When disaster strikes, the U.S. Navy hospital ship Comfort aims to be on the spot ready to treat patients within five days. An innovative supply chain strategy makes it all work.
Steve Geary is adjunct faculty at the University of Tennessee's Haaslam College of Business and is a lecturer at The Gordon Institute at Tufts University. He is the President of the Supply Chain Visions family of companies, consultancies that work across the government sector. Steve is a contributing editor at DC Velocity, and editor-at-large for CSCMP's Supply Chain Quarterly.
When disaster hits, the world mobilizes. And so it was after a devastating earthquake shook Haiti in January 2010. Among the responders that rushed to the scene was the U.S. Navy hospital ship Comfort. A full-service hospital ship, the Comfort provides acute medical and surgical care for the sick and injured, whether deployed military forces or victims of disaster.
With 12 operating rooms, an intensive care ward, medical labs, capacity for 1,000 patient beds, and a flight deck able to handle the largest military helicopters, the vessel is uniquely equipped to treat patients like the earthquake victims. What it did not have at the time of the earthquake, however, was the vast quantity of medical and surgical supplies—more than 5,000 lines—its medical personnel would need when the ship reached the island.
That was no cause for concern. As soon as the call went out, a complex network of suppliers swung into action. Within 36 hours, an array of medical supplies had been delivered to the Comfort at its berth in Baltimore. Within 72 hours of its activation, the ship set sail from Baltimore. En route south, the vessel made a call in Norfolk, Va., to pick up additional crew and supplies. Within seven days, the ship was anchored off the coast of Haiti, fully supplied and staffed and providing medical care.
As remarkable as that might seem, it's hardly a unique occurrence. In fact, this kind of rapid response is close to standard operating procedure for the Comfort and its sister ship, the San Diego-based Mercy. Thanks to a supply chain strategy developed over the past decade by the Defense Logistics Agency (DLA), the ships are able to move quickly from a state of "reduced operations" (skeleton crew, no medicines, limited medical supplies) to "ready to sail." The goal is when the call comes—whether it's to respond to a natural disaster or sail to the Persian Gulf to serve as a floating trauma unit—to be operational within five days. She often does it faster.
Comfort at sea
The Comfort has been busy over the past decade. On the afternoon of Sept. 11, 2001, the Comfort was activated in response to the attack on the World Trade Center, arriving pier side in Manhattan on Sept. 14. Since then, it has embarked on a variety of missions:
In June of 2003, the Comfort deployed to the Persian Gulf in support of Operation Iraqi Freedom.
On Sept. 2, 2005, after only two days of preparation, the Comfort sailed to assist in Gulf Coast recovery efforts after the devastation of Hurricane Katrina.
On Jan. 13, 2010, the Comfort was ordered to assist in the humanitarian relief efforts following the 2010 Haiti earthquake.
In March 2011, the Comfort set sail on a five-month goodwill mission to the Caribbean, Central America, and South America.
Mission nearly impossible
To understand the challenges of supplying the Comfort, it helps to know a little about the scale of the operation. The vessel, which was converted from a Panamax-class oil tanker to a Navy hospital ship in 1987, measures nearly 900 feet long and over 100 feet wide—the equivalent of a little more than two and a half football fields in length and a couple of basketball courts in width. If either the Comfort or the Mercy were relocated to land, it would make the list of the 25 largest hospitals in the United States. Send them together to support a mission, and they jointly are larger than all but a handful of hospitals in the world.
Supplying any hospital of that size—and doing it on short notice—might seem supply chain challenge enough. But in this case, the picture is complicated by the wide variation in mission profiles. The supplies required by a hospital that's caring for a military force during wartime are far different from the supplies needed for a humanitarian mission. Furthermore, not all humanitarian missions are alike—the medications and supplies needed to treat patients in the aftermath of an earthquake are not the same as those needed following a disaster like Hurricane Katrina.
For an example of the difficulty of forecasting supply needs, you need look no further than the Haitian earthquake. Injuries caused by collapsing buildings and falling debris led to unusually high demand for orthopedic devices used for treating traumatic bone fractures, which normally make up only a fraction of the supplies stocked by the Comfort. In that case, the DLA processed orders for more than 1,000 lines of orthopedic items and managed to have most of them delivered to the Comfort within five days, either in Baltimore or Norfolk. The remaining items were flown to the ship in Haiti, using the supplier's corporate aircraft.
Taking a different approach
So how do you configure a supply chain network to respond to the needs of one of the world's largest hospitals with no more than five days' notice of what supplies will be needed? That's been the ongoing challenge for the DLA's Troop Support organization in Philadelphia and, in particular, its Medical Supply Chain team.
Initially, the group followed standard stocking practice—that is, buying enough of everything it thought it might need and putting it on a shelf. Trouble was, that tended to cost a lot of money. On top of that, shelf inventories, particularly medicines, have expiration issues, and there's always the cost of maintaining storage facilities. About 10 years ago, it realized it needed to find a better way.
The task of devising a new process fell to the Medical Supply Chain team's Readiness Division. After a thorough review of the process, the team came up with a whole new approach to supporting the Comfort. Their strategy? Deliver readiness, not product.
Essentially, the DLA now contracts with suppliers not for specific goods, but for a guarantee of the goods' availability.
In practice, that means that each year, the Readiness Division invests over $30 million across 59 "contingency contracts." For this investment, the DLA receives no product. Instead, it receives a guarantee of five-day availability (and sometimes faster), on demand, from its network of commercial suppliers. This investment gives DLA the right to quick-turn delivery for almost $700 million worth of medical products.
In financial terms, what the division gets for its $30 million is a call option. It has the right to exercise a delivery contract and pay for the items, using pre-negotiated unit pricing, at the time of delivery. Or as Mike Medora, chief of the Troop Support medical contingency contracting team, puts it, "We pay for access to the material."
Another way to look at it is that for its annual $30 million, DLA Troop Support is able to tap the most sophisticated medical supply chain in the world, on demand. The DLA never even touches the material. Suppliers are responsible for everything from product freshness to storage, and because they deliver directly to the Comfort and the **ital{Mercy, the agency doesn't even have to maintain its own distribution network.
Take pharmaceuticals, for example. The DLA has a prime vendor contract with Cardinal Health, under which Cardinal agrees to make available within 72 hours a specified list of pharmaceutical products to support a 1,000-bed activation. When it needs to supply the Comfort, Cardinal simply draws on the resources of its 23-center distribution network, according to Theo Wilson, Cardinal Health's vice president of government sales. "We can move product around to support any activation," he says.
Meeting the DLA's fast-turnaround requirement can be challenging, Wilson admits. But workers need little encouragement once they learn where the orders are headed, he says. "It's not hard to motivate people to get it done."
It also helps that Cardinal has a distribution center not far from the Comfort's berth in Baltimore. "After Katrina, we didn't wait the 72 hours that DLA gives us," Wilson says. "We had product there in 24 hours."
Plan and adjust
Along with rethinking the nature of the contracts it places with commercial suppliers, DLA Troop Support's Readiness Division is redefining its own business processes to boost preparedness. For example, it has compiled a cross-referenced list of standard-use medical items from all the services. It has also upgraded its computer systems so that orders can flow without human intervention directly to the suppliers.
That list of "standard" items grows almost daily. The number of surgical items in the catalog is approaching 75,000 SKUs, including almost 2,000 pharmaceutical items. To put these numbers in perspective, a typical supermarket assortment is about 40,000 items. The catalog has developed over time based on experience across the military. "We've been working with the military services for years," says Linda Grugan, a contracting officer in the pharmaceutical prime vendor division at DLA.
In a perfect world, orders would automatically release, supply would flow, and DLA could just sit back and watch once the activation order went out. However, every contingency is different, as the Haiti deployment shows, and that's when the Medical Supply Chain team steps in to tailor supplies to the specific need.
Wilson talks about the improvisation across the supplier base that makes this sort of response possible. "We don't wait. If we see that there is a natural disaster or an emerging contingency, we move. We're in constant contact with Linda Grugan at Troop Support. We're leaning forward, constantly preparing, based on what we see happening in the world. We understand the urgency."
Jackie Basquill, a supervisor in the Medical Supply Chain who works directly with the Comfort, echoes Wilson's observation. "It's a great set of relationships, and when there is a need, we just find a way to make it happen."
The way that shippers and carriers classify loads of less than truckload (LTL) freight to determine delivery rates is set to change in 2025 for the first time in decades, introducing a new approach that is designed to support more standardized practices.
But the transition may take some time. Businesses throughout the logistics sector will be affected by the transition, since the NMFC is a critical tool for setting prices that is used daily by transportation providers, trucking fleets, third party logistics providers (3PLs), and freight brokers.
For example, the current system creates 18 classes of freight that are identified by numbers from 50 to 500, according to a blog post by Nolan Transportation Group (NTG). Lower classed freight costs less to ship, ranging from basic goods that fit on a standard shrink-wrapped 4X4 pallet (class 50) up to highly valuable or delicate items such as bags of gold dust or boxes of ping pong balls (class 500).
In the future, that system will be streamlined by four new features, NMFTA said:
standardized density scale for LTL freight with no handling, stowability, and liability issues,
unique identifiers for freight with special handling, stowability, or liability needs,
condensed and modernized commodity listings, and
improved usability of the ClassIT classification tool.
The new changes look to simplify the classification by grouping similar articles together and assigning most classes based solely on density – the most measurable of the four characteristics, he said. Exceptions will be handled separately, adding one or more of the three remaining characteristics in cases where density alone is not adequate to determine an accurate class.
When the updates roll out in 2025, many shippers will see shifts in the LTL prices they pay to move loads, because the way their freight is classified – and subsequently billed – might change. To cope with those changes, he said it’s important for shippers to review their pricing agreements and be prepared for these adjustments, while carriers should prepare to manage customer relationships through the transition.
“This shift is a big deal for the LTL industry, and it’s going to require a lot of work upfront,” Davis said. “But ultimately, simplifying the classification system should help reduce friction between shippers and carriers. We want to make the process as straightforward as possible, eliminate unnecessary disputes, and make the system more intuitive for everyone. It’s a change that’s long overdue, and while there might be challenges in the short term, I believe it will benefit the industry in the long run.
Business leaders in the manufacturing and transportation sectors will increasingly turn to technology in 2025 to adapt to developments in a tricky economic environment, according to a report from Forrester.
That approach is needed because companies in asset-intensive industries like manufacturing and transportation quickly feel the pain when energy prices rise, raw materials are harder to access, or borrowing money for capital projects becomes more expensive, according to researcher Paul Miller, vice president and principal analyst at Forrester.
And all of those conditions arose in 2024, forcing leaders to focus even more than usual on managing costs and improving efficiency. Forrester’s latest forecast doesn’t anticipate any dramatic improvement in the global macroeconomic situation in 2025, but it does anticipate several ways that companies will adapt.
For 2025, Forrester predicts that:
over 25% of big last-mile service and delivery fleets in Europe will be electric. Across the continent, parcel delivery firms, utility companies, and local governments operating large fleets of small vans over relatively short distances see electrification as an opportunity to manage costs while lowering carbon emissions.
less than 5% of the robots entering factories and warehouses will walk. While industry coverage often focuses on two-legged robots, Forrester says the compelling use cases for those legs are less common — or obvious — than supporters suggest. The report says that those robots have a wow factor, but they may not have the best form factor for addressing industry’s dull, dirty, and dangerous tasks.
carmakers will make significant cuts to their digital divisions, admitting defeat after the industry invested billions of dollars in recent years to build the capability to design the connected and digital features installed in modern vehicles. Instead, the future of mobility will be underpinned by ecosystems of various technology providers, not necessarily reliant on the same large automaker that made the car itself.
This story first appeared in the September/October issue of Supply Chain Xchange, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media & Events’' DC Velocity.
For the trucking industry, operational costs have become the most urgent issue of 2024, even more so than issues around driver shortages and driver retention. That’s because while demand has dropped and rates have plummeted, costs have risen significantly since 2022.
As reported by the American Transportation Research Institute (ATRI), every cost element has increased over the past two years, including diesel prices, insurance premiums, driver rates, and trailer and truck payments. Operating costs increased beyond $2.00 per mile for the first time ever in 2022. This trend continued in 2023, with the total marginal cost of operating a truck rising to $2.27 per mile, marking a new record-high cost. At the same time, the average spot rate for a dry van was $2.02 per mile, meaning that trucking companies would lose $0.25 per mile to haul a dry van load at spot rates.
These high costs have placed a significant burden on the operations of trucking companies, challenging their financial sustainability over the last two years. As a result, 2023 saw approximately 8,000 brokers and 88,000 trucking companies cease operations, including some marquee names, such as Yellow Corp. and Convoy, and decades-long businesses, such as Matheson Trucking and Arnold Transportation Services.
More so than ever before, trucking companies need to get better at efficiently using their assets and reducing operational costs. So, what is a trucking company to do? Technology is the answer! Given the nature of the problem, technology-led innovation will be critical to ensure companies can balance rising costs through efficient operations.
One technology that could be the answer to many of the trucking industry’s issues is the concept of digital twins. A digital twin is a virtual model of a real system and simulates the physical state and behavior of the real system. As the physical system changes state, the digital twin keeps up with the real-world changes and provides predictive and decision-making capabilities built on top of the digital model.
DHL, in a 2023 white paper, suggests that—due to the maturation of technologies such as the internet of things (IoT), cloud computing, artificial intelligence (AI), advanced software engineering paradigms, and virtual reality—digital twins have “come of age” and are now viable across multiple sectors, including transportation. We agree with this assessment and believe that digital twins are essential to radically improving the processes of fleet planning and dispatch.
THE NEED TO AUTOMATE
Outside of attaining procurement efficiencies, trucking companies can achieve lower costs by focusing on critical operational levers such as minimizing deadheads, reducing driver dwell time, and maximizing driver and asset utilization.
However, manual methods of planning and dispatch cannot optimally balance these levers to achieve efficiency and cost control. Even when planners work very hard and owners strive to improve processes, optimizing fleet planning is not a problem humans can solve routinely. Planning is a computationally intensive activity. To achieve fleet-level efficiencies, the planner has to consider all possible truck-to-load combinations in real time and solve for many operational constraints such as drivers’ hours of service, customer windows, and driver home time, to name just a few. These computations become even more complex when you add in the dynamic nature of real-world conditions such as trucks getting stuck in traffic or breaking down or orders getting delayed. This is not a task humans do best! For these sorts of tasks, technology has the upper hand.
When a company creates a digital twin of its trucking network, it has a real-time model that factors in truck locations, drivers’ hours of service, and loads being executed and planned. Planners can then use this digital model to assess possible decisions and select ones that increase asset utilization, improve customer and driver satisfaction, and lower costs.
For example, a digital twin of the network can offer significant insights and analysis on the state of the network, including exceptions such as delayed pickups and deliveries, unassigned loads, and trucks needing assignments. Backed by AI that takes business rules into account, digital twins can allow companies to optimize their fleet performance by finding the most efficient load assignments and dynamically adjusting in real time to changes in traffic patterns and weather, customer delays, truck issues, and so on.
With a digital twin, carriers can optimize the matching of assets, drivers, and freight. Typically, an investment in this innovative technology results in a 20%+ increase in productive miles per truck, while also improving driver pay and significantly decreasing driver churn. Drivers get paid by the miles they run, so when they run more, they are able to make more money, resulting in less need to chase the next job in search of better pay.
ADDITIONAL BENEFITS
Digital twins also combat deadheading, another source of driver dissatisfaction and cost inefficiencies. On average, over-the-road drivers spend 17%–20% of road miles driving empty. Using a digital twin, a company can search across several freight sources to find a load that perfectly matches the deadhead leg without impacting downstream commitments. These additional revenue miles will help drivers to maximize their earnings on the road and carriers to maximize their asset utilization and profitability.
The traditional manual dispatch planning model is becoming increasingly outdated—each planner and fleet manager tasked with overseeing 30 to 40 vehicles. Carriers try to manage this problem by dividing the fleet into manageable chunks, which results in cross-fleet inefficiencies. Such a system isn’t scalable. A digital twin acts as an equalizer for small and mid-sized fleets. It enables carriers to expand by venturing beyond the fixed routes and network they were forced to run out of fear of additional logistical complexity.
A digital twin can also give an organization the transparency and visibility it needs to find and fix inefficiencies. A successful carrier will leverage the technology to learn from the hitches in its operations. While this visibility is beneficial in its own right, it also provides the first step toward a seamless, digitized operation. “Digital revolution” is a buzzword frequently heard at transportation conferences. Yet not too many organizations are dedicated to digitizing their operations past the visibility stage. The end goal should be using decision-support systems to automate key elements of the system, thus freeing up planners from their daily rote tasks to focus on problems that only humans can solve.
Finally incorporating a digital twin can also help trucking companies work toward the broader trend of creating greener supply chains. Because they have lower deadhead and dwell times, trucking companies that have adopted a digital twin can be more attractive to shippers that are looking for more efficient operations that meet their environmental, social, and governance (ESG) goals.
THE FUTURE IS HERE
It is important to note that the benefits described here are not dreams for the future; digital twin technology is already here. In fact, choosing a digital twin can seem daunting because there are already a spectrum of options out there. First and foremost, an organization must ensure that the digital twin it selects aligns with both the goals and the scope of its operation.
Additionally, the ideal digital twin should:
Operate in near real time. A digital twin should be able to refresh as often as the network changes.
Be able to factor in specific customer delivery requirements as well as asset- and operator-specific constraints.
Be computationally efficient and comprehensive as it considers thousands of permutations in milliseconds. The digital twin should be able to reoptimize an entire fleet’s schedule of multi-day routes on the fly.
Before implementing a digital twin, carriers need to make sure that they have robust data management processes in place. Electronic logging devices (ELDs), customers’ tenders, billing, shipments, and so on are already inundating carriers with a glut of data. However, the manual nature of operations in many carriers leads to poor data quality. Carriers will need to invest in data management approaches to improve data quality to support the generation and use of high-fidelity digital twins. Otherwise, the digital twin will not be representative of reality and companies will run into an issue of “garbage in, garbage out.”
REINVENTION AND TRANSFORMATION
While data management is critical, change management through the ranks of dispatch operations is often a harder task. In fact, the largest roadblock carriers face when undergoing a digital transformation is the lack of willingness to change, not the technology itself. Many carriers cling to outmoded planning methods. Planners, used to operating based on well-worn business rules and tribal knowledge, could be wary of the technology and resistant to change. They may need to be assured that, while it is true that every trucking network is uniquely complex, digital twins can be set up to model the intricacies of their specific dispatch operations and drive value to the network. A significant amount of time and resources will need to be expended on change management. Otherwise even though trucking companies may invest in cutting-edge technology, they won't be able to fully capitalize on the added value it can provide.
As the truckload industry works through the current freight cycle, it is important to realize that change is inevitable. Carriers will need to reinvent their operations and invest in technologies to ride through the busts and booms of future freight cycles. Recent global events point to the many ways that wrenches can be thrown into global transportation networks, and the fact that such volatility is here to stay. Digital twins can provide companies with the visibility to navigate such changes. But above all, an operation that uses the digital twin to drive decisions can make customers and drivers happy, and help the carriers keep their heads above water during times such as now.
Regular online readers of DC Velocity and Supply Chain Xchange have probably noticed something new during the past few weeks. Our team has been working for months to produce shiny new websites that allow you to find the supply chain news and stories you need more easily.
It is always good for a media brand to undergo a refresh every once in a while. We certainly are not alone in retooling our websites; most of you likely go through that rather complex process every few years. But this was more than just your average refresh. We did it to take advantage of the most recent developments in artificial intelligence (AI).
Most of the AI work will take place behind the scenes. We will not, for instance, use AI to generate our stories. Those will still be written by our award-winning editorial team (I realize I’m biased, but I believe them to be the best in the business). Instead, we will be applying AI to things like graphics, search functions, and prioritizing relevant stories to make it easier for you to find the information you need along with related content.
We have also redesigned the websites’ layouts to make it quick and easy to find articles on specific topics. For example, content on DC Velocity’s new site is divided into five categories: material handling, robotics, transportation, technology, and supply chain services. We also offer a robust video section, including case histories, webcasts, and executive interviews, plus our weekly podcasts.
Over on the Supply Chain Xchange site, we have organized articles into categories that align with the traditional five phases of supply chain management: plan, procure, produce, move, and store. Plus, we added a “tech” category just to round it off. You can also find links to our videos, newsletters, podcasts, webcasts, blogs, and much more on the site.
Our mobile-app users will also notice some enhancements. An increasing number of you are receiving your daily supply chain news on your phones and tablets, so we have revamped our sites for optimal performance on those devices. For instance, you’ll find that related stories will appear right after the article you’re reading in case you want to delve further into the topic.
However you view us, you will find snappier headlines, more graphics and illustrations, and sites that are easier to navigate.
I would personally like to thank our management, IT department, and editors for their work in making this transition a reality. In our more than 20 years as a media company, this is our largest expansion into digital yet.
We hope you enjoy the experience.
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In this chart, the red and green bars represent Trucking Conditions Index for 2024. The blue line represents the Trucking Conditions Index for 2023. The index shows that while business conditions for trucking companies improved in August of 2024 versus July of 2024, they are still overall negative.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.