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.
Last year proved that intermodal shippers could be a tolerant bunch. Despite a fiasco-filled 2014 on the nation's rail network, noncaptive intermodal users, instead of taking their freight elsewhere, threw more business at the railroads than ever before.
This year will be a test of the railroads' resilience and whether they can vindicate shippers' faith in them. It will also be a test of shippers' fortitude, especially if bad winter weather puts rail service behind the curve again.
Intermodal traffic stood to increase in 2014 by 3 to 5 percent over 2013 levels, according to Intermodal Association of North America (IANA) data in mid-December, when this story was written. Through the end of November, 14.9 million trailers and containers moved in domestic and international service, according to IANA. Barring a December collapse, 2014 volumes will break the 2013 record of 15.5 million units, said Joni Casey, IANA's president and CEO. Through mid-December, intermodal traffic grew at a pace expected to double that of 2014 U.S. gross domestic product, according to Lee A. Clair, partner in the consultancy Zubrod/Clair & Co.
The increases, if they hold through 2014's end, will have come amidst the most chaotic rail operating environment in 10 years. Inclement weather that began in late 2013 intensified during the first quarter, wreaking havoc across the country's northern tier and at the industry's main interchange point in Chicago, where the network froze up as rail and road drayage operations were paralyzed. Not surprisingly, rail velocity and dwell time metrics sagged terribly during the quarter and didn't begin recovering until the end of the year. Carriers were and still are unable to say when complete "fluidity" would be restored to their networks.
Railroads were plagued by shortages of locomotives, crews, and infrastructure. Another season of a bountiful harvest triggered continued surges in grain traffic. A sharp spike in such nontraditional commodities as fracking sand and crude oil forced, notably, BNSF Railway—whose network serves the shale oil fields of the Dakotas—to put energy shipments ahead of other commodities and traffic, including intermodal.
Through the first week of December, BNSF's 2014 intermodal volumes were flat year over year, according to Clair. By contrast, Union Pacific Corp., BNSF's rival whose system wasn't as exposed to the rotten weather and the shale and agricultural booms, posted an 8.3-percent intermodal traffic gain over the same period, he said.
Part of intermodal's gain came from truck shippers who switched because many truck routes were paralyzed during the first quarter (even though the additional demand only worsened the rail capacity problems). But as Anthony B. Hatch, a veteran analyst and consultant, noted, intermodal shippers stuck with the service because, as products of the post-deregulation world, they better understand and accept the turbulence inherent in a market-driven system. Intermodal users also cut their providers slack because they had lived through an eight-year period leading up to the end of 2013 when rail reliability and customer service had strengthened considerably, Hatch said.
Shippers believe the railroads are serious about getting their act together, Hatch said. If money is the benchmark for commitment, then shippers will have little to fret about. Railroads in 2015 are expected to make unprecedented investments in capital improvements. BNSF, which took the hardest hits of any rail last year, plans to spend a record $6 billion in 2015 to add power, track, and labor, all of which will benefit intermodal users. Hatch, who expects the overall service picture to brighten as early as the first half of the year, said shippers would give railroads the benefit of the doubt at least until then.
Clair said that despite the problems, intermodal continues to bring value where big shippers want it, namely in longer-haul transport from their factories to warehouses and distribution centers. These moves provide a wider window for hitting delivery commitments and give a customer's supply chain a bit more breathing room, Clair said. Product that must be expedited direct-to-customer could be funneled to faster truckload services, he added. Intermodal service is in better shape than the rails' traditional carload business, which Clair said remains a major problem with no clear resolution.
A SHORT LEASH
It would be a leap of faith to interpret shipper tolerance as infinite patience, experts said. Even Hatch said that if the situation doesn't appreciably improve by the start of the third quarter, intermodal users will "be as upset as 'ag' shippers are today."
The bad winter weather only amplified problems that have been present for years and which have not abated. The Chicago interchange that intersects six of seven North American Class I railroads remains a mess of delays, disruptions, and backlogs. As was often stated during the year to illustrate the bottlenecks at Chicago, it can take a train more time to get from one end of the city to the other than it takes to run from Los Angeles to Chicago.
Megavessels entering the trans-Pacific trades threaten to overwhelm West Coast port infrastructures, while the creation of vessel-sharing agreements like the 2M alliance between Maersk Line and Mediterranean Shipping Co., which was set to begin in January, could alter freight flows because goods arriving at ports on one vessel will often head for different terminals. This has led to significant congestion and has left the "on-dock rail" model, where railcars must be filled before a train leaves the port area, increasingly prone to delays. The pitched contract battle between coastwide waterfront labor and management, which was still raging at this writing and which has slowed the loading and offloading of vessels since the fall, was a stark reminder of the ongoing risks in an interconnected system.
The cost and availability of drayage services that truck containers between ports, intermodal ramps, and shipping docks remains a significant problem. Port congestion and rail reliability played havoc with dray schedules, forcing drivers to wait longer than normal for loads and cutting into their productivity. Dray has not been immune to the impact of a shortage of commercial drivers. Drayage costs, which for a long-distance round-trip could run over $1,000, can neutralize the benefits of the relatively inexpensive train portion of the overall movement. Shortening dray miles would require the construction of smaller terminals closer to the customer; BNSF said it has terminals within 200 miles of 98 percent of the U.S. importer population.
The silver lining, according to Clair, is that sophisticated and deep-pocketed truckers are entering the space with experienced drivers and cleaner, more fuel-efficient rigs. Their presence should raise the quality and consistency of drayage services, albeit at higher prices than users are accustomed to paying, he said.
Meanwhile, intermodal demand will continue to rise, creating opportunities for the carriers as well as potential headaches in managing growth through the ongoing turbulence. On that score, the industry has been a victim of its own success. Railroads have effectively marketed intermodal as a lower-cost, fuel-miserly, and environmentally friendly alternative to over-the-road truck. In the domestic market, railroads are aggressively competing with trucks on short-haul movements, hoping to convert millions of road shipments to intermodal. Internationally, U.S. imports will keep on coming, maintaining pressure on the intermodal infrastructure to accommodate the flow.
WANTED: A LITTLE CLARITY
Perhaps the biggest challenge for users will be to gain clarity from rail operations people as to when the trains will consistently run on time. According to an intermodal user who asked not to be identified, shippers have been told to re-evaluate their 2015 growth plans because the system in its current state can't handle any growth. The user said there is no accountability at the railroads for the erratic performance, adding that operations people are focused on process, not results.
At this time, all shippers seem to be certain of is that their 2015 rates will increase over 2014's by mid- to high-single-digit levels, the executive said in mid-December. "They're terrified" about the situation, the executive added.
The railroads said the unknowable of first-quarter weather will play a huge role in setting the timetable for back-to-normal service. For example, CSX Corp., the Jacksonville, Fla.-based Eastern railroad, expects to see improvements sometime in the second quarter, according to Melanie Cost, a CSX spokeswoman. The timing will largely depend on the weather, she added.
Ted Prince, a long-time intermodal consultant and chief operating officer of Tiger Cool Express LLC, an Overland Park, Kan.-based company that uses refrigerated intermodal services to move produce eastbound off the West Coast, argued that the problems facing intermodal are more secular. The carriers focus too much on optimizing their individual networks, he said, and lose sight of the fact that intermodal is one national and global system where a yank on one strand sets the whole ball to unraveling. Clair of Zubrod/Clair countered that each railroad is accountable to its owners and its customers, and must develop and execute its individual strategy accordingly.
The railroads are doing what they can. CSX has developed an intermodal hub in the northwest Ohio town of North Baltimore. Western-originating freight headed to destinations east of Ohio is interchanged to CSX at Chicago, then brought to the hub and placed on CSX trains that move the goods to their destinations. The network is being expanded this year to handle 1 million "lifts," according to Cost; one lift is equal to one container being placed on or taken off a railcar. In its first year in 2011, the hub handled 600,000 annual lifts. CSX has added 250 intermodal lanes since the hub opened, she said.
The hub has been hailed by some as the future of intermodal. Instead of Chicago-bound freight's being drayed across town to one of several of CSX's Chicago ramps, the volume flows through in a pure rail-to-rail interchange from Chicago to the Ohio hub. The operation is aimed at avoiding the time-consuming dray at Chicago, thus expediting the discharge of freight from the region.
The hub-and-spoke-like model is "anathema" to traditional linear rail structures, Prince said. However, it offers an innovative way to increase geographic scope and freight density, while easing the pressure on Chicago, he added. Larry Gross, a principal at consultancy FTR Associates specializing in intermodal, called it a "bold experiment" in developing sorting facilities to connect the growing number of Eastern rail facilities. The key to the project's long-term success, Gross said, is to ensure that the benefits of strengthening the network and boosting the density and train size on each of the spokes outweigh the cost and service impacts of sorting containers mid-route.
BNSF, meanwhile, has virtually completed a 10-year, $3 billion initiative to "double-track" its transcontinental route connecting Southern California to the Midwest, according to Katie Farmer, the railroad's group vice president for consumer products. The railroad has launched projects to expand line capacity in the corridor; those efforts will be highly visible throughout 2015, Farmer said in a mid-December e-mail.
A rail-to-rail interchange with CSX that recently opened at Bedford Park, Ill., a small industrial city just southwest of Chicago, has streamlined the handover process between the two rails, easing congestion and boosting on-time metrics along BNSF's transcontinental main line, Farmer said.
Yet in a sign that BNSF has a ways to go, Farmer said the railroad remains "challenged" east and west of Fargo, N.D., due to line capacity projects that require trains to slow down through the respective construction areas.
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.