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The Covid-19 pandemic has expedited the growth of online shopping. After months of lockdown and quarantine measures, people have revised some of their perceptions about shopping.

• A new survey (source: July 23, 2021, issue of Qvalon) shows that 49% of people are mostly focused on product availability—well ahead of price (36%) and quality (34%), which were the top 2 concerns before the pandemic.

• Brick and mortar shops turned digital to keep their businesses afloat. In fact, global e-commerce has become a $26.7 trillion industry because of Covid-19.

• An omnichannel commerce trend, Buy Online, Pick up in Store (BOPIS) paved the way for 195% year-on-year growth, with 60% of US retailers quickly adopting this strategy.

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The Covid-19 pandemic, and the response of the Canadian and U.S. governments and citizens to the virus, is clearly the major story of 2020. The pandemic did not just have impacts on the health of many Americans (i.e. over 11 million cases, 250,000 deaths) and Canadians (i.e. over 306,000 cases, 11,000 deaths); it also had significant impacts on our personal lives, business operations, and freight transportation. This blog will highlight the huge effect of Covid-19 on so many aspects of our lives; an upcoming blog will capture some of the other top freight stories of the past year.

1. Covid-19 – The Impact on our Health and Personal Lives

Millions of Americans and Canadians have been infected and continue to be infected at an escalating rate. Personal reactions have ranged from mild flu-like symptoms to significant health issues to death. To protect oneself from contracting the virus, many citizens have begun wearing masks and other PPE, limiting the size of groups with whom they interact and trying to maintain six feet or more of distance between themselves and others.

The lack of national strategies in Canada and the USA on testing, tracing, and quarantining have resulted in a protracted and extensive virus spread. Varying guidelines on mask utilization, industry sector lockdowns and re-openings, and varying leadership approaches have created confusion, fragmented responses, and disappointing results. Many citizens must stay home if they tested positive, if they had symptoms, or if they had to be quarantined. Many primary, secondary and university students are now participating in online learning rather than attending schools. The year is ending with at least two potentially effective vaccines, which will likely be distributed during the first six months of 2021.

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b2ap3_thumbnail_dreamstime_l_106494691.jpgIn February 2019, the American Trucking Research Institute completed an excellent study entitled, E-Commerce Impacts on the Trucking Industry. This blog contains a summary of the highlights of this report. For more information on this topic, download the full report which contains an array of sources that are footnoted throughout the document.

E-commerce has been defined as retail and business transactions involving the use of online platforms. Closely aligned with E-commerce is omni-channel retailing, which represents a real-time, channel-agnostic synchronized visibility of inventory across the supply chain using a central stock pool, that allows consumers to fulfil demand anytime, anywhere. These developments have disrupted current business models in the retail industry. Technological innovations associated with these developments have significantly changed the consumer experience; manufacturers, distributors, retailers and transportation companies have adapted their supply chains and business models to support the new retail environment.

This blog is comprised of two components.

The first segment examines changes that pertain to retail supply chains. This is followed by a look the direct impacts of these changes on freight transportation.

The Changing Retail Landscape

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The truckload sector of the freight industry is different from the LTL and small parcel segments in two significant ways. Unlike the other two segments, anyone who can buy or finance the purchase of a tractor-trailer unit and can drive the rig, can enter the industry. Freed from the requirement to build cross-dock facilities and/or buy sorting machines, the barriers to entry are low.

There are approximately 540,000 truckload carriers registered with the Federal Motor carrier Safety Administration in the United States. These range from 1 truck to 20,000 truck fleets. The majority have less than 20 pieces of equipment in their fleets. These companies are projected to generate $358.6 billion in revenue in 2018. The comparable Canadian number would probably be in the range of ten percent of these numbers. The truckload sector is about ten times the size of the LTL sector.

Revenue/Tonnage Growth in 2018

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We live in a remarkable era. When people look back at this era 15 or 20 years from now, many will say that this was a golden era for jobs. Most people interested in working have jobs. Employment in Canada and the United States is at almost record levels. Looking ahead to the future, this could change dramatically. If you examine many of the core sectors and jobs in our economy, they are being transformed by technology.

Many manufacturing jobs are being replaced by robots, automation and off-shoring to counties with a lower cost structure. Low-skilled, repetitive factory jobs can now be performed by machines. Similarly, as products are being manufactured, robots allow companies to pack more products into their warehouses, and to speed up picking, so that they can put more products into rapid fulfillment. As an example, Amazon expects to hire another 100,000 workers in the next eighteen months, many of them in their fulfillment centers.

Autonomous and semi-autonomous trucks may soon be able to take most of these goods to their destinations. Many of the almost 4 million truck driving jobs in our economy, specifically the long-haul trucking jobs, could become obsolete.

Ecommerce is having a profound impact on both wholesale and retail jobs. Consumers can now place an order online and have the products delivered directly from the manufacturer to their homes, by-passing a warehouse and/or retail store. In a recent blog (http://www.dantranscon.com/index.php/blog?view=entry&id=290 ), I highlighted the number of malls and stores being closed throughout North America. While some retail jobs may be replaced by warehousing positions, many will be lost.

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Driving a transport truck is one of the most prevalent jobs in North America and throughout the world. There are about 3.5 million truck drivers in the United States; the comparable number for Canada would be in the range of 350,000 people. Truck drivers are mostly men who like a life on the open road, crisscrossing the freeways and city streets of America. These are folks who are away from home for long stretches of time, as they go from state to state, province to province, sleeping in cheap motels or in their sleeper cabs, eating unhealthy meals in Truck Stops and spending long, lonely hours driving their rigs.

Young people seeking to enter the profession need to take a set of courses so they learn safe driving techniques and how to manage their rigs. For those individuals who wish to run their own businesses, they can become owner-operators. They can work for themselves or for one of the thousands of trucking companies throughout North America. This can include working for a for-hire fleet or for the private fleet of a manufacturer or retailer.

Despite the relative ease of entry into the profession, there is a shortage of truck drivers in North America. Driving a truck is a tough job. Bad weather, traffic, and road conditions create difficulties on a daily basis. A lack of investment in infrastructure throughout North America creates congestion and impedes productivity. Driving a tractor-trailer unit with a 45,000-pound payload requires full concentration throughout the period they are on the road.

For many people, being away from home for blocks of time is not glamorous or fun. For someone with a young family, missing family occasions and their kids’ baseball or soccer games does not help maintain positive personal relationships.  While much has been done to raise the quality of the profession, truck driving does not command the respect it deserves; it remains a relatively poorly paid job.

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Over the past couple of weeks, I have had the privilege of sitting in on a discussion and reading some papers on the Future of Freight Transportation. I specifically would like to acknowledge the work of Steve Sashihara at Princeton Consultants and a recent Supply Chain Digest report that helped shape my ideas for this blog. While I previously had some sense of what was going on (i.e. ecommerce, Amazon) in this sector, I was surprised by the range and profound nature of the changes that are taking place. I would like to share some of the major changes with you.

Manufacturing in the Future

The big drivers of change are automation, digital technology, and robotics. Manufacturing is increasingly being performed by robots; automated systems are sorting the products and then loading them on trucks. Sensors are becoming ubiquitous and are now on products, pallets, SKUs, drivers, facilities, tractors and trailers. Conveyor systems move the right product to the right piece of trucking equipment at the right time. Loading software tells you how and where to load the product on the truck or trailer to maximize cube utilization and avoid load imbalances.

With the advent of 3D printing and artificial intelligence, companies can manufacture their products in the locations closest to their customers and/or distribution facilities. What this tells you is that the jobs of assemblers, sorters, fork lift drivers and loaders will increasingly be replaced by machines. While some manufacturing may come back to the United States or Canada, many of the traditional jobs will not.

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The previous blog looked at the potential Trump Effect (http://www.dantranscon.com/index.php/blog?view=entry&id=258 ) on Freight Transportation in 2017. This blog will focus on some of the other variables that are likely to shape the freight world in the coming year.

Upswing in Economic Growth

While 2016 was a soft year economically and in terms of freight and freight rate pricing, shippers, carriers, and economists are somewhat more optimistic about the New Year. Interest rates are likely to remain low (although there will likely be some increases in 2017). Household balance sheets are expected to remain in good shape. Employment levels in the U.S. are projected to remain strong. Investment in energy development is likely to increase. Inventory levels are predicted to decrease, driving an increase in manufacturing. Donald Trump has committed to increase the number of jobs in the United States in the coming year. The improving U.S. economy will likely help boost the Canadian economy as well.

Increase in Cost of Diesel Fuel

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On September 23rd, Logistics Management hosted a webinar at which time the co-authors of the annual Masters in Logistics study presented their major findings. For 25 years, this study has been gathering data from a large sample of shippers and carriers across various levels of spend and size. The three presenters, Karl B. Manrodt, Ph. D., Professor, Georgia College, Mary Holcomb, Ph. D., Professor, University of Tennessee and Tommy Barnes, President, Project 44, highlighted some major changes taking place in Freight Transportation.

E-Commerce is changing the Freight Spend Allocation across various Modes

In 2015, 21.9 percent of freight costs were spent on over the road truckload shipping while 21.7 percent were spent on LTL shipping. In 2016, these percentages declined to 17.8 percent for truckload and 15.0 percent LTL freight. Surface Parcel (i.e. FedEx Ground, UPS) increased year/year from 6.1 percent to 11.5 percent. Small parcel freight volumes increased by one percent. In another area of the study, the researchers revealed that 10 percent of freight shipments move from a DC direct to consumer while 21 percent now moves direct from a plant direct to consumer. This further reinforces the impact that E-Commerce and omni-channel marketing are having on freight activity.

Organization Structures are adapting to Market Dynamics

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Amazon launched a new mobile phone, the Fire Phone that could be a true “game changer,” not just for mobile communications or retail sales but also for freight transportation. Let me tell you why.

Unlike other cell phone manufacturers, Amazon is looking for e-commerce business, not mass profits from mobile phone sales. That is the raison d’etre for this phone. Like Apple, they have created an entire ecosystem. Unlike Apple, their ecosystem is not based on selling just computer hardware and software such as iTunes, iPads and iPhones. Amazon wants their hundreds of millions of registered users to buy books, consumer electronics, toys, household supplies and toasters from their massive warehouses of products.

Amazon has a huge inventory of data on consumer preferences and purchasing behavior. It can tailor its marketing messages to specific target markets and then cross-sell them on purchasing other lenses for a camera or tennis clothes to go with the purchase of a new tennis racquet. Amazon’s Firefly technology allows the user to point the phone at an object and then be transferred to an Amazon website that will sell you the product. This is a neat trick (e.g. clever software) that will allow impulse buyers to obtain instant gratification.

Last but not least, the purchase of the Amazon Fire phone provides the user with a free one year subscription to the Amazon Prime $99 a year freight delivery service. So as the user sees a product in a magazine or store, the Fire Phone can take you immediately to a website that will sell you the product and suggest others that you may like. With another click on the Fire, the user can then arrange to have the goods delivered to their home or office within two business days. Clearly the Amazon Fire is trying to create a new e-commerce business model. Like every other new business model, it will take some time to gain traction. If, and more likely when it does, it could dramatically change the world of freight transportation.

The Amazon Fire will allow consumers to “point, shop and ship” almost anywhere, any time. The speed and simplicity will appeal to anyone who prefers to look at a photo and shop without going to a mall or even searching online to find an object. Of course, the Fire Phone has a number of other interesting features like 3-D imaging and an enhanced camera so it can compete with other mobile phones.

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