Fleet managers grapple with host of challenges as pandemic’s impact persists
Truck fleets continue to navigate an unprecedented market, applying lessons learned as issues old and new complicate operations in a historic capacity crunch.
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
Rounding the bend into year two of the Covid pandemic, fleet managers see hopeful signs as businesses reopen, albeit at an uneven state-by-state pace; vaccinations gain traction among more of the population; and a strengthening economy gradually puts more people back to work.
Yet no one is willing to claim the trucking industry is fully back on its feet. An e-commerce–driven surge in freight has sucked up capacity as stay-at-home consumers ratchet up online buying of everything from essential food and household supplies to home-office equipment, appliances, and home-improvement goods.
Equipment manufacturers, who just a year ago faced a tidal wave of cancellations for new truck and trailer orders, now are near fully booked, with few if any build slots available until 2022. A rise in volumes from big-box retailers—and their demand for drop trailers—is stressing operations planning as fleets struggle to get equipment returned and back in their networks.
At the same time, thanks to Covid-imposed closures of driver schools, 2020 saw 40% fewer new CDL (commercial driver’s license)-credentialed drivers enter the industry than the year before, exacerbating the shortage of qualified professional drivers. And the new federal Drug and Alcohol Clearinghouse has shunted some 50,000 drivers to the side of the road, with less than 15% completing return-to-duty requirements.
WHERE ARE THE PARTS?
Going into the spring, fleet managers are faced with yet another challenge: getting enough parts and supplies to keep trucks serviced and on the road, as well as delayed deliveries of new equipment to replace aging, less-efficient trucks.
“The [parts] supply chain is very stressed,” observes Dave Bates, senior vice president of operations for Thomasville, North Carolina-based less-than-truckload carrier Old Dominion Freight Line (ODFL). “We are finding shortages in everything from lug nuts to semiconductors for computers in the trucks. Everything is behind,” he says. New tractor deliveries for ODFL expected in March were delayed to April. Trailer deliveries expected in April were pushed out to May or later. And everything seems to come with a 4% to 5% higher price tag, Bates notes.
All that has changed how Bates plans fleet replenishment for ODFL. “We are holding onto everything until new equipment comes online and we can assess our needs,” he says. “We don’t really want to get rid of old equipment too quickly when it still has some useful life for us.”
GETTING DEDICATED
Rewriting the operations playbook for pandemic times
One of the pandemic's unexpected developments was how it affected the beverage business. Beverages are one of the most fleet-intensive local-delivery operations in transportation.
For Southern Glazer's Wine & Spirits, responding first to an initial collapse in business and then a rapid uptick in demand from stay-at-home consumers stocking up on wine and spirits, while effectively managing its fleet resources and ensuring employees were protected, meant rewriting the operations playbook.
Based in Miami and Dallas, Southern Glazer's is the nation's largest distributor of beverage alcohol. The privately held, family-owned company handles about 32% of alcoholic beverages sold in the U.S. With over $21 billion in revenue, Southern Glazer's deploys a fleet of some 4,000 trucks operated by over 3,000 drivers, delivering around 180 million cases of beverages annually from 41 distribution centers. Its mostly straight-truck fleet typically delivers to restaurants, bars, grocery and liquor stores, and other retail shops selling wine and spirits.
It's a business where drivers typically interact with a dozen or more customers a day, making inside deliveries, and stocking backrooms and sometimes retail shelves.
"The biggest challenge was protecting our employees," says Ron Flanary, the company's senior vice president of national operations. "[Our drivers] go into retail accounts, facing the public all day long every day," he explains. Job one was "putting the controls in place to protect them and make them feel safe," Flanary says. That required adjusting how it operated, dictated by social distancing and disinfecting needs for trucks and facilities, and acquiring and providing sufficient personal protective gear to drivers and warehouse workers.
"We went to stop-and-drop operations," Flanary says. "Instead of taking the product inside the store, to limit contact we brought it to the back door, checked it in, and stopped there," he notes, adding that the change protected drivers by preventing close contact with store employees. And while initially, the pandemic reduced delivery volumes, for the most part, fleet operations weathered the storm and were able to adjust and adapt.
Southern Glazer's serves both on-premise and off-premise accounts, Flanary explains. During the heat of the pandemic, business with on-premise accounts, like bars and restaurants, "essentially went away," he notes. At the same time, volume with off-premise retail accounts went up some 35%. "It was just a shift in mix," Flanary says. The company was able to effectively redeploy resources idled by closed restaurants and bars to serve surging retail accounts like grocery and liquor stores.
Yet from a broader fleet-management perspective, even during the pandemic, the overall objectives remained the same: "How do you operate as safely as possible, support your drivers, and get the most productivity and utility out of your fleet," Flanary says. "How do you optimize operations to run the fewest miles, get the best stop density, and ensure a consistent level of quality service?"
Another trend over the past year and continuing in 2021 has been shippers and transportation managers embracing more dedicated operations as a way to reduce supply chain risk and lock in increasingly scarce trucking capacity.
Greg Orr, senior vice president, U.S. truckload for TFI International, is seeing accelerated demand for “dedicated committed fleet resources, where [shippers] are willing to pay substantially more or close the loop to make sure they have capacity for their business,” he notes.
Among the operations he oversees is Eagan, Minnesota-based truckload carrier Transport America, whose business mix typically is 75% for-hire over the road (OTR), and 25% dedicated. In the first quarter of this year, “the [demand] for dedicated versus OTR was about 50-50. It has never been that high,” Orr says.
Dedicated is a different conversation from spot market or for-hire negotiations, Orr stresses. Whether it’s taking over a private fleet or establishing a dedicated solution, “we really try to walk them through the commitment and the equipment and capital involved,” he explains, adding that in most cases, starting a new dedicated account means buying or leasing new equipment in the short term.
“We don’t want to be stripping [equipment] from one side of the business to [use in] another. So we try to take them through all the [staffing, asset, and operating needs] of [establishing a dedicated fleet],” he says.
Because of the market’s volatility and the resulting drastic swings in capacity, “the shippers we serve [have] become more creative than ever in terms of finding and capturing any and all capacity to support their networks,” notes Mark Sitko, vice president of dedicated sales for Van Buren, Arkansas-based truckload carrier USA Truck.
With rates at historic highs, some shippers have been reluctant to enter into longer, multiyear dedicated fleet deals, instead opting for “pop-up fleets.” These shorter-term dynamic capacity arrangements “get the capacity to the areas of the network [where] shippers need” immediate support, says Sitko.
In any case, creating a dedicated solution for each customer requires more than a cookie-cutter approach, notes Billy Cartright, senior vice president of dedicated operations at Chattanooga, Tennessee-based Covenant Logistics Group.
“One of our value adds is helping the customer optimize its network,” he says. “How does its [existing] network layer into ours, where can we find synergies?” He notes that in some cases, as part of a dedicated solution, his company will do backhauls and revenue shares, utilizing freight from one customer to fill empty lanes with another, essentially leveraging relationships among its customers to deploy available, unused capacity and increase utilization for all.
The strategic objective for the fleet manager or shipper’s VP of transportation should be “how do you take out cyclicality to have more predictability [with capacity] and understanding of what [transportation costs] will do to your P&L,” Cartright says.
It’s also important for the shipper to understand how operating structure and processes in its warehousing and manufacturing plants—which are to be supported by the dedicated fleet—can impact rates and costs in fleet operations, and where collaboration with its fleet provider can provide productivity gains and new efficiencies for both.
KNOW WHAT YOU ARE GOOD AT
Thomas Regan, vice president of operations for dedicated transportation at Miami-based Ryder System Inc., makes a similar point about dedicated’s growing momentum. His group is seeing especially strong demand, he says.
“Prior to Covid, there were some secular trends driving transition of private fleets to dedicated,” Regan recalls. “Insurance was a big factor,” with some operators saddled with “50% to 100% increases [in insurance rates], depending on the type of business and incident rates,” he notes.
The primary decision factors for shippers seeking more dedicated deals: risk avoidance, committed capacity, and a predictable cost for transportation. And offloading the ever-more-difficult challenge of finding and keeping professional drivers.
“When Covid hit, it made people [operating private fleets] really take a step back,” says Regan. He recalls a lot of shippers having conversations like “My insurance is going up. Technology in trucks is getting more complex. I don’t have the right visibility platform. Can I grow [my fleet] on my own at the pace—and within the cost—that my business needs?”
At the same time, trying to gain reliable capacity in the common carrier market was just as stressful. You either couldn’t find enough, or the cost was exorbitant and service unpredictable.
All that has created an inflection point that’s tipping the scales increasingly to dedicated in 2021, says Regan. He notes that Ryder offers not just dedicated solutions, but also complementary resources and capabilities, all of which can be mixed and matched to help shippers establish stable transportation operations with secure capacity at a reliably budgeted cost.
The point he makes to shippers and transportation managers contemplating private versus dedicated fleet operations: know what you are good at.
“Some have been running private fleets for years; they have good, deep talent and technology to make it successful,” Regan notes. “Others realize they need some help on the transportation side, so they [choose to] focus on the core aspects of their business” and contract with a dedicated fleet provider for whom such services are a core competency.
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.