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's been a rocky last six months for U.S. motor freight shippers, and if the forecasts from three top trucking executives at yesterday's NASSTRAC annual Shipper's Conference and Transportation Expo are any indication, it's likely to get rockier.
None of the three sugarcoated the conditions ahead. None seemed optimistic the environment of tight capacity and higher costs being felt almost across the board would abate when the yearly calendar turns. In fact, even if the economy slides in 2019 and freight demand goes with it—a scenario none of the panelists would predict—carriers will still be grappling with the secular challenge of recruiting and retaining qualified drivers, according to Thomas Connery, president of New England Motor Freight Inc. (NEMF), an Elizabeth, N.J.-based carrier and logistics provider whose core business is in less-than-truckload (LTL) shipments.
"We are not going to stop recruiting and hiring, and wages will continue to rise unless something transformative happens," Connery said at the event in Orlando. He was at a loss to state what that bolt-from-the-blue event could be.
Connery added that price pressures are coming from unconventional sources. For example, Chicago-based trailer manufacturer Great Dane has applied a 5-percent increase on NEMF's trailer purchases to offset higher raw-materials costs, Connery said. This will increase the carrier's per-trailer costs by about $1,600, he added.
Being in a business of derived demand, truckers are inherently reactive to slowing economic conditions rather than being ahead of the curve. "We're not doing much to prepare for a slowdown," said Greg G. Gantt, president and soon-to-be CEO of LTL carrier Old Dominion Freight Line Inc. (Gantt takes over as CEO on May 16 to succeed David S. Congdon.) Thomasville, N.C.-based Old Dominion will re-evaluate its cost structure to keep it in line with any fall-off in demand, Gantt said. But cutting freight rates to keep or gain market share—which Old Dominion refused to do during the 2007-09 downturn—is not in the game plan this time either, Gantt said. "You can't go against your pricing principles," he said.
Within a year after being hired, a truckload driver can expect a $10,000 bump in pay to at least $60,000 a year, according to Craig Callahan, executive vice president and chief commercial officer of Werner Enterprises Inc., an Omaha-based truckload and logistics provider. Those pay rates are just the price of admission, Callahan said. Driver pay is likely to escalate in the months and years ahead, with experienced drivers pulling down $80,000 a year or more, and salaries for qualified team drivers, who are in very short supply, topping $100,000 a year, Callahan said. Werner is hiring about 10,000 drivers a year just to keep pace with annual turnover and shipper demand, he added, but warned that even that pace of hiring will not, in and of itself, remedy all of its customer service challenges.
The biggest pain points for driver recruitment, according to the panelists and other attendees at the conference, are along the East and West coasts. In the East, the problem is compounded by inclement winter weather for three to four months, which makes it difficult to recruit drivers to run over terrible conditions in the middle of the night. Connery said NEMF has been bidding out work in the region to local pickup and delivery drivers in order to meet customer commitments while freeing up other drivers for longer-haul routes.
The federal government's mandate that virtually all trucks built after the year 2000 be equipped with electronic logging devices (ELDs) has cut fleet productivity by between 3 to 10 percent since the mandate took effect Dec. 18, according to unscientific estimates being bandied about at the conference. What's more, between 4 and 7 percent of capacity is still not ELD-compliant, even though enforcement of the mandate—and the out-of-service orders that accompany it—kicked in more than a month ago. The mandate is designed to ensure that drivers can no longer alter their paper logbooks to operate beyond the federal requirements of their hours of service, which limit drivers to 11 consecutive hours behind the wheel in a 14-hour workday, with a 30-minute rest break within the first 8 driving hours.
As expected, the biggest problem has been in 650- to 700-mile hauls, which are difficult for drivers to complete in one driving day, especially if they need to return to a home base after delivering their shipment. With driver reticence to haul those loads keeping supply tight, that segment is seeing a "significant amount of price inflation," according to Gantt. Overall, Old Dominion has experienced minimal impact from broad ELD implementation other than a slight increase in average shipment weight and shorter haul lengths, he added.
LTL carriers are not as exposed to the ELD fallout as their truckload brethren because LTL drivers run comparatively shorter distances. Because of that, carriers like NEMF are receiving overload freight that, in a normal environment, would move via truckload. Due to the diversions, Connery said, the carrier's average weight per shipment is up 7 percent from this time a year ago. This is an unsustainable situation, because NEMF's LTL network is not structured to efficiently handle large quantities of truckload-type shipments over and over again, he said.
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.
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.