Tag Archives: Transportation

Once one of America’s most respected professions, truck driving now generally struggles to be seen in a positive light. Instead of being seen as a traditional, hard-working segment of the workforce, unpleasant notoriety now exists around truck drivers. In 2018, Wisconsin-based trucking company manager Boris Strbac told The Washington Post that “people don’t respect truck drivers. We are treated as the bad guys on the road by other drivers and the police.”

That perceived lack of respect from other motorists, law enforcement, and the general public is just one reason why the U.S. is in the midst of a truck driver shortage. The job is also difficult and isolating, resulting in a high turnover rate.

Employment trends within the trucking industry have wide-reaching implications. For starters, trucking is essentially the lifeblood of manufacturing logistics. Without trucking, the whole supply chain could crumble. In fact, about 71% of American freight is moved via truck, equating hundreds of millions of dollars in revenue on an annual basis. Due to the national truck driver shortage, freight prices have jumped considerably in recent years. And the trend is expected to continue, to the detriment of food suppliers and restaurants alike.

How Trucking Impacts Food Manufacturing Supply Chains

Rising freight costs within the food industry due to truck driver shortages are nothing new. The same year that Strbac vented his work-based frustrations to the Washington Post, food manufacturers began to see freight costs severely impact their bottom line. Representatives for Tyson Foods, one of the country’s largest producers of meat products, reported a freight cost increase of $250 million in a single year.

When freight costs rise, those costs are typically passed along to the consumer. According to the U.S. Department of Agriculture (USDA), national food prices in January 2020 were 1.8% higher than the previous year. What’s more, the cost of foods consumed away from home, such as in restaurants, increased by more than 3%, with fruits and vegetables seeing the largest relative price increase of all food categories.

Produce often must travel long distances to reach the nation’s restaurants, grocery stores, and cafes, and their transport is typically done via truck. And even food and beverage industry trends, such as increased demand for plant-based meat substitutes, can’t curb the damage caused by increased freight costs.

Data indicates that the truck driver shortage is a primary culprit of rising freight costs nationwide. In order to help curb those rising costs, the trucking industry may need to make changes to help bring more workers to the crippled industry.

Methods for Improving Truck Driver Health

Trucking can take a major toll on a driver’s physical and mental health. Thus, many job seekers overlook truck driving opportunities as they find the pay to be negligible compared to the work performed. Long-distance truck drivers, for example, spend a large chunk of their time on the road, and may only see their families a few times per month.

That social isolation, coupled with health difficulties such as lack of physical exercise and sleep deprivation, directly contributes to the national truck driver shortage. Reducing hours spent on the road while increasing pay may be key factors in job recruitment within the trucking industry.

Exercise is also an important consideration for prospective truckers, who need to counteract their sedentary lifestyle in order to improve their overall health. Sitting for more than six hours per day can be detrimental to one’s health, even contributing to premature death. Trucking companies should thus consider including a gym membership as part of their sign-on bonus, or provide incentives for positive health changes among employees, such as weight loss or smoking cessation.

Manufacturing Logistics, Supply, and Demand

Unfortunately, health-related measures may not be enough to spawn a renewed interest in truck driving as a career. The sad truth is that the “U.S. trucker shortage is expected to more than double over the next decade,” reports Bloomberg. Trucking companies are looking to fill in the employment gaps by recruiting more young people and women, typically underrepresented in the workforce.

But it may not be enough, leaving the U.S. manufacturing industry in a limbo. In fact, Washington State University reports that the manufacturing industry is adding jobs faster than the rest of the economy, especially within the fabricated metals, machinery, and food manufacturing industries. And as the manufacturing sector continues to rake in steady revenue, the demand for freight and trucking naturally increases.

If the truck driver shortage isn’t mitigated in the near future, manufacturers from all industries will have to look elsewhere for their freight needs. Inevitably, costs will then rise at both the business and consumer levels. Steadily rising freight costs lead to gaps in the supply chain, a fact that seems counterintuitive in a nation where product manufacturing is in high demand. It’s time for trucking industry leaders to make appropriate, forward-thinking policy changes in order to help mitigate the truck driver shortage and perhaps stop the snowballing costs of freight across the country.

For over 50 years USC Consulting Group has been guiding logistics and manufacturing companies with optimizing their supply chains and improving their bottom lines. Contact us today and we will help drive up efficiency in your operations.

This article is written by guest author Beau Peters. View more of Beau’s articles here.

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Transportation and logistics organizations quite literally propel the modern marketplace, underpinning product and service delivery workflows worldwide. Unfortunately, the businesses that populate this key industry have come up against numerous challenges, including a number of environmental obstacles that impede the progress of the shippers and truckers navigating waterways and highways everywhere. Here are some of those roadblocks and ways that transportation and logistics firms might address them over the coming months and years:

Extreme weather patterns

In late 2018, the container ships navigating the Rhine River, Europe’s busiest commercial waterway, encountered a unique problem: The storied tributary was remarkably desiccated and unable to support large shipping vessels, Bloomberg reported. A drought had brought water levels in the Rhine basin to historic lows, forcing carriers operating in Western Europe to find alternative routes – or cancel shipments altogether. Although the Rhine’s water levels returned to normal in December 2018, according to Reuters, this is just one of the many instances in which extreme weather has threatened transportation and logistics operations in recent years. These occurrences, which scientists link to climate change, pose a significant threat to transportation and logistics organizations. In fact, extreme weather events, natural disasters, and “failure of climate-change mitigation and adaption,” rank among the World Economic Forum’s top five biggest business risks in terms of likelihood and impact.

Transportation and logistics enterprises have no choice but to adjust to this environmental risk, but how? Leveraging forward logistics, proactive notification and direct-store delivery strategies are among the most often recommended courses of action, Inbound Logistics reported.

Crumbling infrastructure

Infrastructure is a significant issue for transportation and logistics businesses operating in the U.S., where an investment gap of more than $4.5 trillion exists, according to researchers from the American Society of Civil Engineers. This problem affects virtually all transportation channels. Many U.S. ports cannot effectively handle modern container ships, leading to long-term delays and other serious problems, the trade association found. American roads are in a similarly sorry state, and in need of $836 billion worth of improvements and repairs, per the ASCE. Domestic railroads are also in disarray, as operators struggle with outdated cars, tracks, and stations that cannot meet the demands of commercial shippers, according to the group.

Industry organizations associated with each of these modes have called on local, state, and federal governments to invest in transportation infrastructure. This includes the Association of American Railroads and the American Trucking Association, both of which support large-scale institutional spending strategies. Unfortunately, the trillions needed to improve the country’s ports, roads, and rails are unlikely to materialize. This means carriers must take matters into their own hands by building flexibility into their supply chains to compensate for any infrastructure-related shipping slowdowns.

Increased government regulation

New pieces of government regulation are weighing heavily on organizations in the transportation and logistics space, according to research from Capgemini published in Logistics Management. While firms in the sector generally understand that carefully crafted statutes carry some benefit, many are concerned that the expenses associated with compliance outweigh potential advantages. For instance, the Federal Motor Carrier Safety Administration’s Electronic Logging rule, which took effect in December 2017, generated significant upheaval in the trucking arena as drivers cut down their hauling times to meet strictly enforced ELD regulations, the Chicago Tribune reported. This resulted in higher shipping costs, which ultimately trickled down to the customer.

Many transportation and logistics organizations struggle to comply with rules like the ELD regulation while maintaining healthy profit margins. While lobbying to stop the passage of additional rules can make a difference, companies in the space would be better off adjusting their internal processes in a manner that streamlines compliance and therefore mitigates its functional and financial impact on the operation.

Taken together, these challenges may seem insurmountable to carriers just looking to survive. This is not the case. By making some of the operational improvements mentioned above and embarking on more robust optimization efforts, transportation and logistics businesses can strengthen their position in the marketplace and find sustainable success. Of course, making such changes alone can be hard. This is where USC Consulting Group comes into play. We can tap into decades of consulting experience to help transportation and logistics companies of all sizes bolster their operations to account for new sector-specific challenges.

Contact USCCG today to learn more about our work in the transportation and logistics industry.

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In April the Chinese Ministry of Commerce announced tariffs on 128 American goods, including almost eight dozen food and beverage products. The country instituted the duties, which range from 15 to 25 percent, in response to the American roll out of protective tariffs on aluminum and steel a month earlier. China is the leading producer and exporter of both materials, and therefore took exception to the move.

Unfortunately, as the two nations face off in this tariff war, American businesses may suffer, especially those in the food and beverage industry. The retaliatory Chinese tariffs have had an impact on a significant number of food and beverage enterprises, including fruit and nut growers, pork producers and winemakers.

Fruit and nut growers bear the brunt

Of the more than 90 American-made food and beverage products China targeted, approximately 78 are grown and harvested by fruit and nut growers, most of whom are based in California. In 2016, the sunshine state’s agricultural sector generated more than $46 billion, according to the California Department of Food and Agriculture. Fruit and nut products account for seven of the state’s top 10 agricultural exports. Almond sales alone totaled more than $5 billion in 2016, eclipsed only by grapes and dairy products.

Many of these items find their way to China, which, according to the California Legislature’s Nonpartisan Fiscal and Policy Advisor, consumes 35 percent of California’s pistachios and 15 percent of its oranges. Shipments have certainly slowed because of the new duties, a development that has put additional financial pressure on West Coast growers. NPR reported that pistachio prices in China increased from $3.50 per pound wholesale to $4.00 per pound following the implementation of the tariffs. The 15 percent hike has forced pistachio growers to completely reassess active logistics and sales strategies, many of which hinge on vendor service agreements. To put things into perspective, the pistachio duty of 15 percent, or $0.50 per pound, increases the shipping cost of each 44,000-pound container by $22,000.

To offset this expense and ship product to China, growers must eat the cost and renegotiate their contracts with logistics providers. Those that decide to divert their shipments to importers without duties often pay between $2,000 and $4,000 per rerouted container. Pistachio producers that simply recall their product back to port can expect to incur costs as high as $10,000 per shipment navigating U.S. customs. None of these options is favorable.

Winemakers face international competition

Wine producers in California and beyond are experiencing similar problems. The U.S. wine industry, which hinges on vineyards in California, shipped $197 million worth of product to China in 2017, capping off a decade that brought export increases of 450 percent, according to analysts at the Wine Institute.

But these gains did not come without struggle. Prior to the April tariffs, China had been collecting duties of 14 percent on American wine imports, disadvantaging U.S. vintners warring with ascendant competitors in Chile, Georgia and New Zealand, which are permitted to ship to Chinese ports duty free. With the new tariffs, total duties increased to 29 percent.

In the short term, this tariff hike will do little to damage the American wine industry. China has a relatively small wine market. Tariffs, however, could have long-term implications if they prevent winemakers from selling to the growing number of Chinese middle-class buyers set to gain purchasing power over the next decade.

Pork producers grapple with difficulties

An estimated 60,000 pork producers operate in the U.S., generating more than $20 billion per year, according to analysts from the National Pork Producers Council. Many of these businesses are based in the Midwest and South East, with Iowa and North Carolina boasting the highest production figures, according to the U.S. Department of Agriculture.

China is the fifth largest consumer of U.S. pork, which will now be subject to tariffs of 25 percent. Many American pork producers are not pleased with this development, despite China’s relatively low consumption levels. Some believe the tariffs will result in depressed profits which will ultimately undermine the local economies that pork producers support.

Pinpointing the ideal strategy

Earlier this month, The Wall Street Journal reported that China offered to purchase $70 billion in U.S. farm and manufacturing products in exchange for immunity from the aluminum and steel tariffs. This development has led some experts within the food and beverage industry to believe that China may soon lift its duties.

For the time being, however, food and beverage producers have no choice but to adjust to this new reality. How? By optimizing production workflows to reduce overhead. When enterprises embrace internal improvement efforts, production costs decrease, leaving room for additional expenses, including those associated with higher transportation costs due to tariff increases. For food and beverage makers navigating the Chinese market, this may be the most viable strategy for short-term success.

At USCCG, we’ve been working with businesses across numerous industries for 50 years, including the food and beverage industry, helping them adapt to marketplace transformations of all kinds. Connect with us today to learn more about our work.

What areas should transportation divisions look to that could both hide wasteful processes and, if maintained properly, significantly optimize processes?

Transporting goods, as a subdivision of a company’s logistics department, has transformed from an ancillary service to one of the most valuable resources in modern commerce.

Though the value of transportation logistics varies across different supply chains and might be difficult to ascertain cumulatively, a William Blair & Company study found third-party logistics companies constitute a more than $500 billion global venture with only 10 percent of the logistics market share. As evidenced, the power of an intelligently managed fleet can yield exciting revenue growth and truly define a business at its core.

That said, operational deficiencies can also turn the best logistics providers on their proverbial ears. Supply chain networks subsist on the fast execution or pertinent tasks and abhor waste in all forms. Depending on where it occurs along the supply chain, even the smallest inconsistency can offset processes down the line and cause subsequent harm, costing several companies considerable revenue all at once.

Best practices always encourage logistics providers to implement verifiable methods of improving operations when it comes to transportation management. In many ways, this is easier said than done. However, what areas should transportation divisions look to that could both hide wasteful processes and, if maintained properly, significantly optimize processes?

Reliance on technology necessitates repair management
As more and more advanced equipment make their way into all levels of the supply chain, manufacturers expand their potential for accelerated growth and enhanced productivity in granular increments to complement positive scalability. However, once any process becomes heavily dependent on technology, it can just as easily fall victim to its limitations. Machinery doesn’t last forever, and eventually businesses utilizing advanced equipment will need to dip into their repair and maintenance allocations. That is, after all, total cost of ownership.

Big trucks cost big bucks to maintain.

Unfortunately, these R&M costs are not fixed and will require foresight to avoid exorbitant fees. According to a study conducted by the American Transportation Research Institute, the average R&M costs per mile for a single truck grew by 7 percent between 2012 and 2013. When multiplied over an entire fleet and compounded by overall industry growth with expanded services, these operational costs truly stack up. Moreover, the ATRI study also stated fluctuating petroleum prices can impact the cost of tires, an integral and unavoidable resource for ground travel.

On top of all that, these costs don’t even consider the most important ones of all: downtime-related revenue losses. This multifaceted issue affects all aspects of business performance and can ruin profitability across all. Downtime loses companies customers, stifles on-site and off-site productivity, leads to expensive overtime pay for workers, hurts a brand’s image and could possibly even lead to expensive litigation. Though trying to assign a set number value to downtime casts a wide net, Gartner places the figure around $5,600 per minute – or more than $300,000 an hour – on average.

Companies who take their R&M schedule into their own hands can undermine these risks. Logistics providers should be sure to develop strategies that log relevant data pertaining to things like vehicle wear and tear. This can allow logistics managers to address necessary maintenance before the equipment breaks down and the serious costs start piling up. Moreover, this regiment creates an operational framework that accounts for repairs rather than responds to them as best it can.

Closing the skills gap
To maintain a competitive edge, the transportation industry requires a competent workforce knowledgeable about on-site operations, as well as overarching trends in the field. However, many problems stand in opposition of this, ultimately stemming from negative public opinion about the transportation industry and those who are needed to assume its mantle in the coming years.

For example, a study by the Economic Modeling Specialists International found more than half of all truck drivers in Houston, Texas, are 45 years old or older. This is not an isolated issue. Given the size of the baby-boom generation, as these workers retire, others will need to fill the void. Not anyone will do – as stated earlier, transportation has undergone a digital age makeover as of late. With Big Data and the Internet of Things redefining logistics operations, new hires must possess ever-increasing technological knowledge. Ironically, many young people in search of their first careers have been and will continue to be swayed by the incorrect notion that logistics and manufacturing are strictly about manual labor.

To ensure any enhancements to long-term productivity, transportation and logistics providers should never underestimate the value of public relations. Additionally, these organizations should develop new training tools that facilitate an accelerated process that doesn’t glance over the necessities, but provide job candidates with resources that complement their tech-savvy lives and minimize downtime between incoming and outgoing employees.