After a quarter century of calling the shots with truckers, logistics pros are having to adjust to a very different reality. Here's how they're coping.
(This is part three of a three-part series. Read parts one and two.)
When the going gets tough, the tough get ... creative. At least that appears to be the case with America's supply chain managers as they face what amounts to a crisis in trucking. Not that they have much choice. After 25 years of what could best be described as a buyer's market where transportation services were concerned, the tables have turned. As a result of rampant industry consolidation and a driver shortage, the once plentiful supply of trucks has dried up.
For shippers, that's a crisis indeed. Managers long accustomed to simply picking up the phone and hiring a truck are learning it's not so simple anymore. First, they have to locate a carrier that actually has capacity—no easy task. And even if they manage to find a truck, they still have to persuade the trucker to take their freight. With demand for trucks far outstripping supply, the carriers that are still around can afford to be downright choosy about whose freight they'll accept.
That's left shippers scrambling to make their business more attractive to carriers. No longer are they letting invoices gather dust on a corner of their desks; the smart ones, at least, are paying bills promptly. And they're making a serious effort to minimize freight claims (which can be as simple as changing loading procedures).
But beyond those obvious steps, shippers have come up with increasingly creative ways to make their operations more carrier-friendly. They're shipping more loads on pallets, hiring "lumpers" and launching incentive programs. They're rerouting truck traffic around their facilities to eliminate traffic snarls, and they're investing in software. They're also re-evaluating the modes of transport and the carriers they use.
To learn more about how the nation's supply chain managers are responding to the crunch, the Warehousing Education and Research Council (WERC) conducted an online survey of both WERC members and DC VELOCITY readers late last spring. By the time the survey's cutoff date rolled around, managers from 722 companies, representing more than 10 percent of all distribution facilities in the major markets in the country, had responded, giving us a detailed picture of the actions they've taken. What follows is a summary of what they said.
FIGURE 1
How have you dealt with the shortage of trucks?
Change
Percentage of respondents
Changed to intermodal
27.8
Added carriers to approved list
66.0
Changed carriers
55.0
Considering adding private fleet
10.0
FIGURE 2
What have you done to increase DC turn time?
Change
Percentage of respondents
Added trailer dock area
24.8
Changed shipping schedule
47.0
Increased warehouse staff
16.8
Added truck doors
7.8
Added drop-and-hook system
20.0
Changed operating schedule
39.0
Added staging areas
27.0
Added more areas for trailer drops
18.0
A closer look at carriers
The obvious response to a shortage of suppliers, of course, is to cast a wider net. And so, in a reversal of a longtime trend, shippers that once consolidated their business with a few core carriers are now actively soliciting new haulers. About two-thirds of the respondents said their companies had added carriers to their approved list. (See Figure 1.) As one of the executives remarked, "I just needed more trucking options."
Others have changed carriers. More than half of the respondents said they had revised the slate of carriers they used. And in some cases, they have turned to brokers as a way of expanding their carrier base.
Still others apparently have decided to take matters into their own hands. About 10 percent of the respondents said they were considering starting up their own private fleet. One manufacturer described his company's strategy as adding "pop-up fleets" in areas where service was inadequate.
And more than a quarter have actually changed transport modes, shifting freight from trucks to intermodal truck/rail transport. A full 27.8 percent of the respondents said they had switched to intermodal transport, an account that's consistent with the large increase in intermodal traffic reported by the nation's railroads.
Catering to carriers
For those sticking with truck transport (at least for now), the capacity crisis has evidently sparked a review of their internal operations. Almost half of the survey respondents reported that they had modified their shipping/receiving procedures to increase turn time at the DC, thus making their operations more carrier-friendly. Many respondents, for example, have expanded their shipping hours to give their carriers more flexibility in their routing even if it meant adding a second shipping and receiving shift.
While some have added (or reassigned) personnel to accommodate a second shift, others have invested in equipment. About one-fifth of the respondents said they had established a drop-and-hook system for truckload carriers, which allows carriers to drop off a trailer for loading or unloading at the shipper's convenience, hook up a new one and be on their way. Although this eliminates the dwell time problem for carriers, it often requires the shipper to buy extra trailers. Still, some have apparently decided it's worth the cost.
As further evidence of shippers' commitment to improving efficiency, many of the respondents said they had made physical alterations to their facilities, such as reconfiguring their space to expand their product and/or trailer staging areas. Some even said they had enlarged their DCs and yards, adding staging areas, trailer drop areas or dock doors, a strong indication that they do not consider this to be a short-term problem.
Curiously, despite their ambitious expansionary plans, companies remain reluctant to hire more workers. Although about 30 percent said they had added inventory and 39 percent had changed their operating schedules, only 16.8 percent said they had expanded their warehouse staffs. (See Figure 2.)
Attitude adjustment
Respondents have used their ingenuity to come up with still other creative ways to ease the crunch. Some, like Limited Brands Logistics Services (see preceding story), have sought out a non-competing user that needs transport at a different season (or in a reciprocal place) in hopes of creating a mutually beneficial collaboration. This type of opportunity is obvious if you look; most are not looking.
Others have attempted to ease the problem by collaborating more closely with their carriers. They've set up regular meetings at which they share forecasts or work out problems.
But what's also clear is that even as they fine-tune their operations, the survey respondents are also hedging their bets. Almost 30 percent are doing what was once unthinkable: increasing inventories. For years, one of the primary goals of U.S. business has been to reduce inventories. But now those same companies that eagerly embraced Quick Replenishment and Efficient Consumer Response programs are abandoning those initiatives. Instead, they're stockpiling inventories to offset transportation service deficiencies—a trend that's reflected in the national inventory statistics.
As for the future, it appears that the survey respondents aren't expecting relief anytime soon. More than half of the respondents (53 percent) said they didn't expect to see much improvement over the next year. Indeed, those on the most pessimistic—or perhaps, realistic—end of the spectrum are convinced that the scarcity problem is here to stay. It may not be pretty, they say, but it's logistics' new reality.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."