logisticsmgmt.

com 2017 Truckload Brokerage

Roundtable 36
Cloud TMS 42
Game-changing voice trends 50
July 2017 ®

28th Annual State of Logistics

Into the great

unknown Page 24

SPECIAL REPORT:
Site Selection: Seeking a
skilled workforce 56S
Get your daily fix of industry news on [Link]

management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S

‹ Industry players make Fortune 500 list. With logistics that for the biggest miners, a move to crew-less ships
accounting for nearly 8% of total U.S. GDP at $1.408 trillion, could deliver new savings in the $86-billion-a-year sea-
it’s not surprising that many well-known freight transportation borne iron ore market, mirroring the shift to autonomous
and logistics companies again made the 2017 Fortune 500 trucks to trains that allow fewer staff to remotely operate or
rankings. Here’s a quick look at where some industry players monitor multiple vehicles.
ranked: UPS No. 46; FedEx No. 58; Union Pacific No. 143;
XPO Logistics No. 191; C.H. Robinson Worldwide. No 212; ‹ Ag kudos on the high seas. A trio of ocean carriers
CSX No. 257; Norfolk Southern No. 284; Ryder System No. reached the highest scores in this year’s “Ocean Carrier Per-
394; J.B. Hunt Transport Services No. 407; and Expeditors formance Survey” conducted by the Agricultural Transporta-
International of Washington No. 429. Many other well-known tion Coalition (AgTC). In the 11th annual survey, Hamburg
companies qualified for the Fortune 1,000, including: YRC Sud was the AgTC “Top Ranked Carrier” for 2017, with
Worldwide No. 534; Swift Transportation No. 586; Hub K-Line and NYK presented with “Top Performance” recogni-
Group No. 640. Landstar System No. 699; Old Dominion tion. The specific categories in which 17 ocean carriers were
Freight Line. No. 731; ArcBest No. 774; Kansas City South- judged included: booking; pre-shipment customer service;
ern No. 854, Werner Enterprises No. 934; Genesee & Wyo- intermodal door service and availability; accuracy in ship-
ming No. 934; Roadrunner Transportation Systems No. 947; ment rating; bill of lading release/turn time; terminal service;
Matson No. 954; and Atlas Air Worldwide Holdings No. 985. equipment availability; documentation; post-shipment ser-
vices; vessel schedules/on time transit; and overall customer
‹ POLA/POLB post best ever May volumes. May vol- service. The AgTC is the largest trade group of agriculture
umes for both the Port of Los Angeles (POLA) and the Port and forest products transportation professionals in the U.S.
of Long Beach (POLB) were better than just pretty good. Collectively, its members will book between two million and
The reason for that is that each port, which collectively three million twenty-foot equivalent units of cargo this year.
account for roughly 40% of U.S.-bound imports, posted
their busiest May ever. POLA May volume was up 3.4% ‹ U.S-bound waterborne shipments remain solid.
annually, with volume through the first five months of 2017 Trade volumes for U.S.-bound waterborne shipments
up 8.5%. Imports were up 3.1%, and exports headed up remained steady in May, according to data recently issued
4.4%. Empty containers saw a 3.1% annual gain. POLB by global trade intelligence firm Panjiva. May shipments at
volumes were up 1.2% annually, topping May 2016 which 987,650 were up 3.3% annually, down from April’s 9.7%
was the second highest May in the port’s history. Imports annual spread, which was the fastest rate of growth going
were up 1.8%, and exports were down 14.2%. Empties back to February 2016 and comes on the heels of a 8.7%
were up 1.2%, with the port having its best month since annual gain in March. Panjiva noted that May shipments
September 2015. Year-to-date, POLB volumes are up were up 3.9% compared to April, and on a year-to-date
4.1%. basis shipments are up 3.6%. On basis of prior years' run
rates, Panjiva said 39.7% of full-year shipments are com-
‹ Mining shipper vetting autonomous cargo ships. pleted by the end of May, which it said suggests full-year
Global mining giant BHP Billiton is looking into using giant 2017 shipments could reach 11.51 million, or 3.3% higher
automated cargo ships to move its commodity-based than a year earlier and lines up with last month’s forecast.
freight like iron ore and coal within the next decade,
according to a Bloomberg report. “Safe and efficient auton- ‹ Maersk fixing financing. Maersk Line has introduced
omous vessels carrying BHP cargo powered by BHP gas is a new service for logistics managers seeking to finance
our vision for the future of dry bulk shipping,” wrote Rashpa their global trade while optimizing carrier service. Spokes-
Bhatti, BHP vice president for freight, in a company blog. men note that supply chains are changing dramatically
He added that the company is seeking partners to work on across sectors, resulting in the need for logistics service
technological changes in the sector. BHP said in the report Continued, page 2

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 1

Get your daily fix of industry news on [Link]

management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S

providers to increase the scope of their services and offer through each port by Harmonized System code as well as
an end-to-end approach. To address this, Maersk has Bill of Landing shipment counts and values. With fluctuat-
launched its Trade Finance solution for it shippers in the ing labor trends, larger ocean vessels and ever-changing
U.S. in five states—New York, Texas, Florida, New Jersey logistics technology, the top U.S. ports have had to adapt
and Georgia—after several successful pilots in Singapore, to stay competitive and meet changing volume demands
India, Spain, and the Netherlands. Maersk contends that year over year.
this “one-stop-shop” concept provides a more effective
way to manage the ocean leg of end-to-end global supply ‹ Learning curve. In an effort to further promote the
chains, both financially and operationally. Leading industry advantages of a career in logistics management, APICs
analysts note that the specific move was not anticipated, announced the launch of a new expanded Supply Chain
but that it appears to be part of Maersk’s efforts to offer STEM Educational Outreach Program aimed at K-12
their shippers a complete package of ocean transportation students. According to APICS, the first effort will be to
and trade services. introduce these young people to the concept of supply
chain by using simple examples before delving into the full
‹ NRF objects to “Brady suggestion.” Logistics man- complexity of the industry. Abe Eshkenazi, CEO of APICS,
agers working with the world’s largest retail trade asso- says that one example of this will be “The Lemonade
ciation may take heed of warnings that the “Brady sug- Activity (K-5)” designed to introduce students to four key
gestion” represents a middle class tax hike. The National areas of supply chain—source, make, deliver, and reuse/
Retail Federation (NRF) recently condemned a proposal by recycle—through an interactive and fun lemonade stand
House Ways and Means chairman Kevin Brady to phase game. “With something as basic as this exercise, we’ll be
in a border adjustment tax over five years. “Phasing in a just starting to demonstrate the importance of supply chain
job-killing plan like the border adjustment tax does nothing management and highlight promising career paths within
to fix its many flaws,” declares David French, senior vice the industry,” he said.
president for NRF's government relations. “It’s a massive
middle class tax hike based on unproven economic theory, ‹ Expat expenses on the rise. Logistics manag-
and doing it more slowly won’t make it any less harmful ers relying on expatriate expertise should take note of
to millions of American workers. If Chairman Brady is truly how expensive some foreign postings have become, say
listening to his colleagues in the House and the Senate, he analysts for ECA, a leading provider of expertise for the
will drop the proposal altogether.” management and assignment of employees around the
world. Its latest “Cost of Living Survey” reveals that Cara-
‹ Digitization of more port metrics. More evidence cas is now the most expensive location in the Americas
of the digitization in the ocean cargo supply chain sur- for expatriates, and the 9th-most expensive in the world,
faced recently with the release of research compiled by thanks to poor availability of goods and global currencies
Descartes Datamyne. The company’s searchable trade in Venezuela. Caracas now sits just above Manhattan in
database—covering the global commerce of 230 markets the regional rankings, and has also overtaken Buenos Aires
across five continents—provides logistics managers with (5th), Los Angeles (6th), Sao Paulo (20th) and Vancouver
fresh news on domestic ocean cargo gateway trends and (38th). Despite prices falling in the previous year, Swiss cit-
productivity in its “U.S. Port Report.” Because ports are ies continue to dominate the global top 10—with Zurich
often a focus point of micro and macroeconomic changes, (3rd), Geneva (4th), Basel (5th), and Bern (6th). The relative
fluctuations in volume and commodities are a key indica- decline of the euro between surveys has seen most Euro-
tor of industry developments, note spokesmen. The report zone locations fall in the global rankings with French, Dutch
reveals the top 20 U.S. ocean ports ranked by inbound and German destinations among those declining most in
twenty-foot equivalent units and key products imported the past year. •

2 LOGISTICS MANA GEM ENT | JULY 2017 [Link]

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 July 2017 [Link]

CONTENTS
VOL. 56, NO. 7
Logistics Management

LM COVER STORY

28th Annual State of Logistics:

Into the great unknown
24 A dash of optimism and a shot of uncertainty continue to cloud the
shipper’s world as U.S. logistics costs decline for the first time since
2009. Meanwhile, e-commerce continues to fuel a boom that’s tempered by
overcapacity, rate pressures, sluggish demand and political doubt. The result:
cognitive dissonance that finds a $1.4 trillion market scratching its head.

SUPPLY CHAIN & LOGISTICS TECHNOLOGY

42 SCM in the Cloud

With 200+ locations, this
105-year-old food retailer
is leveraging a Cloud TMS
to streamline inbound and outbound freight activities at its
1.3-million-square-foot distribution center in Central Pa.

GLOBAL LOGISTICS

46 Emerging Market Logistics:

Mitigating risk
TRANSPORTATION BEST
Transport infrastructure and frequency of
PRACTICES/TRENDS ocean and air connections drive the competi-
36 2017 Truckload tiveness of emerging markets again this year, as
analysts rate “market connectedness” as a key
Brokerage Roundtable economic indicator for expansion.
In a marketplace that’s seeing a
slew of new entrants and significant
technological advances, the truckload WAREHOUSE & DC MANAGEMENT
brokerage market finds shippers and
carriers alike seeking out the high-
50 Voice-directed picking
From augmented reality to the “voodoo of voice” to
est visibility and the best value in a
the sunset of Windows mobile operating systems,
fiercely competitive environment.
here are five voice-related trends that are making
an impact on warehouses and DCs right now.
DEPARTMENTS
1 Management update SPECIAL REPORT
9 Viewpoint
Site Selection/Economic
10 Price trends
Development
13 News & analysis
While warehouse and distribution centers (DCs)
20 Newsroom notes have historically been located where land is cheap
22 Moore on pricing and transportation networks are excellent, today’s
80 Pacific Rim report criteria needs to include a skilled workforce ready to
manage an increasingly digital operation. Page 56S

Logistics Management® (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Suite 200, Framingham, MA 01701. Annual
subscription rates for non-qualified subscribers: USA $139, Canada $219, Other International $269. Single copies are available for $20. Send all subscription inquiries to Logistics
Management, PO Box 677, Northbrook, IL 60065-0677. Periodicals postage paid at Framingham, MA and additional mailing offices. POSTMASTER: Send address changes to: Logistics Management, PO
Box 677 Northbrook, IL 60065-0677. Reproduction of this magazine in whole or part without written permission of the publisher is prohibited. All rights reserved. ©2017 Peerless Media, LLC.

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 5

The average U.S. cargo
theft is $233,000*.
What’s more surprising?
You’re probably not protected.
Most companies assume it won’t happen to them. But in the U.S., more than 800 of them are proved
wrong every year. And they’ll need a lot of new sales to cover just one bottom-line loss. Bad guys are
plotting, but so are we. UPS Capital Insurance Agency, Inc. will customize a policy for your business
and even cover losses to the full retail value. Better yet, with more than 100 years of supply chain
expertise, we can help prevent them in the first place. Protect yourself. [Link]

UPS Capital insurance Agency, Inc., and its licensed affiliates are wholly owned subsidiaries of UPS Capital Corporation. Insurance coverage may not be available in all jurisdictions. Insurance
is underwritten by an authorized insurance company and issued through licensed insurance producers affiliated with UPS Capital Insurance Agency, Inc., and other affiliated insurance agencies.
©2016 United Parcel Service of America, Inc. UPS, UPS Capital, the UPS brandmark and the color brown are trademarks of United Parcel Service of America, Inc. All rights reserved.

*FreightWatch International, Supply Chain Intelligence Center: Annual Cargo Theft Report 2014.
 EDITORIAL STAFF [Link]
ONLINE
Michael A. Levans Group Editorial Director
Francis J. Quinn Editorial Advisor
Patrick Burnson Executive Editor EXCLUSIVE LM WEBCAST
Sarah Petrie Executive Managing Editor
Jeff Berman Group News Editor
THURSDAY • JULY 27, 2017 • 2 P.M.
John Kerr Contributing Editor,

Getting the most out of

Global Logistics

Bridget McCrea Editor at Large,

Technology
Roberto Michel Contributing Editor,
your 3PL relationship
Warehousing & DC Join LM’s executive editor Patrick Burnson in a
John D. Schulz Contributing Editor, Webcast designed to bring shippers up to date on
Transportation the gains that can be made by properly leveraging
3PLs for optimized service.
Chris Lewis Creative Director Evan Armstrong, president of Armstrong &
Wendy DelCampo Art Director Associates, explains how creating a balanced
Kelly Jones Print/Online Production portfolio of “Top 50” global and domestic partners
Manager can maximize efficiency and mitigate risk. Using the
most recent research, Burnson and Armstrong will
COLUMNISTS explore how shippers can measure ROI and plan for the future.
Derik Andreoli Oil + Fuel Attendees will learn:
Elizabeth Baatz Price Trends
• how one or more 3PLs can help shippers penetrate new markets;
Kris Timmermans Excellence
Peter Moore Pricing • how 3PLs use technology to optimize service; and
• how to collaborate most effectively with your 3PL partner(s).
PEERLESS MEDIA, LLC
Brian Ceraolo President and
Group Publisher Register today at:
Kenneth Moyes President and CEO [Link]/20173pl
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EDITORIAL OFFICE

2017 EXCLUSIVE LM WEBCAST

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MAGAZINE SUBSCRIPTIONS
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Women in Logistics
subscription According to the findings of Logistics Management’s recent “Salary Survey,” the vital
WEB: [Link]/subscribe role women play in the logistics management community continues to gain traction
E-MAIL: logisticsmgmt@[Link] every year. In this educational Webcast, executive editor Patrick Burnson will share
PHONE: 847-559-7581 our recent findings and will then be joined by a panel of women who are now leading
MAIL: Logistics Management top-level logistics and supply chain operations. The panel will share their success
P.O. Box 677 stories as well as advice for women who are making their way up the ladder.
Northbrook, IL 60065-0677
Our featured panelists include:
ENEWSLETTER SUBSCRIPTIONS
Sign up or manage your FREE • Tisha Danehl, vice president of
eNewsletter subscriptions at
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the executive recruiting
firm Ajilon;
REPRINTS
For reprints and licensing please • Ellen Voie, president and CEO
contact Brett Petillo, 877-652-5295 of the Women In Trucking
ext 118, peerless@[Link]
Association (WIT);
• Andrea Morriera, international
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Supply Hardware; and
• Heather Sheehan, owner of
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Available On-Demand
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[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 7

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 VIEWPOINT

28th Annual State of Logistics:

“Cognitive dissonance” realized
Logistics Management (LM) has once again devoted a significant portion of its
July issue to putting the “Annual State of Logistics Report (SoL)” into context
for logistics managers. The SoL, a comprehensive report that encapsulates the
cost of the U.S. business logistics system during the previous year, represents

the clearest snapshot available of how economic condi- general business vibe is upbeat,” Schulz says.
tions have shaped the current logistics landscape. But despite vacillating volumes and mixed signals, the
The release of the report—which took place on June 20 in good news to be taken out of the report is that logistics
Washington, D.C.—sparks our annual investigation into the managers have done a terrific job squeezing efficiencies
details of the findings and sends our entire editorial staff on a from their existing networks. According to the SoL, U.S.
quest to summarize where each transportation mode currently business logistics costs fell 1.5% last year—7.5% of GDP—
stands in terms of service, capacity and rates (pages 24 – 34). after rising at a five-year compound annual rate of 4.6%
Our John Schulz, who attended the SoL event, says that from 2010 to 2015.
it appears that the cloud of uncertainty that started accumu- “Costs fell across all three key components—transporta-
lating during last year’s election season certainly permeated tion, inventory carrying and miscellaneous costs—mainly due
the nooks and crannies of our logistics operations over the to overcapacity, slack volumes and rate pressures in several
course of 2016—and it seems to be sticking around. sectors, even while demand and prices rose in others,” says
According to Schulz, the authors of the SoL take their Schulz. “But overall, the fact that total logistics costs are near
diagnosis one step further. “They contend that this fog of vola- an all-time low is a testament to the work logistics profession-
tility has the logistics segment destined for a prolonged bout als have done managing costs and driving good contracts.”
of ‘cognitive dissonance,’” he says. “Upon further research, I As for what the future holds, Schulz adds that all of this
found that this means a ‘conflicted state of mind,’ where a per- uncertainty hasn’t slowed the pace of change—in fact, just
son simultaneously holds two or more contradictory beliefs or the opposite. “The SOL report certainly validates everything
ideals—and you know, that pretty much nails it.” we’ve been following in LM,” adds Schulz. “In parcel, last-
This “conflicted state” continues to be fueled by the frus- mile, brokerage, across every service and mode, we’re seeing
tration over subpar growth in overall GDP and the continued newcomers and mainstays fight for market share—and they
political bluster that’s yielding few results in terms of regula- are using innovation and technology to undermine old busi-
tory changes or much needed infrastructure improvement. ness models in the process. If this maintains, look for that
At the same time, U.S. business and the shippers manag- 7.5% of GDP to continue to drop.”
ing their freight are watching the stock market, technology
investments, and consumer confidence all rise.
“Amidst these mixed economic and political messages,
shippers have to look no further than demands on their
trucking partners to see the seesaw effect in action,” says
Schulz. For example, the most recent ATA “For-Hire Truck
Tonnage Index” increased 6.5% in May. “However, that pos-
Michael A. Levans, Group Editorial Director
itive number followed a 1.5% decline in volume in April.
Comments? E-mail me at
In fact, logistics managers are seeing volume disruptions mlevans@[Link]
of this caliber across all modes in most markets while the Follow me on Twitter: @MikeLeva

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 9

priceTRENDS
Pricing across the transportation modes

2 145 TRUCKING
1 143 The inflation engine driving LTL prices hit the decelerator recently
0 141 when average transaction prices fell 0.4% in May. But when we look
-1 139 at LTL over the past five months, pricing appears to be on a steady
-2 137 path, now up 5% compared to the same period a year ago. At the
Forecast same time, transaction prices for general freight, such as long-distance
-3 135
2015 2016 2017 2018 truckload services, increased only 0.7% while special freight trucking
% change (left scale) Index 2001=100 (right scale) grew by 0.9% and general freight local trucking services fell 3.1%. As
expected, forecasts for LTL and TL prices tell two different stories. Over
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
the second half of 2017, LTL prices are forecast to rise 4.1% from a
General freight - local 0.1 0.3 -1.2
year earlier, and TL prices are expected to increase 2.2%.
TL -0.1 -0.1 1.2
LTL -0.4 1.7 4.1
Tanker & other specialized freight 0.8 1.1 0.9

6 170 AIR
3 167 Global airfreight traffic is flying steadily now, and global prices
0 164 have responded by heading up. Alas, U.S.-owned airliners report that
-3 161
their prices are still having trouble getting off the ground. Average
transaction prices for flying cargo on scheduled flights declined in four
-6 158
Forecast of the past five months and now sit 4.2% below the same five-month
-9 155
2015 2016 2017 2018 cumulative period a year ago. Over the same time period, U.S.-owned
% change (left scale) Index 2001=100 (right scale) airliners moving freight on chartered planes reported a 1.4% price drop.
Our inflation model for scheduled airfreight shows prices up 0.7% in
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
the second half of this year and then increasing 3.1% in 2018 as global
Air freight on scheduled flights -2.2 -1.2 -5.4
airfreight price trends finally begin to infect U.S. airliners.
Air freight on chartered flights 1.1 -4.4 -1.5
Domestic air courier 0.0 5.2 6.7
International air courier -0.1 6.4 7.8

6 185 WATER
3 181 Waterborne global shipping markets are recovering and prices
0 177 are rising thanks to industry consolidation. Higher demand for dry bulk
-3 173 and container marine services also appears to be repairing worldwide
-6 169 over capacity problems. Meanwhile, data for U.S.-owned deep-sea
Forecast
-9 165 shippers reflect this global transformation with wholesale prices in
2015 2016 2017 2018
the past five months increasing 8.6% above a year ago. Meanwhile,
% change (left scale) Index 2001=100 (right scale) exporters of grain and other products have seen inland shipping
prices still sag, down 2.5% over the same time period. In the second
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago half of 2017, we expect prices for deep-sea service to increase 6.8%
Deep sea freight 1.1 5.0 10.3 and inland waterways to decline 2%.
Coastal & intercoastal freight -0.4 -2.5 -5.9
Great Lakes - St. Lawrence Seaway 0.6 -0.2 0.3
Inland water freight 0.5 -2.6 -2.0

4 175 RAIL
2 173 U.S. railroad companies, both intermodal and carload, are finally
0 171 exerting some of their pricing power. According to the most recent sur-
-2 169 veys, in the first five months of this year compared to a year earlier, aver-
-4 167
age transaction prices for intermodal and carload rail service increased
Forecast by 6.1% and 2.8%, respectively. The biggest improvement came from
-6 165
2015 2016 2017 2018 carload, where rising demand has helped push transaction prices to
% change (left scale) Index 2001=100 (right scale) their highest level since February 2015. Another 3.1% price hike, how-
ever, is needed to get carload price tags back to its previous peak set in
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
May 2014. Our forecast calls for the U.S. rail industry’s average prices—
Rail freight 0.3 2.1 4.0
Intermodal 0.5 1.5 4.9
freight and passenger—to increase 2.5% this year and 1% next year.
Carload 0.3 2.3 3.8

10 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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NEWS analysis
Also:
• Once-optimistic truckers struggle with “somewhat choppy” freight demand, Page 14
• Walmart’s “Project Gigaton” focuses on major supply chain greenhouse gas emissions reduction effort, Page 16
• UPS rolls out new peak shipping surcharge, Page 17

U.S. exporters, truckers exhale

as Trump eases NAFTA threats
Despite early tough talk from White House, the administration now speaks
of tinkering around the edges of NAFTA—instead of trashing it.
By John D. Schulz, Contributing Editor

IT APPEARS THE 23-YEAR-OLD Donohue used the exact same words of respondents indicated that U.S.
North American Free Trade Agreement in late May to describe the Chamber’s trade with other countries is likely to
(NAFTA) is safe—for now. goal in lobbying the administration on strengthen the U.S. economy, and 64%
Hearing pleas from the business NAFTA. said it creates American jobs. Some
lobby, as well as individual transpor- David Congdon, vice chairman 62% of all registered voters said that the
tation companies such as UPS and and CEO of LTL giant Old Dominion U.S. government should negotiate more
FedEx, the Trump administration Freight Line, said that he was “con- trade deals—not fewer.
has backed off threats to unilaterally cerned” the new administration would “American voters support trade
sever NAFTA. The administration now hamper cross-border trade by need- because they see its effects in their
talks of tinkering around the edges of lessly scraping NAFTA. “Global trade is lives every day,” said Myron Brilliant,
NAFTA—instead of trashing it. a reality of life these days.” U.S. Chamber executive vice president
Trucking executives, transportation Meanwhile, a majority of voters say and head of international affairs. “From
officials and shippers have enjoyed trade with other countries helps the the goods and services their companies
400% growth in cross-border trade U.S. economy. A recent U.S. Cham- produce to the products they buy at
since NAFTA was implemented. But in ber of Commerce survey showed 70% the grocery store, trade supports good
late April, the tri-nation agree- American jobs, enhances con-
ment appeared threatened by sumer choice, and drives eco-
President Donald J. Trump, nomic growth.”
who at the time said he was NAFTA appeared threat-
“psyched” to sever the popular ened earlier this year not only
pact among the United States, by Trump, but by some of the
Canada and Mexico. isolationists in his administra-
As word spread among the tion, specifically aides Stephen
business community, Trump Bannon and Peter Navarro,
backed down. Now adminis- Trump’s chief trade advisor.
tration officials are sending out However, it appears that
signals that NAFTA needs to calmer heads have prevailed.
be tweaked, not trashed. Gary Cohn, the president’s
“The first guiding prin- chief economic advisor, and
ciple is do no harm,” com- Treasury Secretary Steven
merce secretary Wilbur Ross Mnuchin, both went to bat for
told a Bipartisan Policy Cen- NAFTA. In addition, Secre-
ter forum recently. In fact, tary of State Rex Tillerson and
U.S. Chamber of Commerce Defense Secretary Jim Mattis
president and CEO Thomas also expressed public support

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 13

NEWS analysis

for more free trade agreements, not fewer. Julie Gibbs, director of BPE Global, companies disrupting supply chains,
The death of NAFTA would have had a global trade compliance consulting like Amazon. “I say short-term because
major reverberations for many U.S. busi- firm, called NAFTA “the largest free- companies like Amazon are changing
nesses, especially the fashion industry, trade agreement in the world that has so quickly that it’s difficult for them to
retailers and manufacturers, not to men- quadrupled the trade among the three see the longer term as it relates to their
tion cross-border transportation providers countries. Untangling it and getting the distribution pattern.”
such as Indianapolis-based Celadon, which U.S. out of it would have been a Brexit- After a lackluster spring, usually
earns upwards of 40% of its revenue from style endeavor that would have involved summer retail demand kicks in. While
north-south Mexico and Canada freight. worldwide complications.” • freight volumes and rates are rising
modestly, more freight is being diverted
through e-commerce channels—and
FREIGHT ECONOMY that’s happening much to the chagrin of
traditional truckload haulers, as online
Once optimistic truckers struggle with shopping and “free shipping” continue
“somewhat choppy” freight demand to grow.
Some LTL carriers such as XPO, Pitt
THIS WAS SUPPOSED to be the best demand hasn’t been as robust as execu- Ohio and others are cashing in on that
of times for U.S. trucking companies. tives expected in the wake of Presi- demand. Recently, truckload giant Wer-
Now fully right-sized since the Great dent Donald J. Trump’s surprising elec- ner Enterprises opened a “last-mile”
Recession, trucking executives were tion victory last year. division, hoping to land some of that
hoping to ride optimism from a newly Did you expect more freight demand e-commerce demand.
elected pro-business president to the by this time of the year? “Frankly, yes, Some evidence for an overall freight
promised land of profits and overflow- I did,” said Hammel. “There was a lot buildup comes from the “Cass Freight
ing trucks. of optimism around the administration Index,” a barometer of freight demand
Well, it hasn’t quite turned out that change in Washington in hopes of a and expenditures. The index rose 3.7%
way. Demand has been uneven; sea- business friendly administration. But in April from March and 4% on a year-
sonal uptick has been modest; and thus far, they’ve been distracted with over-year basis. Spot market dry van
few trucking executives are expecting other problems, so that optimism has truckloads also rose in May before the
a robust “peak season” that tradition- somewhat faded for now.” Memorial Day holiday. At the same
ally started about now and ran past the In fact, the numbers are all over the time, the “Cass Shipper Expenditures
Thanksgiving holiday. place. ATA’s truck tonnage fell for three Index” rose 3.1% from March and 6%
“The last four or five years we haven’t straight months in the spring; however, from a year ago, reflecting in part higher
seen a real peak—only a mild bump,” other indicators are more favorable. fuel surcharges.
said Chuck Hammel, president of Pitts- “We’d define the environment as some- The Institute for Supply Manage-
burgh-based Pitt Ohio, the nation’s what choppy,” said Hammel. “We are ment (ISM) recently said that it’s
18th largest LTL carrier. “Because of up in tonnage, revenue and shipments closely watched index of manufacturing
the changing buying patterns, the dis- slightly, about 2% to 3%. There are activity rose to 54.9 in May, a tick above
tribution shift and the rise of e-com- plenty of opportunities for customized April’s level. Any level above 50 indi-
merce, I’m afraid peak season is a thing solutions, but the sales cycle on those cates expanded economic activity. ISM
of the past.” are lengthy.” also points out that the non-manufac-
It’s not as if Pitt Ohio is doing any- Hammel added that there are turing sector grew for the 87th straight
thing wrong, it’s simply that freight also short-term opportunities around month; but housing, a key sector for
trucking, remained sluggish. Housing
starts fell 2.6% in April.
“I have to admit that April’s contrac-
tion is a bit surprising, especially con-
sidering the anecdotal reports I’ve been
hearing from fleets regarding freight
levels,” said Bob Costello, the chief
economist for the American Trucking
Associations. “It’s not necessarily that
tonnage levels fell in April that is sur-
prising, but the size of the decrease.
One explanation is that housing starts
fell substantially in April.” •
––John D. Schulz, contributing editor

14 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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 NEWS analysis

SUSTAINABILITY

Walmart’s “Project Gigaton” focuses nizations, including World

Wildlife Fund and Envi-
on major supply chain greenhouse ronmental Defense
gas emissions reduction effort Fund (EDF), among
others, in creating
TAKING STEPS TO CUT greenhouse tion stemming the emissions reduc-
gas emissions (GHG) from its supply from its opera- tion toolkit, which
chain, retail giant Walmart recently tions and sup- makes the business
announced that is has rolled out an ini- ply chains, with case for why ship-
tiative entitled “Project Gigaton” that’s the help of what pers should consider
geared towards helping the company it calls a “sustain- becoming part of the
achieve its goal of eliminating 1 giga- ability platform.” Project Gigaton project.
ton—or 1 billion tons—of emissions This platform “Through the years,
from its supply chain by 2030. functions as a toolkit for we’ve seen that integrating
This follows a November 2016 a broad network of Walmart sustainable practices into our
announcement Walmart made in which suppliers, with a focus on manufactur- operations improves business perfor-
it rolled out goals specific for their own ing, materials and use of products by mance, spurs technological innova-
operations and fleets and focused on 2030, which Walmart said is the equiv- tion, inspires brand loyalty, and boosts
an 18% reduction in GHG emissions alent of taking more than 211 million employee engagement,” said Laura
between 2015-2015. passenger vehicles off U.S. roads and Phillips, senior vice president of sus-
According to Walmart, a key compo- highways for a year. tainability for Walmart. “Our suppliers
nent of the project focuses on working The retailer added that it has banded recognize the opportunity to realize
with suppliers to achieve the reduc- together with non-governmental orga- those same benefits in their businesses.

Old Dominion’s focus on premium service means every item arrives with one of the
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Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service
marks or registered service marks of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are
the intellectual property of their respective owners. © 2017 Old Dominion Freight Line, Inc., Thomasville, N.C. All rights reserved.
Major League Baseball trademarks and copyrights are used with the permission of Major League Baseball Properties. Visit [Link].
 NEWS analysis

RATES
By working together on such an ambi-
tious goal, we can accelerate progress UPS rolls out new peak shipping surcharge
within our respective companies and DURING CERTAIN WEEKS in Novem- rary facilities, and additional sorting
deep in our shared supply chains.” ber and December this year, shippers and and delivery personnel at short-term
One of the main drivers for Project consumers should prepare to pay a little premium rates—adding that large and
Gigaton runs in tandem with an analy- more for deliveries handled by UPS in the heavy shipments, as well as those with
sis from the Environmental Defense form of a new peak shipping charge, which unconventional shapes or size, often
Fund (EDF) on the relative impact of the company rolled out late last month. pose operational challenges during
supply chain-based emissions com- This charge will be geared toward peak periods.
pared to direct emissions—with a U.S. residential, large packages along “We’re focused on helping our cus-
major takeaway being that 80% of the with packages over maximum limits. UPS tomers achieve success during some of
emissions associated with U.S. retail explained that it will allow the carrier to their most important selling seasons,”
and consumer goods industry is in the continue to focus on “its best-in-class said Alan Gershenhorn, UPS chief com-
supply chain. customer value” as well as offset addi- mercial officer. “To meet their require-
“The vast majority of the impact is tional expenses that are ments, UPS flexes its
in the supply chain, which is why what incurred during periods delivery network to
Walmart is doing is so important,” said of heavy volumes. process near double
said Jason Mathers, senior manager UPS added that, our already massive
of supply chain logistics at the EDF. during the holiday regular daily volume,
“This is on par with the ambition we peak, it needs to tem- and that creates excep-
see true leaders do these days.” • porarily acquire addi- tional demands. Our
––Jeff Berman, tional air and truck goal is to help every
group news editor cargo capacity, tempo- customer obtain the

OD Domestic offers: • More than 220 service centers nationwide

• Competitive transit times and pricing
• Proactive shipping solutions

For more information, visit odfl.com or call 1-800-235-5569.

NEWS analysis

delivery capacity they need, combined added that a similar package shipped to 30 million packages on more than half of
with predictable and timely service they a commercial address would experience the available shipping compared to an
count on from UPS, even when there is no additional cost. average non-peak day when it ships more
limited capacity in the UPS network.” Shippers may also want to think than 19 million packages;
For ground residential rates, UPS’s twice about larger packages during the While this is one way to address the
per-piece peak charge, for the 48 con- holiday season, with UPS saying that additional costs associated with the
tiguous states and intrastate Alaska and from November 19 - December 23 it will holiday shipping period, Jerry Hemp-
Hawaii, will be $0.27 for the weeks apply peak surcharges to large packages stead, president of parcel advisory firm
of November 19-25, November 26 - and also packages that exceed maximum Hempstead Consulting, told LM that
December 2, and December 17-23. size limits, with these charges in addi- the reality is that this additional charge,
There will be an $0.81 charge for UPS tion to normal surcharges applicable to as worded, penalizes all shippers regard-
Next Day Air Delivery from December such packages. less of their shipping pattern.
17-23, a $0.97 charge for UPS 2nd Day UPS said a peak surcharge will be “The fee is focused on residential,
Air Residential from December 17-23, a published on September 1 in a revised but some residential like prescription
$0.97 charge for 3 Day Select Residen- version of its UPS U.S. Rate & Service drugs from Humana or Express Scripts
tial from December 17-23, and a $0.27 Guide, adding that it plans on applying a or CVS are not seasonally related, yet
charge for Ground Residential for the peak surcharge on specific international will be forced to shoulder costs incurred
same week. air shipping lanes over certain parts of by firms like Amazon and Walmart,” said
Putting these changes into perspec- the year. Hempstead. “I can see some push back by
tive, UPS said that a five-pound UPS In offering up some perspective on non-seasonal shippers, however the fee
Next Day Air package shipped from how many shipments the peak surcharges is negotiable. My gut says FedEx will like
Atlanta to a residential address in Phila- will effect, UPS turned to its 2016 peak/ this new charge and mirror it in some way,
delphia will increase about 1%, com- holiday season data. During that time, the at least in the service guide.” •
pared to non-peak shipping times. And it company’s average daily volume exceeded ––Jeff Berman, group news editor
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Newsroom Notes
Jeff Berman is group news editor for
the Supply Chain Group publications.
To contact Jeff with a news tip or
with Jeff Berman idea, please send an e-mail to
jberman@[Link].

Amazon/Whole Foods deal presents

wide range of supply chain questions
The recent news of global e-commerce behemoth friend who owns a New England-based consumer
Amazon acquiring Whole Foods for $13.7 billion was package goods company that has a strong relationship
a bit jarring to say the least. Well, it was for me at first, with Whole Foods—by far his company’s biggest dis-
and not because I found it was surprising that Ama- tributor—made that clear to me.
zon’s pockets were so deep. I think we all assumed “Time will tell, and it requires a long conversa-
that they could afford this type of investment. tion,” he said. “Distribution is probably the biggest
It was more about the fact that they went out and unknown from where I’m sitting. And if Amazon fully
acquired such a major household name and essen- gets into the grocery business will it buy UNFI, the
tially announced to the world that “hey, we are really natural and organic distributor that’s Whole Foods’
big, in fact, huge, and we are fully entering the gro- largest supplier?”
cery business.” That’s another question for another time, but is
And, what’s more, Amazon spending that type of surely something to keep an eye on.
money to get into a new business won’t likely raise as On a separate but related note, while the Amazon/
many eyebrows in the future if and when they
do it a different sector. But that’s not really the
purpose of this column. “ It’s fair to say that the distribution pipeline at
A closer look from my perspective is more Amazon will now be more grocery-centric than
directly related to the supply chain implica-
tions, including transportation management,
it has ever been before. ”
warehousing, distribution, inventory manage-
ment and logistics outsourcing. Whole Foods deal was not public knowledge at the
A recent report in Fast Company had a very inter- time, that did not stop anyone from talking about
esting take on the Amazon/Whole Foods deal as it Amazon’s ever-emerging supply chain presence at last
relates to the supply chain: “Just as it has built an month’s eyefortransport 3PL Summit in Chicago.
operating system for e-commerce, Amazon is now Renowned supply chain consultant Jim Tompkins
poised to create one for our food supply chain. It said in a keynote that no retailer or company can make
would allow [Amazon CEO and founder] Bezos to it on its own, not even Amazon. “Fifty-two percent of
offer the highest-quality, safest, freshest and cheapest Amazon is not even Amazon, it is Fulfillment by Ama-
groceries anywhere on the planet. The supply chain zon [FBA],” he said. “FBA allows Amazon to double
and distribution challenges that Amazon is already its volume through the economies of scale and is an
mastering are part of what landed Whole Foods in a opportunity for some synergistic collaboration, which
position to be acquired in the first place.” allows them to afford a higher level of automation
Isn’t that the truth? The investments Amazon has that’s economically justified with more local distribu-
been making as it relates to myriad facets of the supply tion and fulfillment capabilities.”
chain are very significant, whether it be leasing cargo That said, it’s fair to say that the distribution pipe-
planes; its commitment to free shipping for its Amazon line at Amazon will now be more grocery-centric than
Prime members; same-day shipping; distribution center it has ever been before. While Whole Foods brings a
robotics; the growth of its last-mile network; and don’t lot of physical store locations to Amazon, it also brings
forget the rumored plans to build out larger-scale trans- more online ordering and fulfillment opportunities
portation and logistics operations to add capacity to ulti- as well—something which Amazon has proven to be
mately offer specialized 3PL services to third parties. quite adept at doing.
But that’s just scratching the surface. The next steps in this deal are not yet known; how-
What happens next as it relates to the Whole ever, it looks like it’s going to be quite a ride on the
Foods deal obviously remains to be seen. A close logistics and supply chain front. •

20 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Moore on Pricing
Peter Moore is adjunct professor
of Supply Chain at Georgia College
EMBA Program, Program Faculty at
the Center for Executive Education
at the University of Tennessee, and
adjunct professor at the University of
South Carolina Beaufort. Peter writes
from his home on Hilton Head Island,
S.C., and can be reached
at [Link]@[Link].

Is brokerage getting stronger or weaker?

There are conflicting visions for the future of double-digit rates in part because of the “brain drain”
freight brokers here in the U.S. market. We’ve seen and the need for investment in technology inside ship-
mergers of brokers and acquisitions by third-partly per operations.
logistics providers (3PLs) indicating that this is a The threats? Well, as indicated under weaknesses,
market with room for margin exploitation. With this there’s technology, but also process changes. New
in mind, what follows is a quick SWOT (strengths, freight technology and a global shift to collaborative
weaknesses, opportunities and threats) analysis
of the domestic freight brokers market to help
shippers level the field. “ Those who cannot innovate on behalf of this
Under strengths, there are traditionally high new breed of shipper will be out in the cold. ”
margins, and of course the demographic reali-
ties of baby-boom managers retiring and leaving gaps models means shippers can deal directly with carriers,
in expertise inside logistics operations. To meet this even in complex transactions, through their transpor-
need, brokers are willing to invest in the technology tation management system and the cloud. But more
that makes the ordering of several modes—particular- importantly, there’s the nature of contracts that broker-
ly less-than-truckload (LTL) and truckload (TL)—easy ages usually seek, whether alone or as a part of a 3PL.
for non-logistics workers to execute orders. The traditional broker (and carrier) approach has
The business has grown steadily, with lower mar- been to freeze the shipper at a price level and allow
gin 3PLs snapping up higher margin brokerages to the broker/carrier to be creative for their own margin
improve their bottom line, while offering shippers making. For shippers, a poorly constructed deal can
more one-stop shopping options. For shippers, this often result in a growing distrust. Eventually your
can be advantageous as larger, diversified service pro- customer learns that the discount you offer is only a
viders aggressively seek their business. portion of the discount you’re able to leverage with
However, under weaknesses are the low legal and their volume.
financial barriers to entry into brokerage and a multi- The reaction often finds shippers insisting on non-
tude of software-based firms eyeing any higher margin exclusivity to reduce perceived risks or to be able to
businesses. Where high margin businesses exist, price shop directly with the carrier market. Classic
application firms are working to substitute an app for “sign here; trust me” contracts reduce a shipper’s abil-
a formerly expert-dependent service. ity to respond to the new technology-based platforms
These new apps—and in the near future self-driving (software and service) coming out of “silicon valley”
vehicles—are pushing into the multi-billion dollar freight that represent the new breed of intermediaries.
market and are expected to displace human dispatchers I recommend long-term shipper/3PL relationships;
and various forms of “load boards” that characterize the however, those relationships need to put a premium
brokerage market today. In the meantime, the other key on transparency, pricing innovation and margin shar-
weakness remains the trust factor. Shippers know that ing—three things that freight brokers have historically
brokers are marking up the freight and are suspicious of found particularly distasteful.
the brokers taking too much of the margin. Low trans- The business model for brokerage is arbitrage, or
parency continues to foster this perception. the buying a reselling of services. So, this assumes
Under opportunities, there’s the consolidation that you can keep the real cost a secret and sell conve-
and integration with 3PLs. These firms can do much nience to the customer at a premium.
more than just move your LTL and TL freight. In My prediction is that, in a very short time,
fact, they can manage the shipper’s entire portfolio of everyone will see costs and margins through instant
domestic and international freight, while more sophis- market analysis, and they’ll be able to act on that
ticated sales techniques focus on data collection and information without high levels of logistics training.
business problem solving rather than simply “covering Those who cannot innovate on behalf of this new
the load.” Third-party logistics providers are growing at breed of shipper will be out in the cold. •

22 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

The supply chain never sleeps.
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Shipmen
 EXCLUSIVE

28th ANNUAL

State of Logistics:
INTO THE E-commerce continues to fuel a boom that’s
tempered by overcapacity, rate pressures,

GREAT sluggish demand and political doubt. The

result: “cognitive dissonance” that finds a $1.4
trillion market scratching its head.

UNKNOWN
By JOHN D. SCHULZ,
Contributing Editor

O
ver the course of 2016, logisticians and freight business margins were squeezed in 2016 across most modes—parcel
professionals helped U.S. business costs decline for being the only exception. Contrary to popular belief, this fact
the first time since 2009, even as the booming e-com- is quite worrisome to some shippers, who remain concerned
merce sector “propelled demand” for small parcel delivery that bankruptcies, mergers and acquisitions will leave them
services. In the meantime, the traditional transport modes— with fewer choices—and sharply higher rates.
trucking, rail, water and air cargo—were challenged in 2016 “From the shipper point of view, it’s about rate management,”
by overcapacity, rate pressures and sluggish demand. said Miguel Gonzalez, director of global logistics for DuPont,
Overall, U.S. business logistics costs fell 34 basis points during the official release last month at the National Press Club
last year to a near-record 7.5% of gross domestic product in Washington, D.C. “More and more companies are relying on
(GDP), a number that’s just off the record of 7.4% of GDP strategic partners, so the question remains: ‘How do we miti-
set in the Great Recession year of 2009. By comparison, in gate risks?’ The report reflects the reality we live in.”
1979, the last year before the Motor Carrier Act deregulated Other areas of uncertainty involve the new Trump admin-
the interstate trucking industry, logistics costs were over 18% istration, confusion over export levels amid talk of higher tar-
of GDP in the regulated environment. iffs in international trade, and unsure measures to upgrade
These are the major takeaways from the “28th Annual U.S. infrastructure and trade policy.
State of Logistics Report (SoL)” co-authored by A.T. Kearney The report acknowledges such uncertainty by noting: “The
and the Council of Supply Chain Management Profession- logistics industry appears destined for a prolonged bout of
als (CSCMP) and sponsored by Penske. According to the ‘cognitive dissonance.’” The authors contend that this is due
reported entitled “Accelerating Into Uncertainty,” profit to continued frustration over subpar growth in overall GDP

24 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

 2016 saw the first drop in
U.S. business logistics costs since 2009
($ billion) 5 year
2016 YoY 16/15 CAGR
Transportation costs
Full truckload 269.4 -1.6% 4.3%
while watching the stock market, tech- Less-than-truckload 58.0 0.5% -1.2%
nology investments and consumer con- Private or dedicated 268.1 0.7% 5.7%
Motor carriers 595.5 -0.4% 4.3%
fidence all rise. To top it off, that uncer- Parcel 86.3 10.0% 6.4%
tainty has not slowed the pace of change. Carload 52.6 -13.8% -1.4%
Intermodal 19.3 -2.5% -0.5%
As an example of this volatility, shippers Rail 71.9 -11.0% -1.1%
have to look no further than demands on Air freight 66.9 1.5% 2.4%
(includes domestic, import, export, cargo, and express)
their trucking partners. For example, the
Water (included domestic, import, and export) 40.6 -10.0% -0.1%
American Trucking Associations’ (ATA) Pipeline 33.6 1.1% 4.2%
advanced seasonally adjusted “For-Hire Subtotal 894.7 -0.7% 3.6%
Truck Tonnage Index” increased 6.5% Inventory carry costs
in May, following a 1.5% decline during Storage 143.5 1.8% 3.6%
April. Such volume disruptions are typi- Financial cost (WACC x total business inventory) 143.4 -7.7% -2.2%
Other 122.9 -3.2% 0.5%
cal of what logisticians are seeing across (obsolescence, shrinkage, insurance, handling, other)
all modes in most markets. Subtotal 409.8 -3.2% 0.5%
“On the contrary, industries are churn- Other costs
ing with disruption, as newcomers and Carriers’ support activities 44.7 0.7% 4.2%
incumbents vie for market share and Shippers’ administrative costs 43.3 -4.6% 2.8%
innovation undermines old business mod- Subtotal 88.1 -2.0% 3.5%

els,” say the report authors. “One thing is Total U.S. business logistics costs 1,392.64 -1.5% 2.6%
certain: ‘business as usual’ won’t return.” Note: YoY is year-on-year. WACC is weighted average cost of capital.
Sources: CSCMP’s 28th Annual State of Logistics Report; A.T. Kearney analysis
The big picture
After the International Monetary Fund
predicted 3.5% worldwide economic growth this year, the U.S. variables such as currency exchange levels (namely the strong
GDP started 2017 with an underwhelming 1.2% growth in the U.S. dollar), interest rates and political trends.
first quarter—the fourth worst first quarter in the last six years. “Against that uncertain backdrop,” says the SoL authors,
According to the report, “this disconnect was the latest “logistics executives must make vital decisions about capacity,
unsettling discrepancy between soft indicators of sentiment pricing, technology deployment and strategy.”
and hard data on actual economic activity.” This reality leaves However, those logistics management experts have still
shippers and logistics pros with “little clarity” on economic been able to squeeze out efficiencies from their existing net-
fundamentals for 2017. Further complicating the outlook are works. As proof, the SoL reports that U.S. business logistics
costs fell 1.5% last year after rising at
Business logistics costs have fallen to 7.5% of GDP a five-year compound annual rate of
(U.S. business logistics costs as a share of nominal GDP) 4.6% from 2010 to 2015. Costs fell
across all three components—trans-
portation, inventory carrying and mis-
8.59% 8.46%
cellaneous costs.
-34 bp
7.89% 7.89% 7.91% 7.89% According to the SoL, the declines
reflect overcapacity, slack volumes
7.84% and rate pressures in several sectors,
7.53% 7.50%
7.37%
even as demand and prices rose in oth-
ers. Logistics provider executives are
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 certainly seeing this reality first hand.
Marc Althen, president of Penske
Note: bp is basis points.
Logistics, a sponsor of the annual SoL,
Sources: CSCMP’s 28th Annual State of Logistics Report; A.T. Kearney analysis struck a more optimistic tone. “The

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 25

 EXCLUSIVE: 28th Annual State of Logistics

good news is that supply chain activity is

U.S. economic growth is projected
accelerating,” he says. “Warehousing is
to be strong in the near term
very active, and demand for our techno- (Real GDP growth)
logical solutions is strong.”
According to Althen, 2017 is “shaping 2.6% 2.5%
2.4% 2.3%
up to be a good year after a challeng- 2.2% 2.1%
ing 2016. Shippers are asking to take 1.7%
1.6% 1.6%
cost out of the system, and we’re see-
ing new business activity across all our
divisions—transportation management,
warehousing, truck leasing and dedi-
2011 2012 2013 2014 2015 2016 2017F 2018F 2019F
cated contract carriage.”
Source: International Monetary Fund

Mode by mode
As usual, trucking is the engine that Business inventory productivity improved
drives the U.S. transportation machine. during the second half of 2016
However, the report dives into the 1.45 2,000
details of the financial health of all four
of the major freight modes. 1,500
1.35
($ billion)

Trucking, which hauls about 75% 1,000

of goods by value in the United States, 1.25 Business inventory
continued to struggle with overcapacity 500
Inventory to sales ratio
in 2016, especially in the $270 billion 1.15 0
truckload (TL) sector. According to J A J O J A J O J A J O J A J O J A J O J A
2012 2013 2014 2015 2016 2017
the SoL, TL costs fell 1.6% last year,
Sources: U.S. Bureau of the Census, Total Business Inventories (BUSINV), FRED,
even as its five-year compound annual Federal Reserve Bank of St. Louis; U.S. Bureau of the Census,
Total Business: Inventories to Sales Ratio (ISRATIO), FRED, Federal Reserve Bank of St. Louis
growth rate (CAGR) rose 4.3% from
2010 to 2015. By comparison, the
smaller $58 billion LTL sector enjoyed a 0.5% rise last year The $72 billion rail sector suffered the most last year, with
even as its five-year CAGR fell 1.2%. The $268 billion private rail costs falling 11% amid overcapacity. However, five-year
trucking market costs rose 0.7% as its five-year CAGR was up CAGR rail costs were off just a scant 1.1%, reflecting overall
5.7%, according to SoL data. rail profitability in the period, while 2017 is expected to be a
Overall, motor carrier costs fell 0.4% last year as five-year much stronger year for rail.
growth rates were up 4.3%. The trucking industry was esti- “There’s been a significant recovery in coal demand,” says Beth
mated to be $595 billion of the total $894 billion transport Whited, Union Pacific’s executive vice president and a panelist at
market that includes $73 billion in pipeline and water. the SoL release event. “Low demand for coal has receded, exports
Parcel carriers, namely UPS, FedEx and U.S. Postal Ser- of grains have improved, and chemicals are up.”
vice, fared the best while riding the e-commerce wave. Parcel According to the SoL, the $67 billion airfreight sector
costs rose 10% in the $86 billion sector as five-year CAGR enjoyed a 1.5% rise in costs last year and five-year CAGR of
rings in at 6.4%. For the first time, the parcel market exceeded 2.4%, while water rates were off 10% and pipeline costs were
revenue posted in the rail sector, and parcel rates are expected up 1.1% last year, the report said.
to continue to rise, according to report author Sean Monahan, And in a bit of good news for shippers who control inven-
partner with A.T. Kearney. tory, overall costs in that area fell in 2016. Shippers’ admin-
“UPS is starting a new holiday surcharge for Thanksgiving istrative costs fell a whopping 4.6%, while total inventory
and Christmas,” says Monahan, adding that the new charge carrying costs fell 3.2% helped by the decline in administra-
reflects the carrier’s rising costs of reconfiguring their distri- tive costs. That brought total U.S. business logistics costs to
bution centers and hubs to get closer to customers’ last-mile $1.392 trillion, a 1.5% annual decline. Five-year CAGR for all
delivery demands. business logistics costs were up 2.6% from 2010 to 2015.

26 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

 EXCLUSIVE: 28th Annual State of Logistics

The crystal ball back that threat, slightly.

According to the SoL authors, 2017 could be a pivotal year “Restrictive trade policies would shake logistics providers,
for logistics. They note that demand patterns are shifting and many of which depend on global commerce,” say the SoL
technology is enabling new competitors to challenge old busi- authors. “The pending renegotiation of NAFTA is of particular
ness models—significant moves that could reshape individual interest to railroads and trucking companies, which would
sectors and even the logistics industry as a whole. lose business if trade with Mexico declines.”
The new order could include “major business combinations, The report also warns against a worst-case scenario, which
large-scale shifts in distribution flows, deep capacity cuts, mas- would amount to Trump’s pro-business agenda stalling in
sive infrastructure investments,” among other changes. And, the Washington while Congress enacts import barriers that could
report includes a stern warning about the possibility of “increas- spark trade warfare, damaging the entire logistics industry.
ing political risk” in the world’s largest democracy. “It’s out there,” says DuPont’s Gonzalez of such volatility. “And
“Rising protectionist sentiment around the world threatens that means more time in meetings with ancillary in-house experts
to constrict global trade flows—the lifeblood of logistics,” on taxes, government affairs and NAFTA. It’s not just here in the
the SoL report warns. “Trump won the U.S. presidency with United States. We’re seeing geopolitical factors everywhere in the
a mixed message of tax relief, regulatory reform and trade world, and it’s one more variable we have to manage.”
restrictions. His agenda could cut both ways for logistics, and In the meantime, logistics professionals of all political stripes
it’s still not clear which proposals will become law.” are urging Washington to cool the rhetoric. Cooler heads predict
As part of the report, SoL authors offer four potential scenar- that technological change will drive new supply chain innovation
ios for logistics in the next few years based on current realities: in the future across all modes and borders. •
• Plain sailing. Regulatory constraints recede, global trade —John D. Schulz is a contributing editor
flourishes and technology improves efficiency. to Logistics Management
• Choppy waters. New policies favor U.S. manufacturing
force shippers and logistics companies to adapt, spurring
faster technological adoption. 2017 State of Logistics: Less-than-truckload (LTL)
• Stemming the tide. Tighter regulations raise operating costs LTL: Revived sector benefits
and accelerate investment in cost-saving technologies. from proprietary networks,
• In the doldrums. Regulatory costs rise and tough eco- e-commerce boom
nomic conditions deter technological investments.
Among the technological innovations coming soon, Pen-
ske’s Althen calls driverless trucks “the next technological
wave,” and adds that it’s coming sooner than the industry may
T he once beleaguered $35 billion LTL market is enjoying a
revival thanks to its substantial investment in technology,
difficult-to-replicate hub-and-spoke networks, the boom in
think. “We’ll see end-to-end platooning, or two or more trucks e-commerce as well as other non-traditional
led by an autonomous vehicle, within two to three years and growth areas.
evolving from there.” But even with automation, he says that Simply put, it’s about market share
there will be a need for interaction with humans, as drivers and pricing power. The top 25 LTL car-
will take over the finesse parts of moving goods. riers still account for nearly 90% of market share. And with
Finally, as transportation demand levels are closely tied to giants FedEx Freight and UPS Freight upping the ante with
overall U.S. economic output, the report’s economic forecast is multi-million dollar investments in technology and operations
more of the same—moderate growth, but certainly nothing spec- improvements, the LTL sector continues to enjoy pricing
tacular in the near future. According to the SoL, U.S. economic power over shippers that the highly fragment truckload (TL)
growth is projected to be strong in the near term, forecast for sector does not.
2.3% GDP growth this year, 2.5% next year and 2.1% in 2019. According to David Ross, veteran LTL analyst for Stifel
However, the pending renegotiation of the 23-year-old North Inc., 2017 will be “generally good” for LTL carriers, with
American Free Trade Agreement (NAFTA) is worrisome for results improving as the freight year progresses.
all logistics markets, according to authors. President Trump “The expectation remains for better times ahead in LTL due
threatened in March to unilaterally withdraw from the agree- to the prospect of lower taxes, reduced regulation, increased
ment, which has resulted in a four-fold increase in trade among capital spending and the administration’s stated focus on
Mexico, Canada and U.S. Of course, Tump has since walked domestic jobs, infrastructure and manufacturing,” says Ross. “In

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 27

 EXCLUSIVE: 28th Annual State of Logistics

carrier, as they’re all too big,” adds Ross.

LTL yield vs. demand Of course, all these LTL companies are chasing Old
YOY % change Dominion Freight Line (ODFL), which posted a sector-lead-
3.5% ing $195 million in net income last year while posting an 83.8
2.8% 2.7% operating ratio, a mark that leads the LTL sector.
2.2%
1.6% ODFL vice chairman and president David Congdon says
0.8% 1.1%
that his company formula for success is simple: 99+% on-
-1.4% time service in regional, interregional and national market
-2.7%
lanes at competitive rates with low claims. That’s easy to
-2.8%
say, but difficult to do consistently in the highly competi-
Q1 Q2 Q3 Q4 Q1
2016 2016 2016 2016 2017 tive LTL market place. •
—John D. Schulz, contributing editor
Rev/cwt excl. FSC Tons/day

Source: Company reports, SJC estimates prepared by SJ Consulting Group, Inc. 2017 State of Logistics: Truckload (TL)
Truckload: Turbulent market roils
theory, these should all work to drive earnings per share higher
for LTL carriers—but in practice it may take a while.”
with consolidations and “muted”
For some leading LTL carriers, it’s already happening. freight demand
XPO Logistics, the nation’s 2nd-largest group of LTL carriers,
earned a profit in the first quarter of a year for the first time
since 2010. According to CEO Brad Jacobs, XPO, the former
N obody can accuse the $310 billion TL market of being
boring—especially at the top.
In the first six months of this year, Schneider National, the
Con-way Inc., is benefitting from the boom in e-commerce, storied Green Bay-based carrier, took the plunge with an ini-
last-mile delivery capability, investment in technology and tial public offering that netted in excess of $500 million. That
cross-selling among other XPO units. was quickly followed by the stunning news
Dating back to last year, overall LTL demand is picking up, if of a $6 billion combination of Phoenix-
only slightly. Fourth quarter daily tonnage and shipments at pub- based TL giants Knight-Swift Transporta-
lic LTL carriers rose about 1% on average, but at least both were tion, producing a new behemoth atop the
positive for the first time since the fourth quarter of 2014. Low- highly fragmented TL marketplace. Even after the merger,
single-digit growth rates are forecast for the rest of this year. Knight-Swift commands barely 2% market share in the low-
Stifel’s Ross says that the key to 2018 growth is an improving cost, point-to-point TL sector.
manufacturing sector and reduced truckload supply, which might These moves come at a curious time in truckload carriage.
be sufficient enough to cause lighter-weight TL shipments to Demand has been sluggish for about a year, as too many
flow back into LTL networks. trucks continue to chase too little freight. However, this is
Ross adds that LTL pricing should be higher for the rest of
this year. In fact, revenue per hundredweight (yield–not pure
Truckload yield vs. demand
price) rose on average 1.8% in the fourth quarter. He’s cur- YOY % change
rently forecasting 2% higher rates this year.
2.7%
Unlike the TL market, which recently saw a $6 billion
merger between Knight and Swift Transportation, analysts are 0.4% 0.2%
not expecting similar moves in LTL due to the fact that pub- -0.6%
-1.1%
lic LTL carriers already have their networks largely built out. -1.6%
-1.9%
Few analysts are expecting any mega-mergers in LTL. “There -2.6%
-3.4%
simply aren’t any benefits,” says Ross, who adds that smaller, -3.7%

“bolt-on acquisitions” could make more sense down the road. Q1 Q2 Q3 Q4 Q1

2016 2016 2016 2016 2017
However, Saia—the only public LTL without a national
footprint—is moving down the organic expansion path. “Even Rev/loaded mile excl. FSC Loaded miles
if Saia buys someone to accelerate its growth into the Mid-
Source: Company reports, SJC estimates prepared by SJ Consulting Group, Inc.
Atlantic or Northeast, it probably won’t be a public

28 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

 EXCLUSIVE: 28th Annual State of Logistics

good news for shippers, who have been On the positive side, Larkin says dry van segment; and industrial activity,
leveraging that excess capacity into that the year-long inventory glut has led by the energy sector, has started its
lower contract rates. largely corrected; the seasonal build of rebound.
John White, chief marketing officer late spring/early summer merchandise “Also large fleets have shed some excess
at U.S. Xpress, the nation’s 7th-largest is underway; a strong produce harvest rolling stock,” says Larkin, noting that
TL company, says that demand for in California is drawing temperature some of the large fleet downsizing may
truckload services is “somewhat muted” controlled equipment from the generic have been offset by fleet growth across
so far this year. But he and other TL
executives remain optimistic that the
second half of 2017 will bring the usual
upticks in demand.
“We’d like to see it a little more

HERE
robust, but we haven’t seen a drop off
in volumes from the second half of last
year,” says White. “Those customers
demanding extra capacity are still there,
but in general, it’s quiet.” FOR PUERTO RICO
Some publicly held TL carriers are
reporting sharp drops in earnings in
the first quarter. Universal Logistics
Holdings, for example, saw its net
profit plunge 42% in the first quarter
to $4.3 million, compared to $7.5 mil-
lion in the first quarter of 2016—that
was despite a 9.2% jump in revenue.
It’s even a worse picture at USA Truck,
the nation’s No. 53 TL carrier, which
suffered a $4.9 million loss in the first
quarter, widening the loss of $1.8 mil-
lion in the year-ago quarter.
Analysts say that part of the reason for
these TL losses is the increase in online,
“Uber-like” applications that link shippers
and brokers to carriers seeking capacity.
One of these newcomers is Next Truck-
ing, which describes itself as an “online
trucker-centric marketplace” designed
to connect shippers and truckers. The
company says it has $5 million in fund-
ing already secured since launching. Its
goal, the company says, is to “disrupt” the
SAFETY. COMMITMENT. INTEGRITY.
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Our commitment to Puerto Rico is about more than reliable
In the meantime, veteran trucking deliveries and exceptional customer service. It’s about
analyst John Larkin of Stifel Inc. says community investment through significant renovations to the
San Juan terminal. It’s about preservation of the environment
that the TL sector remains “sluggish,” with the first LNG Powered Container Vessels. It’s about
with a few exceptions. “Dry van freight serving Puerto Rico with pride - learn more today.

has yet to show much more than a 1.877.775.7447 | [Link]

modest seasonal uptick.”

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 29

 EXCLUSIVE: 28th Annual State of Logistics

many of the smaller fleets. “Normally, all of these positive roughshod over carloads. Instead, it speaks to a decent volume
factors would have resulted in a much tighter supply/demand environment for both segments. Keep in mind that carloads
dynamic than is reflected in the reality of today’s dry van mar- are being bolstered by a bounce back in coal volumes due to
ket.” natural gas prices rising and higher coal export levels, even
On the demand side, many were hopeful that the tighten- though the AAR observes that coal volumes still remain low
ing of the spot market and strength in the carload and flatbed when matched up against historical norms.
sectors would translate into tightening in the dry van truckload “The volumes at this point of the year are beyond just pretty
contract market. good,” says Tony Hatch, president of New York-based ABH
However, Larkin adds that “persistent mediocre” freight Consulting. “For each month, they’re getting slightly better,
demand seems to be a function of uninspiring consumer and I think that will start to slow down due to a reasonably
demand, a wet spring, softening in the automotive sector, and healthy economy and a reasonably healthy rail economy, and
recent weakness in the housing market—all of which have the annual comparisons are incredibly easy. Coal has not
depressed TL demand. Most the TL market has been a series bounced back, it has stabilized and is being compared to a
of modest ups and downs, unevenness that hampers freight weak period in 2016.”
demand capacity planning for carriers. Intermodal volumes remain in a decent spot, said Hatch,
Keep in mind that this is all good news for bottom-line ori- who adds that volumes are steady, coupled with many industry
ented shippers seeking TL capacity at bargain rates. • stakeholders upgrading international intermodal expectations
–John D. Schulz, contributing editor that could result in growth in the 5% range. Domestic intermo-
dal, he added, has been chugging along even as it continues to
2017 State of Logistics: Rail/Intermodal run up against loose trucking capacity—something he expects
to be absorbed between now and December when any impact
Rail/Intermodal: Volumes and from the ELD regulation kicks in.
service continue on an upswing As for railroad and intermodal service, Hatch says that

W hile there may be some glimmers of economic hope

on the horizon, much more needs to transpire before
one can point to solid and succinct growth. That’s especially
perception of service has generally been positive, even
though metrics from the AAR have continued to get mod-
estly worse every week in 2017. However, that doesn’t
true when it comes to assessing the current state of freight equate into a crisis, he added, as most customers seem to
railroad volumes. be happy with service over all.
According to recent data issued by the This is reflected in railroads running fewer, longer trains
Association of American Railroads (AAR), in order to lower costs, and results in longer waits between
U.S. carload volumes are up 6.8%, or departures, a move that boosts yard dwell times. “These
358,904 carloads, through the first five months of 2017, with
the weekly carload average for May up 8.4% for the highest U.S. rail cargo volumes
average per month going back to February’s 261,010. This, 2016 Total carloads Total intermodal loadings
of course, is welcome change from the 10.3% decline for the 13,096,860 13,490,491
same period a year prior.
On the rail intermodal side, 2017 container and trailer 8.2% 1.6%
decrease decrease
volumes through May are up 2.3%, marking the highest from 2015 from 2015
year-to-date tally through May for intermodal and topping
2015. What’s more, volumes from January-May 2017 mark January- Total carloads Total intermodal loadings
the highest volume output for that period in U.S. history, May 5,633,477 5,779,098
2017
according to the AAR data.
Like a year ago, a close look at the year-to-date volumes 6.8% 2.3%
for carload and intermodal shows that intermodal units increase increase
from the from the
are outgaining rail carload volumes, something that didn’t first five months first five months
happen prior to May 2015, but is happening with more fre- of 2017 of 2016

quency these days.

Source: Association of American Railroads (AAR)
However, that doesn’t mean that intermodal is running

30 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

 EXCLUSIVE: 28th Annual State of Logistics

huge trains also tend to be slower, and the resulting aver- 2017 will be the turning point the industry desperately
age train speeds are substantially down from prior year, needs—or just another bad year in a growing string of losses.”
but in line with the long-term average,” added Larry Gross Ritzau Finans, an analyst with the Paris-based consultancy
FTR Senior Consultant in the recent Logistics Management Alphaliner, maintains that the reduction in idling container-
“Rail/Intermodal Roundtable.” • ships has been driven by the rollout of new alliance net-
—Jeff Berman is group news editor works, adding that with reduced availability of spot tonnage,
of the Supply Chain Group the charter market is kept upbeat. “The container shipping
industry is expected to continuously optimize networks and
2017 State of Logistics: Ocean Cargo make them more efficient,” he adds.
Analysts for the Baltic and International Maritime
Ocean Cargo: Carriers must
Council (BIMCO) in Copenhagen, agree, noting in their
optimize networks “Shipping Market Outlook” that cutting costs where it’s

O wing to the structural overcapacity in the container

industry, shippers have essentially had most of the pric-
ing power since the financial crisis, says industry consultant
still possible and making the most of the fleet available
remains essential to reaping the benefit of the individual
alliance members.
Lars Jensen, CEO and partner of SeaIn- Above all, add BIMCO analysts, the implementation of
telligence Consulting in Denmark. As a new alliances remains the one thing to watch carefully in
consequence, this has enabled shippers 2017. The three ocean shipping alliances—which replaced
to benefit financially from the cost saving the previous four—now control 77% of global container ship
measures brought about by slow steaming, mega-vessels, ves- capacity and as much as 96% of all east-west trades.
sel sharing and “skipped sailings.” “Before getting carried away, we should remember that
In his new book titled “Liner Shipping 2025,” Jensen 57% of all demand, as measured by twenty-foot equivalent
observes that vessels ordered in 2014 and 2015 will continue unit [TEU] miles, is generated by non-east-west trades that
to be delivered over the next two years, meaning high levels of are particularly impacted by the recent years’ cascading of
scrapping are likely to continue. However, Jensen also notes tonnage,” says BIMCO president Anastasios Papagiannopou-
that in 2019 and beyond, a disproportionate share of feeder- los. “Another two-tier market is in the making.”
sized vessels will be reaching the end of their lifespan, and BIMCO expects the container ship fleet to grow by 2.9%
orders for their replacements are likely to surge. in 2017, under the assumptions that 450,000 TEU will be
“The good news is that their relatively small size means the demolished and 1 million TEU will be delivered. For that to
impact on the overall global market will be limited,” adds Jensen. happen, the current demolition interest must cool somewhat
In the meantime, carriers will still have to make some hard and the delivery pace must pick up, analysts conclude. •
decisions for the remainder of 2017, says Esben Christensen, —Patrick Bernson, executive editor
managing director of the international
consultancy AlixPartners. “They’ve already
Industry debt versus global container capacity
taken steps to relieve their financial woes,
including slashing expenditures,” he says. Total debt (US$ billion)
113.8
Global TEU capacity 110.6
“They must continue to drive down costs
98.2 99.9 100.3
through effective post-merger integration 91.4
85.1
and fleet rationalization to bring supply 76.8 20.7
20.0
and demand into balance.” 18.9
62.9
Fortunately, spot rates have improved 53.6 16.9
16.3
in the wake of last year’s Hanjin bank- 15.4
14.3
ruptcy, and carriers seem to realize that 12.4
13.1

they must do everything they can to 10.9

maintain that trend, adds Christensen. 2007 2008 2009 2010 2011 2012 2013 2014 2015 LTM
“The carrier community’s ability to drive (ended
9-30-16)
rate levels higher into future contract
Source: Alphaliner
negotiations will likely decide whether

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 31

 EXCLUSIVE: 28th Annual State of Logistics

2017 State of Logistics: Air Cargo A pick-up in air freight

Air Cargo: Volume growth finally Composite PMIs (50=no change)

beginning to take off 58

O ne of the most positive developments for logistics manag-

ers so far this year has been the reversal of fortunes in the
air cargo sector.
56

54
According to the International Air Transport Association
(IATA), air cargo markets worldwide showed 52

that demand rose 8.5% in April 2017 com-

50
pared to the same period a year ago. While
Advanced markets
this was down from the 13.4% year-on-year 48 Global
growth recorded in March 2017, it is well above the average Emerging markets
annual growth rate of 3.5% over the past five years. 46
2012 2013 2014 2015 2016 ‘17
“Demand eased in April,” observes Alexandre de Juniac, IATA’s
director general and CEO. “Growth rates, however, are still much *Monthly data Source: IATA

more robust than anything we have seen in the last six years.”
And while that’s good news, de Juniac adds that there’s coupled with renewed demand on selected routes, particu-
room for improvement, particularly in adapting to new tech- larly between Europe and Asia, has contributed to growth in
nologies. “The industry’s antiquated processes need modern- long-haul markets in recent months,” says Andrew Herdman,
ization,” he says. “With e-air waybill utilization topping 50% AAPA director general. Within the same period, Asian airlines
in April, progress is being made. Now we must harness the recorded a solid 9.5% increase in air cargo demand, supported
momentum to drive transformational change across the way by a pick-up in export orders across the region’s economies.
the industry operates.” And over the long term, it may only get better, says John
Meanwhile, IATA says business confidence indicators Leahy, chief operating officer for Airbus. He maintains that
remain consistently upbeat, suggesting year-on-year cargo air traffic continues to prove its resilience to slow economic
growth will remain strong through the summer. There are growth by outperforming global GDP, demonstrating the
signs, however, that the cyclical growth peak for air cargo world’s appreciation of the benefits aviation brings.
has passed, particularly given that the inventory-to-sales ratio “For the next 20 years, the Airbus Global Market
stopped falling at the end of last year. Forecast predicts a 4.4% global annual air traffic growth,
IATA analysts note that air cargo often sees a boost in despite some downward revision of future economic
demand at the beginning of an economic upturn, as companies growth by a number of forecasters in several regions of the
look to restock inventories quickly. This tapers as inventories are world,” says Leahy. •
adjusted to new demand levels. Over the whole year, IATA says —Patrick Burnson, executive editor
that air cargo is headed for a healthy growth rate of 7.5%, sup-
ported by strong pharmaceuticals and e-commerce.
All regions, with the exception of Latin America, reported 2017 State of Logistics: Third-Party Logistics
year-on-year increases in demand so far in 2017. However, 3PLs: No rest for the weary
Asia-Pacific airlines’ freight volumes were especially healthy,
expanding by 8.4% in April 2017 compared to the same period a
year earlier. The increase in volumes reflects the strength of the
T he global forecast for the third-party logistics provider
(3PL) market this year, as composed by the consultancy
Armstrong & Associates, is “lukewarm,” says the organization’s
order books reported by exporters across the region. chairman Richard Armstrong.
Cargo volume figures released by the Association of With the release of its new report, “Third-Party Logistics
Asia Pacific Airlines (AAPA) confirm these observations, Market Results and Trends for 2017” that includes estimates
suggesting that business conditions continued to improve for 190 countries, Armstrong says that “nothing spectacular”
across Asian economies, in turn lending support to interna- was recorded over the past 12 months. “Not that we expected
tional trade activity. much,” adds Armstrong. “The global economy has been soft-
“The broad-based expansion in global economic activity, ening, and that is reflected in supply chains worldwide in gen-

32 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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 EXCLUSIVE: 28th Annual State of Logistics

erally every commodity shipped.” net revenue fell 1.9%.

Furthermore, 2016 was a “mediocre year” for third-party According to Armstrong, both domestic and international
logistics in the U.S., says Armstrong, with net revenues growing providers were negatively impacted by too much air and
a modest 2.1% over 2015 to $73.5 billion, while overall gross ocean capacity in the market. In the meantime, providers
revenues increased 3.5%, expanding the total U.S. 3PL market to with a strong dedicated contract carriage business grew
$166.8 billion. 3.5%, with segment leader Ryder up 14%. Global 3PL
In the meantime, big merger and acquisition deals changed revenues reached $802 billion in 2016 and are on track to
third-party logistics from mid-2014 through 2015, according to exceed $962 billion in 2020.
Armstrong, but in 2016 the pace slackened significantly. The Even as these numbers are projected to be on a healthy
biggest deal last year was FedEx’s acquisition of TNT Express upswing over the next few years, Evan Armstrong, the consul-
in the second quarter. Other big deals were DSV’s acquisition tancy’s president, says that there’s still a general need for more
of UTi Worldwide in January and HNA Group’s purchase of collaboration between 3PLs and logistics managers.
Ingram Micro for $6 billion. Armstrong further notes that there’s an interesting competi-
In 2016, the third-party domestic transportation manage- tive paradigm developing in the current marketplace where
ment (DTM) segment increased 5.3% in gross revenue and large 3PLs are perceived as “not innovating.” At the same
7% in net revenue, as DTMs tightened up operations in an time, innovative start-ups are perceived as being unable to
effort to compensate for ample truck capacity. International develop a network scale.
transportation management (ITM) providers, which had “The consensus is that large 3PLs will be acquiring, or
strong growth 10 years ago, grew 2.6% in gross revenue, but leveraging the technology developed by the most interesting
innovators—such as the deal DB
3PL revenues by industry 2008: Schenker has done with uShip in
2018E for the Fortune 500 Global Europe,” he says.
(US$ billions) 83.4 Along with other industry ana-
80.5
lysts, Armstrong observes that cus-
77.2
71.4 tomer requirements remain very
69.1 72.3 diverse. The challenge is how to
66.8
63.0 Technological respond to this segmentation and
anticipate shipper needs. “Major
56.9 3PLs are stressing targeted customer
54.9
53.9 acquisitions,” he adds. “The focus is
48.5 53.2 51.9 52.5
48.1
on targeting vertical industries and
47.8 49.0 Automotive
46.5 playing to a 3PL’s strengths to deliver
value for customers.”
41.0 Robert Lieb, Ph.D. a professor of
50.7
40.1 49.0
34.3 42.0 46.6 supply chain management at North-
40.4
39.4 42.7 Retailing
37.4 eastern University, agrees, noting
34.4 that the big 3PLs just keep getting
32.4 32.6
36.8 29.4 bigger as they merge and acquire
36.7 28.3 28.6
35.2 Elements
34.6 28.1 smaller players while offering more
30.3 integrated services.
27.0 28.9
18.1 18.7
17.5 Food, groceries “This is especially true of niche
15.6 17.4 16.2
14.4 15.2
13.1 16.8 17.7 18.2
Healthcare
markets like pharmaceutical and
11.4 12.5 12.9 13.3 14.3 15.3
11.1
12.6 automotive,” says Lieb. “And this
9.1 10.1 13.5 14.6 14.9 15.3 15.7
12.1 13.0 14.6 Industrial trend will continue as we see new ser-
10.1 9.7 10.3
13.7 14.0 14.7 14.1 14.6 15.0 Other
11.6 10.7 11.7 13.0 13.4 vices being developed for cross-border
5.2 5.4 5.5 6.0 6.2 6.5 5.0 5.6 5.9 6.1 6.2
2 Consumer goods
trade and emerging markets.” •
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E
—Patrick Burnson is executive editor
Source: Armstrong & Associates
of Logistics Management

34 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Transportation Best Practices/Trends

2017 Truckload Brokerage Roundtable:

TECHNOLOGY
continues to
connect the dots
In a marketplace that’s seeing a slew of new entrants and significant
technological advances, the truckload brokerage market finds
shippers and carriers alike seeking out the highest visibility and
the best value in a fiercely competitive environment.
BY JEFF BERMAN, GROUP NEWS EDITOR

E
ven though the U.S. GDP remains stag- tech prowess as a true value-add in order to stay
nant and retail sales continue to plod ahead of the competition, whether it comes
along, it hasn’t had much of an effect on through the “Uberization” of truckload broker-
the ever-expanding truckload brokerage market. age or API’s that bring together load and rate
At a time when capacity remains read- information in seconds.
ily available and shippers aren’t scrambling Helping Logistics Management provide a
for loads, the market is brimming with new deeper understanding of truckload brokerage
entrants vying to make a name for themselves. market dynamics this year are three prominent
At the same time, established, well-capitalized freight transportation and logistics experts
players are on a mission to create more market offering up their collective perspectives. Our
separation from their biggest competitors and esteemed 2017 roundtable participants include
newbies alike. John Larkin, managing director at Stifel Trans-
Regardless of size of the brokerage and mar- portation and Logistics Group; Ben Hartford,
ket conditions, one common tune all brokerages senior research analyst at Robert W. Baird &
are playing centers on leveraging technology as Co.; and Evan Armstrong, president of third-
a key competitive advantage and differentiator. party logistics provider (3PL) advisory firm
Nearly all brokerages are now showcasing their Armstrong & Associates Inc.
Logistics Management (LM): How would you best describe
the current state of the truckload brokerage market?
John Larkin: We’re currently in no man’s land, wherein shippers want
rate concessions and carriers are looking for higher rates. This confluence
of events puts the squeeze on broker’s margins in the truckload space. At
the same time, we would say that less-than-truckload (LTL) brokerage is
more stable on the pricing and cost fronts and margins remain solid.

36 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

Ben Hartford: From my perspective, the overall state of the the market, so shippers are
truckload brokerage market appears balanced at present. After covering some transportation
2014’s capacity tightness and resulting spike in spot truck- needs themselves versus using
load rates, 2015 was marked by incremental capacity growth brokers. However, average gross
coupled with weakening industrial end-market demand. This margins are still solid and are
resulted in excess capacity in 2016. This year has been rela- running at 16.5%, so smart
tively stable to date, following the volatility of the past three 3PLs are focusing on how to
years. Amid the cyclical dynamics, the truckload brokerage cross-sell truckload brokerage into LTL and intermodal, as
market is also on the cusp of what appears to be as much well as other value-added services.
transformation as the market has faced since at least the mid-
1990s, when the initial wave of “logistics outsourcing” first LM: What is driving growth in the market?
began in earnest. Hartford: We believe that growth in the truckload broker-
Evan Armstrong: I’ll add that the state of the U.S. third- age market and logistics in general is being driven by three
party logistics domestic transportation management (DTM) primary elements. First, outsourcing of logistics functions
market segment, which includes freight brokerage and man- continues, with small and medium-sized customers the
aged transportation, is good. We’re seeing a continuation of most likely sources of sustained outsourcing and subsequent
2016, which had the 3PL segment net revenue growth of 7%. growth in logistics-related functions.
The DTM market segment had gross revenue of $61.8 billion Second, the dynamism of the past few years continues
and net revenue of $10.2 billing in 2016. to underscore the challenges facing in-house transportation
In the meantime, there’s ample truckload capacity in managers and the value provided by truckload brokers that

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Transportation Best Practices/Trends: Truckload Brokerage

provide both scale and visibility to the supply chain. the relatively balanced supply demand environment since 2011,
Third, and in a similar vein, the demand for visibility has led to compression in per-unit gross profit margins for truck-
among shippers—which we understand to outpace shipper load brokerage transactions in high-density lanes on the margin.
demand for both lower price and faster transit/cycle times by The biggest advancement is arguably being undertaken at
a factor of two or more—can increasingly be facilitated by the moment, with the transition to platforms utilizing APIs.
new technologies and support sustained growth in the U.S. APIs provide real-time transmission of data and result in tools
domestic transportation management market 2x to 3x greater that offer increasingly “real time” visibility to shippers into their
than underlying U.S. GDP growth. individual transactions and supply chains broadly—as opposed
Armstrong: And with ample TL capacity available, DTMs to the more static platforms that were facilitated through EDI.
are looking to expand into more value-added services. These This migration toward API-based platforms should improve
include converting LTL shipments to truckload using trans- visibility to shippers, and we believe brokers with scale that
portation management systems (TMS) to support transpor- have committed capital to develop integrated platforms will be
tation planning, building static (daily/weekly) multi-stop in a position to absorb share and consolidate the still highly-
truckloads, or looking at pool distribution strategies. For 3PLs fragmented U.S. domestic transportation management market.
with integrated transportation management and value-added
warehousing operations, cross-selling integrated solutions is LM: How has the truckload brokerage market reacted to
a focus. This is also an emphasis for air and ocean freight for- ebbs and flows in truckload capacity and demand?
warders with domestic transportation management networks. Larkin: Truckload brokers initially benefitted from the loose
Larkin: Ben and Evan are right on, but I’ll emphasize that supply and demand experienced in late 2015 and early 2016.
outsourcing is the big driver here. More and more shippers Purchased transportation costs dropped and only a portion of
are concluding that they simply can’t develop, maintain, and the savings were passed along to shippers. The shippers then
implement the necessary technology to run their own supply smartened up right about the time the spot market began to
chains efficiently. They also struggle to find enough experi- firm—they wanted lower prices while carriers wanted higher
enced talent and can’t negotiate the best rates from carriers. rates, thereby squeezing broker margins. Brokers are hopeful
Outsourcing to a 3PL solves all three of these problems that a recovering economy, smaller fleets and the impending
ELD mandate will tighten supply and demand sufficiently to,
LM: What are the biggest changes or advancements that once again, expand broker margins.
you’ve seen in the last five years? Hartford: Indeed, margins compressed cyclically throughout
Armstrong: We continue to see increased process automa- 2014 as underlying costs of capacity outpaced contractual rate
tion via utilization of the data available through the Internet, or increases in 2014, only to expand during 2015 and into 2016
with specific application programming interfaces. The ability for as supply increasingly exceeded demand. In other words, the
DTMs to access real-time shipment track and trace information, market and the models reacted as designed—brokers absorbed
rate quotes, and carrier capacity information is reducing the need additional volume during 2014’s tightness and benefited from
for manual data entry and follow up with carriers. In addition to margin expansion as the market loosened in 2015.
traditional EDI data interfaces, many DTMs are using project44, Armstrong: While annual contracts and rates still tend to
Kofax, Kapow and links to electronic logging device (ELD) data dominate the shipper “sell” side of freight brokerage operations,
to drive improved data integrations and process automation. the carrier “buy” side has become increasingly important and
Larkin: The first would be the emergence of mega-3PLs like for many freight brokers. Spot market pricing on the carrier side
TQL, Coyote and Echo that are challenging C. H. Robinson to is now driving the majority of the business, so having valid lane
work harder to stay in the lead with respect to technology, scale pricing benchmarks and carrier capacity data is critical.
and breadth of services. The willingness of LTLs to embrace It’s the difference from being a 12% gross margin com-
partnerships with 3PLs has also been a healthy development that pany and a 16% gross margin company. The large guys (C.H.
has helped leading LTL carriers access smaller customers, open Robinson, Hub, Coyote, TQL) tend to be very good at track-
new territories and move in the direction of dynamic pricing. ing lane pricing. Services such as Chainalytics, DAT and
Hartford: With that said, we view the biggest change in the [Link] also help in determining market rates. On top
market over the last five years to be the proliferation of and inter- of these, new entrants such as CargoChief have built some
est from new entrants in the domestic U.S. brokerage space. This leading-edge processes in developing rate benchmarks.
interest and resulting increase in competitiveness, coupled with LM: What about the impact of current economic conditions?

38 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

Transportation Best Practices/Trends: Truckload Brokerage

Hartford: This year’s environment appears similar to 2012 and Larkin: There is no question that the level of competitive
2013—periods that were marked by tepid U.S. GDP growth intensity is ramping up. However, as Evan mentions,the new
and a relatively balanced supply/demand environment within start ups are struggling to gain traction as these companies are
the TL space. The impact to brokers is one of choice—either typically tech-centric and have little feel for all of the nuances
attempt to preserve gross margins by sacrificing transaction vol- that exist in the freight markets.
ume as underlying spot rates remain relatively pressured, or be The Uberization of the space is actually taking place within
willing to compromise gross margins in an effort to continue to the big 3PLs instead. C.H. Robinson’s Freightview is a good
drive transaction volume growth. example of the type of Uberization that is being developed by
Armstrong: Prior to 2015, oil and gas was a bright spot; the leaders in the industry. The Uberization has really taken
however, with lower oil prices the shine has come off. It has hold in the LTL space, as many carriers are API compatible.
made a negative impact on 3PLs in business volumes and in As more and more truckload carriers adopt APIs, this process
decreased fuel surcharge revenues. We expect U.S. GDP to will accelerate on the truckload side of the industry as well.
pick up this year and drive increased 3PL growth, but DTM Hartford: On top of this I’ll add that logistics space is arguably
growth will be closer to 7% to 9% versus the double-digit evolving at the fastest pace in the industry’s relatively young lifes-
growth levels we saw in 2010 through 2014. pan. We believe incumbent brokers must adopt an “evolve-or-die”
Larkin: The current mediocre freight environment has sup- mentality, as the pace of technological change will not wait for
ply and demand roughly in balance in the TL space. Balance is the reactive to respond. However, proactive models—those that
seldom desirable for brokers. Rather they prosper when markets embrace technologies such as API and acknowledge the accel-
are out of balance, when fright exceeds capacity or vice versa. erating pace of change in the space—should be in a position to
capitalize on incremental share gain opportunities presented by
LM: Emerging technologies and start-ups continue to pop the development of new technologies.
up on the scene, coupled with the concept of the “Uberiza-
tion” of the freight market. Where do these elements stand? LM: How do you view the market from a regulatory per-
Armstrong: Back in July 2016, we published a report on spective? ELD is now just a few months out; so, will the
“Uber of Trucking” applications. What we found was of the 27 market benefit from the expected tightening of capacity?
applications we studied, none had the identical functionally Larkin: We believe that the ELDs will have dramatic
of the Uber ride-hailing app, and most had more functional- impact; provided that the Supreme Court doesn’t overturn
ity. So, we prefer to call companies that aim to match shipper the rule. Carriers, that tend to offset their cost disadvantages
demand with carrier supply/capacity via digital platforms Digi- by driving more than the legal number of hours, will either
tal Freight Matching (DFM) companies. become compliant or will simply drop out of the industry.
The numbers are compelling. Our estimate of the 2016 Either way, capacity will drop.
U.S. trucking market was $741.6 billion. Global investment Hartford: I would add that the ultimate impact from the
in on-demand technologies soared to $18 billion in 2015—a upcoming implementation of the ELD mandate remains highly
record high. The DFM sector has attracted over $180 million uncertain and, therefore, a highly debated topic. Numerous
in venture capital investment since 2011, including $67 million important questions remain—primarily in the form of the
in 2016 alone. Motor carrier empty miles estimates range from number of trucks currently in violation of existing drivers’ HOS
10% to 23%, while e-commerce fulfillment costs are increasing. rules, the degree to which those trucks are running hours and
The natural response is to improve inefficiencies in the miles above and beyond current regulations, and what will be
trucking industry with an Uber-like solution. But one of the the level of enforcement when the mandate becomes effective.
key components of Uber’s model is the commodity-like nature However, it’s highly likely that 2018 will experience some
of the ride-hailing service. Our analysis shows the principle degree of capacity tightness due to the mandate, and we believe
behind DFM may be simple, but the trucking industry isn’t. a 2% to 4% reduction in industry capacity is the range with the
Domestic transportation is not a simple commodity. Complex- highest degree of probability of being realized. In the short term,
ities arise in the form of specialized equipment types, ship- brokers are not likely to benefit from any tightening of capacity
ments transported via multiple modes, and necessary exception due to the ELD mandate, as per-unit gross profit margins are
handling for service issues such as equipment breakdowns. Ship- likely to be squeezed as spot market capacity initially tightens.
ments are high-value and time sensitive, and placing an Uber-like Armstrong: Keep in mind that there’s capacity to spare right
app atop a complex industry doesn’t truly address the problem. now, so if the ELD and ‘running legal’ takes out some capacity,

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Transportation Best Practices/Trends: Truckload Brokerage

DTMs will manage. What we find very interesting is the poten- in 3PL use. On average, 3PLs provide 2.77 services per cus-
tial data, which can be garnered from ELDs, may be tapped by tomer relationship, with the most common services including
DTMs. It could provide a real-time solution allowing 3PLs to some combination of transportation management, warehouse
know where carrier capacity is and where drivers have hours. management and value-added transportation management.
This could add efficiencies to the overall U.S. transportation mar- We advocate working with 3PLs to continue to drive out costs
ket and DTM 3PL segment and make up for any lost capacity. and optimize supply chains; and this goes beyond leveraging
the transportation spend of large freight brokers to looking for
LM: What practical advice can you offer shippers in terms of other ways a 3PL can help shipper operations from a cost and
how to best manage their relationships with TL brokerages? performance perspective.
Hartford: As tools that improve the visibility to the broader
supply chain develop, we believe shippers will be presented LM: Where do you see the market in five years?
with capabilities to reduce their per-unit transportation Armstrong: We see the DTM market continuing to
costs by improving inventory cycle times and participating in streamline and automate operations, and there will be more
asset-sharing programs. However, to fully benefit from new with combined freight brokerage and managed transporta-
technologies, shippers will likely have to evolve from recent tion solutions that can meet the needs of small to large
bid mentalities of seeing the lowest-cost solution through an customers having varying degrees of supply chain complex-
annual bid cycle and toward one that involves partnering with ity. Our estimate is that the U.S. DTM 3PL market seg-
brokers with scale and IT capabilities and improving their ment will reach $96 billion in gross revenue by 2022.
communication and collaboration with such brokers. Larkin: Indeed, we project that the outsourcing market for
Armstrong: I certainly agree with Ben. The trend is toward 3PL services will grow faster than the freight market, while
more strategic 3PL/customer relationships. Since we began players within the industry will consolidate into larger, better
tracking 3PL/customer trends in 2001, we’ve seen increases financed, better systematized companies. Smaller companies
will have to join a Landstar, a Sunteck/TTS, a Globaltranz or
a Universal Logistics. Alternatively they will have to subscribe
to the full suite of technology modules—offered by a vendor
like [Link]—in order to survive and prosper.

π Hartford: Certainly the pace of change in the U.S. domes-

tic transportation space is accelerating at its fastest pace
since the early 1980s period of industry deregulation. In
STOCK YOUR WAREHOUSE five years time, we believe API-based platforms that provide
essentially real-time visibility across the supply chain to
shippers will be ubiquitous.
Such capabilities will become a required cost to compete
in the space, resulting in attrition and consolidation among
the brokerage community. It’s estimated that roughly 90%
of truckload freight transactions are ‘planned’ as opposed to
‘spot,’ and we expect an increasing number of these transac-
tions in five years will be automated and transacted at lower
per-unit gross profit margins.
We doubt fully autonomous trucks will be viable, but
advances in semi-autonomous vehicles and hybrid autonomous
applications should enhance a broker’s ‘network effect’ provid-
ing productivity improvements and resulting cost savings to
shippers; further raising barriers to entry in the domestic space;
ORDER BY 6 PM FOR and driving incentives among shippers to continue to outsource
SAME DAY SHIPPING
logistics functions to proven providers. •
COMPLETE CATALOG
1-800-295-5510 Jeff Berman is the group news editor of the Supply Chain Group

40 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

 Expertise + Resources = Excellence

Hawaii Alaska China Matson Logistics

1-800-4MATSON 1-866-MNC GUAM 1-877-678 SHIP 1-877-CHINA-02 1-866-628-7663
customerservice@[Link] customerservice@[Link] alaskacs@[Link] phxchinasales@[Link] websales@[Link]
Supply Chain & Logistics Technology

Cloud TMS:

With 200+ locations, this 105-year-old food retailer is distribution (excluding its direct
leveraging a Cloud transportation management system store delivery or “DSD”). “Nearly
(TMS) to streamline inbound and outbound freight everything we sell runs through our
activities at its 1.3-million-square-foot distribution center distribution center,” says Kinneer.
in Central Pennsylvania. Operating 365 days a year, Weis
Markets’ DC serves as a critical link
By BRIDGET MCCREA, Contributing Editor
between the company and its end

S
ince 2015, Weis Markets has With locations in Pennsylvania, users who shop in the retailer’s 204
achieved record growth, and Maryland, New York, New Jersey, stores. The company has its own
barely resembles the single Delaware, Virginia and West Vir- fleet of tractor-trailers and other
neighborhood store that Harry and ginia, Weis Markets has more than vehicles that it uses to service those
Sigmund Weis opened in Sunbury, 23,000 associates, processes its stores. “Our trucks travel about
Pa. in 1912. As such, its TMS had to own milk and ice cream and has 270,000 miles a week and ship
effectively scale up to meet the gro- a strong focus on buying local. In about 1,000 loads to our stores,”
cery retailer’s needs—a priority Gary its home state of Pennsylvania, the says Kinneer, noting that on the dis-
Kinneer, the company’s director of company purchases more than 26 tribution side alone Weis Markets
managed transportation, says was near million pounds of locally-grown pro- has about 900 associates (700 DC
the top of the firm’s “must-have” list as duce annually. employees and 200 drivers).
it shopped for a solution in 2014. As a vertically integrated food Weis Markets is not in the busi-
“In order to truly maximize our DC retailer, the company supplies its ness of “storing things for a long
efficiencies, we needed to have a bet- stores from a 1.3-million-square-foot period of time,” Kinneer notes.
ter handle on the data,” said Kinneer. distribution center (DC) in Milton, Over a week, it receives approxi-
“We needed a transportation manage- Pa. Located about 12 miles from its mately 1,000 inbound loads—2
ment system to access the data and Sunbury store support center and million cases across 25,000 SKUs.
make better, more informed decisions. manufacturing facilities, this facil- “That’s what we do in Milton, Pa.,”
Quite simply, we needed a solution.” ity manages all of the firm’s product says Kinneer, “day in and day out.”

42 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

Streamlining both sides was clear we needed to do a better managed transportation program.”
of the DC door job maximizing our opportunities.” The retailer found what it was look-
In 2014, Weis Markets started looking The company had 166 locations at ing for in Kuebix TMS, a Cloud-based
for a way to gain efficiencies in its oper- the time and was anticipating solid transportation management system that
ations and improve oversight and visibil- organic (building new stores) growth incorporated all of its “must haves.”
ity of its inbound freight logistics. “We supplemented by an occasional acqui- “Kuebix aligned with what we envi-
didn’t have a transportation manage- sition (buying existing stores). sioned as our business model,” says
ment system, and we needed to improve “We knew that in order to absorb Kinneer, whose team utilizes the TMS
our efficiency at the DC level,” says that growth—and the inbound and in several ways, including for inbound
Kinneer. “Our goal was to find a better outbound volume associated with it,” compliance and routing. “We developed
inbound-outbound balance that would he says, “we had to become more effi- an inbound compliance and routing
allow us to achieve a more streamlined cient at the DC level.” guide that established standards, param-
distribution operation.” To kick off its search for a TMS, eters, and consistency across our ven-
Kinneer, who spent most of his ear- Weis Markets considered the various dors and carriers,” he says.
lier career on the store operations side brand name options on the market. Since it rolled out this portion of the
of the business, was asked to head The company sought out a vendor program, Weis Markets has improved
up the TMS search and oversee its that would provide the technology, utilization of its 1.3 million square foot
implementation. And while he wasn’t the data, and the expertise “behind warehouse, which includes grocery, non-
working within the supply chain when the technology,” says Kinneer. food and temperature-controlled space.
the initial decisions were made, he “Organizationally, we needed a “The inbound compliance not only gave
says the TMS initiative was actually TMS solution provider that not only us consistency of expectations of what
spurred on by the need to improve dis- had the technology, but that also was coming in from the outside,” says
tribution efficiencies. could provide us with support ser- Kinneer, “but it also provided some
“There wasn’t any specific ‘tip- vices to initiate those processes here consistency for internal activities and
ping point’ that pushed the initia- at Weis Markets,” says Kinneer. “We allowed us to streamline efficiencies on
tive through,” says Kinneer. “But it needed a partner to help us build our both sides of the door.”

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 43

Supply Chain & Logistics Technology: TMS

Tracking down the data

Using its TMS, Weis Markets can now
better leverage less-than-truckload
(LTL) consolidation by partnering with
three select national LTL carriers, ver-
sus the dozens of options that it was
previously using. So, where carriers were
previously delivering “one or two pallets
here and there” to the DC, Kinneer says
that those are now all delivered to con-
solidation points. Using its own fleet,
Weis Markets then backhauls from
those points and into its own DC.
“In the past, we had a couple of
hundred LTL deliveries coming in per
week,” says Kinneer, “and now we’re
down to just 20 or 30 because we can
use our TMS to combine the LTL deliv-
eries from the consolidation points.”
In another win, Weis Markets is
using its TMS for online scheduling—
a process that it previously handled from within its marketplace, but has us to make better informed decisions
manually. Using its own parameters, also engaged in conversion of vendor as to what freight transportation we’re
standards, data points and expecta- delivered lanes to customer pick up managing.”
tions, the retailer can now give its sup- from across the country. Once picked To shippers that are considering a
pliers specific delivery time frames via up, those loads are brought back to the Cloud TMS upgrade—or a completely
Kuebix’s Cloud-based, interconnected firm’s Milton DC. Weis Markets is then new system—Kinneer says that the first
solution. “This has not only streamlined reimbursed by its own vendors, which step should be to consider all of the
the scheduling process,” says Kinneer, didn’t have to hire third-party carriers to options currently available on the mar-
ket. Come up with a list of must-haves
“How we envisioned it back in early 2015 is not for the system, and then find the plat-
necessarily how it looks today. And that’s a good form that best meets your own organiza-
thing, because it means we’ve all evolved.” tional needs. And don’t forget to factor
the future into the equation, knowing
–Gary Kinneer, director of managed transportation, Weis Markets
that the company you’re running today
“but it has also given us a tremendous do the work, making the overall process may look very different just three to five
amount of tracking information and data mutually beneficial for both parties. years down the road.
that we didn’t have before.” “It’s a win-win for their respective “It’s only been about three years,
businesses,” says Kinneer. “Vendors but our relationship with Kuebix has
Don’t be afraid to evolve reduce their costs, and they’re no longer evolved during a period of record
Rewind just three years and Weis Markets in the transportation business. At the growth for our company,” says Kinneer.
was using its own fleet to make deliver- same time, we’re increasing revenue or “How we envisioned it back in early
ies to stores and then manually ferreting reducing our cost of goods.” 2015 is not necessarily how it looks
out backhaul opportunities with DCs or Thanks to its TMS, the retailer can today. And that’s a good thing, because
manufacturing facilities near those stores. now better leverage this opportunity. it means we’ve all evolved.” •
Today, with increased access to data, “We have much better insights into the
Weis Markets had not only dramati- value of lane rates and the value of pick- Bridget McCrea is a contributing
cally expanded its backhaul program ups,” Kinneer explains. “It really allowed editor to Logistics Management

44 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

Global Logistics

Emerging Markets:

Mixed forecast
for economic,
infrastructure growth
Transport infrastructure and frequency of ocean and air connections drive
the competitiveness of emerging markets again this year, as analysts rate
“market connectedness” as a key economic indicator for expansion.
By PATRICK BURNSON, Executive Editor

stabilized and prospects look a little

M
any economists note that some emerging markets are
enjoying robust, domestically-driven growth in 2017 and more upbeat. Similarly, the Russian
economy is expected to start growing
are less vulnerable to external volatility, providing poten-
again this year, albeit at a weak pace.
tial opportunities for expanded global supply chains.
In the meantime, Chinese policymak-
However, a cautionary note has been about emerging markets has also faded,” ers have instituted a set of potentially
sounded by Global Insight IHS Markit he says. “Given that world growth is contradictory policies aiming to support
chief economist Nariman Behravesh. gradually edging up, growth in the growth while reducing the high levels of
“As commodity prices have plateaued emerging world can be expected to leverage in the Chinese economy, note
and slid a little, the recent euphoria strengthen moderately.” IHS Markit analysts.
Behravesh also observes that in India, According to IHS, China’s govern-
accelerated “remonetization” has eased ment is accomplishing the first goal
the cash crunch in recent months, and with mild stimulus, which helped boost
spending appears to be picking up. first-quarter growth to 6.9% year-on-
Meanwhile, the Brazilian economy has year. Chinese authorities are trying to
accomplish the second goal via tighter
financial supervision and regulation,
which has rattled China’s financial mar-
kets. IHS has raised the 2017 and 2018
real GDP growth rates by 0.1%.
“However, we also believe that China’s
economy will decelerate in the next few
years,” says Behravesh. “The good news
for all emerging markets is that growth
dynamics are the best since 2014.”
Analysts with Frontier Strategy Group,
a Washington D.C.-based emerging
markets consultancy, note that China’s
current market has major implications
for global logistics managers. Risk to
the enduring health of the Chinese
economy is consistently on their annual
“Events to Watch” list as a major global
disruptor, they say.
“One key initiative that the Chinese
government is working on is to promote
more balanced economic development
across the country,” says Frontier’s
senior analyst Josef Jelinek. “This is part
of its ambitious urbanization agenda,”
Among the reasons such an urbaniza-
tion plan should be of concern to West- Importance of infrastructure
ern businesses are manifest, maintains Atradius Worldwide, a consultancy spe-
Jelinek. “China needs to move millions cializing in trade credit insurance, surety
of rural farmers to cities to sustain its and debt collections, observes that the expected interest rate hike path by
economic growth, while avoiding over- relatively “benign” outlook for emerging the Federal Reserve may expose
population in the largest cities,” he says. market economies in 2017 is also threat- emerging markets to currency
“By 2020, the government plans to relo- ened now particularly from the effects devaluation and capital outflows,
cate 100 million people, and by 2026, of developments in the United States. increasing borrowing costs and the
the government plans to relocate 250 Doug Collins, vice president and debt burden if largely denominated
million people.” regional director of risk services in foreign currency.
As a consequence, the government for Atradius, says that domestically Indonesia in particular is moder-
has developed a blueprint to focus urban- driven growth is an “essential buffer” ately vulnerable, but other selected
ization in a specific set of “city clusters.” to insulation from global volatility. This countries like India, Peru and Bulgaria
For logistics managers working for means logistics managers should look are well insulated from external volatil-
global companies, adopting such a city- for emerging markets that can rely on ity thanks to effective monetary policy,
cluster approach to China will benefit growth from consumption within their low dependence on risky capital flows
from additional scale and a more effi- own regions. and a relatively low external financing
cient use of resources, suggests Jelinek. “Another factor to keep in mind requirement in 2017.
Conversely, if executives continue with when evaluating the viability of emerg- Another potential threat to emerg-
a “provincial strategy” or a “Beijing- ing markets is that young and active ing markets is formed by President
Shanghai-Guangzhou strategy” they populations drive demand,” says Collins. Trump’s more protectionist stance on
will face supply chain inefficiencies in “Strong emerging markets have growing trade, which could weigh on growth
the years to come leading to decreasing populations, rising middle classes and a in countries that send a large share of
market share, loss of top talent, and dis- hunger for imports and investment.” their exports to the U.S.—especially in
tribution model breakdowns. In the meantime, a quicker than Latin America.

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 47

Global Logistics: State of Emerging Markets

Meanwhile, Atradius analysts add

that many emerging nations still need to Emerging Market Volumes:
invest in transport infrastructure to sup- Air and ocean trade lanes
port growth.
“In Indonesia, real fixed investment is
expected to increase above 6% this year,
A nalysts at London-based logistics think tank Transport Intelligence (Ti) note
that the busiest emerging markets for airfreight originating in the EU or U.S.
tend to connect to larger markets in the “Agility Emerging Markets Logistics
as the government expedites large infra- Index”: China, UAE, India, Mexico, Turkey, Saudi Arabia, Brazil and South Africa.
structure improvement projects such However, volume growth along these lanes appears to be subdued. Only EU-
India is likely to show double-digit growth this year (forecast at 10.5%), with the
as toll roads, bridges and airports,” says
next best being EU-Mexico (7.6%). For all other lanes in the top 10, growth is
Collins. “Likewise, India is supporting
expected to be in the low single digits or negative. Brazil looks to have suffered
infrastructure growth, which is directly badly (EU-Brazil down 6.7%, U.S.-Brazil down 11.6%).
correlated with improvements in the The eight fastest-growing lanes involve EU origins. The top five are EU-Viet-
economy. Major infrastructure upgrades nam (up 37.2%), EU-Pakistan (up 31.0%), EU-Colombia (up 18.7%), EU-Oman
are also anticipated in Peru, Ivory Coast (up 14.4%) and EU-India (up 10.5%).
and Kenya. Flowing in the other direction—from emerging markets to the EU and U.S.—
Finally, Collins says that most opti- the picture is mixed. Looking at the two busiest lanes, exports to the EU this
year are being propped up by China-EU growth of 4.8%, while exports to the
mistic markets have progressive poli-
U.S. are being hamstrung by a 10.5% decline in China-U.S. volumes.
cies driving their governments. Stable
Among the 25 fastest-growing lanes, growth is overwhelmingly driven by
political and institutional conditions higher volumes of cereal crops, with a few notable exceptions. Among EU/U.S.
set the table for business-friendly origin ocean freight lanes, it’s almost always bulk goods that drive volume
environments. “Given that infra- growth swings.
structure can be costly, there should Overall, EU-origin trade lanes are set for growth of 0.7% in 2017, while the
be well-developed capital and credit corresponding figure for U.S. lanes is 3%.
markets to fund projects, along with —Patrick Burnson, executive editor
healthy government finances or a wel-
coming attitude to foreign investment seven of the 10 countries deteriorated: connectedness”—UAE, Malaysia,
and ownership of critical infrastruc- China (1), Malaysia (4), Saudi Arabia China and Chile remained at the top.
ture assets,” he concludes. (5), Indonesia (6), Brazil (7), Mexico Russia regressed from No. 10 to No.
(8), and Russia (10). 13 because the overall quality of its
Infrastructure concerns According to Manners-Bell, China infrastructure has worsened, as has
The “Agility Emerging Markets Logistics remained atop the index rankings by “a the burden of its customs procedures.
Index,” compiled each year with the large margin.” Among countries in the Replacing Russia in the top 10 was
help of analysts from the London-based top 10, the markets changing places from Kazakhstan, which jumped up to No.
logistics think tank Transport Intelli- the prior year were India (up to No. 2 9 on the strength of infrastructure and
gence (Ti), contains similar caveats. from No. 3), UAE (down to No. 3 from customs improvements.
“Stagnation in global trade growth No. 2), Turkey (up to No. 9 from No. 10) “Overall, emerging markets retain
and turbulence in emerging markets are and Russia (down to No. 10 from No. 9). much of the capacity for growth and the
reflected in our 2017 index,” says Ti’s “Iran was the most improved emerg- dynamism with which to create and cap-
CEO John Manners-Bell. “Twenty-four ing logistics market, climbing eight spots ture value that much of the investment
of the 50 countries experienced a year- to No. 18 overall as it reintegrates with in them was built on,” concludes Man-
over-year erosion in their overall scores, the global economy and becomes part ners-Bell. “In the year ahead, though,
which could be considered a broad of logistics providers’ strategies,” says a potent mix of challenges, downward
gauge of their competitiveness that Manners-Bell. pressures and risks threatens to reveal
includes growth, market attractiveness, Ultimately, Ti analysts say that which emerging markets have founda-
infrastructure and transport connec- transport infrastructure and frequency tions built on sand.” •
tions, as well as business climate.” of ocean and air connections drive the
All of 2016’s emerging markets competitiveness of emerging markets. Patrick Burnson is executive editor of
remain in the top 10, but scores for In that area—which Ti calls “market Logistics Management

48 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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& Trends
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LOGISTICS: TECHNOLOGY: TRANSPORTATION: WAREHOUSE:

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 W From augmented reality to the “voodoo of
voice” to the sunset of Windows mobile
operating systems, here are five voice-
related trends that are making an impact
on warehouses and DCs right now.

The evolution of voice evolution blends well

with the basic mission of most warehouses and
DCs operating in the e-commerce environment:
To get small orders out the door as quickly and
efficiently as possible.
5
50 L OGISTICS MANA GEM ENT | JULY 2017 [Link]
 Warehouse/DC Operations

53 1
game-changing
voice trends
2
In today’s high-velocity warehouses and DCs, voice-
directed picking systems play an important role that goes
beyond just order selection and product picking. Also
used for receiving, put-away, replenishment, returns and
cycle counting, “voice picking” or “pick by voice” creates
a hands-free, efficient workflow that doesn’t require users
to stop, read, scan, key-in information or jot down notes.
Instead, they can focus on the work at hand.
Known for their ability to improve user productivity—even DCs with
99.9% accuracy before installing voice systems can reduce their picking
errors by 25% or more, according to a study by Lucas Systems—and pick
speeds, voice incorporates speech recognition and synthesis. These tech-
nologies work together to enable communication with the facility’s ware-
BY BRIDGET MCCREA, house management system (WMS), thus ensuring a smooth, accurate
EDITOR AT LARGE flow of information. For example, a voice verification system can receive
data from the WMS, transform that information into speech, and then
instruct the picker to the specific item location within the warehouse and
the quantity required.
Like nearly all warehouse technologies, voice-directed picking has evolved
right along with the facilities and functionalities that it supports. Here are
the top voice-related trends that all warehouse and DC managers should be
keeping an eye on:

[Link]
[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 51
 Warehouse/DC Management: State of Voice

1 Voice is no longer just a “science project”

for large companies
“We’re seeing a dramatic increase in demand in
voice technology in general,” says Keith Phillips, president and
ing arena, but also in voice-related receiving, loading, replen-
ishment, cycle counting and other DC activities. “With the
growing adoption and success of the technology,” Phillips adds,
“companies are now taking a much broader approach to voice
CEO at Voxware. Go back in time, he adds, and the solution implementations.”
was really only on the radar screens of large organizations that At least some of that expanding demand is being driven
could afford to implement it. Over the last few years, however, by e-commerce, omni-channel, and the increased levels of
technology itself has improved (both in terms of easier deploy- piece-picking and each-picking that are being managed in the
ment and ongoing support) while the cost of ownership has modern-day warehouse or DC. “Companies need to be very
been reduced. efficient in these areas,” says Mark Wheeler, Zebra’s director of
“It’s no longer a science project,” says Phillips. “It’s a proven supply chain solutions, “to deal with today’s rapidly changing
technology that works, and that can be implemented within order volumes and distribution networks.”
about three months—from contract signing to the go-live date.”

2
These improvements have pushed up voice adoption and The technology has become
the proven implementations have made companies of all sizes more “day labor-friendly.”
more comfortable with the technology. “Companies that want The labor market isn’t very friendly for warehouse
to improve productivity and accuracy are turning to voice,” says and DC managers right now, particularly when it comes to
Phillips. That interest level is not only being seen in the pick- securing day labor that needs to be able to get up to speed and
working quickly. “A lot of our customers are dealing with high
employee turnover,” says Wheeler. “There’s a lot of competition
for labor, so having a technology tool that’s easy to learn and
use has become an imperative in the typical DC.”
Day laborers present a particularly high hurdle, he says,
and one that voice hasn’t historically addressed very well.
That’s because employees had to go through “voice template
training” to establish his or her unique manner of speaking.
The process took time, and wasn’t very compatible for work-
ers who needed to be up and running the same day (and, for
just one day).
According to Scott Deutsch, president of Ehrhardt + Part-
ner, North America, that has changed. In fact, he says voice
technology (such as topVOX’s Lydia voice solutions) has
become much more “day labor-friendly” in that it allows a
company to bring in a worker at 7 a.m. and have that person
operating within five minutes. “From an ROI perspective, and
assuming that you can train workers very quickly on how the
floor is organized,” Deutsch says, “this completely changes the
Adding augmented reality dynamics of voice adoption.”
to voice has a direct impact

3
on improving the accuracy
of items as they are picked, The “voodoo of voice” just
packed and shipped out to isn’t a thing anymore
customers. Deutsch has been around voice long enough to
remember a time when the technology was so complex it only
attracted companies with huge workforces and deep pockets. “I
call it the voodoo of voice,” he says, “and it’s rooted in the fact that
the marketplace has always thought that voice is complex and that
you need super expertise to implement it.” Deutsch says the tech-

52 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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 Warehouse/DC Management: State of Voice

small orders out the door as quickly and

efficiently as possible. “The small-order
business is exploding, and companies
need to be able to handle it,” says
Deutsch. “Voice really excels in this
arena and helps companies deliver on
their service commitments.”

4
The sunset of Windows
Mobile and CE could
be painful
Anyone who was around for the Y2K
bug remembers how it promised to
cause computer hardware problems
when Jan. 1, 2000 rolled around.
And while it wasn’t exactly the “com-
puter apocalypse” that a lot of people
thought it would be, the so-called
“millennium bug” caused a lot of
anxiety and stress for businesses and
individuals alike.
Fast-forward to 2020 and compa-
nies may find themselves in a similar
position three years from now when
Microsoft officially ends support for its
Windows CE and Mobile products.
“Virtually every mobile device in
the DC that’s not on the Android plat-
form will hit end of life in 2020,” says
Ron Kubera, executive vice president
The expanding demand of voice is being driven by e-commerce, omni-channel, and the
increased levels of piece-picking and each-picking that are being managed. and chief marketing officer at Lucas
Systems. “Voice applications running
nology vendors themselves are to blame for this stigma, which is on those devices are going to have to be refreshed or users
now fading as a result of easier integrations and automated work- will be working with hardware and operating systems that are
flows that truly mirror a company’s business processes. no longer supported by Microsoft. That’s pretty scary.”
“Our own voice product is seamless, easy to integrate and And despite the warnings being circulated about the
looming Windows operating systems sunset, Kubera says a
“The majority of mobile applications that are lot of warehouse and DC operators are unaware of it. “When
running on Windows mobile devices today are I bring it up during conversation, many times it’s the first
going to have to be replaced or rewritten.” time someone is even hearing about it,” he says.
To avoid potential problems, Kubera says companies need
–Ron Kubera, executive vice president and
chief marketing officer, Lucas Systems to come up with a strategy. Understand the potential risks, he
says, and realize that if a device needs its firmware changed—
interfaces in real time/near real time,” says Deutsch, “thus allow- and if Microsoft is no longer supporting that specific operating
ing customers to gain quick value from it.” He says this evolu- system—then you may be stuck. Lucas, for example, develops
tion blends well with the basic mission of most warehouses and the same voice applications on both the Windows and Android
DCs that are operating in the e-commerce environment: To get platforms, which means its customers can switch between the

54 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

two, should they be impacted by the impending sunset. analysis of data or statistics. “We’ve been big proponents
“The majority of mobile applications that are running on of using analytics with voice,” says Phillips. “We started
Windows mobile devices today are going to have to be replaced about three years ago, and have continued to enhance and
or rewritten,” Kubera says. “That’s why it’s such a big issue and make new introductions in the analytics area since then.” In
one that warrants attention now versus later.” most situations, Phillips says companies that add analytics
capabilities to their voice solutions can expect 10% to 15%

5 Adding analytics and augmented reality to

voice are real game-changers
Data analytics has taken center stage in business
applications, where knowing and understanding historical
productivity gains in their warehouses and DCs.
Add next-generation solutions like augmented reality
(i.e., technology that superimposes computer-generated
images on a user’s view of the warehouse or DC, thus
data—and having it aggregated on a user-friendly dash- providing a composite view) to the mix, Phillips says, and
board—helps organizations make better forward-looking the business case for voice becomes even stronger. That’s
decisions. In the voice arena, Phillips says a growing number because augmented reality has a direct impact on improv-
of customers are asking for analytical capabilities to further ing the accuracy of items as they are picked, packed and
improve accuracy and productivity. “Once voice is imple- shipped out to customers.
mented and positively impacting operations, the next logical “It’s no secret that the distribution side—not retail—
questions are, ‘How do we become even more efficient?’’ determines the real customer experience,” Phillips adds.
says Phillips, “and, ‘How do we leverage this technology even “You can have a great customer shopping experience on a
more than we already are?’” Website, but when the box shows up on your doorstep dam-
In most cases, the answers to those questions lie in aged or filled with the wrong items, then that positive shop-
analytics, or information that results from the systematic ping experience goes down the drain pretty quickly.” •

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A S P E C I A L S UP P L E ME NT TO:

SITE SELECTION:

Seeking a
skilled workforce
While warehouse and distribution centers (DCs) have historically been
located where land is cheap and transportation networks are excellent,
today’s criteria needs to include a skilled workforce ready to manage
an increasingly digital operation.
By KAREN E. THUERMER, Contributing Editor

I
n this increasingly virtual world, next year and bring 360 jobs to the region. provide for multiple labor shifts and
retail stores may be disappearing, but “The DC will enable our Indianapolis working hours,” Della Valle says.
distribution centers (DCs) continue and Dallas facilities to take on more Oklahoma, Missouri, Nebraska and
to be fundamental for expanding capacity and reduce delivery distances Iowa were first examined, which pro-
logistics networks. Even for indus- in the Midwest,” notes Jim Della Valle, duced nearly 50 candidate site proposals.
trial warehousing, trends in e-commerce CVS’ senior director for supply chain These were short listed to 15 sites in
and nearshoring are making an impact transformation and outbound transpor- Kansas and Missouri, then seven, then
on logistics and site selection choices. tation leader. eventually two sites. Ultimately, the loca-
Any way you slice it, the need for rapid To help with finding the best loca- tion off I-26 in Kansas City was selected.
customer response is resulting in a close tion for the DC, CVS hired Cushman Location and size of project is
examination regarding location. & Wakefield as the consultant on the critical to giving a company all the
For example, CVS Pharmacy is build- project. During the site selection pro- advantages and flexibility in its DC
ing a $110 million, 762,000-square-foot cess, criteria focused on affordable high investment. Criteria, such as those
DC on 71-acres in Kansas City, Mo., to quality labor, proximity to key roadway determined by CVS with the consult-
create a hybrid e-commerce service model and other transportation systems, cost ing help of Cushman & Wakefield,
that will support the service and fulfill- of business, a business-friendly environ- helped CVS decide these factors.
ment needs of more than 370 CVS stores ment and options of expanding. “We Such decisions are unique, as one size
throughout the Midwest. It will open early were interested in an area that would never fits all for every project, although

56S L OGISTICS MANA G EM ENT | JULY 2017 [Link]

 A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

that she’s seeing site selection deci-

sions centered on e-commerce needs.
“Almost every business today has an
e-commerce component,” she reports.
“Customer proximity remains top on
the criterion list. For e-tailers, this even
includes customers’ homes.”
Other variables include company
size and specific customer type. Also,
how many DCs will be needed to serve
a market? How many products will be
handled? Is there a need for one-day
shipments? One hour? Does it serve
just-in-time manufacturing facilities?

Critical criteria
Today, transportation and labor are top
cost variables examined in the process.
“Labor is a huge component,” says Com-
erford. With U.S. unemployment rates
today’s trend is for mega DCs. markets with large populations. “They’re hovering below 5%, there’s simply not a
“We’re always asking how to improve clearly seeking locations where they can large cache of available workers.
the customer experience,” says Kris do last minute distribution,” Steele says. “Of great concern is not just available
Bjorson, international director at com- Site selection decisions uniquely labor, but also finding people with the
mercial real estate services firm JLL. reflect company requirements and its appropriate skills,” Steele adds. “People
“The first priority is the customer, then customer base along with its fine sci- may be available, but not always at the
the supply chain. Site selection is always ence of algorithms and defined criterion, rates or skill levels wanted.”
driven by the customer.” says Steele. DCs serving all types of Truck drivers and forklift operators
clientele have historically been located are among the top positions that need
Unique decisions where land is cheap, access to popula- to be filled. But as Steele emphasizes:
Chris Steele, COO of business and eco- tion centers is good, and transportation “The problem is compounded by the
nomic advisory firm Investment Consult- networks—highways, port access, rail, fact that the age requirement for a
ing Associates (ICA), notes that while the and air—are excellent. commercial driver license [CDL] is
trend is toward larger DCs, facility sizes “Specifically where to locate, however, 25 years old. Many people know what
are all over the place. “Some companies is a tough question because every com- they’re going to do for a living by then.”
require 50,000 square feet,” he says, pany is unique in what they need and To combat this mounting challenge,
“while others are constructing DCs of what markets they serve,” adds Steele. some companies are trading transporta-
several million square feet.” Michelle Comerford, project direc- tion advantages for locations that have a
This is particularly the case for com- tor and industrial and supply chain desirable labor pool. “At the end of the
panies such as Amazon and Wayfair, practice leader at site location advisory day, if you don’t have people with skills,
e-tailers that are building huge DCs in firm Biggins Lacy Shapiro & Co., says an otherwise good location is a useless

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 57S

 SPECIAL REPORT:
Site Selection/Economic Development A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

investment,” Comerford emphasizes. Plus, companies are working to show- training to companies as an economic
Northeast Indiana, which spans 11 case opportunities while students are in development tool, making this program
counties, is an example of a location junior high and high school.” unique is the fact that it crosses county
with a solid concentration of interstates, One of the challenges, however, is lines to find workers who are working
access to rail and air networks, and prox- logistics is perceived as a low wage, multiple jobs to make ends meet and
imity to key markets including Chicago, dead-end job. “Available workforce is a aims to attract them to logistics jobs that
Detroit, Indianapolis, Dayton and Cleve- key question I ask about everywhere I pay a livable wage.
land. General Mills and XPO Logistics go,” remarks Bjorson. “With unemploy- “We’re doing it at a level where we’re
recently opened DCs in Fort Wayne. ment now 2.3% in some areas, we also wrapping our arms around so many
aspects of the community,” says Kindle.
“We’re always asking how to improve the customer “Our goal is to change the dynamic.
experience: The first priority is the customer, then the supply Amazon is surprised at how much
chain. Site selection is always driven by the customer.” we’re putting into this.” He particularly
emphasizes how jobs, such as forklift
–Kris Bjorson, international director, JLL
operator, have become “high-tech” jobs.
“Given that Northeast Indiana is a have to address issues such as working “They now require STEM [science,
major manufacturing location, distribution on public transportation to get people to technology, engineering, and mathemat-
is important to moving product,” says John work from where they live.” ics] backgrounds.”
Sampson, CEO of the Northeast Indiana Chattanooga, Tenn., is another
Regional Partnership. Hampering the area, Kansas City here I come area that’s realizing how important
however, is its 3% - 3.5% unemployment This is particularly a concern for Kansas education is to attract DCs to the
rate. “Functionally, full employment is our City region where Amazon is building region. Companies are locating DCs
No. 1 challenge,” he admits. its third DC—a 822,000-square-foot in Chattanooga primarily because of
To compensate, the region has facility in Edgerton, Kan., where avail- its 1.5-hour distance from Atlanta.
launched a non-profit workforce devel- able labor is extremely limited. Provid- Amazon has a large DC there, and last
opment initiative called Northeast ing more than 1,000 jobs, Amazon will year FedEx put its final touches on a
Indiana Works. Its purpose is to provide become the 4th largest employer in the ground handling facility there.
public/private financial and employ- area once the facility is up and running. However, Chattanooga’s labor market
ment resources for education and skills To address labor concerns, Kansas is tightening. Charles Wood, vice presi-
training to meet the needs of regional City Kansas Community College, along dent of economic development at Chat-
industries. It operates and staffs North- with silent partner Wyandotte County tanooga Area Chamber of Commerce,
east Indiana’s 11 WorkOne Northeast Economic Development Council and explains that helping the situation is a
career centers, as well as oversees state Workforce Partnership Kansas Works, growing interest inside Tennessee for
and federally supported adult education have agreed to train and help provide post secondary credentialing. He attri-
programs and two youth-oriented career 1,500 workers for the new DC. Espe- butes this to the “Tennessee Promise”
development programs. It also funds cially needed are pickers, packers, UCP program, a landmark scholarship program
and manages employer-focused training code readers and forklift drivers. introduced by Governor Bill Haslam in
programs, and helps facilitate commu- Talent turnover is also a big concern. 2014 that offers free community college
nity-based career pathway initiatives. “One of the first questions is what are for anyone who graduates high school.
In addition, the Northeast Indiana you paying?” comments Greg Kindle, “It doesn’t have to be for an associ-
Regional Partnership has a strong rela- president of Wyandotte Economic ate’s degree,” says Wood. “It can be
tionship with Ivy Tech Community Development Council. “If a company through the Tennessee College of
College. “Today we don’t do any projects doesn’t pay well, there will be turnover.” Applied Technology [TCAT], our college
without a workforce component,” Samp- While most community colleges of applied technology. TCAT issues a
son says. “Community colleges are play- around the nation offer certificate pro- host of training programs certificates—
ing a role in filling the job shortage gap. grams, associate degrees, or customized anything from welding to CDL.”

58S L OGISTICS MANA G EM ENT | JULY 2017 [Link]

 SPECIAL REPORT:
Site Selection/Economic Development A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

The program especially feeds into resources differently today, but trucking industry being transformed over
Chattanooga’s logistics sector, given the resources are different even as of 12 a period of the next decade, even for long
area’s massive trucking industry. US months to 18 months ago,” he says. haul deliveries,” adds McDonald. •
Express and Covenant Transport are Moving forward, McDonald says he
headquartered there. sees autonomous technologies taking –Karen E. Thuermer, is a contributing
the lead. “We see the beginning of the editor to Logistics Management
New directions
Perhaps Columbus, Ohio, offers a
good example of where DCs are head-
ing in the future thanks to increased
integration between manufacturing
and logistics operations—all driven by
speed to market.
“With the amount of analytics and
agile information being employed by
manufacturing plants today, we’re seeing
increased evidence that manufactur-
ers are getting very intelligent in using
data to drive logistics operations both
inbound and outbound,” says Kenny
McDonald, senior vice president of the
Regional Columbus Partnership. Con-
sequently, he sees fewer products going
to DCs and instead moving directly to
consumers and users.
Columbus has advantages by being
at the crossroads of I-71 and I-70 and
is home to two intermodal yards served
by CSX and Norfolk Southern. Norfolk
Southern’s Heartland Corridor carries Best in class organizations achieve
dock to stock in less than 2 hours.
double stack containers between Vir- How does your process stack up?
ginia’s Port of Norfolk and Chicago via Adding a mobile powered receiving
Rickenbacker Inland Port in Columbus. station to your process can:
In addition, Columbus is a one-day Reduce handling and paperwork
drive to 47% of the U.S. population and Ensure accurate inbound labeling
47% of U.S. manufacturing capacity. To NEW Help get items off the dock
Lithium 50% faster
top it off, international air cargo carriers Power
Cathay Pacific, Cargolux, Emirates and System!

Etihad serve the region’s Rickenbacker

International Airport.
“For employers looking for skilled
workers and increasingly higher
labor quality as operations get more Your Power to Process Improvement

sophisticate, Columbus is in a great

situation,” says McDonald says. “Not
only are companies handling human
Learn more: [Link]/powerboost

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 59S

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VIEW FROM THE TOP

In it’s 15th year, View From The Top offers terrific insight from
top-level executives in leading logistics companies as to the
current state of the industry and how their companies are meeting
today’s challenges.

Read through these pages and see all of the new opportunities
that are being offered to help improve your company’s logistics
network and keep costs in check.

60 L OGISTICS MANA GEM ENT | JULY 2016 [Link]

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Two Logistics Trends to Watch in 2017

Q&A with Dennis Anderson
&KLHI&XVWRPHU([SHULHQFH2IÀFHU$UF%HVW Փ

Q: How can the rise of data analytics aid shippers?

A: Data and analytics can change the game if a shipper responds to uncovered trends. Most shippers
are looking to increase their analytics capabilities to help drive supply-chain decision-making in terms of
WYV]PKLYZLSLJ[PVUZ\WWS`JOHPUKLZPNUHUKVYM\SÄSSTLU[Z[YH[LN`(Z[YVUNZ[YH[LNPJZ\WWS`JOHPUWHY[ULY
like ArcBestSM can help with leveraging analytics to uncover trends, then address them with integrated
logistics solutions. We can leverage our decades of expertise in areas such as less-than-truckload (LTL),
truckload (TL), ground expedite and time-critical shipping, or supply-chain optimization.

Q: What are shippers seeking as their own logistics needs change?

(!*OHUNLPZJVUZ[HU[HUK[OLJVTWSL_P[`HUKJVU[PU\LKL]VS\[PVUVMZ\WWS`JOHPUZYLÅLJ[[OPZ:OPWWLYZ
want expert logistics solutions, partners they can trust, up-to-date technology, reasonable prices, and
value for their money. They want a reliable and excellent experience. At ArcBest SM, we are well aligned
to handle supply-chain challenges seamlessly through an expanded set of logistics solutions. We have
guaranteed capacity, we continue to make investments in technology, and we have remarkable people
who build exceptional strategic partnerships. The supply-chain business is not for the faint of heart, but
strategic partnerships with a provider like ArcBestSM can help shippers navigate its increasing complexity.

Welcome to Simplistics. ™

[Link]
©2017 ArcBest Corporation ®. All rights reserved. All service marks featured in this
advertisement are the property of ArcBest Corporation ® and its subsidiaries.

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 61

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VIEW FROM THE TOP

THE GLOBAL TRADE NETWORK

IS HERE
Supply chain software, as we once knew it, is done. It died
when no one could challenge the status quo of the
stand-alone supply chain. It died when no vendor
adapted to support the rise of global trade. It died when
innovation only meant adding the latest technology fad
to your marketing material. That’s why companies
spent $50 billion over the last decade trying to improve
their supply chains with only marginal performance
improvements.

The good news? Today is a new day. The supply chain

software industry is reborn. We are going through a major
industry revolution. But forget the term supply chain
software. That term misses the point. It’s all about the Doug Braun
Global Trade Network. CEO, BluJay Solutions

When I joined BluJay Solutions (Kewill at the time) in late

2015, we set into motion a strategic plan to create the world’s first Global Trade Network
– with the right technology and processes to best serve our customers. What does
Global Trade Network mean? Four things:
1. Universally connecting ALL supply chain partners on the same network to
increase speed, agility, and performance.
2. Optimizing across supply chains and not just optimizing a single stand-alone
supply chain.
3. Providing unprecedented velocity in the form of connecting new partners,
changing workflow, and reacting to changes in your world.
4. Integrating customs and compliance into your streamlined workflow for
friction-free borders.

Today we have over 40,000 supply chain partners connected to the BluJay Global
Trade Network. The network provides instant access to create, adapt, and optimize
across the globe. You can think big and deliver for your customers in ways you didn’t
think were possible. You are no longer stuck in the quicksand of a rigid stand-alone
supply chain. A global trade network enables a virtually unlimited number of options
and services to help you outmaneuver your competitors every – single – day. This is a
really exciting time to be in our industry.

I’m happy to say that our 1,100 employees around the world measure their success by
our customer’s success. We believe that supply chain is the ultimate team sport. If you
don’t already know BluJay Solutions, we’d love to welcome you into our global
community. We want to help you optimize your future in the Global Trade Network.

[Link]

62 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Dear Logistics Management Readers:

It is often said that the definition of insanity is doing the same thing over and over again and expecting
a different result. So why are so many businesses in the logistics industry continuing to use the same
traditional gateway ports expecting something other than unreasonable delays and loss of time due to
high traffic and congestion?

There is a better way. With a cargo-dedicated airport, extensive rail intermodal facilities and premier
logistics providers offering air, ocean, rail, trucking and warehousing services, Rickenbacker Inland Port
can eliminate hours and costs from your supply chain.

Situated between New York, Chicago, Toronto and Atlanta, Rickenbacker Inland Port is a one-day truck
drive to nearly half of the U.S. and one-third of the Canadian populations. With Rickenbacker’s access
to interstates and area roadways, multiple trucking companies and brokerages find it easy to reach
more overnight service points than anywhere in the nation.

Progressive cargo airlines and nimble freight forwarders are growing their businesses by taking
advantage of Rickenbacker International Airport’s dedication to cargo. The airport’s global reach
supports the ability to handle the world’s largest aircraft while an unparalleled geographic location
and friendly, knowledgeable personnel make Central Ohio a critical link in customers’ supply chains.

Opened in 2008 and already expanding, the Norfolk Southern Rickenbacker Intermodal Terminal
processes over 260,000 annual container lifts. By taking advantage of the Heartland Corridor
expansion, which connects the Port of Virginia to the Midwest and increases the speed of
containerized freight moving in double-stack trains between the East Coast and the Midwest, the
terminal is growing every year.

The Columbus Region can accommodate all of your warehouse and distribution needs. Dozens of
companies – including the recent additions of Amazon, BASF, lululemon and zulily – have successfully
expanded operations among more than 70 million square feet of warehouse and distribution space
at Rickenbacker and there’s significant room for additional growth. Combined with tens of millions
of additional warehouse and distribution space in the Region, Columbus has one of the largest
concentrations of warehouse and distribution facilities in the world.

Collaborative partnerships between businesses, government and higher education for the betterment
of the local and global economy is a primary reason behind the Region’s record growth. So whether you
move goods by air, ocean, rail or truck, Columbus’ Rickenbacker Inland Port can move your goods faster
and more reliably. Let us collaborate with your company to advance the speed of your business.

David Whitaker
Chief Commercial Officer,
Columbus Regional Airport Authority

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 63

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Hoosier Energy: Powering the Logistics Industry

Harold Gutzwiller
Manager of Economic
Development
Phone: 812-876-0294

HOOSIER ENERGY POWERS THE LOGISTICS INDUSTRY

THROUGH OUR 18
MEMBER The road to your company’s profitability and success
COOPERATIVES IN may run right through central and southern Indiana or
CENTRAL, southeastern Illinois. And in fact that road may look a
SOUTHERN INDIANA, lot like a highway, runway, railway or river port. That’s
AND because Hoosier Energy has some of the best sites for
SOUTHEASTERN distribution and logistical operations that the Midwest
ILLINOIS, HOOSIER has to offer.
ENERGY HAS BEEN If you’re building, expanding or relocating, you should
PROVIDING make it a point to talk with us. Because while supplying
RELIABLE, you the power you need is job one, getting your product
AFFORDABLE from point A to point B comes second nature. Let’s talk.
POWER TO THE You’ll find Hoosier hospitality also means Hoosier
LOGISTICS INDUSTRY Accessibility.
FOR OVER A HALF
CENTURY.
[Link]

64 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Landstar
Advantage Jim Gattoni
Landstar President &
Chief Executive Officer

Landstar is best known for our Safety First the resources of a financially stable, multi-
culture and our unique network of over 1,000 billion dollar company standing behind them.
agent locations, 9,000 leased truck owner- Whether it’s managing the complex regulatory
operators, 14,000 pieces of trailing equipment, environment, providing technology that
and over 45,000 approved carriers providing improves profits and productivity, or supplying
transportation services to over 25,000 different expertise on all modes of transportation, the
customers. ability of our network to support shippers
large and small is the envy of the industry.
Participation in our network provides to
agent small-business owners unmatched scale, And, Safety First is more than a slogan
systems and support, so they can be focused at Landstar; it is our core value. While the
and committed to shippers’ needs. This creates Landstar network is impressive, it is our
an environment where these Landstar agents uncompromising commitment to safety
can exercise their entrepreneurial talents that sets us apart.
and explore business opportunities with
shippers of all sizes, knowing that they have

Landstar System, Inc. [Link]

13410 Sutton Park Dr. South [Link]/LandstarSystem
Jacksonville, FL 32224 [Link]/LandstarSystem
877-696-4507
Solutions@[Link] [Link]/company/Landstar

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 65

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66 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Rated the #1 Ocean Carrier by consumers in Logistics Management’s annual

Quest for Quality awards for the past three consecutive years, Matson is known
for its industry-leading schedule reliability and award-winning customer service.

Our diversified fleet features purpose-built containerships, combination container

and roll-on, roll-off vessels and specially designed container barges. Matson’s ships
and assets are U.S.-built, U.S.-crewed and U.S.-operated, which provides advantages
Matthew J. Cox
in the integrated trade lanes of our operations spanning the Pacific.
Chairman and
Chief Executive Officer Serving Hawaii from the West Coast continuously since 1882, Matson is uniquely
Matson, Inc. experienced in carrying the wide range of commodities needed to support
remote economies. Matson provides a vital lifeline to the economies of Hawaii,
Alaska, Guam, Micronesia and select South Pacific islands, and is a key supply
chain component, allowing customers to rely on dependable vessel schedules to
continually replenish inventories.

Matson’s China-Long Beach Express has a strong reputation in the Transpacific trade
for reliable, expedited service from China to Long Beach, consistently delivering the
fastest transit times and offering next day cargo availability on the West Coast.

Logistics Excellence
Matson Logistics, also a Quest for Quality winner, helps companies source, store,
and deliver their products faster, better, at lower cost, and more reliably. Our services
and technology are customized to drive efficiencies in—and costs out—of sourcing
and distribution networks for companies of all sizes. Our team can help you with:

• Long haul and regional highway FTL and LTL service

• Domestic and international intermodal rail service with all Class I providers
• Specialized hauling, flatbed and project logistics
• Contract and public warehousing at key East and West Coast ports including
transload, cross-dock and product preparation and handling down to the
SKU level
• Freight forwarding in Alaska
• Value-added packaging services, light assembly, and product customization
• E-commerce fulfillment and DtC programs
• Asia-origin consolidation, PO management, customs brokerage, and NVOCC
services for FCL and LCL shipments
• Online, on-demand portal to book, track, and manage your shipments—
from source to store

Matson is firmly committed to operational excellence and providing its customers

with the highest level of service across all modes of transportation.

Learn more at [Link].

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 67

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68 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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DAVID CONGDON:
VIEW FROM THE TOP
These offerings help us deliver the trajectory over the next 10 to 20 years,
highest quality service to our customers. while also maximizing the operating
This service quality has been validated efficiency of our business.
by numerous awards, including the Another key strategic investment priority,
prestigious Mastio Quality Award, and perhaps the most important, is the
recognizing OD as the top national LTL investment in our people. Our success
carrier an unprecedented seven years in depends on the skill and performance
a row. of everyone in the OD Family, and we
It’s not enough these days for businesses Old Dominion provides high-quality believe in the continuous education and
to maintain a solid relationship with regional, inter-regional and national training of our employees to optimize
their customers. You have to perform service through one company at a fair our other investments in capacity and
at a deep level, delivering premium and equitable price. technology.
service, innovating through technology
The new benchmark that we have The significant and ongoing investment
and investing in employee growth and
created for high-quality service requires in our employees reflects our long-
expertise.
a long-term commitment to investing term strategy of building a motivated,
At Old Dominion Freight Line, we in capacity, technology and people. innovative and flexible OD team that
believe we are achieving on all of these Much of this investment has gone into strives to consistently surpass our
levels, while keeping an eye on the expanding the capacity of our service customers’ expectations each day.
future for new challenges, continuous centers and our equipment, consistent
Much has changed over these 80-plus
improvement and always, always helping with our strategy of maintaining the
years, in our company, our industry and
customers keep promises. excess capacity needed to leverage
our world. Our commitment to Helping
OD started more than 80 years ago with industry consolidation and growth
the World Keep Promises hasn’t wavered.
one truck and one route. That original opportunities.
It is as strong as ever.
route—between Richmond and Norfolk, We have also steadily invested in
Virginia—has expanded tremendously. technology that has allowed us to
Today, we offer global transportation improve our productivity, while also
services with the help of over 18,000 providing our customers with freight
employees. As our employees continue visibility and other management tools. David Congdon is CEO and Vice
to provide premium service, we continue In addition, we have increased our
Chairman of Old Dominion Freight Line,
to experience profitable growth within technology investment and continue
our industry. Our premium services to expand and enhance our technology Inc. With more than 35 years of

consist of OD Domestic, OD Expedited, platform. This initiative has prepared Old experience in the transportation

OD Global, OD Technology and OD Dominion for our anticipated growth industry, Congdon has spent the majority

Household Services.
of his career continuing the legacy of his
grandparents, Old Dominion founders,
Earl and Lillian Congdon.

1.800.235.5569 | [Link]
Old Dominion Freight Line, the Old Dominion logo, OD Household Services and Helping The World Keep Promises are service marks or registered service marks
of Old Dominion Freight Line, Inc. All other trademarks and service marks identified herein are the intellectual property of their respective owners.
© 2017 Old Dominion Freight Line, Inc. Thomasville, N.C. All rights reserved.

[Link] JULY 2017 | L O G I ST I C S MAN AG E M E N T 69

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70 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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LO G I ST I C S M A N AG E M E N T
ŝƐƌƵƉƟǀĞĨŽƌĐĞƐƐƵĐŚĂƐƐŽƉŚŝƐƟĐĂƚĞĚ ZLJĚĞƌŝƐƵŶŝƋƵĞůLJƉŽƐŝƟŽŶĞĚƚŽďĞ ƚŽƌŽĂĚǁĂLJĂŶĚƉŽƌƚĐŽŶŐĞƐƟŽŶ͕ƚŽƉĂƌƚƐ
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ƚŽŐĞƚĂŚĞĂĚŽĨƚŚĞĐŽƐƚĐƵƌǀĞ͕ůĞǀĞƌĂŐĞ 
ƉĂƌƚŶĞƌƐŚŝƉƐ͕ĂŶĚƚƵƌŶƚŚĞŝƌƐƵƉƉůLJ dŚŝƐŶĞƚǁŽƌŬŝƐƐƵƉƉŽƌƚĞĚďLJĐŽŵƉůĞdž
Tom Kroswek͕Group Director of Supply
ĐŚĂŝŶƐŝŶƚŽĂĚŝīĞƌĞŶƟĂƚŽƌ͘KŶĞĂƉƉƌŽĂĐŚ ƚĞĐŚŶŽůŽŐLJ͕ŽŶĞŽĨEŽƌƚŚŵĞƌŝĐĂ͛Ɛ Chain Excellence, Product Development
ŵŽƌĞĐŽŵƉĂŶŝĞƐĂƌĞƚƵƌŶŝŶŐƚŽŝŶŽƌĚĞƌ ůĂƌŐĞƐƚŇĞĞƚƐŽĨƚƌƵĐŬƐ͕ĂŶĞdžƉĂŶƐŝǀĞ ĂŶĚ/ŶŶŽǀĂƟŽŶ͕ZLJĚĞƌ^LJƐƚĞŵ͕/ŶĐ͘
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ĞŶǀŝƌŽŶŵĞŶƚĂůƌĞŐƵůĂƟŽŶƐ͖ĂƐƐĞƐƐĂŶĚ ŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ǁĞŚĞůƉĐƵƐƚŽŵĞƌƐ džƉůŽƌĞŚŽǁLJŽƵĐĂŶƉƵƚƚŚĞĞdžƉĞƌŝĞŶĐĞ
ŝŶƚĞŐƌĂƚĞŶĞǁƚĞĐŚŶŽůŽŐŝĞƐ͖ĂŶĚĚƌŝǀĞ ŵŝƟŐĂƚĞƐƵƉƉůLJĐŚĂŝŶĚŝƐƌƵƉƟŽŶƐƌĞůĂƚĞĚ ĂŶĚĞdžƉĞƌƟƐĞŽĨZLJĚĞƌƚŽǁŽƌŬĨŽƌLJŽƵ͕
ĞĸĐŝĞŶĐLJĂŶĚŝŶŶŽǀĂƟŽŶŝŶƚŚĞƐƵƉƉůLJ ƚŽĞǀĞƌLJƚŚŝŶŐĨƌŽŵŶĂƚƵƌĂůĚŝƐĂƐƚĞƌƐ͕ ǀŝƐŝƚ[Link]͘
ĐŚĂŝŶƐŽĨƐŵĂůůĂŶĚůĂƌŐĞĐŽŵƉĂŶŝĞƐ͘

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 71

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IMPROVINGOMNICHANNEL
IMPROVING OMNICHANNEL PERFORMANCE
PERFORMANCE

At Saddle Creek, we specialize in helping retailers, manufacturers and ecommerce companies get products
where they need to be quickly, cost-effectively and seamlessly.
Our solutions are custom engineered to meet the unique needs of each of our customers. By leveraging our
integrated logistics services, extensive resources, nationwide network, and advanced technology, we can
design scalable solutions to accommodate your requirements today — and in the future.

Network Optimization
We take a strategic approach to network configuration and can help you determine the right DC locations for
optimal efficiency. With well-positioned DCs, it is possible to reach more than 98 percent of the U.S. within
two business days via ground service — helping to significantly reduce transportation costs.

Omnichannel Technology
Our comprehensive omnichannel technology management solution includes order management (OMS),
warehouse management (WMS), and transportation management (TMS).
These systems integrate seamlessly with your current systems to manage order processing through to the
end customer. We can leverage inventory from multiple fulfillment sources to deliver the optimal customer
experience across all sales channels.

Service Excellence
Over the past 50 years, we’ve focused on delighting our customers with flexible, responsive service. We take
time to understand your business objectives and go the extra mile to deliver omnichannel supply chain
solutions to help achieve them. You’ll find us to be process driven, collaborative and accountable.

Looking for speed, service and scalability? We’ll do Whatever It Takes!

to ensure that your supply chain delivers.

[Link]
888-878-1177
Cliff Otto
CEO

72 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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“Driven to
a Higher
Standard.
Yours.”
A passion for people
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Delivering for our customers every day

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Focused on the future

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[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 73

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The evolution of supply

chain messaging
Andrew Slusher, SMC³ President and CEO [Link]

V I S I B I L I T Y. Real-time into competitively based, market-specific rates,

data. Cloud technologies. Though these buzz providing them with the confidence that they
words aren’t new to the broader technology field, are securing the best rates rather than carrier-
the introduction of new cloud-based solutions specific rates, which are often not competitive
that provide shippers and 3PLs with increased in all lanes. It’s been proven over time that the
shipment visibility and data are the talk of the savviest shippers, the companies that consistently
supply chain community. The tools that most secure the best rates from carriers, utilize rate
often accompany this buzz, application program benchmarking processes.
interface communication solutions, have Many in the market see APIs and rate
generated quite a bit of excitement. Customers benchmarking at odds with each other; however,
should carefully sort through the hype to truly it is fundamentally important that transportation
understand the value propositions each company technology providers have a strong foundation
offering buzz-worthy APIs brings to the table. in both tools in order to provide the most
While the industry shares information today comprehensive solutions to the marketplace.
via API standards, as technology continues to Currently, lightweight API capabilities represent
progress, it is important for companies touting only one means of increasing communication
API solutions to keep innovation at the forefront. throughout the industry. To take a holistic
Nobody knows when the next new technology approach, technology providers must also
will come along, so shippers must partner with not reject pervasive industry communication
trusted technology providers dedicated to a standards because they might be seen as outdated.
spirit of innovation and progress. In the current At SMC3, we continually investigate the
transportation landscape, it is crucial to select latest technologies on the horizon, developing
a company that has a trusted reputation, an innovative solutions in our Atlanta headquarters,
established network of supply chain partners, but we also discuss and dissect supply chain trends
and reliable and tested cloud security. and business opportunities at our twice-yearly
For shippers and other customers trying to conferences. Our next event is in Atlanta from
make sense of the complex arena of LTL rating, January 22 to 24. At the annual Jump Start event,
using APIs to connect to an array of different we will welcome more than 500 supply chain
carriers for rate information may not be the best professionals to the heart of the transportation
solution. A rating benchmark is a fundamental hub of the south for a full slate of thought-
tool that shippers utilize to effectively manage provoking discussions and usable information
the start of the LTL shipment lifecycle. – practical ideas they can take home to their
Benchmark rates give shippers greater visibility companies to streamline their supply chains.

74 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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Experience
the TOTE Maritime Difference
To Logistics Management Readers:
At TOTE Maritime, shipping is about more than transporting cargo
– it’s about people and values. That’s why we remain as dedicated
to caring for our employees and our community as we are to
exceeding clients’ expectations. This dedication is central to our
core values of safety, commitment and integrity. And it keeps us
focused on providing unparalleled service.

There’s no stronger example of our commitment to the community

than our leadership in environmental responsibility. We were first
in the industry to invest in LNG powered container vessels – the
first of their kind and built specifically to support TOTE Maritime’s
Puerto Rican trade. These Marlin-class ships markedly surpass
the U.S. Environmental Protection Agency’s clean air regulation
standards, while carrying twice what our previous ships could.

TOTE Maritime’s focus on safety includes technological innovation. StarGuard is a

telematics solution that allows us to remotely monitor and control our refrigerated
containers, using real-time information. This enables us to maximize the safety and
efficiency of our supply chain operations while better serving our customers.

We maintain the youngest fleet in the Puerto Rican trade because we believe it should
reflect the integrity of our organization. This year, TOTE Maritime invested in even more
cutting-edge technology for our fleet, including new orders of Carrier gensets and new
40-foot and 45-foot refrigeration containers.

TOTE Maritime believes our leadership in environmental responsibility and technological

innovation are important commitments to our valued customers as well as our
community both today and in the future.

Sincerely,

Tim Nolan
President, TOTE Maritime Puerto Rico

1.877.775.7447 | [Link]

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 75

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76 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 77

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100% of supply chain

execs think insurance is
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78 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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JAMES HANCOCK
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More and more companies are Let’s talk transportation. The freight seasonal spikes, promotions, and
moving their in-house transportation market is ever-changing and highly other planned or unplanned business
to an outsourced TMS model. Why the volatile. We have specialized freight events. What’s more, our manage-
shift? Companies enjoy cost savings teams and approximately 15,000 ment and replenishment systems let
and the convenience of a one-stop carrier relationships* to combat these customers know what they have at
shop for all of their transportation PDUNHWŴLSVDQGJHWWKHEHVWUDWH$QG all times.
needs. Veritiv™ Logistics Solutions with approximately 170 operating
(VLS) meets the needs of the market distribution centers* in North America, With Veritiv, you can double-down
by offering transportation, technol- we can consolidate loads, cross-dock with both logistics and packaging
ogy and warehousing solutions to shipments and turn costly LTL inbound expertise. We have the experience
varying industries. shipments into economical shipments. and expertise to maximize your
SDFNDJLQJZLWKZRUNŴRZDQG
But we didn’t become a national 3PL Let’s talk tech. Our top-tier supply automation, equipment, and design.
leader overnight. It began several chain technology is pretty powerful – All the while our logistics team helps
years ago with a handful of employ- it does the heavy lifting by managing customers stay true to commitments
ees. Fast forward to today, we employ all transportation needs. This leads to with reliable ETAs and real-time
hundreds of logistic professionals – smarter sourcing and spending, real- tracking.
specialized brokers, asset teams, time tracking and peace of mind for
and more – along with technology customers. With supply chain visibility
capabilities that we never thought and automated transactions, custom- About the author
possible. ers can take on more responsibilities, James Hancock is Director of Sales for
like focusing on their core business. Veritiv Logistics Solutions, and has
VLS is backed by the power of Veritiv, played a vital role in the expansion
one of North America’s largest distrib- Let’s talk warehousing. In short, of VLS.
utors. As such, we extend the same we’ve got space. Warehousing is a
industry-leading technology, depend- hot commodity right now – and James earned a bachelor’s degree in
able carriers and logistics experts to because of our far-reaching network, political science and economics from
customers that we use with our own we’re able to secure space for our Georgia State University, and a mas-
brand. This is a unique perspective, customers. We have approximately ter’s degree in global supply chain
and gives our customers a leg up on 20M square feet of warehouse space* management from the University of
the competition. available so customers can manage Southern California.

*For the year ended December 31, 2016.

855 857-4700 [Link]/logistics

[Link] JULY 2017 | L O G I ST I C S MAN AG E ME N T 79

Pacific Rim Report
Patrick Burnson is executive editor
of Logistics Management. To contact
Patrick with feedback or a story idea,
By Patrick Burnson please send an e-mail to pburnson@
[Link].

Asia-Pacific business leaders must

become “digital evangelists”
Surveys undertaken by global research firms often Gartner analysts, though, insist that CEOs expect IT
reveal a “disconnect” between what respondents say they’ll to play a strong role in fueling this profitable growth in
do and how they actually behave. A recent example of this the region. In fact, “IT-related” appears as the second
was revealed when Gartner researchers asked Asia-Pacific business priority after growth, reflecting the importance
CEOs about technology investment. While most execu- CEOs put on technology. This continues a trend that
tives maintained that technology was a chief priority, their first appeared in Gartner’s 2015 survey, when IT reached
investment in new systems did not mirror that contention. the top five business priorities of Asia-Pacific CEOs.
“Asia-Pacific CEOs want to increase profit margins This year’s ranking of No. 2 is the highest ranking IT has
while maintaining sales growth, and they expect IT to play achieved in the last three years.
a strong role in this,” says Partha Iyengar, vice president According to Gartner, companies in Asia-Pacific
and Gartner Fellow. “The problem is that Asia-Pacific benefit from being located in the region with the fastest-
firms aren’t moving fast enough to capitalize on

“
this potential. Their focus on conventional tech-
nologies will likely have less of a transformative Digital business offers a way for Asia-Pacific
effect than more innovative technologies.” firms to lower their cost structure drastically
According to the Gartner study, Asia-Pacific
leaders expect productivity in their organizations
and thereby increase margins. ”
to increase by 24% by the end of 2018, with
revenue (cited by 26% of respondents) and profitability growing economy, so they may be less concerned about
(15%) as the top two metrics of success. However, the sales growth than companies in other regions. Instead,
survey uncovers a gap between what they want to achieve these companies are more focused on increasing profit
and where technology investments are being made. than revenue growth.
To achieve such aggressive productivity gains, Asia- Indeed, digital business offers a way for Asia-Pacific
Pacific CEOs believe that conventional technologies— firms to lower their cost structure drastically and thereby
Cloud, ERP, analytics and CRM—will help them, rather increase margins, but Gartner contends that these orga-
than technologies that support digital transformation— nizations are not pursuing digital business as aggressively
digital environments, blockchain, the Internet of Things, as they could.
robotics, artificial intelligence and 3D printing. This is The survey also indicates that Asia-Pacific enterprises
despite their awareness and understanding of the major are slightly behind global counterparts in terms of digi-
impact that these key digital business technologies will tal business maturity, with 20% of the region’s CEOs
have on their industry. describing their enterprise as “digital to the core,” com-
Other analysts believe that while these statistics pared with 22% globally.
may apply in aggregate, they doubt they’re completely Further complicating the findings, researchers
accurate country by country. Rosemary Coates, presi- discovered that “digital” means different things to dif-
dent of Blue Silk Consulting and author of “42 Rules for ferent people, and Asia-Pacific CEOs hold less trans-
Sourcing and Manufacturing in China,” notes that in formative views of digital business than their global
China, President Xi has initiated “Made in China 2025,” counterparts. Indeed, the Gartner survey found that
a program focused on advanced manufacturing through 45% of the CEOs in the region think of digital trans-
investment in automation. formation as a way to optimize their current business
“China’s intention is to improve productivity and versus 42% globally.
sophistication in manufacturing; and, as usual, they’re The obvious remedy, say Gartner analysts, is for
achieving this goal with lightning speed,” says Coates. logistics managers and chief information officers work-
Other nations such as Vietnam and Indonesia are ing in the region to take on an “evangelizing role” with
at the early stages of industrialization and are tak- the CEO and other business leaders about the trans-
ing only small steps toward technology, adds Coates. formative possibilities of digital business using real
Investment in these countries is far less than China. supply chain examples.
“Making sweeping generalizations about the entire “Many business leaders still cannot describe digi-
region doesn’t reflect the diversity and development tal business well and need education,” concludes
stages of different countries,” she says. Gartner’s Iyengar. •

80 L OGISTICS MANA GEM ENT | JULY 2017 [Link]

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