The volatility in the transportation market may leave shippers feeling more than a little seasick. A recent industry report offers suggestions for how to make it through these tumultuous times.
Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
The transportation market has been a volatile and stormy one these past few years, with shippers trying to weather a confluence of issues including rising rates, shrinking capacity, driver shortages, increasing government regulation, and greater demand for smaller, more frequent shipments.
Indeed, a recent report by researchers from Auburn University compares managing the transportation function to "living along coastal waters in perpetual hurricane season." The report, titled Logistics 2030: Navigating a Disruptive Decade, Year 1—Freight Transportation, presents the findings of research on what companies are doing to ride out the storm, according to Gail Rutkowski, executive director of the National Shippers Strategic Transportation Council (NASSTRAC), which was one of the main sponsors.
The report, which is part of a multiyear study on key aspects of logistics and supply chain management, is based on survey responses from 420 industry professionals as well as focus-group discussions and in-depth one-on-one interviews. (See sidebar for more on the study.) Based on these discussions, the researchers concluded that for many companies, navigating the storm will involve establishing a clear transportation strategy that incorporates outsourcing. Companies will also need to create a formal, structured plan for recruiting and developing transportation leaders and make thoughtful investments in emerging technologies, they added.
SILVER LINING
If there has been a silver lining to all these storm clouds, it's this: Companies are becoming increasingly aware of the strategic importance of transportation. Three-fourths of the survey respondents say transportation is a priority for their organization, and 89 percent expect that it will be a company priority in 2030. Similarly, although 40 percent of respondents currently believe that their C-level executives do not understand the transportation function, that number is expected to drop to 16 percent by 2030, according to the survey findings.
"Double-digit rate increases, risks of freight not moving due to capacity shortages, and increasing customer expectations for fast, consistent transportation service combined to create a transportation crisis that C-level executives could no longer ignore," says report author Brian Gibson, professor at Auburn University's Raymond J. Harbert College of Business. "When your corporate strategies are threatened by an essential function like transportation, you are compelled to learn more about it and pay more attention to it going forward. These C-level executives are becoming well-attuned to my mantra that you can develop, build, and market a great product, but if you can't get it to the customer, then your money and efforts have been wasted."
While transportation is becoming increasingly important, it is also becoming increasingly complex. The growing demand for smaller, more frequent shipments and for greater visibility of delivery status requires sophisticated tools and capabilities. It's perhaps not surprising, then, that respondents expect to outsource more of their transportation responsibilities in the decade ahead. Almost 70 percent projected that their use of outsourced transportation services would increase by 2030. (See Exhibit 1.)
As for which tasks they'll hand off, the report indicated that technology, operations, and regulatory compliance would be the most widely outsourced transportation activities. (See Exhibit 2.) "We're not doing anything directly like we used to with spreadsheets and analysis, we're handing all that over to 3PLs (third-party logistics service providers)," said one focus-group participant.
As their outsourcing activity ramps up, however, companies will need to grow their own capabilities with regard to vetting, selecting, and managing service providers. The report also suggested there will be some changes in the way they manage their 3PLs. While review meetings, key performance indicator (KPI) dashboards, and service scorecards will continue to be important, the report indicates that the use of onsite representatives—where service provider representatives work directly in the customer operations or customer representatives work directly at the service provider's operations—will increase by 50 percent.
BUILD YOUR BENCH
Regardless of how they structure their outside partnerships, it's clear that companies will require in-house transportation expertise in the coming decade. However, filling those jobs will continue to be difficult as competition for top talent intensifies. Gibson believes there are currently not enough transportation professionals available who could step into the shoes of today's leaders if they were to retire or change jobs. "There's a great deal of technical transportation knowledge and savvy that will be difficult to replace," he says.
To complicate matters, most survey respondents believe it takes more than just technical skills and experience to be an effective transportation leader. It also requires strong skills in problem solving, communication, and analysis, they say. (See Exhibit 3.) However, 40 percent of survey participants said this combination of analytical skills, leadership capabilities, and transportation expertise is either "rarely available" or "not available" in the marketplace today.
This means that companies will have to devote significant time and resources to training and development. No longer can they rely on on-the-job training; instead, they must establish formal, structured leadership training programs, according to the report. But nearly all of the survey respondents agree that their current training programs are lacking, with 94 percent saying they will have to revise their development programs to better attract and retain talent. Indeed, fewer than 30 percent of companies currently have a formal structured training program, although there are signs others are starting to fall in line. More than 55 percent of the respondents say they will likely have a formal transportation management talent-development program in place by 2030.
EXCEL WON'T DO
For companies looking to stormproof their operations, developing a championship-caliber leadership team won't be enough, however. They also have to give their people the right tools. "The more complex the freight market and customer requirements become over the next decade, the more companies will need strong technology to manage transportation planning and operations," Gibson says. "Legal pads, maps, and Excel spreadsheets just won't do in the current and future transportation environment."
For years, the "go-to" application for transportation managers has been the transportation management system (TMS), with its suite of planning, execution, and control applications. Seventy percent of survey respondents use TMS for carrier selection, cost analysis, performance measurement, and visibility, while a smaller number use the software for labor planning, event management, requirements forecasting, and analytics. In spite of the widespread use, the software does not receive rave reviews, according to the report. The majority of respondents rated their TMS tools as only moderately or minimally effective for such tasks as cost analysis. Those shortcomings notwithstanding, survey respondents say they intend to expand their use of all TMS capabilities.
At the same time, they're keeping an eye on emerging technologies that promise to drive operational gains. According to the survey, 87 percent of respondents think next-gen technologies will fundamentally change transportation operations, although the timetables will vary. For example, respondents believe that advanced analytics and the Internet of Things (IoT) have a high potential to upend transportation operations in the next three years, and that blockchain and artificial intelligence (AI) have significant "disruption potential" over the next five years. (See Exhibit 4.) On the other end of the spectrum, "Logistics 2030" respondents are not convinced that driverless trucks are coming in the near future, Gibson says. They predict it will be 10 years or more before the market sees significant implementations.
"That's quite a departure from the hype that we've been hearing in the popular media over the last three to five years," Gibson says.
While respondents were excited about the potential of emerging technology, their optimism was tempered by realism—and an awareness of obstacles they face. For instance, 61 percent said they did not have adequate funding to support a major technology initiative, and 82 percent believe there's a significant risk that heavily hyped technology will not achieve the promised benefits.
FIVE STEPS TO GET AHEAD
Transforming transportation management to meet the demands of a new world order will not be easy, but the report has five common-sense suggestions to help companies get there. They are as follows:
1. Establish coherent, data-driven plans. Managing transportation via intuition and a day-to-day firefighting approach will no longer cut it.
2. Strengthen key relationships. The balance of power currently lies in the hands of the carriers. To get reasonable rates and guaranteed capacity, shippers will have to don their sales hats and sell themselves to potential carriers and third-party logistics service providers.
3. Give transportation a seat at the "adult" table. In a world where speed is a priority, it's imperative that C-level executives acknowledge the key role played by transportation and include it in corporate strategic planning efforts.
4. Adopt 21st-century technology. Companies can no longer base key decisions on spreadsheets and instinct; instead, they need sophisticated analytics capabilities and tools that can provide visibility and insight into what's happening in the supply chain right now.
5. Show transportation professionals the money (and respect). To attract and retain people with the right skills, companies must commit to recruiting, developing, and properly compensating top transportation talent.
The way forward may be tough going, but if anyone knows how to ride out a storm, it's transportation and distribution professionals. As corporate leadership wakes up to the critical nature of transportation, the function will likely command the resources and attention it needs to address these challenges.
"One happy takeaway [from the study] is that companies are finally allowing the transportation functions a seat at the table and are including them in their supply chain strategy," Rutkowski says. "Too often in the past, transportation was left out or brought in too late to be an active contributor. The recent 'perfect storm' or transportation disruption was one of the catalysts for this change."
About the study ...
Logistics 2030: Navigating a Disruptive Decade is a multiyear study conducted by the Center for Supply Chain Innovation at Auburn University's Harbert College of Business, the National Shippers Strategic Transportation Council (NASSTRAC), the Council of Supply Chain Management Professionals (CSCMP), CSCMP's Supply Chain Quarterly, and DC Velocity, and sponsored by the transportation spend management company TranzAct Technologies Inc. The goal of the study is to "assess the strategies, requirements, and tools that will shape supply chains and drive success over the next decade." In 2018, the first year of the study, the researchers looked at freight transportation. Next year's study will address warehousing and distribution. The report can be downloaded from DC Velocity's website, or purchased in hard-copy form for $25 at NASSTRAC's website.
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.