Failure to prescreen air freight could mean added costs, delays
An Aug. 1 deadline looms for screening all U.S. cargo carried in passenger aircraft. If more shippers don't sign on to the government's prescreening program, chaos could ensue.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
It is the supply chain equivalent of putting a square peg in a round hole: An industry built on speed of delivery is being forced to stop in mid-process and examine every piece of cargo before it is loaded into the bellies of passenger planes.
Starting Aug. 1, all shipments to be carried on passenger aircraft—3 billion pounds each year moving in U.S. domestic or export commerce—must be screened or physically inspected prior to loading. Compliance with that mandate may prove to be the air-cargo industry's biggest challenge of the post-9/11 era.
Ready or not?
The Transportation Security Administration (TSA), which oversees the program, said it is prepped for show time. "Both we and the industry are ready" for the Aug. 1 deadline, John Sammon, the Department of Homeland Security's assistant administrator, transportation-sector network management, said at a June 30 congressional hearing. "All segments of the cargo community are prepared, and we expect that [the Aug. 1 transition] will happen with little disruption."
But the industry has yet to walk the walk, and the path is littered with mines. On May 1, TSA announced that the industry had met a key milestone by screening three-fourths of all cargo transported on passenger aircraft. That cargo, however, probably represents the air freight equivalent of "low-hanging fruit."
The remaining 25 percent consists of multiple pieces that are shrink-wrapped on pallets or loaded into containers. Those are expected to be difficult to inspect without disrupting flight schedules and deliveries. The problem is that cargo must be examined at the individual piece level before it goes aboard a plane, and no government-approved technology exists to screen goods in palletized or containerized form. Unless the shipments have been screened before they reach the airport, the carrier will have to break down the pallet or container, examine the cargo, and then rebuild the unit load before moving it onto the aircraft.
In an effort to divide up the screening burden and avoid having mountains of unscreened cargo piling up at airports, the government created what it calls the Certified Cargo Screening Program (CCSP). Under this voluntary initiative, participants certified by the government—shippers, freight forwarders, airlines, and third-party facilities—would be authorized to screen cargo in their custody.
To date, there are 440 government-licensed forwarders enrolled in the program, as well as 60 independent screening facilities—informally known as "car washes"—that are certified to screen the cargo but may not deliver the screened cargo to the airlines.
But shipper enrollment has fallen short of expectations. As of mid-June, the TSA said 237 shippers had registered for the program. That's well below the thousands of shippers agency officials had hoped would be participating by that time.
The industry worries that a lack of significant shipper involvement will lead to chaos. Airlines fear they will be inundated with unscreened cargo that they will be obliged to examine. For their part, freight forwarders are concerned their shipper customers will dump the screening burden on them under the premise that it is part of the forwarders' job description.
Those concerns appear to be justified. A recent survey conducted by the Airforwarders Association found that 70 percent of shippers believe that forwarders should assume the responsibility for screening or inspecting shipments. "It has become very clear that the task of screening is going to fall largely on us," said Brandon Fried, the association's executive director.
The Government Accountability Office (GAO) said at the June 30 congressional hearing that shippers' participation would need to increase sixteenfold by Aug. 1 to achieve TSA's goal of having each group bear an equal share of the screening burden. The watchdog agency questioned whether the industry could meet the deadline without the flow of commerce being impeded.
Despite the concerns, the forwarder survey found most respondents "cautiously optimistic" that the industry will be able to manage effectively through the mandate.
Slow on the uptake
Why have shippers been so slow to sign up for CCSP? Some say it's because they have no real inducements to participate. During the June 30 hearing, the GAO noted that shippers have neither regulatory incentives to join the program, which is voluntary, nor economic incentives to do so because the airlines have yet to impose significant screening costs.
Freight forwarder and airline executives call that flawed thinking. As they see it, a shipper's ability to control the screening and inspection of a shipment—rather than having someone else do it for them and risk damaging a fragile, high-value product—should be enough of an economic incentive to enroll in the program.
Shippers would also benefit from prescreening their cargo themselves because it would reduce the risk of having their shipments held up at the airport. Shippers already pay a premium for the speed of air transportation, so they should examine the "opportunity costs" they would incur if their cargo should miss a scheduled flight because the airline couldn't examine it in time, said Ken Konigsmark, senior manager, supply chain & aviation security compliance for the Boeing Co., a large air-freight shipper.
"To the supply chain professional, time is as important as cost," he said.
Art Arway, who heads security for the Americas for Deutsche Post DHL, which owns the world's biggest air forwarder, said shippers are taking a big chance by not joining CCSP and certifying their security processes. "The airlines have said they will accept certified cargo first and then [screen] as they are able," he said. "Shippers will definitely run the risk of missing an airline's cutoff" if their cargo reaches an airport unscreened, he added.
In for a rude awakening
Although some shippers may have hesitated to join CCSP out of concerns about cost, forwarders say such fears are overblown. The cost of participating in the CCSP program varies widely by industry sector, they say, and while forwarders are likely to face significant expense, shippers are apt to get off relatively lightly.
What makes participation so costly for some forwarders is the equipment they have to buy. To accommodate large volumes of cargo, some might end up building stand-alone screening areas, complete with X-ray or explosives trace detection (ETD) machines that identify high-risk cargo. The cost could range from $30,000 to $500,000 per facility, depending on the quantity and sophistication of the equipment, according to Fried of the Airforwarders Association.
At the June 30 hearings, Mike Middleton, executive vice president of Secure Global Logistics, a Houston-based integrated logistics company, told lawmakers that his firm had spent about $400,000 on equipment, staff training, and implementing security measures to comply with the inspection mandate. And the tab can run much higher. Arway said Deutsche Post DHL spent millions of dollars in 2009 to purchase ETD machines after deciding that X-ray equipment produced too many false positives.
Shippers, on the other hand, may not have to go to such lengths. Many shippers already examine their shipments as part of their daily manufacturing processes and have security equipment installed and inspection procedures in place. In some cases, joining the CCSP could be as simple and inexpensive as erecting a fence around an open area and having it designated a certified screening facility, according to Fried.
"Shippers face very little cost in getting certified. The challenge is that they're not registering," he said.
That could be a big mistake. Shippers that haven't registered for the program or made other arrangements to have their freight prescreened could be in for a rude awakening next month, when new fees and requirements kick in. For example, American Airlines on Aug. 1 will double its security charges for goods it is required to screen. It will also add two hours to flight cutoff times for unscreened cargo, meaning the goods must hit American's docks six hours before the flight's scheduled departure, according to Dave Brooks, head of the airline's cargo unit. However, for cargo that has been screened or inspected before it reaches the airport, the airline will keep the four-hour cutoff times and waive the additional screening fees, he said.
Lest anyone think that American's policy is an anomaly, Arway offered a warning. Virtually all U.S. airlines will follow the carrier's lead—if they haven't already, he said.
A tangled web of cargo security rules
The story of air-cargo security is, in reality, two stories.
The first has largely been written. On Aug. 1, all air cargo scheduled to fly from any U.S. airport in the lower decks, or "bellies," of passenger planes must be screened or inspected before being allowed on board. The law covers all domestic cargo as well as export shipments flown by U.S. or foreign-flag carriers.
The second has yet to play itself out. It involves the screening or inspection of cargoes departing foreign airports bound for the United States. It is a complex, tangled affair involving issues of national sovereignty and paranoia. And it may take several years to write.
The 2007 law requiring the screening or inspection of U.S. belly cargo also set an Aug. 1, 2010, deadline for the examination of all air-freighted goods loaded on passenger planes at foreign airports. However, meeting that deadline would prove to be impossible, due to the difficulty in harmonizing multiple security regimes.
Several months ago, administration officials discussed the possibility of setting a Dec. 31, 2010, deadline to meet the mandate. That, too, was quickly withdrawn. At a congressional hearing on June 30, the Transportation Security Administration (TSA), which oversees the cargo security program, said it would take about three years to achieve 100-percent examination of inbound belly cargo. Currently, about 62 percent of all inbound cargo is being inspected before loading, according to TSA estimates.
For U.S. and foreign governments, the first order of business may be to resolve the "Catch 22" that currently exists in the global security net. Many of the United States' trading partners have supply chain security programs in place. However, they are unwilling to share information about those programs with other countries—including the United States—because of their sensitive nature. The TSA has said that unless it gains access to the details of foreign governments' screening provisions, it cannot determine if they meet U.S. requirements, and thus cannot recognize them.
The back-and-forth between governments means that the international air supply chain may find itself dealing with multiple security programs for some time to come. For example, in the case of cargo flying from Germany to the United States., the goods may be subject to two screening programs, one complying with German requirements, the other meeting the U.S. standards.
TSA and its umbrella agency, the Department of Homeland Security (DHS), said they are working with international regulatory bodies like the International Civil Aviation Organization (ICAO) as well as individual governments to develop harmonized standards for cargo security. Through cross-sharing of information, DHS and TSA hope to identify nations with security programs with requirements that are similar to the United States'.
TSA also said it is exploring with the Bureau of U.S. Customs and Border Protection (CBP) the possibility of using CBP's Automated Targeting System to collect information on inbound cargo before the plane departs the origin airport. TSA said the program will allow it to perform what it called "baseline threshold targeting," enabling it to better identify high-risk cargo that should be subjected to further screening.
The way that shippers and carriers classify loads of less than truckload (LTL) freight to determine delivery rates is set to change in 2025 for the first time in decades, introducing a new approach that is designed to support more standardized practices.
But the transition may take some time. Businesses throughout the logistics sector will be affected by the transition, since the NMFC is a critical tool for setting prices that is used daily by transportation providers, trucking fleets, third party logistics providers (3PLs), and freight brokers.
For example, the current system creates 18 classes of freight that are identified by numbers from 50 to 500, according to a blog post by Nolan Transportation Group (NTG). Lower classed freight costs less to ship, ranging from basic goods that fit on a standard shrink-wrapped 4X4 pallet (class 50) up to highly valuable or delicate items such as bags of gold dust or boxes of ping pong balls (class 500).
In the future, that system will be streamlined by four new features, NMFTA said:
standardized density scale for LTL freight with no handling, stowability, and liability issues,
unique identifiers for freight with special handling, stowability, or liability needs,
condensed and modernized commodity listings, and
improved usability of the ClassIT classification tool.
The new changes look to simplify the classification by grouping similar articles together and assigning most classes based solely on density – the most measurable of the four characteristics, he said. Exceptions will be handled separately, adding one or more of the three remaining characteristics in cases where density alone is not adequate to determine an accurate class.
When the updates roll out in 2025, many shippers will see shifts in the LTL prices they pay to move loads, because the way their freight is classified – and subsequently billed – might change. To cope with those changes, he said it’s important for shippers to review their pricing agreements and be prepared for these adjustments, while carriers should prepare to manage customer relationships through the transition.
“This shift is a big deal for the LTL industry, and it’s going to require a lot of work upfront,” Davis said. “But ultimately, simplifying the classification system should help reduce friction between shippers and carriers. We want to make the process as straightforward as possible, eliminate unnecessary disputes, and make the system more intuitive for everyone. It’s a change that’s long overdue, and while there might be challenges in the short term, I believe it will benefit the industry in the long run.
Business leaders in the manufacturing and transportation sectors will increasingly turn to technology in 2025 to adapt to developments in a tricky economic environment, according to a report from Forrester.
That approach is needed because companies in asset-intensive industries like manufacturing and transportation quickly feel the pain when energy prices rise, raw materials are harder to access, or borrowing money for capital projects becomes more expensive, according to researcher Paul Miller, vice president and principal analyst at Forrester.
And all of those conditions arose in 2024, forcing leaders to focus even more than usual on managing costs and improving efficiency. Forrester’s latest forecast doesn’t anticipate any dramatic improvement in the global macroeconomic situation in 2025, but it does anticipate several ways that companies will adapt.
For 2025, Forrester predicts that:
over 25% of big last-mile service and delivery fleets in Europe will be electric. Across the continent, parcel delivery firms, utility companies, and local governments operating large fleets of small vans over relatively short distances see electrification as an opportunity to manage costs while lowering carbon emissions.
less than 5% of the robots entering factories and warehouses will walk. While industry coverage often focuses on two-legged robots, Forrester says the compelling use cases for those legs are less common — or obvious — than supporters suggest. The report says that those robots have a wow factor, but they may not have the best form factor for addressing industry’s dull, dirty, and dangerous tasks.
carmakers will make significant cuts to their digital divisions, admitting defeat after the industry invested billions of dollars in recent years to build the capability to design the connected and digital features installed in modern vehicles. Instead, the future of mobility will be underpinned by ecosystems of various technology providers, not necessarily reliant on the same large automaker that made the car itself.
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.