Prior to starting LTL contract talks, home healthcare products maker Invacare did a detailed lane-by-lane analysis of its carriers' tariffs. The result: big savings.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
Shippers who rely on trucking service don't have it easy these days. Truck rates keep going up, and haulers seem to have the upper hand when it comes to pricing.
But that's not to say they're completely without options. In many cases, there are still a few things shippers can do to hold down costs. For instance, one is to figure out on which lanes a carrier wants or needs business and then leverage that information during contract negotiations.
It's a simple concept, but one that's tough to execute, largely because of the amount of work involved. Generally speaking, it requires the shipper to comb through multiple freight tariffs to find the lowest rates on individual lanes.
Matt Knittle, director of corporate logistics at Invacare Corp., however, found a shortcut. Rather than pore through the tariffs manually, he used software to conduct a freight rate analysis with an eye toward determining which shipping lanes offered some negotiating leverage. He then used that information in his contract talks with trucking companies. The result was over a million dollars in savings with no degradation in service.
"I used this tool to get negotiating power with the carriers," says Knittle.
RUNNING OUT OF OPTIONS
Based in Elyria, Ohio, Invacare makes wheelchairs, bariatric equipment, disability scooters, respiratory products, and other homecare items. Last year, it generated $1.8 billion in revenues from business in 82 countries. The company, which has manufacturing plants in Florida and Ohio, as well as in China and Mexico, operates a network of 10 distribution centers to supply its customer base of medical equipment providers.
What prompted Knittle to begin scrutinizing freight tariffs last year was intensifying rate pressure that threatened to wreak havoc on Invacare's shipping budget. Up to that point, the company had enjoyed reasonable success in managing its shipping costs. Over a five-year period, it had pared its ranks of less-than-truckload (LTL) carriers from 15 to three core carriers, all super regionals capable of making next-day deliveries. The carrier consolidation, coupled with good negotiating skills, helped Invacare keep freight costs down for several years.
By 2011, however, that tactic had pretty much run its course, Knittle says. "We had saved over $10 million in transportation over 5 years from pure negotiations, but that was the last water out of the well. It was pretty dry," he explains. "We were at a point on the rate negotiations side where we could not get more done without more intelligence on the market and systems to analyze the various rate bases that exist in the market."
The problem facing Knittle was that the tariffs he used for all of his existing carriers relied on one common rate base, which was itself an outdated pricing structure.
To be specific, Invacare was still using the Southern Motor Carriers Rate Conference (SMCRC) tariff system to determine rates, and then discounting as much as 50 to 60 percent from the benchmark price. But most truckers have their own rate tariffs that reflect their unique costs and freight densities on specific lanes.
To get the best pricing, Invacare had to match its own freight requirements against multiple carrier rate bases, Knittle says. Truckers vary their pricing lane by lane, he explains, charging higher rates on lanes with heavy demand and offering price breaks on lanes where they want business.
"If FedEx Freight, for example, has lanes they're heavy in, they won't give you a good price if they don't need the volume," Knittle says. "And if there's a lane where it needs the capacity, the tariff will state that."
"You can get better pricing by mixing and matching carriers within lanes and within ZIP codes," he adds.
But examining multiple freight tariffs to identify the lowest rates on individual shipping lanes was far too big a task for a human to take on. "It's impossible to do this manually because there are too many variables and too much volume," says Knittle. "You'd have to have six tariffs loaded onto your computer and then rate a shipment on each one."
FINDING THE BEST DEAL
That's where the software came in. In the fall of 2011, Knittle brought in RateLinx, a developer of freight analysis software, to assist him with the analytical process.
RateLinx offered a software application that could analyze carrier tariffs by lane. Knittle loaded six months' worth of data—about 100,000 shipments—into the RateLinx model. The software used the historical shipping data as the basis for determining average shipping volumes on lanes.
It then priced Invacare's freight movements on specific lanes against the individual tariffs published by the company's three core carriers as well as by three new carriers—another super regional and two small regionals—that also offered next-day service. Knittle says he added additional carriers to the freight analysis because "we felt the need for some improvement as some of our carriers had been with us for a long time."
The software model identified which of the six carriers would operate most cost effectively on each of Invacare's freight lanes. Armed with a lane-by-lane freight analysis, Knittle assembled a proposal for each of the six carriers to haul designated portions of Invacare's freight and began negotiations with them.
For the most part, the carriers went along with the proposals, Knittle says. "It helps their profitability because you're putting them [in places] they want to go to," he explains.
As for Invacare itself, Knittle reports that the company saw a big payoff—savings of 7.5 percent on an annual LTL transportation spend of approximately $25 million.
"This approach brought some needed savings at a tough time in a competitive freight market," he says.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
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.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.