Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
As much of America has settled into a social distancing routine by staying home and making the occasional trip to the grocery store or pharmacy, warehousing and logistics professionals are watching it play out in real time, all day long. Distribution center employees, truck drivers, delivery personnel, and essential retail workers are among those most affected by social distancing and safety protocols aimed at containing the spread of the novel coronavirus that has gripped the country since mid-March. In this new environment, logistics workers have seen their workplaces retooled, processes redesigned, and interactions with supply chain partners upended as companies seek to create a delicate balancing act between keeping people safe and keeping on with business.
“We have customers that rely on us, even more now, to move their goods around,” explains Maryclaire Hammond, senior vice president of human resources for transportation and logistics provider XPO Logistics, emphasizing the importance of maintaining a productive supply chain workforce amid shutdowns and quarantines. “We are spending 16 hours a day working on this and doing everything we can to keep our employees safe. We have to focus on safety, business continuity, and also keeping our business solvent for the future … We’ve got to keep the world moving.”
That means creating workplace guidelines for social distancing and deep cleaning as well as enhancing sick leave policies and other benefits. The changes affect everyone across the organization and are vital to keeping the business open as demand from particular segments of XPO’s customer base grows, Hammond explains. Food and beverage customers are among those seeing the greatest need; one of XPO’s large wholesale grocery customers has predicted it will need 50% more capacity over the next few months, for instance, and has turned to XPO to fill that transportation void, according to the company. XPO says it is also handling 40% more shipments from its facilities to the hospital community right now.
As a result, Hammond says the company is on a communications campaign to educate employees about the steps they need to take to stay safe while reminding them of the vital service they are performing during the pandemic.
“We have to communicate, communicate, communicate—we can never communicate enough. Especially at times like this,” Hammond says. “Our drivers, our warehouse people, fork truck operators, customer service [personnel]—they are all on the front lines and we are reminding them of all the good they are doing.”
NEW SAFETY PRECAUTIONS
Like other essential workplaces, XPO has taken steps to enforce social distancing in its facilities, including marking floors to indicate six-foot distances in work areas and at building entrances, creating barriers where necessary to keep people apart, staggering break times, and removing chairs from break rooms to keep gatherings to recommended minimums. Early on, XPO removed all biometric login devices from its facilities and implemented extra cleanings at the beginning and end of each shift, Hammond says. In addition, every shift starts with a meeting reminding employees of the government-recommended safety measures and other precautions the company has put in place. Employees are asked to take their temperature before reporting to work each day and stay home if they are sick; they must also confirm that they have not tested positive for Covid-19, are not experiencing any symptoms, and have not been exposed to anyone who has tested positive for the virus.
Employee reaction has been reassuring, Hammond says.
“People are, overall, reacting very, very well and we need to keep repeating, repeating, repeating,” these messages, Hammond adds. “But people are scared. So we have to keep reminding them why we are considered essential; we have to keep reminding them what we do here [every day].”
Material handling systems integrator Vargo Solutions is fielding requests from customers about how to implement similar social distancing protocols, according to Art Eldred, the company’s client executive for system sales. He says Vargo’s customers, which include firms that operate warehouses and distribution centers in a range of industries, are figuring out how to retool their layouts to add space between workstations while also accommodating the need for more frequent equipment cleaning. He says the biggest challenge for many is making employees feel comfortable enough to come to work.
“[With the] Covid crisis, right now [some] people aren’t showing up to work,” he says, adding that companies are responding with incentives such as hourly bonuses and paid time off. “Everyone is getting creative to get people to come into work.”
XPO has added pandemic paid sick leave to its U.S. and Canadian benefits packages, giving affected full-time employees up to 80 hours of additional sick leave on top of standard annual paid time off, Hammond says. The company is also giving up to three days of 100% pay continuation if a facility is closed temporarily for deep cleaning or sanitation, and is offering free counseling sessions for all U.S. employees and their dependents via its Employee Assistance Program.
E-COMMERCE BACKLOGS, RISING DELIVERY DEMANDS
As more people stay home, online ordering and demand for home delivery are increasing, creating order backlogs and putting pressure on delivery methods—in many cases among companies that were just beginning to get a handle on their e-commerce and omnichannel business strategies over the last couple of years. Eldred says many e-commerce customers are experiencing order backlogs, some significantly. That lines up with recent reports of delays at large online retailers such as Amazon.com and delivery services such as Peapod.
As a result, businesses are scrambling to accommodate an increased need for last-mile delivery—especially small businesses, according to George Schegolev, vice president of operations for Route4Me, a New Jersey-based route optimization software provider. Schegolev says the company has seen increased interest in its product—which helps firms plan last-mile delivery routes—from small, independent grocery stores, bakeries, and restaurants who want to stay up and running and keep people employed during the pandemic. Schegolev adds that the global pandemic is creating behavior changes that will only accelerate demand for last-mile delivery, and notes that Route4Me is offering tutorials via video conferencing service Zoom to help get companies up to speed.
“Businesses need to adapt to more deliveries because behaviors are changing,” Schegolev says. “And many are saying they don’t know how to do it. Our tool is just one small piece of the puzzle … it’s a complicated journey and we just want to support communities and people throughout these difficult times.”
The extra tutorials are a cost for Route4Me, but Schegolev says it’s a way for the firm to help address a need during the pandemic. Route4Me has also made its service available at no cost to federal, state, and local government agencies as well as food banks.
HELP WANTED
Despite the difficulties, the logistics sector remains one of the healthier segments of the economy. Business activity increased in March as demand for warehousing and transportation surged, according to the most recent Logistics Manger’s Index report, released April 3. And businesses are hiring. U.S. drugstore chain Rite Aid said this week it will hire 5,000 full- and part-time employees nationwide for both store and distribution center positions to meet coronavirus pandemic demand. In March, Amazon said it would hire 100,000 warehouse and delivery workers to accommodate a surge in online orders. And the National Retail Federation (NRF) reports that although many retailers have had to make cuts to their workforce, others are hiring thousands of workers during the current conditions. The association is listing more than 900,000 job opportunities for workers displaced by the Covid-19 pandemic via a dedicated page on its website.
XPO’s Hammond underscores the growing need for supply chain workers by pointing to a new motto the transportation and logistics provider is using throughout the organization: “Together we can.”
“From the bottom of my heart, I cannot thank [these workers] enough. In XPO we’re calling them our everyday heroes,” she said, adding that XPO’s sentiments apply across the board, no matter your industry or your location. “We are all in this together, and together we can. We will get through it.”
The way that shippers and carriers classify loads of less than truckload (LTL) freight to determine delivery rates is set to change in 2025 for the first time in decades, introducing a new approach that is designed to support more standardized practices.
But the transition may take some time. Businesses throughout the logistics sector will be affected by the transition, since the NMFC is a critical tool for setting prices that is used daily by transportation providers, trucking fleets, third party logistics providers (3PLs), and freight brokers.
For example, the current system creates 18 classes of freight that are identified by numbers from 50 to 500, according to a blog post by Nolan Transportation Group (NTG). Lower classed freight costs less to ship, ranging from basic goods that fit on a standard shrink-wrapped 4X4 pallet (class 50) up to highly valuable or delicate items such as bags of gold dust or boxes of ping pong balls (class 500).
In the future, that system will be streamlined by four new features, NMFTA said:
standardized density scale for LTL freight with no handling, stowability, and liability issues,
unique identifiers for freight with special handling, stowability, or liability needs,
condensed and modernized commodity listings, and
improved usability of the ClassIT classification tool.
The new changes look to simplify the classification by grouping similar articles together and assigning most classes based solely on density – the most measurable of the four characteristics, he said. Exceptions will be handled separately, adding one or more of the three remaining characteristics in cases where density alone is not adequate to determine an accurate class.
When the updates roll out in 2025, many shippers will see shifts in the LTL prices they pay to move loads, because the way their freight is classified – and subsequently billed – might change. To cope with those changes, he said it’s important for shippers to review their pricing agreements and be prepared for these adjustments, while carriers should prepare to manage customer relationships through the transition.
“This shift is a big deal for the LTL industry, and it’s going to require a lot of work upfront,” Davis said. “But ultimately, simplifying the classification system should help reduce friction between shippers and carriers. We want to make the process as straightforward as possible, eliminate unnecessary disputes, and make the system more intuitive for everyone. It’s a change that’s long overdue, and while there might be challenges in the short term, I believe it will benefit the industry in the long run.
Business leaders in the manufacturing and transportation sectors will increasingly turn to technology in 2025 to adapt to developments in a tricky economic environment, according to a report from Forrester.
That approach is needed because companies in asset-intensive industries like manufacturing and transportation quickly feel the pain when energy prices rise, raw materials are harder to access, or borrowing money for capital projects becomes more expensive, according to researcher Paul Miller, vice president and principal analyst at Forrester.
And all of those conditions arose in 2024, forcing leaders to focus even more than usual on managing costs and improving efficiency. Forrester’s latest forecast doesn’t anticipate any dramatic improvement in the global macroeconomic situation in 2025, but it does anticipate several ways that companies will adapt.
For 2025, Forrester predicts that:
over 25% of big last-mile service and delivery fleets in Europe will be electric. Across the continent, parcel delivery firms, utility companies, and local governments operating large fleets of small vans over relatively short distances see electrification as an opportunity to manage costs while lowering carbon emissions.
less than 5% of the robots entering factories and warehouses will walk. While industry coverage often focuses on two-legged robots, Forrester says the compelling use cases for those legs are less common — or obvious — than supporters suggest. The report says that those robots have a wow factor, but they may not have the best form factor for addressing industry’s dull, dirty, and dangerous tasks.
carmakers will make significant cuts to their digital divisions, admitting defeat after the industry invested billions of dollars in recent years to build the capability to design the connected and digital features installed in modern vehicles. Instead, the future of mobility will be underpinned by ecosystems of various technology providers, not necessarily reliant on the same large automaker that made the car itself.
This story first appeared in the September/October issue of Supply Chain Xchange, a journal of thought leadership for the supply chain management profession and a sister publication to AGiLE Business Media & Events’' DC Velocity.
For the trucking industry, operational costs have become the most urgent issue of 2024, even more so than issues around driver shortages and driver retention. That’s because while demand has dropped and rates have plummeted, costs have risen significantly since 2022.
As reported by the American Transportation Research Institute (ATRI), every cost element has increased over the past two years, including diesel prices, insurance premiums, driver rates, and trailer and truck payments. Operating costs increased beyond $2.00 per mile for the first time ever in 2022. This trend continued in 2023, with the total marginal cost of operating a truck rising to $2.27 per mile, marking a new record-high cost. At the same time, the average spot rate for a dry van was $2.02 per mile, meaning that trucking companies would lose $0.25 per mile to haul a dry van load at spot rates.
These high costs have placed a significant burden on the operations of trucking companies, challenging their financial sustainability over the last two years. As a result, 2023 saw approximately 8,000 brokers and 88,000 trucking companies cease operations, including some marquee names, such as Yellow Corp. and Convoy, and decades-long businesses, such as Matheson Trucking and Arnold Transportation Services.
More so than ever before, trucking companies need to get better at efficiently using their assets and reducing operational costs. So, what is a trucking company to do? Technology is the answer! Given the nature of the problem, technology-led innovation will be critical to ensure companies can balance rising costs through efficient operations.
One technology that could be the answer to many of the trucking industry’s issues is the concept of digital twins. A digital twin is a virtual model of a real system and simulates the physical state and behavior of the real system. As the physical system changes state, the digital twin keeps up with the real-world changes and provides predictive and decision-making capabilities built on top of the digital model.
DHL, in a 2023 white paper, suggests that—due to the maturation of technologies such as the internet of things (IoT), cloud computing, artificial intelligence (AI), advanced software engineering paradigms, and virtual reality—digital twins have “come of age” and are now viable across multiple sectors, including transportation. We agree with this assessment and believe that digital twins are essential to radically improving the processes of fleet planning and dispatch.
THE NEED TO AUTOMATE
Outside of attaining procurement efficiencies, trucking companies can achieve lower costs by focusing on critical operational levers such as minimizing deadheads, reducing driver dwell time, and maximizing driver and asset utilization.
However, manual methods of planning and dispatch cannot optimally balance these levers to achieve efficiency and cost control. Even when planners work very hard and owners strive to improve processes, optimizing fleet planning is not a problem humans can solve routinely. Planning is a computationally intensive activity. To achieve fleet-level efficiencies, the planner has to consider all possible truck-to-load combinations in real time and solve for many operational constraints such as drivers’ hours of service, customer windows, and driver home time, to name just a few. These computations become even more complex when you add in the dynamic nature of real-world conditions such as trucks getting stuck in traffic or breaking down or orders getting delayed. This is not a task humans do best! For these sorts of tasks, technology has the upper hand.
When a company creates a digital twin of its trucking network, it has a real-time model that factors in truck locations, drivers’ hours of service, and loads being executed and planned. Planners can then use this digital model to assess possible decisions and select ones that increase asset utilization, improve customer and driver satisfaction, and lower costs.
For example, a digital twin of the network can offer significant insights and analysis on the state of the network, including exceptions such as delayed pickups and deliveries, unassigned loads, and trucks needing assignments. Backed by AI that takes business rules into account, digital twins can allow companies to optimize their fleet performance by finding the most efficient load assignments and dynamically adjusting in real time to changes in traffic patterns and weather, customer delays, truck issues, and so on.
With a digital twin, carriers can optimize the matching of assets, drivers, and freight. Typically, an investment in this innovative technology results in a 20%+ increase in productive miles per truck, while also improving driver pay and significantly decreasing driver churn. Drivers get paid by the miles they run, so when they run more, they are able to make more money, resulting in less need to chase the next job in search of better pay.
ADDITIONAL BENEFITS
Digital twins also combat deadheading, another source of driver dissatisfaction and cost inefficiencies. On average, over-the-road drivers spend 17%–20% of road miles driving empty. Using a digital twin, a company can search across several freight sources to find a load that perfectly matches the deadhead leg without impacting downstream commitments. These additional revenue miles will help drivers to maximize their earnings on the road and carriers to maximize their asset utilization and profitability.
The traditional manual dispatch planning model is becoming increasingly outdated—each planner and fleet manager tasked with overseeing 30 to 40 vehicles. Carriers try to manage this problem by dividing the fleet into manageable chunks, which results in cross-fleet inefficiencies. Such a system isn’t scalable. A digital twin acts as an equalizer for small and mid-sized fleets. It enables carriers to expand by venturing beyond the fixed routes and network they were forced to run out of fear of additional logistical complexity.
A digital twin can also give an organization the transparency and visibility it needs to find and fix inefficiencies. A successful carrier will leverage the technology to learn from the hitches in its operations. While this visibility is beneficial in its own right, it also provides the first step toward a seamless, digitized operation. “Digital revolution” is a buzzword frequently heard at transportation conferences. Yet not too many organizations are dedicated to digitizing their operations past the visibility stage. The end goal should be using decision-support systems to automate key elements of the system, thus freeing up planners from their daily rote tasks to focus on problems that only humans can solve.
Finally incorporating a digital twin can also help trucking companies work toward the broader trend of creating greener supply chains. Because they have lower deadhead and dwell times, trucking companies that have adopted a digital twin can be more attractive to shippers that are looking for more efficient operations that meet their environmental, social, and governance (ESG) goals.
THE FUTURE IS HERE
It is important to note that the benefits described here are not dreams for the future; digital twin technology is already here. In fact, choosing a digital twin can seem daunting because there are already a spectrum of options out there. First and foremost, an organization must ensure that the digital twin it selects aligns with both the goals and the scope of its operation.
Additionally, the ideal digital twin should:
Operate in near real time. A digital twin should be able to refresh as often as the network changes.
Be able to factor in specific customer delivery requirements as well as asset- and operator-specific constraints.
Be computationally efficient and comprehensive as it considers thousands of permutations in milliseconds. The digital twin should be able to reoptimize an entire fleet’s schedule of multi-day routes on the fly.
Before implementing a digital twin, carriers need to make sure that they have robust data management processes in place. Electronic logging devices (ELDs), customers’ tenders, billing, shipments, and so on are already inundating carriers with a glut of data. However, the manual nature of operations in many carriers leads to poor data quality. Carriers will need to invest in data management approaches to improve data quality to support the generation and use of high-fidelity digital twins. Otherwise, the digital twin will not be representative of reality and companies will run into an issue of “garbage in, garbage out.”
REINVENTION AND TRANSFORMATION
While data management is critical, change management through the ranks of dispatch operations is often a harder task. In fact, the largest roadblock carriers face when undergoing a digital transformation is the lack of willingness to change, not the technology itself. Many carriers cling to outmoded planning methods. Planners, used to operating based on well-worn business rules and tribal knowledge, could be wary of the technology and resistant to change. They may need to be assured that, while it is true that every trucking network is uniquely complex, digital twins can be set up to model the intricacies of their specific dispatch operations and drive value to the network. A significant amount of time and resources will need to be expended on change management. Otherwise even though trucking companies may invest in cutting-edge technology, they won't be able to fully capitalize on the added value it can provide.
As the truckload industry works through the current freight cycle, it is important to realize that change is inevitable. Carriers will need to reinvent their operations and invest in technologies to ride through the busts and booms of future freight cycles. Recent global events point to the many ways that wrenches can be thrown into global transportation networks, and the fact that such volatility is here to stay. Digital twins can provide companies with the visibility to navigate such changes. But above all, an operation that uses the digital twin to drive decisions can make customers and drivers happy, and help the carriers keep their heads above water during times such as now.
Regular online readers of DC Velocity and Supply Chain Xchange have probably noticed something new during the past few weeks. Our team has been working for months to produce shiny new websites that allow you to find the supply chain news and stories you need more easily.
It is always good for a media brand to undergo a refresh every once in a while. We certainly are not alone in retooling our websites; most of you likely go through that rather complex process every few years. But this was more than just your average refresh. We did it to take advantage of the most recent developments in artificial intelligence (AI).
Most of the AI work will take place behind the scenes. We will not, for instance, use AI to generate our stories. Those will still be written by our award-winning editorial team (I realize I’m biased, but I believe them to be the best in the business). Instead, we will be applying AI to things like graphics, search functions, and prioritizing relevant stories to make it easier for you to find the information you need along with related content.
We have also redesigned the websites’ layouts to make it quick and easy to find articles on specific topics. For example, content on DC Velocity’s new site is divided into five categories: material handling, robotics, transportation, technology, and supply chain services. We also offer a robust video section, including case histories, webcasts, and executive interviews, plus our weekly podcasts.
Over on the Supply Chain Xchange site, we have organized articles into categories that align with the traditional five phases of supply chain management: plan, procure, produce, move, and store. Plus, we added a “tech” category just to round it off. You can also find links to our videos, newsletters, podcasts, webcasts, blogs, and much more on the site.
Our mobile-app users will also notice some enhancements. An increasing number of you are receiving your daily supply chain news on your phones and tablets, so we have revamped our sites for optimal performance on those devices. For instance, you’ll find that related stories will appear right after the article you’re reading in case you want to delve further into the topic.
However you view us, you will find snappier headlines, more graphics and illustrations, and sites that are easier to navigate.
I would personally like to thank our management, IT department, and editors for their work in making this transition a reality. In our more than 20 years as a media company, this is our largest expansion into digital yet.
We hope you enjoy the experience.
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In this chart, the red and green bars represent Trucking Conditions Index for 2024. The blue line represents the Trucking Conditions Index for 2023. The index shows that while business conditions for trucking companies improved in August of 2024 versus July of 2024, they are still overall negative.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.