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.
The nation's leading shipper executives didn't rise to the top of their profession by accident. It took resourcefulness and determination, honed by decades of experience and results, to get to where they are.
They will need all of those qualities, and then some, to cope with what is coming at them. However, underestimating their cat-skinning abilities could be a mistake.
To be sure, the obstacles are daunting. To begin with, there's the run-up in fuel costs. The average national price of diesel fuel rose to more than $4.10 a gallon as of April 18, according to the Department of Energy's Energy Information Administration. In California, diesel prices reached a near-punitive $4.44 a gallon. As this story was written, the national average had risen by $1.03 a gallon from mid-April 2010 levels, hitting its highest point since August 2008, when diesel reached a monthly average of $4.30 a gallon. As of mid-April, fuel had surpassed labor as the largest expense for many truckers.
At the same time, tractor counts continue to shrink at a rate that has alarmed even the most seasoned shipper executives. A spate of bankruptcies and a weak economy that forced rigs and trailers off the road has led to a 16-percent decline in truckload capacity from the industry's 2006 peak, according to Transport Capital Partners, a transport mergers and acquisitions advisory firm.
A monthly Shippers' Condition Index (SCI) published by the Nashville, Ind.-based consultancy FTR Associates declined in April to levels not seen since 2004, the firm said in mid-April. The index, which sums up all "market influences" affecting shippers, came in at -7.7 in April, FTR said. A reading below zero reflects an unfavorable climate for shippers.
"Shippers are being hit in two ways as ... base rates are moving higher for all major modes and fuel surcharges are surging," said Larry Gross, senior consultant for FTR. "While there might be some relief later in the year on fuel surcharges, we expect base rates to continue to increase." Although estimates vary, consultancy IHS Global Insight says the average fuel surcharge today is equal to one-fourth of the truckers' base rate for line-haul service.
Tactical maneuvers
Transport costs were much on the minds of an elite group of about 100 shipper executives gathered in Atlanta in mid-April at a conference hosted by Georgia Tech's Supply Chain & Logistics Institute. Executives and analysts attending the National Logistics & Distribution Conference voiced concerns that as fuel surcharges course through the supply chain, the result will be a surge in consumer prices—perhaps as early as the summer—to levels the nation hasn't seen for decades.
One executive, speaking without being identified, said that unless oil prices receded quickly and dramatically, "I don't see how we can avoid consumer price inflation in the double digits later this year."
Yet there was also a sense that shippers will find their way through the morass. From the use of "load bars" that can reduce damage claims by securing freight aboard a trailer, to the development of capacity-sharing arrangements, to paying bonuses to drivers to finish local multi-stop routes earlier than planned to save time and fuel, to simply asking partners if they could adjust their delivery schedules to accept less-expensive services, shippers and truckers will look under every rock in their bid to neutralize higher fuel spend with better productivity—and cost savings—elsewhere.
"I can't offset it completely, but I can minimize the hurt," said Gough Grubbs, senior vice president of logistics and distribution for Stage Stores, a Houston-based retail chain with more than 780 stores operating under the Goody's, Bealls, Palais Royal, Peebles, and Stage brands.
Stage has begun a pooling program with other retailers that operate in roughly the same geographic footprint, Grubbs said. Under the program, Stage's competitors bring their small parcels to one of the company's distribution centers, located in South Hill, Va.; Jeffersonville, Ohio; and Jacksonville, Texas. Once those shipments arrive, Stage will break down the trailers and cross-dock the shipments onto its own trailers—along with its own goods—for outbound truckload deliveries to its 21 hubs that augment the DCs.
The pooling agreement has three-tiered benefits, according to Grubbs. Stage's rivals, which were forced to pay much-higher small-parcel rates because they lacked the density to build less-costly truckloads, now have access to truckload pricing because their shipments ride along with Stage's freight. Stage benefits by filling its trailers faster, thus avoiding the cost of holding a rig and trailer overnight to build a truckload. And the trucker gains by having more freight to transport. In addition, service levels increase because the supply chain is effectively sped up, Grubbs said.
Stage has already signed up two retailers, the names of which Grubbs wouldn't disclose. A third was expected to come on board by the end of May, and talks were ongoing with six more retailers, he said.
The agreement and others like it herald a new era in supply chain cooperation, Grubbs said. Today's mantra is "we compete on the shelf and collaborate in the supply chain," he said, adding that the company "welcomes any inquiries from companies who believe their circumstances fit this model."
At the heart of Stage's strategy is to create as many truckload shipments as possible and reduce its reliance on less-than-truckload (LTL) or small-parcel service, where the shipping costs can be up to 40 percent greater. Grubbs estimates that about 90 percent of Stage's annual inbound deliveries of 9 million cartons now move in truckload service, up from about 70 percent four to five years ago.
Going for full loads
Converting freight from LTL to less-costly truckload service is also the holy grail of The Home Depot Inc.'s five-year supply chain transformation plan, which is now nearing completion. The Atlanta-based home improvement giant has created 19 "rapid deployment centers" (RDCs), which are flow-through facilities that, as with Stage's plan, enable the cross-docking of large quantities of merchandise.
By leveraging the RDCs, suppliers who used to ship direct to stores using LTL service can now consolidate their shipments into truckload quantities for shipping to the facilities.
Mark Holifield, Home Depot's senior vice president, supply chain, said the company should realize 40 basis points—roughly 0.4 of 1 percent—of profit margin improvement largely through the savings in converting LTL to truckload. Given the company's $55 billion in annual sales, that level of margin expansion is significant, Holifield said.
In addition, Home Depot is looking to share capacity with other retailers on its dedicated contract carrier network, according to Michelle D. Livingstone, the company's vice president, supply chain-transportation. Under the dedicated concept, a shipper commits to a multi-year contract where it tenders a certain amount of volume and pays for transportation on a round-trip basis. In return, the shipper gets predictable capacity and pricing, no small matter in the current volatile environment.
Holifield said that Home Depot, one of the world's largest users of LTL services, would like to dramatically shrink its use of LTL. Both he and Livingstone stressed, however, that the company would always rely on LTL to some degree, given the requirements of its supply chain.
An orderly approach
Some shipping executives may be loath to re-engineer their networks in response to the current fuel pressures, perhaps not feeling the same sense of urgency today after recalling how the 2008 spike was followed by an equally violent price downdraft after the economy collapsed.
Chuck Taylor, whose firm consults with companies on the interconnections between energy and the supply chain, said shippers and carriers were so focused on surviving the recession and riding the recovery that they paid scant attention to escalating oil prices. The recent run-up, he said, "is catching many off guard."
Taylor, who has long preached that the supply chain must adjust to permanently elevated oil prices, said he has "heard nothing about any new or innovative approaches" to counteract rising energy costs. "It seems to be a stunned acceptance of higher fuel prices followed by the usual beat-the-carrier-down approach," he said.
Starbucks Coffee Co. is trying to take an orderly approach to the problem. For the past year, the Seattle-based giant, which each year consumes about 7 million gallons of fuel moving product from its DCs to its thousands of retail stores, has been modeling various supply chain scenarios and responses with oil at different price points, according to Gregory Javor, Starbucks' senior vice president, supply chain operations, global logistics.
Javor told the conference that with diesel fuel prices at mid-April levels, the company is "ready for a refresh" of its transport network requirements. It is considering expanding its current DC capabilities, and adding to its network of five regional facilities to bring inventory closer to its customers, Javor said. Starbucks has tripled its use of more cost-effective intermodal service on inbound consignments into its DCs and will use more intermodal if necessary, Javor said.
In the past 12 months, Starbucks has cut fuel usage 3.6 percent by reducing delivery frequencies, reconfiguring the location of what it terms its "last-mile facilities," and integrating more energy-efficient vehicles into its fleet, Javor said. The company will continue to drill deep into its transportation system to uncover cost-saving opportunities, he added. "Transportation connects all the dots," Javor said in an interview following his presentation.
Brian P. Clancy, managing director and co-founder of Logistics Capital & Strategy LLC, an Arlington, Va.-based consultancy, said higher fuel prices will force many businesses to shrink the length of haul from DC to retailer, and to ship in large quantities to achieve economies of scale. "To accomplish this, additional and larger warehouses will be needed, which implies more stock and higher inventory levels and costs," he told the group.
Clancy said the big winner in all of this could be Mexico, a country where cumbersome regulations, primitive infrastructure, a reputation for corruption, and language barriers have kept many producers away. With fuel and transport costs on the rise, however, producing closer to the U.S. market is starting to look more attractive than manufacturing in Asia and shipping across the Pacific. In a recent survey by his firm of 250 U.S., European, and Asian manufacturers with a presence in Mexico, 200 said they plan to either maintain or expand operations there.
"Mexico is finally going to get its turn," he said.
Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.
In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.
Rogers graduated from Princeton University and went to work for a medical device startup in China before moving to a hedge fund company, where he became a Chartered Financial Analyst (CFA). After that, he joined the U.S. Marine Corps, serving eight years in the infantry. Following two combat tours, he earned an MBA from the Harvard Business School and became a consultant for McKinsey & Co.
During this time, he founded Local Motors, a next-generation vehicle manufacturer that launched the world's first 3D-printed car, the Strati, in 2014. In 2021, he brought the technology to the furniture industry to launch Haddy. The father of four boys, Rogers is also a director of the RBR Foundation, a philanthropic organization focused on education and health care.
Rogers spoke recently with DC Velocity Group Editorial Director David Maloney on an episode of the "Logistics Matters" podcast.
Q: Could you tell us about Haddy and how this unique company came to be?
A: Absolutely. We have believed in the future of distributed digital manufacturing for a long time. The world has gone from being heavily globalized to one where lengthy supply chains are a liability—thanks to factors like the growing risk of terrorist attacks and the threat of tariffs. At the same time, there are more capabilities to produce things locally. Haddy is an outgrowth of those general trends.
Adoption of the technologies used in 3D printing has been decidedly uneven, although we do hear about applications like tissue bioprinting and food printing as well as the printing of trays for dental aligners. At Haddy, we saw an opportunity to take advantage of large-scale structural printing to approach the furniture and furnishings industry. The technology and software that make this possible are already here.
Q: Furniture is a very mature market. Why did you see this as a market that was ripe for disruption?
A:The furniture market has actually been disrupted many times in the last 200 years. The manufacturing of furniture for U.S. consumption originally took place in England. It then moved to Boston and from there to New Amsterdam, the Midwest, and North Carolina. Eventually, it went to Taiwan, then China, and now Vietnam, Indonesia, and Thailand. And each of those moves brought some type of disruption.
Other disruptions have been based on design. You can look at things like the advent of glue-laminated wood with Herman Miller, MillerKnoll, and the Eames [furniture design and manufacturing] movement. And you can look at changes in the way manufacturing is powered—the move from manual operations to machine-driven operations powered by steam and electricity. So the furniture industry has been continuously disrupted, sometimes by labor markets and sometimes by machines and methods.
What's happening now is that we're seeing changes in the way that labor is applied in furniture manufacturing. Furniture has traditionally been put together by human hands. But today, we have an opportunity to reassign those hands to processes that take place around the edges of furniture production. The hands are now directing robotics through programming and design; they're not actually making the furniture.
And so, we see this mature market as being one that's been continuously disrupted during the last 200 years. And this disruption now has a lot to do with changing the way that labor interacts with the making of furniture.
Q: How do your 3D printers actually create the furniture?
A:All 3D printing is not the same. The 3D printers we use are so-called "hybrid" systems. When we say hybrid, what we mean is that they're not just printers—they are holders, printers, polishers, and cutters, and they also do milling and things like that. We measure things and then print things, which is the additive portion. Then we can do subtractive and polishing work—re-measuring, moving, and printing parts again. And so, these hybrid systems are the actual makers of the furniture.
Q: What types of products are you making?
A: We've started with hardline or case goods, as they're sometimes known, for both residential and commercial use—cabinets, wall bookshelves, freestanding bookshelves, tables, rigid chairs, planters, and the like. Basically, we've been concentrating on products that don't have upholstery.
It's not that upholstery isn't necessary in furniture, as it is used in many pieces. But right now, we have found that digital furniture manufacturing becomes analog again when you have to factor in the sewing process. And so, to move quickly and fully leverage the advantages of digital manufacturing, we're sticking to the hardline groups, except for a couple of pieces that we have debuted that have 3D-printed cushions, which are super cool.
Q: Of course, 3D printers create objects in layers. What types of materials are you running through your 3D printers to create this furniture?
A: We use recycled materials, primarily polymer composites—a bio-compostable polymer or a synthetic polymer. We look for either recycled or bio-compostable [materials], which we then reinforce with fibers and fillers, and that's what makes them composites. To create the bio-compostables, we marry them with bio-fibers, such as hemp or bamboo. For synthetic materials, we marry them with things like glass or carbon fibers.
Q: Does producing goods via 3D printing allow you to customize products easily?
A: Absolutely. The real problem in the furniture and furnishings industries is that when you tool up to make something with a jig, a fixture, or a mold, you tend to be less creative because you now feel you have to make and sell a lot of that item to justify the investment.
One of the great promises of 3D printing is that it doesn't have a mold and doesn't require tooling. It exists in the digital realm before it becomes physical, and so customization is part and parcel of the process.
I would also add that people aren't necessarily looking for one-off furniture. Just because we can customize doesn't mean we're telling customers that once we've delivered a product, we break the digital mold, so to speak. We still feel that people like styles and trends created by designers, but the customization really allows enterprise clients—like businesses, retailers, and architects—to think more freely.
Customization is most useful in allowing people to "iterate" quickly. Our designers can do something digitally first without having to build a tool, which frees them to be more creative. Plus, because our material is fully recyclable, if we print something for the first time and find it doesn't work, we can just recycle it. So there's really no penalty for a failed first printing—in fact, those failures bring their own rewards in the form of lessons we can apply in future digital and physical iterations.
Q: You currently produce your furniture in an automated microfactory in Florida, with plans to set up several more. Could you talk a little about what your microfactory looks like and how you distribute the finished goods?
A: Our microfactory is a 30,000-square-foot box that mainly contains the robots that make our furniture along with shipping docks. But we don't intend for our microfactories to be storage warehouses and trans-shipment facilities like the kind you'd typically see in the furniture industry—all of the trappings of a global supply chain. Instead, a microfactory is meant to be a site where you print the product, put it on a dock, and then ship it out. So a microfactory is essentially an enabler of regional manufacturing and distribution.
Q: Do you manufacture your products on a print-to-order basis as opposed to a print-to-stock model?
A: No. We may someday get to the point where we receive an order digitally, print it, and then send it out on a truck the next day. But right now, we aren't set up to do a mini-delivery to one customer out of a microfactory.
We are an enterprise company that partners with architects, designers, builders, and retailers, who then distribute our furnishings to their customers. We are not trying to go direct-to-consumer at this stage. It's not the way a microfactory is set up to distribute goods.
Q: You've mentioned your company's use of recycled materials. Could you talk a little bit about other ways you're looking to reduce waste and help support a circular economy?
A: Yes. Sustainability and a circular economy are really something that you have to plan for. In our case, our plans call for moving toward a distributed digital manufacturing model, where we establish microfactories in various regions around the world to serve customers within a 10-hour driving radius of the factory. That is a pretty large area, so we could cover the United States with just four or five microfactories.
That also means that we can credibly build our recycling network as part of our microfactory setup. As I mentioned, we use recycled polymer stock in our production, so we're keeping that material out of a landfill. And then we tell our enterprise customers that while the furniture they're buying is extremely durable, when they're ready to run a special and offer customers a credit for turning in their used furniture, we'll buy back the material. Buying back that material actually reduces our costs because it's already been composited and created and recaptured. So our microfactory network is well designed for circularity in concert with our enterprise customers.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.
The two acquisitions follow Arvato’s purchase three months ago of ATC Computer Transport & Logistics, an Irish firm that specializes in high-security transport and technical services in the data center industry. Following the latest deals, Arvato will have a total U.S. network of 16 warehouses with about seven million square feet of space.
Terms of the deal were not disclosed.
Carbel is a Florida-based 3PL with a strong focus on fashion and retail. It offers custom warehousing, distribution, storage, and transportation services, operating out of six facilities in the U.S., with a footprint of 1.6 million square feet of warehouse space in Florida (2), Pennsylvania (2), California, and New York.
Florida-based United Customs Services offers import and export solutions, specializing in remote location filing across the U.S., customs clearance, and trade compliance. CTPAT-certified since 2007, United Customs Services says it is known for simplifying global trade processes that help streamline operations for clients in international markets.
“With deep expertise in retail and apparel logistics services, Carbel and United Customs Services are the perfect partners to strengthen our ability to provide even more tailored solutions to our clients. Our combined knowledge and our joint commitment to excellence will drive our growth within the US and open new opportunities,” Arvato CEO Frank Schirrmeister said in a release.
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.