For well over a decade, third-party service providers 3PLs have been the lost boys of logistics, with no trade association to call their own. Joel Hoiland hopes to change that by welcoming them into the International Warehouse Logistics Association.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
As both buyers and sellers of logistics services, third—party logistics providers (3PLs) have always been an uneasy fit with exis ting trade groups and professional associations. Truth be told, they haven't even been a natural fit with what's nominally their own group—the International Warehouse Logistics Association (IWLA )—whose members are all too often dismissed as warehouse operators. IWLA's head, Joel Hoiland , aims to change all that. He's come up with a plan to open up the group to a broader membership, effectively repositioning it to provide a home for the lost boys of logistics.
Though Hoiland is undoubtedly betting his future on the plan, it doesn't exactly smell of risk. Dubbed 3PLs back in the early 1990s, these companies have enjoyed a steady increase in both buying power and influence over the past 10 years. Third party providers today account for over 15 percent of the $970 billion logistics market—up from less than 1 percent in 1990. That's a market segment that's hard to ignore, and Hoiland is determined not to let it happen.
Q: What made you decide that it was time to reposition IWLA and open its membership to other providers?
A: Though our members represent nearly 400 million square feet of outsourced warehouse space and provide timely and cost-effective global logistics solutions for their customers, we've seen a downward trend in membership over the past four to five years.Although we see a continued decline in the numbers of traditional warehousing distribution companies, we see an increase in companies calling themselves "third-party logistics providers."
Q: Have you seen that downward trend among companies that exist specifically and solely to provide warehousing service?
A: That's correct. Actually, we've seen an increase in the logistics dollars spent on 3PL services, particularly on third-party warehousing and distribution. So there's more money being spent by private companies, but it's being spent with fewer and fewer third-party providers.
Of the top three reasons we lose members, number one is that companies go out of business. Number two is that companies run into financial difficulty, which typically leads to number one. The third reason is that companies have been bought or sold—there's been an acquisition of some sort. Though most of our members are privately held, family-owned businesses, more investment companies and even publicly held companies have entered this space.
Q: The steps you're taking clearly reflect market conditions, but don't they also reflect your vision of where the market's going?
A: We truly believe that this market is stratifying into three basic categories, although it's not always this simple. We believe that the lion's share of the money is going to be spent on commodity-type services. These would be warehousing and transportation-related services, but they're going to be very price sensitive. The next level up will be partnership-type relationships among companies. That's where 3PLs provide a variety of valueadded services in addition to those basic commoditized services. At the top would be those companies that provide strategic solutions, serving as what are sometimes known as lead logistics providers. As such, they form a high-level relationship with a customer and assist with the supply chain process development.
Q: All of those would find value in membership with your organization?
A: Certainly, because our purpose as we go forward is to become an association of third-party logistics providers. Ours will be the only organization exclusively focused on promoting excellence in logistics outsourcing. Our objectives are number one, to define the standards of excellence in logistics outsourcing; number two, to work with member organizations to meet these standards through education and professional programs; and number three, to promote these standards and advance logistics outsourcing in the logistics community.
Q: Third-party logistics companies basically come in two varieties: asset-based and non-asset based service providers. The asset-based providers have traditionally brought either transportation-related assets or distribution center/warehousing assets to the table. It's no surprise, given the organization's history, that your members come largely from the ranks of warehouse-asset-based 3PLs. Are they expanding their service menus to go beyond just third-party warehousing?
A: Most certainly. In early 2002, I took a comprehensive industry marketing initiative to our board of directors. It was a very aggressive plan that called for a significant amount of money to be spent on promoting the industry. At the top of the list was the development of a branding strategy. The board decided to tackle that piece first. So in March 2002, we launched an effort to assess our current name in the marketplace and our brand equity and then develop a strategy based on what we found.
We then went out and hired a branding consultant. We tested IWLA as a name, what it meant internally, externally, the whole nine yards. The consultant brought findings and recommendations to our board in November. It was at that time that we learned that although the majority of our members have come from the third-party warehousing and distribution business and continue to provide those services, 98 percent also provide transportation services.
Q: That's 98 percent of your existing members?
A: Of our existing members. Nearly all of our existing members provide value-added services.
Q: Did that come as a surprise?
A: Yes, although it's hard at times to convince all of our members that it's true. We also found that nearly everyone provided IT solutions for their customers. We found that one in five of our members was providing consulting services on a fee basis, which was much higher than we expected. So our consultant said, 'You call yourselves a warehouse/logistics association when, in fact, that's not really the case. Your people are third-party providers.' Most of them started in the warehousing business. Some of them started in the transportation business and expanded into warehousing, but today they call themselves third-party providers or in some cases, lead providers. So our traditional members are changing fast. We also discovered, not surprisingly, that most people outside the organization thought of us as a warehouse association.
Q: So you found that essentially the membership itself had changed to a point where a major repositioning would better reflect what the members did?
A: That's right. That was part of the reason we commissioned Dale Rogers of the University of Nevada to conduct a 3PL trends and practices study. He presented the findings at our convention in March. One of the things he discovered was that only 20 percent of our members today use "warehouse" in their name—a dramatic change from 10, 20, 50 or 100 years ago.
Q: That's a powerful finding considering that not too many years ago, your organization was called the American Warehouse Association.
A: Yes. Even the use of the term "warehousing" is declining rapidly.
Q: Third-party logistics service providers occupy a unique position in the market. On the one hand, they provide logistics services. But on the other, they're also heavy consumers of logistics services—they frequently have to contract for additional space or hire a trucker or other freight carrier to serve their customers.
A: Definitely. I think very few people have come to that realization. Third parties represent tremendous buying power in the market as well as being service providers themselves.
Q: That goes a long way toward debunking the old notion that asset-based 3PLs exist merely to channel revenue to their core business, whether warehousing or transportation. Have the buyers of 3PL services gotten past that concern yet?
A: I think they have, but there are different types of buyers. Some are highly sophisticated; others are still new to the outsourcing of logistics services. One of the challenges and perhaps opportunities for our members and third-party providers is identifying the type of customer they're dealing with and then adjusting their service offerings to that customer's needs. Frankly, I think that's why there's so much opportunity in this industry. Not only for people who have been in this business for a while, but also for those who are just starting out. There are so many different niches available. It's a vast industry and it's going to expand exponentially in the next five to 10 years.Many people report that it's growing at a 15- to 20-percent rate. That's significantly faster than most other industries.
Q: Significantly faster than most other industries, and considerably faster than the traditional function-based logistics services.
A: Without a doubt. You know, many different sectors are feeling the squeeze. I know that the wholesaler- distributor industry, if that's a proper term, is looking at 3PLs with great concern.They have a right to be concerned because that whole middle market between the manufacturer and the end user is being squeezed. The 3PLs are in an enviable position: Their core competency is managing inventory-moving, storing and strategically positioning that inventory near particular manufacturing operations or consumer markets. Manufacturers and major retailers have recognized it already.
The industry today is much like the old Wild West, because there are a lot of unknowns as to where it's going and how it's going to mature. The outsourcing business is picking up. It is only going to snowball further as we develop best practices. I believe our association can play a key role in defining standards of excellence so that customers will know what they should be looking for and how to identify companies that can meet those standards.
Q: Part of your repositioning strategy included a name change, which your members voted down. What was the name you proposed?
A: The Association of Logistics Outsourcing. The proposal was rejected by a very small margin—fewer than 20 votes out of over 250. But, even without a name change,the board is still moving forward in a new direction.
Q: I know part of your repositioning task has been to develop a document that addresses the group's future. What will your organization look like three or four years from now? What will tell you that you did the right thing?
A: We want to be recognized as the world's leading association for logistics outsourcing. That's number one. Number two, we want to be the source for logistics outsourcing information. Number three, we want to be known as the organization that's defining the standards of excellence in logistics outsourcing.When we're acknowledged as such by members, by non-members, by customers and by the general public we'll know we've succeeded.
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."