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.
Brian Devine launched ProLogistix, a leading provider of logistics talent in the U.S.
It's unfortunate the rest of the U.S. economy isn't firing on all cylinders the way the industrial property sector is. Demand is strong, space can't come online fast enough, and, after more than a decade of lean times, DC workers are finally seeing more money for their efforts.
These also make for good times for Brian Devine. A 20-year staffing veteran and senior vice president of Atlanta-based EmployBridge, Devine in 1999 launched ProLogistix, a division of EmployBridge dedicated to specialized warehouse and distribution center staffing. ProLogistix has since become a leading provider of logistics talent in the U.S.
Devine recently spoke with Mark B. Solomon, executive editor-news, to discuss the outlook for labor and how managers will need to balance the realities of higher pay and margin pressure.
Q: How are the supply-demand scales balancing for peak season?
A: Based on what we've seen over the past three years, we expect the demand for hourly labor to increase by about 28 percent over the headcount needs of the third quarter. This large increase will be on top of the already-tight labor market we are now experiencing, so recruiting for this peak season will be even more challenging than it was in the last few years. The good news for associates is that over half of the positions created during the peak season of 2015 turned into full-time positions. That compares with just 10 percent of the positions converting to full time in 2013 and 2014.
The current labor market will require companies to pay peak season premiums of $1.50 to $3 per hour to attract and retain workers through the fourth quarter. Additionally, weekend shifts and second and third shifts will require a $1-per-hour shift differential during this upcoming peak season to meet demand. I anticipate that companies will have to include more part-time positions to attract people who want to work just 20 to 25 hours per week. Fortunately, many of the jobs created during the peak season have a very short learning curve, so employees can be productive with just a few hours of training.
Q: It sounds like workers have bargaining power?
A: Workers are in a better position now than at any time since 2007. With unemployment rates well below 5 percent in major logistics markets, good workers are reaping the rewards of an employer base that has become more creative and generous in its attempts to attract and retain their services. The generosity starts with a competitive pay rate. We know the most important factor in attracting employees is competitive pay. Secondarily, employees want job security so they can gain a sense of financial stability. After over a decade of stagnant wages, we have seen an 11-percent increase in pay rates for logistics employees in the last 24 months, and I anticipate that rate of pay increases will continue for the next year.
Q: To what levels can wages rise before they become a pain point for managers?
A: I expect average pay rates for hourly logistics employees will rise until we get to $14 per hour. At that point, we should start to see some leveling off. That will put associates' wages in line with their spending power back in 2002. Wages will vary depending on the availability of labor in a specific market and the minimum wage laws for each market. Another important variable affecting pay is the complexity of the position. For instance, an associate who is expected to operate four different types of forklifts will warrant a higher pay rate than an associate who is operating only a sit-down forklift.
Q: What do your customers tell you about the role that robotics or other forms of automation will play in managing through peak season?
A: I get a mixed response. On one hand, technological improvements in robotics allow some functions to be performed by a robot at a much lower cost than having a person perform that same function. But that activity has to be repetitive enough and be required to be performed for a duration long enough to warrant the cost associated with purchasing, setting up, and programming the robot to perform the task. Many of today's consumers want their purchases to be customized, which creates a higher demand for the flexibility you can only get by using employees.
Q: To what extent can automation offset the impact of a shortage of human labor?
A: The use of automation can help make employees significantly more productive. We are seeing automated solutions implemented in almost every aspect of a distribution or fulfillment center's operations from a basic corrugated box assembly to a complex conveyor system tied to a pick-to-light station. The combination of the right automation and the right work force can drive down labor costs considerably. While the use of automation and robots reduces the headcount requirements in a facility, the remaining positions often require an advanced skill set to optimize the capabilities of the new technology.
Q: Looking beyond peak and into 2017 and 2018, what is the most likely scenario confronting warehouse operators?
A: In the near future, I expect to see the "Uber-fication" of positions within distribution or fulfillment centers. For example, companies will digitally post various schedules for 100 order selectors on their website, and associates who have been previously vetted and certified can go online and choose the schedules that work best for them. The labor market will be able to react in real time, so companies will be able to make quick adjustments in schedules or pay rates to attract the required number of associates.
Some of the changes facing warehouse operators will be determined by the timing and duration of our next recession. In recessionary times, labor becomes more plentiful, and while I do not anticipate a retraction of the pay rate increases that we've seen in the last 24 months, any further increases would be unlikely.
Q: New federal overtime rules have broadened the universe of workers that are eligible for overtime. What will be the impact on warehouse staffing costs and availability?
A: The changes will impact warehouse supervisors and managers with annual salaries of less than $47,476. Hourly employees will not be affected by the new ruling. Currently, most salaried employees earning more than $23,660 are exempt from overtime pay. Under changes to the Fair Labor Standards Act, effective Dec. 1, salaried employees must make more than $47,476 a year before they will be exempt from overtime pay. Companies will have to be prepared to pay more employees overtime or to change their salaries to meet the new threshold.
This change takes effect in the middle of peak season, so companies have to take this into consideration for the end of the year.
Q: The growth of e-commerce and a broad recovery in the industrial market is leading to more project approvals and construction of new DCs. Is the labor market big enough to accommodate the ongoing expansion?
A: The Bureau of Labor Statistics (BLS) tracks a segment of the population it classifies as "Not in Labor Force." These are people 16 years and older who are neither working nor unemployed. They might be in school or retired or simply not actively looking for work. The number of people "Not in Labor Force" has grown by more than 17 million people in the last 10 years. We now have over 94 million people who fit this description. I'm certain that companies will find ways to attract many of these people back into the work force. By increasing pay rates and offering flexible work schedules for students, retirees, and stay-at-home parents, we can meet the demand for more workers.
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."