A step closer to better roads

By David Maloney | November 11, 2015 | 7:31 AM | Categories: Trade, Transportation

As an industry that relies on our nation’s roads to move goods from place to place, it is refreshing to see Congress finally acting on behalf of infrastructure improvements.

Last week, the House of Representatives approved a six-year, $325 billion bill to fund our nation’s surface roads. The Senate approved a similar plan in July. The legislation is now before House and Senate conferees to reconcile the two bills. Both chambers will then have to approve the conference version. Hopefully, it will soon be in front of President Obama for his signature.

One of the significant measures in the House bill is a National Highway Freight Network that will provide funds and structure for connections to ports and intermodal facilities. This is an important piece considering that these connections are vital to logistics operations.

Another key provision is the requirement that the Department of Transportation set up a program to investigate granting modified commercial driving licenses to what it terms “novice licensed drivers.” These would be drivers between 19 years, 6 months and 21 years of age. Currently commercial licenses are available only for drivers over 21. This potentially opens the doors to a pool of drivers before they begin other careers and should help to fill the ranks where shortages have been persistent for years. Personally, I feel this should extend to drivers 18 and up, but this is a step in the right direction.

Unfortunately, the House also killed a provision that would have raised the weight limit for trucks from the current 80,000 pounds to 91,000 pounds. This is despite evidence that shows such a raise would better utilize existing capacity without compromising safety. It would reduce miles driven, energy consumed, and the total number of vehicles on our highways. Hopefully such a measure will be considered again in the future.

On the whole, it was a good week for transportation advocates.

The Echo chamber

By Mark Solomon | November 06, 2015 | 2:09 PM | Categories: Transportation


Doug Waggoner chuckled as he answered the question the only way he legally could. The chairman and CEO of Chicago-based freight broker Echo Global Logistics Inc. was asked at an Armstrong & Associates Inc. 3PL conference last month, in the wake of UPS Inc.’s $1.8 billion acquisition of hometown rival Coyote Logistics LLC, had Echo been approached by a possible buyer that wanted the same type of skills that UPS had identified in Coyote, namely the ability to fill UPS’ underutilized trucks and reduce its network variability?

As the head of a publicly traded company, Waggoner said he couldn’t answer that question under any circumstances. But Waggoner did applaud UPS and Coyote for agreeing to a deal he said makes perfect sense for both.

These days, Waggoner can afford to be jovial and magnanimous. His company is in excellent shape, with solid positions in truckload, less-than-truckload, and intermodal brokerage to accompany Echo’s footprint in managed transportation. From its start in 2005 as an LTL broker, Echo has penetrated the exponentially larger truckload market with much success. And it closed June 1 on its $420 million purchase of rival Command Transportation, a broker that focuses exclusively on the non-contract, or spot, market and is strong in the East Coast and Southeast, balancing Echo’s well-entrenched positions in the upper Midwest and West Coast.

Like other brokerage executives, Waggoner has preached the mantras of geographic coverage and shipment density. Echo’s third-quarter numbers bear out that strategy. Its third-quarter gross revenue increased 40 percent year-over-year to $450 million. Net revenue increased by 50 percent to $87 million from the third quarter of 2014, numbers that included 8 percent organic growth. Net transport margins rose to 19.4 percent, up year-over-year and sequentially. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 46 percent. Truckload volume increased by 134 percent over the third quarter of 2014, results that were boosted by Command’s contribution. The tailwind from Command notwithstanding, these were very good numbers in an otherwise subpar macro environment.

While Command’s volume growth was stunted by a spot market that’s been weak virtually all year, its value will show through if and when capacity tightens again. Meanwhile, Echo’s organic truckload growth in the quarter surged 24 percent. That’s the beauty of the model: It is a designed to work in all market conditions. It can also be effectively cross-sold by Echo’s sales force. These positive traits should significantly boost the top line, if estimates are accurate. Investment firm BB&T Capital forecast $2.09 billion in gross revenue next year and $2.73 billion in 2017, up from a 2015 estimate of $1.53 billion.

Despite all this, the market value of Echo equity was cut by more than half from peak to through, dropping from $34.35 in late June to $16.56 a share in late October; it has since climbed to $24.31 a share in the wake of the strong third-quarter numbers. 

As of the Nov. 7 close, Echo’s market cap sits at a little more than $752 million. Its enterprise value, which is often referred to as a business’ “takeover” price because it includes the amount of debt and cash an acquirer would assume, is $842 million.

That begs the question: If UPS can take out Coyote for $1 billion or so more than Echo’s market cap and enterprise value—to be sure, Coyote went for a healthy premium, but with a market cap of $94 billion, what UPS shelled out was a rounding error—what’s to stop FedEx Corp., a large truckload carrier, or anyone with similar deep pockets, from pursuing a strong business like Echo? 

Hometown heroes

By Toby Gooley | October 28, 2015 | 12:31 PM | Categories: Lift Trucks

Earlier this month I traveled to the village of Greene, N.Y. It’s the kind of place where, as you drive up hill and down dale, carefully passing John Deere tractors, you can’t help thinking that there might be more cows than people among the local population.

Greene is home to the lift truck maker The Raymond Corp. I’d been invited to observe a program designed to introduce students to manufacturing and engineering careers, and to attend the ribbon cutting for a major expansion to the company’s facilities.

I reported on the events of the day, but there was something else that bears mentioning—something I’ve observed when visiting a few other lift truck OEMs: that despite being world-class, technologically sophisticated operations, they still feel like small-town, family businesses. (In the case of privately owned Crown Equipment, it is a family business.)

The population of Greene swells dramatically when Raymond’s 1,500-plus local employees are on the job. The mayor, Phill Brown, is a 35-year Raymond employee, and several other town officials work for the lift truck maker. There’s no doubt that the company plays a central role in the lives of people who live in the village and surrounding communities.

The same is true of Crown, which is not only by far the largest employer in rural New Bremen, Ohio, but also has purchased and renovated historic buildings in the town center, provides ongoing support to local organizations, and has employed multiple generations of families throughout the area. It’s not a stretch to say that if not for Crown, New Bremen would be a different place than it is today.

Like many Japanese companies, the attitude that “we are not just a business, we are a family” is ingrained in the culture of Toyota Industrial Equipment Manufacturing (TIEM), maker of Toyota lift trucks and a sister company to Raymond. That was manifest during a recent celebration in Columbus, Ind., of TIEM’s 25 years of manufacturing in the U.S. The plant was shut down for the afternoon—a very expensive proposition, and a decision not made lightly—while more than 1,500 associates attended the ceremony, lunch, and concert the company put on for them.

Of course, you can’t expect everyone to have warm feelings about his or her employer. But clearly many of Toyota’s U.S. employees do. For example, when retired former TIEM President Yoshimitsu Ogihara was introduced during the ceremony, the crowd of factory and warehouse workers cheered loudly. Later, as Ogihara walked around the grounds, many of those associates greeted him warmly. Out on the lawn, associates didn’t hesitate to toss a soccer ball to Toyota Material Handling North America President and CEO Brett Wood and kick it around with him.

These are not the only lift truck OEMs that have close relationships with their employees and the communities where they do business, of course. All of them exemplify why a strong U.S. manufacturing sector is not just about competitiveness and employment numbers, it’s also about quality of life.

May the Force Be With You: Are delivery droids better than delivery drones?

By Susan Lacefield | October 28, 2015 | 8:04 AM | Categories: Supply Chain, Transportation

The first live-action movie that I saw was the original Star Wars. I was almost 4-years-old and had to sit on my knees to see over the heads to the people in front of me. From the moment that the opening credits scrolled across the screen with words that I could not yet read, I was hooked, and like many people of my age, Star Wars became my foundational myth.

So when I stumbled across this video a couple of weeks ago of lollipop-colored delivery robots, it delighted something deep within me. 

Israeli engineer designs grounded drone delivery service 

While the creator, Kobi Shikar, an Israeli engineer calls them “Transwheel Delivery Drones,” they looked to me more like something that would come out of George Lucas’s Industrial Light & Magic Studio. The video shows the unicycle (!) robots holding packages on their heads with robotic arms as they zipped down city streets and then using face-recognition technology to deliver the package to the correct person. (For larger packages, two or more would team up.) Yes! My heart responded. Yes! If R2D2 could deliver an appeal for help to Obi-Wan Kenobi living in his cave on Tatooine, why couldn’t a candy-apple droid deliver a box of socks to me in my triple-decker in Boston?

It’s appealing: the thought of a cute robot handing a package to you with a cheerful chirp and beep, instead of an whirring insect-like drone (with its militaristic overtones) dropping one down from on high. There seem to be fewer risks of from a small drone malfunctioning on the ground than an aerial one breaking down and dropping on someone’s head. We are used to AGVs in DCs delivering pick bins. It's an easy step to them delivering packages to consumers.

Yet, the adult me (who is more than ten times older than the me who saw Star Wars), is skeptical. Just how cost effective are these delivery drones? And how secure? What’s to stop a Jawa from waylaying a lonely drone and then selling it on the black market? What happens when a drone breaks down en route to a delivery? I want this technology to exist, but there are a lot of real-world issues that have to be figured out before Boston looks like Mos Eisley.

So it may take a while. (Indeed Shikar believes the first applications could be not in delivery networks but at airports and military bases.) In the meantime, I have a four-year-old daughter of my own, and The Force Awakens opens in just a couple of short months.

University on wheels

By David Maloney | October 20, 2015 | 3:29 PM | Categories: Lift Trucks, Material Handling, Supply Chain, Warehousing

Last month I attended the Material Handling and Logistics Conference in Park City, Utah. In my opinion, this is always one of the better industry events held each year. It always has high caliber content on supply chain operations, with the emphasis on distribution and material handling systems. And the mountain scenery is also easy on the eyes.


The MHLC is organized and sponsored by the folks at Dematic. One of the events in the conference program this year was a tour of the Dematic manufacturing facility in nearby Salt Lake City, which featured the latest lines of Dematic material handling systems.


Dematic used the tour to also showcase its Dematic University Mobile Training Unit, which had arrived in Salt Lake City to coincide with our visit. The Mobile Training Unit basically consists of two tractor-trailers that are stuffed full of conveyor and sortation modules designed to train the operations and maintenance personnel of customers using Dematic equipment. This technical training center on wheels travels the country between customer sites. Each equipment module is mounted onto its own wheels so that it can be quickly offloaded and wheeled into the customer site for the training sessions.


A key benefit for the customer is that they do not have to shut down their own conveyor and sorting units in order to conduct training – operations can hum along as normal while the training occurs in a space that is away from causing disruptions.

The equipment modules are also designed to work on standard 110-volt outlets so that no additional power needs to be run for them. They can quickly be put in place and powered without extra assembly or installation. The modules are also self-contained with everything that might be needed typically by a conveyor or sorter system, such as air, motors, electronic sensing, and controls.


According to a Dematic brochure, the units brought to a customer site include transportation and accumulation conveyors, motorized rollers, segmented belt on roller, right angle transfers, and curves. We also saw a sliding shoe sorter module there. The units can be disassembled to demonstrate belt changes, motor replacement, preventative maintenance procedures, and more. The training program can be customized according to the needs of the host company and the equipment they have installed or are about to install. Dematic says that the training is also augmented with video and e-learning instruction.


In an age where keeping systems up and running is crucial to any operation, having this type of mobile training available for customers just makes a lot of sense. It is a good example of a systems manufacturer responding to the needs of its user community.

Brad Jacobs: Rock Star

By Mark Solomon | October 02, 2015 | 7:48 AM


We got 10 minutes of Brad Jacobs’ time this week at the Council of Supply Chain Management Professionals’ (CSCMP) annual meeting in San Diego. Granted, it was standing against a wall outside the CSCMP sponsors’ room. But given the elevated stature of XPO Logistics, Inc.’s founder, chairman and CEO, we were happy for any time and venue we could get. 

Going from almost nothing in five years to a $15 billion a year company, largely through a spree of acquisitions, will attract attention. Sure enough, as we talked, peripheral vision picked up people stopping and staring as they walked by. Jacobs professed not to notice (we did). There were also folks lining up to get a chance to pick Jacobs’ brain about any number of issues—not the least of which would be what it would take to buy their company. If you think that scenario to be far-fetched, consider that a freight broker attending last April’s Transportation Intermediaries Association annual meeting, where Jacobs was appearing, said he was there for the sole purpose of convincing Jacobs to buy his firm. (We have suggested the silk screening of t-shirts that read “Bought By Brad.” Jacobs, for his part, said he wants one.)

Our talk covered as much ground as can be trod in 10 minutes. On acquisitions, there will be none in the near term—integrating two transactions with a combined cost of $6.5 billion will take priority. The integration of the French firm Norbert Dentressangle, bought in April for $3.5 billion, is virtually complete, Jacobs said. The focus now is on Con-way, Inc., the $5.8 billion a year asset-based truck, brokerage and 3PL provider bought by XPO last month for $3 billion.

Asked why he entered the asset-based game after building a model around non asset-based services, Jacobs said customers, almost from XPO’s founding, would ask if the company had trucks or if it didn’t; the constant querying led Jacobs to believe that assets were something customers were interested in. In a world of tight capacity, truck assets are king, and will serve as the gateway to conversations about XPO’s other services, according to Jacobs. Besides, XPO is no stranger to assets, having owned container equipment operated by intermodal marketing company Pacer International, which XPO bought in 2014, and trucks that are operated by Norbert Dentressangle in Europe, Jacobs added.

Re the Con-way assets, which consist of LTL carrier Con-way Freight, Con-way’s largest unit, and truckload carrier Con-way Truckload, the work still lies ahead. Headcount at Con-way Freight’s corporate level will likely be reduced, but the operations will largely be left alone. Jacobs said Con-way Freight customers have told him the service levels are excellent and customers love the provider.

Maybe so. But 2013 numbers for Con-way Freight’s national accounts didn’t demonstrate a lot of love. According to internal data, the company lost more than $72 million in aggregate on its top 20 national accounts that year. Of those, only three generated a profit. National accounts made up more than 65 percent of the unit’s overall revenue in 2013, according to the data.

A good chunk of the losses were the legacy of the 2008-10 LTL price wars when Con-way and FedEx Freight, the LTL unit of FedEx Corp., led the charge to slash prices in an effort to drive YRC Worldwide, Inc., the then-market leader and way, way back on its heels, out of business. As those who follow the business know, the effort failed. YRC is still in business, and most of the industry managed to dig itself a huge hole that took several years to emerge from.

Yet there is a belief that Con-way Freight has lost market share because it is not as efficient and productive as its peers. Its second-quarter operating ratio—the ratio of revenues and expenses—rose to 92.4 from 91.2 in the second quarter of 2014, not a positive trend. Revenue, tonnage and operating income also fell year-over-year. Yield rose a scant 0.4 percent, benefiting modestly from better pricing. 

Jacobs has said XPO will boost the Con-way parent’s operating profits by up to $210 million a year for the first two years through “synergies and operational improvements.” The LTL unit may be the best place to harvest those synergies and improvements. Given the unit’s so-so operating performance, the gains there are likely not to come from robust top-line growth, at least in the near term.

Five years on, the jury is still out on Jacobs’ great experiment. Some point to his solid track record in the energy, solid waste, and equipment rental businesses, and say the same principles of scale, scope, and density that worked there can work here. Others say XPO is a house of cards, pointing to a near 50 percent drop in the company’s market value in the past few months. Still others say that, by buying Con-way, Jacobs bit off more than he could chew.

We will let time answer the first two arguments. To the third, we contend that the opposite is true. Asset-based players will have superior leverage for the balance of the decade as a shortage of drivers and tougher government regulations reduce the carrier playing field. XPO needed a meaningful asset-based position in the U.S. to balance out its service proposition and support the rest of its portfolio. There is no doubt non-asset based players enjoy fatter margins, but if the world is changing as many people believe it is, then the deal was something Jacobs had to do, and one that will ultimately pay off.



Risky business

By David Maloney | September 23, 2015 | 11:59 AM | Categories: Supply Chain, Transportation

I was in Europe a few weeks ago visiting several distribution facilities for future articles in DC Velocity. While in one warehouse in Belgium, I noticed a stack of fliers in the area where delivery drivers check in. What was odd was that the fliers were warning of the risk of theft of the goods they haul.


Drivers always need to be aware of the security of their goods with which they have been entrusted, but this warning seemed far beyond the normal amount of caution required. The flier displayed a picture of a truck being opened while it was moving at high speed. Apparently a group of thieves in this part of Europe, including Belgium, are pulling up to the rear of moving trailers, walking onto the hoods of their own vehicles, breaking the locks, and opening the trailers to remove goods.


I mentioned this to some of our editors who are our experts in covering the trucking industry and was told that incidents like this have also occurred in the United States. Apparently in one occurrence, the thieves drove a truck backwards at high speed so that the bed of their truck was within a foot of the rear of a trailer for easy pickings.


Possibly the use of rear cameras can help to reduce this threat. Regardless, it seems that if thieves are willing to take risks like these, it is nearly impossible to secure all freight 100 percent of the time. Being ever vigilant is about all that we can do.

Extreme urbanization could force changes in delivery networks

By Ben Ames | September 09, 2015 | 11:23 AM | Categories: Transportation

Last-mile parcel delivery can be the toughest leg of e-commerce fulfillment, and that task may become even tougher as many cities struggle with a trend of “extreme urbanization” that will stress their infrastructure, according to urban planners at the Massachusetts Institute of Technology (MIT).

The move will trigger consequences like urban sprawl and steep population growth that could make traditional traffic flow difficult or unwieldy, warned Kent Larson, director of the Changing Places Group at the MIT Media Lab and Co-director of the lab’s City Science Initiative.

Urban planners are already designing creative systems to help avoid these bottlenecks, such as “responsive cities” that use networks of sensors to guide traffic and support more efficient public transportation networks, Larson said in a talk at Innovation Enterprise’s Internet of Things Summit, held in Boston September 9.

One of the heaviest examples of swift growth will occur in China, where an estimated 300 million rural inhabitants will move to urban areas over the next 15 years, requiring the country to build an entire new infrastructure in just a few decades.

To avoid spiraling costs and wasted resources, officials are making creative plans. One project in the European country of Andorra calls for incoming traffic to park on city edges and support commutes to destinations in the city center through shared transportation, Larson said.

Autonomous vehicles could also help to alleviate road crowding by allowing more efficient traffic patterns, but many countries face hurdles such as cost and liability that could discourage this approach.

These new traffic flow patterns could also challenge business patterns for carriers and delivery trucks if they fail to adapt their logistics networks to the fast-changing urban landscape.

However, other new urban planning designs could make life easier for office and residential delivery. Urban leaders in Chattanooga, Tenn., are laying the foundation for building a less car-centered community that would allow residents to live nearer to their jobs, schools, and stores instead of logging long commutes on highways, said Larson.

Likewise, planners in Atlanta, Ga., are hoping to build “micro-cities” that are designed to avoid unmanageable urban sprawl by creating zoning laws that support self-contained, decentralized regions. These small cities would allow residents to access most of their needs at local spots, while relying on high-bandwidth connectivity to share the data and business resources people need for work, health, education, and entertainment.

Transportation and delivery systems in these micro-cities would likely follow the private business model lead by the Uber car hiring service, he said.

For more information on MIT’s urban planning research, see cities.media.mit.edu.

The high cost of not caring

By Toby Gooley | September 04, 2015 | 6:56 AM | Categories: Supply Chain, Trade, Transportation

In my first job after college, I worked in the ocean shipping industry. One of my responsibilities was to arrange transportation of hazardous materials, including verifying that they were properly classified, marked, and documented. As part of my training, I attended a safety seminar designed for shipping line employees, freight forwarders, and stevedores. The Coast Guard officer who presented the seminar began by dimming the lights and projecting a photo of a large cargo ship on a screen at the front of the room. Suddenly the slide changed; in the next image the ship had been blown to pieces, with chunks of steel flying through the air and a huge fireball and black smoke filling the sky above what was left of the hull. “This is what happens if you don’t do your job right,” the officer said. “Take it very, very seriously. People will die if you don’t.”

That was nearly 40 years ago, and I have never forgotten that image or the instructor’s warning. They invariably came to mind each time I handled a hazmat shipment during the 10 years I was an export traffic manager. And they were front of mind again earlier this month, when an explosion that originated in a hazardous materials warehouse destroyed a large area in and around the port of Tianjin, China.

For anyone involved in international trade, the news photos of 40-foot ocean containers that had been twisted, crushed, and tossed like empty soda cans by the blasts were shocking. But that is a truly minor consideration compared to the loss of human life and the innumerable injuries suffered by people who lived nearby.

Which brings us to the title of this post. Because someone—business owners, real estate developers, local government officials, maybe all of the above—did not take the risks of storing and transporting hazardous materials very, very seriously, companies were allowed to construct apartment and office buildings dangerously close to huge quantities of those materials. And because someone—the warehouse operator, and perhaps its customers—did not care enough to do everything possible to eliminate those risks, hundreds of people are dead, injured, or missing.

Safe handling of dangerous goods in transport and storage requires appropriate training, strict discipline, constant vigilance, ferocious attention to detail, and an unflagging commitment by every employee at every point in the supply chain to follow the rules and always do the right thing—no matter how difficult, costly, or time consuming that may be. It is challenging, of course, to enforce such practices across supply chains that span the globe. But as the events at Tianjin make painfully clear, failure to do so could have tragic consequences.

Distribution across the Pond

By David Maloney | September 02, 2015 | 7:43 PM | Categories: Material Handling, Supply Chain, Warehousing

I was in Europe last week looking at five effective distribution centers, three in Germany and two in Belgium. While DC Velocity primarily reports on things going on here in North American distribution, it is also important for us to share the worldview.


Europe has always been very advanced in warehouse technology. Many of the industry’s leading automation companies are based on the continent and there tends to be more automation overall in Europe than here at home. There are two important reasons for this. First, land is more scarce and expensive there, especially in Western Europe. Automation helps companies reduce the footprint of their buildings. Secondly, labor is also more costly. Automation helps there too to reduce manpower and save on overall distribution expenses.


Four of the facilities I visited store products very densely in several variations of automated storage systems, including shuttle systems, miniloads, and automated storage and retrieval systems. Two of the facilities operate AS/RS systems inside freezer environments, saving people from having to work in such harsh environments.


I also saw a couple of iterations of goods-to-person picking systems that handle a variety of products from cosmetics to auto parts.


I will be sharing these stories in future issues of DC Velocity. I also shot videos in four of the facilities, which will be used in upcoming episodes of our popular Move It! program. This will allow you to see some of these sophisticated systems in action.


And speaking of seeing distribution operations from elsewhere, Toby Gooley and I will be visiting some facilities in Japan later this year – again, with the goal of helping our readers to see what is going on elsewhere in the world. Stay tuned.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

Thoughts from our editors.

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