Here’s a look at news stories from the supply chain, logistics and transportation industries from November 2015:
Bigger Trucks Shot Down. After a long battle, the call for increased truck size was shot down by the House. However, the motion only denies language about bigger trucks in the highway bill, they could still become a reality someday.
$340 Billion, Not Enough? The House passed a long-term highway funding bill. This is the first long-term bill since 2005 and authorizes nearly $340 billion for highway and transit programs over 6 years. Many in the industry fear this is not nearly enough to fund proper repairs and even more money will be needed in the near future.
Are CSA Scores Accurate? A new ATRI study shows the Compliance, Safety and Accountability (CSA) scores are affected by non-preventable crashes, once again opening a discussion to the scores value. FMCSA’s Safety Measurement System does not factor in crash accountability, and the agency has not been able to factor non-preventable crashes into the percentile score.
More Regulations on Hold. There are a few highly anticipated rule changes on hold: the HOS restart suspension may be on pause until February, and the ELD Mandate is on hold indefinitely. These regulations will affect the industry and everyone is anticipating their application. The HOS restart rule has yet to show any significant safety improvements, and the ELD Mandate, while in the works for some time, is still being finalized.
Opportunity for Rail Industry. The elimination of the Keystone Pipeline will be beneficial for the rail industry, if they can handle it. Rail companies could benefit from the denial of the Keystone XL, but first, they must provide better rates compared to over-the-road trucking and find more rail car capacity.
As the New Year approaches, the logistics industry can look forward to advances. New technology continues to develop, supply chains will be even more influenced by consumers, and shipping costs will increase. Logistics operations have changed dramatically in the last few years and 2016 will bring even more changes.
Here are some trends you can expect in 2016:
Real-time inventory management. Leading retailers will begin implementing mobile point of sale (POS) systems, beacons, sensors and other technology that will revolutionize inventory management and the whole buying experience. Customers will be able to pick up an item and simply walk out of the store, with the price of the item automatically charged to their card. Real-time visibility, both in the store and throughout the supply chain, will allow inventory to be replaced as it is moved, and items produced as they are bought.
Retailers will make organizational changes. Omni-channel challenges will force retailers to look at the structure of their organization. Processes must be fluid. Departments have to work together – sharing short- and long-term goals and exchanging data quickly and efficiently. Logistics departments will be more involved with the entire organization as the fulfillment of e-commerce demand requires an enterprise-wide effort.
Transportation rates will increase.FedEx and UPS rolled out 4.9% general rate increases (GRIs) at the end of 2015 that will be applied in 2016. This increase falls on top of two fuel surcharge increases in 2015. The entire motor freight industry will likely follow suit in an effort to increase revenue. For a long time, carriers scraped by on razor-thin margins due to high gas prices and high competition for freight. Now, the worsening driver shortage has made truck capacity a scarcer commodity, which drives up rates. Many carriers kept fuel surcharges the same or increased them, even though the price of diesel has plummeted and is expected to stay low. Truck prices will rise and are expected to continue rising for the next few years.
Collaborative relationships. Many companies are working together in order to become a preferred shipper. Shippers will continue to turn to 3PLs to improve transportation operations and to secure reliable capacity. This has been a trend for years, but now, shippers are even collaborating with their direct competition to save on freight spend. For example, two industrial distributors in the same geographic location may decide to use the same freight carrier service in order to consolidate loads, acquire transportation data and provide carriers with backhaul opportunities – all in an effort to guarantee capacity and lower costs.
Sustainability. Eco-friendly initiatives will become more important in every industry as consumers demand more social responsibility from corporations. The EPA is set to outline very strict emissions regulations in 2016, which much of the transportation industry sees as unfair. Freight transportation will be an area of focus for green-initiatives, as it is a pollution-heavy industry. It is up to logistics departments across the country to find solutions to these increasingly difficult challenges.
The biggest shopping weekend of the year is right around the corner, and retailers have been planning for the increase in sales for months. Most retailers have adopted to the omni-channel environment, merging numerous shopping channels for the convenience of the customer. Modern shoppers avoid the long lines and huge crowds associated with Black Friday to buy from online vendors who offer the same markdowns, plus free shipping and various return options.
Consumer expectations put pressure on retailers to provide a high quality, omni-channel experience. According to a Dynatrace holiday survey, 46% of customers will shop elsewhere if an app or website fails to load in 3 seconds, and 52% of millennials shop more on their devices than in a store.
In the highly competitive omni-channel world, retailers who have built a sustainable strategy will find advantages over competition in areas like:
Supply chain experts anticipate Cyber Monday to be one of the busiest delivery days of the year, largely in part to additional e-commerce shopping. In 2013, FedEx said it moved more than 22 million shipments worldwide on Cyber Monday. This season, FedEx predicts it will move a record-breaking 317 million shipments between Black Friday and Christmas Eve.
Half of holiday shoppers have concerns about timely deliveries, but according to an analysis by software provider ShipMatrix, last year, freight carriers provided on-time delivery; reassuring retailers and shoppers that products will arrive when wanted, and that carriers have the ability to handle large volumes of freight.
Omni-channel fulfillment has retailers asking questions about which mode is the best, where distribution centers should be located and how to make the supply chain more efficient. According to Brain J. Gibson, omni-channel isn’t the only trend shaping the retail supply chain. Retailers are struggling with inventory management, cost of labor, capacity, and rates.
For shippers concerned about delivery performance, a TMS provides shipment visibility and status notifications throughtrack and trace features. TMS software documents data so that retailers can plan for capacity needs, increases of demand, fluctuating costs and shipment volume.
An efficient transportation network and solutions will overcome obstacles for retailers, especially during the seasonal rush. “You have to be able to manage the basics of freight movement, capacity, inventory accuracy, and labor productivity very closely and very well. You can’t jump ahead or forge the basics as you move forward,” says Gibson.
For retailers overwhelmed with the seasonal demand, outsourcing transportation management to a 3PL with a TMS and strategic focus will present opportunities for savings through competitive rates, more efficient processes and optimized operations.
It has been another tough year for consumer packaged goods (CPG) shippers. In 2015, CPG shippers were hurt by the same trends that affected the industry last year, despite increased efforts to cut logistics costs and improve service. Data collected from 2014 sheds light on what affected CPG shippers in 2015. Here are 5 trends that continue to affect CPG shippers in 2015:
CPG transportation is the most important aspect of logistics. In a recent study, 83% of supply chain leaders said transportation is their greatest concern. This is a drastic change from an identical study done two years ago, where transportation was never mentioned as a top priority. The main obstacles in transportation are rising line haul rates and the difficulty of securing capacity. These obstacles are driven, among many factors, by the increasing driver shortage and infrastructure-related problems. The bad news for CPG shippers is that these are systemic problems with no resolutions in sight and they will continue to drive up linehaul rates and worsen the driver shortage.
CPG transportation networks require redesign. Network redesign is the second highest concern of supply chain leaders in 2015, with 72% saying it was one of their top priorities. With the rising costs of transportation, the need for more carrier-friendly routes, and the emergence of new and fast-growing channels, CPG shippers realize that networks cannot be static in today’s supply chain environment. To achieve strategic objectives, networks must be frequently analyzed and adjusted to provide consistent service levels and keep up with fluctuating demand. A network redesign can be difficult, requiring long-term thinking about company goals and the market outlook, but it is a necessary step to take for CPG shippers.
CPG inventory size is growing despite lean efforts. Approximately 70% of ambient CPG shippers experienced an increase in inventory in 2015, despite improvements in demand and transportation forecasting. There are a few straight-forward reasons for inventory increases: inventory is backed up due to road congestion and last-mile delivery obstacles, shippers have accumulated safety stock while redesigning transportation networks, and limited capacity has left some inventory unable to be moved. Only 60% of temperature-controlled CPG shippers experienced inventory increases because temperature-controlled shippers often have long-term, mutually beneficial relationships with carriers, which highlights the need for better partnerships.
CPG freight costs continue to rise. Median freight costs have risen by 14% for temperature-controlled shipping. CPG shippers have historically enjoyed competitive pricing, but tightening capacity is increasing rates. CPG shippers usually ship transactional freight for convenience, but now, capacity is scarce and costs are high, CPG shippers are trying to move to long-term relationships with 3PLs and carriers to lock in reasonable freight rates. Looking ahead, 83% of supply chain leaders in the CPG industry expect transportation costs to continue to increase. Increasing rates mean now is the time for CPG shippers to find long-term solutions.
CPG service levels are declining. CPG shipping service levels have slowly declined over the past few years. The main reasons for declining service are transportation related: the driver shortage and tight capacity, congestion along routes and at delivery points that create significant shipping delays. Amazingly, 96% of CPG shippers did not meet their requested arrival date (RAD) goals for the year, with only about 85% of shipments arriving on time industry-wide. Consistency in freight transportation is difficult for CPG shippers fighting for transactional freight while operating insufficient transportation networks. These statistics highlight the serious shortage of capacity and infrastructure problems that the industry faces.
Transportation is the biggest obstacle for CPG shippers and moving goods will only get more expensive and more complex. Industry leaders choose to outsource to a 3PL to save time and money, while gaining expertise from a long-term solutions partner. 3PLs provide custom, technology-enabled transportation solutions that CPG shippers need to navigate today’s logistics environment.
Technology has made supply chains and transportation more competitive, more convenient and more profitable. Technology’s biggest gain for shippers is actionable data. Shippers who examine transportation data develop strong operative initiatives, identify inefficiencies and improve inventory management.
What are some transportation sources that shippers can generate data from?
Transportation Management Software
Electronic On-Board Recorders (EOBRs)
Social Media, s, Email Records
TMS data is considered an internal data source. It can be intricate, but if evaluated properly, it will reduce costs and increase productivity. More than half of TMS users gain at least 8% savings in freight costs. Companies who operate manual methods instead of using a TMS for supply chain and transportation management lack visibility.
A TMS registers new data and stores historic data which, when used together, creates better communication, forecasting and decision making. Using a TMS lets a shipper measure, predict and expose obstacles and solutions in the supply chain.
EOBRs are an external data source that has revolutionized business intelligence for shippers and carriers. EOBRs collect data and communicate regularly to ensure that there are no problems on the road and that deliveries will arrive on time.
Here’s an example of how EOBRs benefit shippers and carries:
A driver with a reefer trailer full of produce is driving down a long stretch of highway they are unfamiliar with. Unknown to the driver, something has gone wrong with the trailer and the temperature is slowly increasing, putting the produce at risk of spoiling. The EOBR will notify the carrier that something is wrong, and they can in turn notify the driver. At this point, the carrier would, based on the truck’s location from EOBR information, direct the driver to the nearest garage to get the trailer fixed. The EOBR technology is constantly monitoring so that product integrity is never compromised
With the help of technology, transportation users and providers can experience better service, faster communication, more visibility and smarter operational decisions. Now, complicated tasks can be automated and processes can be regularly evaluated in order to produce maximum efficiency. Supply chains will continue to benefit from technology by seeing lower costs, less error and accessible information.
The holiday season is upon us, and retailers must be prepared to avoid seasonal challenges. One major obstacle facing retailers: the rising number of e-commerce returns.
Return rates have amplified as the percentage of internet sales continues to develop. The shift to e-commerce sales, especially during the holidays, prompts impulse buying and a greater chance of the customer’s later regret, which results in higher return rates. The predicted rate of returns of total retail sales for the 2015 holiday season is 8.1%. Establishing an effective reverse logistics process allows retailers to minimize processing costs and increase the recovery value of returned goods.
Supply chain managers will face more complexity during the holiday season, Pitney Bowes 2015 Holiday Shipping Survey shows. The majority of shoppers prefer to return purchases in a nearby store, while 38% of shoppers choose to return a package through a shipping provider. Only 20% of shoppers like to have a carrier pick up a package from their home.
In order to keep up with competition, companies must offer a few return options and analyze sales in order to successfully condense returns.
1)Recalled or overstocked products that weren’t purchased and must be removed from the stores. This usually happens when a retailer has an agreement with a manufacturer, where a manufacturer takes back all unsold inventory above a negotiated amount.
2)Customer return volume can be predictable, forecasted by sales volume. Although the return rates for products bought online is much higher than for goods sold in physical stores, most returned online goods can be returned to stock.
The main challenge is controlling reverse logistics processes with multiple return channels and remote facilities. The retailer should think about acquiring additional labor and space, enhancing communication with partners and adjusting shipping processes:
A company may need additional warehouse space to keep up with high flow of returned goods during the seasonal rush. This mean renting storage trailers and/or using space in the nearby warehouses.
In order to ensure quick product flow during peak times, when return volume can be three times greater than usual, a company should hire additional staff.
Retailers need proper management of processing and shipping. There should be a balance between the free space needed for shipping high-value inventory and the amount of excessive inventory leftover.
Retailers will benefit from establishing internal lines of communication with all key partners. Ensuring data visibility will make reverse logistics management easier and allow all parties involved operate in cost- and time-efficient manner.
The earlier retailers start preparing for transportation during the holiday season, the better. Well-designed return processes will improve customer experience and satisfaction. With the right reverse supply chain strategy, a retailer can benefit from returned inventory by processing it quickly and returning it in stock or into alternative channels.
This year has been less stressful for shippers compared to the strong customer demand and tight capacity of 2014. But, the situation is about to change. A recent market overview by the Journal of Commerce shows that both contract and spot market truck rates will increase.
The current recess of rate growth will end due to the expanding economy and shrinking capacity. Economic forecasts for 2015-2016 predict that development will accelerate from about 2.4% to 3%. David G. Ross, a managing director at Stifel, expects that truckload rates will rise 3-5% and LTL rates will rise 2-4% percent this year.
A new report by the ATA projects freight volume to rise 29% over the next 11 years, due to a boost in population, foreign trade and added development from the energy sector.
The truckload capacity crunch has been stimulated by new US regulatory requirements that worsen the continuing driver shortage. The truck driver shortage is estimated at 48,000. This trend will only get worse as the industry grows and more drivers retire; the driver shortage could reach 175,000 by 2024.
There are additional factors that impact truckload capacity including demand, weather, industry trends, fuel prices, and federal regulations.
Demand. US consumers have gained confidence; employment rates are up, debt is falling and Americans are spending. As customer demands increase, shippers require more capacity, which drives up transportation costs. When demand is too great, it results in inadequate capacity, which leads to poor delivery performance, expedited carrier labor and higher costs.
Weather. Weather impacts prices and capacity; for example, the 2013-2014 “Polar Vortex” led to tension on truckload markets in one of the biggest parts of the country. Even states like California and Texas experienced instability in capacity, though they weren’t impacted by snowy weather. Bad weather increases shipping costs because extra effort is required by the carrier, and weather strains capacity because trucks are on the road much longer.
Industry Trends. Mounting demand in a specific vertical can eat up available truckload capacity. Shippers must be aware of geographical, market and opponent demand in order to find capacity ahead of time to move products.
Fuel prices. For now, shippers are profiting from relatively low fuel rates. Sometimes, fuel prices lead to lower transportation costs, but higher fuel prices mean greater pressure for a transportation budget.
Federal Regulations. Rules and regulations placed by the government reshape how carriers operate and serve shippers. With HOS Rules, a driver loses productivity. The ELD Mandate hurts a carrier’s profitability in the short-term and can put them out of business. For some shippers, this means limited capacity and an inflexible timeline.
What should shippers do? When capacity is strained, rates react by going up. Carriers realize they are able to charge more, both on the spot market and for a long-term deal. In order to avoid the inescapable capacity crunch, shippers should plan a pricing strategy.
Short-term: shippers need to respond quickly to bids and adjust rates.
Long-term: shippers should define key carriers and lock in fixed rates.
The best time for a shipper to set up long-term contract rates is during January and February, when carriers tend to offer lower rates after peak season.
As the holiday season approaches, shippers have to think about securing capacity for freight by finding a reliable partner. PLS Logistics provides value for shippers by instantly finding the best option to move shipments (rates, lanes, carriers).
A national, high-quality steel manufacturer was experiencing difficulty within its supply chain because of a limited scope and sole focus on outbound management. The company wanted to remain focused on their core competencies, but its transportation needs were taking up too much time and effort.
The steel manufacturer realized its need to outsource logistics functions to a 3PL. It needed to partner with a scalable transportation management expert who could handle a complicated, wide-ranging transportation network. As a steel manufacturer, the company needed a 3PL that prioritizes safety and could be responsible for various levels of transport.
PLS Logistics and the company began working together. PLS was able to add value to the company’s supply chain by offering competitive rates, a large carrier network, a user-friendly transportation management system and an on-site team of logistics experts.
First, PLS analyzed historical freight data and used TMS technology to identify inefficiencies in their supply chain. Through detailed reports, PLS saw the need for centralized logistics management and consolidation of transportation metrics. The steel company’s outbound freight management had to be restructured; there was no control over inbound raw materials transportation, which was not moved efficiently.
Since implementing solutions based on actionable data, PLS and the steel manufacturer found profitable results. Today PLS manages over 200,000 truckloads annually for the company and has expanded its scope to include tactical and strategic rail / barge management.
This manufacturer has seen a 15 – 20% reduction in freight costs due to PLS’ purchasing power, and has benefited from a fuel surcharge 40% lower than the market fuel surcharge because of the 3PLs relationships and carrier network.
With the help of on-site logistics coordinators, PLS continues to facilitate collaborative projects to uncover additional savings in freight spend and resource utilization.
The relationship between this client and PLS was effective because transportation management technology was fully integrated, creating a centralized logistics policy where information could be stored and shared throughout the organization.
Enjoy this post? Learn more by reading how to leverage practical big data solutions to save money on transportation.
The process of outsourcing logistics management involves a lot of trust and a cost investment for both parties. Although 3PLs find new ways to provide value for clients, many shippers are not ready to initiate strategic and long-term relationships that require deeper implementation.
Outsourcing specific parts of business operations to an expert is not uncommon. Since a 3PL can reduce transportation costs and improve customer service, many companies outsource inbound and outbound transportation.
5 major benefits customers gain with a long-term 3PL relationship:
Gain expert analysis and other resources to help in decision making
Free up time to focus on core competency – No more manual processes
Maintain/Improve customer service
Improve supply chain efficiency
Enhance operation productivity
A 3PL has the ability to discover profitable solutions through competitive analysis, inbound vendor management and ancillary reports. Some companies find more benefits and savings from spot movements, while others need full support to centralize transportation management software.
When a 3PL provider and shipper enter an embedded, long-term partnership, the 3PL functions as a seamless part of the customer’s supply chain. The embedded level refers to 3PLs and shippers wokring in close, long-term partnerships. This form of relationship requires 3PL providers to invest in technology and facilities, and ensure complete transparency. The main goal of an embedded level partnership is to share risks and gains between parties, so that both can achieve a competitive advantage and provide customer satisfaction. Here, a 3PL becomes a part of the strategic team that will plan supply chain strategy according to the shipper’s needs.
For effective transportation management, PLS’ mission is to become an extension of the customers’ supply chain network. Fully understanding a customers’ supply chain allows PLS’ team of experts to compare rates and lanes, analyze reports and volume, and then suggest the best solutions based on customer needs.
Truck driver pay has increased 17% over the last two years and will continue to climb. Truck drivers haven’t seen pay raises in years. They’re now demanding more money, and carriers must oblige.
What Caused Driver Pay Increases?
Many carriers have recently doled out their biggest pay raises in decades. The average annual pay of a truck driver is $57,000, an all-time high, with many long-haul truckers receiving upwards of $70,000. Carriers have had to significantly increase pay to fight driver retention and help recruit new drivers.
Driver retention reached as high as 96% in 2014. According to a report from the American Trucking Association (ATA), the industry is already short 48,000 drivers. Current truck drivers are nearing the age of retirement and there are not enough young drivers to replace them, let alone keep up with the growing U.S. freight volume. The large pay increases are a direct result of these major challenges facing the industry.
How Does this Affect Shippers?
Increasing driver pay accrues more operating costs for carriers. Over the road (OTR) carriers have been financially hurt by high fuel prices, expensive equipment investments and razor thin margins in recent history. With the new, additional costs of increased driver pay, carriers must pass these expenses on to shippers. All shippers can expect transportation costs to increase by at least 10% in the coming years.
In addition to increased transportation costs, shippers are having a harder time securing the truck capacity they need to ship regularly and on time. This is because carriers have to use their drivers wisely since there are so few of them. Carriers are very selective with the freight they haul.
Due to the rising cost of transportation and the difficulty of securing capacity, many shippers are scrambling to improve transportation operations. This is in order to gain preferred shipper status so that carriers choose to haul their freight over others.
Outsourcing transportation is becoming very popular amongst shippers. About 80% of Fortune 500 companies and 96% of Fortune 100 companies use 3PL services in some way. This is because most 3PLs have access to guaranteed capacity and can leverage down prices in carrier negotiations.
3PLs typically have the expertise to help carriers navigate the difficult trends in the transportation industry.
Enjoy this post? Learn more by reading how to leverage practical big data solutions to save money on transportation.