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.
As a consultant to trucking companies since 1977, Larry Menaker, who heads a Chicago-based firm that bears his name, has witnessed much of the industry's past.
But Menaker says he has also seen the industry's future. And it can be summed up in one word: Dedicated.
Menaker's firm does not focus all its efforts on dedicated carriage—the practice whereby, as the name implies, a trucker dedicates equipment and drivers to serving an individual shipper, allowing that customer to lock in rates and capacity with the carrier for a multi-year period. However, he is steering many of his trucking clients in that direction.
Menaker predicts that about half of the future opportunities in trucking will emerge from the dedicated space, not from private fleet operations or from traditional on-demand service, where a trucker waits for a shipper to call with a load and dispatches a rig and trailer for a one-way haul.
Converting private fleets and one-way trips to dedicated service could bring in as much as $80 billion in additional annual revenue to dedicated carriers, according to Menaker.
Menaker also sends a blunt warning to carriers who now generate more than 90 percent of their traffic from on-demand service: Unless those companies migrate to dedicated carriage, "they will not be in business five years from now," he says.
With rising equipment costs, increasingly burdensome government regulations, and a shrinking pool of qualified drivers, carriers can ill afford to have resources sitting idle waiting for a shipper's call, and may not be able to adequately service the customer when the call does come, Menaker explains.
As a result, those carriers that stick with the on-demand model may find themselves behind the competitive eight ball or drowning in red ink, Menaker says. "If you are waiting for someone to get in touch with you, you will be in trouble," he says.
Double-digit savings
John G. Larkin, lead transport analyst for investment firm Stifel, Nicolaus & Co., calls dedicated trucking the "mutually beneficial antidote" for carriers that want to get paid for capacity and shippers that want to know it's available.
"Both shippers and carriers are increasingly realizing that dedicated trucking may be just the solution that meets both their needs," Larkin wrote in early October.
Speaking that same month at the Council of Supply Chain Management Professionals' (CSCMP) Annual Global Conference in Philadelphia, Larkin said shippers who own and operate private fleets could "see 10-percent savings right off the bat" from switching to dedicated service. That's because specialized operators can usually manage fuel, insurance, maintenance, equipment utilization, and driver schedules more efficiently than a shipper that also operates its own trucks can, Larkin notes.
What's more, companies that outsource their fleet needs can free up their balance sheet capacity and reinvest more of their cash into their core business, which is generally not transportation, Larkin says.
Menaker goes one better, noting that many private fleets lease their equipment from companies like Ryder Truck Leasing and Penske Truck Leasing, which charge premiums for using their vehicles. "Those premiums go away" when a shipper converts from a private fleet to dedicated carriage, he said.
All in all, a company that shifts from private fleet ownership to a dedicated operation can shave its costs by up to 15 percent, while securing dependable capacity for constant, or "baseload," volumes and using third parties like freight brokers to handle unexpected surges in demand, experts say.
A shift in the winds
The upshot is more shippers will likely be giving dedicated a second look, experts say. David D. Congdon, president and CEO of less-than-truckload carrier Old Dominion Freight Line Inc., said he expects to see an expansion in the use of dedicated service, as well as private fleets, as shippers look to build stability into their networks and reduce the risk of paying for so-called empty miles. "If you can reduce empty miles, you can beat any pricing game," Congdon told a gathering at CSCMP.
Some shippers have already seen the light. "We will rely more on dedicated fleets to manage variability, and control peaks and valleys in our traffic flow," Michael F. Heckart, manager, North American logistics and strategic sourcing at agribusiness giant Deere & Co., said at CSCMP.
Michael Cole, senior director of transportation for food and confectionary titan Kraft Foods, said at the conference that Kraft this year will have 400 rigs at its disposal for dedicated carriage, up from 220 in 2010. About 30 percent of Kraft's total 2011 rig count will be privately held or dedicated, up from 22 percent in 2010, according to Cole.
Since converting part of its fleet to dedicated, Kraft has seen an eight-percentage-point improvement in its on-time delivery metrics from its distribution centers to retailer warehouses, Cole adds.
The recent spike in interest in dedicated carriage stands in stark contrast to the 25-plus year period after truck deregulation, when the service grew so slowly that no one took notice. According to Menaker, shippers were intrigued by the concept but were skeptical about service quality and promised cost savings. Market pricing also sowed confusion, as carriers that charged premiums for providing a "specialized" service were undercut by renegade operators that priced dedicated at a discount. In addition, traffic managers who ran private fleets were loath to outsource their operations for fear of losing their jobs, Menaker adds.
All of that changed starting in the middle of the last decade, as oil prices became increasingly volatile, equipment costs rose, the industry experienced an acute driver shortage, and a freight recession pressured traffic managers to improve the efficiency of their operations and drive out costs.
Proceed with caution
As the dedicated model gains traction, experts caution shippers and carriers not to enter into these arrangements with blinders on. A dedicated relationship generally spans three to five years, and is akin to a marriage with both sides contractually joined at the hip.
And dedicated fleet contracts can be complicated compared with conventional truckload service agreements. For example, because dedicated providers are paid based on an agreed-upon number of round-trip miles driven, the contract must ensure an operator is properly compensated on low-mileage as well as high-mileage days. A properly written dedicated contract "should [be structured so that] the carrier gets paid even if a load doesn't move," says Lana R. Batts, a long-time trucking executive and a partner in Transport Capital Partners, a transport mergers and acquisitions advisory firm.
In addition, contracts must be painstakingly detailed in terms of fleet size specifications, and spell out provisions and charges for driver stop-offs, detention, and layover. Fuel surcharge, loading, and unloading costs must also be thoroughly addressed.
Menaker said the process has to be completely transparent, with shippers and carriers knowing from the start what is expected of each other.
"Both parties need to establish quantifiable performance measurements. There must be a sense of equal and shared responsibility as if each party is an extension of the other. And there has to be availability and sharing of quality information, especially if there are organizational changes that could affect the service," he said.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.