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transportation management

Accelerating Business Growth And Lowering Cost With Data Analytics

Too many companies are experiencing transportation and freight expenses as one of their top three costs. Smaller companies feel the pinch the most. They typically incur greater logistics costs than medium and large sized companies, as do companies that sell lower product value goods. In a recent survey, 32% of online retailers expected logistics and delivery to be their biggest cost this year. The expense of moving products or assets to different destinations should not be the leading cost in any business, if possible. (See How Does Freight and Transportation Fit into your Budget? 

What’s behind the dramatic rise in transportation costs in nearly every sector? There are simply not enough drivers on the road to keep up with demand.  

Truck Capacity Crunch 

The first explanation for the rise in transportation costs is the truck capacity crunch.

The first explanation for the rise in transportation costs is the truck capacity crunch. See “Rising Costs and Lower Capacity in the Domestic Truckload Market.” There are simply not enough drivers on the road to keep up with demand. “Surging transportation demand is spurring trucking companies to charge as much as 30 percent more for long-distance routes compared with prices a year ago, and they’re hard pressed to add capacity because of a long-standing shortage of drivers,” explains Thomas Black, in Bloomberg’s “There Aren’t Enough Truckers, and That’s Pinching U.S. Profits.” Tyson Foods Inc anticipates paying $200 million more for freight in 2018 from the previous year. Kellogg Co’s logistics costs are expected to rise by nearly 10 percent. 

Chief Executive Jim Snee of Hormel Foods, the maker of Skippy peanut butter and SPAM, says, “We don’t believe we’re going to recoup all of our freight cost increases for the balance of the year.” He informed Reuters that the company’s operating margin sank to 13.2 percent, from 15.6 percent due to rising costs – freight among them – in the most recent quarter. 

Stringent Demands of the ELD Mandate 

The second reason is the new ELD (Electronic Logging Devices) Mandate which entered into force on December 18, 2017.  Drivers are now driving less, in keeping with the new regulations. Fewer drivers on the road at any given time due to the ELD Mandate is equivalent to taking 200 to 300,000 or so trucks off the market, according to a podcast episode by Freight Savings Tips.

Truck Driver Wage Increase

With fewer people getting licensed to become truck drivers, and older drivers retiring (see “Attracting the Next Generation of Truckers”), it will be inevitable that wages will need to go up to attract much-needed drivers. To cover the cost of truck driver wage increases, truckload rates will inevitably rise. 

Fuel Price Hikes 

The rise in fuel prices is especially hard-hitting for companies as fuel represents a significant portion of freight spends – often appearing as a surcharge on carrier invoices or embedded in line-haul rates. Fuel, according to the Harvard Business Review, is often the “largest inadequately monitored part of a company’s cost structure.” 

Tom Kloza, global head of energy analysis for Oil Price Information Service calls this season “the most expensive driving season since 2014.”  

Congestion In Cities 

With increased traffic volumes and customer expectations on delivery times, the pressure to perform – quickly, and in congested parts of the city (i.e., tricky navigation) is very real. Consumer changes and complicated last-mile delivery obligations require money which must then be offset elsewhere. 

The main solution – and greatest hope for companies engaged in shipping activity –  is data analytics.

What To Do: It’s All about Data Analytics 

The main solution – and greatest hope for companies engaged in shipping activity–  is data analytics. Data analytics lessen the cost of bringing products to retailers or customers by uncovering new possibilities.  

Transportation spending covers many dimensions. Therefore, there are many opportunities to control the spend. These solutions come in the form of reconsidering warehouse processes, leveraging IT systems, revising package and product designs to alleviate excess weight and increase shipment density, or “nearshoring” (reducing the number of miles shipments travel). 

Bringing in the Experts

Companies who have relied on BlueGrace’s tried-and-true data analytics have recouped losses from mistakes they have made in the past. Consider the consumer packaged good company that underwent BlueGrace data analysis to determine what the “true cost” of its orders were (using information from historical orders) when freight cost was allocated.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level.

The company executives were able to “drill down and allocate a freight cost to not only the customer level but the customer location, customer location type (Direct to Store or Distribution Center) and even down to the SKU level. Since freight cost was not passed through to the client, this would either show a net margin loss on certain orders or opportunities to reduce the freight cost allocation on others to become more competitive. The result highlighted regions that were more costly to ship to, products that did not have enough margin potential to consider shipping unless they met a specific minimum requirement and insight into regions of the country that would benefit from an additional warehouse location.” 

With BlueGrace’ specialized business intelligence, processes become clearer. Transportation costs are curbed relative to sales and overall budget. Ready to find your own clarity today? Feel savings relief by taking the first step. Watch the video on our proprietary game-changing data service here and talk to an expert today. Fill out the form below or call 800.MY.SHIPPING (697-4477) to be connected to a Transportation Management Expert. 

Walmart’s OTIF Policy Gets Harder 

On Time In Full is a policy that Walmart created back in 2016 and implemented in August of 2017. In an attempt to drive their proficiency up and costs down, the mega retail chain started targeting their supply chain. Under this policy, suppliers that failed to deliver the total amount of promised goods, to designated stores at the prescribed time are penalized; fined up to three percent of the total shipment value.  

The shipment has to arrive exactly when it’s expected. Not before, and certainly not after.  

It’s not just trying to curb late deliveries, either. The OTIF policy also cracks down on trucks arriving too early, as it can create excess traffic and delays for loading and unloading. For suppliers and trucking companies, this means there’s no leaving early to create a buffer zone. The shipment has to arrive exactly when it’s expected. Not before, and certainly not after.   

In addition to making things more challenging for suppliers to make sure their goods arrive on time, it will bring even more stress on carriers – we discussed this in more detail in our earlier post. With the Electronic Logging Device more closely monitoring hours of service, truckers will be in a tight spot when it comes to making sure that deliveries arrive exactly when they’re supposed to, all while making sure to stay compliant with their working hours.  

A Tough Policy Gets Tougher 

As of April 1st of this year, the company made the policy even harder. Prior to this month, the OTIF policy stated that full truckload shipments needed to meet a 75 percent OTIF rating and less-than-truckload shipments needed to meet 33 percent OTIF to avoid fines. Now, FTL’s are required to meet an 85 percent standard (down from the lofty 95 percent they had originally planned) while LTL requirements have increased to 36 percent.

Keeping products on the shelf is the name of the game for Walmart.

Keeping products on the shelf is the name of the game for Walmart. With increased competition from the likes of Target, Dollar General, and Amazon, the more items Walmart can keep in stock, the less likely they are to lose out to the competition.  

A Necessary Change 

While it’s easy to paint Walmart in a bad light through this policy, they aren’t the only company to enforce such a policy. Competition stores like Target, Kroger, and Walgreens also have similar OTIF policies. If retailers don’t hold the supplier accountable and they don’t make them try to comply, then suppliers can cause backlogs.

With the 90 percent failure rate for full and timely deliveries, Walmart has found a rather convenient way to turn a problem into profit.

According to a Bloomberg report, Walmart had a OTIF success rate hovering around a dismal 10 percent. With the 90 percent failure rate for full and timely deliveries, Walmart has found a rather convenient way to turn a problem into profit. This new policy doesn’t cost the company a dime. In addition to generating money from the fines, increased product availability will also mean increased in-store sales.  

Given that Walmart is such a heavy hitter for suppliers, suppliers will have little choice but to either comply or lose out on some considerable business. With the extra revenue generation, Walmart can take that money and reinvest in its e-commerce business.  

A Hard Place for Small Suppliers 

While larger companies have no problem meeting delivery quotas, it’s the LTL deliveries that are going to take the brunt of the OTIF policy. Considering the strained nature of supply chain as it is, especially in the trucking sector. ELD and HoS mandates are pitting truckers against the clock as it stands. Couple that with the driver shortage and rising demand for LTL, and capacity becomes even more limited.   

Couple that with the driver shortage and rising demand for LTL, and capacity becomes even more limited.   

At least in that regard, the company has cut smaller suppliers a little slack, which is the reason that LTL shipments have less than half the requirements of their FTL counterparts. An LTL doesn’t schedule a delivery to a Walmart [distribution center] until the freight arrives at the terminal.

In order to avoid hefty fines being levied by Walmart and other retailers such as Kroger and Walgreens, suppliers are going to have to tighten and fine tune their logistics and supply chain considerably, especially given the current tight capacity environment.  

Do You Need Help With OTIF Issues?

A 3PL, such as BlueGrace, can help your business overcome the challenges of OTIF and other supply chain issues. If you have questions about OTIF or just how to simplify your current transportation program, feel free to contact us via phone at 800.MY.SHIPPING or using the form below and we will be happy to assist.

Artificial Intelligence and the Future of Trucking

Freight is one of the most essential industries in the United States, and according to the US Freight Transportation Forecast publication conducted by the American Trucking Association (ATA), it’s going to continue growing over the next decade. The ATA forecast estimates that US freight will grow to 20.73 billion tons by 2028, a 36.6 percent increase over tonnage moved in 2017.  

Given the considerable amount of freight being moved, the freight industry has some considerable challenges to overcome to get the job done. New regulations (such as the ELD mandate) are putting a strain on trucking companies. Fuel prices and spot rates are prone to changing which can make finding reliable capacity, booking freight, and making a profit frustrating, even at the best of times. Increasing demand means a shortage in capacity, and many shipments are being left behind and delayed. There’s also a massive driver shortage in the United States, a problem that will get worse before it gets better.  

In order to mitigate the obstacles, logistics is going to have to get a whole lot smarter.

In order to mitigate the obstacles, logistics is going to have to get a whole lot smarter. While human intelligence certainly goes a long way towards planning, artificial intelligence is beginning to take up a role in the industry.  

The Growing AI Market 

AI has a number of applications that will be crucial to the trucking industry and Original Equipment Manufacturer (OEM). Increasing operational efficiency can help to reduce costs for OEMs and fleet operators. Predictive modeling is also made possible by AI, allowing for preemptive maintenance by combining data collected via the Internet of Things, sensors, external sources, and maintenance logs.   

“The possible increase in asset productivity (20%) and the reduction in overall maintenance costs (10%) can be observed,” according to a recent article from Market Research.  “Also, according to a publication by the National Highway Traffic Safety Administration (NHTSA), advanced driver assistance systems (ADAS) with vehicle-to-vehicle (V2V) communication have the potential to prevent 40% of reported crashes.”  

In addition to increased road safety, AI can also offset the potential increase in trucking costs and higher driver wages. Artificial Intelligence will also help OEMs and fleet operators stay in compliance with new regulations regarding vehicle and driver safety. This is spurring the growth of ADAS technologies and other initiatives created by OEMs, especially when it comes to automated vehicles. It’s estimated that the AI market within the transportation industry will grow from $1.21 billion in 2017 to $10.30 billion by 2030.   

However, despite the growth and development in the AI market, installation and infrastructure costs will likely be prohibitive to smaller companies. Even a few ADAS features like blind spot detection, telematics, and lane assist can drastically increase the cost of a commercial vehicle. Adding AI systems to vehicles will also require a heavy infrastructure cost as well, further complicating implementation and adoption.  

Various AI Functions for Trucking 

Artificial Intelligence in the trucking industry presents a wide array of opportunities and potential, especially when combined with automated trucking.  

“AI constitutes various machine learning technologies such as deep learning, computer vision, natural language processing (NLP), and context awareness. Some of the recent applications of these technologies in the transportation industry are semi-autonomous and autonomous vehicles, truck platooning, and human-machine interface (HMI) applications,” Market Research says. 

Deep learning is one of the most promising AI developments.

Deep learning is one of the most promising AI developments. As an advanced form of AI, it analyzes a myriad of different data sources including images, sound, and text, and then compiles that data through a synthetic neural network. The result is the ability to identify and generalize patterns and strengthens the decision-making capabilities for safe operation of autonomous vehicles.  

Computer vision is another potential application for AI in trucking. Computer vision utilizes a high-resolution camera and increases the HMI (human machine interaction) capabilities of driver and vehicle. The camera interprets various data inputs such as lane departure, traffic signs, and signals, and is also able to detect driver drowsiness. Ideally, this version of AI will help to bridge the gap between semi-autonomous and fully autonomous vehicles.  

The Future of AI in the Trucking Industry 

AI will be instrumental in the future of trucking. Not only can it collect and monitor data, but as it observes patterns, it will be able to make predictions based on those patterns. These predictions will enhance onboard AI capabilities assisting in both driver and navigation functions as well as back-end functions like data monitoring and preemptive maintenance. Onboard AI will also increase connectivity and communication between other trucks on the road, improving platooning and other joint lane management systems.  

The strength of AI in the trucking industry will be dependent on the amount of data it has to work with.

The strength of AI in the trucking industry will be dependent on the amount of data it has to work with. The more data, the smarter the AI. Building up a database from scratch, however, can be a costly and time-consuming endeavor, one that might be impossible for some companies to achieve in a reasonable time frame.

Integrating AI systems with a transportation management system can help to reduce both costs and implementation time, however.

Integrating AI systems with a transportation management system can help to reduce both costs and implementation time, however. Working in tandem, the AI can help to increase driver safety while a TMS can optimize the overall efficiency of the supply chain, allowing for a smoother and more profitable operation.  

Using a 3PL to Prepare for the Future

While there is near limitless potential for artificial intelligence in the future of the trucking industry, it’s still a ways off from where it needs to be for rapid and easy implementation. The same is also true for automated trucking. However, there are readily available steps you can take to improve your operations without having to break the bank. We at BlueGrace specialize in true Transportation Management, without the need for a heavy investment in labor or technology. For more information on how we can help you harness the full potential of your logistics, fill out the form below: