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.
In late June, Con-way Truckload, the truckload unit of transport logistics giant Con-way Inc., launched a partnership with a driver training school in Detroit. Under the partnership, students would receive reduced tuition rates while in school and be eligible to have up to one-half of that tuition reimbursed by the company when they graduate.
Con-way Truckload then extended an extraordinary carrot: It would waive the traditional "commitment" contract requiring a new driver to remain with the carrier for a specified period or else return the reimbursement. In other words, there was nothing to keep students from taking advantage of the subsidized training then moving on once they earned their commercial license.
Herb Schmidt, Con-way Truckload's president, said the waiver is an indication of the company's confidence in the quality of its work environment. "We want drivers to be here because they want to be, not because they are contractually or financially obligated to be," he said.
The waiver represents an unconventional approach to keeping drivers in what could become an unprecedented period of driver demand. While the nation struggles through a painfully prolonged period of high unemployment, driver jobs go begging. Consultancy FTR Associates estimates the industry is short about 188,000 drivers. National Transportation Institute (NTI), a firm that tracks driver employment and compensation trends, pegs the shortfall at about 30,000.
The revolving door
Beyond the shortage, however, lies a more pernicious problem: driver turnover, known in industry parlance as "churn." A report by the American Trucking Associations (ATA) estimated that, based on first-quarter numbers, 75 percent of drivers for large truckload fleets will turn over in 2011, the fastest clip since the second quarter of 2008. Turnover at smaller truckload fleets is projected at 50 percent, the highest annualized level reported since 2008's third quarter, according to the report.
Some of the turnover is due to attrition from death, retirement, and drivers' leaving the business. But Bob Costello, ATA's chief economist, said most of the churn comes from drivers becoming free agents who make their services available to the highest bidder. Costello said he expects the turnover rate to rise as freight demand accelerates, the number of retirees outpaces new entrants (one of every six drivers is 55 or older), and new safety regulations like CSA 2010—an initiative designed to winnow out marginal drivers through a complex grading system—give drivers with solid safety records more bargaining power than they've had in years.
For carriers, churn is a serious headache. Replacing a qualified over-the-road driver takes time and money. An unexpected departure also wreaks havoc on a carrier's network.
Shippers, meanwhile, get hit two ways: Not only does churn threaten to disrupt their supply chains, but it forces them to pay higher rates to compensate truckers for rising labor costs. Lana R. Batts, a long-time top trucking executive and now a partner in Transport Capital Partners LLC (TCP), a transport mergers and acquisitions advisory firm, said virtually all of the revenues obtained from rate increases will be sunk into paying escalating driver wages.
Estimates vary on the likely impact of wage increases on the nation's fleets. Leo Suggs, CEO of the former Overnite Transportation Co. and now chairman of Dallas-based contract carrier and third-party logistics service provider Greatwide Logistics Services, told an industry conference recently that wage hikes could drive up truckload rates by 5 to 15 percent over the next year. However, Schmidt of Con-way Truckload predicted only a 2- to 3-percent increase during that time due to general economic softness and labor slack in other industries like construction that compete for the same workers.
Schmidt added, however, that should the economy pick up appreciably, "there will be a driver shortage the likes of which we've never seen before." Right now, he said, "I've seen worse."
Ongoing wage problem
Carriers seeking to keep their drivers don't have much in the way of options. They can pay their drivers more, redesign their networks to provide drivers with predictable schedules and a better work-life balance, or a combination of the two.
Wages appear to be trending upward. Rates for owner-operators have climbed to $1 per mile from 92 cents a little more than a year ago, according to Gordon Klemp, president of NTI. Driver wages at for-hire carriers are also rising, though not at the same pace, he said.
Another factor in drivers' favor is that carriers are asking their drivers for more miles, which pads the paychecks of drivers paid on a per-mile basis, said Klemp.
But the industry has a ways to go to achieve the kind of wage levels that attract drivers or keep them from jumping to rivals. According to FTR estimates, the median annual salary for a truckload driver is about $48,000, though pay will range from $35,000 to $75,000 depending on the trucker's financial condition and the driver's qualifications. For drivers at less-than-truckload (LTL) and private fleets, the average is about $58,000, said Noel Perry, a senior analyst at FTR. Klemp pegs the median annual salary for a dry-van truckload driver in the Midwest at about $46,700. He did not have details on salaries for drivers at LTL or private fleets, but he said they are higher.
A recent survey of 150 fleets by TCP said wages need to be in the $50,000- to $70,000-a-year range to draw applicants into the field and keep them once they're hired. Klemp said the median driver salary needs to reach about $67,000 a year to accomplish both objectives.
Of equal importance is to narrow the wide gap between the wages of drivers working for truckers in the top quartile of payors, and those at carriers in the bottom quartile, Klemp said. The differential currently sits at a historic high of 16 cents per mile, well above the traditional gap of nine to 10 cents per mile, according to NTI data. Until the gap is closed, "you will continue to have churn," he said.
Batts of TCP said wages must rise to keep drivers performing a job so critical to the U.S. economy but which presents serious work-life challenges due to long periods of time away from home. "If you are going to have an awful lifestyle connected with the job, you need to be overcompensated for it," she said.
Keeping drivers content
Carriers, for their part, recognize this fact. For example, J.B. Hunt Transportation Services Inc., the company perhaps most closely associated with long-haul trucking, is diverting more of that freight to intermodal rail service as it focuses its truck network on more regionalized deliveries. Hunt and other carriers realize that intermodal service, besides reducing their line-haul costs, boosts driver retention because shorter hauls at the regional level mean more time at home.
Kane Is Able Inc., a trucker and third-party logistics service provider, keeps its 200 drivers operating at distances of about 300 miles each way, thus maximizing home time. That factor, as much as anything, makes driver churn a virtual non-issue, said Lawrence Catanzaro, the company's vice president, transportation safety and recruiting. "We don't have a lot of turnover. When we get drivers, we generally keep them," he said.
Most of the driver retention precepts are not rocket science, carrier executives say. Companies must stress communication with their drivers, create a pleasant work environment, provide opportunities for advancement either within the unit or with another company division, and monitor their competitors to uncover best practices and to stay a step ahead.
With CSA 2010 at the top of everyone's mind, carrier executives stress that working with drivers to improve their safety scores has the ancillary benefit of improving morale and minimizing churn.
"You are improving a driver's performance, which will make a company more valued in a customer's eyes. But it also shows the drivers that the company cares about their life and their work," said Charles W. Clowdis Jr., managing director, transportation consulting and advisory services at consultancy IHS Global Insight.
Shippers can play a part by making their freight more driver-friendly, executives say. "Attention to proper loading, adjusting pickup or delivery times to better accommodate [current driver hours-of-service] regulations, and managing driver [wait times] are more important than ever," said Mark Rourke, president of the truckload division of trucking and logistics giant Schneider National Inc. "Shippers need to be cognizant of the downstream impact of their freight on drivers."
"It's pretty simple," said Schmidt of Con-way Truckload. "Run an efficient dock, turn the loads quickly, and get the driver moving on down the road."
Churn, schmurn!
The problem of driver turnover, or "churn," keeps many trucking executives awake at night. But Herb Schmidt, CEO of Con-way Truckload, says he sleeps pretty soundly.
"It doesn't bother me one bit," said Schmidt, referring to driver turnover. Although "churn" is inevitable in trucking, he says, there are ways to minimize its impact on operations. The key, he explains, is to make sure the turnover is "planned."
In a program that the executive said is unique to the trucking business, the Joplin, Mo.-based carrier grants its drivers as much as four to five months of unpaid leave a year if the driver is considered a good worker and demonstrates a legitimate personal or business need for the time off.
Drivers using the program are technically terminated when they leave and do not receive any credits toward service tenure during their time away. However, they are guaranteed of rehire when their leave is over, and at the same pay, benefit, and seniority levels they had when they departed. The time off can be taken all at once, or it can be divided into intervals of the employee's choosing.
Schmidt said the program boosts morale and helps discourage turnover by giving drivers the freedom and flexibility to tend to other business or personal needs. At the same time, the company can plan ahead for their absence and minimize the risk of being caught short of drivers. Schmidt said that Con-way Truckload's driver turnover is about 30 to 35 percent below truckload industry averages.
The program is well suited for drivers who have second vocations—such as farming and ranching—with predictable seasonality to them, according to Schmidt. He estimated that less than 5 percent of Con-way Truckload's 3,000 drivers now take advantage of the program.
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
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.
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.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”