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.
For building products manufacturer Owens Corning Corp., whose annual transportation fuel bill hits about
$100 million, $1.1 million in savings over the last year or so may seem like a drop in the bucket. Unless,
that is, the bucket is filled with found money.
Owens Corning gained these savings by doing nothing more than going about its business. One of its truckers,
Chicago-based Dillon Transport Inc., converted from diesel fuel to lower-cost, cleaner-burning liquefied natural
gas (LNG) on two lanes that it operates for the Toledo, Ohio-based company. The routes from Owens Corning's
suppliers to its factories in Texas and Ohio have stayed the same, as have the rates. Owens Corning's savings
come from lower energy surcharges imposed by Dillon.
Phil Crofts, Dillon's marketing director, reckons its natural gas surcharges are, on average, 30 percent below
those on traditional diesel fuel. Unlike with diesel, there is no industrywide template for determining natural
gas surcharges. However, natural gas prices are today about 90 cents to $1 a gallon cheaper than diesel prices.
In addition, natural gas' price fluctuations are less extreme. The combination of low prices and low volatility
has become a boon to truckers, which can pass on some of that bounty to their shippers.
The two companies have benefited from the steady and predictable velocity of goods flow on the two lanes—raw
materials moving from Owens Corning's suppliers to its factories. The transit is so predictable that Dillon buys natural
gas from one of its fueling partners, Seal Beach, Calif.-based Clean Energy Partners, on a guaranteed basis knowing it
has the loads to support the fuel consumption. The only change is that Owens Corning now commits to a three-to-five year
relationship with Dillon rather than a year-to-year agreement.
Dillon Transport and Owens Corning are not the only companies seeing savings from converting to natural gas. In Arizona,
Golden Eagle Distributors Inc., a Tucson-based beverage distributor whose largest customer is the beer titan Anheuser-Busch
InBev, put its first compressed natural gas (CNG) power unit on the road about 20 months ago. Today, Golden Eagle's CNG units,
which are leased from Ryder System Inc., comprise nearly half of its total rig count. Golden Eagle consumes 90,000 "gas gallon
equivalents" (GGE) of CNG a year and saves an estimated $142,020 annually over the cost of diesel. Those savings more than offset
the additional $81,600 annual costs of leasing the more expensive CNG trucks, according to Bill Osteen, senior vice president of
business operations.
Keeping those costs down is crucial because Golden Eagle does not pass on higher fuel charges to its end users—supermarkets,
convenience stores, restaurants, and bars. So it must stay on top of its fuel spending or pay the price. The switch to CNG has
been "vital to us in containing our fuel costs," Osteen said.
Golden Eagle also estimates it saves $12,500 in lower vehicle maintenance on CNG trucks, Osteen said. What's more, Golden
Eagle generates royalties by allowing public fill-ups at its CNG refueling facilities in Tucson and nearby Casa Grande. Under
an arrangement with Chicago-based Trillium CNG, a provider of CNG fueling services, Golden Eagle supplies the raw land to
Trillium, which then designs, builds, operates, and maintains the facilities, according to Osteen.
These stories illustrate the possible monetary benefits of using natural gas, either in compressed or liquefied forms. But
there are still obstacles to overcome before either form enters the mainstream.
CNG VS. LNG
Much of the uptake for CNG so far has come from delivery fleets such as garbage trucks, mass transit, and school buses
whose vehicles travel less than 250 miles per day and return to their bases after their shifts. CNG is a dense, heavy
substance. What's more, the nine-liter engines that are still the standard for natural gas transport lack the horsepower
and torque to haul heavy loads. As a result, it is virtually impossible to use CNG to transport 80,000 pounds of gross
vehicle weight—the maximum tonnage allowed by law—over any appreciable distance.
In addition, there aren't many CNG fueling stations that can accommodate a heavy-duty tractor-trailer; even if a site
could be accessed it would take as long as 30 minutes to top off a rig's tank because most compressor outputs are undersized
for that function, according to Clean Energy.
LNG is dispensed and stored as a "cryogenic" fuel at temperatures of -260 degrees. Unlike CNG engines, which can lose up to
one-fourth of their tank storage capabilities during fill-ups because of heat and temperature gain, LNG engines do not generate
heat, and their design allows all of the fuel to be used. This leads to fueling speeds comparable to that of diesel engines and
no loss of range. An LNG-powered truck can travel up to 750 miles on one tank, making them more suitable for regional or
longer-haul truck runs.
One big advantage of CNG is that it doesn't bear the liquefaction and delivery expenses of LNG, and is thus significantly
less costly to produce. It is also taxed at a lower rate than LNG.
FUTURE ADOPTION LEVELS
Industry experts expect adoption levels to rise significantly over the next several years. Natural gas will power about
17 percent of the nation's heavy-duty truck fleet by 2017, up from 4 percent today, according to estimates from Siemens,
the German industrial giant, which supplies LNG. Annual purchases for LNG-powered trucks, currently at less than 500, will
increase to about 4,000 by 2020, according to Dave Hurst, analyst for Boulder, Colo.-based Navigant Research, a consultancy.
LNG, however, will remain a niche market for heavy-duty trucks through the end of the decade, Hurst says.
The catalyst for increased use of CNG-powered vehicles will be the adoption by fleets of the more powerful 12-liter engines.
Scott Keeley, director of the Compressed Natural Gas Initiative for Siemens Infrastructure and Cities, said the move to the
12-liter engines will enable CNG-powered rigs to haul thousands of pounds of cargo on 300-mile treks, the typical truck
length-of-haul. Given that the interstate highway system stretches about 45,000 miles, Keeley said it would only require
about 165 or so CNG-refueling stations to cover the country's highway backbone.
The move to the 12-liter engine for LNG has already begun. In late April, Pittsburgh-based Modern Transportation became
the first trucker to operate LNG-powered vehicles with a 12-liter engine when it launched service for Owens Corning on a
dedicated route linking Sanford, N.C., and Owens Corning's roofing plant in Savannah, Ga. The engines are built by Cummins
Westport Inc., a joint venture between manufacturer Cummins Inc. and Westport Innovations Inc., which designs technologies
allowing engines to operate on natural gas and other alternate energy solutions.
OBSTACLES AHEAD
Like any major conversion, the jump from diesel to natural gas will not fully take hold until several
obstacles are surmounted. Today, a 9-liter LNG truck costs about $30,000, while a similar CNG-powered truck
costs about $60,000, according to Clean Energy Fuels estimates. What's more, a 12-liter truck would cost between
$55,000 and $80,000 than a comparable diesel truck, according to Siemens. That is currently too cost-prohibitive
for large-scale natural gas fleet utilization. Keeley said technological advancements and process improvements
should drive down the differential to $35,000 in two years.
There is also the cost of building out a refueling infrastructure. The number of CNG and LNG refueling stations will
approximately double by 2020, with the vast majority being for CNG fill-ups, according to Navigant estimates. LNG station growth
will increase from slightly more than 200 this year to 343 by 2015, and then slow after that, according to Navigant.
David Uncapher, transportation sourcing and logistics leader for Owens Corning, said the country's refueling infrastructure is
currently "inadequate everywhere for ease of growth." He added, though, that the two fueling stations used by Dillon to support
Owens Corning's business are fine for its needs.
Uncapher also worries about the availability of replacement vehicles in the event of equipment problems. "What happens if a
truck goes down," he asked. "Can [providers] still get capacity?"
Yet for the growing supporters of natural gas for transportation, these issues amount to little more than growing pains.
Keeley is convinced that the train (or truck) has left the yard, and that the public will catch on natural gas' enormous
potential once refueling stations start to become as visible as gas stations on the nation's roads.
"It's not often you can use this term without it being an overstatement, but this is truly a game changer," he said.
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."