With decision-making spread across multiple locations and many employees, Dayton Superior had little control over its transportation spending. Bringing discipline to its transportation management process helped the company cut costs and create a more efficient system.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
If there's one thing logistics managers don't like, it's feeling that their operations are not completely under control. But that's just how senior managers at Dayton Superior Corp. undoubtedly felt a couple of years ago when they took a look at the company's transportation practices. Unfortunately, their suspicions turned out to be correct: The manufacturer and distributor of concrete construction products had no systematic control of its freight spend.
This was no small matter. The $500 million company, which sells specialized products such as ties and inserts, bar supports, chemicals, and clamp systems for concrete construction projects, had a direct freight spend of about $40 million annually, split about equally among flatbed, less-than-truckload, and truckload carriers. Another $20 million in trucking expenses were under suppliers' control.
It was a pretty messy situation. Some 100 employees across the company's 52 locations, which include 10 large DCs and four major manufacturing sites, had authority to select carriers. For most of those employees, transportation was just a small part of their jobs.Without decision-support tools to help them, moreover, they were doing business with more than 400 carriers, and they often hired multiple carriers to haul shipments over the same lanes.
Adding to Dayton Superior's trucking dilemma were the dynamics of the construction industry. A large percentage of shipments move not in regular lanes but to construction job sites— often on short notice—and orders are hard to forecast. The result was a heavy reliance on premium transportation to handle a truly diverse freight mix—everything from small packages on pallets to large products requiring a lot of special handling. "It is a challenge for us to get there when we need to be there," says Director of Transportation John Klima.
This lack of coordination was costly and created a host of problems for Dayton Superior. It was time for the Ohio-based manufacturer to take control of the way it purchased trucking services.
Rates and relationships
To help instill greater discipline in its transportation practices and create a more efficient and reliable motor carrier network, Dayton Superior's management brought in AlixPartners LLP, an international consulting firm based in Southfield, Mich., that specializes in corporate turnarounds and performance improvement. The initiative undertaken by AlixPartners (and later handed off to Klima when he joined the company about six months into the project) had lofty goals: to reduce logistics costs while maintaining service and minimizing risk by creating a centralized transportation team.
The project began with an overhaul of rates and relationships. One of its objectives was to take advantage of the size of Dayton Superior's overall freight spend to get better rates from motor carriers. The consultants developed information about recurring lanes and looked for backhaul opportunities. Suppliers' transportation spending also came under scrutiny. "We looked for opportunities to …take greater control [over inbound shipments] so that those were not profit centers for suppliers," says Foster Finley, AlixPartners' managing director.
Decisions about routes, rates, and carrier selection were facilitated by the implementation of a hosted transportation management system from Descartes Systems. Based on the analyses made possible by the new software, Dayton Superior renegotiated its carrier contracts. It reduced the number of carriers it used from a high of 448 at the project's outset to under 300 when Finley's assignment ended, and Klima has continued to whittle away at that number. It now stands at about 150.
One criterion for retaining carriers was the number of Dayton Superior facilities they served. "We tried to [consolidate business with] the carriers that were common across all the sites so we could leverage the network," Finley says. Rate reductions—coupled with high-quality service—were another factor in carrier selection. "We brought in our major carriers, showed them what was available, and asked them to revisit their pricing," Klima says. "We tried to make the carriers understand that service was very important. After that, the best price would get the freight."
Those that were able to meet those criteria have been rewarded: According to Klima, the shipper has concentrated its freight spend with its top 10 truckload carriers. The fact that the market has been soft and truckload carriers are searching for business certainly helped Dayton Superior's cause, but the transportation director emphasizes that the focus is not solely on the near term. Instead, he is determined to protect the company when capacity gets tight again, as it inevitably will—and the way to do that is by becoming a favored customer. "We are trying to use the opportunity in a light market to build relationships with our carriers," he says. "We want prices that will move freight and not be the lowest on the totem pole."
Further analysis turned up opportunities to change modes and realize some hefty savings. For instance, the shipper has doubled its use of costeffective intermodal service. Klima cites the example of shipments that used to move from a facility in Long Beach, Calif., to the Pacific Northwest on flatbed trucks. After investing $20,000 in a new dock that could accommodate intermodal equipment, the company was able to shift those shipments to rail. Dayton Superior also now uses intermodal to re-supply its DCs in Mexico.
Not all changes have resulted in cost savings, however. The company actually increased its spending on stop-off charges when it replaced some LTL shipments with consolidated truckloads. But such instances have been more than outweighed by successes like a remarkable 42-percent drop in accessorial charges.
The power of people
Dayton Superior's transportation transformation remains a work in progress. Klima expects more improvements over the next year or two. Currently, the company is in the process of refreshing its LTL carrier base and is looking at ways to get more favorable parcel contracts. It is also working with customers to find flexibility in delivery dates, which would allow the company to better coordinate multiple shipments to a delivery site.
Although the shipper's drive to take control of its transportation spending launched with a temporary consulting assignment, it was never intended to be about short-term gains alone. Instead, its aim has been to assure continued improvement through long-term investments. "We didn't just want a sugar high," Finley jokes.
Perhaps the most important long-term investment has been in people. In addition to Klima, the company brought on three full-time transportation managers at corporate headquarters. "The company needed dedicated professionals who were focused on daily transportation management," says Finley.
The new transportation team can claim some of the credit for the program's success, but Finley and Klima believe that support from both senior management and those out in the field played a crucial role as well. "Leadership backed us every step of the way," Finley says. "We made a conscious effort not to dictate from Dayton," Klima adds. "We got out into the field, went to the sites, and listened to their problems."
seeing carriers in a different light
Carrier selection traditionally has revolved mainly around rates and service, but consultant Justin Zubrod thinks that's about to change. The vice president in Booz Allen Hamilton's transportation practice believes a host of new pressures will require shippers to take a more strategic approach to purchasing transportation.
In a presentation at the annual conference of the Council of Supply Chain Management Professionals in October and in a subsequent interview with DC VELOCITY, Zubrod said that mounting concerns about fuel prices, the environment, and security will all enter into carrier selection decisions in the future. Although shippers will still be looking closely at price and service, he said, they'll also be evaluating carriers from the standpoint of supply chain resilience and supply chain sustainability.
The issue of resilience—the ability to recover from supply chain disruptions—has gained attention since the 9/11 terrorist attacks, the Gulf Coast hurricanes, and labor strife at West Coast ports in recent years. External events like natural disasters and internal events like factory shutdowns all pose risks to supply chains. Businesses that keep inventories lean are particularly vulnerable.
Carriers play an important role in shippers' efforts to build resilience into their supply chains. "Shippers are evaluating carriers from a risk-assessment point of view," Zubrod said. That is, they are looking at carriers' ability to adapt to changes in sources of supply, at their labor stability, and so on.
Likewise, the issue of sustainability is becoming a core part of management strategy. "Green" initiatives are at the heart of sustainability efforts, with nearterm goals like waste and emissions reductions and energy conservation. Those are goals that reach well beyond transportation, of course, but they have critical implications for the way carriers and shippers do business.
Zubrod said he is seeing more shippers asking carriers about sustainability and their companies' efforts to reduce their carbon footprints. It is not yet a widespread phenomenon: He estimates that about 20 percent of shippers— including market movers like Wal-Mart—are making those sorts of inquiries in their requests for quotes (RFQs) and requests for information (RFIs).
Europe, which tends to lead on environmental issues, may provide some indication of what is coming our way. "It is beginning to hit the carrier industry pretty hard there," Zubrod said. "The United States is not quite there. No one is making yes-or-no decisions based on this, but we are seeing it more and more in RFIs and RFQs."
Zubrod cautions that with sustainability initiatives, it's important not to lose sight of the big picture. Otherwise, decisions made with the purest of eco-intentions in one part of the operation could end up doing more harm than good to the supply chain overall. "It is fine to say you are going to use hybrid trucks for delivery, but by the time products get to the other end, you have had 15 or 16 hand-offs," he noted. "It comes back to better use of material and waste reduction. The real leverage point is a more efficient supply chain."
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."