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.
A consumer in Jacksonville, Fla., orders several products from a retailer's website. As soon as the order is received, the retailer's omnichannel platform scans inventory records for a store in Hilton Head Island, S.C., 170 miles to the north. The retailer sees the products are available at the Hilton Head store and are classified there as "excess stock."
The retailer's transportation management system (TMS), which is seamlessly integrated with its omnichannel network, compares parcel rates from the Hilton Head store and from the retailer's DC in Topeka, Kan., and finds it would be 25 percent cheaper to ship from the Hilton Head store. The order is forwarded to Hilton Head, where the merchandise is picked from inventory in the backroom, packed, labeled, and scheduled for pickup later that day.
The customer gets the products as scheduled (and gets free shipping to boot), the retailer cuts its transport spend, inventory is optimized that would otherwise be sitting idle in Hilton Head, and the laggard store gets a sales boost of sorts.
The hypothetical scenario is what omnichannel fulfillment could look like for traditional retailers. But it can't be consistently executed without the end-to-end visibility needed to fulfill from multiple locations in concert with dozens of suppliers and carrier partners. It's a code the marketplace has not been able to crack in a sustainable manner to date.
To complicate matters, the technology that helps shippers perform load planning based on mode and carrier is not linked to a retailer's inventory, according to a survey released in late May. The annual survey, conducted by the publication American Shipper, benchmarked transportation procurement attitudes and activities of 103 large companies, nearly 60 percent of them retailers and the remainder manufacturers. About 64 percent of the retailers said transportation's role was critical to their company's omnichannel strategy. However, only 41 percent said their transport procurement was "very closely" tied to their inventory strategy, the survey found.
Eric Johnson, the study's author, said the gap underscores a fundamental problem facing traditional retailers. "If a company doesn't have a handle on where it wants inventory or isn't able to throttle the pace of inventory to meet demand, it can't effectively serve multiple channels," Johnson wrote in an analysis of the results. "And if transportation procurement isn't closely tied to inventory strategy, it's hard to imagine how a company can ensure its inventory levels and placement are where they would want them to be."
A DELICATE BALANCE
Coordinating transport procurement activities, inventory placement, and unpredictable omnichannel fulfillment is a tricky proposition. As fulfilling "eaches" becomes more commonplace, parcel shipping has become the e-commerce mode of choice. But parcel is expensive compared with less-than-truckload (LTL) service, making it more important than ever to consolidate shipments into the more cost-efficient LTL loads where possible but hard to do without aligning procurement and inventory control processes.
With a procurement module embedded in a single-platform TMS that simultaneously manages multiple parcel carriers as well as other modes, businesses gain the visibility to see their entire inventory in real time. This enables them to commingle individual packages into LTL or truckload consignments if the opportunity arises. They would realize sizable transportation savings through such practices as "zone skipping," where parcels are aggregated and shipped to a nearby distribution point for final delivery, instead of shipping single items from origin to destination, according to several experts. Perhaps unsurprisingly given the increased demand, LTL carriers are rumored to be looking at expanding into parcel services.
The problem, the experts said, is that integrating parcel services into transportation management systems traditionally geared toward freight has been the IT equivalent of fitting a square peg into a round hole. "The marriage of parcel with traditional TMS systems has usually been an afterthought," said Daniel Vertachnik, chief sales officer of Kewill, a Chelmsford, Mass.-based TMS provider whose strengths in the parcel arena were augmented in early May when it acquired Holland, Mich.-based LeanLogistics, a TMS provider on the freight side, for $115 million. Vertachnik declined to comment on the transaction.
Vikram Balasubramanian, senior vice president, strategic product development for Cary, N.C.-based TMS provider MercuryGate International Inc., said parcel-centric systems typically lack the capability to consolidate parcels into larger shipments. Similarly, traditional TMS systems that effectively manage LTL, truckload, and intermodal shipments have not been designed to provide parcel consolidations, Balasubramanian said.
"Identifying and executing savings across a nationwide or global network is difficult, if not impossible, by using one or both types of these TMS platforms," he said.
Jim Hendrickson, marketing and logistics professor at the Ohio State University's Fisher College of Business, said it's important that a transport procurement system be able to provide buyers with a multitude of shipping options to support end-to-end supply chains domestically and internationally. "But there isn't an optimization software model that cuts across freight and parcel, and does it efficiently," he said.
BETTER NEWS
On the positive side, as logistics technology relentlessly improves, the cost of buying or leasing a procurement module that can be integrated with a TMS, or an entire TMS for that matter, has dropped significantly. Vertachnik recalled that in 2005, the annualized cost of a transport procurement module alone could be in the seven-figure range and could only be justified by big shippers with an equally big transport spend. Today, a smaller shipper can manage procurement in-house with cloud-based software for about $100,000 a year, he said.
Vertachnik said today's tools are more intuitive, user-friendly, and aesthetically pleasing than ever before. However, because of the changes in the way procurement will be used to support omnichannel fulfillment, there will be much more emphasis, and time spent, on that function than in the past, he added.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
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.