Harvey moves on, leaving a transport network with formidable challenges
Trucking operations to resume out of balance, with many truckload carriers, drivers chasing high-margin "FEMA Freight." LTL carriers may see major cost hit.
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.
There are countless unforgettable images capturing Hurricane Harvey's destructive path across Houston, the Texas Gulf Coast, and Louisiana. But for folks who ship and move stuff for a living, and who face the daunting prospect of returning a key part of the U.S. economy to working order, two are particularly poignant.
After regaining strength for the past 24 hours over the warm waters of the Gulf of Mexico, Harvey made landfall again this morning east of Houston, sparing the nation's fourth most populous city further misery after dumping an almost biblical 52 inches of rain in some areas in just the past five days. Instead, Harvey turned towards Louisiana, but not before effectively drowning Port Arthur, Texas, home to the nation's largest oil refinery, on its way to swamping Baton Rouge and New Orleans, among other Louisiana cities.
Little has changed at this point in the transport ecosystem. The Port of Houston, as well as the city's two major airports, George Bush Intercontinental and William P. Hobby, remains closed until further notice. Omaha-based rail giant Union Pacific Corp., whose network feeds into the affected areas, continues to suspend service from Brownsville, Texas to Lake Charles, La. Most areas of east of downtown Houston are still inaccessible, UP said. The railroad has begun inspecting most of its infrastructure in Houston and west of the city, using helicopters and drones to view the damage in areas where there is no road access.
Rival BNSF Railway, which also serves the region, said yesterday that it continues to suspend all Houston originating and destination traffic, as well as all traffic scheduled to route through Houston. BNSF's Houston-area rail yards and facilities, such as those that house intermodal and automotive operations, remain closed until further notice, the Fort Worth, Texas-based railroad said. "Given the size and scope of the flooding, normal train flows in the area are not likely to resume for an extended period," and customers should expect continued delays, BNSF said.
UPS Inc., the nation's largest transportation company, said this afternoon that 574 zip codes in Texas and four in Louisiana are experiencing some level of service disruption. "There continue to be many locations where no pickup and deliveries are being made," the company said in an online service alert.
Companies shipping into the Houston area will experience extensive delays, though operations have resumed in Austin, Atlanta-based UPS said. UPS advised shippers to contact their customers prior to shipping to see if their locations have been impacted by the flooding. Rival FedEx Corp., based in Memphis, said it continues to monitor the situation but provided no details on service issues.
Not surprisingly, trucking networks are likely to find themselves out of balance once the region's highways, state, and local roads become sufficiently passable for the rigs to roll. Truckload carriers chasing so-called FEMA Freight, shipments of emergency supplies that are priced at a premium, will descend on south Texas, siphoning off capacity from elsewhere and raising spot, or noncontract rates, in the region and, for the short term, nationwide. Commercial truckload shipments bound for Houston or for south Texas may be delayed or re-routed due to a compromised infrastructure, creating a ripple effect as markets like Dallas, San Antonio, and Austin become de facto staging points and themselves become congested.
Less-than-truckload (LTL) carriers may face added pressure because they operate costly and complex hub-and-spoke type networks, part of which have been idled for days.
Re-balancing the typical LTL network will likely be expensive in terms of additional manpower needed to get loads back on their way, as well as the costs of possibly relocating personnel, cleaning up terminals, and paying freight claims.
C. Thomas Barnes, president of Chicago-based logistics technology provider project44 and a veteran of more than 20 years in the LTL, truckload, and third party logistics (3PL) segments, estimated that it will cost LTL carriers in aggregate, as much as $250 million to restore their networks to pre-Harvey conditions.
What's more, LTL rates are considered "static" in that they don't change frequently and become embedded in a shipper's or 3PL partners' transportation management systems (TMS). Attempts by LTL carriers to boost rates to offset rapidly escalating and extraordinary costs would require shippers or 3PL's to spend hours manually loading carrier rate information into a TMS, Barnes said. This becomes problematic when natural disasters create major imbalances in LTL carrier networks, he said.
According to consultancy FTR, Harvey will "strongly affect" more than 7 percent of U.S. trucking, with about 10 percent of all trucking operations affected during the first week of operation. A portion of the country's trucking network will be impaired for as long as two weeks, FTR said. After a month, about 2 percent of the national network and one-quarter of the regional system—skewed heavily towards the Gulf—will be impacted. Regional services will absorb most of the dislocation, FTR said.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.