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 trucking industry's 2015 diesel fuel bill will come in $42 billion less than 2014's tab due to the decline in oil prices which began last fall and has re-accelerated in recent weeks, according to estimates provided last week by the American Trucking Associations (ATA).
ATA estimated that the industry would spend about $105 billion on diesel fuel by the end of 2015, compared with about $147 billion in 2014. The trade group, which represents the largest for-hire motor carriers, based its forecast on information from the Department of Energy's Energy Information Administration (EIA) and the group's internal data on diesel consumption.
The figures include fuel consumed by for-hire and private fleets across the board, said Sean McNally, a spokesman for the group.
The amount of actual 2015 savings may end up even bigger if the current decline in oil and fuel prices continues. A barrel of West Texas Intermediate (WTI) crude for delivery in October was priced at $38.22 in trading on the New York Mercantile Exchange, down $2.23 a barrel. Prices for North Sea Brené crude, considered the benchmark for U.S. retail diesel and gasoline prices, fell nearly $3 a barrel, to $42.50 a barrel. These are closing levels not seen since the depths of the recession in early 2009.
According to EIA's weekly update on pump prices for gasoline and diesel, which was released at around 5 p.m. eastern time today, the average price of a gallon of on-highway diesel was quoted at $2.561 cents, a decline of $1.26 a gallon from the same period a year ago. The data includes today's dramatic pricing moves.
Sean Hill, an EIA economist, said in an e-mail last week that retail diesel prices could fall another 25 to 30 cents a gallon by year's end due to excessive inventory levels, concerns over end demand, and the potential impact of Iranian oil hitting world markets and adding to supply concerns.
EIA last Wednesday revised downward its forecasts for WTI crude to $49 a barrel in 2015 and $54 a barrel in 2016, declines of $6 and $8 a barrel, respectively, from what the agency forecast in July. The average price of a barrel of Brené crude will remain about $5 a barrel above WTI's levels for the rest of 2015 and into 2016, EIA said.
Motor carriers assess fuel surcharges on users to cover their fuel costs. The average fuel surcharge (FSC) for the spot market is currently just under 30 cents per mile, according to FTR, a consultancy. The average FSC was at 50 cents per mile when diesel was priced around $3.90, FTR said.
The jury is out on how or whether FSCs reflect the dramatic drop in truckers' fuel costs. A trucking-industry source said FSCs on contract rates are currently not falling as fast as the declines in diesel. Jonathan Starks, FTR's director of transportation analysis, said FSCs are usually adjusted within weeks, or a couple of months at most, of fuel-price movements. The violent sell-off that occurred in the last four months of 2014—a period when oil prices were cut nearly in half—is fully reflected in current surcharge levels, Starks said.
However, Charles W. Clowdis Jr., managing director, global transportation, for IHS Economics and Country Risk, said surcharges don't always fall in lockstep with fuel price declines. "Unfortunately, there are always carriers who are slower to lower FSCs when diesel prices are dropping than they are quick to raise FSCs. This is not to say that all or top-tier carriers would do this, but we have seen examples over the years where the higher FSC's were being applied well after there was a dramatic drop in fuel prices like we are experiencing now."
Clowdis advised truck users to compare their FSC charges with the language in their contracts to make sure that any adjustments accurately reflect the changes in the marketplace.
The decline on oil prices on Monday coincided with another massive selloff in global equity markets, taking well-known indices like the Standard & Poor's 500 index and the Dow Jones Industrial Average about 10 percent below their all-time highs. The 20-stock Dow Jones Transportation Average (DJT) fell $276.98, a 3.52 percent decline to close at $7,595, its lowest level of 2015. In mid-March, the average was trading at around $9,100 before beginning a multi-month decline that began raising concerns about the strength of the U.S. economy.
Transportation has traditionally been viewed as a leading indicator of broader economic conditions because the pace of shipping orders reflect future business confidence, or lack thereof. However, a recent school of thought puts less emphasis on transportation as a leading indicator because services, not production, compose an ever-larger portion of the U.S. economy.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
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.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
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!