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Johnathan Foster is principal consultant with Proxima, a supply chain consulting firm. He is an accomplished leader with 20 years of diverse experience. Working as a shipper, broker, and carrier, he has spent his career crafting and implementing logistics and supply chain strategies to improve operations, control costs, and drive revenue. Before consulting, Foster worked for various companies in both the private and public sectors, in the retail, manufacturing, and logistics services. Foster has been published in Forbes, US News and World Report, The Chicago Tribune, and many other publications.
David Maloney, Editorial Director, DC Velocity 00:00
A stuck boat and port congestion make for stormy ocean shipping. How do you develop greener last-mile logistics? And as the economy continues its Covid recovery, will we find enough truck drivers to handle post-pandemic demand?
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Honeywell Intelligrated. From system design and simulation to integrated warehouse automation software and technologies to AS/RS shuttles and robotics, Honeywell Intelligrated's end-to-end solutions address the most pressing e-commerce and labor challenges facing our industry. To learn more, visit intelligrated.com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: We all heard about that ship the Ever Given that was stuck sideways across the Suez Canal. Well, thankfully, it was refloated earlier this week, and the canal is open again, but the delays caused backups to supply chains all over the world—and that's on top of all the port congestion we've already experienced. So, just how bad are things out there on our oceans? To address that, here's Ben with today's guest. Ben.
Ben Ames, Senior News Editor, DC Velocity 01:29
Thank you, Dave. Yes, today, we have with us on the podcast, Johnathan Foster. He's a principal consultant with Proxima, a supply chain consulting firm. Thank you for being here with us on the line, Johnathan.
Johnathan Foster, Principal Consultant, Proxima 01:41
Thank you for having me.
Ben Ames, Senior News Editor, DC Velocity 01:43
Johnathan, I know you've been in the business a long time, over 20 years of experience in the industry, and you've worked as a shipper and a broker and a carrier, and now as a consultant, so you've seen lots of different sides of this. However, some of the events of the past week really don't look like some things that people have seen in a long time. Fortunately, as Dave mentioned, after six days of stopping all cargo traffic through the Suez Canal, the Ever Given has moved and ships are finally sailing again, but when they do arrive at ports, will they be able to quickly unload and get back on schedule again?
Johnathan Foster, Principal Consultant, Proxima 02:18
I think it'll be, the first ships, I would suspect, they'll be unloaded at pace. They'll work through them pretty fast, and as that backlog starts making its way in, I think you'll start seeing some slowdowns because of container—you know, the time it takes to physically get containers off the port, unloaded, back to the port, it'll kind of be a meter-down effect. It'll take a little bit to to work through that backlog. First, that pace, and then just a little bit of slow down.
Ben Ames, Senior News Editor, DC Velocity 02:55
Yeah, absolutely. And I think we've all seen some of the photographs above a lot of the ships that are still at anchor. There's some pent-up demand there, so they'll really be waiting in line to get in at the port there. Even when things are slow, there'll be plenty of other ones right behind them. Obviously, we're coming off a full year of pandemic shutdowns, so we've seen some congestion already, but is the pandemic chaos the only cause of the shipping delays and the port congestion that we see pretty broadly?
Johnathan Foster, Principal Consultant, Proxima 03:28
Not at all. We call 2020—obviously, Covid was a factor—but we call it the year of disruption, because if you look at it—particularly I'll focus on the U.S., but you can make the same analogy on a global scale—in the U.S., you had wildfires, you had hurricanes, you had tornadoes, you had all of these disruptive events, beyond just the Covid impacts and the influx of medical essentials. You've got metering of steamship lines. You've got chassis changes. You've got containers stuck and continents like South America and Africa. You've got all of these disruptive events, and it's really hitting every mode, and all of it has this correlating effect. I read this morning that DAT reported that the spot market was up 28% year over year. It's just one more thing that continues to hit supply chains everywhere, and it is not going away anytime soon.
Ben Ames, Senior News Editor, DC Velocity 04:39
Yeah, really interesting. There's some big challenges there. Interesting that containers sort of get stuck in certain places along the way. What are some of the reasons that they get tangled up in certain spots like that, instead of maintaining their steady flow that that the industry is used to?
Johnathan Foster, Principal Consultant, Proxima 04:56
Well, I think you've got a few factors here, is when you when you take ships out of strings, you're not returning the pace that you can cycle those ships through, you know, the strings that they go through, it's just gonna take a little longer, so there's a little bit of delay on some of that. I think, from what I've been told, is there's some containers during Covid that were sent to some of the more undeveloped countries or continents, and, and they—with medical essential goods, and those containers are still sitting there. I think you've seen some of the greatest losses of containers on the sea that we've seen in a long time. And I think that's—what I've been told is, that's a side effect of how big the ships are, and now they're getting really weighed down, and there's, you know, rumor is there's waves on the ocean, and things happen. You can see this, this compounding effect. And I think you've got, you can't understate the, the essential nonessential component. You've got warehouse space in short supply, and you've got some businesses thriving, and they're running through goods as fast as they can, and you've got other struggling. And when they're struggling, their warehouse is typically full, so you got to find places to put stuff, and then the labor to support that. You may be running on a reduced labor force, which means you're not turning that container. Maybe you sit on it a little longer, or you're not turning it as fast, on the unloading in some of that. I think all of these things are in play, and all of these things have impact.
Ben Ames, Senior News Editor, DC Velocity 06:38
Really interesting. There's so many moving parts in that. You mentioned that some businesses are thriving, some of them are struggling. What what are the effects of these freight delays that we're seeing? Are there certain sectors that are hurt more than others?
Johnathan Foster, Principal Consultant, Proxima 06:50
Yeah, I think, you know, I think your raw materials—it depends on where your raw materials—a lot of people wouldn't correlate—let's let's talk about the Suez Canal as an example. A lot of resins and a lot of raw materials that come from Europe will be delayed just off of that, but if you look at—I think I actually read on you guys' website that the Footlocker and some of these retailers are at record lows on their inventories, and I think that's telling. So I think retail is obviously struggling, because—well, certain aspects of retail. You've got others that are thriving in dealing with this disruption, because I think they've been adaptive and reactive to what they could see coming. And that's, that's not to take a shot at anybody particular. That's to say, it is truly a disruption of] a historic nature, and doing things the same way is not going to work. You can't just throw this into a box, no pun intended, and say that's just an isolated event. This is a trend, and it's a trend where the trends are changing. And they're changing at pace through this whole thing.
Ben Ames, Senior News Editor, DC Velocity 08:11
Yeah, it's really hard to keep up with. You mentioned, you know, retailers and inventory. It sounds like these trends are affecting both businesses and consumers.
Johnathan Foster, Principal Consultant, Proxima 08:23
It very much is. Ultimately, you know, historically, the leading indicator of an expansion or recession has been freight, and it's because before you can make something or manufacture something, you've got to move it. And so, you've got to move those raw materials. You've got to get it to the manufacturing sector, then you've got to subsequently move it to its distribution path, whether that's direct-to-consumer, or to another manufacturer, or to a retail distribution path. And all of that is is there. But what we're seeing is disruption at, every mode, and in every area, networks, carrier networks out of balance, and that ultimately impacts everyone. Freight is, for the most part, agnostic. It's a box. If you look at containers and dry vans, you're filling a box. And so, everybody gets impacted. The natural competitors that somebody might face on the street, you know, like a Home Depot and a Lowe's compete head to head, but when you're when you're talking about freight, and you're talking about that, it's the natural competitors, it's whoever's filling those boxes, so that literally hits every supply chain, and cannot help, or cannot be not impacting consumers.
Ben Ames, Senior News Editor, DC Velocity 09:52
Right, right. Yeah, I'm sure we're all going to be feeling that some of the impact of that, either in shortages or raised prices in the coming weeks and months. Have you also been keeping track of any sort of possible solutions to these delays and congestions that will help the whole system get back on track?
Johnathan Foster, Principal Consultant, Proxima 10:12
Yeah, I mean, I think there are some things that can be done. I think you can adjust your, number one, your lead time—and that should have already been done at this point, is give yourself some cushion. The trends the last 10 years have been a lot of JIT [just-in-time], a lot of smaller shipments. I think inventory is not a bad thing—being prepared to take on that inventory, being able to order bigger lots, bigger sizes with greater lead time—but I think there's other ways you can control your destiny. And that's—it's simple things in a port environment like leasing your own chassis, is something we recommend. Control that piece. If you look at—and, I forget which one of the ports, off the top of my head, in LA, one of them has, I think nine different terminals—I may be off a number—but as an example, I know they have multiple terminals, but you may need a chassis to go pick up a shipment off of one pier, but it may be stuck at another pier. And so you've got to run there first, pick up, then go get your product, you know, sit in a line to get the chassis, and then go get your load and come through. That's inefficiency. If you lease your own chassis and you control that, well you can go straight in, and you can take that inefficiency and translate that into more efficient turns. It's just a small way of doing it. I think there are other opportunities—you know, are using or utilizing NORs [notices of readiness] so that steamship lines can position the capacity there? Have you taken inlet intermodal ways that move it off of the ports like what Savannah is doing. You have to be creative and you have to be adaptive, and I think some companies have done this, and others have kind of continued to do business as usual, and business as usual is is going to struggle. But I think those companies that have been innovative and have focused and built—a lot of times freight providers get commoditized, and have, over the last several years, in corporate views, and the companies that have viewed their transloaders, their carriers, their trade networks as strategically and treating them as such, I think that's also a key thing, key piece of what can be done.
Ben Ames, Senior News Editor, DC Velocity 12:34
Gotcha. Really interesting. Well, it sounds like for sure, we'll have a whole lot to cover in the coming year here, but that there are some, there is some hope for getting through this and some light at the end of the tunnel. Johnathan, I really appreciate your spending some time with us today on the podcast.
Johnathan Foster, Principal Consultant, Proxima 12:48
I appreciate the invitation. And I do believe there's absolutely hope, and I think we have a lot of skilled people working in supply chains that have already proven a tremendous amount of resilience. And, again, thank you.
Ben Ames, Senior News Editor, DC Velocity 13:02
Terrific. We've had Johnathan Foster here with us today, and, again, he's a principal consultant with the supply chain consulting firm, Proxima. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 13:12
Thank you, Ben and Johnathan. Now let's take a look at some of the other supply chain news from the week. Victoria, you wrote this week about how microfulfilment can help develop a greener last mile. Can you explain more?
Victoria Kickham, Senior Editor, DC Velocity 13:25
Sure, Dave, happy to. Yeah, so when it comes to sustainability, it seems that small changes to last-mile delivery can actually have a big impact. And that's according to a study I came across from consulting firms Accenture, and Frontier Economics. Their report is called The Sustainable Last Mile: Faster. Greener. Cheaper, and it identifies some steps that retailers and delivery companies can take to reduce carbon emissions and traffic congestion within cities—so, we're talking about in dense urban areas. The key finding was that using microfulfillment centers, or MFCs, can lower delivery-vehicle related emissions between 16% and 26% by 2025. As our listeners will know, these microfulfillment centers are small facilities located close to customers that can kind of speed last-mile delivery, and as I say they're often located in really dense urban areas. The researchers figured this out by developing a model for studying the impact of local fulfillment centers in three cities in particular: London, Chicago, and Sydney. Their model estimates the impact on outputs—emissions and traffic congestion—based on inputs such as local fulfillment-center prevalence in the city; population density; average distance traveled per parcel delivery; vehicle mix; and consumer demand projections. So, they took all that, and they found that traffic in London and Chicago could be reduced by, I think it was like 13%, by using MFCs, and they found a 2% potential reduction in Sydney. They also found a similar impact when it came to carbon emissions. So, essentially, what they're saying is that having delivery vehicles make shorter trips from local sources can really make a difference in an organization's environmental impact.
David Maloney, Editorial Director, DC Velocity 15:14
That's really interesting. Did the study bring up the use of energy-efficient vehicles or anything of that nature?
Victoria Kickham, Senior Editor, DC Velocity 15:22
Yeah, yeah. So, as you can imagine, there, you know, a wide variety of factors that go into making the last mile greener. One thing that they mentioned in particular was combining the use of these local fulfillment centers with other efforts, particularly click-and-collect options, which encourage customers to travel in person for their order pickup. and often when they do that, they do it by lower-emission vehicles, like private cars, or zero-emission methods—by bicycle or on foot, if you're close enough, in a city. They also mentioned things like government and business incentives for consumers to make greener choices—and that can take a variety of forms, depending on your business model—and reassessing your supply chain strategies and how you're deploying assets, particularly heavy goods vehicles; and also use of—or greater use of things like data and analytics technologies to assess your overall operations, and also route optimization programs—and those are things that can help make sure your deliveries are traveling in the most efficient, effective path. So, yeah, there are a lot of elements that go into this, but as I say the the bottom line seems to be that there are some small changes you can make to make a big difference.
David Maloney, Editorial Director, DC Velocity 16:32
Yeah, there's all seem like very interesting strategies to make that last mile more efficient, as well as friendlier to the environment. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 16:40
David Maloney, Editorial Director, DC Velocity 16:41
And Ben, you wrote about whether there will be enough truck drivers to keep up with the rising freight volumes and tight capacity during the pandemic recovery. What did you find?
Ben Ames, Senior News Editor, DC Velocity 16:52
That's right, Dave, and some of this touches on our previous discussion about some of the congestion at the ports and the big surge that we're seeing. We saw new evidence this week that one of the most important levers in continuing the country's economic recovery from the lockdowns and the recessions that we saw during pandemic is truck drivers. And currently there are just enough of them to keep the recovery moving. Specifically, logistics companies say that the over-the-road freight market is very tight right now, has been for months, and that's due to a range of factors: the backlog at the maritime ports that we mentioned; a reduced fleet of airplanes carrying cargo, another mode; stores and warehouses have been hurrying to stock up with inventory as we see some vaccines roll out and some states begin to open up again. For example, the load board operator DAT Freight & Analytics said that the demand for flatbed truckload services jumped to its highest point in nearly three years last week. That's in response to rising shipment volumes in construction and manufacturing and industrial markets. And, in fact, looking ahead, flatbed capacity is forecast to become even more scarce, because produce season is just around the corner, when farmers in the agricultural sector will start making a boom [in] shipping. And another example, there's a third-party logistics provider called GSC Logistics on the West Coast—they provide drayage services at ports—and they plan to hire 100 extra truckers in the next couple months to handle the boom in container volumes that we were talking about with Johnathan, our guest. So, that would actually boost its driver pool by almost 30%. You can see a really big difference that some companies are making to try to keep up with the volumes.
David Maloney, Editorial Director, DC Velocity 18:40
Are there enough drivers in the market to meet that growing demand?
Ben Ames, Senior News Editor, DC Velocity 18:44
Well, that question touches on a long-running debate. Industry groups and fleet owners often say there's been a driver shortage for decades now, but labor groups often say there's only a shortage at the salary rates that those fleets are offering. So, it depends who you ask. In fact, that picture has gotten even more complicated in recent months, because we've seen a Covid case surge, you've seen in the newspapers. That makes some drivers sick, and it makes other drivers stay home to avoid getting sick. Also, there's a rise in unemployment benefits and stimulus checks, so that encourages some workers, some drivers to sit on the sidelines, and instead of reporting to work. And also, there's a new federal drug and alcohol clearinghouse, or testing program, and that's taken a lot of potential drivers out of the hiring pool—which is a good thing of course, but it makes it harder to hire enough workers. Despite all those changes, the American Trucking Associations—it's a trade group—said this week that truck driver turnover in the fourth quarter of 2020 actually remained steady. That turnover rate for large truckload fleets was unchanged at 92% on an annualized rate, and the churn rate for smaller truckload carriers dropped a couple percentage points to 72%. So, not changing is good, but of course, 92% annualized turnover means that nearly the whole roll of your employees would be different year to year. The ATA did warn, though, that despite that encouraging news—that the rates have not increased—the ATA said that as the economic recovery continues, motor carriers really have to stay focused on driver retention, because it all hinges on keeping drivers in those trucks, so we can keep these increased volumes moving.
David Maloney, Editorial Director, DC Velocity 20:37
Yeah, that is very important, that whole idea of retaining the drivers that you have. It certainly seems like finding drivers is going to continue to be a challenge for some time to come. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 20:48
David Maloney, Editorial Director, DC Velocity 20:49
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today. Thanks, Ben and Victoria, for sharing highlights of the news this week.
Ben Ames, Senior News Editor, DC Velocity 21:04
Thanks, Dave. Glad to be here.
Victoria Kickham, Senior Editor, DC Velocity 21:05
Yeah, you're welcome.
David Maloney, Editorial Director, DC Velocity 21:07
And again, our thanks to Johnathan Foster of Proxima for being with us today. We encourage your comments on this topic and or other stories. You can email us at email@example.com. We also encourage you to subscribe to Logistics Matters at your favorite podcast platform, and to give us a rating. We appreciate your feedback, and it really does help people to find us. Our new episodes of Logistics Matters are uploaded each Friday.
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