David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Parcel shippers may be in for a shock when they open their first parcel shipping bills of 2015. By that time, FedEx Corp. and UPS Inc. will have implemented what is known as "dimensional weight pricing" for all of their ground packages, including those measuring less than three cubic feet that were previously exempt from dimensional weight, or dim weight, pricing.
For the first time, parcels falling under the three-cubic-foot dimensional threshold will be priced based on a combination of weight and carton dimensions, not their weight alone. For shippers of lightweight items with packaging heft to them, this could spell double-digit price increases because the parcels will be rated based on the amount of space they occupy in a van. No longer will the carriers haul Styrofoam popcorn and other cushioning materials that amount to little more than air for free.
The companies say the pricing changes will foster greater packaging efficiency for shippers, reduce fuel consumption through better truck utilization, and result in a smaller carbon footprint. They are also likely to generate for the carriers hundreds of millions of dollars in additional revenues without significant fleet investments. "The simple reason for the new pricing structure is it is much cheaper for [FedEx and UPS] than buying more trucks and airplanes. They want to get more product into the trucks and airplanes they already have," says Jack Walsh, director of sales and marketing for CASI, a company that provides dimensioning and weighing systems.
Before the Internet changed shopping (and shipping) habits, a large portion of parcel loads involved business-to-business shipments that were optimally packed by the manufacturer. Things are different in the age of e-commerce. Speed has now taken precedence, and for most DCs doing e-commerce fulfillment, it is faster for workers to grab a larger carton than necessary than risk having to repack an order because the carton originally selected was too small.
Jack Ampuja, president of the packaging and supply chain consulting firm Supply Chain Optimizers, says an order picker chooses the wrong sized carton about a quarter of the time. "We have all gotten that small item, such as a flash drive, packed in a breadbox-sized carton," he says.
Such packaging habits result in wasted space. "Forty percent of total shipping volume is unnecessary air," says Hanko Kiessner, CEO of Packsize, a company that provides on-demand packaging systems that enable users to build custom cartons. "If we can reduce shipping volume by 40 percent, we can actually increase fleet efficiency by 66 percent."
KNOW YOUR NUMBERS
So how can companies avoid high parcel shipping charges? The first step is to talk to the carriers. Many companies have negotiated rates, so it remains to be seen if, or by how much, the pricing changes will immediately affect them. Experts emphasize that the time for shippers to act is well before their contracts are up for renewal. "If your water bill goes up, you turn off the sprinklers," quips CASI's Walsh.
The second step is to know what is actually being shipped. "You can't make intelligent packaging decisions if you don't know the [dimensional] volume of your products," says Walsh. Few companies know their product characteristics, especially those companies that have a constant churn of stock-keeping units (SKUs). But knowing the actual weight and size of products can pay big dividends. It can make handling easier, optimize storage space, and save on shipping costs. If you know the size and weight of each item shipped, you can then optimize how the items are packed so you're not paying to transport air.
As for how you can get those dimensions, there are a number of ways. Sometimes, suppliers will provide you with that data. But more often than not, shippers have to gather the data themselves. They can measure and weigh products manually using a tape measure and a scale, but this can be very time consuming. Another option is to use automatic dimensioning and weighing systems. Not only are these systems much faster and more accurate, but they can help take the guesswork out of the carton selection process. The systems can transmit the weight and dimensional data they capture to a warehouse management system and shipping software. The software then guides packers in choosing the best packaging for the product, including the correct size carton and the amount of dunnage needed to protect its contents. Some systems will also tie into a computer screen to display the optimal way to arrange products within the carton—for instance, with heavier items on the bottom and lighter ones on top.
In addition to being used to collect data on individual SKUs handled at the facility, automated dimensioning systems can be installed at the end of the line to capture information about each package in a shipment. This information is then passed along to the carrier and can also be used for customer billing. "It is important for shippers to include the dimensions of the parcel when processing their ground shipments. If they don't, they are likely to receive significant 'back-charges' from their carrier, which cannot be passed back to the shipper's customer," notes Randy Neilson, director of sales and marketing for Quantronix, the manufacturer of CubiScan dimensioning systems. "The system will collect the parcel's ID/order license plate number as well as its length, width, height, and weight," he says. "All of this information is then electronically transferred and integrated with the user's shipping software system."
Such systems are certified as legal-for-trade dimensioning and weighing systems. Therefore, the information they gather may also be useful in settling any billing disputes that might arise with the carrier or customer.
CARTON CORRECTION
Another way to address shipping costs is to evaluate the packaging you're using to see if the cartons you employ are the best ones for your needs. Consultants like Ampuja can help shippers determine carton characteristics, the number of cartons that are ideal for their products, and the sizes those cartons should be. "Six box sizes are about optimum for manual operations," Ampuja says. Companies that use computers to select the proper box size really have no limit on the number of boxes they employ but typically use about 15 to 18 boxes, which will provide more freight savings, he says.
Ampuja notes that shippers are sometimes reluctant to increase the number of boxes they use because they feel it will complicate their operations. However, expanding their carton lineup can save money if the cartons are a better fit for their products, he says, especially if computers handle the carton selection. "The money is in the freight, not in the box," Ampuja says.
Making even minor changes in the boxes' dimensions can also greatly affect the dim weight. For example, simply trimming a half-inch off the length, a quarter-inch off the height, and so on can save significant money when multiplied by thousands of boxes.
Obviously, consideration should be made for the types of products shipped—how heavy and fragile are they? What is the ideal corrugated thickness and design to assure the products are protected? The cartons should not be too weak or too strong, but as Goldilocks would say, "Just right." Another matter to consider is the optimal amount of dunnage to use to ensure the product will survive the journey while at the same time making the most efficient use of space.
"ON-DEMAND" PACKAGING
Another option for companies looking to eliminate wasted space is to go the custom carton route. They can do this by installing an on-demand packaging system that allows them to make custom cartons on the spot. Using measurements obtained from dimensioning systems, an on-demand packaging system forms the correctly sized box for the product being shipped. In short, these systems can neutralize the effects of the new dim weight charges, as the package is already as compact as it can get. "Our solution can actually help customers see a reduction in their shipping charges even with dim weight pricing," says Packsize's Kiessner. He says customers using his company's on-demand packaging solution currently obtain at least a 20-percent overall savings even before dim weight pricing kicks in. The savings come from lower shipping charges as well as a reduction in the amount of corrugate and dunnage needed.
Using a carton of the correct size also reduces the potential for product damage. "There is no better protection for any product than the best fit, so that there is no shifting inside the box," explains Kiessner.
On-demand packaging can be especially useful for companies shipping irregularly shaped items. One such shipper is CarPartsDepot Inc., an online store that sells automotive body parts, such as bumpers, fenders, grills, radiators, hoods, and headlights. Not too many of these parts fit neatly into a standard box. For that reason, CarPartsDepot relies on a Packsize system to create the oddly shaped boxes it needs.
"We have around 6,000 SKUs. Every one has a different shape, so we need a perfectly shaped box for each item," says Tony Chiu, CarPartsDepot's general sales manager. He says the retailer captures each part's dimensions, which are then stored in a computer until it's time to create the box for the shipment. About 1,200 to 1,500 parcels ship daily from his facility. He adds that he is not worried about dim weight pricing as he is already optimized for parcel shipping. "We are saving 15 percent now and will save even more comparatively when the dimensional weight [pricing] starts."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
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.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."