from the Wall Street Journal states, “Mexico may already be a less-expensive place to make an array of products for the U.S. market, which estimates China’s average manufacturing wage topped Mexico’s this year (2012), when accounting for differences in productivity.”

Mexico could be an option with their close proximity to the US border, duty free trade status, and lower wages than their Chinese counterpart. Although the gains will be limited due to growing concerns over personal safety, skill shortages, and poor infrastructure.

The types of companies more likely to engage in onshoring manufacturing are those with products that are high-value, high-weight, high-volume, or quickly change with innovation (auto parts, construction equipment, and appliances). For instance, a major consumer goods manufacturer, which had been opening facilities in Mexico, is now building a plant in the southeastern United States.

Analysis of BCG by Harold Sirkin and Michael Zinser, and Douglas Hohner; concludes, “within five years the total landed cost of production for many products will only be about 10 to 15 percent less in Chinese coastal cities than in some parts of the US. (Essentially) the cost gap between sourcing in China and manufacturing in the US will be minimal.”

Shifting your supply chain to a new continent doesn’t happen without careful planning. Converting an Asian-based supply chain to one in North America requires a new strategic approach in order to realize the benefits. The opportunities for improved performance include the full range of supply chain interactions, such as inventory distribution systems, production distribution, and supplier networks. If each of these aspects of your supply chain are fully optimized, then the benefits attributable to moving manufacturing to North America can be much greater than simply reducing cycle times and inventory costs.

How do you determine if onshoring makes sense for your supply chain? This is where the science of supply chain management can be leveraged to maximum effect. Thanks to decades of innovation and education, the logistics industry can now provide solutions to supply chain management problems through problem solving and analysis that delivers world class results with high reliability. There are many well-established consultants and 3PLs who can responsibly guide you through the complexities of supply chain redesign.

We can’t predict how fast onshoring will grow and stabilize, but we do know many manufacturers we talk with are either planning or implementing onshoring strategies now.

Is it time for you to join them?

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Contact us today to learn more about how Kenco can optimize your supply chain. Kenco provides integrated logistics solutions that include distribution and fulfillment, comprehensive transportation management, material handling services, real estate management and information technology.

The Importance of a Company’s History, Values, and Culture

On August 1, 1950, Kenco began with just two employees–my father, Jim Kennedy, Jr. and my uncle, Sam Smartt, Sr. They started with just one 100,000 square-foot warehouse in Chattanooga, Tennessee. Today, Kenco is one of the largest family-owned and privately held third-party logistics providers (3PL) in the United States with more than 100 facilities and 4,500 employees across North America.

To honor our founders, employees and this remarkable company, we established an internal company holiday called Kenco Founders’ Day. We celebrated with an inaugural event on August 2nd where we held a special ceremony at our company’s Chattanooga headquarters. That same day, Kenco employees hosted similar celebrations at every site across our network.

As we celebrated our first Founders’ Day, I couldn’t help but reflect on what has made our company so successful. I believe it is because we have extraordinary people who make our company the best it can be. I believe that is what sets our company apart from others is its history, family culture and unique values. I know these values are unique because I hear about them from our customers and from you who respect our commitment to integrity and partnership.

On Kenco’s 60th Anniversary, my father put to paper the “Ten Principles of Success” which defined the culture established in 1950 and the one that we enjoy today. These principles were condensed into an easy-to-remember list that we call our “Guiding Principles.” They state our values, define our culture and guide our actions. In recent months we have made an effort to make these principles highly visible to all our employees through onsite posting and personalized wallet-size cards. In addition, our executive team has visited or has plans to visit every site to reinforce the importance of our culture and values.

One of the best ways to communicate our values is through the sharing of stories from our company’s rich history. My dad is a great story teller. He uses these stories to share some of the lessons he has learned in the business and to guide us in our work relationships.

One of my favorite stories that illustrates commitment, camaraderie and putting customers first, dates back to our company’s early beginnings when my father and uncle were the only two employees. Since it was commonplace for them to trade the duties of making sales and working in the warehouse, each would wear the appropriate clothing for his role that day. However, on a day when my dad happened to be wearing jeans to work in the warehouse, one of his customers called on short notice and wanted to meet that same day. As soon as he got off the phone, my dad went to my uncle Sam (his brother-in-law) and asked if he would trade clothes so he could be properly dressed for the meeting. Without hesitation, Uncle Sam removed his suit and traded for the “work jeans.” My dad was then able to attend his meeting in professional attire.

This story is a good example of commitment and camaraderie (and resourcefulness) – values our founders practiced daily to build a successful company. I am pleased to say these same guiding principles are very much alive today because I hear our employees’ stories and see these principles practiced daily.

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Kenco provides integrated logistics solutions that include distribution and fulfillment, comprehensive transportation management, material handling services, real estate management and information technology. Contact us today to learn more!