It’s no secret, in any business relationship, that the easier the relationship between customer and provider the more smoothly things run. In a shipper/provider relationship this is particularly important. The intricacies of logistics can be very challenging given the nature of all the moving parts; desirability of lanes, pickup and delivery restrictions, equipment availability and all the issues that can happen on the way to a 1000 mile delivery.  We have discussed the importance of becoming a preferred shipper in previous blogs. The impact of carrier relations on your supply chain is more important now than ever. Several factors are putting pressure on carrier/shipper relationships and performance. Fluctuating fuel costs, capacity issues, driver shortages, and carriers that abruptly go out of business can all take a toll on a shipper’s ability to get the right products to the right customer within the right time frame. Take the time to make some manageable changes to your supply chain protocols to improve operations, moral and overall supply chain efficiency.

Some Easy Fixes

There needs to be a culture shift in vendor relations, particularly when it comes to carriers. Historically, truckers have been treated as second-class citizens when it comes to, for example, driver accommodation and respect for one’s time. A reasonably comfortable waiting area for the driver is an inexpensive and easily implemented enhancement to the driver experience. Minimizing loading time is also an easy, low cost, improvement to loading and unloading dock protocol. 

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The federal government has proposed long-awaited changes to the hours-of-service rules that would increase truck drivers’ flexibility while on duty. FMCSA’s newly proposed HOS rule offers five main revisions to the existing HOS rules, which are based on extensive public comments shared with the agency since last year. The adjustments would happen in five areas:

1. Flexibility for the 30-minute break rule by tying the break requirement to eight hours of driving time without interruption for at least 30 minutes; and allowing the break to be satisfied by a driver using on-duty, not-driving status, rather than off-duty.

2. Modifying the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of at least two consecutive hours either off duty or in the sleeper berth. Neither period would count against the driver’s 14‑hour driving window.

3. Allowing one off-duty break of at least 30 minutes but not more than three hours that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.

4. Modifying the adverse driving conditions exception by extending by two hours the maximum window during which driving is permitted.

5. Changing to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on‑duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.

The proposed rule would not increase driving time and would continue to prevent commercial operators from driving for more than eight consecutive hours without at least a 30-minute change in duty status.

Safety Remains The Driving Force For Both Sides

Most in the logistics industry consider trucking deregulated. While this perspective is accurate in a financial sense, the truth is trucking is among the most regulated industries in the country. It is important to understand government regulations add significantly to the cost of operations which, of course, is reflected in the rates. Most carrier executives question the depth and breadth of the regulations and how the federal regulators iron out their final rulemaking is critical to fleets’ efficiency and legal use of time. For example, a truck driver has 660 minutes (11 hours) of legal driving time during his or her 14-hour “on duty” time. How those minutes are divvied up not only matters to safety, but it’s a huge factor in both the driver’s compensation and the carrier’s financial wellbeing.  Among the challenges of drafting regulations for the trucking industry is the myriad of equipment types and services offered. Dry van, refrigerated, bulk carriers and other specialty carriers have present different safety concerns. Add to that mix carriers who transport more dangerous commodities such as hazardous materials like chemicals and munitions, fuel and over-dimensional loads and you end up with multiple regulations to cover all possibilities.

Manufacturers Look To Technology for Help

Technology is constantly evolving, particularly for motor vehicles. Self-automated technologies such as automatic braking systems have already appeared in passenger vehicles and are rapidly becoming available for large semi-trucks as well. Safety systems recommended by AAA researchers include:

• Air disc brakes, which significantly reduce the distance a large truck needs to stop.
• Automatic emergency braking systems, which engage the brakes if the system detects the truck is about to collide with another vehicle or object.
• Lane departure warning systems, which detect when a truck drifts from its intended lane and may hit vehicles in neighboring lanes.
• Onboard video monitoring systems, which monitor the road in front of a truck or the driver’s actions inside the cab to detect when unsafe practices occur.

Some of these systems not only help reduce the risks of truck accidents but may also aid injured victims recover legally afterward. For example, onboard systems can record if the lane departure warnings triggered before the accident, or whether the automatic braking engaged. This can provide evidence that a truck driver was distracted, fatigued, or otherwise impaired behind the wheel. Onboard video monitoring systems are pretty much common these days. They provide a solid picture of what transpired in any incident. They are a welcome e addition to most fleets since they reduce litigation costs and help drivers become more safety conscious. 

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Artificial intelligence and the Internet of Things are making their initial forays into a myriad of warehouse operations. The expected outcome; DCs able to respond dynamically to current supply chain conditions instead of pre-set rules. Look for newfound flexibility and an ability to respond to specific customer demands. The general programming protocol is to minimize human intervention in daily supply chain operations. This should not be news to anyone involved in complicated supply chain systems.

We are at the point where AI and IoT are viable IT applications for the warehouse. Both are powerful new tools that better enable warehouse and distribution center activities to keep pace with rapidly shifting supply chain dynamics. Artificial intelligence systems can learn, over time, the patterns and trends that are most important. It can identify when specific events occur which require human intervention. It can sense security breaches and stop them before they become crises. Simply put, for the IoT to grow to its full potential, it needs the processing power of artificial intelligence.

Integration Into the Supply Chain

AI promises a brave new world of computers that can plan, strategize, evaluate options, calculate probabilities, and make smart decisions. The inter-connectivity and dual reliance of both systems is evident in the automotive applications currently being tested. Repetitive daily environments are best suited for early stage AI learning and IoT experiences at this stage in the application. An example is a typical commercial bus route. The travel route is planned and timed out as are the stops. IoT applications including sensors, video cameras and time keeping technology all gather data throughout the daily route. This data is the basis upon which AI evaluates and electronically digests the information. It is through the digestion process that AI basically learns the particular details of the route like staying on time, the average number of passengers per stop, and, in fact, the unpredictable events like traffic and weather delays. It is through this repetitive experience that AI will eventually be able to maximize the efficiency of the route by anticipating daily events along the route based upon historical data.

The same inference can be applied to a route for a commercial delivery unit whether it be a truck, plane, train or any other conveyance unit. In this example the desired result is the same. To maximize efficiency by learning the route and experiencing every possible condition which may affect it so contingency plans can be implemented in real time to maintain the integrity of the delivery. The benefit of this technology application will become evident once driver less technology is fully implemented.

Early Areas of Implementation

AI can significantly improve business operations by leveraging the tremendous amount of data generated by sensors monitoring the production and movement of products using IoT. The result is referred to as AIIOT, which is the merging of AI and IoT to manage inventory, logistics, and suppliers with a higher level of awareness and precision. The supply chain is one area that can benefit the most from streamlining since it has a direct influence on profitability and customer satisfaction.

There are already several implementations of AI and machine learning where supply chain efficiency is improved:

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There is little doubt that technology has transformed the Logistics business in the last several years. Will we ever get to fast enough or efficient enough? It's not likely. Under pressure exerted by demand for instant gratification, new tech-first logistics providers are beginning to pervade the fulfillment environment. Without the autonomous hardware that promises to supersede traditional road transportation, they are instead leveraging digital tools to improve the performance of manually executed deliveries and reduce lead times from days to hours, with 24 being today’s bargain-basement service level. These companies, through the use of customer-integrated business platforms, mobile technology, and crowd-sourcing, are finding ways to pick orders within minutes of receiving them, dispatch deliveries on-demand, and bring buyer’s purchases to them in time-frames of two hours or even less.  How are logistics professional going to keep this pace?  Here are some technology trends that may be worth a look as we enter 2020 and beyond.

Robotics

Given the energy and investment in robotics in our space, suggesting that there will be a robotics trend in 2020 is pretty obvious. After all the pilots and promises, what seems to be happening is that robot solution providers, and the end user community, are realizing that there is no one size fits all robotic applications. Quite the opposite is true. The customization is proving so complicated due to the advanced operations of the robots that the programming and engineering has become problematically complicated. Robotic applications are a very customized solution depending upon the product line, distribution protocols and warehouse volume parameters. The challenge, in addition to the design, will be the management system that can bring the components in synchronicity with the rest of the automation. The difficulty seems to be that there is no standardization among the robotic providers. Each have their own standards, communication protocols and capabilities. Someone will have to figure all of that out as robots proliferate. The next generation robots will not just be tasked with simply, repetitive and mundane projects as were the first generation. The robots of today will be much more complicated providing a wide range of services. As you increase the tasks you increase both the software and hardware configurations necessary to support the project. These ambitious goal will certainly be a challenge to the engineers and programmers.

Edge Computing is a distributed computing paradigm which brings computation and data storage closer to the location where it is needed, to improve response times and save bandwidth. In layma 's terms it puts the entire computer in your handheld or mobile device. Not all that long ago, we saw the wireless revolution in the warehouse as barcode scanners, mobile printers, voice headsets and the like were decoupled from the computers that controlled them. That enabled the mobile worker, who could take a device to the point at which the work was being done. But those tools were essentially dumb terminals, the computing power and analytics were back somewhere else. Edge computing changes that. It puts computing power and analytics down on the floor, enabling truly real-time decision making and real optimization of the associate pushing a cart or driving a lift truck. Edge computing simply provides serious computing power to handheld and mobile devices throughout the warehouse enabling the user to have much more computing power at the point of use.

Logistics Safety

Ever since the eCommerce boom, the race has been on to deliver products faster with the fewest errors possible. In 2019, we saw the race for faster delivery hit a few bottlenecks, both legal and physical. The ability of tools such as drones to fly freely ran up against privacy laws. Delivery technology appeared to have reached a limit short of asking drivers to speed and forgo sleep.

The way we know these bottlenecks became serious was seen through companies suddenly making logistics safety their priority. With greater connectivity and more robust data, concerns over logistics safety and cyber-security came to the forefront. Customer data faced new challenges, and enhanced data richness gave drivers and fulfillment professionals new corners to cut, posing a challenge to safety. Technology appears to be introducing logistics solutions at a greater rate than federal, state and local governments can digest them.

Looking Forward: Order Fulfillment Optimization Logistics Trends for 2020

In 2020, you can expect to see many of the above trends continue to develop since they are still massively useful.

As safety became an issue in 2019, companies have turned to delivery experience enhancement. These are Order Fulfillment optimization methods that help alleviate the customer’s “gotta-have-it-now” anxiety; a need that I struggle to understand even today. These methods of order experience enhancement are all about letting the customer in on the shipping process. One massively effective way we can enhance customer experience is simply by raising the transparency of the shipping process. When it comes to improving customer experience, this is done with customer-facing APIs. API stands for “Application Programming Interface.” APIs give individuals and companies the power to add functionality to a website, application, platform, or software without having to actually write the programming code.

This is accomplished by integrating the API code into a company's existing code. We encounter APIs all the time online. If you’ve ever bought something from an online retailer, for example, then you’ve almost certainly interacted with an API. Most online retailers process payments using APIs from Stripe or PayPal.

‍Other APIs you’ve likely run into include the Google Maps API on sites like Yelp, and the “Sign in with Facebook” API which allows you to log in to a website using your Facebook credentials. Be careful of that ease of login using social media or other websites. You're giving up some security.

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Retailers are offering the most aggressive return policies in history but at what cost. Returns can be a disease,  aggressively attacking profit margins, gutting conversion rates, and ultimately threatening your business. In the U.S. alone, Statista estimates return deliveries will cost $550 billion by 2020, 75.2% more than four years prior. Worse, that number doesn’t include restocking expenses nor inventory losses. Nailing down exact numbers on return rates is notoriously difficult, but compiled data from separate sources paints a bleak portrait, especially for online retailers. The fierce competition among online retailers has forced the price margins so low that they cannot support the cost of these return policies.

In response, businesses are adding workers, increasing warehouse space, and establishing separate departments to handle reverse logistics. Returns are the new normal and central to customer experience but they don’t have to be a plague. In fact, how you deal with returns, before and after purchase, can differentiate your brand, create a competitive advantage and even make you more profitable.

Such generous return policies are an invitation for abuse. People are waiting months to return items rendering them useless to the retailer if the item is seasonal. Also, you have people using a particular product and carefully repackaging the item. The ends result is the same; the item is either not available to resell or it is not in sellable condition. Either way your looking at liquidation value for those items.

Some in the industry that created the monster are trying to put it back in its cage. They’re taking baby steps; not providing pre-paid mailing labels, requiring a receipt unless an unwanted item is carried to a store but also threatening to cut off serial returners, the most troublesome of the offenders.

These offenders are indeed a cause for concern among online retailers. Last year, $369 billion in merchandise, or 10% of total retail sales, was returned in the U.S., according to a study by research firm Appriss, up from $260 billion in previous years. The holiday season, of course, is the one to dread in the returns departments. United Parcel Service Inc. expected to handle more than 1 million such packages every day, reaching a peak of 1.9 million on Jan. 2, which would be a 26% increase from the 2019 high point.

How Retailers Are Dealing with Serial Returners

Habitual returners fall into two distinct types:

The Wardrober

People who buy items to wear once and have no intention of keeping them afterward. The Wardrober may not be able to afford the item or are taking advantage of overly lenient policies.

The Fitting Roomer

People who replicate the brick-and-mortar experience at home by purchasing different sizes and colors of the same item, pick their favorite, and return the rest.

In late 2018, The Wall Street Journal reported Amazon had begun banning shoppers — i.e., closing their accounts — who “made too many returns.” While extreme, such actions are often necessitated by the first type of habitual returner. Last year, Amazon also unveiled Prime Wardrobe which is free to members but limited to 3-8 items per order with a seven-day window to return before getting charged.

Retailers are now tracking serial returners and threatening harsh action. The bigger problem is the big retailers have made returns far too easy for shoppers. Trying now to pull back on that ease of shopping experience may backfire. It will be interesting to see the changes for the next holiday season.

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Eighty-five percent of supply chain managers expect their outsourcing budget to increase by more than 5% in 2020, according to Gartner, Inc. A sizeable portion of that will be aimed at choosing multiple third-party-logistics (3PL) partners.

The question no longer is whether to outsource; it's what to outsource and how much. Evaluating different outsourcing strategies has become a priority for global managers. To be effective, the supply chain outsourcing strategy needs to be aligned with the overall logistics priorities. Supply chain leaders are realizing that updating their technology systems, increasing speed to customer and improving visibility are their most important goals for next year. We are in the thick of the digital era and new routes to market and technology-enabled products and services are rapidly disrupting industries and business models. To respond to these accelerated and evocative changes, logistics leaders need not only understand the foundational elements of good overall strategy, but also rethink how their logistics outsourcing strategy is assessed and developed.

If your organization is considering a 3PL relationship here are several potential benefits to consider:

Improve global capabilities. 3PLs have on-ground knowledge of local markets, regulations and government agencies, and understanding of capacity constraints.

Reduce costs. 3PLs can help reduce excess carrying costs, return goods cost and lost sales. They can also help manufacturers move more material with fewer assets while still meeting customer requirements. In some cases, manufacturers can realize savings when consolidating warehouses and/or using shared facilities operated by 3PLs.

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As another year draws to a close it may be useful to review some of your supply chain protocols. A good place to start is a year end freight bill review. Things are a little quieter this time of year and there is plenty of recent data to review. Typically, this is a no cost exercise provided by your 3PL so there is every reason to have the review done. If for no other reason than knowing your fright payment protocols are working.

What is a Freight Invoice Audit?

As a concept, freight invoice auditing is simple to understand. The idea is to make sure you only pay the shipping charges you should, and nothing more. In most cases, software does the hard work. However, some auditing must be done by hand. All this happens once the invoice is received. The carrier only gets paid after it’s determined that the invoice is accurate.

Billing Errors Happen More Than You Think

Shipping charges can make up to 10 percent of a company’s total expenses. It’s not unusual for companies to spend millions or tens of millions of dollars annually to ship their products with trucking companies or parcel carriers like UPS and FedEx. But it’s common for major shipping carriers to overcharge by missing discounts or mis-classification of freight. Pricing in the shipping industry is complex, and in many cases, carriers make mistakes or do not meet service requirements. Billing in today’s logistics environment contains a myriad of charges and discounts, base rates, fuel surcharges and hundreds of accessorial charges. There’s a lot of opportunity for mistakes, and you need to protect yourself. That’s where freight invoice auditing comes in.

At Freight Payment, Inc., a subsidiary of Land Link, freight bill auditing is a big part of our business.  Most successful companies know the value associated with utilizing the services of a fully integrated freight bill audit and payment service. More than 80% of well managed companies, with operations in the US currently use and leverage the power of audit and pay solutions. Our solution takes the benefits of standard freight bill audit and payment to an entirely different level.

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Celadon Transport, a division of the Celadon group filed for bankruptcy protection this week just days after two former officials were charged in an accounting fraud scheme. The Chapter 11 bankruptcy filing by the Indianapolis based Celadon Group left more than 3,000 drivers jobless and, in many cases, stranded drivers across the U.S. after their company gas cards were cancelled.  Another 500 administrative jobs are expected to be eliminated through the bankruptcy.

Celadon's former president and chief operating officer, William Meek, 39, and its former chief financial officer, Bobby Lee Peavler, 40, were indicted on conspiracy and other charges. They knew the value of a substantial portion of Celadon's trucks had declined and that many trucks had serious mechanical issues that made them unattractive to drivers, according to the indictment.

Earlier this year, Celadon agreed to pay $42.2 million to settle securities fraud allegations stemming from falsely reporting profits and assets. The company's stock was trading at less than 3 cents a share on Monday, down from a 52-week high of $2.83 last April 11. Celadon said it was the largest provider of international truckload services in North America, and its bankruptcy filing means 3,300 trucks and 10,000 trailers will stop rolling.

Among the big companies that failed in 2019 are New England Motor Freight, which employed more than 1,400 drivers. HVH Transportation, Falcon Transport and LME have all shuttered operations this year, too. Part of the problem, according to Donald Broughton, principal and managing partner of data firm Broughton Capital, is that spot pricing has dropped, which is hurtful to smaller companies that operate in the spot market instead of the contract market. Spot prices refer to shipping prices as they currently exist.

Trade tariffs, as well as slowdowns in a variety of markets, including housing and auto, contributed to the drop, Broughton had told FOX Business. He predicted companies would continue to fail into 2020 because of the weak pricing environment.

Additional pain for the industry could be coming next year in the form of labor laws designed to protect contracted workers from being misclassified. In California, for example, starting in January a law will go into effect that will make it harder for companies to classify workers as contractors, which the California Trucking Association has said could put 70,000 owner-operators in the state out of work. The group has sued to prevent the law from taking effect.

New Jersey is considering similar presumption-of-employment status legislation, which has caused alarm among the state’s trucking industry, as well.

What Shipper Can Do To Protect Shipments

The thousands of trucks stranded Celadon trucks likely have customers shipments onboard which will not be delivered anytime soon.  Getting that freight delivered will likely cost significantly more than the original rate.  The most damaging aspect of getting caught in a bankruptcy like this one is that thousands of customers supply chain has been significantly disrupted.

The best way to protect yourself against insolvent and even under achieving carriers is to vette them annually.  Review financial statements, credit ratings, customer experiences on social media and verifiable on time percentages.  Another option is to employ a 3^rd party Logistics Firm to help with routing decisions.  At Land Link Traffic Systems carrier vetting is a standard procedure.  We take every precaution to route our customers freight with a financially healthy carrier with above average performance.

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