With decision-making spread across multiple locations and many employees, Dayton Superior had little control over its transportation spending. Bringing discipline to its transportation management process helped the company cut costs and create a more efficient system.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
If there's one thing logistics managers don't like, it's feeling that their operations are not completely under control. But that's just how senior managers at Dayton Superior Corp. undoubtedly felt a couple of years ago when they took a look at the company's transportation practices. Unfortunately, their suspicions turned out to be correct: The manufacturer and distributor of concrete construction products had no systematic control of its freight spend.
This was no small matter. The $500 million company, which sells specialized products such as ties and inserts, bar supports, chemicals, and clamp systems for concrete construction projects, had a direct freight spend of about $40 million annually, split about equally among flatbed, less-than-truckload, and truckload carriers. Another $20 million in trucking expenses were under suppliers' control.
It was a pretty messy situation. Some 100 employees across the company's 52 locations, which include 10 large DCs and four major manufacturing sites, had authority to select carriers. For most of those employees, transportation was just a small part of their jobs.Without decision-support tools to help them, moreover, they were doing business with more than 400 carriers, and they often hired multiple carriers to haul shipments over the same lanes.
Adding to Dayton Superior's trucking dilemma were the dynamics of the construction industry. A large percentage of shipments move not in regular lanes but to construction job sites— often on short notice—and orders are hard to forecast. The result was a heavy reliance on premium transportation to handle a truly diverse freight mix—everything from small packages on pallets to large products requiring a lot of special handling. "It is a challenge for us to get there when we need to be there," says Director of Transportation John Klima.
This lack of coordination was costly and created a host of problems for Dayton Superior. It was time for the Ohio-based manufacturer to take control of the way it purchased trucking services.
Rates and relationships
To help instill greater discipline in its transportation practices and create a more efficient and reliable motor carrier network, Dayton Superior's management brought in AlixPartners LLP, an international consulting firm based in Southfield, Mich., that specializes in corporate turnarounds and performance improvement. The initiative undertaken by AlixPartners (and later handed off to Klima when he joined the company about six months into the project) had lofty goals: to reduce logistics costs while maintaining service and minimizing risk by creating a centralized transportation team.
The project began with an overhaul of rates and relationships. One of its objectives was to take advantage of the size of Dayton Superior's overall freight spend to get better rates from motor carriers. The consultants developed information about recurring lanes and looked for backhaul opportunities. Suppliers' transportation spending also came under scrutiny. "We looked for opportunities to …take greater control [over inbound shipments] so that those were not profit centers for suppliers," says Foster Finley, AlixPartners' managing director.
Decisions about routes, rates, and carrier selection were facilitated by the implementation of a hosted transportation management system from Descartes Systems. Based on the analyses made possible by the new software, Dayton Superior renegotiated its carrier contracts. It reduced the number of carriers it used from a high of 448 at the project's outset to under 300 when Finley's assignment ended, and Klima has continued to whittle away at that number. It now stands at about 150.
One criterion for retaining carriers was the number of Dayton Superior facilities they served. "We tried to [consolidate business with] the carriers that were common across all the sites so we could leverage the network," Finley says. Rate reductions—coupled with high-quality service—were another factor in carrier selection. "We brought in our major carriers, showed them what was available, and asked them to revisit their pricing," Klima says. "We tried to make the carriers understand that service was very important. After that, the best price would get the freight."
Those that were able to meet those criteria have been rewarded: According to Klima, the shipper has concentrated its freight spend with its top 10 truckload carriers. The fact that the market has been soft and truckload carriers are searching for business certainly helped Dayton Superior's cause, but the transportation director emphasizes that the focus is not solely on the near term. Instead, he is determined to protect the company when capacity gets tight again, as it inevitably will—and the way to do that is by becoming a favored customer. "We are trying to use the opportunity in a light market to build relationships with our carriers," he says. "We want prices that will move freight and not be the lowest on the totem pole."
Further analysis turned up opportunities to change modes and realize some hefty savings. For instance, the shipper has doubled its use of costeffective intermodal service. Klima cites the example of shipments that used to move from a facility in Long Beach, Calif., to the Pacific Northwest on flatbed trucks. After investing $20,000 in a new dock that could accommodate intermodal equipment, the company was able to shift those shipments to rail. Dayton Superior also now uses intermodal to re-supply its DCs in Mexico.
Not all changes have resulted in cost savings, however. The company actually increased its spending on stop-off charges when it replaced some LTL shipments with consolidated truckloads. But such instances have been more than outweighed by successes like a remarkable 42-percent drop in accessorial charges.
The power of people
Dayton Superior's transportation transformation remains a work in progress. Klima expects more improvements over the next year or two. Currently, the company is in the process of refreshing its LTL carrier base and is looking at ways to get more favorable parcel contracts. It is also working with customers to find flexibility in delivery dates, which would allow the company to better coordinate multiple shipments to a delivery site.
Although the shipper's drive to take control of its transportation spending launched with a temporary consulting assignment, it was never intended to be about short-term gains alone. Instead, its aim has been to assure continued improvement through long-term investments. "We didn't just want a sugar high," Finley jokes.
Perhaps the most important long-term investment has been in people. In addition to Klima, the company brought on three full-time transportation managers at corporate headquarters. "The company needed dedicated professionals who were focused on daily transportation management," says Finley.
The new transportation team can claim some of the credit for the program's success, but Finley and Klima believe that support from both senior management and those out in the field played a crucial role as well. "Leadership backed us every step of the way," Finley says. "We made a conscious effort not to dictate from Dayton," Klima adds. "We got out into the field, went to the sites, and listened to their problems."
seeing carriers in a different light
Carrier selection traditionally has revolved mainly around rates and service, but consultant Justin Zubrod thinks that's about to change. The vice president in Booz Allen Hamilton's transportation practice believes a host of new pressures will require shippers to take a more strategic approach to purchasing transportation.
In a presentation at the annual conference of the Council of Supply Chain Management Professionals in October and in a subsequent interview with DC VELOCITY, Zubrod said that mounting concerns about fuel prices, the environment, and security will all enter into carrier selection decisions in the future. Although shippers will still be looking closely at price and service, he said, they'll also be evaluating carriers from the standpoint of supply chain resilience and supply chain sustainability.
The issue of resilience—the ability to recover from supply chain disruptions—has gained attention since the 9/11 terrorist attacks, the Gulf Coast hurricanes, and labor strife at West Coast ports in recent years. External events like natural disasters and internal events like factory shutdowns all pose risks to supply chains. Businesses that keep inventories lean are particularly vulnerable.
Carriers play an important role in shippers' efforts to build resilience into their supply chains. "Shippers are evaluating carriers from a risk-assessment point of view," Zubrod said. That is, they are looking at carriers' ability to adapt to changes in sources of supply, at their labor stability, and so on.
Likewise, the issue of sustainability is becoming a core part of management strategy. "Green" initiatives are at the heart of sustainability efforts, with nearterm goals like waste and emissions reductions and energy conservation. Those are goals that reach well beyond transportation, of course, but they have critical implications for the way carriers and shippers do business.
Zubrod said he is seeing more shippers asking carriers about sustainability and their companies' efforts to reduce their carbon footprints. It is not yet a widespread phenomenon: He estimates that about 20 percent of shippers— including market movers like Wal-Mart—are making those sorts of inquiries in their requests for quotes (RFQs) and requests for information (RFIs).
Europe, which tends to lead on environmental issues, may provide some indication of what is coming our way. "It is beginning to hit the carrier industry pretty hard there," Zubrod said. "The United States is not quite there. No one is making yes-or-no decisions based on this, but we are seeing it more and more in RFIs and RFQs."
Zubrod cautions that with sustainability initiatives, it's important not to lose sight of the big picture. Otherwise, decisions made with the purest of eco-intentions in one part of the operation could end up doing more harm than good to the supply chain overall. "It is fine to say you are going to use hybrid trucks for delivery, but by the time products get to the other end, you have had 15 or 16 hand-offs," he noted. "It comes back to better use of material and waste reduction. The real leverage point is a more efficient supply chain."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“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.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
However, that trend is counterbalanced by economic uncertainty driven by geopolitics, which is prompting many companies to diversity their supply chains, Dun & Bradstreet said in its “Q4 2024 Global Business Optimism Insights” report, which was based on research conducted during the third quarter.
“While overall global business optimism has increased and inflation has abated, it’s important to recognize that geopolitics contribute to economic uncertainty,” Neeraj Sahai, president of Dun & Bradstreet International, said in a release. “Industry-specific regulatory risks and more stringent data requirements have emerged as the top concerns among a third of respondents. To mitigate these risks, businesses are considering diversifying their supply chains and markets to manage regulatory risk.”
According to the report, nearly four in five businesses are expressing increased optimism in domestic and export orders, capital expenditures, and financial risk due to a combination of easing financial pressures, shifts in monetary policies, robust regulatory frameworks, and higher participation in sustainability initiatives.
U.S. businesses recorded a nearly 9% rise in optimism, aided by falling inflation and expectations of further rate cuts. Similarly, business optimism in the U.K. and Spain showed notable recoveries as their respective central banks initiated monetary easing, rising by 13% and 9%, respectively. Emerging economies, such as Argentina and India, saw jumps in optimism levels due to declining inflation and increased domestic demand respectively.
"Businesses are increasingly confident as borrowing costs decline, boosting optimism for higher sales, stronger exports, and reduced financial risks," Arun Singh, Global Chief Economist at Dun & Bradstreet, said. "This confidence is driving capital investments, with easing supply chain pressures supporting growth in the year's final quarter."