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.
Since the recession hit, truckload carriers have tried to push their shippers into one-year contracts rather than locking them in for two, three, or more years at a time.
For the carriers, the reasoning was simple. With their costs rapidly escalating, they wanted the flexibility to change rates and contract terms on short notice and not be saddled with static multiyear pricing that lagged behind their dynamic expense structures.
But short-term contracts might not just benefit the carriers. In what may be the most extensive study ever conducted into contract bidding behavior in the truckload sector, researchers at Iowa State University found that shippers who rebid their freight on an annual basis could save significant money—in the millions of dollars a year in some cases.
The three-year study, commissioned by third-party logistics services and brokerage giant C.H. Robinson Worldwide Inc., found that shippers who rebid their business regularly achieved rate reductions of $25.17 per load compared with shippers who rarely or never utilized this method.
What's more, because the researchers found that the savings generated at the initial stage of the rebid diminished within a year, a strategy of annual rebids allowed those savings to be freshened every year.
All told, shippers were able to save, on average, $40.44 per load through what the study called "annual bid procurement events." Given that the average contract rate for an individual load in the study was $907, yearly rebids helped shippers cut their contract pricing by about 4.4 percent, which the researchers called a "sizable gain."
A large shipper tendering 100,000 loads a year could save about $2.5 million through annual rebids, according to estimates by the survey's authors. Although it costs more to rebid contracts annually instead of on a multiyear basis, the rate savings—even for smaller shippers—usually outweigh the expenses, according to the authors.
The study analyzed data from 700,000 truckload shipments that were accepted by carriers from 2008 through 2010. The shipments were tendered by TMC, a division of C.H. Robinson, using TMC's transportation management system, or TMS. The rates applied to shipments moving more than 250 miles and hauled on dry vans, the most common form of truckload livery in the United States.
THE TRUTH ABOUT CONTRACTS
The study's findings seem to counter the conventional wisdom that shippers need to obtain multiyear contracts to achieve rate stability and capacity assurance in a climate of shrinking rig and trailer counts. Tractor capacity has dropped by as much as 18 percent from 2006, the year the trucking industry entered into what became a multiyear recession.
At the heart of the study's findings is a fact that most who ship and haul for a living already know: that no truckload contract, regardless of duration, can force a shipper to honor a volume commitment, or a carrier to honor a capacity commitment. Because trucking is considered "derived demand"—meaning supply doesn't react unless demands are put on it—a carrier can easily change capacity, and the rate it charges, if it doesn't secure enough high-yield freight on a lane and finds better opportunities elsewhere. In many cases, it will stop accepting freight on a lane altogether.
Faced with little or no capacity when it's needed, a shipper has no choice but to scour its rate guide—which lists the carriers that provide service on a lane—to seek out alternate sources of supply. However, these backup carriers will often charge more for their services than the original supplier had supposedly promised. This scenario—known in the trade as "rate guide bleed"—is the main reason a shipper will see its rates increase beyond what it modeled for during the initial procurement event, the study concluded.
According to the study, the average truckload rate went "stale" after only 328 days, meaning that after that point, the original rate was no longer valid at the capacity levels the shipper had originally anticipated. "We were surprised [rates] became stale that quickly," said Bobby Martens, assistant professor of supply chain management at Iowa State's College of Business and a former account manager at the logistics arm of Schneider National Inc., one of the nation's leading truckload carriers.
The study's authors emphasized that neither side enters into a procurement event with the idea that the deal will dissolve before its time. "Both parties have the best intent, but both parties have levers that pull on their business," said Steve Raetz, director of supply chain integration at Eden Prairie, Minn.-based Robinson. "Demand may change, and capacity needs may change. As a result, equipment gets positioned in unplanned ways."
Annual rebidding can avoid much of this fallout by allowing shippers to stay on top of carrier realignment strategies and be able to pivot quickly if rate and capacity patterns are altered, the authors contend. Annual procurement builds carrier goodwill by fostering some level of predictability of load flow, they add. Carriers appreciate consistency of traffic and the beneficial impact it has on their resource utilization. In return, they will be more willing to allocate appropriate capacity at an agreed-upon price, according to the authors. It will also enhance service levels for that shipper because carriers will be better motivated to outperform, the authors said.
"What a procurement exercise does, above all else, is allow for price discovery," said Raetz. "The more visibility a shipper has into its business and the more information that's available to the carrier, the more rewarding it will be to the shipper."
AVOIDING "STALE" BIDS
One shipper, Houston-based retailing chain Stage Stores Inc., has gone even further in its procurement practices. "Our rating is dynamic based on competitive bidding, rather than an annual volume bid. This removes the dilemma of 'stale' bids," said Gough Grubbs, Stage's senior vice president, distribution/logistics. "As more competitive bids come in for certain lanes, incumbent carriers are given the opportunity to revise their rates in our system if they choose to. If not, they drop down in the pecking order for future loads."
The study's authors stress that they don't advocate a strategy that would trigger a massive annual turnover of a shippers' carrier universe. They note that carriers want shipper relationships that foster multiyear stability. At the same time, however, shippers need to understand that freight transportation—and the nation's truckload networks that move most of that freight—is a fast-changing business and what might be in place this September may not be there the following fall.
Those most surprised by this process are procurement professionals who oversee the buying of trucking services, said Kevin McCarthy, director of consulting services for Robinson. "Those with a procurement background have a hard time understanding that you can't leverage truckload transportation," he said. "It's not like buying boxes. There is no bidder's remorse. The shippers won't tender the freight, or the carriers just don't pick it up. For procurement folks, that's a novel concept."
By contrast, McCarthy said, transportation professionals that live this world simply shrug their shoulders. "For people who've been around the block and have access to a TMS, they are not surprised at all," 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 U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
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.