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.
Last year proved that intermodal shippers could be a tolerant bunch. Despite a fiasco-filled 2014 on the nation's rail network, noncaptive intermodal users, instead of taking their freight elsewhere, threw more business at the railroads than ever before.
This year will be a test of the railroads' resilience and whether they can vindicate shippers' faith in them. It will also be a test of shippers' fortitude, especially if bad winter weather puts rail service behind the curve again.
Intermodal traffic stood to increase in 2014 by 3 to 5 percent over 2013 levels, according to Intermodal Association of North America (IANA) data in mid-December, when this story was written. Through the end of November, 14.9 million trailers and containers moved in domestic and international service, according to IANA. Barring a December collapse, 2014 volumes will break the 2013 record of 15.5 million units, said Joni Casey, IANA's president and CEO. Through mid-December, intermodal traffic grew at a pace expected to double that of 2014 U.S. gross domestic product, according to Lee A. Clair, partner in the consultancy Zubrod/Clair & Co.
The increases, if they hold through 2014's end, will have come amidst the most chaotic rail operating environment in 10 years. Inclement weather that began in late 2013 intensified during the first quarter, wreaking havoc across the country's northern tier and at the industry's main interchange point in Chicago, where the network froze up as rail and road drayage operations were paralyzed. Not surprisingly, rail velocity and dwell time metrics sagged terribly during the quarter and didn't begin recovering until the end of the year. Carriers were and still are unable to say when complete "fluidity" would be restored to their networks.
Railroads were plagued by shortages of locomotives, crews, and infrastructure. Another season of a bountiful harvest triggered continued surges in grain traffic. A sharp spike in such nontraditional commodities as fracking sand and crude oil forced, notably, BNSF Railway—whose network serves the shale oil fields of the Dakotas—to put energy shipments ahead of other commodities and traffic, including intermodal.
Through the first week of December, BNSF's 2014 intermodal volumes were flat year over year, according to Clair. By contrast, Union Pacific Corp., BNSF's rival whose system wasn't as exposed to the rotten weather and the shale and agricultural booms, posted an 8.3-percent intermodal traffic gain over the same period, he said.
Part of intermodal's gain came from truck shippers who switched because many truck routes were paralyzed during the first quarter (even though the additional demand only worsened the rail capacity problems). But as Anthony B. Hatch, a veteran analyst and consultant, noted, intermodal shippers stuck with the service because, as products of the post-deregulation world, they better understand and accept the turbulence inherent in a market-driven system. Intermodal users also cut their providers slack because they had lived through an eight-year period leading up to the end of 2013 when rail reliability and customer service had strengthened considerably, Hatch said.
Shippers believe the railroads are serious about getting their act together, Hatch said. If money is the benchmark for commitment, then shippers will have little to fret about. Railroads in 2015 are expected to make unprecedented investments in capital improvements. BNSF, which took the hardest hits of any rail last year, plans to spend a record $6 billion in 2015 to add power, track, and labor, all of which will benefit intermodal users. Hatch, who expects the overall service picture to brighten as early as the first half of the year, said shippers would give railroads the benefit of the doubt at least until then.
Clair said that despite the problems, intermodal continues to bring value where big shippers want it, namely in longer-haul transport from their factories to warehouses and distribution centers. These moves provide a wider window for hitting delivery commitments and give a customer's supply chain a bit more breathing room, Clair said. Product that must be expedited direct-to-customer could be funneled to faster truckload services, he added. Intermodal service is in better shape than the rails' traditional carload business, which Clair said remains a major problem with no clear resolution.
A SHORT LEASH
It would be a leap of faith to interpret shipper tolerance as infinite patience, experts said. Even Hatch said that if the situation doesn't appreciably improve by the start of the third quarter, intermodal users will "be as upset as 'ag' shippers are today."
The bad winter weather only amplified problems that have been present for years and which have not abated. The Chicago interchange that intersects six of seven North American Class I railroads remains a mess of delays, disruptions, and backlogs. As was often stated during the year to illustrate the bottlenecks at Chicago, it can take a train more time to get from one end of the city to the other than it takes to run from Los Angeles to Chicago.
Megavessels entering the trans-Pacific trades threaten to overwhelm West Coast port infrastructures, while the creation of vessel-sharing agreements like the 2M alliance between Maersk Line and Mediterranean Shipping Co., which was set to begin in January, could alter freight flows because goods arriving at ports on one vessel will often head for different terminals. This has led to significant congestion and has left the "on-dock rail" model, where railcars must be filled before a train leaves the port area, increasingly prone to delays. The pitched contract battle between coastwide waterfront labor and management, which was still raging at this writing and which has slowed the loading and offloading of vessels since the fall, was a stark reminder of the ongoing risks in an interconnected system.
The cost and availability of drayage services that truck containers between ports, intermodal ramps, and shipping docks remains a significant problem. Port congestion and rail reliability played havoc with dray schedules, forcing drivers to wait longer than normal for loads and cutting into their productivity. Dray has not been immune to the impact of a shortage of commercial drivers. Drayage costs, which for a long-distance round-trip could run over $1,000, can neutralize the benefits of the relatively inexpensive train portion of the overall movement. Shortening dray miles would require the construction of smaller terminals closer to the customer; BNSF said it has terminals within 200 miles of 98 percent of the U.S. importer population.
The silver lining, according to Clair, is that sophisticated and deep-pocketed truckers are entering the space with experienced drivers and cleaner, more fuel-efficient rigs. Their presence should raise the quality and consistency of drayage services, albeit at higher prices than users are accustomed to paying, he said.
Meanwhile, intermodal demand will continue to rise, creating opportunities for the carriers as well as potential headaches in managing growth through the ongoing turbulence. On that score, the industry has been a victim of its own success. Railroads have effectively marketed intermodal as a lower-cost, fuel-miserly, and environmentally friendly alternative to over-the-road truck. In the domestic market, railroads are aggressively competing with trucks on short-haul movements, hoping to convert millions of road shipments to intermodal. Internationally, U.S. imports will keep on coming, maintaining pressure on the intermodal infrastructure to accommodate the flow.
WANTED: A LITTLE CLARITY
Perhaps the biggest challenge for users will be to gain clarity from rail operations people as to when the trains will consistently run on time. According to an intermodal user who asked not to be identified, shippers have been told to re-evaluate their 2015 growth plans because the system in its current state can't handle any growth. The user said there is no accountability at the railroads for the erratic performance, adding that operations people are focused on process, not results.
At this time, all shippers seem to be certain of is that their 2015 rates will increase over 2014's by mid- to high-single-digit levels, the executive said in mid-December. "They're terrified" about the situation, the executive added.
The railroads said the unknowable of first-quarter weather will play a huge role in setting the timetable for back-to-normal service. For example, CSX Corp., the Jacksonville, Fla.-based Eastern railroad, expects to see improvements sometime in the second quarter, according to Melanie Cost, a CSX spokeswoman. The timing will largely depend on the weather, she added.
Ted Prince, a long-time intermodal consultant and chief operating officer of Tiger Cool Express LLC, an Overland Park, Kan.-based company that uses refrigerated intermodal services to move produce eastbound off the West Coast, argued that the problems facing intermodal are more secular. The carriers focus too much on optimizing their individual networks, he said, and lose sight of the fact that intermodal is one national and global system where a yank on one strand sets the whole ball to unraveling. Clair of Zubrod/Clair countered that each railroad is accountable to its owners and its customers, and must develop and execute its individual strategy accordingly.
The railroads are doing what they can. CSX has developed an intermodal hub in the northwest Ohio town of North Baltimore. Western-originating freight headed to destinations east of Ohio is interchanged to CSX at Chicago, then brought to the hub and placed on CSX trains that move the goods to their destinations. The network is being expanded this year to handle 1 million "lifts," according to Cost; one lift is equal to one container being placed on or taken off a railcar. In its first year in 2011, the hub handled 600,000 annual lifts. CSX has added 250 intermodal lanes since the hub opened, she said.
The hub has been hailed by some as the future of intermodal. Instead of Chicago-bound freight's being drayed across town to one of several of CSX's Chicago ramps, the volume flows through in a pure rail-to-rail interchange from Chicago to the Ohio hub. The operation is aimed at avoiding the time-consuming dray at Chicago, thus expediting the discharge of freight from the region.
The hub-and-spoke-like model is "anathema" to traditional linear rail structures, Prince said. However, it offers an innovative way to increase geographic scope and freight density, while easing the pressure on Chicago, he added. Larry Gross, a principal at consultancy FTR Associates specializing in intermodal, called it a "bold experiment" in developing sorting facilities to connect the growing number of Eastern rail facilities. The key to the project's long-term success, Gross said, is to ensure that the benefits of strengthening the network and boosting the density and train size on each of the spokes outweigh the cost and service impacts of sorting containers mid-route.
BNSF, meanwhile, has virtually completed a 10-year, $3 billion initiative to "double-track" its transcontinental route connecting Southern California to the Midwest, according to Katie Farmer, the railroad's group vice president for consumer products. The railroad has launched projects to expand line capacity in the corridor; those efforts will be highly visible throughout 2015, Farmer said in a mid-December e-mail.
A rail-to-rail interchange with CSX that recently opened at Bedford Park, Ill., a small industrial city just southwest of Chicago, has streamlined the handover process between the two rails, easing congestion and boosting on-time metrics along BNSF's transcontinental main line, Farmer said.
Yet in a sign that BNSF has a ways to go, Farmer said the railroad remains "challenged" east and west of Fargo, N.D., due to line capacity projects that require trains to slow down through the respective construction areas.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.