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.
It was launched five years ago with little fanfare. It has mostly driven under the radar since then, despite its association with perhaps the world's most famous brand. Now, it has hit the nation's highways full-bore in an effort to become its parent's next billion-dollar-a-year business.
In 2010, senior executives at Charlotte, N.C.-based Coca-Cola Bottling Co. Consolidated, the largest independent U.S. bottler of Coca-Cola products, recognized that demand for truck capacity to carry Atlanta-based Coke's products had leveled off within its geographies, a trend that mirrored a broader trend of slowing demand for many of the beverage giant's products. The executives also knew the bottler's trucks generally returned empty after the drivers made their deliveries, a common scenario for private fleets whose mission is to return to the base location to load up the company's freight for another run.
In an effort to boost the fleet's capacity utilization and develop a whole new revenue stream, the executives decided to do what few had done with their own equipment: They formed a wholly owned subsidiary to offer an over-the-road dry-van truckload service to all qualified comers. They dubbed the unit "Red Classic."
To get the operation off the ground, Red Classic's trucks—the unit operates 500 power units pulling 53-foot trailers—transported mostly backhaul shipments from Coke's raw materials vendors, as well as materials to be consumed by the bottler. But as the unit got its sea legs, the emphasis began to change. Today, Red Classic has 200 non-Coke customers and is angling for far more. Red Classic's fleet now handles more headhaul traffic than it does backhaul shipments. About 60 percent of its overall revenue, the amount of which the unit would not disclose, comes from freight tendered by property brokers that arrange transport for shippers.
Not surprisingly, Coke Consolidated's business still takes priority on Red Classic's headhauls, with the parent accounting for 60 to 65 percent of the carrier's traffic. However, David A. Heller, senior director of sales, marketing, and strategies for Red Classic, said the carrier's overall focus is to untether itself from the parent's—and by extension, Coke's—long rope. "Our objective is to grow the non-Coke business," Heller said in a late-September interview at the Council of Supply Chain Management Professionals' (CSCMP) annual conference, part of the unit's effort to expand its visibility within the shipping community. Red Classic's customers "will not get kicked to the curb because of Coke," Heller added.
Heller said in a subsequent e-mail that Red Classic is looking to penetrate the "dedicated contract carriage" category, where big shippers sign multiyear agreements that guarantee a specific amount of capacity in return for their carrier partners' being paid for a certain number of roundtrip miles driven. Such agreements have become more popular as a tightening market for qualified truck drivers puts capacity in certain key lanes at a premium. However, they generally make economic sense only for shippers with substantial two-way traffic flows or whose one-way traffic is so meaningfully large that they are willing to absorb the roundtrip costs even if there isn't much coming back.
As of the end of September, Red Classic had 370 company drivers and 80 owner-operators, with an average length-of-haul of 130 miles. Red Classic will restrict its haulage to what Heller called "food grade" commodities, saying Red Classic does not want to risk commingling Coke products with non-consumable items. For Coke products, Red Classic's fleet will operate from plants to the store level. Coke's familiar vehicles with the doors that are manually raised from the side will continue to be the exclusive hauler of product from its distribution centers to the stores.
END OF EMPTY MILES
Heller forecast that Red Classic would not be the last private fleet to attempt to wring revenue out of tractors that in the past ran backhauls with empty or near-empty trailers. As capacity is expected to shrink in the years ahead due to a shortage of drivers and an increase in regulatory requirements that could take many smaller operators off the road, deep-pocketed asset-based carriers like Red Classic will be well positioned to benefit, he said. Armed with sophisticated transportation management system (TMS) technology, for-hire, dedicated, and private fleets, in theory, could optimize their equipment by better positioning headhaul and backhaul movements to capture available loads.
There is little doubt that empty miles are inefficient, fuel-wasting, and non-revenue-producing albatrosses. About 12.5 percent of all truckload miles driven in 2012 had no freight, according to estimates from consultancy DAT Solutions. Yet for big companies, the logistics of repositioning private fleets just to fill empty trailer space may make it more trouble than it's worth. Big corporations that use private fleets are generally more concerned with getting their trucks and drivers back to their distribution centers as quickly as possible to reload their trailers for another move, according to Charles W. Clowdis Jr., managing director, transportation, for consultancy IHS Economics and Market Risk. Unless backhaul freight is available near headhaul dropoff points, it is counterproductive for fleets to waste their time looking to fill backhaul miles, Clowdis said.
Richard Armstrong, founder and chairman of consultancy Armstrong & Associates Inc., said at a recent conference when the subject of empty backhaul miles came up that fleets are "often better off not trucking goods and simply letting (the equipment) run empty."
Undeterred by the risks, Red Classic is moving forward on the back of its parent's geographic expansion. On Oct. 30, Coke Consolidated, which at this writing had operations in 13 states, said it would expand its distribution territory into Norfolk, Fredericksburg, and Staunton, Va., and Elizabeth City, N.C., under an agreement with Coca-Cola Refreshments USA Inc., a Coke affiliate. Coke Consolidated also signed a definitive agreement to acquire Coca-Cola Refreshments' plants in Sandston, Va., and Baltimore and Silver Spring, Md., for undisclosed sums. In addition, Coke and several of its bottlers, including Coke Consolidated, have formed a "National Product Supply Group" to oversee nationwide supply activities such as infrastructure planning and product sourcing for participating bottlers, Coke Consolidated said in a statement.
In September, Coke Consolidated signed a nonbinding letter of intent with Coke to acquire manufacturing plants in Indianapolis and Portland, Ind., and in Cincinnati. It also expects during 2016 to acquire additional distribution rights from Coca-Cola Refreshments in Delaware, Maryland, Pennsylvania, West Virginia, and the District of Columbia.
The deepening of Coke Consolidated's production and distribution network will open up new markets and opportunities for Red Classic to ply its trade, particularly west of the Mississippi, according to Heller.
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”