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Mary Murphy is senior director of managed logistics strategy for BlueGrace Logistics. She shares duties between the Tampa and Detroit offices and is responsible for curating the customer experience end to end, with the goals of driving improvements, reducing attrition, and uncovering growth opportunities within the Managed Logistics line of business. Murphy has 24 years in the logistics and supply chain industry.
David Maloney, Editorial Director, DC Velocity 00:01
How are record fuel prices affecting logistics? Mitigating supply chain risk in food and beverage. And maritime shipping may be next in line for congressional action.
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 group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Beckhoff. Discover intralogistics automation without limits. Beckhoff offers a complete ultra-compact motion-control system for automated material handling equipment, including a range of space-saving motor and drive solutions for BLDC, MDR, servo technology, and more. Make your move to better motion control by visiting Beckhoff.com/intralogistics.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: Fuel prices just continue to rise, adding to the cost of transporting all the products that we use every day. Is there any end in sight? To find out, here is Ben with today's guest.
Ben?
Ben Ames, Senior News Editor, DC Velocity 01:24
Thanks, Dave. You know, the last couple of weeks, as you said, have seen oil prices increase dramatically in global markets, largely due to disruptions caused by Russia's invasion of Ukraine, and while oil prices have since begun to drop again as that economic volatility calms a bit, drivers are still seeing the impact at the pump, for both gasoline and for diesel fuel. And, just as you said, that's hit transportation and logistics companies particularly hard, since trucks are the backbone of how we move goods around the country. Here to talk with us today about the impact of rising fuel prices on that sector is this week's guest. We have Mary Murphy, who's senior director of managed logistics at BlueGrace Logistics. They're a third-party logistics provider.
Welcome, Mary.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 02:12
Thank you, Ben.
Ben Ames, Senior News Editor, DC Velocity 02:14
Yeah, we're glad to have you with us here. It's busy times, for sure. Can you give us an idea of how bad it is out there? After all, gas prices usually move in cycles, don't they? But earlier this month, we've seen some of the biggest jumps in almost 30 years.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 02:31
Yes, it is definitely a significant spike. And the percent of total shipping costs attributed to fuel right now are at a level that I have not seen or experienced, and I've been in this industry for over 20 years. So, it's it's big. It's definitely something that pretty much everyone is talking about. Every client is looking for some assistance in one way or another. But interestingly enough, it is coinciding with a slight softening of the market, so we're seeing some line-haul rates coming down, which has helped with maybe mitigating a bit of the overall shipping costs. But it's definitely a huge impact right now.
Ben Ames, Senior News Editor, DC Velocity 03:10
Got it. And so, if those line-haul rates come down, then that might help the shipper. Of course the carrier, the drivers, is still seeing the cost be high. In situations like that...
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 03:23
Yeah, absolutely.
Ben Ames, Senior News Editor, DC Velocity 03:24
...like that, like the average citizen or a consumer might be able to control those costs, right? Maybe they would work from home, maybe they might even cancel a trip or something. But the trucking fleets really can't do that. They have to cover those miles.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 03:38
Yeah, that's correct, they do. And while some of the larger carriers, they might have the ability to purchase in advance some of them might keep tanks on site and are able to hedge risk that way, the smaller providers—and those are the carriers that make up the bulk of our trucks on the road—they typically only have access to fuel-incentive programs, and those do not significantly offset these costs. So, it's a challenge. And additionally, with the cost of running empty being extremely high, they really, all these small to mid-size carriers really need to ensure that they've got loaded miles. You know, one of the recent estimates that I heard was that the typical cost of empty miles for a truck is around $2,000 per year, but they're anticipating that to go up to about $3,000 if fuel prices stay where they are.
Ben Ames, Senior News Editor, DC Velocity 04:25
Wow, yeah, that that's real money all of a sudden there. And we're talking, there, about about backhaul, is that right? Once the trucker delivers their load, they may not have a similar rate put back into the truck to pull back the other direction?
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 04:43
Absolutely. And certainly it's rare that they're going to have something exactly where are they delivered, right? So, they're typically going to do some sort of hauling empty, hopefully to a fairly close shipper, to get their next shipment. But all those empty miles definitely take a toll, because you're paying for fuel and you are not getting any revenue to offset that.
Ben Ames, Senior News Editor, DC Velocity 05:05
Right, right, got it. Hard to avoid that. Faced with those challenges, one way that we've seen transportation and logistics providers handle some of those rising costs is by adding surcharges to their fees, essentially passing the cost along. Have you seen diesel fuel increases across the industry affecting that kind of surcharge rate.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 05:28
Yes, it's up across the board for less-than-truckload, for truckload. In fact, I actually have seen several surcharge tables that would have been [tapped], you know, they essentially didn't even go that high. They will continue because, you know, you have to add the additional range, right? to include the higher fuel, but the actual tables that you see in contracts did not even go this high in several occasions. So, it's definitely a very big piece. And I would say a large number of shippers have been reaching out for cost, you know, analysis to understand more about their, the fuel impact on there.
Ben Ames, Senior News Editor, DC Velocity 06:07
Right, right, for sure.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 06:08
I mean, that's a big piece, and certainly trying to figure out how the fuel, and really getting granular of how much fuel, like, is attributed to this one widget. You know, how do they understand, is that something they should be passing along to their customers? Are they going to try to ride the storm? And so, I get requests on a daily basis for that type of analysis.
Ben Ames, Senior News Editor, DC Velocity 06:31
Yeah, they're really getting pinched there, it seems. And to make matters worse, you mentioned another interesting point, that rising oil prices can also actually make prices tick up for end consumers for any product that uses petroleum as one of the ingredients. They use, you know, byproducts to make these things, and apparently, that includes the everyday stuff like sneakers and lotions and candles and trash bags. That's also affecting some of this?
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 07:01
Yes, I think that's a little slower to hit. Like, as a consumer, I have not experienced it, but I do anticipate that those costs will start hitting the consumer if these fuel levels rise. I know you mentioned that there has been a slight decline in the last week, but they're still hovering at extremely high levels, and I believe that retailers are seeing those costs on their products rising, but are trying to grapple with "What are we doing? When do we pass this on? You know, how do we pass this this increase on?" because it's hit so suddenly. So, I think that if it stays like this, yeah, we are going to be paying more for lotion and trash bags and things like that. I just don't know if everyone's been able to get their arms around it enough yet to pass it on to that consumer.
Ben Ames, Senior News Editor, DC Velocity 07:44
Got it. It takes time to filter through the system.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 07:46
Yeah, just like our, you know, I'm sure all of us experience, when you go to the grocery store now and supply chain costs, it took a while for that bottleneck in supply chains to to hit us as end consumers, but I've seen it now pretty much everywhere.
Ben Ames, Senior News Editor, DC Velocity 08:00
Yep, for sure. And as a 3PL, at BlueGrace, there, you're really sort of in the middle and having conversations with both the shippers and with the truckers, the carriers. I know you mentioned that, that you're getting calls on a daily basis to look for solutions. But what sort of answers are you giving them?
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 08:20
Well, you know, on the carrier side, the big one is reducing the deadhead miles, as we already discussed, and the cost of moving an empty truck. So, that's our focus for our carrier base, is to keep them running and to keep them full. As far as clients, I would say they're now looking at a lot more optimization analyses, too. They're more willing to hold on to shipments to increase their density, or maybe making a larger window for shipping, getting something ready a couple days in advance and trying to fill a truck, and that is, in particular, for those that don't typically use the entirety of a truck. Or maybe even if you're shipping less-than-truckload, only a couple of pallets, they're holding onto those pallets to create a denser load and reduce their overall costs, because once they can get—again, especially for LTL, it's a percent of the line haul, so you want to get more shipped at a time. So, we are definitely doing a lot of these types of analysis for our customers right now. I think the other thing that all these shippers are looking at doing is passing it on to all of us. So, those are basically the ways they're looking to offset these rising costs.
Ben Ames, Senior News Editor, DC Velocity 09:27
Got it, yeah. Those dominoes, they just keep on tipping over and it all filters through the system. Mary, we really appreciate your spending some time to talk us through some of these issues this week.
Mary Murphy, Senior Director of Managed Logistics Strategy, BlueGrace Logistics 09:38
Thank you. I really enjoyed it.
Ben Ames, Senior News Editor, DC Velocity 09:40
Our guest today has been Mary Murphy from BlueGrace Logistics. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 09:46
Thank you, Mary and Ben. Now let's take a look at some of the other supply chain news from the week. And Victoria, you wrote this week about a new report from the food industry that discusses their major supply chain concerns. Can you tell us more?
Victoria Kickham, Senior Editor, DC Velocity 10:00
Sure, yeah. So executives in the food and beverage industry are really stepping up their efforts to mitigate supply chain risks following, you know, really two years of delays and disruptions to business operations. And that's according to a report from the advisory firm Mazars. This report is called the Annual Food & Beverage Industry Outlook for the United States, and it actually covers a wide range of issues pertinent to food and beverage that includes things like sales trends, changing consumer buying habits, consolidation and acquisitions in the industry. But what stood out for me is that supply chain issues have risen to the top of industry leaders' concerns. More than half—I think it was about 54%—of survey respondents said their top industry concerns this year are shipping costs, container costs, and/or other unexpected fees at ports. Some other concerns included rising commodity costs, the need for supply chain improvements, delays due to shipping congestion, and truck driver availability. Now, these are all issues we talk about regularly from an overall logistics and supply chain perspective, but I think it's interesting to see how they're affecting specific industries—especially the food supply chain, which is, of course, important to all of us.
David Maloney, Editorial Director, DC Velocity 11:19
Right, it certainly is. Victoria, did the report mention any strategies that the food industry is using to address these problems?
Victoria Kickham, Senior Editor, DC Velocity 11:27
Yes, and these are familiar tactics and terms as well. So, to combat the unpredictability they're experiencing and better manage risks and costs, 41% of the respondents said they're making strategic investments in supply chain diversification and 45% said they plan to increase their number of suppliers this year. They also said they plan to source more domestically and seek alternative products to address all of these problems we're talking about. The survey also asked how companies will prioritize supply chain improvements, and respondents said they'll focus on the cost of goods, followed by product delivery time, knowledge and information sharing, and food safety issues. And that last one is really important in this industry, of course, because, you know, delays and disruptions can lead to loss of income, but also, due to spoilage, it's also a health and safety concern. So, like we've said over and over again the past two years, logistics and supply chain has really taken on a much higher profile, and it's something companies across so many industries are paying more attention to these days.
David Maloney, Editorial Director, DC Velocity 12:35
Certainly is. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 12:38
You're welcome.
David Maloney, Editorial Director, DC Velocity 12:39
And Ben, you wrote this week about a proposed ocean shipping reform act. Can you share some details about that?
Ben Ames, Senior News Editor, DC Velocity 12:45
That's right, we've been talking about some challenges, really, in a lot of parts of the industry, but thankfully, we can now talk a little bit about some efforts to find some solutions. We've been covering Washington a lot this year, and that's because Congress has found a way to pass several significant acts affecting the logistics sector, in spite of the partisan, you know, bickering and resentment that usually comes these things up. One, of course, was the infrastructure bill in 2021, and another was the postal seervice reform bill just earlier this month, and now we have a third logistics-area bill that appears destined for success. You always have to be careful saying that with federal politics, but this one has lots of supporters. I'm talking about the Ocean Shipping Reform Act, which on Tuesday this week passed a vote in a Senate committee, and it's now due to come before the full Senate for a vote. Since it's already passed the House at the end of last year, it would then be reconciled with that previous version, and then it would head to the White House, where President Biden has said he supports it. So, when you add all that up, it could take effect as soon as this spring. What it would do, the bill is an attempt to fix some of the big container backups at the maritime ports that have contributed to some of the supply chain problems we talked about. The supporters of the bill say that it would keep U.S. exports more viable in foreign markets by preventing what they call unfair ocean carrier practices. And what they mean by that is, in their words, exorbitant freight rates, declined booking requests, unreasonable freight and demurrage and detention charges. So, it would control those things by strengthening the Federal Maritime Commission ability to have oversight and enforcement. As a reminder—I had to look this up myself—but the FMC defines itself as an independent federal agency, and they're responsible for regulating U.S. international ocean transportation system[s] in order to benefit U.S. exporters, importers, and consumers.
David Maloney, Editorial Director, DC Velocity 14:48
Well, Ben, this all sounds like it could be a real solution to the port congestion problem and other maritime issues we've been reporting on. Is there anybody opposed to this approach?
Ben Ames, Senior News Editor, DC Velocity 14:58
I'm glad you asked.The answer's "of course." There is some resistance. And that comes particularly from the ocean carrier trade group the World Shipping Council. Now, of course, they represent those ocean carriers who may be headed for stricter oversight, so maybe it's not surprising that they oppose it, but they do make some strong points. First, they say that the container shipping industry is not as uncompetitive or monopolistic as some of the supporters say. And secondly, they say that the bill would do nothing to address some of the root causes of our supply chain congestion on the land side. So, the group pointed out that Americans—consumers, that is—continue to import goods at record levels, so much so that the U.S. ports and the landside logistics workforce is just unable to process all that cargo at once. And they say that the ocean carriers, meanwhile, have deployed all the ships they have, but the logjams on land are what's keeping the vessels stuck outside U.S. ports. So, you can see there's some finger pointing going on. But there's so much bipartisan support for the reform bill that it looks to be on really strong footing for that upcoming Senate vote. On the industry and business side, for example, it has some support from groups like the Agricultural Transportation Coalition and the American Apparel and Footwear Association. And in Congress, it has the support of a group in the House of Representatives. It's called the Problem Solvers Caucus. That's a bipartisan group that says it gets behind ideas that appeal to the broad spectrum of the American people. So, you know, a lot of moving parts here to track, but the best we can tell, it looks to be sailing toward probable success.
David Maloney, Editorial Director, DC Velocity 16:40
Right. Sailing is right. So we'll keep an eye on how the legislation progresses through Congress. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 16:47
Yeah, sure will.
David Maloney, Editorial Director, DC Velocity 16:48
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And be sure to check out the podcast Notes section for some direct links on the topics that we discussed today.
And our thanks again to Mary Murphy of BlueGrace Logistics for being our guest today. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded on Fridays.
And speaking of subscribing, we encourage you to check out our new sister podcast series Supply Chain in the Fast Lane. It's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. The initial series looks at the state of logistics. This past Tuesday, we discussed the parcel industry. Next Tuesday we'll be looking at the trucking market. Subscribe to Supply Chain in the Fast Lane wherever you get your podcasts, and be sure to catch the past episodes.
And a reminder that Logistics Matters is sponsored by Beckhoff. Discover intralogistics automation without limits. Beckhoff offers a complete, ultracompact motion-control system for automated material handling equipment, including a range of space-saving motor and drive solutions for BLDC, MDR, servo technology, and more. Make your move to better motion control by visiting Beckhoff.com/intralogistics.
Next week our entire staff will be in full force at Modex in Atlanta, so we're taking a week off from this podcast. Be sure to join us again in two weeks. Until then, please stay well and have a great week.
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