Fleet managers grapple with host of challenges as pandemic’s impact persists
Truck fleets continue to navigate an unprecedented market, applying lessons learned as issues old and new complicate operations in a historic capacity crunch.
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
Rounding the bend into year two of the Covid pandemic, fleet managers see hopeful signs as businesses reopen, albeit at an uneven state-by-state pace; vaccinations gain traction among more of the population; and a strengthening economy gradually puts more people back to work.
Yet no one is willing to claim the trucking industry is fully back on its feet. An e-commerce–driven surge in freight has sucked up capacity as stay-at-home consumers ratchet up online buying of everything from essential food and household supplies to home-office equipment, appliances, and home-improvement goods.
Equipment manufacturers, who just a year ago faced a tidal wave of cancellations for new truck and trailer orders, now are near fully booked, with few if any build slots available until 2022. A rise in volumes from big-box retailers—and their demand for drop trailers—is stressing operations planning as fleets struggle to get equipment returned and back in their networks.
At the same time, thanks to Covid-imposed closures of driver schools, 2020 saw 40% fewer new CDL (commercial driver’s license)-credentialed drivers enter the industry than the year before, exacerbating the shortage of qualified professional drivers. And the new federal Drug and Alcohol Clearinghouse has shunted some 50,000 drivers to the side of the road, with less than 15% completing return-to-duty requirements.
WHERE ARE THE PARTS?
Going into the spring, fleet managers are faced with yet another challenge: getting enough parts and supplies to keep trucks serviced and on the road, as well as delayed deliveries of new equipment to replace aging, less-efficient trucks.
“The [parts] supply chain is very stressed,” observes Dave Bates, senior vice president of operations for Thomasville, North Carolina-based less-than-truckload carrier Old Dominion Freight Line (ODFL). “We are finding shortages in everything from lug nuts to semiconductors for computers in the trucks. Everything is behind,” he says. New tractor deliveries for ODFL expected in March were delayed to April. Trailer deliveries expected in April were pushed out to May or later. And everything seems to come with a 4% to 5% higher price tag, Bates notes.
All that has changed how Bates plans fleet replenishment for ODFL. “We are holding onto everything until new equipment comes online and we can assess our needs,” he says. “We don’t really want to get rid of old equipment too quickly when it still has some useful life for us.”
GETTING DEDICATED
Rewriting the operations playbook for pandemic times
One of the pandemic's unexpected developments was how it affected the beverage business. Beverages are one of the most fleet-intensive local-delivery operations in transportation.
For Southern Glazer's Wine & Spirits, responding first to an initial collapse in business and then a rapid uptick in demand from stay-at-home consumers stocking up on wine and spirits, while effectively managing its fleet resources and ensuring employees were protected, meant rewriting the operations playbook.
Based in Miami and Dallas, Southern Glazer's is the nation's largest distributor of beverage alcohol. The privately held, family-owned company handles about 32% of alcoholic beverages sold in the U.S. With over $21 billion in revenue, Southern Glazer's deploys a fleet of some 4,000 trucks operated by over 3,000 drivers, delivering around 180 million cases of beverages annually from 41 distribution centers. Its mostly straight-truck fleet typically delivers to restaurants, bars, grocery and liquor stores, and other retail shops selling wine and spirits.
It's a business where drivers typically interact with a dozen or more customers a day, making inside deliveries, and stocking backrooms and sometimes retail shelves.
"The biggest challenge was protecting our employees," says Ron Flanary, the company's senior vice president of national operations. "[Our drivers] go into retail accounts, facing the public all day long every day," he explains. Job one was "putting the controls in place to protect them and make them feel safe," Flanary says. That required adjusting how it operated, dictated by social distancing and disinfecting needs for trucks and facilities, and acquiring and providing sufficient personal protective gear to drivers and warehouse workers.
"We went to stop-and-drop operations," Flanary says. "Instead of taking the product inside the store, to limit contact we brought it to the back door, checked it in, and stopped there," he notes, adding that the change protected drivers by preventing close contact with store employees. And while initially, the pandemic reduced delivery volumes, for the most part, fleet operations weathered the storm and were able to adjust and adapt.
Southern Glazer's serves both on-premise and off-premise accounts, Flanary explains. During the heat of the pandemic, business with on-premise accounts, like bars and restaurants, "essentially went away," he notes. At the same time, volume with off-premise retail accounts went up some 35%. "It was just a shift in mix," Flanary says. The company was able to effectively redeploy resources idled by closed restaurants and bars to serve surging retail accounts like grocery and liquor stores.
Yet from a broader fleet-management perspective, even during the pandemic, the overall objectives remained the same: "How do you operate as safely as possible, support your drivers, and get the most productivity and utility out of your fleet," Flanary says. "How do you optimize operations to run the fewest miles, get the best stop density, and ensure a consistent level of quality service?"
Another trend over the past year and continuing in 2021 has been shippers and transportation managers embracing more dedicated operations as a way to reduce supply chain risk and lock in increasingly scarce trucking capacity.
Greg Orr, senior vice president, U.S. truckload for TFI International, is seeing accelerated demand for “dedicated committed fleet resources, where [shippers] are willing to pay substantially more or close the loop to make sure they have capacity for their business,” he notes.
Among the operations he oversees is Eagan, Minnesota-based truckload carrier Transport America, whose business mix typically is 75% for-hire over the road (OTR), and 25% dedicated. In the first quarter of this year, “the [demand] for dedicated versus OTR was about 50-50. It has never been that high,” Orr says.
Dedicated is a different conversation from spot market or for-hire negotiations, Orr stresses. Whether it’s taking over a private fleet or establishing a dedicated solution, “we really try to walk them through the commitment and the equipment and capital involved,” he explains, adding that in most cases, starting a new dedicated account means buying or leasing new equipment in the short term.
“We don’t want to be stripping [equipment] from one side of the business to [use in] another. So we try to take them through all the [staffing, asset, and operating needs] of [establishing a dedicated fleet],” he says.
Because of the market’s volatility and the resulting drastic swings in capacity, “the shippers we serve [have] become more creative than ever in terms of finding and capturing any and all capacity to support their networks,” notes Mark Sitko, vice president of dedicated sales for Van Buren, Arkansas-based truckload carrier USA Truck.
With rates at historic highs, some shippers have been reluctant to enter into longer, multiyear dedicated fleet deals, instead opting for “pop-up fleets.” These shorter-term dynamic capacity arrangements “get the capacity to the areas of the network [where] shippers need” immediate support, says Sitko.
In any case, creating a dedicated solution for each customer requires more than a cookie-cutter approach, notes Billy Cartright, senior vice president of dedicated operations at Chattanooga, Tennessee-based Covenant Logistics Group.
“One of our value adds is helping the customer optimize its network,” he says. “How does its [existing] network layer into ours, where can we find synergies?” He notes that in some cases, as part of a dedicated solution, his company will do backhauls and revenue shares, utilizing freight from one customer to fill empty lanes with another, essentially leveraging relationships among its customers to deploy available, unused capacity and increase utilization for all.
The strategic objective for the fleet manager or shipper’s VP of transportation should be “how do you take out cyclicality to have more predictability [with capacity] and understanding of what [transportation costs] will do to your P&L,” Cartright says.
It’s also important for the shipper to understand how operating structure and processes in its warehousing and manufacturing plants—which are to be supported by the dedicated fleet—can impact rates and costs in fleet operations, and where collaboration with its fleet provider can provide productivity gains and new efficiencies for both.
KNOW WHAT YOU ARE GOOD AT
Thomas Regan, vice president of operations for dedicated transportation at Miami-based Ryder System Inc., makes a similar point about dedicated’s growing momentum. His group is seeing especially strong demand, he says.
“Prior to Covid, there were some secular trends driving transition of private fleets to dedicated,” Regan recalls. “Insurance was a big factor,” with some operators saddled with “50% to 100% increases [in insurance rates], depending on the type of business and incident rates,” he notes.
The primary decision factors for shippers seeking more dedicated deals: risk avoidance, committed capacity, and a predictable cost for transportation. And offloading the ever-more-difficult challenge of finding and keeping professional drivers.
“When Covid hit, it made people [operating private fleets] really take a step back,” says Regan. He recalls a lot of shippers having conversations like “My insurance is going up. Technology in trucks is getting more complex. I don’t have the right visibility platform. Can I grow [my fleet] on my own at the pace—and within the cost—that my business needs?”
At the same time, trying to gain reliable capacity in the common carrier market was just as stressful. You either couldn’t find enough, or the cost was exorbitant and service unpredictable.
All that has created an inflection point that’s tipping the scales increasingly to dedicated in 2021, says Regan. He notes that Ryder offers not just dedicated solutions, but also complementary resources and capabilities, all of which can be mixed and matched to help shippers establish stable transportation operations with secure capacity at a reliably budgeted cost.
The point he makes to shippers and transportation managers contemplating private versus dedicated fleet operations: know what you are good at.
“Some have been running private fleets for years; they have good, deep talent and technology to make it successful,” Regan notes. “Others realize they need some help on the transportation side, so they [choose to] focus on the core aspects of their business” and contract with a dedicated fleet provider for whom such services are a core competency.
Parcel giant FedEx Corp. is automating its fulfillment flows by investing in the AI robotics and autonomous e-commerce fulfillment technology firm Nimble, and announcing plans to use the San Francisco-based startup’s tech in its own returns network.
The move is significant because FedEx Supply Chain operates at a large scale, running more than 130 warehouse and fulfillment operations in North America and processing 475 million returns annually. According to FedEx, the “strategic alliance” will help to scale up FedEx Fulfillment with Nimble’s “fully autonomous 3PL model.”
“Our strategic alliance and financial investment with Nimble expands our footprint in the e-commerce space, helping to further scale our FedEx Fulfillment offering across North America,” Scott Temple, president, FedEx Supply Chain, said in a release. “Nimble’s cutting-edge AI robotics and autonomous fulfillment systems will help FedEx streamline operations and unlock new opportunities for our customers.”
According to Nimble founder and CEO Simon Kalouche, the collaboration will help enable FedEx to leverage Nimble’s “fast and cost-effective” fulfillment centers, powered by its intelligent general purpose warehouse robots and AI technology.
Nimble says that more than 90% of warehouses today still operate manually with minimal or no robotics, and even those automated warehouses use robots with limited intelligence that are restricted to just a few warehouse functions—primarily storage and retrieval. In contrast, Nimble says its “intelligent general-purpose warehouse robot” is capable of performing all core fulfillment functions including storage and retrieval, picking, packing, and sorting.
For the past seven years, third-party service provider ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
Photo courtesy of Dematic
For the past four years, automated solutions provider Dematic has helped support students pursuing careers in the STEM (science, technology, engineering, and mathematics) fields with its FIRST Scholarship program, conducted in partnership with the corporate nonprofit FIRST (For Inspiration and Recognition of Science and Technology). This year’s scholarship recipients include Aman Amjad of Brookfield, Wisconsin, and Lily Hoopes of Bonney Lake, Washington, who were each awarded $5,000 to support their post-secondary education. Dematic also awarded $1,000 scholarships to another 10 students.
Motive, an artificial intelligence (AI)-powered integrated operations platform, has launched an initiative with PGA Tour pro Jason Day to support the Navy SEAL Foundation (NSF). For every birdie Day makes on tour, Motive will make a contribution to the NSF, which provides support for warriors, veterans, and their families. Fans can contribute to the mission by purchasing a Jason Day Tour Edition hat at https://malbongolf.com/products/m-9189-blk-wht-black-motive-rope-hat.
MTS Logistics Inc., a New York-based freight forwarding and logistics company, raised more than $120,000 for autism awareness and acceptance at its 14th annual Bike Tour with MTS for Autism. All proceeds from the June event were donated to New Jersey-based nonprofit Spectrum Works, which provides job training and opportunities for young adults with autism.
I recently came across a report showing that 86% of CEOs around the world see resiliency problems in their supply chains, and that business leaders are spending more time than ever tackling supply chain-related challenges. Initially I was surprised, thinking that the lessons learned from the Covid-19 pandemic surely prepared industry leaders for just about anything, helping to bake risk and resiliency planning into corporate strategies for companies of all sizes.
But then I thought about the growing number of issues that can affect supply chains today—more frequent severe weather events, accelerating cybersecurity threats, and the tangle of emerging demands and regulations around decarbonization, to name just a few. The level of potential problems seems to be increasing at lightning speed, making it difficult, if not impossible, to plan for every imaginable scenario.
What is it Mike Tyson said? Everyone has a plan until they get punched in the mouth.
It has never been more important to be able to pivot and adjust to challenges that can throw you off your game. The report I referenced—the “2024 Supply Chain Barometer” from procurement, supply chain, and sustainability consulting firm Proxima—makes the case for just that. The company surveyed 3,000 CEOs from the United Kingdom, Europe, and the United States and found that the growing complexities in global supply chains necessitate a laser-sharp focus on this area of the business. One example: Rightshoring, which is the process of moving business operations to the best location, means companies are redesigning and reconfiguring their supply chains like never before. The study found that large numbers of CEOs are grappling with the various subsets of rightshoring: 44% said they are planning to or have already undertaken onshoring, for instance; 41% said they are planning to or have undertaken nearshoring; 41% said they are planning to or have undertaken friendshoring; and 35% said they are planning to or have undertaken offshoring.
But that’s not all. CEOs are also struggling to deal with the rise of artificial intelligence (AI) and its application to business processes, the potential for abuse and labor rights issues in their supply chains, and a growing number of barriers to their companies’ decarbonization efforts. For instance:
Nearly all of those surveyed (99%) said they are either using or considering the use of AI in their supply chains, with 82% saying they are planning new initiatives this year;
More than 60% said they are concerned about the potential for human or labor rights issues in their supply chains;
And virtually all (99%) said they face barriers to decarbonization, with 30% pointing to the complexity of the work required as the biggest barrier.
Those are big issues to contend with, so it’s no surprise that 96% of the CEOs Proxima surveyed said they are dedicating equal (41%) or more time (55%) to supply chain issues this year than last year. And changing economic conditions are adding to the complexity, according to the report.
“As inflation fell throughout last year, there were glimmers of markets stabilizing,” the authors wrote. “The reality, though, has been that global market dynamics are shifting. With no clear-set position for them to land in, CEOs must continue to navigate their organizations through an ever-changing landscape. Just 4% of CEOs foresee the amount of time spent on supply chain-related topics decreasing in the year ahead.”
Simon Geale, executive vice president and chief procurement officer at Proxima, added some perspective.
“It’s fair to say that the complexities of global supply chains continue to have CEOs around the world scratching their heads,” he wrote. “The results of this year’s Barometer show that business leaders are spending more and more time tackling supply chain challenges, reflecting the multiple challenges to address.”
Perhaps the extra focus on supply chain issues will help organizations improve their ability to roll with the punches and overcome resiliency challenges in the year ahead. Only time will tell.
Investing in artificial intelligence (AI) is a top priority for supply chain leaders as they develop their organization’s technology roadmap, according to data from research and consulting firm Gartner.
AI—including machine learning—and Generative AI (GenAI) ranked as the top two priorities for digital supply chain investments globally among more than 400 supply chain leaders surveyed earlier this year. But key differences apply regionally and by job responsibility, according to the research.
Twenty percent of the survey’s respondents said they are prioritizing investments in traditional AI—which analyzes data, identifies patterns, and makes predictions. Virtual assistants like Siri and Alexa are common examples. Slightly less (17%) said they are prioritizing investments in GenAI, which takes the process a step further by learning patterns and using them to generate text, images, and so forth. OpenAI’s ChatGPT is the most common example.
Despite that overall focus, AI lagged as a priority in Western Europe, where connected industry objectives remain paramount, according to Gartner. The survey also found that business-led roles are much less enthusiastic than their IT counterparts when it comes to prioritizing the technology.
“While enthusiasm for both traditional AI and GenAI remain high on an absolute level within supply chain, the prioritization varies greatly between different roles, geographies, and industries,” Michael Dominy, VP analyst in Gartner’s Supply Chain practice, said in a statement announcing the survey results. “European respondents were more likely to prioritize technologies that align with Industry 4.0 objectives, such as smart manufacturing. In addition to region differences, certain industries prioritize specific use cases, such as robotics or machine learning, which are currently viewed as more pragmatic investments than GenAI.”
The survey also found that:
Twenty-six percent of North American respondents identified AI, including machine learning, as their top priority, compared to 14% of Western Europeans.
Fourteen percent of Western European respondents identified robots in manufacturing as their top choice compared to just 1% of North American respondents.
Geographical variances generally correlated with industry-specific priorities; regions with a higher proportion of manufacturing respondents were less likely to select AI or GenAI as a top digital priority.
Digging deeper into job responsibilities, just 12% of respondents with business-focused roles indicated GenAI as a top priority, compared to 28% of IT roles. The data may indicate that GenAI use cases are perceived as less tangible and directly tied to core supply chain processes, according to Gartner.
“Business-led roles are traditionally more comfortable with prioritizing established technologies, and the survey data suggests that these business-led roles still question whether GenAI can deliver an adequate return on investment,” said Dominy. “However, multiple industries including retail, industrial manufacturers and high-tech manufacturers have already made GenAI their top investment priority.”
Regardless of the elected administration, the future likely holds significant changes for trade, taxes, and regulatory compliance. As a result, it’s crucial that U.S. businesses avoid making decisions contingent on election outcomes, and instead focus on resilience, agility, and growth, according to California-based Propel, which provides a product value management (PVM) platform for manufacturing, medical device, and consumer electronics industries.
“Now is not the time to wait for the dust to settle,” Ross Meyercord, CEO of Propel, said in a release. “Companies should approach this election cycle as an opportunity to thrive in the face of constant change by proactively investing in technology and talent that keeps them nimble. Businesses always need to be prepared for changing tariffs, taxes, or geopolitical tensions that lead to unexpected interruptions – that’s just the new normal.”
In Propel’s analysis, a Trump administration would bring a continuation of corporate tax cuts intended to bolster American manufacturing. However, Trump’s suggestion for spiraling tariffs may benefit certain industries, but would drive up costs for businesses reliant on global supply chains.
In contrast, a Harris administration would likely continue the current push for regulatory reforms that support sectors like AI, digital assets, and manufacturing while protecting consumer rights. Harris would also likely prioritize strategic investments in new technologies and provide tax incentives to promote growth in underserved areas.
And regardless of the new administration, the real challenge will come from a potentially divided Congress, which could impact everything from trade negotiations to tax policies, Propel said.
“The election outcome is less material for businesses,” Meyercord said. “What is important is quickly adapting to shifting policies or disruptions that address ‘what if’ scenarios and having the ability to pivot your strategy. A responsive manufacturing sector will have a significant impact on the broader economy, driving growth and favorably influencing GDP. One thing is clear: the only certainty is change.”