Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The bombardment is over, or at least it has abated. Shell-shocked logistics executives have emerged from their foxholes to face a future that they can only hope is better than the recent past.
The recession has left indelible scars on the supply chain. No one with two digits to their age is likely to recall a decline so swift and severe. Few would doubt that the industry is now in recovery mode, but fear still trumps optimism.
"Many of our customers went through a near-death experience," said Vincent W. Hartnett, president of Penske Logistics.
Given the recession's ferocity, it might appear that the industry would treat the recovery—for as long as it lasts—with sober reflection. But some veterans say history indicates otherwise.
"When you come out of a recession, only 10 percent of the costs you save [during it] are sustainable," said Thomas W. Speh, James Evans Rees distinguished professor of distribution at Miami (Ohio) University's Richard T. Farmer School of Business, at a press conference following the early June release of the 2010 State of Logistics Report. "My concern is we are going to forget some of those lessons."
Detlef Trefzger, a member of the board of management for contract logistics and supply chain management for the German giant Schenker AG, disagrees with Speh over the extent of the industry's collective amnesia. He thinks the change in customer attitudes has staying power.
"People are more focused and more committed to solutions," Trefzger said in an interview later in June. "Before the recession, we discussed strategies with our customers that were nice to talk about but never implemented. That has changed."
Trefzger doesn't think the crisis has passed. However, he sees growth continuing across all of Schenker's regions and is optimistic about next year.
One sign of customer skittishness can be found in the absence of even an intermediate-term outlook. John P. Lanigan, executive vice president and chief marketing officer of BNSF Railway, said at the State of Logistics Report press conference that a customer told him the "last four to six weeks have been great. But I'm scared to death about the next four to six weeks."
Trefzger said it has become virtually impossible to forecast volume patterns beyond three-month cycles, especially in industries like auto manufacturing that have volatile sales activity. "We have tried to reduce our lead times for future investments and have tried to not end up in long-term commitments," he said.
Jim McAdam, president of APL Logistics, the logistics arm of shipping giant APL, has a different view, He said that importers, many of them in the retail trade, have seen their order books "strong and strengthening" throughout the year and heading into the end of the peak holiday season inventory replenishment period. McAdam said he sees nothing on the horizon to support concerns about a marked economic slowdown. (Trade in and out of North America accounts for 60 percent of APL Logistics' revenue.)
McAdam said an enduring lesson from the downturn is for customers to develop tight strategic bonds with service providers instead of jumping back and forth looking for the best rate. "I think many customers wished they had worked a little bit closer with their supply chain partners instead of chasing different providers over a few dollars," he said.
Another trend, according to McAdam, is that businesses that took their logistics functions in-house for any number of reasons are re-examining, and in many cases restoring, their relationships with third-party service providers.
Put away the gloves
If the recession was a boxing match, it was an awfully bloody affair. As demand fell faster than carriers could withdraw capacity, shippers held the iron fist and were not afraid to wield it. On the inbound side, shippers pressured their suppliers for the lowest prices for their products.
As the recovery takes hold, the chickens are coming home to roost. Demand is up, capacity is tight, and many suppliers—especially second- or third-tier vendors hit by the double-whammy of weak demand and scarce credit—have gone out of business. Bereft of traditional supply sources, companies are now preaching collaboration and are talking about a "new normal" in supply chain matters.
"Consolidation of suppliers is something we should all expect in the future," said Hartnett of Penske.
The more candid shipper executives say they will need to lie in the bed they've made for themselves. "Shippers took advantage of the situation a year ago and jeopardized long-term relationships" with their providers, Don Ralph, senior vice president, supply chain and logistics for Staples Inc., said at the June press conference. "These levels of rates are not sustainable."
Kate Vitasek, founder and president of consultancy Supply Chain Visions, said the climate is ripe for a concerted push to "vested outsourcing," where, distilled to its base elements, companies nurture relationships with suppliers so they are first or near-first in line for product without having to pay a premium for it.
"The power has shifted to the suppliers," she said. "People came out of the gate with massive cost-cutting. But you can't beat up suppliers for very long. You will, at some point, face retaliation."
The Boston-based enterprise software vendor Board has acquired the California company Prevedere, a provider of predictive planning technology, saying the move will integrate internal performance metrics with external economic intelligence.
According to Board, the combined technologies will integrate millions of external data points—ranging from macroeconomic indicators to AI-driven predictive models—to help companies build predictive models for critical planning needs, cutting costs by reducing inventory excess and optimizing logistics in response to global trade dynamics.
That is particularly valuable in today’s rapidly changing markets, where companies face evolving customer preferences and economic shifts, the company said. “Our customers spend significant time analyzing internal data but often lack visibility into how external factors might impact their planning,” Jeff Casale, CEO of Board, said in a release. “By integrating Prevedere, we eliminate those blind spots, equipping executives with a complete view of their operating environment. This empowers them to respond dynamically to market changes and make informed decisions that drive competitive advantage.”
Material handling automation provider Vecna Robotics today named Karl Iagnemma as its new CEO and announced $14.5 million in additional funding from existing investors, the Waltham, Massachusetts firm said.
The fresh funding is earmarked to accelerate technology and product enhancements to address the automation needs of operators in automotive, general manufacturing, and high-volume warehousing.
Iagnemma comes to the company after roles as an MIT researcher and inventor, and with leadership titles including co-founder and CEO of autonomous vehicle technology company nuTonomy. The tier 1 supplier Aptiv acquired Aptiv in 2017 for $450 million, and named Iagnemma as founding CEO of Motional, its $4 billion robotaxi joint venture with automaker Hyundai Motor Group.
“Automation in logistics today is similar to the current state of robotaxis, in that there is a massive market opportunity but little market penetration,” Iagnemma said in a release. “I join Vecna Robotics at an inflection point in the material handling market, where operators are poised to adopt automation at scale. Vecna is uniquely positioned to shape the market with state-of-the-art technology and products that are easy to purchase, deploy, and operate reliably across many different workflows.”
Third-party logistics (3PL) providers’ share of large real estate leases across the U.S. rose significantly through the third quarter of 2024 compared to the same time last year, as more retailers and wholesalers have been outsourcing their warehouse and distribution operations to 3PLs, according to a report from real estate firm CBRE.
Specifically, 3PLs’ share of bulk industrial leasing activity—covering leases of 100,000 square feet or more—rose to 34.1% through Q3 of this year from 30.6% through Q3 last year. By raw numbers, 3PLs have accounted for 498 bulk leases so far this year, up by 9% from the 457 at this time last year.
By category, 3PLs’ share of 34.1% ranked above other occupier types such as: general retail and wholesale (26.6), food and beverage (9.0), automobiles, tires, and parts (7.9), manufacturing (6.2), building materials and construction (5.6), e-commerce only (5.6), medical (2.7), and undisclosed (2.3).
On a quarterly basis, bulk leasing by 3PLs has steadily increased this year, reversing the steadily decreasing trend of 2023. CBRE pointed to three main reasons for that resurgence:
Import Flexibility. Labor disruptions, extreme weather patterns, and geopolitical uncertainty have led many companies to diversify their import locations. Using 3PLs allows for more inventory flexibility, a key component to retailer success in times of uncertainty.
Capital Allocation/Preservation. Warehousing and distribution of goods is expensive, draining capital resources for transportation costs, rent, or labor. But outsourcing to 3PLs provides companies with more flexibility to increase or decrease their inventories without any risk of signing their own lease commitments. And using a 3PL also allows companies to switch supply chain costs from capital to operational expenses.
Focus on Core Competency. Outsourcing their logistics operations to 3PLs allows companies to focus on core business competencies that drive revenue, such as product development, sales, and customer service.
Looking into the future, these same trends will continue to drive 3PL warehouse demand, CBRE said. Economic, geopolitical and supply chain uncertainty will remain prevalent in the coming quarters but will not diminish the need to effectively manage inventory levels.
In a push to automate manufacturing processes, businesses around the world have turned to robots—the latest figures from the Germany-based International Federation of Robotics (IFR) indicate that there are now 4,281,585 robot units operating in factories worldwide, a 10% jump over the previous year. And the pace of robotic adoption isn’t slowing: Annual installations in 2023 exceeded half a million units for the third consecutive year, the IFR said in its “World Robotics 2024 Report.”
As for where those robotic adoptions took place, the IFR says 70% of all newly deployed robots in 2023 were installed in Asia (with China alone accounting for over half of all global installations), 17% in Europe, and 10% in the Americas. Here’s a look at the numbers for several countries profiled in the report (along with the percentage change from 2022).
Sean Webb’s background is in finance, not package engineering, but he sees that as a plus—particularly when it comes to explaining the financial benefits of automated packaging to clients. Webb is currently vice president of national accounts at Sparck Technologies, a company that manufactures automated solutions that produce right-sized packaging, where he is responsible for the sales and operational teams. Prior to joining Sparck, he worked in the financial sector for PEAK6, E*Trade, and ATD, including experience as an equity trader.
Webb holds a bachelor’s degree from Michigan State and an MBA in finance from Western Michigan University.
Q: How would you describe the current state of the packaging industry?
A: The packaging and e-commerce industries are rapidly evolving, driven by shifting consumer preferences, technological advancements, and a heightened focus on sustainability. The packaging sector is increasingly prioritizing eco-friendly materials to reduce waste, while integrating smart technologies and customizable solutions to enhance brand engagement.
The e-commerce industry continues to expand, fueled by the convenience of online shopping and accelerated by the pandemic. Advances in artificial intelligence and augmented reality are enhancing the online shopping experience, while consumer expectations for fast delivery and seamless transactions are reshaping logistics and operations.
In addition, with the growth in environmental and sustainability regulatory initiatives—like Extended Producer Responsibility (EPR) laws and a New Jersey bill that would require retailers to use right-sized shipping boxes—right-sized packaging is playing a crucial role in reducing packaging waste and box volume.
Q: You came from the financial and equity markets. How has that been an advantage in your work as an executive at Sparck?
A: My background has allowed me to effectively communicate the incredible ROI [return on investment] and value that right-size automated packaging provides in a way that financial teams understand. Investment in this technology provides significant labor, transportation, and material savings that typically deliver a positive ROI in six to 18 months.
Q: What are the advantages to using automated right-sized packaging equipment?
A: By automating the packaging process to create right-sized boxes, facilities can boost productivity by streamlining operations and reducing manual handling. This leads to greater operational efficiency as automated systems handle tasks with precision and speed, minimizing downtime.
The use of right-sized packaging also results in substantial labor savings, as less labor is required for packaging tasks. In addition, these systems support scalability, allowing facilities to easily adapt to increased order volumes and evolving needs without compromising performance.
Q: How can automation help ease the labor problems associated with time-consuming pack-out operations?
A: Not only has the cost of labor increased dramatically, but finding a consistent labor force to keep up with the constant fluctuations around peak seasons is very challenging. Typically, one manual laborer can pack at a rate of 20 to 35 packages per hour. Our CVP automated packaging solution can pack up to 1,100 orders per hour utilizing a fully integrated system. This system not only creates a right-sized box, but also accurately weighs it, captures its dimensions, and adds the necessary carrier information.
Q: Beyond material savings, are there other advantages for transportation and warehouse functions in using right-sized packaging?
A: Yes. By creating smaller boxes, right-sizing enables more parcels to fit on a truck, leading to significant shipping and transportation savings. This also results in reduced CO2 emissions, as fewer truckloads are required. In addition, parcels with right-sized packaging are less prone to damage, and automation helps minimize errors.
In a warehouse setting, smaller packages are easier to convey and sort. Using a fully integrated system that combines multiple functions into a smaller footprint can also lead to operational space savings.
Q: Can you share any details on the typical ROI and the savings associated with packaging automation?
A: Three-dimensional right-sized packaging automation boosts productivity significantly, leading to increased overall revenue. Labor savings average 88%, and transportation savings accrue with each right-sized box. In addition, material savings from less wasteful use of corrugated packaging enhance the return on investment for companies. Together, these typically deliver returns in under 18 months, with some projects achieving ROI in as little as six months. These savings can total millions of dollars for businesses.
Q: How can facility managers convince corporate executives that automated packaging technology is a good investment for their operation?
A: We like to take a data-driven approach and utilize the actual data from the customer to understand the right fit. Using those results, we utilize our ROI tool to accurately project the savings, ROI, IRR (internal rate of return), and NPV (net present value) that facility managers can then use to [elicit] the support needed to make a good investment for their operation.
Q: Could you talk a little about the enhancements you’ve recently made to your automated solutions?
A: Sparck has introduced a number of enhancements to its packaging solutions, including fluting corrugate that supports packages of various weights and sizes, allowing the production of ultra-slim boxes with a minimum height of 28mm (1.1 inches). This innovation revolutionizes e-commerce packaging by enabling smaller parcels to fit through most European mailboxes, optimizing space in transit and increasing throughput rates for automated orders.
In addition, Sparck’s new real-time data monitoring tools provide detailed machine performance insights through various software solutions, allowing businesses to manage and optimize their packaging operations. These developments offer significant delivery performance improvements and cost savings globally.