A crumbling infrastructure by any other name...

I'm a fan of the podcast 99 Percent Invisible, which points out how design affects our lives in ways that we often don't even notice. In a recent episode, the host, Roman Mars, interviewed Henry Petroski, a professor of civil engineering and history at Duke University. Petroski recently wrote a book called The Road Taken: The History and Future of America's Infrastructure.

It's no secret that the federal gas tax isn't nearly keeping up with the costs of road maintenance, but raising it isn't a popular idea with voters. The interview pointed out that, with the advent of hybrid and electric cars, a fuel tax might not be the best way to fund highway projects anyway. Instead of taxing gas, says Petroski, we should be taxing miles. Pilot programs to do that are underway, but there are problems with that idea, too. Petroski thinks it will be at least 10 years before a new funding mechanism is in place—but he does think it will happen.

A surprising fact that came up during the interview: the word "infrastructure" is actually pretty new. Infrastructure projects were called "public works" up until about the 1980s, according to Petroski. But because people started to equate public works with dubious "pork-barrel" projects, advocates began using the term "infrastructure" instead.

Mars suggested that reclaiming the phrase "public works" might help motivate the voting public to fund those programs. After all, the word "infrastructure" is pretty abstract and hard to get excited about. "Public works," on the other hand, emphasizes that we, the people, benefit from these projects.

The episode is called "Public Works: Rethinking America's Infrastructure." It's just under 20 minutes long, and it's worth a listen. 

Bloomberg Businessweek asks: "Will Amazon kill FedEx?"

In case you missed it: last week, Bloomberg Businessweek published an article titled "Will Amazon Kill FedEx?" 

As the title indicates, the piece speculates that Amazon aims to upend FedEx and UPS—a topic we've written about here and elsewhere.

A few of the more interesting facts from the Bloomberg article:

• There's been resistance to Amazon's expansion in at least a couple of major European cities.
• According to a June Deutsche Bank report, Amazon has patented a technology called "anticipatory package shipping," which will allow it to figure out when a customer will need products replenished and have a package ready in advance. The technology should save Amazon money, since it potentially could use a slower shipping method and still get shipments to customers exactly when they're needed.
• Also from the Deutsche Bank study: Amazon has employed "hundreds of Ph.D. mathematicians" whose job is to model logistics networks.

There's also a short (about 10 minutes) interview with the article's author.

Amazon also recently hired lawyer Seth Bloom, who used to be general counsel to the Senate Antitrust Committee, as a lobbyist.

Home delivery is not always easy

I have been playing tag of sorts with my parcel delivery company.

Since I work from home most of the time, my son felt it would be wise to have packages intended for him requiring a signature sent to my home instead of his own. He, of course, is not present when most parcel companies come calling, so this seemed a reasonable request.

However, it has not always worked out. I travel a good bit in my job as chief editor, so I am not always home when the parcels arrive. Also, it appears my delivery driver has weak knuckles, as he claims he knocks on my screen door, but I do not always hear him. I have even tried putting a note on the door to request that he knock loudly enough so that I can hear his bidding even when in my office or another room of the house. I really don’t have time to camp at the front door to await his arrival, which is never at a consistent time.

I even told him to open the screen door and knock on the wooden door itself, but he claims he cannot do that. Once, he said, a customer’s screen door “broke” and he was accused of causing the damage.

I can hardly blame him though. Drivers are often under tremendous pressure to stick to time schedules. They don’t want to spend time knocking on doors. I think they also assume that someone is not home. I know that they never knock if a signature is not required – they simply leave the package on the doorstep.

As a father, I don’t want to disappoint my son. If I fail to hear the parcel carrier’s arrival, then it means he has to try delivery again. After a few attempts at non-delivery, for example if I am traveling several days in a row, the package has to go back to the sender or else I have to drive 45 minutes each way to the distribution center to pick up the parcel or pay for it to be re-delivered the next day. I realize there are alternative programs that parcel companies now offer (usually for a fee) which will wave the signature if no one is at home. But that cannot be done for some items, as either an adult is needed to sign for the product, it has too much value to simply leave it on the doorstep, or the sender requires the signature as definitive proof of delivery.

So, there has to be some alternatives for home delivery. For instance, why doesn’t this parcel company leverage its store franchises when a signature is required? I would gladly pick it up there, but I don’t want to pay the fee for something that is really their convenience, not mine. Another solution would be to install delivery kiosks located in strategic parts of the community, such as a grocery store, mall, department store, etc. This solution has worked well in other parts of the world, but has not yet taken root in the United States for some reason. Picking it up at a kiosk and leaving an electronic signature would be a snap compared to playing hide and seek with the deliveryman.

Kiosks would also eliminate the most expensive part of the delivery - those last few miles getting it to my home. That’s especially important for shippers who are under pressure to offer next day delivery (or soon same day delivery) for free. Maybe some day a kiosk solution or alternative delivery method will save my deliveryman’s knuckles from bruising.

Warming up for the supply chain

While I am writing this blog posting, my area in Pennsylvania is experiencing the first real snowfall of the year. Just a few inches outside now. This is mid-January already, and to say that we have had a mild winter so far is certainly an understatement.

For the most part, the recent holiday season was a big winner from a transportation and distribution standpoint. Absent were the hiccups parcel carriers experienced in 2013 when many presents arrived too late to go under the tree by Christmas morning. Parcel capacity has expanded over the past two years, which has been the biggest factor in avoiding the nightmares of the Ghosts of Shipping Past.

Yes, volumes were high – about 1.3 billion packages in December alone, but most products got to destinations on time. Retailers also have gotten smarter, which has resulted in making the volume easier to handle. Many online stores began promotions earlier and more often, which helped spread the Black Friday and Cyber Monday deals over several weeks instead of one weekend.

But even with these changes, a lot of credit for a successful shipping season must be given to El Nino, which gave us mild weather that broke records across the nation. The lack of snow meant planes were flying, trains were moving, trucks were not delayed, and products met promised delivery dates. Lower fuel costs were an added benefit. Certainly such mild weather is not something we can expect every year, but at least for this season, we will count our blessings.

A step closer to better roads

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

 

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? 

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

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.

Risky business

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

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

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.