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.
U.S. intermodal traffic volumes set a record in 2017, and the consensus going into 2018 is for more gains. The global economy ended last year with its best-synchronized recovery since 2010. In the U.S., ocean imports were expected to rise 7 percent over 2016 levels, according to a December survey by the National Retail Federation (NRF) and consultancy Hackett Associates. Meanwhile, already-solid domestic intermodal demand will likely be goosed if qualified over-the-road drivers remain in short supply and if the trucking industry struggles with transitioning to the federal safety mandate requiring that virtually all trucks built after the year 2000 have electronic logging devices (ELDs) onboard.
The ELD mandate, which took effect Dec. 18, could result in a conversion of highway traffic to rail if businesses believe that over-the-road drivers may not be able to meet delivery targets; the ELD rule is expected to cut driver productivity by 3 to 10 percent as drivers accustomed to fudging paper logs in order to run more miles than allowed by law are now forced by technology to stay within federal hours-of-service (HOS) limits.
But the mandate could be a doubled-edged sword for the intermodal supply chain. That's because dray drivers who haul traffic to and from intermodal ramps are required to comply unless they operate less than 100 "air" miles—roughly equivalent to 115 road miles—per road shift. There is no typical dray distance, as the lengths of haul vary widely depending on the circumstance. There is no available data to determine the percentage of non-compliant dray drivers.
A worsening overall shortage of qualified drivers, exacerbated by the cost and operational pressures of "running electronically," is likely to lead to higher wages for dray drivers and increased costs for a network still heavily dependent on the dray. Any potential problems could be amplified depending on the number of independent draymen who drop out of the business because they were unwilling to adapt to a post-Dec. 18 world. In addition, dray drivers could migrate to the over-the-road side of the business, especially given the large-scale wage increases being offered by big trucking. All of this could result in significant consolidation within the dray segment, leading to higher rates.
"THE BIG WILL GET BIGGER"
Should ELDs force dray drivers off the road, "the big will get bigger, the small will be put out of business, and prices for dray as well as long haul will increase, especially in tight local markets," said Patrick J. Ottensmeyer, president and CEO of Kansas City, Mo.-based Kansas City Southern Railway Co. (KCS), one of the seven Class I rail carriers in North America.
C.H. Robinson Worldwide Inc., the Eden Prairie, Minn.-based broker and third-party logistics service provider (3PL) and one of the top five users of U.S. intermodal services, is bracing for what Phil Shook, the company's intermodal director, called a "significant shift in drayage rates" partially caused by a tightening driver market. In an interview in early January, Shook said some drayage firms are mulling a shift to a time-based pricing formula rather than one based on mileage in part because of the ELD mandate.
On Jan. 10, Overland Park, Kan.-based 3PL MIQ Logistics warned in an e-mail that drayage rates have escalated due to stronger demand, a shrinking driver pool, and the effect of delays and long wait times at ports and chassis yards, which make it harder for dray drivers to hit their delivery targets and stay within the HOS limits. Winter storm Grayson, which battered the Eastern Seaboard in early January and either shut down or curtailed operations at multiple ports, also took a toll on dray capacity, the company said.
Because dray is inherently a short-haul move, many drivers, by definition, can operate roundtrips and remain within the mandate's "100 air mile" geographic limit. However, many others routinely put more daily roundtrip miles than that on their rigs. James Hertwig, who retired at the end of 2017 as president and chief executive officer of Jacksonville-based Florida East Coast Railway (FEC), said there were more than a few times when goods scheduled to move via less-than-truckload (LTL) to FEC's rail head in Jacksonville had to instead be trucked there via dray because the LTL trailer lacked sufficient density to make the run at the time required to hit FEC's cutoff.
Larger dray fleets are, for the most part, already equipped with ELDs. However, much of the nation's dray hauling is handled by owner-operators, the segment of the driver community who've so far been the most challenged by ELD compliance requirements.
Then there is the overarching problem of driver undersupply, which affects draymen as it does long-haul truckload types. Shook of C.H. Robinson perhaps best summed up the industry's predicament by saying he was recently told by a large trucker that it had more manpower allocated to recruiting drivers than to soliciting freight.
MARKET UPHEAVAL
All of this comes as the railroads and the intermodal community confront a profound change in how product is ordered and distributed. Rising e-commerce demand and the accompanying shift in order fulfillment patterns will require inventory to be dispersed across a large number of DCs located closer to the customers. The railroads are handling their share of e-commerce—the Intermodal Association of North America (IANA) reported a 7.7-percent increase in 2017 in the use of 28-foot trailer "pups," the type of equipment utilized to haul the smaller, lighter-weight goods that are most commonly ordered online.
However, e-commerce's distribution characteristics run counter to the railroads' traditional model of clustering operations in select large-volume terminals, said Larry Gross, a long-time rail consultant. The solution, according to Gross, would be to create a network of secondary terminals near the freight. However, that creates challenges of its own because the vast length of intermodal trains would make it difficult for smaller terminals to serve them. How the supply chain configures the drayage network to respond to these secular changes in distribution will be a story to play out in 2018 and beyond.
The remedy for sustaining timely and reliable dray service in a post-Dec. 18 world lies, as it has with virtually every supply chain management challenge, in more timely and efficient operations. Shook said greater emphasis will be placed on such basic blocking-and-tackling processes as "drop-and-hook," where a full trailer's availability is synchronized with a truck's arrival so a driver can dump an empty trailer, hook up a full one, and be on his or her way.
But the ultimate responsibility lies with the railroads, according to Ottensmeyer of KCS. "Where ELDs could have a direct impact on dray carriers is when train service deteriorates in terms of on-time-performance and predictability," Ottensmeyer said in an e-mail. "A driver waiting will consume hours of service, so if a driver had planned to make two dray runs and the second incoming load is delayed on rail, he or she may run out of hours before completing both runs." The same scenario applies at cargo owners' facilities, where loading dock productivity at a warehouse can impact waiting times for drivers, he added.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.