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.
The third time wasn't the charm for ABF Freight System Inc. in its three-year legal battle to
overturn separate collective bargaining agreements reached in 2009 and 2010 between the Teamsters
Union and ABF's less-than-truckload (LTL) rival YRC Worldwide Inc.
The appellate court's decision marks the third time ABF has failed in its effort to reverse the separate agreements. Federal
District Court Judge Susan Webber Wright has twice before dismissed ABF's complaint.
In a statement after the appellate court ruling, Fort Smith, Ark.-based ABF said it was reviewing the decision
and assessing its options. It said it was "disappointed" with the ruling. By contrast, Overland Park, Kan.-based YRC
said it was pleased with the decision.
YRC had received three rounds of concessions from its unionized workers calling for significant wage and benefit cuts. The
separate agreements were seen at the time as vital to keeping financially ailing YRC in business. However, ABF argued that it
never received similar concessions and that the givebacks to YRC gave its rival a significant and unfair cost advantage. ABF
has the highest cost structure in the LTL business. The Teamsters represent workers at both companies.
ABF had sought to return YRC's cost structure to the levels that existed prior to the separate agreements. It also sued YRC
and the Teamsters for $750 million in damages.
CONTRACT NEGOTIATIONS CONTINUE
In June, ABF's approximately 7,500 unionized workers ratified a five-year collective bargaining agreement. The
tentative compact calls for an immediate 7-percent wage reduction, which would be recouped in increments over the life
of the contract. For the first time, ABF can subcontract out over-the-road driving, at least up to the equivalent of 6 percent of
its total miles. In return, all current union health, welfare, and pension benefits will be maintained. Workers would
get a 1-percent bonus if ABF's operating ratio—the ratio of expenses to revenues—fell between 95.1 and 96.
They would get a 2-percent bonus if the ratio fell between 93.1 and 95 and a 3-percent bonus if it dropped below 93.
ABF's national compact cannot be implemented until all regional supplements have been renegotiated and ratified by the
affected members. All but two of the original 27 supplemental agreements have been approved. However, in late August members
of the central region local cartage agreement—the largest ABF supplement with about 1,700 affected members—rejected
their compact for a second time. Unionized office employees in the western region did the same. Under the Teamster constitution,
after two rejections, the union's principal negotiators must return to the bargaining table to address the issues. If no new
agreement is reached or members reject a proposal for a third time, a strike vote would be taken in the affected areas.
ABF and the union have agreed to another 30-day extension of the current agreement to Sept. 30 in order to give both sides
time to hammer out an agreement. This marks the sixth one-month extension since the current contract expired March 31.
A team from the University of Tennessee, Knoxville, walked away with top honors at this year’s event. It was the school’s first time competing in the scholarship competition, which was held during IANA’s Intermodal Expo in September.
The winning squad included students Jaren Bussell, Elizabeth Shuler, Brock Sooley, and Kathryn Whittaker and was coached by Dr. Donald Maier, associate professor of practice–supply chain. “It is exciting to see what the students can achieve in five hours. Each team reads, analyzes, and prepares a presentation with no faculty input,” Maier said in a release.
In addition to UT, participating schools included the California State Maritime Academy, College of Charleston, Georgia Southern University, and SUNY Maritime as well as the universities of Arkansas, Maryland, North Florida, North Texas, and Wisconsin at Superior.
IANA’s scholarship awards support curriculums designed to attract students to careers in freight and intermodal transportation. Since the program’s inception in 2007, IANA has awarded over $5.3 million in scholarships.
Having survived the demand surge of the pandemic and its aftermath, the parcel express market is undergoing an evolution of unprecedented proportions as the nation’s largest express carriers struggle to address multiple challenges—from a growing cast of new competitors, to rationalizing their networks and reining in surging costs, to dealing with flattening e-commerce volumes and a stubborn weakness in U.S. manufacturing and industrial output that’s putting a damper on parcel growth.
Shippers have serious issues with the high cost of parcel service, exacerbated by a flurry of surcharges and changes implemented for this peak season, says Bart De Muynck, principal at strategic supply chain consulting firm Bart De Muynck LLC. “If you are doing high volumes in peak season, those increases mean tens of millions of dollars in extra parcel shipping costs,” he says.
In response, shippers are diversifying their carrier bases and continuing to adjust and adapt their supply chain operating strategies, with a hard focus on how and when parcel shipments are delivered and by whom.
“They’re looking at more regional providers for better rates and service,” De Muynck observes. “With new players coming into the market, especially in the last mile, that has created a lot more options for shippers.” That in itself is making parcel planning and management a much more difficult and complex endeavor, he adds. “And that means you need more technology to manage multiple providers effectively.”
TURBULENT TIMES
The parcel shipping market is undergoing an evolution that is fundamentally changing the structural foundation of the business, observes Satish Jindel, principal at ShipMatrix, a consulting firm that provides parcel data and analytics.
“We are in the most turbulent time people have seen in the last 40 years,” he says. “The competition [that the major parcel carriers] are facing is unlike anything they have faced before. So they’re struggling to figure out who the competitors are, how [those competitors] will affect them, and how they need to respond.”
Among the competitive challenges: the surging growth of Amazon’s own parcel and small-package delivery business, and competition from big retailers like Walmart, Costco, Home Depot, and Target, which have launched their own last-mile delivery services, fulfilling e-commerce orders directly from retail stores for delivery to local customers.
Then there are crowdsourced last-mile delivery services like DoorDash and Roadie, which contract with drivers in their own vehicles to make local same-day deliveries for a wide range of businesses. And not to be forgotten are the regional parcel carriers like OnTrac (formerly LaserShip), which operate off lower cost bases and are expanding their coverage, as well as hyperlocal delivery firms that focus exclusively on an individual metro area.
All these developments come in response to the demands of consumers who continue to fuel modest growth in retail spending—a consistent share of that, roughly 16%, represented by e-commerce sales—and the reality that short-distance home delivery of just about anything is here to stay. And that growth opportunity is enticing more players to jump into the BtoC last-mile market.
TRADING DOWN
Shippers and third-party logistics service providers (3PLs) are employing a laundry list of strategies and tactics as they try to rein in rising parcel shipping costs. At the same time, they are reworking the menu of e-commerce shipping options they offer to consumers, who are increasingly forgoing next-day delivery in favor of slower, deferred service if it will save them money—and help the environment.
Micheal McDonagh is president of parcel services at 3PL AFS Logistics. He, for one, wonders how long the big parcel carriers can keep raising prices (and surcharges) before it becomes untenable and begins eroding their customer base.
“The biggest thing for me with UPS and FedEx is how do they expect to keep customers, with the increases [and surcharges] they are [imposing]?” he says. “Their price increases are forcing shippers to look at other alternatives. Plus, they are generally less flexible about when they will take your parcels. They are more rigid with their cutoff times, and [their deadlines] are typically earlier than what some regional carriers will offer.”
McDonagh estimates that with the large parcel carriers, parcel transport costs have increased 33% in the past five years.
Such rate jumps are increasingly difficult for shippers to absorb, McDonagh says, especially when shippers typically set their budgets at the start of the year, only to get hit “in the last quarter [by] a raft of surcharges and zone changes they didn’t plan for.”
That’s driving two trends among shippers and the 3PLs like AFS who manage freight and parcel transportation for their customers.
“We are telling our customers to look at the U.S. Postal Service as an option,” McDonagh says. While the Postal Service may not be as quick, “[it is] cheaper,” he notes, adding that shippers are making that tradeoff to save money. He believes that the USPS is the nation’s largest parcel carrier, handling an estimated 6.6 billion packages annually. By his accounting, UPS handles 4.6 billion and FedEx 3.9 billion.
The other trend is shippers “trading down” in service selection. “Shippers are reacting to the high cost of premium services and moving freight into the lower-cost … deferred ground services,” he notes. In addition, many retailers have curtailed the practice of offering free shipping for every e-commerce order, instead setting minimum order levels to qualify for free shipping or only offering free shipping for deferred two- or three-day service so the package can go via ground. For parcel carriers, this trend means that shipments moving via premium next-day service—which provide more revenue and higher margins—are being replaced with lower-revenue shipments.
Shippers are also reimagining their shipping practices—instead of shipping small lots every day, they’re consolidating shipments and dropping them with carriers once or twice a week. That tactic helps the shipper negotiate lower rates with the carriers, who are not making as many stops to pick up parcels.
“If you can mode-shift to slower services like the Postal Service or economy ground, you will save money,” says McDonagh.
He also cites opportunities for shippers to reduce costs by examining how they package and box orders. Parcel shipments often arrive in a box that’s larger than necessary and contains excessive amounts of filler material. “How much are you paying to ship air, and what’s the cost of that unused space?” McDonagh asks. Among other things, the need to eliminate wasted space has led to the growth of automated packaging systems that will scan the product as it comes down the line and then custom build a box to that product’s dimensions.
OFFERING CHOICES
Chris Kina, senior director and analyst, logistics, customer fulfillment, and network design for the consulting and advisory firm Gartner, has spent 30 years as a logistics practitioner, working for Gillette, Procter & Gamble, and KB Toys before joining Gartner three years ago. In his conversations with logistics executives, Kina has detected a shift in strategies in response to today’s market. “We are seeing clients begin to look more and more at segmentation of their last-mile provider networks ... by region, by state, by metro area,” he says. “The question they are asking is, ‘Who can meet my service expectations at the lowest cost?’”
It’s a trend driven by increasingly powerful, sophisticated, and capable technology platforms. These systems are designed to handle everything from order management and inventory visibility, to shipment and delivery route optimization, to shipment enroute visibility on the delivery side, to customer feedback. And virtually all communications between the shipper, delivery driver, and customer take place via smartphone.
“These advanced technologies [and the real-time nature of their functionality] are the key to making it all work in this new environment,” he says.
Bart De Muynck agrees with Kina’s observation, sharing one example of a new technology that’s rising to the challenge of a more complex and fragmented parcel market. De Muynck points to Shipium, a company launched by Amazon alum Jason Murray. According to De Muynck, Murray is building an Amazon-like platform for parcel optimization and carrier management—and is targeting as customers businesses that ship dozens to thousands of parcels a day from many locations.
“It’s parcel optimization that provides for the most efficient allocation of freight from many locations across multiple carriers,” by examining the requirements of a shipment, then looking at the broader carrier network to find the best combination of service and price, he says.
The platform also allows the shipper to model its parcel volumes against its carrier network to develop an optimized price/service tactical plan for shipping. “It is reducing [parcel shipping costs] by as much as 20%,” De Muynck adds.
Gartner’s Kina also emphasizes how parcel shippers and managed transportation providers are deploying various tactical and strategic developments that add flexibility and options as shippers figure out the best delivery models for their business.
Those include the use of small electric vans or bicycles for inner-city deliveries; locker systems at convenient retail sites, which serve as consolidated dropoff locations and customer pickup points, versus a truck making a residential stop; and cloud-based route optimization models and other tools, all of which “maximize the ability to select, manage, and deploy multiple forms of sources for delivery carriers,” Kina notes.
Where is the market headed? In Kina’s view, “five years from now, the U.S. market will have more of a European flavor …. [It will be] much more fragmented around regional and local carriers, crowdsourcing [services], and technology solutions that help make deliveries of BtoB and BtoC shipments more efficient.”
Another rising trend: Consumers, concerned about cost and sustainability, are seeking more choices, opting for deferred deliveries and consolidating their e-commerce purchases into a single large delivery on a designated day of the week—which Amazon is already doing.
“Assuming everyone wants their shipment the next day is not a viable business strategy for any shipper,” Kina says. “Consumers will typically accept delivery in three days as long as you … are consistent with it. If they want expedited, they will [specify] that and often pay for it.”
PLAYING THE LONG GAME
Many sources interviewed for this story shared their intentions to move away from putting all their parcels in one or two big carrier buckets, instead seeking to diversify their carrier base to improve service, gain flexibility, and better control rising costs.
Yet that’s not a strategy for everyone.
“We play the long game,” says John Janson, vice president of global logistics at SanMar, the nation’s largest provider of branded promotional apparel. “We set a carefully crafted strategy and stick with it. We don’t put out a bid and change it from one year to the next. We develop and nurture strategic relationships with our core carriers, and we lean on those,” he says.
SanMar, which ships almost exclusively to businesses, deploys a supply chain featuring 13 distribution centers across the U.S., which, during this year’s peak season, will ship over 100,000 packages nightly. UPS is SanMar’s principal parcel carrier.
For Janson, one philosophy he’s never wavered from is being a shipper of choice. “I believe there is still currency around being a desired shipper, making our freight as attractive as possible to the carrier,” he emphasizes. “It’s easy when times are bad, but it pays dividends [when capacity is tight]. It’s an investment in our carrier partners and [in] ensuring we get the quality of service our customers demand.”
He agrees with Jindel and others that in the parcel industry, “there is more dynamic change happening right now than at any time in recent history.” And the BtoC last-mile home delivery market—as opposed to the BtoB arena, where SanMar generally plays—is seeing the most significant change, he adds, noting that “there are some really interesting developments on the horizon.”
He points to how Walmart has teamed up with The Home Depot on its “GoLocal” delivery-as-a-service business, giving Home Depot customers (and others) another option for same-day or next-day last-mile delivery. And as more retailers take Walmart up on its offer, that will help build more density in that network, reducing per-package costs and providing more revenue opportunity for the network’s delivery drivers.
Then there is Amazon, which Janson notes is also offering third parties access to its logistics services and parcel delivery network.
Essentially, Amazon’s pitch is “Let us deliver all your packages,” not just those generated as an Amazon reseller, he says. And while the pitch may sound enticing, Janson offers a word of caution. “Do you want Amazon to have access to all your final-mile delivery customers? And if you are using Amazon as a reseller and a logistics provider, how deep [do you really want that relationship to go]? I think it’s a risk.”
Family-owned business Cibao Meat Products, a producer of Hispanic-style sausages and deli meats, has long prided itself on staying true to the traditions and values the company was founded on in 1969—like a commitment to high-quality ingredients and a family workplace atmosphere. Less of a source of pride, however, was its continuing reliance on the same, mostly manual, processes and data management techniques used at its inception.
With the company now selling its meats to retail giants such as BJ’s, Sam’s Club, and Costco as well as 500 supermarkets and restaurants across the U.S., Cibao president Heinz Vieluf Jr. knew that it was time to take the company into the digital age. “As a third-generation leader of a multigenerational company, I put an emphasis on bringing our business into the digital future and utilizing technologies that will help propel success,” he said in a statement.
IN WITH THE NEW
In Cibao’s case, that would require modernizing its data-collection practices. Because the meat producer still relied on legacy processes, its company data and customer data were siloed, scattered throughout departments from sales to manufacturing to accounting. Teams were manually gathering information and creating reports on a weekly or biweekly basis. As a result, company leaders had no real-time visibility into business-critical operations. On top of that, creating those reports ate up hours of team members’ time each week.
For help bringing all of its organizational data into one central location, Cibao turned to the Slingshot work management platform from software company Infragistics. In October 2023, the company began working with Slingshot to compile data from multiple sources into a centralized hub that would be accessible to every employee.
Today, with the new platform in place, Cibao is benefiting from enhanced data transparency across the company and from accelerated data-reporting capabilities. Employees can now create reports within minutes, eliminating the biweekly reports in favor of daily assessments and unlocking insights needed to make critical decisions 10 times faster than before—saving 120 hours a month, the company says. For example, now that it has real-time access to its customer payment data, Cibao’s accounts receivable team has been able to detect any discrepancies in real time. This has allowed the team to check in with customers as soon as they notice a potential issue, which has increased the company’s cash flow by $40,000 a week on average, or up to 65%.
STRENGTHENING THE BOTTOM LINE
With teams saving hours each week on reporting, Cibao employees can now concentrate on higher-value tasks. For instance, they have more time to connect one-on-one with clients and develop relationships, instead of getting held up on the back end. They can also focus on new marketing efforts and promotions, not only boosting customer satisfaction but also helping to grow existing customer relationships and develop new ones.
“We created Slingshot to bring together data that has traditionally been spread across departments into one completely accessible space so that companies can better drive productivity, insights, and ultimately business results,” said Dean Guida, founder of Slingshot, in the statement. “By bringing its data into a central location, Cibao Meat Products has unlocked insights that have allowed [it] to move strategically and at a faster pace, strengthening the company’s bottom line.”
As autonomous systems take on a bigger role in logistics and industrial production applications, the race is on to make the equipment smarter, more efficient, and safer. To accelerate work in this area, the German lift truck and logistics technology vendor Kion Group is partnering with a local university to support expanded studies on artificial intelligence (AI) and autonomous systems.
According to Kion, Peitz’s work will focus on the development of autonomous systems that operate intelligently and safely for all parties involved, with a particular focus on autonomous mobile robots, forklift trucks, and AI-based systems that are used in logistics and production environments.
The objective of the endowed professorship is to advance the field of research at the highest international level, Kion said in a statement. In close collaboration with research networks and other partners both within and outside TU Dortmund University, such as the Fraunhofer Institute for Material Flow and Logistics IML and the Kion Group itself, the professorship will form a “hub” for digital and intelligent logistics, the company added.
American skin-care company ET Browne—best known for its Palmer’s Cocoa Butter—has trimmed costs, boosted revenue, and increased profits thanks to a recent IT upgrade from its longtime technology partner Syspro, a global enterprise resource planning (ERP) software provider that specializes in serving manufacturing and distribution businesses. ET Browne has run on Syspro software for 25 years and racked up some of its biggest year-over-year improvements following a 2023 upgrade to the latest version of Syspro ERP—an enhancement that allowed it to leverage the platform’s material requirements and planning (MRP) capabilities to build a just-in-time inventory system.
The net result? A smoother-running supply chain.
“We’ve successfully relied on [Syspro] for more than a quarter century while both growing and aligning our business to take advantage of the [platform’s] enhancements,” Pieter Goes, ET Browne’s vice president of IT & BI (business intelligence), said in a statement describing the project. “After bringing in [Syspro] to do native demand forecasts, we were able to better evaluate key markets and key customers, enabling our forecasting and capacity planning to be much more accurate. As a result, we can achieve a fill rate of greater than 95% and are able to process our purchase orders much sooner, resulting in better supply.”
NEW CAPABILITIES, BETTER OUTCOMES
Syspro’s MRP capabilities allow companies to balance supply and demand for materials and components so they can accelerate manufacturing production. With the system upgrade, ET Browne was able to take advantage of those capabilities to gain better visibility and control over inventory and the supply chain. As the companies explain, this allowed ET Browne to predict demand, understand how filling the projected sales pipeline would affect production schedules, and anticipate the peaks in demand it would need to buffer.
Leveraging those demand forecasting and supply chain management capabilities, ET Browne created a just-in-time inventory system that has dramatically reduced the amount of raw material and product it keeps on hand—a move that is translating into increased profits: Since implementing the upgrade, ET Browne has reduced inventory by 22% and increased profits 113% on 7% revenue growth.
ET Browne’s leaders say they intend to leverage Syspro to manage emerging challenges as well. Those include meeting growing consumer, distributor, and government demands to use recycled materials in packaging, while also making sure the company first uses up the materials it already has on hand. That transition will increase complexity within the company’s bill of materials, something Syspro’s management capabilities can help it navigate.
“[Syspro] ERP provides much more than just financial management,” Brian Rainboth, CEO of Syspro Americas, said in the statement. “Our platform empowers mid-market manufacturers to create accurate demand forecasts [and] project exactly how much raw material they’ll need to order and how much product they need to make to meet demand. We’re proud to celebrate 25 years with ET Browne and look forward to enabling future growth and profitability as the company deploys additional capabilities with [our] platform.”