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.
The great ocean freight tsunami that swamped the maritime industry from the fall of 2021 through spring 2022—and threw ports and containership lines for a loop—has subsided. In its place has emerged a market slowly returning to some semblance of pre-pandemic normal while facing the prospect of a recession on the near-term horizon, rapidly softening demand, and plummeting rates for container cargoes that have yet to hit bottom—and are foreshadowing rate wars of past years.
“Spot rate levels are back to pre-pandemic levels,” observes Lars Jensen, chief executive officer of consulting firm Vespucci Maritime. He cites two principal reasons. One has been the recovery of ports from congestion bottlenecks through the first half of last year. “High rate levels were partly a function of vessels trapped by congestion. As those eased, more capacity was released into the market,” he notes.
The second was a sudden sharp drop in demand starting in September, “where [the market] collapsed, especially in Asia-to-North America and Asia-to-Europe lanes,” driven by inventory corrections on the part of importers in the U.S. and Europe, he says. It’s a cycle that’s typical of a market bracing for uncertain economic times, and shippers consequently dialing back ordering and more aggressively managing inventory levels.
Yet there could be a silver lining on the other side, Jensen notes. “Every time an inventory correction occurs, once addressed, you get a wave of cargo on the back side. Consumers regain confidence, and importers need to bring business back to normal levels, which leads to a surge in cargo,” he explains.
Betting on how deep the decline will be and when the rebound will begin is the challenge for shippers, ports, and vessel operators alike. Ship operators are likely to cancel more sailings in response to weaker demand and the diminished need for capacity. “One scenario is that we are heading into a recession that is short-lived,” Jensen says. In that case, he sees a market continuing to collapse in January and February, then rebounding sometime in the spring.
“If we are heading into a deeper and longer recession, then cargo going back to the normal surge will be late in the year,” he predicts. “That will leave a relatively depressed [ocean freight] market for [most of] 2023.”
PORTS: A RETURN TO NORMALCY?
Ports are feeling the impact as well, although in different ways. The double-digit surge in cargo experienced in 2021 has been considerably dialed back. In October, the Port of Long Beach (POLB) saw a 16% decline in container volumes compared to the previous year. Yet for the first 10 months of 2022, the port was tracking 1.5% ahead of 2021. Mario Cordero, POLB’s executive director, says he expects the full year 2022 to be flat. “For me, that’s not a bad number given that 2021 was a record year of unprecedented surges.”
He sees the port “on the cusp of normalization.” Where in January 2021, there were nearly 110 containerships anchored outside the port waiting to unload, “today there are zero vessels at anchor and backed up,” he notes. Container dwell, the amount of time a container sits in the port, is down 93% from the worst congestion in November 2021. Today, only 3% of containers dwell in the port more than a few days. On the rail side, “back in July, we had 13,000 rail containers that were dwelling at the terminals nine days or more. That number today is less than 350,” he reports.
Cordero is optimistic as he considers lessons learned from the past two years. “Anytime you move 20 million containers in a gateway, you need to transform your operations,” he says. Looking ahead, Cordero and his team are focused on improving and expanding the port’s infrastructure and increasing productivity and velocity. Over the past decade, the port has invested some $4 billion in its infrastructure. Over the next decade, the port’s plans call for $2.6 billion in capital expenditures, “a lot of that directed toward rail improvements and expansion,” Cordero notes.
One particular issue somewhat unique to Southern California ports is meeting upcoming goals for emissions reduction, notably a zero-emissions goal for trucks by 2035 and for cargo-handling equipment by 2030. “Both of these objectives are very challenging,” Cordero says. The port is getting a helping hand from the federal government, having recently won a $30 million grant to replace diesel-powered yard tractors with zero-emission electric models. “We’re moving ahead with electrification in a socially responsible way sensitive to the importance of the job market.”
DIVERSIONARY TACTICS
The 2021/2022 port congestion issues, particularly on the West Coast, also caused shippers to take a more in-depth look at their supply chains—and where they have import ocean cargoes landing in the U.S. One outcome was a marked diversion of ocean container cargo from West Coast to East Coast ports, a surge that led to congestion issues there, particularly in Savannah, Georgia. Another factor was concern about rail labor contracts and fears of a looming strike, which Congress averted. Some believed that trucking—and to some extent, westbound rail service—would be easier to find from East Coast ports and would reduce their risk of exposure to potentially strike-affected rail service from the West Coast.
A recent survey of shippers by investment firm Cowen & Co. found that while a majority of shippers likely will move much of their freight back to the West Coast, a small but significant portion of that volume will never return. “We believe there may be a [roughly] 10% permanent shift of freight to the East Coast … creating long-term opportunities for Eastern transportation companies,” the report said.
Among the motives the report’s lead author, Jason Seidl, cites for the shift are: the impact on Southern California truck capacity from regulations related to California emission requirements and the impact of AB5, the law that restricts businesses from classifying workers as independent contractors rather than employees; the opportunity for (and increasing interest in) reshoring to Mexico and the benefits associated with potential shifts; reduced political risk; the lower cost of transportation; and the further technology enablement of the supply chain.
“A LITTLE BIT OF BREATHING ROOM”
East Coast ports have been adjusting to the shifts in business as well. Beth Rooney, director of the Port of New York & New Jersey, noted that of the port’s 10.5% growth in the past year, roughly 85% of that was cargo diverted to New York/New Jersey from West Coast ports. “It has been an interesting evolution,” she says. “All the East and Gulf Coast ports benefited from those shipper decisions.”
In her conversations with the maritime community about freight diversion, she says, she’s found “it’s more a function of anxiety, what is going to happen with [West Coast longshore] labor negotiations, rail congestion concerns, what’s happening on the drayage trucking side,” and the prospect of California ports losing some 25% of their drayage capacity on January 1, when new laws kicked in.
More than anything else, shippers are searching for reliability, consistency, and peace of mind, Rooney observes. And that presents opportunity. “We won’t have another 18% increase like we had in 2021, but I don’t think we are going to be flat or losing ground in 2023,” she notes. “We will get close to what we have been, which is 2% to 2.5% compound annual growth.”
One upside of the softer market, Rooney says, is that “we have a little bit of breathing room. We handled volumes we were not expecting until the 2027 or 2028 time frame [last year].” The slower pace makes this a good time to continue to work on developing capacity and improving fluidity, she oberves.
She also cites the need for increased creativity and innovation. “We are operating as a supply chain participant pretty much the same way as when container shipping started in 1956. And it’s not unique to us. It’s a national issue.”
A MATTER OF CAPACITY
For their part, vessel operators are watching the market and reacting swiftly to address declining demand, rationing capacity to match. That could lead to more blank (canceled) sailings and other adjustments.
“Our aim is to focus on improving service levels and vessel schedule integrity, which has been impacted by record cargo volumes the past two years,” says Narin Phol, Maersk North America regional managing director based in the U.S. As for capacity, Phol believes that “current fleet capacity will stay the same. And as we retire old tonnage, we will replace it with new, green methanol-fuel ships. We have 19 green methanol ships on order.”
Vessel operator Hapag-Lloyd has also put plans for further expansion on hold. Over the past two years, the containership giant has placed orders for 22 new vessels “with a capacity of more than 400,000 TEUs [20-foot equivalent units],” notes company spokesman Tim Siefert. “We have no plans for [additional] newbuilds at the moment.”
Will rate wars of the past return? “We cannot speculate,” Siefert says. “As usual, it is hard to foretell rate developments in the market when they always depend on the supply and demand balance,” he explains. “A crucial point will be the influx of capacity over the next [several] years. At the same time, we will see more scrapping and fleet modernization programs on the back of environmental obligations.”
Vespucci Maritime’s Jensen says that while there hasn’t been much scrapping over the past two years, he expects it will pick up. “In a market where you had $20,000 per-container freight rates, it doesn’t matter how rusted or leaky your ship is, because someone will pay you for it,” he says.
Yet between a looming recession, declining demand, new environmental obligations, and operational changes such as fewer vessels in service and slow steaming (the practice of deliberately reducing ship speeds to minimize fuel consumption and carbon emissions), capacity eventually will come out of the industry. He cites consensus estimates of about a 10% capacity reduction over the next year. New capacity is not expected to come on-stream until later in 2023 or 2024.
At the end of the day, Jensen says, vessel operators are watching closely how deep a “hard landing” will be for the market and how low rates will go ahead of a rebound. “The rule of thumb was if a freight rate goes so low [that] the carrier becomes cash-negative, they’d step away from the brink” to stem potential losses, he says, adding that excessively low rates and negative cash flow would push them toward bankruptcy.
But vessel operators, reaping the benefits of two years of record profits, are in much better shape today than in the market downturns of the past. “They are all sitting on massive coffers of cash,” Jensen says.
What happens when your warehouse technology upgrade turns into a complete process overhaul? That may sound like a headache to some, but for leaders at paper crafting company Stampin’ Up! it’s been a golden opportunity—especially when it comes to boosting productivity. The Utah-based direct marketing company has increased its average pick rate by more than 70% in the past year and a half. And it’s all due to a warehouse management system (WMS) implementation that opened the door to process changes and new technologies that are speeding its high-velocity, high-SKU (stock-keeping unit) order fulfillment operations.
The bottom line: Stampin’ Up! is filling orders faster than ever before, with less manpower, since it shifted to an easy-to-use voice picking system that makes adapting to seasonal product changes and promotions a piece of cake. Here’s how.
FACING UP TO CHANGE
Stampin’ Up!’s business increased rapidly in 2020, when pandemic-era lockdowns sparked a surge in online orders for its crafting and scrapbooking supplies—everything from rubber stamps to specialty papers, ink, and embellishments needed for home-based projects. At around the same time, company leaders learned that the WMS in use at its main distribution center (DC) in Riverton, Utah, was nearing its end-of-life and would have to be replaced. That process set in motion a series of changes that would upend the way Stampin’ Up! picked items and filled orders, setting the company on a path toward continuous improvement.
“We began a process to replace the WMS, with no intent to do anything else,” explains Rich Bushell, the company’s director of global distribution services. “But when we started to investigate a new WMS, we began to look at the larger picture. We saw problems within our [picking] system. Really, they were problems with our processes.”
Stampin’ Up! had hired global supply chain consulting firm Argon & Co. to help with the WMS selection and implementation, and it was that process that sparked the change. Argon & Co. Partner Steve Mulaik, who worked on the project, says it quickly became clear that Stampin’ Up!’s zone-based pick-and-pass fulfillment process wasn’t working well—primarily because pickers spent a lot of idle time waiting for the next order. Under the old system, which used pick-to-light technology, workers stood in their respective zones and made picks only from their assigned location; when it came time for a pick, the system directed them where to make that pick via indicator lights on storage shelves. The workers placed the picked items directly into shipping boxes that would be passed to the next zone via conveyor.
“The business problem here was that they had a system that didn’t work reliably,” Mulaik explains. “And there were periods when [workers] would have nothing to do. The workload was not balanced.”
This was less than ideal for a DC facing accelerating demand for multi-item orders—a typical Stampin’ Up! order contains 17 to 21 items per box, according to Bushell. In a bid to make the picking process more flexible, Mulaik suggested eliminating the zones altogether and changing the workflow. Ultimately, that would mean replacing the pick-to-light system and revamping the pick-and-pass process with a protocol that would keep workers moving and orders flowing consistently.
“We changed the whole process, building on some academic work from Georgia Tech along with how you communicate with the system,” Mulaik explains. “Together, that has really resulted in the significant change in productivity that they’ve seen.”
RIGHTING THE SHIP
The Riverton DC’s new solution combines voice picking technology with a whole new process known as “bucket brigade” picking. A bucket brigade helps distribute work more evenly among pickers in a DC: Pickers still work in a production-line fashion, picking items into bins or boxes and then sending the bins down the line via conveyor. But rather than stop and wait for the next order to come to them, pickers continue to work by walking up to the next person on the line and taking over that person’s assignment; the worker who is overtaken does the same, creating a process in which pickers are constantly filling orders and no one is picking from the same location.
Stampin’ Up! doesn’t follow the bucket brigade process precisely but has instead developed its own variation the company calls “leapfrog.” Instead of taking the next person’s work, pickers will move up the line to the next open order after completing a task—“leapfrogging” over the other pickers in the line to keep the process moving.
“We’re moving to the work,” Bushell explains. “If your boxes are full and you push them [down the line], you just move to the open work. The idea is that it takes the zones away; you move to where the next pick is.”
The voice piece increases the operation’s flexibility and directs the leapfrog process. Voice-directed picking allows pickers to listen to commands and respond verbally via a headset and handheld device. All commands filter through the headset, freeing the worker’s eyes and hands for picking tasks. Stampin’ Up! uses voice technology from AccuSpeechMobile with a combination of company-issued Android devices and Bluetooth headsets, although employees can use their own Bluetooth headsets or earbuds if they wish.
Mulaik and Bushell say the simplicity of the AccuSpeechMobile system was a game-changer for this project. The device-based system requires no voice server or middleware and no changes to a customer’s back-end systems in order to operate. It uses “screen scrape” technology, a process that allows the collection of large volumes of data quickly. Essentially, the program translates textual information from the device into audible commands telling associates what to pick. Workers then respond verbally, confirming the pick.
“AccuSpeech takes what the [WMS] says and then says it in your ear,” Bushell explains. “The key to the device is having all the data needed to make the pick shown on the screen. However, the picker should never—or rarely—need to look at the screen [because] the voice tells them the info and the commands are set up to repeat if prompted. This helps increase speed.
“The voice piece really ties everything together and makes our system more efficient.”
And about that system: Stampin’ Up! chose a WMS from technology provider QSSI, which directs all the work in the DC. And the conveyor systems were updated with new equipment and controls—from ABCO Systems and JR Controls—to keep all those orders moving down the line. The company also adopted automated labeling technology and overhauled its slotting procedure—the process of determining the most efficient storage location for its various items—as part of the project.
MISSION ACCOMPLISHED
Productivity improvement in the DC has been the biggest benefit of the project, which was officially completed in the spring of 2023 but continues to bear fruit. Prior to the change, Stampin’ Up! workers averaged 160 picks per hour, per person. That number rose to more than 200 picks per hour within the first few months, according to Bushell, and was up to 276 picks per hour as of this past August—a more than 70% increase.
“We’ve seen some really good gains,” Bushell says, adding that the company has reduced its reliance on both temporary and full-time staff as well, the latter mainly through attrition. “Overall, we’re 20% to 25% down on our labor based on the change …. And it’s because we’re keeping people busy.”
Quality has stayed on par as well, something Bushell says concerned him when switching from the DC’s previous pick-to-light technology.
“You have very good quality with pick-to-light, so we [worried] about opening the door to errors with pick-to-voice because a human is confirming each pick,” he says. “But we average about one error per 3,300 picks. So the quality is really good.”
On top of all that, Bushell says employees are “really happy” with the new system. One reason is that the voice system is easy to learn—so easy, anyone can do it. Stampin’ Up! runs frequent promotions and special offers that create mini spikes in business throughout the year; the new system makes it easy to get the required temporary help up to speed quickly or recruit staff members from other departments to accommodate those spikes.
“We [allocate] three days of training for voice, but it’s really about an hour,” Bushell says, adding that some of the employees from other departments simply enjoy the change of pace and the exercise of working on the “leapfrog” bucket brigade. “I have people that sign up every day to come pick.”
Not only has Stampin’ Up! reduced downtime and expedited the picking of its signature rubber stamps, paper, and crafting supplies, but it’s also blazing a trail in fulfillment that its business partners say could serve as a model for other companies looking to crank up productivity in the DC.
“There are a lot of [companies] that have pick-and-pass systems today, and while those pick-and-pass systems look like they are efficient, those companies may not realize that people are only picking 70% of the time,” Mulaik says. “This is a way to reduce that inactivity significantly.
“If you can get 20% of your productivity back—that’s a big number.”
With its new AutoStore automated storage and retrieval (AS/RS) system, Toyota Material Handling Inc.’s parts distribution center, located at its U.S. headquarters campus in Columbus, Indiana, will be able to store more forklift and other parts and move them more quickly. The new system represents a major step toward achieving TMH’s goal of next-day parts delivery to 98% of its customers in the U.S. and Canada by 2030, said TMH North America President and CEO Brett Wood at the launch event on October 28. The upgrade to the DC was designed, built, and installed through a close collaboration between TMH, AutoStore, and Bastian Solutions, the Toyota-owned material handling automation designer and systems integrator that is a cornerstone of the forklift maker’s Toyota Automated Logistics business unit. The AS/RS is Bastian’s 100th AutoStore installation in North America.
TMH’s AutoStore system deploys 28 energy-efficient robotic shuttles to retrieve and deliver totes from within a vertical storage grid. To expedite processing, artificial intelligence (AI)-enhanced software determines optimal storage locations based on whether parts are high- or low-demand items. The shuttles, each independently controlled and selected based on shortest distance to the stored tote, swiftly deliver the ordered parts to four picking ports. Each port can process up to 175 totes per hour; the company’s initial goal is 150 totes per hour, with room to grow. The AS/RS also eliminates the need for order pickers to walk up to 10 miles per day, saving time, boosting picking accuracy, and improving ergonomics for associates.
The upgrades, which also include a Kardex vertical lift module for parts that are too large for the AS/RS and a spiral conveyor, will more than triple storage capacity, from 40,000 to 128,000 storage positions, making it possible for TMH to increase its parts inventory. Currently the DC stores some 55,000 stock-keeping units (SKUs) and ships an average of $1 million worth of parts per day, reaching 80% of customers by two-day ground delivery. A Sparck Technologies CVP Impack fit-to-size packaging machine speeds packing and shipping and is expected to save up to 20% on the cost of packing materials.
Distribution, manufacturing expansion on the agenda
The Columbus parts DC currently serves all of the U.S. and Canada; inventory consists mostly of Toyota’s own parts as well as some parts for Bastian Solutions and forklift maker The Raymond Corp., which is part of TMH North America. To meet the company’s goal of next-day delivery to virtually all parts customers, TMH is exploring establishing up to five additional parts DCs. All will be TMH-designed, owned, and operated, with varying levels of automation to meet specific needs, said Bret Bruin, vice president, aftermarket sales and operations, in an interview.
Parts distribution is not the only area where TMH is investing in expanded capacity. With demand for electric forklifts continuing to rise, the company recently broke ground for a new factory on the expansive Columbus campus that will benefit both Toyota and Raymond. The two OEMs—which currently have only 5% overlap among their customers—already manufacture certain forklift models and parts for each other, said Wood in an interview. Slated to open in 2026, the $100 million, 295,000-square-foot factory will make electric-powered forklifts. The lineup will include stand-up rider trucks, currently manufactured for both brands by Raymond in Greene, New York. Moving production to Columbus, Wood said, will not only help both OEMs keep up with fast-growing demand for those models, but it will also free up space and personnel in Raymond’s factory to increase production of orderpickers and reach trucks, which it produces for both brands. “We want to build the right trucks in the right place,” Wood said.
Editor's note:This article was revised on November 4 to correct the types of equipment produced in Raymond's factory.
“The latest data continues to show some positive developments for the freight market. However, there remain sequential declines nationwide, and in most regions,” Bobby Holland, U.S. Bank director of freight business analytics, said in a release. “Over the last two quarters, volume and spend contractions have lessened, but we’re waiting for clear evidence that the market has reached the bottom.”
By the numbers, shipments were down 1.9% compared to the previous quarter while spending dropped 1.4%. This was the ninth consecutive quarterly decrease in volume, but the smallest drop in more than a year.
Truck freight conditions varied greatly by region in the third quarter. In the West, spending was up 4.4% over the previous quarter and volume increased 1.1%. Meanwhile, in the Southeast spending declined 3.3% and shipments were down 3.0%.
“It’s a positive sign that spending contracted less than shipments. With diesel fuel prices lower, the fact that pricing didn’t erode more tells me the market is getting healthier,” Bob Costello, senior vice president and chief economist at the American Trucking Associations (ATA), said in the release.
The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment, which processes more than $42 billion in freight payments annually for shippers and carriers across the U.S. The Index insights are provided to U.S. Bank customers to help them make business decisions and discover new opportunities.
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.