To stay square with the EPA, makers of big diesel engines have found new ways to curb the clouds of noxious diesel exhaust. But the low-emissions engines carry a high price.
It may be small comfort as you sit stalled behind an 18-wheeler in traffic, sucking soot down into your lungs from the clouds of diesel exhaust. But our air's actually getting cleaner all the time. Makers of big diesel engines have tinkered furiously with their products in the past few years to bring them into compliance with the first phase of the EPA's tough anti-pollution rules. And they've made real strides in getting the lead—or more precisely, the nitrogen oxide and particulates—out; nitrogen oxide alone is expected to be down a third from 1998 levels by the end of this year. Now they're gearing up to meet the next phase of the agency's aggressive timetable. With luck, Americans everywhere will be inhaling far fewer particulates and a lot less nitrogen oxide (NOx) by 2010.
But there's a price to pay for cleaning up this act. The new low-emissions engines introduced in October 2002 cost more than their predecessors—anywhere from $2,500 to $4,000 more per unit, according to Fleet Owner magazine. They also burn fuel more freely. And those are just the quantifiable concerns. What's really giving fleet operators the chills are the unknowns: Will the new engines need more frequent maintenance? Will they stand up to the day-in/day-out demands of real-world hauling conditions? Will they last as long as the older, non-compliant models?
The engine manufacturers themselves are unhappy about the uncertainties, but they point out that they've had to meet what they consider a tough set of standards in a very short time. The first phase of the EPA's rules, which called for lowering both NOx and particulates (soot), were originally set to take effect in 2004. But as part of a $1 billion 1998 settlement arising from an EPA "enforcement action" against engine makers for alleged testing irregularities, "several engine manufacturers had to sign a consent decree with the EPA to move the standards ahead to 2002," explains Bill Gouse, vice president of engineering at the American Trucking Associations (ATA), based in Alexandria, Va.
Moving up the deadline meant scaling down the testing. And that's what worries truckers."While we supported the 2004 standard," says Gouse,"we weren't able to test the product as we would have liked in time for the 2002 pull ahead, so there were a lot of concerns about the new engines." Adds Tom Freiwald, senior vice president of marketing for Detroit Diesel, "We worked closely with the EPA and we wanted the new engine introduction process to go as smoothly as possible. But the truck manufacturers and their customers would have preferred to test the technology before it was int roduced. They usually get two years to do this, and that didn't happen this time."
Not ready for prime time?
Given the time constraints for compliance, most manufacturers opted to outfit their engines with cooled exhaust gas recirculation (EGR) hardware to cut NOx emissions. Under this system, much of the exhaust stream is recirculated, cooled and then reintroduced into the combustion chamber, where it's burned off.
The fix was quick, as fixes go, but it's also somewhat experimental. Because this technology's largely unproven, many fleet owners fear that the engines' longevity may be compromised. "We'd like to stay on the same [engine] life cycle of about 800,000 miles," says Steve Duley, vice president of purchasing for Schneider National of Green Bay, Wis."Logic would tell you that with the new technology, the new engines won't last as long, but right now it's too early to tell."
Another concern has been the amount of maintenance the low-emissions engines will require,though the manufacturers downplay this one."The standard used to be oil changes at 15,000 to 25,000 miles, although changes with our engines were typically at 35,000 miles," says Tom Kieffer, executive director of marketing at Cummins, based in Columbus, Ind. "With the new engines, we recommend changing at 25,000 miles, which is still above standard."
But Gouse says that this one's too early to call."In some of the new engines,exhaust is cycled back into the oil,so the oil must do more work," he reports. "So we really don't know yet how this will play out."
Perhaps the truckers' biggest concern has been fuel economy. The EGR technology is said to cut fuel efficiency anywhere from 3 percent all the way to 15 percent, depending on who you talk to."This is the first time we've had a reduction in fuel economy from new engines," Gouse notes.
Freiwald of Detroit Diesel counters that the engine manufacturers are continually working to improve fuel economy, and the industry can expect improvements in this area in the future. "We have to be sensitive," he says. "The fuel economy issue hasn't been as bad as people had predicted, but it is a loss." In fact, Freiwald believes that as a whole,the en gines have perform ed mu ch bet ter than pred icted . "People who tried to get the standard delayed based their arguments on the worst-case scenario," he says. "The issues were unknown then," he says, "but most of them haven't come to fruition."
Rush delivery
Those assurances apparently weren't enough for fleet operators, however. Many hastily revised their spending plans last year and pre-bought trucks equipped with engines made prior to the October 2002 deadline. Ann Arbor, Mich. -based Con-Way Transportation Services, for instance, pre-bought all of its truck needs for 2003. Con- Way,which operates three regional less-than-truckload carriers that provide service across the United States, bought 400 new trucks before the October 2002 deadline kicked in, forestalling the need to purchase any trucks in 2003. "And we're not planning on buying any in 2004 either," says Doug Stotlar, COO and executive vice president for the company. "Our concern was that when technology changes this quickly, it's not given an adequate test period."
Schneider National, based in Green Bay, Wis., also prebought tractors. "There weren't any engines available for testing to help us make a decision about the technology," says Duley. "We did our best to help delay the standard, but that didn't work."
Schneider bought about a third more trucks than it normally would have for 2003 in advance of the new standard. Since that time, the company has also purchased 50 trucks with the new engines to begin testing their performance and will start adding some of the trucks to its fleet in the coming months.
This spike in demand disrupted operations not only for the engine manufacturers, but for the truck manufacturers as well. Many had to go from one or two shifts to three on short notice in order to meet the sudden demand for vehicles equipped with the pre-standard engines.
Yet most of the engine manufacturers insist they were able to weather the pre-buy storm as well as the ensuing sales drought. "There was about a two- to three-month drop-off," admits Kieffer of Cummins, "but it wasn't as significant as had been predicted. We're at or exceeding our plan for market size at this point in the year."
Too much, too soon?
Fleets won't be able to put off equipment purchases indefinitely, however; at some point, they'll have to make the switch. And when they do, they'll have to choose between two competing technologies. Two of the Big Three engine manufacturers—Cummins and Detroit Diesel—met the 2002 EPA standard by adding EGR technology to their new engines; the third, Caterpillar, took a different route, developing advanced combustion emission reduction technology (ACERT) . But because it has only recently been able to put its ACERT technology to work in its engines, Caterpillar has had to pay fines for its out-of-compliance engines in the interim.
Yet Caterpillar dismisses the fines, which averaged $3,000 per engine, as a small price to pay for the added development time."We knew we couldn't have the ACERT technology available in time for the 2002 deadline," says spokesman Carl Volz. "But the ACERT technology is revolutionary and will certify our engines in time for the next deadline."
That will come in 2007, when the final stages of the EPA's anti-pollution mandate start to kick in. The 2007 standards, which focus on further reducing NOx and particulates, have the fleet owners seriously worried. According to Stotlar, none of the engine manufacturers has yet been able to demonstrate a clearly delineated strategy for meeting the stand a rds even though they must be ready for testing the new technology by 2004.
At this point, the industry's best hope for meeting the NOx limits appears to be installing an aftertreatment device known as an adsorber. But that won't be cheap. Stotlar of Con-Way estimates the cost of installing NOx adsorbers on engines at anywhere from $4,000 to $15,000 apiece, and he predicts another large equipment pre-buy prior to 2007. "Those buying and using the engines will have to pass that cost along to the consumer," he says."We support clean air," adds Duley of Schneider."But these standards are too much to absorb, too quickly."
First, 54% of retailers are looking for ways to increase their financial recovery from returns. That’s because the cost to return a purchase averages 27% of the purchase price, which erases as much as 50% of the sales margin. But consumers have their own interests in mind: 76% of shoppers admit they’ve embellished or exaggerated the return reason to avoid a fee, a 39% increase from 2023 to 204.
Second, return experiences matter to consumers. A whopping 80% of shoppers stopped shopping at a retailer because of changes to the return policy—a 34% increase YoY.
Third, returns fraud and abuse is top-of-mind-for retailers, with wardrobing rising 38% in 2024. In fact, over two thirds (69%) of shoppers admit to wardrobing, which is the practice of buying an item for a specific reason or event and returning it after use. Shoppers also practice bracketing, or purchasing an item in a variety of colors or sizes and then returning all the unwanted options.
Fourth, returns come with a steep cost in terms of sustainability, with returns amounting to 8.4 billion pounds of landfill waste in 2023 alone.
“As returns have become an integral part of the shopper experience, retailers must balance meeting sky-high expectations with rising costs, environmental impact, and fraudulent behaviors,” Amena Ali, CEO of Optoro, said in the firm’s “2024 Returns Unwrapped” report. “By understanding shoppers’ behaviors and preferences around returns, retailers can create returns experiences that embrace their needs while driving deeper loyalty and protecting their bottom line.”
Facing an evolving supply chain landscape in 2025, companies are being forced to rethink their distribution strategies to cope with challenges like rising cost pressures, persistent labor shortages, and the complexities of managing SKU proliferation.
1. Optimize labor productivity and costs. Forward-thinking businesses are leveraging technology to get more done with fewer resources through approaches like slotting optimization, automation and robotics, and inventory visibility.
2. Maximize capacity with smart solutions. With e-commerce volumes rising, facilities need to handle more SKUs and orders without expanding their physical footprint. That can be achieved through high-density storage and dynamic throughput.
3. Streamline returns management. Returns are a growing challenge, thanks to the continued growth of e-commerce and the consumer practice of bracketing. Businesses can handle that with smarter reverse logistics processes like automated returns processing and reverse logistics visibility.
4. Accelerate order fulfillment with robotics. Robotic solutions are transforming the way orders are fulfilled, helping businesses meet customer expectations faster and more accurately than ever before by using autonomous mobile robots (AMRs and robotic picking.
5. Enhance end-of-line packaging. The final step in the supply chain is often the most visible to customers. So optimizing packaging processes can reduce costs, improve efficiency, and support sustainability goals through automated packaging systems and sustainability initiatives.
Keith Moore is CEO of AutoScheduler.AI, a warehouse resource planning and optimization platform that integrates with a customer's warehouse management system to orchestrate and optimize all activities at the site. Prior to venturing into the supply chain business, Moore was a director of product management at software startup SparkCognition. He is a graduate of the University of Tennessee, where he earned a Bachelor of Science degree in mechanical engineering.
Q: Autoscheduler provides tools for warehouse orchestration—a term some readers may not be familiar with. Could you explain what warehouse orchestration means?
A: Warehouse orchestration tools are software control layers that synthesize data from existing systems to eliminate costly delays, streamline inefficient workflows, and [prevent the waste of] resources in distribution operations. These platforms empower warehouses to optimize operations, enhance productivity, and improve order accuracy by dynamically prioritizing work continuously to ensure that the operation is always running optimally. This leads to faster trailer turn times, reduced costs, and a network that runs like clockwork, even during fluctuating demands.
Q: How is orchestration different from a typical warehouse management system?
A: A warehouse management system (WMS) focuses on tracking inventory and managing warehouse operations. Warehouse orchestration goes a step further by integrating and optimizing all aspects of warehouse activities in a capacity-constrained way. Orchestration provides a dynamic, real-time layer that coordinates various systems and processes, enabling more agile and responsive operations. It enhances decision-making by considering multiple variables and constraints.
Q: How does warehouse orchestration help facilities make their workers more productive?
A: Two ways to make labor in a warehouse more productive are to work harder and to work smarter. For teams that want to work harder, most companies use a labor management system to track individual performances against an expected standard. Warehouse orchestration technology focuses on the other side of the coin, helping warehouses "work smarter."
Warehouse orchestration technology optimizes labor by providing real-time insights into workload demands and resource availability based on actual fluctuating constraints around the building. It enables dynamic task assignments based on current priorities and worker skills, ensuring that labor is allocated where it's needed most, even accounting for equipment availability, flow constraints, and overall work speed. This approach reduces idle time, balances workloads, and enhances employee productivity.
Q: How can visibility improve operations?
A: Due to the software ecosystem in place today, most distribution operations are highly reactive environments where there is always a "hair on fire" problem that needs to be solved. By leveraging orchestration technologies, this problem is mitigated because you're providing the site with added visibility into the past, present, and future state of the operation. This opens up a vast number of doors for distribution leadership. They go from learning about a problem after it's happened to gaining the ability to inform customers and transportation teams about potential service issues that are 24 hours away.
That clash has come as retailers have been hustling to adjust to pandemic swings like a renewed focus on e-commerce, then swiftly reimagining store experiences as foot traffic returned. But even as the dust settles from those changes, retailers are now facing renewed questions about how best to define their omnichannel strategy in a world where customers have increasing power and information.
The answer may come from a five-part strategy using integrated components to fortify omnichannel retail, EY said. The approach can unlock value and customer trust through great experiences, but only when implemented cohesively, not individually, EY warns.
The steps include:
1. Functional integration: Is your operating model and data infrastructure siloed between e-commerce and physical stores, or have you developed a cohesive unit centered around delivering seamless customer experience?
2. Customer insights: With consumer centricity at the heart of operations, are you analyzing all touch points to build a holistic view of preferences, behaviors, and buying patterns?
3. Next-generation inventory: Given the right customer insights, how are you utilizing advanced analytics to ensure inventory is optimized to meet demand precisely where and when it’s needed?
4. Distribution partnerships: Having ensured your customers find what they want where they want it, how are your distribution strategies adapting to deliver these choices to them swiftly and efficiently?
5. Real estate strategy: How is your real estate strategy interconnected with insights, inventory and distribution to enhance experience and maximize your footprint?
When approached cohesively, these efforts all build toward one overarching differentiator for retailers: a better customer experience that reaches from brand engagement and order placement through delivery and return, the EY study said. Amid continued volatility and an economy driven by complex customer demands, the retailers best set up to win are those that are striving to gain real-time visibility into stock levels, offer flexible fulfillment options and modernize merchandising through personalized and dynamic customer experiences.
Geopolitical rivalries, alliances, and aspirations are rewiring the global economy—and the imposition of new tariffs on foreign imports by the U.S. will accelerate that process, according to an analysis by Boston Consulting Group (BCG).
Without a broad increase in tariffs, world trade in goods will keep growing at an average of 2.9% annually for the next eight years, the firm forecasts in its report, “Great Powers, Geopolitics, and the Future of Trade.” But the routes goods travel will change markedly as North America reduces its dependence on China and China builds up its links with the Global South, which is cementing its power in the global trade map.
“Global trade is set to top $29 trillion by 2033, but the routes these goods will travel is changing at a remarkable pace,” Aparna Bharadwaj, managing director and partner at BCG, said in a release. “Trade lanes were already shifting from historical patterns and looming US tariffs will accelerate this. Navigating these new dynamics will be critical for any global business.”
To understand those changes, BCG modeled the direct impact of the 60/25/20 scenario (60% tariff on Chinese goods, a 25% on goods from Canada and Mexico, and a 20% on imports from all other countries). The results show that the tariffs would add $640 billion to the cost of importing goods from the top ten U.S. import nations, based on 2023 levels, unless alternative sources or suppliers are found.
In terms of product categories imported by the U.S., the greatest impact would be on imported auto parts and automotive vehicles, which would primarily affect trade with Mexico, the EU, and Japan. Consumer electronics, electrical machinery, and fashion goods would be most affected by higher tariffs on Chinese goods. Specifically, the report forecasts that a 60% tariff rate would add $61 billion to cost of importing consumer electronics products from China into the U.S.