DC Velocity - June 2014

inbound

In a move that takes field testing to new levels, Ergodyne, a maker of protective clothing often used in warehouses and DCs, outfitted explorers Eric Larsen and Ryan Waters with its high-performance gear for their recent expedition to the geographic North Pole. The two reached their destination in early May, following an unaided trek of 53 days.

St. Paul, Minn.-based Ergodyne supplied the adventurers with insulated clothing, foot protection, hats, duffel bags, and custom-designed gloves. The company has been working with Larsen—the first person to successfully complete expeditions to the South Pole, North Pole, and summit of Mount Everest in a continuous

365-day period—for the past three years.

Just how tough was the trip? Larsen and Waters traveled across shifting sea ice using skis and snowshoes, and at times, had to swim through open water. Larsen had high praise for his sponsor’s products. “If Ergodyne’s stuff can keep me warm in - 34 degrees Celsius [- 29 degrees F] weather, they can certainly keep workers warm across the globe,” he said.

Cold comfort?

The move toward dimensional pricing continues. FedEx Corp. recently made headlines by announcing that starting Jan. 1, 2015, it would price ground parcel shipments measuring less than three cubic feet by size rather than weight. This will likely result in significant rate increases for lightweight, bulky shipments that take up a lot of space in the company’s vans.

FedEx is far from the first to go the dimensional pricing route. Old Dominion Freight Line (ODFL) pioneered the practice in less-than-truckload (LTL) transportation a few years ago. More recently, UPS Freight, the LTL unit of UPS Inc., rolled out a density-based pricing program for interested shippers. Now, LTL carrier YRC Worldwide has similar plans. The company expects to install 38 automated “dimensioners” to measure and weigh items at some of its YRC Freight terminals by year’s end. YRC also has a pilot program to install dimensioners at some locations operated by its YRC Regional unit, CFO Jamie Pierson said in a conference call to discuss the company’s first-quarter results.

Pierson told analysts that the dimensioner technology helps the company more accurately measure the cubic volumes of a larger percentage of its shipments. “The capture of precise shipment dimensions improves our ability to determine the true cost of each shipment based on weight and space utilized,” Pierson said during the call. And in words that won’t be music to the ears of pillow, lampshade, and feather shippers—whose lightweight products have long been priced by weight rather than by cubic volume—Pierson added that the equipment “positions us to accommodate a shift in the market toward density-based pricing methodologies.”

A new dimension
(in pricing)

The American Trucking Associations (ATA) measures the health of the motor freight industry using its monthly for-hire truck tonnage index. Based on that benchmark, things are generally going well. The index in 2013 increased 6. 2 percent over 2012 results, making 2013 the best year since 1998.

But John G. Larkin, lead transport analyst at Stifel, Nicolaus & Co., uses a different method to take the trucking industry’s temperature, and that method produces a more sobering reading. According to Larkin, dry-van truckload shipments have not recovered as strongly as flatbed and refrigerated loads have since the 2008–09 economic downturn. Furthermore, dry-van loads turned negative in January for the first time since April 2013. Larkin presented his findings at the NASSTRAC annual conference in Orlando, Fla., in mid-April.

According to Larkin’s data, dry-van load volumes plunged in late 2008 and into the first half of 2009. Van loads shot up again in late 2009 and the beginning of 2010, but since then, they’ve spent as much, if not more, time in negative territory than in positive terrain.

Van-load activity has been suppressed by improved software tools and processes that allow shippers to better optimize their loads, Larkin said. Persistently sub-par demand has also played a role, he added.

The apparent disconnect between tonnage growth and load stagnation could be attributed to the surge in demand for trucks hauling sand used in oil and gas fracking operations, Larkin said. He noted that movements of such a heavy commodity could skew the tonnage figures without leading to a corresponding rise in loads.