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.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.