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This is the decade of the “effect.” As  an example, we keep hearing about the “Trump Effect.” While not much of his legislative agenda has been approved to date, president Trump still has almost three and half years remaining on his first term in office. It will be interesting to see how much of his “conservative” agenda is implemented and the impact that it will have. Of particular interest will be the NAFTA negotiations that begin on August 16. Similarly, Climate Change is having profound effects in various parts of the world, whether it is from flooding, forest fires, drought, severe storms, or floating ice bergs.

We are also going through an era of major transformations in energy production/consumption and technology. The new Tesla car that was introduced to great reviews this week may be the catalyst to a shift away from gasoline-powered cars to electric vehicles. The fact that this beautifully designed car, introduced at a market friendly price, can get almost 500 miles on a charge, could be a turning point in the evolution of electric vehicles. India has recently made a major commitment to electric vehicles.  This coupled with driverless or at least semi-autonomous cars and trucks, that are a few years away, could have profound effects on energy consumption and transportation.

Smartphones, tablets, ecommerce, apps and Uber threaten to have an equally dramatic impact in many areas of business. One company that is very well positioned to capitalize on the Technology Effect is Amazon. Here are a few statistics to consider.

While total retail sales in the United States grew by 3.8 percent in 2016, ecommerce sales grew by 15.1 percent during the same period. Most of that growth is being driven by one company. According to Slice Intelligence, Amazon accounted for 53% of all ecommerce growth in 2016. During 2016, Amazon had almost 37% market share in ecommerce sales; Wal-Mart had a 2.6 percent market share and Target had a 2.7 percent share. Keep in mind, these statistics don’t reflect the potential impact of the Whole Foods acquisition.

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As baby boomer logistics leaders move into retirement, their successors are tasked with directing the company’s distribution operations. Informed business leaders realize that we are in a period of profound changes. Companies such as Amazon and Uber are disrupting current business models. Technology and automation are altering manufacturing processes. Ecommerce and omni-channel distribution are upsetting existing retail processes. As my colleagues and I meet with shippers, we find many companies are exploring their options. Should they try to manage these changes in house or should they enlist the support of outside resources?

In-House or Outsource?

It is important to understand that business leaders do not face a binary choice. The field of Logistics is more complex than it has ever been. Senior logistics professionals must possess a variety of business skills and possess a depth of knowledge in a range of areas such as supply chain design and management, warehouse and inventory control, customer service, transportation and information management. These leaders must then be able to adapt and apply their skills and knowledge to specific companies in the manufacturing, distribution and retail sectors, including bricks and mortar and eCommerce organizations. This leads to a fundamental question for every organization. Does the company have a set of leaders who possess this range of skills and knowledge?

While it is unlikely that one senior executive will possess all of these attributes, the broader question is does the company possess these skills across its logistics management team. If not, what skills and knowledge does it need to import from external sources? This article outlines how to create a leadership plan (http://www.supplychainquarterly.com/news/20170428-how-to-plan-for-future-supply-chain-leadership/?utm_medium=email&utm_campaign=Executive%20Insight%20 ).

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Here are the top stories in freight transportation that caught my attention over the past year.

The Tepid Economy

The North American economies underperformed the global economy and the economies of emerging markets in 2016. Business investment, a key driver of the economy, was down in 2016, driven in large part by the big drop in fortunes of the oil and gas industry. Consumer spending and employment levels remained solid in the United States and somewhat less so in Canada. US manufacturing activity increased.

US imports began an uptick as did US imports of Canadian goods, driven in part by the strong US dollar and drop in the value of the Canadian dollar. Auto manufacturing remained strong in Canada but resource and activity in other sectors remained weak. The strong US dollar depressed export activity. Overall it was a sub-par year for the American and Canadian economies. As a result, demand for over the road truckload, intermodal and LTL service was soft in 2016.

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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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E-commerce purchases make up 5 percent of Sales in the United States and about 3.4 percent in Canada. These relatively small percentages may cause retailers and trucking companies to downplay the role that e-commerce is having and will have on this sector on this sector. This would be a huge mistake.

Dramatic changes are coming to almost all facets of the retail sector. In the home entertainment and book distribution segment, retailers are changing product lines and the customer buying process experience. A trip to the local Chapters or Indigo store will open your eyes to the types of transformations under way. As online music sales have escalated in recent years, CDs have been almost totally removed from store shelves and books constitute a much lower percentage of the floor space. In their place, you will find dolls, toys, gifts, glassware, e-readers and tablets, blankets and a host of other items. Since so many Dell computers and other high tech products have been purchased online for the past 20 years, consumers are very confident in buying products in this manner.

A visit to the local Loblaw’s store will highlight a much larger footprint and a greatly expanded product line. Take-out meals, sushi counters, organic and non-organic food counters, in-house restaurants and a host of other changes have greatly expanded the size of these giant stores. Staples, Toys “R” Us and Best Buy Co. Inc. are shrinking their store space, expanding stock rooms for e-commerce distribution or shutting certain outlets. Toys “R” Us is converting more store space to backrooms to fulfill its growing number of online purchases. Later this year it will begin allowing customers to pick up their online orders at its stores.

Meanwhile in the United States, Amazon is investing in distribution centres in the major markets so it can provide same day delivery to its customers. This will allow them to take direct aim at a range of retailers in these markets. As they increase their e-commerce business, they will continue to draw more business away from traditional retailers.

Retailers are scratching their heads as to the appropriate footprints for their stores, the correct assortment of products, the marketing approaches they should use for their brick and mortar operations and e-commerce operations and whether to shutter or add stores.

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This is the fourth in a series of blogs on Technology in Transportation. The three previous articles appeared in 2013 (http://www.dantranscon.com/index.php/blog/entry/quotemytruckloadcom-and-freightopolis-enter-the-automated-freight-brokeragefreight-portal-space, http://www.dantranscon.com/index.php/blog/entry/innovation-and-technology-come-to-the-freight-brokerage-industry, http://www.dantranscon.com/index.php/blog/entry/freightsnap--an-exciting-new-visual-tool-to-verify-the-density-of-ltl-freight) and featured 5 interesting companies, FreightSnap, Freightopolis, QuoteMyTruckload, BuyTruckload and Post.Bid.Ship. In this piece, I will examine two other innovative freight transportation companies, Zipments (https://www.zipments.com/) and DashHaul (https://www.dashhaul.com/) that are using technology to transform their segments of the freight industry.

Walmart, Amazon, and Google, among others, are piloting same-day delivery projects in select locations around the country that have enough density and demand to drive the value proposition. However, obstacles persist, and success is contingent on critical mass. Expedited transportation is costly, and last-mile capacity is likely to become even more constrained as e-commerce grows. Moving small volumes over short distances at high speed is a significant challenge.

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Zipments aggregates courier capacity—whether it's a truck, van, or bicycle messenger—in effect, creating capacity that didn't exist before, especially in urban areas. This New York City-based technology company has evolved into a “virtual freight broker for local and regional courier services”. The company serves four types of customers: retail, professional services, consumers, and restaurants. Many startups in the same-day delivery space are searching for capacity to provide consumers with the fastest delivery possible. That's not the case for Zipments that is focused on tapping into latent capacity. So whether it's auto part milk runs, florist delivery vans, or bicycle messengers, there's a huge nationwide fleet of available but untapped capacity. Zipments tries to work with fleet managers to help them better utilize their assets and serve other sectors.

The business is segmented both in terms of the markets it serves and the modes of transportation. Metro delivery is anything less than 10 miles, local deliveries extend out to 20 miles, suburban deliveries reach 30 to 50 miles and regional deliveries would represent going from New York City to Philadelphia or Montreal to Toronto. Zipments doesn’t do many regional deliveries yet, but as their network grows, they expect that segment to expand. There is capacity for regional deliveries; people are passing through these corridors every day.

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