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 past four years have been a rough ride for U.S. trucking, and the segment known as "dedicated contract carriage" was dinged up like the rest.
The business model, which has been around for decades, is aimed at shippers who want the advantages of a private fleet without the attendant headaches. Under a dedicated service arrangement, a shipper outsources its fleet operations to a third-party specialist that "dedicates" rigs, trailers, and drivers for that customer's sole use. The standard dedicated contract runs three to five years, and usually requires the customer to compensate the provider for an agreed-upon number of miles driven on a round-trip basis. Companies with enough freight to justify round trips—often from DCs to stores and back—may find dedicated a better value proposition than paying for one-way truckload service.
For shippers and their customers, the dedicated model has two-tiered appeal: Not only does it shift a non-core competency to a third party, but it enables users to lock in dependable and consistent truck capacity at predictable rates for a multi-year period.
However, the trucking environment of the past four years has worked against the model's success. Freight demand began declining around 2006 and then plummeted following the financial crisis and broad-based downturn in 2008 and 2009.
Carriers responded by taking capacity out of play as fast as they could. Despite that, space remained so abundant that shippers often found it cheaper to contract for one-way hauls than pay for round-trip service and worry about filling backhaul miles in a weak economy. One trucking executive, John Simone, president and COO of Dallas-based dedicated service provider Greatwide Logistics Services, LLC, describes the past four years as "the longest period of overcapacity I've seen in 28 years in the business."
Annual data on third-party logistics providers (3PLs) from research and consulting firm Armstrong & Associates Inc. give some indication of how hard the segment was hit. In 2009, gross revenues for the nine asset-based dedicated service providers Armstrong tracks declined 16 percent year over year. Net revenues—or revenues after paying for purchased transportation—fell by 15.9 percent in the same period.
The firm expects dedicated gross revenues to grow in 2010 by 6.6 percent over 2009 levels. By contrast, it forecasts 13.4 percent year-on-year gross revenue growth for the 3PL sector as a whole.
Armstrong believes dedicated will continue to lag behind other types of outsourced services when it comes to growth. The dedicated segment is a "mature market" with "very limited" growth potential, says Evan Armstrong, the firm's president. "The large private fleets that were going to be outsourced have already been outsourced," he adds.
Difference of opinion
Those in the trenches take issue with the idea that the dedicated category has little life left. With trucking capacity continuing to shrink, a looming shortage of qualified drivers, and one-way rates on the rise, shippers and their customers will increasingly turn to dedicated carriage to secure predictable service at fixed rates, they say.
Some shippers are already moving in that direction. RockTenn Co., a Norcross, Ga.-based producer of paperboard, containerboard, and corrugated packaging, is looking to expand its use of dedicated from its current 15 percent, according to Josh Webb, the company's supply chain manager. "We are adding dedicated fleets to avoid increasing freight rates and tightening capacity," says Webb. "We feel this is a long-term sustainable transportation solution."
Simone of Greatwide says his largest customers are growing more and more concerned over the outlook for capacity, and are seeking certainty in what is becoming a clouded market. That anxiety has in part fueled a 15 percent year-over-year increase in Greatwide's dedicated revenue, he says. Simone estimates that 80 percent of Greatwide's customer base came from private fleets, while the rest had been relying on irregular route truckload capacity.
Transport logistics giant J.B. Hunt Transport Services Inc. has also seen a pickup in its dedicated business. During the third quarter, revenue and operating income from Hunt's dedicated services rose 18 percent and 17 percent, respectively, from year-earlier levels. (Dedicated accounted for slightly less than one-fourth of Hunt's total revenue in the quarter.)
As Hunt sees it, that's a positive sign not just for the dedicated segment, but for the economy as a whole. "Load volume in our [dedicated services] segment, which we believe is a strong indicator of current customer demand and the general direction of the freight economy, continues to point toward steady business activity," said company CEO Kirk Thompson in a statement announcing Hunt's third-quarter results.
Slicing and dicing
The dedicated model doesn't work for everybody. For one thing, it carries some risk for shippers. In a dedicated arrangement, customers are contractually committed to pay for all their miles—whether they can find the freight to fill them or not. Paying for empty backhauls can be a costly proposition, and in a tough economy, it's a gamble not all companies are willing to take.
In addition, dedicated carriage relies on symmetry—trucks returning to origin—and not every routing is structured in such a fashion.
"The main limiting factor in dedicated is physical connectivity," says Thomas K. Sanderson, president and CEO of Transplace, a Frisco, Texas-based asset-light 3PL whose services include dedicated carriage. Transplace manages inbound flows to DCs for its retail customers and coordinates with a network of truckers—for hire, private, and dedicated—for store deliveries.
Providers have gotten creative in an effort to surmount these obstacles, and are leveraging their entire customer base to execute. For example, Transplace will pair up two different customers operating in the same lane and build a dedicated operation that would not have been possible with the loads from just one customer. Transplace also contracts for 60 trucks with four carriers and guarantees them a certain number of paid weekly miles. It then scans what Sanderson calls its "basket" of freight to find loads that can fill the backhaul and reduce its empty miles.
"If you run enough miles and have fewer empty miles, it's cheaper to operate a dedicated service than it was with one-way freight," Sanderson says. "Shippers get a better price than they would on a one-way move, and the providers like it because their assets are being used."
Cardinal Logistics Management Corp., a Roswell, Ga.-based dedicated service provider, has taken a similar approach to helping clients fill backhaul miles. Jerry Bowman, Cardinal's president and COO, says his company will first look inside the company's customer universe to match empty miles and available loads. Then, if needed, it will go outside its customer base to find freight.
"The advantage of matching lanes with other dedicated customers is that we control the scheduling, we control the drivers, and we control the equipment, so we are able to provide the same service level to both customers as if we were hauling their own product both ways," he says.
Bowman adds that Cardinal focuses exclusively on arranging direct or near-direct backhauls because it's the only way it can deliver quality service while maximizing fleet utilization. "We can't send a unit and a driver on a three- or four-leg move as we don't have excess capacity built into our dedicated operations," he says.
In some cases, shippers themselves get involved in the load matching efforts. RockTenn, which is a Transplace customer, works with the provider to explore what Webb of RockTenn calls "collaborative pop-up fleet opportunities" with other Transplace customers. The strategy, which Webb acknowledges is "non-traditional," allows RockTenn to increase service and capacity as needed to a specific region. Once demand drops off and capacity isn't needed, "the fleet can dissolve," he says.
RockTenn also works with Transplace and other dedicated carriers to fill the empty miles of other dedicated fleets, Webb says. "This provides RockTenn [with] savings over the current baseline and allows carriers and [the] shipper with the dedicated fleet to recover [their] cost."
Greatwide, for its part, has developed two "hybrid" versions of the traditional dedicated model for customers concerned about empty backhauls. In one, a shipper pays for all miles driven, but Greatwide will use its brokerage services to search for other freight—often not the customer's freight—to fill miles that the customer can't. Greatwide and the customer then share the revenue and profit from the traffic.
In the second, Greatwide, rather than the shipper, takes the risk on fulfilling the "empty mile" requirement. The shipper pays a higher rate for the one-way move than it would by using either the traditional model or the first hybrid option; however, it's off the hook for empty miles obligations.
The second option may sound a lot like traditional truckload service, but Greatwide executives point out that with this arrangement, the shipper still enjoys all the advantages of dedicated service. Richard M. Metzler, Greatwide's chief commercial officer, adds that the two hybrid services are best suited to shippers with diverse product lines and who need multiple solutions to give them service flexibility at an affordable cost.
The lure of predictability
For all the providers' bullish talk, no one expects dedicated's growth to return to the heady post-deregulation days of the 1980s when businesses operating private fleets were all too happy to dump their assets, reduce their bloat, and let someone else do the work. Skeptics like consultant Evan Armstrong say that one-way truckload capacity would have to tighten much more than it has for the dedicated model to gain meaningful traction.
Yet those in the dedicated field believe that for the first time in years, the trends are working in their favor.
"I don't know of any other way you can lock in three to five years of predictable costs and higher service levels ... and take the risk out of what your costs will be," says Bowman. "You can't do it in your own private fleet. And you certainly can't do it in the one-way truckload market. It doesn't fit every movement, but for the movements it fits, we still think there's a great market for dedicated."
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”