The winner of this year’s 2020 Supply Chain Innovation Award (SCIA) was announced on the final day of the CSCMP EDGE Live! Virtual conference. Joan Duemler, supply chain manager at Intel Corporation, received the award for her use of contract digitization and analytics to disrupt the contract domain.
Auditing contract documents and scoring key contractual provisions is typically a formidable and manually overwhelming undertaking. Intel’s Indirect Materials and Advanced Analytics teams were able to use digitization and analytics to improve velocity by 99% and save the company $19 million.
Each year at the EDGE Conference, CSCMP hosts the SCIA program, which typically features six finalists who present their innovations to a live audience where a panel of judges hears and reviews the finalists’ presentations to select the most innovative case. This year, however, due to the virtual format, the process was changed. Four finalists from 30 initial submissions were chosen by the awards committee. The additional two finalists were selected from a group of eight semifinalists who submitted a short video expanding on their innovation.
In addition to the Intel Corporation’s submission, the other finalists included:
(First runner up) DLT Labs and Walmart Canada: Supply chain and finance transformation using blockchain
FourKites & Land O’Lakes: Reducing “empty miles” through machine learning-powered collaboration
Intel's Revolution in Silicon Wafer Transportation: Transforming how we ship our wafers
Raymond: Virtual reality helps solve a real-world labor and skills challenge
Cisco Factory Quality Automation: Exceeding customer expectations and streamlining operations
In addition to the Innovation Awards, CSCMP also presented the 2020 Supply Chain Sustainability Award to Ron Jarvis, chief sustainability officer and vice president of environmental innovation at The Home Depot.
Under the leadership of Jarvis, The Home Depot launched a program to turn waste from its stores into Trex decking. The process of creating this decking begins with collecting plastic waste generated from packaging and other sources at The Home Depot stores. Rather than sending these materials to landfills, it is collected and consolidated in The Home Depot’s Returns Logistics Centers (RLCs.) This project stretches across the entire supply chain, from The Home Depot stores, distribution, and returns logistics centers to manufacturer, back to stores, and finally to customers’ homes.
To see a full list of the 2020 CSCMP Award winners presented this week at the EDGE Live! Virtual Conference, visit the CSCMP website at cscmp.org.
It’s been an up and down year for the intermodal rail industry. Severe weather impacted operations early in the year. Yet the market absorbed those challenges and staged a modest recovery. By the end of the second quarter, total intermodal volumes had risen 7.9% year over year, according to the Intermodal Association of North America’s 2024 second-quarter report, released July 29. International containers, those 20- and 40-foot TEUs (20-foot equivalent units) coming into the nation’s ports, rose 13.3%. Domestic intermodal traffic, typically 53-foot containers, improved 5.0%, while trailers fell 20.6%.
“International volume provided the biggest lift,” noted Joni Casey, IANA’s president and CEO, who is retiring at the end of the year, in a news release announcing the report. “Domestic containers played a supporting role, especially important as the decline in TOFC [trailer on flatcar] moves continued.” Total IMC (intermodal marketing company) volumes increased 5.5% year over year in Q2, she added.
Nevertheless, troubling signs are on the horizon that could derail the market’s newfound stability. According to the Institute for Supply Management’s “Manufacturing ISM Report on Business” for August, economic activity in the manufacturing sector contracted in August for the fifth consecutive month (as measured on a year-over-year basis). But compared to July, the August index was up slightly to 47.2, or 0.4 percentage points.
And while the overall economy continued its expansion for the 52nd consecutive month (after one month of contraction in April 2020), U.S. manufacturing activity remained in contraction territory, the report’s author, Timothy R. Fiore, chair of the ISM’s Manufacturing Business Survey Committee, said.
“U.S. manufacturing activity contracted slower compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative,” he said in a statement, adding that three key related indexes—New Orders, New Export Orders, and Backlog of Orders—“remained in strong contraction territory.”
One silver lining has been the U.S. consumer, who has kept spending at a positive yet measured pace, providing an underpinning for the overall economy. That’s been good news for intermodal service providers looking for a more sustained recovery.
WHAT’S AN OPERATOR TO DO?
Larry Gross, founder and president of Gross Transportation Consulting,has seen any number of market cycles over his decades of work in the intermodal industry. “There is a lot of churn, a lot of uncertainty in the markets right now,” he’s observed. A lot of freight moved earlier in the year as shippers took steps to pull forward inventory in an attempt to avoid potential disruptions from various issues.
Those issues include a potential East and Gulf Coast port strike, labor unrest with Canada’s railroads (workers are now back on the job while their contract is in arbitration), continued geopolitical hostilities, concerns over the upcoming election, and the prospect of future new tariffs on a variety of imports next year.
Worries over a disruption at East Coast ports in particular “have caused a swing to the West Coast in terms of TEUs coming into North America,” says Gross. “There has definitely been a diversion,” he adds, citing container volumes out of the Pacific Northwest that were up 83% in July over last year. “The PNW is getting really congested,” and that, Gross says, is part of the reason why the Los Angeles and Long Beach ports are seeing container volumes surge as well. “It’s a reversal of a long-term trend, which was west-to-east migration.”
Those trends also reflect routing decisions made months ago by shippers to avoid potential port strike disruptions, and which will take months to unwind, Gross points out. “Containers on the water today, headed to West Coast ports and eventually destined for transfer to intermodal trains, are based on decisions shippers made in the spring or before. They’re set in stone,” he says. So as intermodal operators look at that incoming traffic, they have to plan for and start repositioning assets to handle those volumes at those ports. And that takes time.
“August and September are typically the biggest months for international,” Gross adds. “October is the biggest month for domestic. The rail network, from all indications, is running smoothly. Trains generally have recovered [from earlier operating hiccups] and are running consistently, but it takes time for the system to fully reset,” he says, and it could take months for the system to balance out.
PLENTY OF CAPACITY
Intermodal rail capacity is not an issue, according to several reports. Whereas ample capacity and rate competition through most of 2024 caused shippers to move some freight from rail to road, “the bleeding has stopped,” says Gross. “The erosion of share from intermodal to truck” has subsided, and rail intermodal operators are working hard to “claw that traffic back,” he adds.
Of the overall volume of truckload freight moving 500 miles or more, excluding ISO container moves (moves of international intermodal containers coming off ships), domestic intermodal accounts for about 6% of the market, with truck accounting for 94%. During the pandemic, intermodal’s share hit nearly 7%. For the past six quarters, that share has returned to the more typical 6%.
“I am of the opinion that the market we are in right now with regard to freight is not that unusual,” says Gross. “We are not that far off” [from a more balanced market],” he adds. “[The railroads] have removed poor service as a reason for shippers to abandon intermodal. Now the door is open, and they have to close the sale.” For a shipper who is close to an origin and destination intermodal terminal, “it is almost unbeatable.”
Indeed, Class 1 railroads are making operational improvements, investing in capacity and infrastructure, and gearing up to aggressively go after more intermodal business as the year proceeds, buoyed by surging international import volumes, according to several industry sources.
At Union Pacific, which generated $5.6 billion in second-quarter revenue, “service levels and network performance for the second quarter remained strong, demonstrating our recoverability in the wake of major weather disruptions,” said Eric Gehringer, UP’s executive vice president of operations, in the company’s recent second-quarter earnings call. Freight car velocity was flat, as improvements in terminal dwell were offset by weather-related drops in train speeds.
He sees opportunity to drive stronger terminal dwell performance “by removing unnecessary car touches across the network.” Results also benefited from a 6% improvement in locomotive productivity driven by better network fluidity and improved asset utilization. Train length improved 2%, with June marking the first month ever with a UP train length over 9,600 feet. “That’s a remarkable achievement by the team as they continue to generate mainline capacity for future growth,” Gehringer said.
Looking ahead, Jennifer Hamann, UP’s executive vice president and CFO, noted “a lot of the drivers that were present in the second quarter are going to be present at least into the third quarter. International intermodal is staying strong, [and] coal is weaker.” On the industrial side of the business, Hamann said, “while we have great business development opportunities, there’s a little softness there.”
Added Jim Vena, UP’s CEO: “We’ve got a great team. They know what the end goal is. So I see us optimizing the railroad and getting better at how we operate.” Yet what really will help improve UP’s operating margin, Vena believes, “is revenue growth. We are pushing hard on that piece by both bringing in volume at the right price” and managing pricing effectively to account for inflation and other cost challenges the railroad has endured.
A FOCUS ON SERVICE
At BNSF, the railroad is leveraging a $3.92 billion capital plan this year to, among other things, add main track miles, expand intermodal parking, add rolling stock, increase production capacity at intermodal yards, improve technology, and make “resiliency investments” to harden its network against extreme weather conditions, according to Kendall Sloan, BNSF’s director of external communications.
“BNSF’s reach is broader than any other Class 1 railroad,” she notes. The railroad operates 32,500 miles of track, providing “direct access to the country’s biggest … inland markets and multiple service options,” with particular attention to customer service.
One example she cites is the BNSF’s partnership with intermodal operator J.B. Hunt. Last fall, the two companies jointly launched Quantum, a new intermodal service “to accommodate the service-sensitive highway freight needs of customer supply chains,” she says. Citing as its hallmarks consistency, agility, and speed, Sloan says Quantum is averaging “up to 98% on-time delivery,” generally providing a service that is a day faster than traditional intermodal.
On the technology side, BNSF has been investing in and deploying new technologies to better leverage data to provide improved analytics and support safety improvements. Among those have been “brake health effectiveness detectors, drones,” and other advanced equipment, software tools, and systems, all designed to provide more timely and accurate data. On the labor front, BNSF as of Sept. 4 had reached tentative collective bargaining agreements with six of its labor unions, months ahead of schedule. The agreements will now need to be ratified by covered employees.
In preparation for the upswing in demand expected from this year’s domestic intermodal peak season, BNSF since early July has deployed additional train crews, locomotives, and railcars across the Pacific Northwest, California, and Texas. The railroad so far has seen a 40% increase in Inland Point Intermodal (IPI) volumes (IPI moves are cargoes going from a port to a shipper’s door in the interior of the country via a domestic or international intermodal container), handling a record number of on-dock railcar loadings from Southern California’s ports of Los Angeles and Long Beach in the first half of this year.
What are intermodal customers asking for? Reliable capacity; safe, efficient operations; and consistent, reliable performance that meets expected delivery times at a reasonable cost. For Class 1 railroads, that means continued investments across the board. Among BNSF’s initiatives in this regard are a planned multibillion-dollar investment in its Barstow (California) International Gateway and a master-planned logistics hub in Arizona’s Maricopa County.
“We know that our customers always are looking for new ways to move their shipments as safely and quickly as possible,” notes Sloan. That’s the underlying incentive for both the rail’s billion-dollar investments in the network and its focus on safety, exemplified by the railroad’s finishing last year with “the fewest injuries in BNSF’s history,” Sloan says. “We continue to lead the industry in safety and are committed to continuous improvement.”
OPPORTUNITIES AHEAD
As the intermodal rail market settles back to prepandemic levels, there remain opportunities, yet the constant competitive tug of war between over-the-road trucking and intermodal shows no signs of abating. IANA’s Casey expects the industry to continue to deliver modest growth—a prediction that was borne out in July’s and August’s upbeat volume numbers—fueled by containerized import traffic returning to the West Coast, which has seen double-digit gains for most of the year.
Domestic container growth, however, has not been as strong “due to tougher year-over-year comparisons and competition with over-the-road trucking,” she notes. “Still, modest growth of industrial activity and transloads from West Coast imports have provided a tailwind.”
With peak season in full swing, she believes the industry can avoid the congestion issues experienced during the pandemic. “Fleet owners have signaled that container velocity continues to trend to prepandemic levels. The intermodal network appears to have [sufficient] assets in place. And there has been no mention of any chassis supply constraints,” she says.
Yet challenges are looming. Among the most worrying to shippers is the prospect of a strike at East and Gulf Coast ports. “This would be disruptive not only for those locations, but also for a good portion of the intermodal supply chain,” she believes. “That would force shippers to execute contingency plans.” Other concerns center on the upcoming election, the prospect of higher tariffs under a new administration, and other disruptive “black swan” events.
On the opportunity side of the ledger, Casey cites the growth of nearshoring and reshoring as companies move operations from Asia to Mexico, increasing opportunity for cross-border U.S.-Mexico moves. She also cites transloading and the potential for domestic intermodal growth as well as the accelerating demand for “sustainable” transportation driven by clean air initiatives.
At its core, in her view, the intermodal rail industry still has three primary advantages over highway truckload service: “environmental stewardship, service consistency, and cost savings.” And those are advantages that will continue to endure and deliver sustainable value in any market cycle.
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.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.