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Transcript
Bill Van Amburg of Calstart
David Maloney, Editorial Director, DC Velocity :
Will all the trucks on our highways be electric vehicles by 2050? Many of our states think so. With lost foot traffic, some retailers are converting their storage space into last-mile distribution hubs. And proposed legislation may be able to help food distributors hit hard by the pandemic.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Fortna. Fortna partners with the world's leading brands to transform their distribution operations to keep pace with digital disruption and growth objectives. Known worldwide as the distribution experts, Fortna designs and delivers intelligent solutions powered by their proprietary software to optimize fast, accurate, and cost-effective order fulfillment. For more information, visit Fortna.com.
As usual, DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today, we welcome Bill Van Amburg, the executive vice president of Calstart. He is here to discuss the landmark memorandum of understanding that's between 15 states plus the District of Columbia. They recently adopted this memorandum of understanding aimed at placing more zero-emission trucks, buses, delivery vans, and other medium- and heavy-duty vehicles on our nation's roads. The initial target is for the zero-emission vehicles to be 30% of sales by 2030. And eventually, all new commercial truck and bus vehicles will have zero emissions by the year 2050. Welcome, Bill. Thanks for joining us.
Bill Van Amburg, Executive Vice President, Calstart :
Hey, my pleasure. Great being here with you.
David Maloney, Editorial Director, DC Velocity :
To begin, can you tell us a little bit about the work of your organization, Calstart.
Bill Van Amburg, Executive Vice President, Calstart :
Yeah. So Calstart is a clean transportation nonprofit organization. We're made up of about 250-plus industry, fleet-manufacturer, but also public-agency members. Mostly North America, but increasingly, worldwide. And we've had a unique goal, while we're a nonprofit, and our goal is to create positive environmental outcomes. We're really an industry-focused group. Our goal is actually to create a clean-transportation-technologies industry that leads to good jobs, cleaner air, and reduction in carbon emissions for climate change. And we've been doing this now for about, almost 30 years.
David Maloney, Editorial Director, DC Velocity :
Why are the 15 states and the District of Columbia coming together at this time for this initiative?
Bill Van Amburg, Executive Vice President, Calstart :
Well, you know, we're really at an interesting time for multiple pressures, not just in the United States, but really worldwide. But for those states, the primary reasons are twofold.
One, they're facing increased nitrogen oxide and also particulate-matter emissions, particularly in their urban centers. And this is primarily caused by heavy-duty trucks this as we've cleaned up industrial sectors as we've cleaned up power plants, really the biggest and growing sector for urban criteria emissions emissions that cause smog, if you will, are the heavy duty trucks and we're growing that sector you know, goods movement continues to grow over that last-mile sector, and e-commerce is really driving it.
But increasingly with that is also climate change. And the growth of this sector, the biggest sector in the United States and worldwide now, single sector, is transportation or carbon emissions. And again, for those same reasons that I just outlined, this sector is continuing to grow. We're really a dynamic society. We ship goods around the world. We order things online with a push of a button, they show up the next day or the next day afternoon. And so this is, we're really seeing this sector grow, and we really have to get our hands around it. So the states have decided "We need new tools and let's work together to figure out how can we get to the cleanest technologies we can?" And particularly in our urban regions, but also beyond those. And let's tackle two things at once. Let's not only go after the air pollution in our cities, but let's go after the energy use that's tied to climate change. And that's why they're talking about getting towards really pretty aggressive goals for zero emission, in trucks in general.
David Maloney, Editorial Director, DC Velocity :
Can you highlight what some of those goals are, and what their hopes are to achieve those?
Bill Van Amburg, Executive Vice President, Calstart :
Yes. So, you know, first of all, getting 15 states to agree to anything is a pretty phenomenal step. And this also includes the District of Columbia, so 16 governmental agencies. Their high-end goals are these: That they will work with together collaboratively to see what they can do to build and support a market that leads to these goals: Thirty percent of new truck sales--truck and bus, by the way--in 2030, and then 100% zero-emission truck and bus sales by 2050. So their goals are, okay, if those are kind of our two high points that we're getting to--one with the midpoint in 2030, and then to 2050--now, what do we need to put in place to do it? So the what they've really agreed to do as a group is work together to set policies that can interconnect, cross-support each other.
This really represents 40% of the population in the United States. So that's a pretty big market sector, and fairly large amount of our goods movement in the U.S.
David Maloney, Editorial Director, DC Velocity :
Now when we're talking about zero-emission vehicles, are we primarily talking about electric vehicles?
Bill Van Amburg, Executive Vice President, Calstart :
Yeah, when you really get down to it--well, we need a couple of things, and just to back up one step: We definitely need, as we move forward, two things. We either need to get to zero emissions, which would be, say, battery electric or fuel-cell electric, everywhere that we can. And then where we can't—because there's going to be longer-distance trucking and and heavier duty cycles, heavier weights that are going to be tougher to do for a while—then we've got to get to the lowest combustion engines with the cleanest possible fuel that we need. And those are really kind of like the two big paths forward.
But when we're talking the zero-emissions piece of this that they're talking about, which is 30% of trucks being zero emissions in new sales by 2030, yes, we're talking about either a fuel-cell or battery electric vehicle in those cases. Or possibly something like a hybrid that can run on its battery power for some period of time, maybe when it's in the center part of a city, and then could shift over to a combustion-engine hybrid when it's out on the open road.
David Maloney, Editorial Director, DC Velocity :
We obviously don't have the infrastructure currently to support this. And while there is a good bit of time in this initiative, what's it going to take for the states to be able to mobilize that kind of infrastructure, and what are they going to do to support it?
Bill Van Amburg, Executive Vice President, Calstart :
Yeah, it's a good question. When we looked—and we've been very active in this space, for, as I said, almost 30 years—we've seen just a sea change, in the base technology for the vehicles. I think if people, even five years ago, had said, "Oh, the major truck makers, they're not going to be able to make these zero-emission vehicles."
So the technology's improved so well that we do have Volvo coming forward with a Class 8 tractor that will be zero emissions for regional use later this year, early next. Same with [] same with the Packard Group, you know, same with Navistar. So we're seeing the real technologies move forward both from innovators out From our major truck makers.
Now the question, as you say is how do we make sure there is the sufficient refueling infrastructure to make this work? And now that we've actually started to see real momentum on the truck-capability side, it's, the long pole in the tent is infrastructure.
What we've seen in some of the states that have been leaders in this—and California as an example, but we're also seeing similar things going on in Western Europe, similar things going on in China, for instance—as what we, first of all, we're seeing the utilities really start to weigh in, get the approvals from their authorizing authorities or regulators to invest in this space. Normally, you wouldn't have the truck maker invest in a diesel fueling station. Similarly, you wouldn't necessarily want to have to have them investing and just bringing the core capability to use that fuel to their depots. So getting the utilities involved is really a big deal.
So in California, there is authority from the utilities to actually Invest and rate-base this so that they can provide the capacity to their new customer set. You know, they've never had transportation as their customer. Now transportation is one of their customers. So that is really a pretty key place.
We're seeing it start to develop now in other states. New York is starting to see this approval come through. We're seeing it in Michigan, interestingly. We're seeing it up in a couple of other states in the Northeast. But this is something needs to happen first. Utilities need to get engaged. And then I think from a public standpoint, this is a really good place to start thinking about where can we put our investment. But this is going to have to be what we're going to be focused on in the next 10 years is, let's make sure we really start to roll out and do the investments in sufficient capacity and the distribution networks for the utilities to provide the power at the right place at the right time.
Let's really get competitive rates for that electricity that's understandable to a fuel user. You know, most of the fleets are not in the business of running buildings. They don't really know what electricity charge rates are, time-of-use rates. So we really need to make a streamlined rate structure that fleets can understand and use, and then just make sure that we're investing at the pace of change that's needed.
And I think what the states have done with this signal they're sending is send a powerful message, not just to the manufacturing sector for the vehicles, but for all the other supporting sectors, to say, "Okay, here's where we're going. Here's where we need to get. Your investments will actually pay off, because this is the requirement that's going to be out there." So we are seeing large institutional investors starting to look at, "Okay, we could invest in this space and and now get a payoff for putting in infrastructure, for adding capacity to the electrical grid, for putting in services to provide charging so that we can streamline it for fleets. This space is really starting to develop right now.
David Maloney, Editorial Director, DC Velocity :
So bottom line, what will this mean for the trucking industry and supply chain in general?
Bill Van Amburg, Executive Vice President, Calstart :
Well, I think we live in interesting times, right?
We're dealing with with Covid right now. Covid has had a really intriguing impact on our goods movement. Because these are essential services, we have really not seen this sector drop off the way the rest of the economy has, at least not to the same extent. But I think what is true for trucking in general, and it's why it's such an interesting industry to work in, this industry is always looking for the next best business case. If it can prove out to help me with my costs of delivering these services, I'll entertain it, I'll look at it.
And I think the trucking industry is starting to realize, Wow, you know, for these urban duty cycles, if I'm in delivery or services, or a variety of these functions—and particularly right now in the next five to 10 years—within these urban regions, these trucks can actually have a better payoff than the diesel truck I'm replacing. Now, they're a little more expensive today, and that's a hurdle we'll get through over the next few years. But the operational costs tend to be significantly lower than for diesel. There's less brake wear. There's less maintenance, because of the way these vehicles function and the fewer moving parts on board. And the fuel costs are cheaper, because it's just a fundamentally more efficient drive system, taking energy in and how it uses it. So I think a lot of truckers are going to be surprised that this actually is going to lead to a better, more efficient business case for them.
But, it's going to be a period of shakeout. People need to start getting experience with this on a fast track. It's a new fuel type that we need to get experience with. And I think, I think the more we can get service providers in, I think one of the solutions that's going to be out there is providing transportation or Infrastructure as a service. Meaning, if you're a fleet, it's like, I just, I got to do my job, and that vehicle is a tool to me. If somebody could provide to me that vehicle, and it's electric, and the infrastructure is included in the package, and some fuel that I know is at a rate that I can deal with, and I just pay you on a monthly basis, or I do it through a lease structure, that's fine by me. As long as that truck is out there and can do the job every day and rolls out. I think this is where we're going to start to see some really exciting new approaches. Leasing has really become a big tool in the goods-movement sector. And I think maybe it starts to step up even more that people will start to say, "My business is moving these things. This truck is a tool for me. You provide the tool at a competitive price. I'll just lease it from you, and I don't worry about anything else." That could be a really exciting new model. But it is a period of shakeout. No doubt about it.
David Maloney, Editorial Director, DC Velocity :
We've been talking to Bill Van Amburg, the executive vice president of Calstart. Bill, thanks for joining us today.
Bill Van Amburg, Executive Vice President, Calstart :
My pleasure.
David Maloney, Editorial Director, DC Velocity :
Now let's turn to some of the other supply chain news from the week. Ben, you wrote about the growing number of companies either running fulfillment out of the back room of a retail store, or converting the retail site to a last-mile hub entirely. Is this a growing trend?
Ben Ames, Senior News Editor, DC Velocity :
It is Dave. This came from a study from the real estate services firm CBRE, which produces a whole lot of numbers and we've often reported in DC Velocity on some of their statistics. Right now, they're talking about e-commerce, which, we've heard through the years is, continues to be red hot and continues to take up a larger share of all retail sales. That has never been more true than it has been during these coronavirus, stay-at-home and work-from-home times.
So, under that sort of pressure, a lot of companies are trying to find a way to make it work more smoothly, more efficiently. And that is pushing a growing number of companies to convert underperforming retail stores into industrial operations, like last-mile distribution hubs for online fulfillment. Historically, there have been downsides to that. You need very precise inventory visibility, so you know exactly what's in your store, if you're going to be running fulfillment there. And also, retail store associates typically make more money in terms of their salary than warehouse workers, so that can mean that it costs more to have them do fulfillment. However, in this time of the pandemic, we're seeing what CBRE called a large volume of dead malls, particularly in the Midwest region. And so there's just a lot of unused storage space—retail space—at the same time that there's growing pressure to meet those online orders. So when you add up all that stuff together, CBRE counts 59 retail-to-industrial conversion projects that are either underway or completed since 2017. And that's a big jump from the 24, instead of 59, that they counted just 18 months ago.
David Maloney, Editorial Director, DC Velocity :
Can you give some examples of specific companies [that] are involved in the strategy?
Ben Ames, Senior News Editor, DC Velocity :
I sure can. There was a big name, that also this week said that they are moving in that direction, and that's Walmart. Walmart, Canada, that is. This was a initiative that they announced to spend $2.6 billion, which is a lot of money even for Walmart, to make their omnichannel, both retail and online sales, more efficient. Part of that, they're putting more robotics and automation into their DCs, which is a continuing trend we've seen for many companies. They're also looking at their retail stores, putting in electronic shelf labels and robotics and computer vision. But in terms of this trend, what Walmart Canada is doing is piloting what they call hybrid locations. And that converts the back rooms of some of their large retail supercenters that a lot of our listeners have probably been in at one point or another, changing them into facilities that run micro-fulfillment centers in the back room of the retail store. So that's been predicted to spread throughout Walmart's Canada stores to allow more BOPIS, which is buy online pick up in store, or curbside pickup, or, particularly important during coronavirus times, contactless pickup, to up to 70% of their locations by the end of the year. So, it's definitely something that's coming on fast.
David Maloney, Editorial Director, DC Velocity :
Well it's certainly a trend we'll continue to track. Thank you, Ben.
Victoria, legislators introduced a bill this week to provide tax credit to food and beverage distributors. Can you share with us the details of that proposed legislation?
Victoria Kickham, Senior Editor, DC Velocity :
Yes. Thanks, Dave. Trade associations representing the food service industry this week, were praising the introduction of a bill that, as you say, will help food distributors offset uncollectible debt that they incurred as a direct result of Covid-19 business shutdowns. So, it's a bipartisan bill called the Providing Liquidity for Uncollectible Sales Act, or the PLUS Act, and it was introduced this week by Representative Darin LaHood, a Republican from Illinois, and Jimmy Panetta, a Democrat from California. Essentially, the legislation provides a tax credit for food and beverage distributors who are unable to collect on debts from food establishments—you know, restaurants, hotels, bars, schools—that were forced to shut down this spring. The bill, as I said earlier, is supported by the food industry associations. The three groups that we heard from were the United Fresh Produce Association, the International Food Distributors Association, and the National Fisheries Institute.
David Maloney, Editorial Director, DC Velocity :
So how exactly would this help the companies within the food supply chain?
Victoria Kickham, Senior Editor, DC Velocity :
Yeah, so good question. Just to back up, a little history: So, the food service distribution industry says it collectively experienced more than $12 billion in uncollected debts as a result of the shutdowns from the pandemic. Now, this is for products that were shipped to food establishments prior to Covid-19 shutdowns, but they hadn't been paid for. So a lot of times what happens is, these distributors, you know, they they provide their products on credit. So, seafood distributors said that they have approximately $2.2 billion in debt owed to them. Fruit and vegetable distributors said they have an additional $5 billion in such debt. And broadline food distributors reported more than $5 billion in debt.
So, essentially what this PLUS Act does, it would give those distributors a 100% tax credit for uncollectible debt from those establishments that were ordered to close for at least 30 days between March 25 and July 15. So, in addition, what they say is that this helps with shortcomings that the industry also experienced from the CARES Act, which was enacted in March. The group says the CARES Act didn't account for this kind of debt, although it helped with paycheck protection and other issues. It didn't help them collect on the credit they had given to these customers. So it's a big, big step in the right direction as distributors continue to, you know, keep the supply lines open and running, especially as businesses, restaurants, get back up on their feet.
David Maloney, Editorial Director, DC Velocity :
And we'll continue to track that bill as it makes its way through Congress. Thank you, Victoria.
Victoria Kickham, Senior Editor, DC Velocity :
You're welcome.
David Maloney, Editorial Director, DC Velocity :
And thanks, Ben, also for sharing your news this week.
Ben Ames, Senior News Editor, DC Velocity :
Yes, thanks. It was fun to talk.
David Maloney, Editorial Director, DC Velocity :
And our thanks again to Bill Van Amburg of Calstart for being our guest today. We encourage your feedback on this topic and our other stories. You can email us at podcast@dcvelocity.com.
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