2015’s Warehousing and Logistics Issues: Capacity, Congestion & Collaboration
Shippers, logistics and transportation providers, and Wall Street analysts attending recent industry meetings agreed the supply chain will continue to face capacity and congestion challenges in 2015 – and quite likely for many years to come.
The good news is that shippers are increasingly turning to third-party logistics providers to help them secure solutions needed to these stubbornly persisting challenges.
Driving these points home were many speakers at the National Industrial Transportation League Transcomp conference in November and the logistics forum organized by Armstrong & Associates for Infocast that was held in Chicago in late October.
Some speakers were not sanguine about the future for non-asset-based small third-party logistics, like freight brokers, to adjust to rapid change. CEO Echo Global Logistics Douglas Waggoner told the Infocast briefing, “There is a growing awareness among some of the smaller brokers that you’ve got to get big or go home. I think the entire landscape is changing every quarter.”
However, when it comes to warehouse-based 3PLs, some see a role continuing well into the future. In a press conference he held at NITL, Brad Jacobs, President of XPOlogistics, said small and regional warehouse operations will be able to successfully serve a wide range of niche markets.
Warehouse based Third Party Logistics (3PL) offer compelling value.
Sean Coakley, Senior Vice President of Kenco, commented in Chicago, “Smaller and family-owned warehouse operations allow flexibility in deal making, and a smaller company can deliver hand-holding and provide closer customer service.”
Customers are looking for more value, said David Starnino, Vice President of Sales for Nulogy, who noted that for smaller warehouse providers, “kitting, packaging and assembly can set you apart.”
Ryan Kelly, Senior Vice President of Genco, who spoke at the Chicago event about six weeks before it was announced that his company is being acquired by FedEx, asserted that the key to providing world-class value-added warehousing and distribution is your employees.
“We try to offer our warehouse employees a ‘lifestyle approach’ to their jobs,” he said. We place enormous emphasis on a teammate culture; it’s something we work on all the time.”
Kelly also said Genco’s decision to maintain a large industrial engineering department has allowed it to emphasize product lifecycle management, for example, by working with customers to attack the truck capacity shortage by eliminating the need for transportation between distribution centers.
However, in the future smaller 3PLs will not need large, sophisticated IT departments to unleash the power of analysis for helping their customers improve their supply chain management, said John Golub, CEO of Lanetix. “Cloud technology will allow smaller companies to use Big Data just as capably as large companies,” he predicted.
Driver shortages continue to impact the logistics industry.
Not surprisingly, the truck driver shortage was top of mind at both industry meetings. During the Chicago forum held at the end of October Dick Armstrong, CEO of Armstrong & Associates, said the average cost of a driver and tractor had reached $75 per hour – a number the trucking and 3PL executives who were present agreed with.
Paul Bowman, Senior Vice President of Sales at U.S. Xpress, said his company is partnering with truck driver training schools, but warned that exit from the industry by an older, more experienced driver force is an obstacle to finding a solution.
American Trucking Associations has estimated that the industry will need at least 100,000 new drivers each year, but Bowman said that the real number is probably closer to 120,000 when you figure in the reduced productivity of newer drivers.
Brad Jacobs declared in his NITL keynote address, “The driver shortage is here to stay for at least the next 10 years,” predicting that the problem will only be fully solved when driverless trucks actually become viable seven to 10 years from now.
The driver challenge also was taken up by a NITL conference panel made up of trucking industry executives, which was moderated by ACWI Advance Editor David Sparkman.
From its origins in the early 20th Century until just a few years ago, the trucking industry relied primarily on the same portion of the U.S. population to recruit drivers: rural white males. That has changed over the last several years.
Rob Kemp, President of DRT Transportation, a broker and fleet operator, said his company has succeeded in drawing on much more diverse demographic spread for its driver force. (In Chicago, Bowman said his company has seen its proportion of female drivers go from 3% just two years ago to 14% today).
Lance Whitacre, Vice President and CIO of the windows manufacturer Anderson Corp., and head of its fleet, agreed that the industry needs to do more to recruit from nontraditional demographics.
Mark Tinch, Associate Vice President of Field Sales for Werner Enterprises, said his company succeeded in this regard by recruiting from the military. Following the NITL meeting, ATA committed the industry to recruit 100,000 members of the military.