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 is no shortage of unsettling trends confronting U.S. truckers. Qualified drivers are in short supply, and those being seated are getting paid much more than before. The electronic logging device (ELD) mandate has curbed fleet productivity as runs that in the past could be completed in one workday can now take two days. As of mid-June, nationwide on-highway diesel fuel prices were up 75 cents a gallon from the same period in 2017, according to government reports. Road congestion, and the delays that accompany it, is worsening. The cost of everything from trucks to tires continues to escalate. Insurance premiums rise as insurers terrified by so-called "nuclear verdicts" in the many millions of dollars ratchet up rates or leave the business. Then there is the ever-present and formidable competition from railroads, with their more economical and fuel-efficient services.
Thus, it might seem odd to think trucking firms would be in a commanding competitive position as the decade winds down. But that is what the authors of the 29th annual "State of Logistics Report," released June 19 in Washington, D.C., have predicted. The report, prepared by consultancy A.T. Kearney Inc. for the Council of Supply Chain Management Professionals (CSCMP) and presented by third-party logistics service provider (3PL) Penske Logistics, found that favorable supply-demand dynamics combined with information technology adoption will enable truckers to generate solid profits and take market share from a railroad industry struggling to keep pace with innovation.
Advanced technologies ranging from autonomous vehicles and truck platooning—which could be widely available to shippers over the next three to seven years—to enhanced route optimization tools will narrow the cost differential between the two modes and put railroads under increasing pressure, according to the report. That's because rail suppliers have not been as aggressive as their trucking counterparts have in embedding performance-enhancing technology into their products, the authors said.
Using sophisticated analytics, truckers can assess the profitability of each route and shift assets to higher-margin lanes while rejecting more loads on low-density lanes, the report said. By tracking how much time trucks spend at each stop, carriers can purge "sluggish" shippers that take up too much driver time and generate little profit, according to the authors. In the current cycle, which could last several years, shippers stuck in the transactional rate-driven mindset that paid short shrift to the needs of fleets and drivers will be marginalized.
That's not to say railroads still can't make hay. It's just that they have to do it while the sun shines. Based on the report's data, it's shining right now. Intermodal costs climbed 10.5 percent in 2017 over the prior-year totals, the biggest gain among across-the-board leaps in freight rates as a better economy met up with tighter capacity, according to the report. Strong demand gave railroads pricing power—especially in intermodal—while productivity improvements boosted their profit margins and the newly enacted corporate tax cuts increased their cash flows, the report found. Intermodal gained a powerful tailwind from traffic conversions by shippers struggling to find over-the-road capacity.
How long intermodal's good times last will not only depend on the traction of truckers' improvements, but also on the rails' ability to keep their own operational house in order. Events of the past few months haven't been encouraging. In March, the Surface Transportation Board (STB), the nation's rail regulator, concerned about unreliable and inconsistent service, ordered all Class I railroads to submit to the agency their service plans for the rest of 2018. Service complaints in 2017 spiked 144 percent from 2016 levels, the STB said.
Erik Hansen, vice president, intermodal for Kansas City Southern, the Kansas City, Mo.-based railroad that operates north-south routes within the U.S. and in and out of Mexico, said at a June 19 news conference following the report's release that the company is closely watching developments in linehaul technology. Hansen shared the view held by many that it could be years before such technologies become mainstream and that their impact on all supply chains, including the railroads, is "uncertain."
STEEP GRADE AHEAD
The exceptional pricing leverage enjoyed by asset-based carriers was the central narrative of this year's report, titled "A Steep Grade Ahead." Last year's report, which analyzed 2016's performance, described an uncertain future for the industry and posited various scenarios for its direction. By contrast, this year's report had a single message: Assets are where it's at.
"Carriers are in control as demand outstrips supply, while shippers try to 'create capacity' by improving efficiency whenever possible," according to the authors. For shippers, the biggest challenge won't be fighting the upward rate trend, but rather, finding creative ways to secure adequate capacity at prices they can live with.
Shippers are digging deeper into their routing guides than ever before and are increasing their reliance on freight brokers, which continue to show healthy demand increases. Broker volumes rose 40 percent in 2018, a period of ultra-tight capacity that forced many shippers onto the "spot," or non-contract, market, said the report, citing data from loadboard operator DAT Solutions.
Shippers who avoided putting their freight out to bid in an effort to wait out the upward rate trend often found themselves facing load rejections that disrupted their operations, the report found. Those who re-bid their freight, although they absorbed "painful" rate hikes, managed to preserve service levels and to keep disruptions at bay, the authors wrote.
LOGISTICS COSTS RISE
Overall, after declining in 2016 for the first time since 2009, U.S. business logistics costs climbed 6.2 percent in 2017. Logistics costs as a percentage of gross domestic product (GDP) rose to 7.7 percent last year from 7.6 percent the prior year. The report's three main components—transportation, inventory-carrying costs, and so-called "other" expenses, such as administration—rose substantially.
Transportation costs increased 7 percent, led by intermodal. That was followed by dedicated contract carriage, which spiked by 9.5 percent as more shippers demanded capacity assurance, and parcel and express, which rose 7 percent. Truckload and less-than-truckload (LTL) costs rose 6.4 percent and 6.6 percent year over year, respectively, according to the report. Only waterborne freight, with an increase of just 1.1 percent, came in below the 3-percent threshold for year-over-year gains.
Inventory-carrying costs climbed 4.6 percent over 2017 figures, paced by a 5-percent gain in borrowing costs as interest rates climbed, according to the report. Physical storage costs rose 4.2 percent as demand for facilities to support e-commerce fulfillment and distribution continued apace, the report said. The driver shortage has forced many shippers to push goods closer to end customers in order to meet fulfillment and delivery commitments, according to the report. This, in turn, has increased inventory levels and reduced warehouse capacity, thus driving up inventory and storage rates.
In a sober assessment of the long-running problems between shippers and their 3PLs, the focus between the two still remains on cost cutting rather than on building mutually beneficial relationships, according to the report. Blame can be found on both sides: Shippers expect 3PLs to meet unrealistic implementation milestones and performance standards, while 3PLs avoid the risk of developing premium-priced and customized solutions for fear of losing price-sensitive customers, and then wonder why shippers dissatisfied with 3PL cookie-cutter solutions regularly rethink the idea of bringing logistics activities in-house.
In a climate of ever-increasing end user demands, shipper and 3PL executives can't afford to give up on collaboration, the report said. For their part, shipper and 3PL executives at the June 19 event said the problem isn't grounded in mutual distrust but in the failure to have the right conversations. As Joe Carlier, Penske Logistics' senior vice president of global sales, put it, the dialogue shouldn't focus on "here is the rate for this," but on "here's what I can do" for your spending.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
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.”