For over a year, industry pundits have predicted that in 2018, we would experience a significant increase in rates for both truckload and LTL shipments. Many were predicting another “perfect storm”.  While I think the storm might have been somewhat overstated, it appears that basically, they were correct. ACT Research has said “Clearly, truckers are entering 2018 in the best negotiating position in many years”. The expected general rate increases have been announced at 4-6%, but it looks as if we will go well beyond these. According to Bloomberg, spot rates through March 23, were 28% higher than the same period last year. FTR Transportation Intelligence predicts that even the longer term, more stable contract rates will rise by 12% this year. This compares to about 4% in 2017. While there are several reasons for the increases, i.e. weather, higher demand, etc. the most often discussed are the lack of capacity and the competition among carriers for qualified, responsible drivers.

Earlier this year, the Washington Post, following a survey of 1600 shippers, concluded that trucking capacity (or lack thereof) would be the industry’s “primary hurdle” this year. Much of the blame for the capacity shortage has been laid at the feet of the Electronic Logging Device (ELD) mandate. Since they were first suggested several years ago, it has been predicted that they would result in decreased capacity. After several attempts to block their installation, they finally were mandated to be in place by December 18, 2017. Strict enforcement however, was to be delayed until April 1, 2018. Most large carriers installed theirs years ago, but the smaller carriers and particularly the owner-operators, have resisted right down to the wire (and beyond). With full enforcement in effect, a broader adherence to the driver hours of service rules is expected, which in turn will reduce capacity. The log “fudge factor” has been taken away. It is hard to believe that forcing drivers to comply with the rules will make that much difference, but capacity losses have been estimated to be between 4 and 7%. We will know more as we get more experience. It is clear now however, that more drivers will be needed to meet the current demand.

The second contributing factor is the competition for qualified drivers. Rarely, is a capacity problem caused by lack of equipment. More often than not, it results from the lack of drivers to operate it. The shortage of drivers is well known, and I won’t belabor it here. There is an underlying issue with which we deal every day. Now however, as carriers start to compete for those in the driver pool, salaries finally are increasing. Carriers willing to pay more are finding their capacity issues reduced. Those who are not are paying the price through loss of business and increased driver turnover. According to the American Trucking Associations (ATA) driver salaries rose 15-18% from 2013 – 2017. A private fleet driver now can earn as much as $86,000 annually, plus benefits. Salaries for entry level truckload drivers have risen 15% from 2013, to about $53,000. A number of carriers have added several cents per mile to driver compensation, and some are offering substantial “sign up bonuses”.

An interesting contradiction to the driver shortage is the fact that carriers are ordering new equipment at a rapid pace. During the first three months of this year, they ordered about 134,000 heavt duty trucks – almost double last year’s purchases for the same period. The new tax laws have freed up cash for many which is being used to upgrade fleets and add capacity.

Hopefully better pay and more equipment will help negate the driver shortage and the capacity shortfall in the entire industry, but the improvements will come at a price that will ultimately be paid by the shippers.

Written By: Clifford F. Lynch


Several years ago, I wrote that the three major impacts on the supply chain during my career were technology, globalization, and Wal-Mart. Recently, a colleague asked me if I was ready to add a fourth, which of course would be Amazon. A good question, but at this point, I am not so sure. Let’s take a look at Wal-Mart. When Sam Walton opened the first Wal-Mart store in 1962, he probably had no inkling of the way he would be changing the retail landscape of the country. Building on the success of that first store, by the 1970’s, Wal-Mart had begun its march through small-town America, then not-so-small-town America, and the world. By 2015, the company had 2.3 million employees, serving 200 million customers weekly, in 11,000 stores in 27 countries. In its wake, it left thousands of casualties as neighborhood hardware, appliance, apparel, and other local businesses collapsed under the weight of the competition from Walmart’s selections and lower prices. Thousands of workers were displaced, but every new Wal-Mart brought new job opportunities; and to many, the lower prices justified the job losses.

But as Wal-Mart and the local competitors and customers settled into new relationships, the company was turning to its supply chain as a major factor in holding down prices, and has been a true pioneer in the supply chain industry. Automated warehouses, huge cross dock facilities, top notch technology, sustainability programs and modern truck fleets have not only improved Wal-Mart’s operations; but the techniques and processes they have introduced have made major impacts on the operations of others.

To state that Amazon has changed the face of on-line buying is unnecessary. Electronic commerce continues to grow.  Much of the increase has been going to Amazon, and their share of the pie is expected to expand. Just as Wal-Mart did in the 1970’s, Amazon is having a major impact on the competition and employment. In 2017, 7000 retail stores closed, and so far this year, 1770 have locked their doors. Toys ‘r Us recently announced the closing of 800 more. According to the recent issue of Forbes, Jeff Bezos, CEO of Amazon is now the richest man in the world. Still, Amazon’s annual sales of $180 billion are far behind Wal-Mart’s $500 billion. If Sam Walton were still alive, he would have the richest man distinction. As it is, he has three very rich kids.

It is important to keep things in perspective.What Amazon has done is speed up the entire selling and delivery process, and through their reselling of others products, are to some extent, helping their competition. Other competitors are scrambling to find ways to provide same and next day deliveries. Amazon has opened  over 150 distribution centers to shorten the “last mile”. Through its purchase of Kiva, a robotics company, most of these buildings are equipped with robots to assist in product movement. They also employ thousands of order pickers; and like Wal-Mart, they are not known for their high wages and sensitivity toward employees.

As far as real contribution to the body of supply chain knowledge, I do not see too much. They obviously employ some very smart minds but some of their innovations seem to be solutions looking for a problem. Drones certainly a part of our future, but I do not see delivering pizzas or Zappo’s shoes their highest and best use. Amazon’s patented distribution center in the sky is pretty exciting stuff and has Star Trek fans salivating as they await the assumption of command by Captain Kirk. But a practical contribution to the supply chain? I don’t think so.

It is a rapidly changing world for the supply chain manager. Consumer buying habits and expectations have changed dramatically. Amazon and others are not just accommodating these changes, but are part of them; and supply chain managers must reeducate themselves accordingly. At the same time, we must separate the hype from the reality. This is not the first seismic change we have seen in supply chain management, nor will it be the last.

Written By: Clifford F. Lynch


For those supply chain managers working for firms that engage in foreign trade, one of the major concerns is likely to be the delivery arrangements – in particular, the potential for confusion surrounding the responsibility for freight, insurance, customs charges, and damage in transit. To assist in understanding, the International Chamber of Commerce has published 11 International Commercial Terms, or Incoterms, which are internationally recognized and have clearly defined both the buyer’s and seller’s obligations in common transactions.

Last revised in 2010, the new terms are divided into two groups – seven terms which apply to any mode of transport and four which are to be used for ocean and inland waterway transport only. Some managers have been confused by the terms; but hopefully, the following list and explanations will aid in understanding.


Ex-Works means the buyer assumes total responsibility for the shipment. Delivery is accomplished when the product is handed over to the buyer’s representative at the plant or DC. The buyer is responsible for freight costs, insurance, export and import clearance, and all customs charges.

FCA (Free Carrier) provides that the seller fulfills his responsibility when he delivers the product to the carrier.

CPT (Carriage Paid To) provides that the seller pays transportation costs and export clearance charges, but the buyer pays for insurance.

CIP (Carriage and Insurance Paid To) This term is used primarily for multimodal moves and is the same as CPT, except the seller must also purchase cargo insurance in the buyer’s name.

DDP (Delivered Duty Paid) This is the maximum obligation that can be assumed by a seller. The seller is responsible for all risks and charges up to the consignee’s door.

DAT (Delivered at Terminal) (new) Delivery is accomplished when goods are unloaded and placed at the disposal of the buyer at a named terminal.

DAP (Delivered at Place) (new) Delivery is accomplished when goods arrive and are ready for unloading at the destination.

(Note: These last two terms replace the 2000 Incoterms for Delivered at Frontier, Delivered Ex – Ship, Delivered Ex – Quay, and Delivered Duty Unpaid.)


FOB (Free on Board) means that the seller is responsible for getting the goods to a port. The buyer bears the cost and responsibility from that point on.

FAS (Free Alongside Ship) requires the seller to deliver the product alongside a given vessel at a port.

CFR (Cost and Freight) deals with the cost of the merchandise as well as the freight costs. The seller is responsible for the product and the transportation costs to the destination port.

CIF (Cost, Insurance, and Freight) provides that the seller pays for insurance in addition to the product and transportation costs.

A clean understanding of these terms is important. They have been designed to cut down on the uncertainty arising from differing interpretations of terms of sale from one country to another.  The new terms can be found at several locations on the internet, and free, printable charts are readily available.

Written By: Clifford F. Lynch


On February 12, President Trump sent to Congress his long awaited plan for repairing the nation’s infrastructure. The plan was first mentioned during his campaign when he promised that $1.0 trillion would be spent on the repair and/or construction of bridges and roadways. Even before the plan was formally presented however, it became clear that the federal government would provide only $200 billion of the total. The bulk of the funds ($800 billion) would have to come from the states or private enterprise. The final proposal was pretty much as predicted, and was disappointing to almost everyone.

Even the $200 billion is problematic. The Highway Trust Fund has always been the source of most of the funding for highway and bridge repair and construction. Currently however, the federal government is spending about $15 billion more annually than the fund takes in. The fund is supported by the federal fuel tax of $.184 per gallon on gasoline and $.244 per gallon on diesel fuel. These taxes have not been increased since 1993. The reason for this is purely political. No member of Congress wants to be associated with such a visible tax, particularly this year, when a number of them are up for re=election. Most industry organizations such as the American Trucking Associations and the U.S. Chamber of Commerce, have advocated an increase, but Congressional leaders apparently would rather have a root canal than to try to push such legislation through Congress.

To compound the problem further, because of Congress’ failure to act, twenty-six states have raised their fuel taxes since 2013. If by some miracle, the federal tax was increased, drivers in those states would be penalized for their states’ proactivity. Right now, it appears that the $200 billion Federal share is going to increase the Federal deficit even further or be siphoned off from other programs, neither of which is a satisfactory solution.

That still leaves the bulk of the funding up to the states or private interests. It is reasonable to expect that this can only result in increased state taxes or the privatization of public services. Some states already have privatized rest areas along interstate highways. Both the White House and the Department of Transportation see tolling of interstate highways as one of the cornerstones of the plan. When the interstate highway system was authorized in 1956, Congress banned tolling on any of these roads.   Although some exceptions have been approved, most of the interstate system is toll free. It is difficult to visualize private investors getting excited about owning highways unless there is a reasonable return on their investment. The same is true for any state or federally funded public facility. We could find ourselves paying fees for using highways, bridges, airports, and rivers. The sparsely populated, rural areas could see no improvements since there would not be enough utilization of roads and bridges to justify private investment.

Finally, the states if left to their own devices, will invest in the projects they feel are important, not necessarily what is best for the country or the national highway system. We could end up with a state of the art highway in one state that quickly deteriorates at the state line. I am afraid that by the time this all sorts out, we would be much better off if Congress just increased the federal fuel taxes.

In a 2017 speech, President Trump said, “I will be asking Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States – financed through public and private capital – creating millions of new jobs. Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land.” This is a great goal, but so far the execution appears to be a little weak.

Written By: Clifford F. Lynch


For the past year, there has been a considerable amount of discussion about blockchain and its applicability to the supply chain. New supply chain management concepts pop up all the time, but it has been a while since we have seen a subject so often discussed, yet so poorly understood. The most common questions seem to be, “What is it?” followed by “What does it do?” According to MIT associate professor Christian Catalini, “at a high level, it allows a network of computers to agree at regular intervals on the true state of a distributed ledger.” This so-called distributed ledger is one in which every transaction on a particular network is recorded and is available to the participants to view and verify.  According to Catalini, “such ledgers can contain different types of shared data, such as transaction records, attributes of transactions, credentials, or other pieces of information.” The technology is based on the same complicated mathematical functions that brought us Bitcoin, Ethereum, and other digital currencies- subjects that can be even more confusing than blockchain.

According to its proponents, blockchain can increase visibility in the supply chain (as well as other functions) by breaking each movement down into a block and documenting the transactions every time a shipment changes hands. Linking the blocks together creates a record of the details of each movement, and every party to the transaction has access to the information.  An independent third-party records and validates the information, and no party can amend anything without validation by the other members of the chain. Blockchain supporters claim that this visibility will save time, reduce costs and risk, and promote trust among the parties.  Some go so far as to say it is as significant as the invention of double entry bookkeeping. Skeptics suggest that it seems to be touted most often by vendors who stand to profit from its implementation.

The 2018 Third Party Logistics Study, released at last fall’s CSCMP conference devoted several interesting pages to the subject, and suggested that “the goal is to create one version of the truth, link information, and create transparency.” Their survey however, indicated that 67% of the LSP users and 62% of the providers did not know enough about it to draw any conclusions at the time of the survey. Across the industry as a whole, there seems to be a similar mood. While there has been a considerable amount of interest and discussion, there has been little use. Some companies are moving ahead, however. Maersk Line, Wal Mart, and IBM are working on systems currently, and others no doubt will follow suit as understanding of the concept grows.

It is not the first new supply chain development to require a quick education, nor will it be the last. While the technology is complex, this should not keep us from embracing the concept, determining how it can help us manage our supply chains more effectively, and implementing the concept where appropriate to do so.

For a good discussion of blockchain, see the 2018 Third Party Logistics Study and the September 1, 2017, issue of Fortune.

Written By: Clifford F. Lynch


For over a year, carriers have warned us of pending capacity issues and increases in rates occurring in 2018. We are a month into the New Year, and early indications are that those predictions are going to be on target, particularly in the LTL sector.  If the economy continues to improve as most expect it to, soon we will begin to see capacity shortages and higher rates. Although most shippers have already factored last fall’s general rate increases into this year’s budgets, most industry watchers believe we will see additional increases this year. In a recent Logistics Management article, John Schulz wrote LTL shippers……”should brace for some of the steepest increases in a decade because of rising costs and sharply higher demand.”

As everyone in the industry understands, the primary reason for decreasing capacity is the continuing shortage of drivers. This is not a new problem by any means, but one which has been with us for several decades. It is being exacerbated in the LTL sector however, by the significant increases in on-line ordering and the resulting smaller shipments. We are creating more shipments, but not more drivers. The other reasons for driver shortages are well-known. Factors such as pay, lifestyle, hours of service, and government regulation all contribute to a somewhat negative work environment.

Already, a number of carriers have increased pay, added sign-up bonuses and other incentives to attract and retain drivers. Since the total pool of experienced drivers is limited, we will see more turnover in the industry as drivers move for more lucrative positions. Currently, the turnover rate is in excess of 90%. Private fleets for example, pay as much as 30% more than the for-hire carriers, making them formidable employment competition. The end result of all this is that shippers will pay the cost of keeping drivers in the system and keeping them happy.

Another contributing factor will be increasing carrier equipment costs. The cost of a tractor has more than doubled in the last ten years because of the modifications involved in reducing carbon emissions. Today, the air coming out of the engines is cleaner than the air going in. The most recent major expense hitting the entire industry is the cost of the new electronic logging devices (ELDs) that became mandatory for most interstate carriers on December 18, 2017. Under the new law, most tractors will be required to have the new equipment. Although some of the major carriers installed them several years ago, many, particularly the smaller carriers and owner-operators, did not. Not only will ELDs require additional investment, they are predicted to reduce driver productivity as well. The elimination of paper logs will eliminate the ability to drive an extra hour or so with no consequences. Experts are suggesting this productivity loss may be as much as 4 – 7%, thereby requiring more drivers to move the same amount of freight.

Finally, just as other firms have learned to do, carriers are taking advantage of new technologies – in their case to price more efficiently. One recent example is another result of the electronic commerce trend. FedEx and UPS found themselves handling an increased number of light weight packages that occupied an inordinate amount of space. Last year they began the use of a new “volumetric divisor” which is used to calculate the dimensional (dim) weight of the packages they handle. Charges are based on the actual weight or dimensional weight, whichever is higher. LTL carriers are beginning to adopt similar pricing schemes. This is sure to increase the costs of firms moving this kind of traffic unless they take corrective action.

It will become increasingly important for shippers to search their supply chains for ways to mitigate increased rates. For example, changes in package design could eliminate the need for lightweight packing materials, reducing the size of shipping cartons. The outsourcing of distribution to a logistics service provider with a strong consolidation program can reduce transportation costs. Less tangible, but just as important, try to improve relationships with carriers and drivers. Good relationships can be very important when capacity is tight.

In summary, while it appears that some rate increases are inevitable, taking a hard look at your processes and techniques may yield some surprising positive results.

Written By: Clifford F. Lynch


There are several trucking legislation issues carrying forward into 2018, but there is one in particular I think will be resolved this year, provided Congress passes an infrastructure bill. Three years ago, several LTL and parcel carriers urged Congress to pass legislation that would have allowed the use of 33 foot twin trailers on the nation’s highways. Although the proposal had a fair amount of backing in Congress, the legislation did not make it to the President’s desk. The new law, had it been enacted, would have allowed the use of the longer trailers, in lieu of the 28 footers now in use, allowing about 18% more volume and requiring fewer trailers to move the same amount of freight.

Early last year, year, with a new administration and a new Congress in place, Fred Smith, Chairman of FedEx began to lead a charge to get this legislation passed. FedEx, joined by UPS, Amazon, YRC, U.S. Chamber of Commerce, National Association of Manufacturers, and others have formed a group called Americans for Modern Transportation (AMT). According to its press release, the group was established with the intent to improve infrastructure and transport policies in order to more efficiently address the needs of the industry.”  In explaining this central goal, the group went on to say: “To continue moving America forward, infrastructure investment cannot simply be improved roads and bridges. We need to lay the groundwork for a modern transportation system. Central to this goal is combining infrastructure enhancements with efficient trucking and policies, as well as incentives for better safety and fuel technology.” Not surprisingly, the group’s first major initiative was to seek approval of the 33-foot legislation.

Since truckload carriers use 53-foot trailers, the movement has been spearheaded by the LTL and parcel carriers who use the twins, but the Truckload Carriers Association has opposed the adoption of the new rules, citing competitive disadvantage, safety, issues with TOFC equipment designed for 53 and 28 foot containers, and other concerns. (Frankly, these and their other arguments seem weak.) Other groups have expressed safety concerns with the longer rigs on the highways. In fairness however, 33 foot twins already are allowed on portions of highways in 20 states, without disruptions to the marketplace of safety problems.

AMT commissioned a study to determine the feasibility and economics of operating the longer trailers, and the conclusions published in March, 2017, in an analysis entitled “Twin 33 Foot Truck Trailers: Making U.S. Freight Transport Safer and More Efficient”, were very positive. The consultants concluded that in 2014, widespread adoption of the 33 foot trailers would have resulted in 3.1 billion fewer vehicle miles traveled, 4500 fewer truck crashes, $2.6 billion saved in shipper costs, 53.2 million fewer hours saved due to less congestion, 255 million fewer gallons of fuel, and 2.9 million f ewer tons of CO2 emissions. The 19 page report explains these conclusions and also addresses specifically each of the concerns of the TCA.

If one takes this report at face value, and so far, there seems to be no reason not to, it would be difficult for legislators to ignore these positive impacts on infrastructure and environment. No doubt, there will be lengthy partisan debates; but at this point, I think the prospects of passage look good, as part of a broader infrastructure bill. While as a stand-alone bill, passage could be a problem, slipping it into a more important and acceptable infrastructure bill should make it easier for uncertain or pressured members of Congress to justify.

Written By: Clifford F. Lynch


Many of our readers will remember the dire predictions of massive computer failures that were to occur on January 1, 2000. The Y2K problem, as it was called, was expected to arise because most software at the time, represented a four digit year with only the last two digits. For example, the year 1999 would be represented by 99. This would make the year 2000 indistinguishable from 1900, 1800, etc. For at least two years prior to the new century, hundreds of articles were written about the horrific problems we could expect. On January 1, 2000, as we all sat around waiting for the world as we knew it to end, nothing happened. Most companies and organizations had upgraded their systems well ahead of the dreaded date, and problems were minimal.

For the trucking industry, December 18, 2017, was a minor Y2K.This was the long-awaited date when most motor carriers would be required to begin using electronic load devices (ELDs) rather than paper logs. Experts predicted productivity losses of 4-7%, and a number of industry analysts predicted minor chaos on Y12/18. As far as we can tell, December 18 came and went with a minimal impact on the industry. There are several reasons for this.

First of all, most of the major truckload carriers already use ELDs or similar devices called Automatic on Board Recording Devices (AOBRDs), and have for several years. Their learning curves and adjustments are long past. The biggest impact was expected to be on the smaller carriers and owner operators in the network. The latter group is suspected of often stretching their hours of service. ELDs of course, will make that impossible. This is important however, because smaller carriers actually haul the majority of truck freight in the country.

The date about which we should be concerned is April 1, 2018, the date on which the Federal Motor Carrier Safety Administration (FMCSA) will begin enforcement. Although ELDs should have been installed by December 18, if a driver is caught without one between now and then, he or she will not be placed out of service.  More importantly, this violation will not negatively affect the drivers’ CSA scores. So the predictions that drivers, particularly the older independents, would trade their trucks for campers and boats, rather than stand the ELD expense and constraints, are going to be delayed somewhat.

Business is good right now. Rates are high, truckers are busy, and everyone has a 90-day grace period during which to prepare for the enforcement date. April 1, 2018, then becomes the new kick off date for the expected difficulties. My guess is that the smart shippers and carriers will find a way to minimize the impact, just as they did for January 1, 2000.

Written By: Clifford F. Lynch


In the several decades I have been in the supply chain industry, I have seen a number of changes in almost every aspect of the industry. Up until recently, I have suggested three that have been the most important – globalization, technology, and Wal-Mart. All three have influenced supply chain managers to adopt new mindsets and develop new skills and processes. Wal-Mart, in particular, has raised the level of warehousing and trucking operations to almost an art form, and has inspired innovation in a number of supply chain techniques and processes.

And then along came Amazon, and what is now being called the “Amazon Effect”. In a retail sense, this has been defined as “the ongoing evolution and disruption of the retail market, both online and in physical outlets, resulting from increased e-commerce. The name is an acknowledgement of Amazon’s early and continuing domination in online sales which has driven much of the disruption” (Whatis.com) It has gone far beyond that, however. From a supply chain perspective, Amazon is rapidly changing the way managers must look at their own systems. Offering 398 million products from well over 100 fulfillment centers, utilizing its 40 aircraft and fleet of trucks,  Amazon’s goal is to be in a position  to deliver most of its orders the same day they are received, or the day after.

This level of customer service, if widely adopted, while no doubt extremely pleasing to the consumer, could keep consumer goods manufacturer and retailer supply chain managers up at night. While the above improvements are primarily in the business to consumer sector, many similar business to business requirements are beginning to follow. But it is not going to put the rest of us out of business. To be sure, Amazon is having a dramatic impact on buying and shipping patterns; and prophets of doom have predicted all sorts of negative results. In November, 2016, the Institute for Local Self Reliance published a 79 – page report entitled, “Amazon’s Stranglehold: How the Company’s Tightening Grip is Stifling Competition, Eroding Jobs, and Threatening Communities”. Such discussions are not too unlike what critics published about Wal-Mart when it first began to invade small-town America. But we survived that and learned from it, and we will survive and learn from the “Amazon Effect”. Now is not the time for supply chain managers to throw themselves in front of an autonomous truck.

We simply must rethink our strategy, asking ourselves some difficult questions, such as

  1. How good does our service have to be? Is our business such that we really need to offer same day or early next morning delivery to compete effectively? On which products?


  1. Depending on the answer to question 1, how many distribution centers will we need to achieve our service targets? What items will we need to stock?


  1. Where should they be located? To achieve next day delivery they probably should be located in or relatively close to the major, more expensive markets.


  1. And finally, how will we deliver the products? Will we need a private fleet, contract carriers, or a combination of the two? Apparently, no idea is too bizarre. In March of this year, Reuters reported that Wal-Mart was exploring the feasibility of asking store shoppers to drop orders off to on-line customers on their way home. The legal obstacles to such a program are significant, but stranger things have happened in this business.


So what will the answers to these questions be?  I believe the best response to all can be summarized in one word– “Outsourcing”. For years, one of the major advantages to outsourcing distribution operations has been the flexibility it afforded the outsourcing firm. As market and product characteristics change, logistics processes must change as well; and the use of a logistics service provider greatly reduces the risk of misplaced company-owned distribution centers or obsolete techniques. The warehouse building boom generated by the internet hysteria of the late 1990’s is a classic example. Several privately owned and operated 500,000 plus square foot fully automated facilities were left empty after only a few months of operation because the predicted e-commerce volumes didn’t materialize.

Even more important are the density and shared networks that logistics service providers enjoy. Sophisticated consolidation programs can greatly reduce the cost of delivering what will be smaller shipments quickly.

For reasons of its own, Amazon is relying on company owned and operated distribution centers. While this can be a smart real estate play, such a network can have its own set of disadvantages. To survive in this environment, flexibility must be the bed rock of any supply chain operation.

Written By: Clifford F. Lynch

We continue to read and hear that this winter may be the most frustrating shippers have experienced in several years. Capacity issues and higher spot market rates are expected to continue into the new year. And with the higher spot markets, we can expect to see contract rates follow the same path. As might be expected, many of the capacity issues will revolve around driver shortages. According to a recent study by the American Trucking Associations (ATA) the driver shortage is increasing and is expected to exceed 50,000 by the end of the year. Most of us have read about the letter J. B. Hunt sent its customers, warning of increases of 10% or more as the Electronic Log Device (ELD) implementation adds more fuel to the existing driver shortage fire.

After several years of controversy and challenges, the effective date for ELDs is fast approaching (December 18) and most industry watchers are predicting productivity losses of 4 – 7%. This is a little hard to understand since most of the major truckload carriers have used ELDs for several years, and are well past the learning curve. The biggest impact apparently will be on the smaller carriers and thousands of owner – operators in the U.S. transportation network. The latter group is suspected of routinely fudging on their hours of service thereby driving longer than they should; and ELDs will make cheating almost impossible. (Ironically, the smaller carriers stand to benefit most from ELDs and the efficiencies they are expected to bring to their systems.)

Whatever the impact of the implementation, most agree that it will exacerbate the capacity problem. Some experts are predicting that older drivers may even quit driving rather than work with the new system. This would be especially true for the already financially stretched owner – operators who would have to dig into their own pockets for the recorders.

Industry analyst John Larkin of Stifel, warns, “Expect a three ring circus when the ELD mandate is implemented on December 18.”

ELDs aside, if the economy continues to grow and carriers are unable to attract new drivers, tight capacity will continue to drive rates up. This would be an excellent time for shippers their c contracts and cement relationships with their carriers. Most important, treat your drivers and carriers well. It goes without saying that shippers and receivers that do will experience fewer problems than those that don’t. Keep in mind that for the time being, it is going to be a carriers’ market.

Written By: Clifford F. Lynch