applying logic to logistics: interview with George Clopton
As a college student majoring in industrial engineering, George Clopton was drawn to the logical and rational. So how did he end up running that messy, complex, sprawling network we call the supply chain?
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
George W. Clopton has spent nearly 30 years in industry leveraging his leadership and interpersonal skills to blend competing interests and gain the support of diverse groups, currently as vice president of distribution for Gap Inc. in San Francisco. Clopton's versatility and wealth of knowledge in supply chain design and process measurement have been amassed through a lifetime of experience and training he received at companies such as Nike Inc., Georgia Pacific, USCO Distribution, Johnson & Johnson, Heublein and Frito Lay.He continues to learn and share his knowledge through active participation in professional organizations such as the Council of Logistics Management, the Warehousing Education and Research Council, the Richmond Events Logistics Forum and the Institute of Industrial Engineers.
Clopton has received industry recognition for his design and implementation of profit and productivity improvement programs as well as for people development and employee participation in large capital projects. He is noted for his hands-on experience in the design and start-up of distribution centers while implementing process improvements; for proven project management skills demonstrated through numerous start-ups, re-engineerings and process redesigns; and for achieving results.
He spoke recently with DC VELOCITY Editorial Director Mitch Mac Donald about his accomplishments and the things he believes make this an exciting time to be a logistics professional.
Q: You have a very influential role at a very well known company. How did you end up in this profession?
A: I received an industrial engineering degree from Northeastern University. That gave me a start in manufacturing. Somewhere along the line I realized that logistics and distribution is a common element for most manufacturing. In trying to find more opportunities I've always felt it important to broaden my scope. Logistics seemed like a natural place to do that. For instance, companies like Johnson & Johnson and IBM make very different things, but they're similar in their logistics disciplines. I wanted to be in a field where a common set of skills would allow you to move easily across the various industries. I realized that if I worked in the logistics sphere, it would be easier to be accepted into new companies as my career advanced. So I transferred. I actually worked about 15 years in manufacturing, but I had a lot of distribution projects. Then as I converted over, I found an opportunity with Uniroyal that had a division called USCO (now Kuehne + Nagel) Distribution, where I actually had an opportunity to hone my skills in logistics and distribution.
Q: So this interest in logistics was really born out of work experience in other sectors within manufacturing?
A: Yes.
Q: Tell us a little bit about that. You came into Uniroyal in a logistics position. Did USCO Distribution exist then as a subsidiary?
A: USCO was created in 1967. It was actually one of the early public warehousing companies. It was an outgrowth of Uniroyal's in-house logistics operation. Uniroyal realized it had extra space and decided to go out and lease that space—and later, the services of its human and other resources—to turn it into a business.
Q: You have to give them credit for being so far ahead of the curve that they could look at something like excess warehouse space and turn it into a profit center.
A: Absolutely.No question about it. It wasn't all that common back then. There have, of course, been several companies that have done that in the past 20 to 25 years.
Q: What was your first position there?
A: Manager of industrial engineering. I actually ended up as regional operations manager.
Q: Was there a specific logistics role you had there or were you still on the industrial engineering side?
A: Actually it was operations. I was promoted to regional operations manager and at the same time started up a lot of operations for USCO clients. I set up IBM operations, General Electric operations, Glaxo Pharmaceuticals contract operations and so forth.
Q: Setting up their distribution network and operation for them?
A: Absolutely. Another great experience was setting up USCO's distribution network in Mexico. It was a lot of fun and a tremendous learning experience. I was able to utilize my engineering background as well as my logistics background.
Q: It sounds like you were a 3PL executive before we knew what third-party logistics was.
A: It became that. We started out as public warehousing, and we evolved into contract services. Then all of a sudden this term "3PL" became very popular.
Q: Where did you go from USCO?
A: Georgia Pacific, where I designed and constructed distribution centers throughout the country. It was a reengineering project to set up operations in roughly a dozen cities.
Q: How long were you there?
A: A I stayed with GP for a short while.We wound down on that project, and the re-engineering project didn't go exactly where they wanted it to go. Coming out of that opportunity, I was very fortunate to end up with Nike Inc.
I went to work at Nike's corporate headquarters in Portland, Ore., as a general manager and was responsible for the company's Wilsonville (Ore.) Distribution Center handling West Coast distribution. Wilsonville was one of the company's three major distribution centers. It had about 800,000 square feet of space under one roof and a team of about 800 employees.
Q: Was this the first job in which you had to deal with both "on the ground" logistics issues and with all those other administrative issues that come with being a manager?
A: Oh yes, that certainly was part of it. The key driver with the Nike business, though, was really learning to deal with brands, the awareness that brand management was extremely important. You had footwear, apparel and equipment. Within Nike, each of those divisions had very specific and distinct expectations for logistics services.
Q: It sounds like Nike had its logistics operation integrated into the larger strategy. You folks were aware of what the company was trying to achieve overall?
A: We had to be. It was a very effective approach to logistics. What was also particularly exciting at Nike at the time was they were just embarking on two initiatives. One was establishing a broader supply chain strategy, including implementation of a sophisticated ERP [enterprise resource planning] platform. The second was implementing a shared-service model, where they were trying to integrate and get better asset utilization with all of the brands. For instance, previously we had an equipment facility, an apparel facility and a footwear facility. Then we decided that it might make sense to integrate these into several different facilities that were multi-purpose, multifunctional.
Q: Sounds like you built in flexibility to allow you to shift resources from one operation or brand to another to accommodate the peaks and valleys of business cycles?
A: Exactly. It was a challenge at times.Nike, of course, sells to retailers, but within the corporation,we had product owners in each brand. So each brand had its ownership and then its relationship with the retailer that we were selling to. Our responsibility was to interact with that brand and then provide the services to his retailer.
Q: How long were you with Nike?
A: I was with Nike for six years.
Q: Next came your current position with Gap Inc. Tell us a little bit about what you do when you come to work every day.
A: Here, I have responsibility for several facilities, but I'm also part of the global logistics supply chain leadership team. At Nike, my role was a little more specific. Here, we're not just a part of the supply chain—our involvement actually extends to a true integrated supply chain approach, from the procurement of raw materials all the way through to the store itself.
Q: I've always pointed to the retail sector as a hotbed of innovation in the logistics field. There have been so many instances over the past 30 years or so where retailers have been at the cutting edge both in terms of operations and the use of enabling technologies.
A: I would agree, and I think the Gap has been very much a part of that trend. We spend a lot of time gathering information, educating the members of our team, myself included, and looking for ways to extend our efficiencies. Right now, we're doing a lot with the concept of collaboration. We're looking at our supply chain from end to end. We're steadily integrating new metrics and new processes into our operations.
Q: As you come to work each day, what personal skill, or set of skills, is most important to you in your job?
A: I'd say it's the benefit of having been an engineer because it requires a logical thought process. Many people think engineers are basically boring, but we do, at least, try to put things into perspective. My personal skill is my ability to relate to people plus my passion to engage our people into our processes.
Q: What's the biggest challenge you face right now?
A: I'm working hard with my team to figure out how we can all work together most effectively and establish systems and processes to help us do that.We're focused on getting the most out of our people.
Q: In the past several years, we've seen a transformation of the traditional warehouse from a sort of storage bunker to a distribution center where inventory is never idle. Do you think distribution centers have taken on an enhanced role within the supply chain?
A: We have always felt that was the case. We look upon ourselves here as the people responsible for maintaining the flow through a pipeline. If there's no flow—that is, if things stop moving—we're not necessarily doing our job.
There's a genuine competitive advantage to be had if you can remain focused on the fact that your supply chain is important to your overall profitability and shareholder value. Logistics, properly executed, can be a key driver in a company's success.
Q: What are the biggest changes you've seen in logistics in the past 15 or 20 years?
A: The biggest changes are linked to the amount of technology that's being developed and made available in logistics and distribution. Then there's the awareness that we are part of a supply chain … that is equally huge in terms of driving change. Probably as an outgrowth of those two points, we are starting to see a much more critical need to train our people around the technologies and processes that are being implemented.
But there's another piece that's particularly important in terms of where we are in the evolution of the logistics profession. We are finally starting to understand board talk, meaning the boardroom expectations and communication—the whole concept of shareholder value and free cash flow and how the activities of logistics, like managing inventory and utilizing assets efficiently, relate to the boardroom goals. I think that's particularly important because although we've had the [boardroom] audience for several years now, they kept checking out on us. I think we're learning that we can't just go in there and talk about inventory turns. Instead, we need to go in there and connect the dots between inventory turns and shareholder value.Without that connection, they didn't quite understand where we were coming from and how we could provide a competitive advantage.
Q: Do you think the next big thing coming in logistics will be technology-related or is there something else out there on the horizon?
A: Technology, such as advancements in areas like RFID, will always be important, but opportunities through technology will be coupled with increased attention from CEOs and senior executives as they come to recognize the importance of the supply chain to the company's overall success.
Q: What do you consider to be your biggest accomplishment in your logistics career?
A: I think my biggest accomplishment has been working with a number of different teams and learning from all the people I've worked with throughout my career. It has been huge. I have worked with some of the best people in every category of logistics and distribution and supply chain. My success has been being able to assimilate a lot of that knowledge and information and apply that to whatever new challenge I am facing.
This story first appeared in the September/October issue of Supply Chain Xchange, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media & Events’' DC Velocity.
For the trucking industry, operational costs have become the most urgent issue of 2024, even more so than issues around driver shortages and driver retention. That’s because while demand has dropped and rates have plummeted, costs have risen significantly since 2022.
As reported by the American Transportation Research Institute (ATRI), every cost element has increased over the past two years, including diesel prices, insurance premiums, driver rates, and trailer and truck payments. Operating costs increased beyond $2.00 per mile for the first time ever in 2022. This trend continued in 2023, with the total marginal cost of operating a truck rising to $2.27 per mile, marking a new record-high cost. At the same time, the average spot rate for a dry van was $2.02 per mile, meaning that trucking companies would lose $0.25 per mile to haul a dry van load at spot rates.
These high costs have placed a significant burden on the operations of trucking companies, challenging their financial sustainability over the last two years. As a result, 2023 saw approximately 8,000 brokers and 88,000 trucking companies cease operations, including some marquee names, such as Yellow Corp. and Convoy, and decades-long businesses, such as Matheson Trucking and Arnold Transportation Services.
More so than ever before, trucking companies need to get better at efficiently using their assets and reducing operational costs. So, what is a trucking company to do? Technology is the answer! Given the nature of the problem, technology-led innovation will be critical to ensure companies can balance rising costs through efficient operations.
One technology that could be the answer to many of the trucking industry’s issues is the concept of digital twins. A digital twin is a virtual model of a real system and simulates the physical state and behavior of the real system. As the physical system changes state, the digital twin keeps up with the real-world changes and provides predictive and decision-making capabilities built on top of the digital model.
DHL, in a 2023 white paper, suggests that—due to the maturation of technologies such as the internet of things (IoT), cloud computing, artificial intelligence (AI), advanced software engineering paradigms, and virtual reality—digital twins have “come of age” and are now viable across multiple sectors, including transportation. We agree with this assessment and believe that digital twins are essential to radically improving the processes of fleet planning and dispatch.
THE NEED TO AUTOMATE
Outside of attaining procurement efficiencies, trucking companies can achieve lower costs by focusing on critical operational levers such as minimizing deadheads, reducing driver dwell time, and maximizing driver and asset utilization.
However, manual methods of planning and dispatch cannot optimally balance these levers to achieve efficiency and cost control. Even when planners work very hard and owners strive to improve processes, optimizing fleet planning is not a problem humans can solve routinely. Planning is a computationally intensive activity. To achieve fleet-level efficiencies, the planner has to consider all possible truck-to-load combinations in real time and solve for many operational constraints such as drivers’ hours of service, customer windows, and driver home time, to name just a few. These computations become even more complex when you add in the dynamic nature of real-world conditions such as trucks getting stuck in traffic or breaking down or orders getting delayed. This is not a task humans do best! For these sorts of tasks, technology has the upper hand.
When a company creates a digital twin of its trucking network, it has a real-time model that factors in truck locations, drivers’ hours of service, and loads being executed and planned. Planners can then use this digital model to assess possible decisions and select ones that increase asset utilization, improve customer and driver satisfaction, and lower costs.
For example, a digital twin of the network can offer significant insights and analysis on the state of the network, including exceptions such as delayed pickups and deliveries, unassigned loads, and trucks needing assignments. Backed by AI that takes business rules into account, digital twins can allow companies to optimize their fleet performance by finding the most efficient load assignments and dynamically adjusting in real time to changes in traffic patterns and weather, customer delays, truck issues, and so on.
With a digital twin, carriers can optimize the matching of assets, drivers, and freight. Typically, an investment in this innovative technology results in a 20%+ increase in productive miles per truck, while also improving driver pay and significantly decreasing driver churn. Drivers get paid by the miles they run, so when they run more, they are able to make more money, resulting in less need to chase the next job in search of better pay.
ADDITIONAL BENEFITS
Digital twins also combat deadheading, another source of driver dissatisfaction and cost inefficiencies. On average, over-the-road drivers spend 17%–20% of road miles driving empty. Using a digital twin, a company can search across several freight sources to find a load that perfectly matches the deadhead leg without impacting downstream commitments. These additional revenue miles will help drivers to maximize their earnings on the road and carriers to maximize their asset utilization and profitability.
The traditional manual dispatch planning model is becoming increasingly outdated—each planner and fleet manager tasked with overseeing 30 to 40 vehicles. Carriers try to manage this problem by dividing the fleet into manageable chunks, which results in cross-fleet inefficiencies. Such a system isn’t scalable. A digital twin acts as an equalizer for small and mid-sized fleets. It enables carriers to expand by venturing beyond the fixed routes and network they were forced to run out of fear of additional logistical complexity.
A digital twin can also give an organization the transparency and visibility it needs to find and fix inefficiencies. A successful carrier will leverage the technology to learn from the hitches in its operations. While this visibility is beneficial in its own right, it also provides the first step toward a seamless, digitized operation. “Digital revolution” is a buzzword frequently heard at transportation conferences. Yet not too many organizations are dedicated to digitizing their operations past the visibility stage. The end goal should be using decision-support systems to automate key elements of the system, thus freeing up planners from their daily rote tasks to focus on problems that only humans can solve.
Finally incorporating a digital twin can also help trucking companies work toward the broader trend of creating greener supply chains. Because they have lower deadhead and dwell times, trucking companies that have adopted a digital twin can be more attractive to shippers that are looking for more efficient operations that meet their environmental, social, and governance (ESG) goals.
THE FUTURE IS HERE
It is important to note that the benefits described here are not dreams for the future; digital twin technology is already here. In fact, choosing a digital twin can seem daunting because there are already a spectrum of options out there. First and foremost, an organization must ensure that the digital twin it selects aligns with both the goals and the scope of its operation.
Additionally, the ideal digital twin should:
Operate in near real time. A digital twin should be able to refresh as often as the network changes.
Be able to factor in specific customer delivery requirements as well as asset- and operator-specific constraints.
Be computationally efficient and comprehensive as it considers thousands of permutations in milliseconds. The digital twin should be able to reoptimize an entire fleet’s schedule of multi-day routes on the fly.
Before implementing a digital twin, carriers need to make sure that they have robust data management processes in place. Electronic logging devices (ELDs), customers’ tenders, billing, shipments, and so on are already inundating carriers with a glut of data. However, the manual nature of operations in many carriers leads to poor data quality. Carriers will need to invest in data management approaches to improve data quality to support the generation and use of high-fidelity digital twins. Otherwise, the digital twin will not be representative of reality and companies will run into an issue of “garbage in, garbage out.”
REINVENTION AND TRANSFORMATION
While data management is critical, change management through the ranks of dispatch operations is often a harder task. In fact, the largest roadblock carriers face when undergoing a digital transformation is the lack of willingness to change, not the technology itself. Many carriers cling to outmoded planning methods. Planners, used to operating based on well-worn business rules and tribal knowledge, could be wary of the technology and resistant to change. They may need to be assured that, while it is true that every trucking network is uniquely complex, digital twins can be set up to model the intricacies of their specific dispatch operations and drive value to the network. A significant amount of time and resources will need to be expended on change management. Otherwise even though trucking companies may invest in cutting-edge technology, they won't be able to fully capitalize on the added value it can provide.
As the truckload industry works through the current freight cycle, it is important to realize that change is inevitable. Carriers will need to reinvent their operations and invest in technologies to ride through the busts and booms of future freight cycles. Recent global events point to the many ways that wrenches can be thrown into global transportation networks, and the fact that such volatility is here to stay. Digital twins can provide companies with the visibility to navigate such changes. But above all, an operation that uses the digital twin to drive decisions can make customers and drivers happy, and help the carriers keep their heads above water during times such as now.
Regular online readers of DC Velocity and Supply Chain Xchange have probably noticed something new during the past few weeks. Our team has been working for months to produce shiny new websites that allow you to find the supply chain news and stories you need more easily.
It is always good for a media brand to undergo a refresh every once in a while. We certainly are not alone in retooling our websites; most of you likely go through that rather complex process every few years. But this was more than just your average refresh. We did it to take advantage of the most recent developments in artificial intelligence (AI).
Most of the AI work will take place behind the scenes. We will not, for instance, use AI to generate our stories. Those will still be written by our award-winning editorial team (I realize I’m biased, but I believe them to be the best in the business). Instead, we will be applying AI to things like graphics, search functions, and prioritizing relevant stories to make it easier for you to find the information you need along with related content.
We have also redesigned the websites’ layouts to make it quick and easy to find articles on specific topics. For example, content on DC Velocity’s new site is divided into five categories: material handling, robotics, transportation, technology, and supply chain services. We also offer a robust video section, including case histories, webcasts, and executive interviews, plus our weekly podcasts.
Over on the Supply Chain Xchange site, we have organized articles into categories that align with the traditional five phases of supply chain management: plan, procure, produce, move, and store. Plus, we added a “tech” category just to round it off. You can also find links to our videos, newsletters, podcasts, webcasts, blogs, and much more on the site.
Our mobile-app users will also notice some enhancements. An increasing number of you are receiving your daily supply chain news on your phones and tablets, so we have revamped our sites for optimal performance on those devices. For instance, you’ll find that related stories will appear right after the article you’re reading in case you want to delve further into the topic.
However you view us, you will find snappier headlines, more graphics and illustrations, and sites that are easier to navigate.
I would personally like to thank our management, IT department, and editors for their work in making this transition a reality. In our more than 20 years as a media company, this is our largest expansion into digital yet.
We hope you enjoy the experience.
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In this chart, the red and green bars represent Trucking Conditions Index for 2024. The blue line represents the Trucking Conditions Index for 2023. The index shows that while business conditions for trucking companies improved in August of 2024 versus July of 2024, they are still overall negative.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.
A coalition of truckers is applauding the latest round of $30 million in federal funding to address what they call a “national truck parking crisis,” created when drivers face an imperative to pull over and stop when they cap out their hours of service, yet can seldom find a safe spot for their vehicle.
According to the White House, a total of 44 projects were selected in this round of funding, including projects that improve safety, mobility, and economic competitiveness, constructing major bridges, expanding port capacity, and redesigning interchanges. The money is the latest in a series of large infrastructure investments that have included nearly $12.8 billion in funding through the INFRA and Mega programs for 140 projects across 42 states, Washington D.C., and Puerto Rico. The money funds: 35 bridge projects, 18 port projects, 20 rail projects, and 85 highway improvement projects.
In a statement, the Owner-Operator Independent Drivers Association (OOIDA) said the federal funds would make a big difference in driver safety and transportation networks.
"Lack of safe truck parking has been a top concern of truckers for decades and as a truck driver, I can tell you firsthand that when truckers don’t have a safe place to park, we are put in a no-win situation. We must either continue to drive while fatigued or out of legal driving time, or park in an undesignated and unsafe location like the side of the road or abandoned lot,” OOIDA President Todd Spencer said in a release. “It forces truck drivers to make a choice between safety and following federal Hours-of-Service rules. OOIDA and the 150,000 small business truckers we represent thank Secretary Buttigieg and the Department for their increased focus on resolving an issue that has plagued our industry for decades.”
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.