Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
When Macy's, the giant department store chain, wanted to reduce its lead times for imports from Asia and trim warehouse inventories, it hired a consultant to help it figure out how to do that. The consultant recommended that Macy's implement a high-velocity, fully automated store-level distribution process supported by an electronic data interchange (EDI) platform. Key elements of the solutions included applying bar codes at the origin warehouse to eliminate manual receiving processes; leveraging volumes and equipment to improve utilization; and cross-docking at the destination. These and several other steps slashed cycle time by a two full weeks and made it possible for Macy's to redirect shipments in transit. They also saved the retailer more than $11 million annually in transportation and logistics costs.
What's unusual about this story—aside from the impressive savings—is the type of consultant that Macy's hired. Instead of bringing in a traditional consulting firm, the retailer worked with Maersk Logistics Supply Chain Development, the consulting arm of Maersk Logistics, a third-party logistics service provider (3PL). Unlike traditional consultancies, which typically deal in ideas, this one (along with its parent company) also implemented its recommended solutions and now operates the distribution centers and information systems.
The Macy's-Maersk relationship is not unique. A number of large 3PLs offer supply chain and logistics consulting services. UPS Supply Chain Solutions was among the first; others include Ryder System Inc., DHL Exel Supply Chain, and APL Logistics.
Why are 3PLs getting into the consulting arena? Often it's because customers ask their service
providers to redesign the logistics networks they operate. "The longer you perform well for a
customer, the more they push you into other areas that may stretch beyond what you can do,"
says Greg Aimi, director of supply chain research for AMR Research.
Another reason, says Dick Armstrong, chairman of the research and consulting firm
Armstrong & Associates, is that a lot of 3PLs would rather implement a solution of their own
design than carry out a plan developed by an outside firm. If 3PLs do the consulting project
themselves, moreover, they're much more likely to get the operational part of the business. In
short, it gives them control over the entire process, from idea through implementation and continuing operations, he says.
Says Clifford F. Lynch, executive vice president of CTSI, a freight payment and technology firm, and author of the book Logistics Outsourcing—A Management Guide: "I think the primary reason [3PLs offer consulting services] is they hope that they'll get the work after they do the analysis. ... It's a vehicle for getting new business."
But hold on—isn't that like putting the fox in charge of the henhouse? Won't a 3PL consultant inevitably design a solution that guarantees business for its parent or sister companies?
There's nothing wrong with getting new business as a result of a consulting assignment, say 3PLs, provided they truly are the best choice to handle those responsibilities. Besides, consultants that steer business to their parent or sister companies at the expense of their clients won't be around for long, says Marc Heeren, senior director of Maersk Logistics Supply Chain Development. "If by favoring your own organization you don't provide advice that really leads to the best efficiency and performance, then you will get very few projects before you have to close up shop," he says. "Credibility is critical."
Which is best?
It's clear why a 3PL would want to offer logistics and supply chain consulting services—although, as Aimi points out, few have been successful at forming profitable consulting organizations whose results can be accurately measured. But why would a shipper choose a 3PL over a traditional consulting firm?
For one thing, there's the appeal of working with a known quantity. "The most prevalent kinds of consulting projects generally are with existing clients, where the 3PLs have already proven themselves," says Aimi. "They have seasoned, competent talent who know the operation as well as or better than the customer, plus they can pull in ideas from their outside experiences with other companies."
There's also the matter of cost. Armstrong notes that much of this type of consulting is done at less than market prices because it creates opportunities that lead to other business. Some 3PLs will carry out a consulting project, and if they are chosen to implement the project and handle subsequent operations, then the shipper pays little or nothing for the analysis. If the shipper does not hire the 3PL, then the shipper pays for the consulting work. That offers some protection for the service provider, too, adds Lynch. It's not unheard of for shippers to gather as much information for free as they can, and then walk away.
For their part, 3PLs say there are two big advantages for shippers. First, the provider will recommend only what it knows can be successfully implemented, says Heeren, whose company offers a "Supply Chain Health Check" assessment and analysis service. And second, the 3PL's consulting arm can tap into deep operational knowledge in specialty areas or, as in his company's case, a broad spectrum of supply chain functions, from order to delivery.
Traditional consultants aspire to deliver the same results. But it takes more time for them to gain access to the organization and data, and more time to determine whether their recommendations can be implemented and succeed than it does for 3PLs that already have established relationships with shippers,Heeren says.
Even so, many times a traditional consulting firm is a better choice, says Lynch. "It depends on what the project is. If you have a transportation project, then you probably don't want to go to a warehouse-oriented [3PL] to get it done. They may have consulting departments and say they can do any kind of supply chain work, but I don't think you're buying from the experts in the field when you do that." When a project crosses several functional lines within a supply chain—for example, a project that involves warehousing, transportation, IT systems, and perhaps purchasing or production— shippers would be better off using a traditional consulting firm with a broad range of experience, he says.
Fresh competition
AMR's Aimi, who recently wrote a brief on the subject of 3PL consulting, sees this trend as a natural expansion of a maturing industry that serves a clientele with increasingly complex supply chains. Still, most logistics companies that offer consulting services remain focused on the area where they are most comfortable, such as transportation or warehousing. Only a few are doing more comprehensive, true supply chain consulting, he observes.
While Aimi expects to see more 3PLs offering consulting services, he cautions that success will be elusive unless they also take on the execution of their proposed solutions. And they could soon face some new competition for consulting work: business process outsourcing (BPO) firms. The BPO firms, especially those in India, are very large and very aggressive, and they are already involved with some aspects of supply chain management, he notes. They typically pitch their IT, human resources, and customer support services at the executive level—to CFOs, if not the CEOs, he says. Logistics service providers are not communicating at that high a level, which could put them at a disadvantage, he adds.
Regardless of which type of consultant a company chooses, though, the end result should be the same: a measurable improvement in supply chain performance resulting from a plan that offers the greatest possible benefits to the customer, not to the provider.
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."