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.
That may be the most important question facing the trucking industry today. How shippers answer it—and carrier perceptions of that response—could determine if and how freight gets moved, the cost of moving the goods, and how effectively this large and important business is able to function at a critical point in its history.
What is known today has been known for some time: Truck capacity has shrunk by 15 to 20 percent since the onset of the four-year freight recession in 2006, and with the possible exception of specialized equipment like "reefers" or flatbeds, it isn't returning to its pre-recession size any year soon. About 10 percent of commercial drivers are expected to leave the business over the next several years, pushed out by advancing age, tough new government safety rules, and a general weariness of the road and the short shrift their skills often receive. Diesel fuel prices reached a national average of $4.14 a gallon on April 2 and could go higher. Asset inflation is hitting everything from trucks to tires, to motor oil to labor. And ever-increasing government regulations have added to those operating costs and subtracted efficiencies from the supply chain.
With capacity contracting and costs rising, carriers can no longer afford to accept and move all freight that comes their way. And shippers no longer have the luxury of contributing nothing more to the relationship than the goods they tender.
"Ten to 15 years ago, the definition of a good shipper was 'one that had a lot of freight,'" said Dan Van Alstine, senior vice president and general manager, dedicated services for truckload and logistics giant Schneider National Inc. "Today's definition is much different."
Refrigerated truckload carrier Marten Transport Ltd. believes it can define a good shipper, at least on paper. Marten executives keep a checklist—in the form of a PowerPoint presentation—that outlines how a "perfect shipper" should behave under more than 25 different scenarios.
Yet finding "shipper wonderful" seems consigned to the realm of fantasy at Marten, at least for now. For example, about 30 percent of its refrigerated freight still doesn't get loaded or unloaded within a generally acceptable two-hour time window, according to Tim Kohl, president of the Mondovi, Wis.-based carrier. This is no small problem for Marten, considering its drivers have only 11 hours in a day in which to haul and that they operate specialized tractor-trailers that can run $200,000 per unit and are costly assets if they're not moving.
The pressure on both sides is unprecedented. Yet the burden seems to fall more on the shippers. After all, it's their freight—and their business—at stake. Many shippers have never needed to think about being "sticky" with their carriers. The time to start thinking about it, experts said, is now. Herewith are four steps to being a "good" shipper:
1. Trust, communicate, and participate. These are time-worn maxims. But they are worth repeating, especially since all carrier and third-party logistics (3PL) executives interviewed for this story did so.
"Carriers don't want to be treated like vendors," said Ben Cubitt, who sits in the middle of the fray as senior vice president of consulting and engineering for Frisco, Texas-based 3PL Transplace. "They want you to be fair. They want you to engage in fact-based discussions. And they want to be recognized for doing a good job for you."
This recognition, Cubitt said, should come in the form of consolidating more business with a top-performing carrier, especially if the carrier has invested in building a broad product and service portfolio that reduces a shipper's costs and improves convenience.
Shippers should also take pains to roll out the freight within four to six weeks of accepting a carrier's bid, Cubitt added. Too many shippers wait longer than that, a habit that tests a carrier's patience and won't win that shipper many friends.
In a world where shippers no longer dictate the terms of engagement, carriers will insist that their customers take the time to understand their business and proactively communicate any changes in their shipping patterns that may affect capacity allocations, carrier executives said.
J. Edwin Conaway, senior vice president, sales for Con-way Freight, the less-than-truckload (LTL) arm of Con-way Inc., said shippers must have a realistic understanding of their carriers' capabilities and must negotiate in good faith based on that knowledge.
Conaway said for shippers, a little knowledge could go a long way. He said many of his customers' traffic departments have been "too focused on the freight charge, while upper management did not realize there was a freight company that could improve their customer experience. Many times, it is our salespeople that help them uncover the unanticipated solution."
Conaway said the solution often doesn't show up as a cost reduction on the shippers' freight bill. Rather, it manifests itself in the benefits of fixing internal defects that lead to improved customer satisfaction metrics.
2. Don't skimp on the data (but make sure it's both accurate and up-to-date). It's been said that "there is no bad freight, just bad pricing." And bad pricing frequently stems from being forced to work with incorrect and insufficient shipper data, according to carrier executives.
Schneider generates up to 35 percent of its volumes through the competitive bidding process. However, the data contained in many bids is often stale or inaccurate, according to Van Alstine. As a result, Schneider finds itself in the uncomfortable position of revising its initial bid based on subsequent changes in the data elements, he said.
"I believe carriers ... are going to be far more diligent in tethering their pricing to the bid data and far more assertive on recalibrating their pricing to the actual freight experience," he said.
Kenneth Burroughs, vice president of revenue management for UPS Freight, the LTL unit of UPS Inc., urges shippers to provide as much information as possible about their business and freight. "Our advice is to give us all of the available data, and let us sift through it and see if we can build a proper network solution around it," he said.
Burroughs said that without robust data streams, it becomes difficult for UPS Freight to assign the proper amount of truck cube to the freight, the paramount objective of any successful shipper-LTL carrier relationship.
"We really need good, accurate data that we can model," he said. "Unless we already have a lot of experience with that customer, we don't know how the characteristics of their freight will fit into our network."
The lack of visibility has in the past made for unpleasant surprises when UPS Freight received the goods, according to Burroughs. "We were assured of one thing, and we got something else," he said.
Full knowledge of the customers' unique freight needs triggers a virtuous cycle, according to Burroughs. It gives UPS Freight insight into the customer's business requirements, which then helps it build workable shipping and logistics solutions. Without that level of data detail, the task would be much harder, he said.
3. Know your accessorials. The treatment of accessorial charges is a perpetual work in progress. In the past, carriers lacked the visibility into the various scenarios that triggered accessorials to price them correctly. And shippers have pushed back on many of the charges because they were unsure they were responsible for the exceptions that triggered them.
"Transport companies have much to improve upon in terms of the type of accessorials and the pricing of them," said Conaway of Con-way Freight.
But the give-and-take process is coming to a head, and that's a good thing.
High-tech advances, notably the advent of electronic on-board recorders (EOBRs) that monitor a truck's every move, give neither side room to hide. Gone (or fast going) are the days when drivers prepared paper logbooks—and sometimes fudged the information in them—and their employers would not be the wiser. EOBRs, whose mandatory use is the subject of legal action but which are now being used by many large truckers, does away with paper logs and makes it impossible for drivers to exceed their hours-of-service limits.
Using the technology, the trucker knows exactly where its drivers are, what they should be doing, and what keeps them from accomplishing the task within the number of hours in a day they can operate. The good news is that both sides now have increased visibility into the problems and their causes, and that's a key step toward achieving solutions, according to Kohl of Marten Transport.
Kohl contended that as technology becomes more pervasive in fleet operations, the standard shipper demand of lumping accessorial charges into the base rate rather than breaking them out as individual line items should be tossed over the side.
Unless the items and charges are listed separately, Kohl said, carriers will never be fairly compensated for the actual cost of the individual services, and the specific issues that slowed the trucks down and warranted the accessorial fees in the first place won't be identified and corrected.
In a business where time is money and driver delays cause real-time cash burn, "it's critical that drivers get paid for the 'down' time that they don't control," Kohl said.
However, shippers should not blindly accept all accessorials without first understanding what they mean and then negotiating any appropriate changes with the carriers, according to Charles W. Clowdis Jr., a long-time trucking executive and head of supply chain advisory services at consultancy IHS Global Insight. "Most carriers will be more than willing to discuss and negotiate," Clowdis said.
To pre-empt the aggravation of having to work things out across a bargaining table, Clowdis has advised that, when appropriate, shippers compensate truckers and drivers for going—sometimes literally—the extra mile upon request.
"If you need a driver to go into a residential area to make a delivery, give him a few extra bucks for doing it," he said.
4. Show a little love. For years, there has been mounting evidence showing that drivers jump companies and leave the industry not because of inadequate pay or benefits, but because of lifestyle issues and from shabby treatment they receive from shippers and even from their employers.
It is no secret that drivers have historically been taken for granted. But as demand continues to grow, rig counts shrink, and government programs like CSA 2010 remove unsafe drivers from the highways, qualified drivers are well-positioned to work wherever they want. Shippers must pay heed to the changing environment and end their cavalier treatment of drivers, executives said.
"If you call me and say 'I need my load picked up at 3: 00' and I get there at 3: 00, don't screw me around and load me at 4: 30 or 5: 00," said Clowdis of IHS. "The shipper needs to keep the driver and truck moving, and do so in a friendly manner."
With drivers constrained by federal hours-of-service rules, each minute they sit idle waiting for loading or unloading is one minute of lost income. It also creates operational headaches for carriers whose drivers are running shorter lengths of haul per day than ever before and have more daily stops to make as a result.
Kohl of Marten said as U.S. commerce and distribution becomes more regionalized, carriers like Marten find themselves operating over shorter distances and making multiple stops. Each stop involves loading and unloading, and ups the risk of delays that could derail an entire workday, Kohl said.
"Our typical loaded length of haul today is about 550 miles," he said. "It used to be 1,000 miles."
If a driver arrives early or is on time but the load isn't ready, a shipper should be prepared to give him or her a comfortable rest place with something to eat or drink, rather have the driver leave the facility and drive around looking for a truck stop that may or may not be convenient, carrier executives said.
Van Alstine of Schneider said the carrier was pleasantly surprised when a large customer—a big-name retailer that Van Alstine would not identify—consulted Schneider on the development of a dedicated rest area for drivers while designing a distribution center.
"They wanted to know what would be an appropriate space for drivers to get easy access to their docks, and to rest and wait, if need be. They wanted to make sure they designed a driver-friendly distribution center," he said. "We were thrilled."
The anecdote is an example, albeit a small one, of what could become a new and positive chapter in the long-contentious yet necessary relationship. The consensus among carrier executives is that shippers understand that working from a perceived position of strength is no longer sustainable, and they are far more receptive than in the past to the idea of treating their carriers as partners rather than adversaries.
"Programs like CSA are forcing shippers to be far more engaged in our business than before," said Van Alstine. "We definitely hear that they are more willing to get involved and better understand our business and our needs."
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.”