Why shippers, not truckers, hold the key to US truck capacity

Why shippers, not truckers, hold the key to US truck capacity

Trucks travel in Tennessee, United States.

The electronic logging device mandate broke the supply chain clock. To fix it, shippers must better manage their time, and give more of it back to truckers, logistics and truck sector specialists agree. (Above: Trucks travel in Tennessee, United States.) Photo credit: Shutterstock.com.

There’s a clock that regulates supply chains, and lately it is losing time, not just by a beat, but hours and days. That throws off sales forecasts and orders, lengthens transit times, and leads to missed deliveries and a pervasive imbalance in assets, people, and goods throughout the economy.

The cost of this loss of time in supply chains is likely huge, and a major factor behind higher transportation prices that have stunned US shippers. The reason the supply chain clock is out of beat isn’t hard to find. The US electronic logging device (ELD) mandate knocked it out of kilter.

As Amazon cut fulfillment cycles from days to hours, the ELD mandate in effect extended delivery times from hours to days. In many cases, shippers found that same-day loads became next-day deliveries as truck drivers ran out of on-duty time or refused loads that cost them a weekly turn.

The result is a further drain on surface transportation capacity already stretched thin by high freight demand and a shortage of qualified drivers that is getting worse as the US unemployment rate drops toward 3 percent. Supply chains need not just truck drivers, tractors, and trailers but more time.

The result of the shortage in capacity and time is evident in recent earnings reports from public companies such as Coca-Cola, Hershey, Hasbro, Deere and Company, Nestlé, and Unilever. “Everybody is seeing an increase in the freight cost,” Unilver CFO Graeme Pitkethly, said on an earnings call.

The good news is that by better managing time in the supply chain, shippers can create capacity. That may require them to not just polish their logistics networks but to change processes to free up time where it’s needed most: with the trucker on the highway. Technology will be part of the solution.

“I rarely get to talk about time, but it’s fundamental,” William Salter, president and CEO of Paragon Software Systems, a British-based developer of truck routing and scheduling software. In shipping, “time can be saved in lots of different ways, it depends on the angle from which you want to approach it.”

Simply reducing the time it takes drivers to load or unload creates capacity by allowing those drivers to fully utilize their available hours. But shippers will have to dig even deeper, Salter said. “You’ve got to make the best use of all the resources you have available,” including tractors, trailers, and time.

“If you’re dropping trailers, then you’ve got separate availability of tractors and trailers,” he said, referring to carriers that “drop and hook” trailers, a practice that requires a higher ratio of trailers to tractors. “You need to make sure you’re not over-resourced on equipment and under-resourced on drivers.”

Travels in time and freight space

The supply chain clock already was wound tight when the ELD mandate arrived, thanks to decades of effort by logisticians. From just-in-time manufacturing to narrow delivery windows, time has been siphoned from either end of the supply chain, shifting the burden, ultimately, to the trucker.

As a variable, transportation time could be flexed to accommodate inflexible production demands or consumer expectations. The ELD mandate took away that variable, however, and supply chains that had some “slack” in terms of time suddenly became rigid, and those without slack snapped.

“We kept getting calls from our third-party logistics provider [3PL] that drivers were running out of hours,” John Janson, global logistics director at apparel importer SanMar, said. The company also experienced a sudden increase in refused tenders in lanes where a trucker would have difficulty finding a backhaul and returning within 11 hours, the legal daily driving limit.

SanMar, like other shippers, learned that time is more than money, it’s capacity. Truck capacity levels in the United States were already stressed by high freight demand and a shortage of qualified drivers when the ELD mandate took effect last year, making a tough situation worse for carriers, 3PLs, and shippers.

“With ELDs, people have been forced to adhere to a standard,” said Andrew Lynch, president of Zipline Logistics in Columbus, Ohio. “We’ve always had hours-of-service rules, but shippers now have to account to them. Any amount of detention [of a truck driver at a dock] can blow a plan out of the water.”

Zipline was one of the first companies to measure the actual cost in time of the ELD mandate and its impact on supply chains. Leveraging its data analytics tool KanoPI, Zipline found transit times increased 16 percent on 450-mile to 550-mile routes, from 1.05 transit days before Dec. 18, when the mandate took effect, to 1.22 transit days afterward, a gain of about four hours.

Four hours is a big chunk of a truck driver’s day. Legally, truckers can drive for 11 hours in a 14-hour window. When they hit that 14-hour limit, they have to stop for 10 hours. Realistically, however, most truck drivers don’t get near that 11-hour driving limit. In a 2015 study, Telematics provider PeopleNet found in more than 200,000 records, drivers averaged 6.09 hours a day.

Longer transit times are a direct result of shorter available driving time. The widespread lengthening of transit times noted by Zipline and by shippers indicates that many drivers, especially at smaller companies, had either falsified logs before the mandate or were now avoiding longer trips.

Why would they do that? Parking. There’s a truck parking shortage in the United States, as well as a driver shortage, a mechanic shortage, and a slew of other shortages related to transportation. If a truck driver knows he or she can find a parking space after driving 9 hours, but isn’t sure one will be available closer to the 11-hour limit, that driver is likely to stop short of the daily limit.

Before the ELD era began in December, and out-of-service enforcement started April 1, “a shipper, anecdotally, might call us at noon and say, I need you to pick this up now and have it 400 miles away at 6 a.m.,” Lynch said. “The answer might be that’s not doable. The shipper then would hang up and call someone until they got a yes.” That shipper, anecdotally, is still there.

“Just this week a shipper made a request, and we told them it was not legally possible,” Lynch said. “An hour later, they called and said don’t worry, we’ve found somebody who doesn’t have ELDs. I couldn’t believe it. For all intents and purposes, you’re violating the law, based on what — not wanting to call a customer to tell them their product is going to be a couple hours late?”

There are better ways to approach the supply chain’s “time shortage,” Lynch, Salter, and others said. Most require some technology, but as the means to an end, not the answer. Much of the most important work needs to be done before a shipment comes near a dock, at the heart of the planning process.

“About 17 to 20 percent of the trucks on the road have available capacity,” said Tommy Barnes, president of technology firm project44. “But people aren’t considering the time elements they could use to manage that and dramatically impact the capacity they have today. There’s a disconnect between the upstream time component and that empty space in the trailer.”

“There are fantastic opportunities for better time management in trucking and there are untold billions of dollars wasted every year on poor planning,” Frank McGuigan, CEO of logistics company Transplace, said. “The carriers, candidly, we’re seeing them adjusting their freight-time standards, saying, ‘This is killing us. We can’t afford to have that asset sitting around for free.’”

At the moment, shippers are focused on securing truck capacity any way they can, and they’re striving to become what’s been called “shippers of choice” to carriers that have more demand than supply. When it comes to being a shipper of choice, however, “people oversimplify the concept and make it sound like it’s something you can do overnight. It’s not,” said Lynch.

“Shippers would be wise to take a more holistic look at where logistics fits into their overall operation,” Lynch said. “Up until late 2017, at almost every company on the consumer goods side, logistics was just a cost center, a necessary evil, it wasn’t integral to relationship management decision making. Rarely was logistics involved in creating a sales contract.”

In the current market, “everyone has to align here,” he said. “How do your delivery requirements line up with production cycles and the realities of trucking? So much of what shippers can do to impact transportation spend needs to be done internally. Everyone’s first reaction is to go find a new carrier or fire a carrier, but a lot of the real low-hanging fruit is found internally.”

"Think about the chokepoints,” McGuigan said. “Dock doors. Inventory on hand. Last minute orders. Labor flows. There are so many variables for better management, and as you add scale it becomes more difficult. What the shipping community can’t expect is for the carriers to absorb all the pain.”

Advanced scheduling gives time to truckers

The most frequent advice offered by experts? Start at the beginning. “Lead time is critical — the more time we give to carriers [when tendering loads], the more time they have for planning, and that keeps loads out of the spot market,” said Julie Thuston, assistant vice president of operations and account management at logistics provider Unyson, a Hub Group company.

Speaking at the Transportation and Logistics Council’s annual meeting in March, Thuston and Jeffrey L. Meyer, group manager of transportation for Nestlé Purina PetCare, stressed the importance of advanced scheduling in securing capacity, let alone creating it. As transportation costs rise, “we’ve got to take the blinders off and see how we can adapt,” Meyer said.

“The answer ‘that’s how we used to do it’ is not acceptable anymore,” Meyer said. “I’m educating a lot of people on operations stuff. Challenging them to think about how to change daily operations.” That could include staggering dock hours to give drivers more flexibility for deliveries or pickups. “Our drop lots are open 24 hours, seven days a week,” Meyer said.

Laura Venchuk, corporate logistics manager at Kuriyama of America, has spent a great deal of time talking about logistics constraints with her company’s front-line sales people, educating them about the impact of electronic logging and the driver shortage on their ability to meet freight delivery promises that customers had come to regard as standards.

Her company, a Schaumburg, Illinois-based manufacturer of industrial hoses, used to deliver most shipments within two days. With the ELD mandate putting pressure on capacity and transit times, that’s not always possible, she said. The effect of explaining that to sales people “has been enormous. I’m no longer getting angry calls” about late deliveries, said Venchuk.

Really advanced shipment scheduling, however, is only as good as a company’s ability to forecast demand, said Jerry Robertson, chief technology officer of Bolt System, in Nashville, Tennessee. “If you know what you’re going to produce on an hourly basis, and have plenty of inventory in stock for production, you can do that, but it doesn’t often work out that way.”

“The problem really is long-term planning requirements for the optimization of capacity,” said Anshu Prasad, CEO of LogisticsExchange, a Chicago-based technology firm that early this year launched an online market for buying and selling future transportation capacity. “Part of what we are trying to do is to move beyond the two-day spot market window,” he said.

Getting beyond that window, and beyond transactional tenders, will give carriers time to plan their truck drivers’ schedules, assigning them to loads that make optimal use of the hours available to them each day and week. The more advance time, the more time carriers have to plan, and the more time they have to quickly adapt to dynamic changes in that plan.

“If you can plan quickly, you can get information to the warehouse to make sure things are ready in the loading bays for the trucks,” said Salter. “That lead time makes it possible to plan for next-day and even same-day deliveries, including home deliveries,” he said.

Advanced scheduling is a step toward greater visibility needed if logistics managers are going to be able to regulate time in their operations more precisely and use that capability to find capacity. That type of visibility goes well beyond the technology used to track and trace pallets and trucks today.

“We’re actually using [location and tracking] data to determine what are the next steps that need to happen, so we can drive inefficiencies out of the supply chain,” David Venberg, senior director of transportation at flour shipper Ardent Mills, said at the SMC3 JumpStart 2018 conference in January.  “We need to use visibility to do a better job of managing capacity.”

Visibility evolves toward ‘predictive capacity’

Achieving true supply chain visibility means grappling with the concept of time, and understanding its relationship to other factors within the supply chain. Logistics, like spacetime, has four dimensions, and time is one of them. A degree in physics isn’t required to work that out, though it may help.

As Venberg pointed out, true visibility isn’t just “dots on a map” showing truck or shipments, but a clearer view of time available in the supply chain. When does a production facility need to have a shipment, and when will that shipment arrive? Does the truck driver have the hours needed?

Is a truck available near a shipment pickup point, or a potential head-haul or backhaul shipment near a drop-off point? Visibility is quickly evolving from the need to track an individual, siloed shipment to the need to provide a more “holistic” view of a logistics network, a task that involves truly big data.

“We get too focused on telematics,” Prasad said. “Track and trace is useful, but it’s inefficient when it comes to building a network that keeps drivers moving. There’s more to being able to get forward visibility to plan capacity, to really string together freight that makes sense,” and that’s analytics.

“The industry as a whole is pushing toward greater use of data” and analytics, said Mark Carroll, director of product strategy at Descartes MacroPoint, a visibility technology provider. “End-to-end [shipment] tracking is the biggest thing people are focused on right now,” he said, but the end goal is to apply more predictive analytics to capacity to offer “predictive capacity.”

“We are using some of our data now to begin matching up capacity for people as they continuously move trucks,” Carroll said. “The answer is to book things further in advance so they have their routes prepared and drive down deadhead miles. The further we book in advance, the less time a driver spends waiting for a next load. We need to focus on their downtime.”

MacroPoint is beta testing a “predictive capacity” tool with shipper customers, Carroll said. Others are moving in the same direction. Shippers are asking, “If you see the freight, can’t you let me know where there’s carrier capacity available?” said Mike Dieter, chief technology officer at Transplace.

Artificial intelligence or AI, coupled with machine learning, may be the key to building predictive systems. “Our network is this large, undulating ocean of orders coming in and going out every day, with significant scale,” McGuigan said at the Transplace 2018 Shipper Symposium in Dallas in early May. “How do we leverage that scale to keep capacity operating super efficiently?”

"It’s hard for shippers to tender freight days in advance when their own customers are shortening order-to-fulfillment cycles. “Time is a really interesting thing,” McGuigan said. “Most orders are within a 48-hour run. So when you’re trying to create the network to utilize that capacity, you don’t have that great of a time window for maximum utilization.”

That, he said, is where AI will come into play, to predict demand and book shipments before an order is even placed. “I may not have the order yet, but the AI will know that every Friday morning a customer is going to put something out that generally flows in a certain direction, and the system will tell the carrier to expect it without even having the order yet,” he said.

Blocking and tackling, dropping and hooking

As Transplace and others work on AI-based systems, shippers looking to cut time from their processes and return it to truck drivers today, in order to secure capacity now, may need to look to tools already at hand and work with them.

For one, understand daily traffic patterns in urban markets. “If I’m going to Atlanta and I have to make a delivery at 5 p.m., I’m not very happy,” said Bolt’s Robertson. “I may have to get there much earlier. You need to think about the hours you need to complete the delivery and move on to the next piece.”

Bolt’s routing system color codes trucks running behind time. “I just had a request from a customer who asked why can’t you let us know when we’re running ahead of time, so I can better match capacity on the next leg?” Robertson said. “Now we’re putting that in, so they can look ahead.”

If you want to save time, Paragon’s Salter suggests, don’t waste it.

“We’ve got a proof of delivery system called fleXipod that can be populated with route information and instructions for the driver,” he said. “We’ve found that makes things far more accurate and more precise, more predictable for everyone, so no one is wasting as much time as they did in the past.”

“You can plan fantastic routes and utilize resources really effectively, but once the freight is on the road, it’s very much in the hands of the drivers, and it can unravel a little bit,” he said. In other words, you can’t always depend on the best-laid schemes of men and machines. He recommends using real-time data from freight visibility systems to keep supply chains running on-time.

"You can constantly make sure the drivers are on track, and feed information back to the customer so they can have an idea when their shipment is going to arrive,” Salter said. “In big superstores where they’re receiving waves of deliveries, we can even populate an arrivals board, like an arrivals screen at an airport. Everyone receiving a delivery will have its ETA [estimated time of arrival].”

The end goal, Robertson said, is to give the driver as much driving time as possible. “You want the driver to be able to drive as close to 11 hours as possible, instead of being on duty four or five hours, and then waiting four or five hours to unload.” He expects more and more shippers and carriers to move to drop-and-hook operations to avoid potential detention time.

“You’ve got people refusing to do live loads and unloads,” meaning they require the full trailer be dropped at a site, he said. “The fleets have got to figure out if they can afford to increase their trailer-to-tractor ratio. If they’re using two trailers per tractor, they might have to bump that up to three. That becomes a good upfront expense, a bigger capital expense than an ELD.”

Robertson expects shippers and carriers will eventually change their physical distribution footprint, with facilities closer to customers. “They could create pop-up distribution centers at travel stops, depending on what states allow,” he said. “You can have day drivers pick up trailers and make deliveries.”

That distribution model is not unlike the one railroads used to move “less-than-carload” freight before the rise of trucking in the 1920s. It’s also not far from the business model Uber Freight envisions for autonomous trucks, with short-haul truckers exchanging trailers with long-haul drivers.

“Relays will be almost mandatory,” Robertson said. “You’ve got to do something to keep that freight moving.” And that means giving the driver the time he or she needs to keep moving. Drop and hook certainly helps, but because of the need for additional trailers, smaller fleets have had a hard time getting involved in drop-and-hook operations with shipper customers.

At the request of some large shippers, digital freight broker Convoy is allowing smaller carriers to utilize a “gray trailer pool,” dropping trailers and picking them up in “trailer loops.” The carriers operate “power only,” meaning they provide the driver and tractor, and Convoy the “sponsored trailers.”

“The bigger shippers we work with — the most forward-thinking shippers — asked us how can we scale the drop program” to include a broader range of trucking operators, said Adarsh Nair, vice president of growth at Convoy. “Most of the doors at these shippers’ facilities are tied to drop programs.”

It may sound like a shell game, with waves of equipment being dropped, hooked up to new power units, and exchanged in a never-ending loop, but the bottom line is more time and miles on the road for drivers. The equipment costs may be higher, but transport costs lower as truckers drive more.

“If you can use a driver’s time more efficiently, you can create capacity,” said Kristen Forecki, vice president of carrier engagement and expansion at Convoy. “If you could use all drivers more efficiently, you’d increase capacity 40 percent.” That’s a big percentage, but even smaller growth would help.

Any increase in available truck capacity will have to come not from the truckers, but shippers. There aren’t enough potential truck drivers looking for jobs in 2018 to create the level of new capacity that would be needed to meet freight demand. And truly autonomous trucks are years away. For the foreseeable future, shippers who want additional freight space will have to look for ways to better manage existing capacity. After all, it’s about time.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.


Interesting points and asking shippers to accept responsibility to do things more efficiently and effectively will be a challenge. Many have adopted good logistical practices as the see it as a "profit center" and not a cost center. But vast majority took the easy way out and this article highlights many. The prevailing argument being, I'm the customer, do what you have to do but don't charge me for it.