David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
American farmers and growers of other agricultural products have had to endure a worldwide pandemic, an economic downturn, and extreme weather this past year. And now on top of all that, they face another growing crisis.
A surging tide of Asian imports is straining capacity at U.S. ports, especially on the West Coast. Import volumes are so high right now that ships remain at anchor in harbors for days waiting to dock and unload their goods. And sitting on those ships are ocean containers that are needed for exports. It’s a situation that has been exacerbated by a worldwide container shortfall. For products with limited shelf lives like agricultural goods, the current state is nothing short of a looming disaster.
Peter Friedmann is the executive director of the Agriculture Transportation Coalition (ATC). This group was formed 30 years ago with the goal of assuring that U.S. agriculture exports remain competitive with products from around the world. ATC members include producers of agriculture and forest products, such as cotton, poultry, beef, milk, dry dairy goods, berries, and lumber and paper products. Friedmann spoke recently to **{DC Velocity} Editorial Director David Maloney about the difficulties that many of these exporters now face.
Q: Can you tell us about the current shortage of containers for agriculture products and why that is a problem for your exporting members?
A: It is not an overstatement to say that the current situation is devastating to all U.S. agriculture exports. This includes products such as soybeans and hay, which are our largest volume exports off of our coast, as well as cotton and manufactured and processed foods, both refrigerated and dry.
The reason it is devastating is twofold. One is ocean carriers are looking at the revenue they can get on that inbound cargo coming from Asia, or what we call the eastbound. Those importers are paying $6,000, $8,000, $10,000, and in some cases up to $14,000 in freight rates for a container coming to the United States.
U.S. agriculture exporters have to compete with producers from all over the world. We cannot afford to pay those kinds of freight rates. The value of the cargo in those export containers is not that high. Therefore, the export revenue that the ocean carriers get for carrying the cargo westbound to Asia is more like $400, $800, or maybe $1,400 to $2,000 on the high end. So, ocean carriers are making an economic decision to forgo carrying cargo outbound across the Pacific and instead are sending the containers back empty.
Q: Why are the carriers returning the containers empty? They obviously won’t make money on containers with no cargo in them.
A: The reason they do this is to get them back to Asia as fast as they can so they can be filled with lucrative consumer goods and immediately sent back to the United States at those higher inbound rates. It has to do with processing time. They make money with containers on the water.
Our agriculture exports originate where crops and livestock are grown and processed. The stockyards are no longer in downtown Chicago. They are in places where there are fewer consumers and thus, fewer import distribution centers. So, for those containers to be loaded with our agriculture exports, they have to travel away from the gateway ports to inland areas. Some are just a couple hours inland, such as almonds from California’s Central Valley or the hay and dairy going out of Washington and Oregon. But many containers have to be hauled 1,500 miles to places like Kansas City, where our dry dairy goods come from; Arkansas, where pork comes from; and Minnesota, where soybeans are grown. So those export containers have to travel quite a distance and are not on the ship, where the revenue is made.
Q: So, that extra time required to send containers to the heartland to be filled with agriculture products and then back to the port is time that they’re not making money for the carriers. As a result, your members are not given an opportunity to fill any of those containers. Is that the basic problem we’re seeing?
A: That is correct. The other aspect is that ocean carriers are imposing penalties on failure of containers to arrive at the terminals in time or for arriving too early, the so-called demurrage and detention charges. The Federal Maritime Commission (FMC) has viewed those penalty fees as unreasonable and spent two years developing guidelines for the ocean carriers on what are reasonable practices. Most of the practices in use today don’t meet those guidelines, yet they continue, and the charges that the carriers are imposing are collectively in the hundreds of millions of dollars for our larger agriculture exporters. In fact, demurrage and detention charges are now more than the basic freight charges for carrying our exports. So, the freight budgets are more than double due to those penalty fees. Those are putting quite a few exporters—and I would also say importers—at financial risk.
Q: What are the long-term ramifications if the current situation does not improve?
A: When it comes to agriculture and forest products, there is nothing we produce in this country that cannot be sourced somewhere else in the world. If we can’t deliver it affordably and dependably to our overseas customers, they will find some other source in some other country, and we could lose that business and those customers forever.
Q: We know there is not a lot of available capacity right now in transportation networks. Even the trucking industry has limited capacity. It is very easy to rack up a lot of those penalty charges simply because there are inherent delays within our freight systems, including getting containers to and from the ports by truck and rail.
A: Yes, and there are delays and difficulties that the ocean carriers themselves face in maintaining their own vessel schedules. They keep changing. It is difficult for exporters to get the cargo to the terminal within a carrier’s time window when the carrier is changing that window constantly to meet sailing schedules that are themselves changing rapidly. That is why the FMC says those are unreasonable charges. Yet those charges continue to be imposed, and if exporters don’t pay them, the carrier won’t carry their cargo, even those export containers that are still being loaded.
Q: What products are the most affected by the lack of containers? Are they the ones that have a limited shelf life and could rot before they get to their destination if delayed too long?
A: We find that, frankly, all agriculture exports should be considered perishable. First of all, you have the obvious products. Those would be the chilled products where you have to monitor temperature. If there is a delay, they can be frozen. However, frozen products have a delivered value of probably 25% of what chilled temperature-controlled beef and pork would.
Then there are crops like soybeans and hay, which are largely exported as animal feed. Those animals can’t wait overseas. If the product doesn’t arrive on time, those animals are in real jeopardy. The last time we had a slowdown at the West Coast ports, the minister of agriculture in Japan wrote to the secretary of the U.S. Department of Agriculture, saying your ports are not working but our cows continue to eat.
So, if we can’t get our hay and soybeans and animal feed over to Asia in a timely way, the animal feed might still be good but those animals that depend on it may not survive. That is why some of those countries have invested considerable effort, time, and money into developing alternative sources for forage and soybeans. When we prove to be undependable, that is what we lose.
Q: So, there are a lot of ripple effects. I understand it is also worse than in the past because of the consolidation of ocean carriers in recent years. There are very few U.S.-owned carriers now. Can the federal government exert leverage over foreign carriers as it might with a U.S.-flagged carrier?
A: Foreign carriers should be subject to the same pressures and regulatory oversight by our Shipping Act as U.S. carriers. They are all subject to Federal Maritime Commission regulation, and they all would comply with regulations and the guidelines if the FMC were aggressive in the enforcement.
Q: But they are not complying right now, so what can be done to alleviate the problem?
A: First, folks are sending complaints to the Federal Maritime Commission in the hope and expectation that the FMC will self-initiate enforcement actions. At the same time, we are going to Capitol Hill. Many members of Congress have written letters to the FMC and to the Department of Agriculture seeking intervention. Over 70 of the largest agriculture trade associations in the U.S. have also written to President Biden and Department of Agriculture Secretary Tom Vilsack seeking intervention. And finally, we are developing legislative remedies, such as amendments to the Shipping Act, to mandate reasonable behavior by the ocean carriers.
Q: Is this a temporary problem or something that will be with us for some time to come?
A: World commerce is in turmoil right now due to the volume of imports coming into the United States and e-commerce globally. The ocean carriers and the ports cannot be blamed for that. That is a situation they are trying to adjust to. Neither the ocean carriers nor anybody else has enough capacity to handle this avalanche of imports into the United States.
What the agriculture exporters, together with all the big importers, retailers, and manufacturers, seek is fair treatment by the ocean carriers. When the ocean carriers change their sailing schedule and thus change the window for cargo to arrive at the terminal and for the ship to be loaded, the exporter should not be held responsible for failing to meet that window because the carrier has changed it at the last minute. The carrier should refrain from imposing these demurrage and detention charges, which depending on the cargo and the container, can run between $175 and $375 a day.
Q: That is quite a lot, and obviously, that drives up the cost of those exports. Are there any alternative markets for these products within North America that can be reached by truck, or is there just too much in the pipeline to be consumed domestically and in neighboring countries?
A: Everything that can be exported to Mexico and Canada goes by truck. In terms of domestic markets, yes, everyone is seeking to find domestic outlets. But there is only so much consumption that we have in this country of animal feed, soybeans, pork and beef, and so on. There is only so much we can eat. Those markets overseas are very valuable. The question is, can we find other markets overseas that are not subject to the trans-Pacific Ocean transportation turmoil? I would say that we are looking for every one of those and, frankly, the lack of capacity by the ocean carriers—not enough containers, not enough chassis, not enough ship space—is now a global challenge. The challenge exists across the Atlantic and across the Indian Ocean. The challenge is global.
Q: What do you foresee for the immediate future?
A: Well, first, this situation will be with us as long as the surge in imports continues—and I guess everyone who orders anything by e-commerce is part of the problem, including myself. We understand that this flood of imports is going to continue into the fall of this year and perhaps well into 2022. That flood will continue.
We do believe that ocean carriers are going to gain additional capacity. We do believe that there will be exports and imports that are going to shift from the most troubled and congested ports primarily on the U.S. West Coast to the Gulf ports, such as Houston, and to the Southeast ports, like Savannah, Charleston, and Norfolk. Those ports have larger terminals, and some of the port authorities themselves are operating more of the functions, rather than the private marine terminals at other ports. Operators at some of the East Coast ports have already endeavored to address some of the problems of demurrage and detention charges in a very constructive way. We will see if they will continue to do so and thus attract more cargo from the most congested West Coast ports.
Sometimes, all you need is the right partner to solve your logistics problems.
In 2021, global paint supplier Sherwin Williams faced driver and hazardous material (hazmat) capacity constraints: There simply weren’t enough hazmat drivers available in its fleet to maintain the company’s 90% fleet utilization rate expectations for key partner store deliveries while also meeting growing demand for service. Those challenges threatened to become even more acute in the future, as a competing paint supply company began to scale back its operations in the Pacific Northwest, leaving Sherwin Williams with an opportunity to fill the gap.
The paint supplier needed a logistics partner that could help it overcome the shortage of hazmat drivers while also helping to manage its West Coast trailer pools, out-of-region runs, and ad-hoc freight. It also needed a solution that would meet quarterly and annual fleet budgets.
SCALING UP
Enter ITS Logistics, a third-party logistics service provider (3PL) that offers supply chain solutions for drayage, network transportation, distribution, and fulfillment across North America. ITS proposed a combined owned-asset and asset-light approach that would provide Sherwin Williams with the equivalent of 21 additional drivers. The 3PL would leverage its carrier network to overcome the shortage of hazmat capacity while also certifying its own drivers via a three-month process. Further, ITS would help manage Sherwin Williams’ trailer pools and coordinate carriers, providing the paint company with a single point of contact for transportation.
The project would address cost concerns as well: “ITS Logistics aligned its solution with Sherwin Williams’ budgetary cadence and offered a quarterly business review to align on price structure, adding a level of transparency and trust to the relationship,” according to a case study the partners released earlier this year.
The companies soon sealed the deal and launched the program.
Not long after that, Sherwin Williams began to feel the effects of the anticipated challenges in the Pacific Northwest—but the company was prepared. When the competing paint supply company shuttered its operations, causing demand for Sherwin Williams’ products to spike, ITS injected a blend of owned trailers and carrier power to alleviate equipment challenges, cover all locations and regions, and help the paint supplier scale to meet volume.
CLOSING THE GAPS
The project has helped Sherwin Williams rapidly scale its capacity, meet fleet utilization requirements, manage trailer pools, coordinate carriers, and flex to meet spikes in regional demand.
And the results speak for themselves.
“ITS integrating themselves into our fleet was instrumental in helping increase our outbound volume by 18.4 million pounds [year over year] in the last seven months of 2023,” said Ted Taxon, regional transportation manager at Sherwin Williams, in the case study. “This equated to approximately 460 truckloads of extra freight, a large portion of which ITS [handled] on an ad-hoc basis with no operational constraints or quality issues.”
The partnership also helped Sherwin Williams maintain a 90% fleet utilization rate with big box retailers—an increase from less than 70% prior to the partnership’s launch.
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”