It appears that the era of motor carrier collective ratemaking is over. After nearly 10 years of deliberation, the Surface Transportation Board (STB) last month eliminated antitrust immunity for motor carrier bureaus engaged in col lective ratemaking and freight classification. "This will help the shipping community because each individual carrier will be fighting for its own traffic, rather than having that [rate] protection," says transportation consultant Cliff Lynch, principal of Clifford F. Lynch & Associates. "I think it's a good thing. Things will certainly get a little more interesting in the marketplace."
"We have felt for many years that collective ratemaking by carriers is anticompetitive and does not benefit shippers," says Gail Rutkowsi, director of operations at AIMS Logistics and president of the National Shippers Strategic Transportation Council (NASSTRAC).
The ruling takes effect after a 120-day waiting period, which means price competition may begin to heat up toward the end of the summer. However, consultants agree that the ruling will be appealed. At the least, an extension may be sought to allow industry to better prepare for the massive changes about to take place. Once implemented, the decision could save shippers anywhere from 5 to 10 percent on truck rates.
John Cutler, general counsel for NASSTRAC, says his group will oppose an extension of the 120-day waiting period, as well as an appeal. Cutler adds that NASSTRAC will seek a price freeze if an extension is granted to keep bureaus from trying to put through one last general rate increase.
But at least one observer worries that the 120-day window might be too short. Longtime industry consultant Hank Mullen of Mullen Associates says the tight timeframe could create havoc in the marketplace as shippers and truckers scramble to adjust to the phase-out of a practice that has been in place for 70 years. "I am of the opinion that the system needs to change, but not at the cost and confusion this will create," says Mullen. "I'd say it is easily another year before this settles down, and even that would be kind of fast." He adds that the 37-page rulemaking alone could take some companies weeks to digest.
Though the STB decision is likely to have a huge impact on its operations, SMC3 has yet to comment on the ruling beyond acknowledging its existence. The Peachtree City, Ga.-based bureau publishes CzarLite, the de facto standard for the base tariffs used by many less-than-truckload carriers in their rate negotiations. "SMC3 will be evaluating the STB's decision in detail in order to fully address both the challenges and opportunities it presents us and our customers," says Danny Slaton, who is senior vice president, business development for SMC3. "We will provide regular updates to our customer segments regarding our business responses to the decision."
While the STB's decision means that carriers will be required to develop rates individually—rather than collectively—in the future, they will still be allowed to use the National Motor Freight Classification for rating shipments, as long as all parties to the negotiation agree. The classification, which rates commodities on density, handling difficulty, and other factors, is often used to establish pricing for particular products. Changes in class ratings, however, will now be subject to negotiation, instead of being imposed by carriers acting collectively.
"This is an issue we've been working on for more than 10 years," says Cutler. "Motor carrier collective ratemaking is a holdover from the cartel era of trucking industry pricing and is inconsistent with the competitive goals of deregulation. Reforms the STB adopted in the last round of proceedings did not solve the problem, so NASSTRAC welcomes the new decision by the Surface Transportation Board. Shippers and carriers benefit from competition. That is the main lesson of deregulation."
planning for automation
It might seem intuitive: better workforce planning and scheduling will lead to greater productivity in the distribution center. Unfortunately, knowing and doing are not always the same thing. A recent study of workforce planning and scheduling practices conducted by the University of Wisconsin at Madison's E-Business Consortium reveals that in many DCs, there's a big gap between the real and the ideal.
The study was designed to identify current practices for workforce planning and scheduling, and to determine whether greater automation might yield benefits. What researchers found was that manual processes continue to dominate both planning and scheduling practices. Fifty-nine percent of the respondents reported using manual practices for planning, while a mere 3 percent said their processes were fully automated. An even greater percentage—67 percent—said they used manual processes for scheduling labor, while just 2 percent said they had automated their processes.
A slight majority of the participants said they were dissatisfied with their companies' current planning processes. A greater percentage said they believed that automating those processes would pay off in greater workforce utilization. And most believed the payoff could be significant; two-thirds of the survey participants estimated that automating their planning and scheduling processes would improve workforce utilization by anywhere from 6 to 20 percent.
Nonetheless, the survey respondents said their biggest frustration wasn't their own scheduling woes but the lack of visibility into future demand and the inaccuracy of forecasts they do receive. Survey respondents believe automation would ease the process of converting demand forecasts into accurate workforce requirements and allow them to simulate staffing requirements based on the forecast information.
"According to the overwhelming majority of survey respondents, the primary benefit of automated workforce planning capabilities would be more efficient and effective labor utilization, as well as the closely related benefits of reduced unit labor costs and improved customer satisfaction," the report says.
Most of the 196 respondents to the survey, which was sponsored by supply chain software and services provider RedPrairie, were managers or directors within the distribution, logistics, or operations functions of various-sized companies in 11 industry segments. The full study, "Workforce Planning and Scheduling in Warehouses and Distribution Centers," can be found at <www.dcvelocity.com/workforcestudy.
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."